Sanitation district agrees to end litigation, pay fine

August 3, 2016


The South San Luis Obispo County Sanitation District board announced Wednesday that the state has agreed to settle litigation and permit the district to pay a $1.19 million fine levied because of a 2010 sewage spill. As part of the negotiations, the state has agreed to allow the sanitation district to spend approximately $550,000 of the fine on plant repairs and environmental projects.

Arroyo Grande Mayor Jim Hill, who ran for office on a platform of ending the sanitation district’s costly legal battle, took a seat on the sanitation district board in 2015 and began pushing for settlement negotiations.

“Getting out of the litigation is a success and in the best interest of the district,” Hill said. “It is very satisfying to me to finally get this done.”

The sanitation district board is comprised of three board members, one from Arroyo Grande, Oceano and Grover Beach. The current board members include Hill, Grover Beach Mayor John Shoals and Oceano Community Services District President Mary Lucey.

On April 20, 2012, after the Central Coast Regional Water Quality Control Board determined the 2010 spill was the result of mismanagement by former plant administrator John Wallace, the state proposed a settlement that included a $400,000 fine and the requirement for the district to spend $375,000 on specific plant upgrades.John Wallace

However, a month later, the three sanitation district board members at the time, Oceano Community Services District President Matt Guerrero, Grover Beach Councilman Bill Nicolls and Arroyo Grande Mayor Tony Ferarra, rejected the state’s settlement offer in closed session.

Instead, the sanitation district board decided to file suit against the state in a battle board members did not anticipate winning.

Since then, the sanitation district has paid about $850,000 to Wallace’s engineering firm, the Wallace Group, and a team of lawyers to argue against the allegations of mismanagement and the proposed fine.

After the sanitation district filed a lawsuit against the state in a later attempt to battle the fine, the state pulled its offer to allow the sanitation district to use a portion of the fine for repairs.

Then in December, Hill asked staff to work to settle the fine and negotiate a settlement that would again allow the sanitation district to spend a portion of the fine on plant upgrades.

“In hind sight, our predecessors should never had sued, they should have just paid the fine,” Hill said.


This “fine” is actually a hidden TAX on rate payers that is used to fiance a government bureaucracy so they can justify their salaries and benefits. This is a very REGRESSIVE TAX because it hits those on limited income the hardest.


You’re correct, which makes it even more difficult to understand why Oceano’s reps chose to sue rather than settle years ago when they had the opportunity.

They knew there was sewage in their streets and homes, so pay the fine.

Now it’s rate hikes for everyone.


No, it’s not a tax. The way Sanitation Districts (or licensed dischargers) are regulated is by the Honor System. If the District is found to have violated standards, which is rare that they are actually caught, the Water Board has the right to either fine them or take away their permit.

It’s kind of like a Driver’s License…


The sanitation districts are required by law and people cannot voluntarily join and they cannot individually control the district but they must pay the fines and that money doesn’t go to fix the problem. It goes to pay the salaries and benefits of the water board employees. It’s a scam to soak people for more money that goes to the bureaucrats..


Dischargers like the SSLOCSD have responsibilities to protect the health of the community and environment. The other option is having State regulators running the plants. When the District’s Management and political leadership failed the Honor System, they also failed the trust of everyone who claims the Honor System is an effective means for regulating dischargers.

Mitch C

I cannot understand how one tax payer supported organization paying over $1,000,000 to another tax payer supported agency can be considered a victory. I don’t see how the tax payers won anything.



While the state initially presented a better offer to the district, Ferrara, Guerrero, and Nicolls turned it down. Accepting THAT offer would have been the wise and best decision, but in an effort to aid Wallace, those three initiated litigation instead.

Jim Hill campaigns on transparency and ending the waste of ratepayer dollars, and he WINS!

Here’s what the ratepayers “won”.

We won the right to stop suing the state agency the district must deal with now and into the future.

We won the right to cease paying attorney fees to district counsel and to a firm who’s strategy was never to “win” but only delay LOSING the case.

We won the right to stop spending staff time and other resources on a pointless, defenseless position.

We won the right to turn the page on Ferrara and his costly support of Wallace Group.

We won the right to stop paying WALLACE for trying to justify/excuse his own mismanagement.

Finally, we won the right to stop the bleeding and refocus district energy and dollars in a positive direction rather than throwing good money after bad.

It’s a shame it took so long for Guerrero, Shoals and Lucey to come around, but old habits die hard.

Mitch C

Sorry, in my book any payment was a sellout. The San District should have told Water Quality Control Board to pound sand and paid only an amount ordered to do so by a court of competent jurisdiction. Who do these people think they are giving away over a million dollars of rate payer’s money.



The SSLOCSD had already tried that “pound sand” approach and it cost the ratepayers MORE THAN THE FINE in litigation. Enough was enough. The district was found responsible for the spill. They had more than one opportunity to settle for less, but blew it when they rejected the smaller settlement offer and continued to fight with ratepayer money.

“Get out of the litigation business” has been the mantra since before the spill.

Personnel matters plagued the district when Wallace was in charge.

The real stench coming from the district was Wallace got paid over and over again to defend himself. Then he charged the district to return their own files (he had no authority to remove); or he wasn’t going to return them — that’s extortion. Now that’s who should have been told to pound sand and have a court order the return of the files at no charge.

Mitch C

I am not suggesting litigation. Just don’t write the check.

debbie peterson

Not to mention that last I heard, just a few weeks ago, THERE ARE STILL FILES THAT HAVE NOT BEEN RETURNED despite the fact that:

1. The District paid for the work contained in the files,

2. The files are the property of the District,

3. The files should never have been taken off District property,

4. Wallace billed the District to return them,

5. The District has asked for their return multiple times.

I agree with Mitch – hard to call this a victory for anyone. It is horribly frustrating that it took 35 members of the District to attend as many meetings over 20 months asking the District to stop wasting money litigating, but now that elections are rolling around, board members Shoals, Lucey and Guerrero, who ignored and insulted members of the public for 20 months are publicly commending themselves for doing what they refused to do for months; in fact for nearly five years.


Mayor Jim Hill will be interviewed today (Thursday) at 5:05 p.m. on News/Talk 920 KVEC AM. You can listen live online at


I’m always surprised to see “thumbs down” on articles that report success to the people. Do these downer’s WANT to waste money at the ratepayers expense?


Since government is one of the largest employers here and many places and they do not want the gravy train to end, the simple answer is “YES”


Good Morning All:

Mayor Hill deserves credit for fighting the long fight.

Prior mayor cost Arroyo Grande citizens over a million dollars!

It amazes me that some people think Jim Hill is unethical .

He has done more for rate payers of Arroyo Grande than entire city council then or now.


Arroyo Grande voters remember this November Kristen Barneich and Caren Ray are both part of the group that wanted and supported to continue the litigation and the funneling of ratepayer’s money to John Wallace and Tim Carmel’s companies. We have gotten rid of Wallace, sort of, I still not sure why I keep seeing his company of the list for payments, now Mayor Hill needs to lead the push to get rid of Tim Carmel and associates as the city’s attorney.


Without question, this senseless litigation forced upon the ratepayers by Nicholls, Guerreo and former AG Mayor Ferrara was THE biggest waste of money district customers have been subjected to in a long while.

Unfortunately, most residents have NO clue their hard earned dollars have been squandered by those they elected to look out for their interests.

A huge thank you to all those who worked so hard for this settlement. Each one of you played a critical role in keeping the pressure on until even John Shoals (but it IS an election year) and Matt Guerrero could no longer keep up the charade.

Without question, the election of Jim Hill in AG was pivotal in helping bring this to an end. Thank you Mayor Hill!

Now we wait for the legal system to deal with Wallace, Ferrara and the like.


THANK YOU JIM HILL! In 1 1/2 years, you were able to accomplish what you promised you would do if elected to Arroyo Grande Mayor. You successfully succeeded in breaking up the on-going corruption. Finally, an end to this crazy lawsuit that has costs ratepayers MORE than the actual fine.

Good-bye Tony Ferrara, good-bye John Wallace, good-bye Bill Nichols. Keep your eyes opened, Mary Lucey and John Shoals, as you will have a more difficult time now getting away with taking advantage of your constituents.

Now, let’s see what the District Attorney, the State District Attorney and the FBI conclude regarding the Knudsen Report submitted last year. Finally, we’re on the road to transparent and fair representation!


Unless the fine is payed from Wallace’s coffers there is no victory here. KSBY report indicated a broken valve, what valve? A broken management is what caused the spill, and the hundreds of thousands in tax payers dollars wasted on litigation is now in Wallace’s and Seitz’s bank accounts, well done 5 cities.

debbie peterson

This victory goes to:

— Jim Hill, who stood up to the corruption as far back as 2009

— a businessman who exposed the corruption back in 2002, but may not wish to be named

–Brad Snook & Jeff Pienack of Surfriders who called the board out in countless meetings

–3 whistle blowers who paid a very high price

–around 100 citizens who kept going to meetings and speaking up – let’s credit them here

But hard to call it a victory when it’s taken 20 months of calling out the board at over 30 meetings.

The million dollar egos sitting on the board wasted more litigating than the cost of the fine, and lost.


The KSBY coverage showed Hill, Shoals, and a third man (not Mary Lucey). Was that Guerrero? or someone else filling for Lucey? and was there a public vote or a closed door vote? I’d like to know if any of the 3 opposed this.

Kevin Rice

Congratulations DEBBIE PETERSON! YES, DEBBIE worked hard on this issue, advocating to the board and the state and even traveling to Sacramento to speak to the water board. Debbie and a litany of like-minded individuals brought this good result. THANK YOU MAYOR JIM HILL, and the others as well.