History is repeating at South County sanitation district

March 28, 2017


Until four years ago, I was not involved in local government. After hearing about problems at the South San Luis Obispo County Sanitation District, I started going to meetings.

The plant has served Arroyo Grande, Grover Beach, and Oceano for over 50 years. Starting in 2000 things went downhill and reports of discrepancies involving board members started in 2002.

Between 2009 and 2011, the sanitation district settled with three whistleblowers who lost their jobs. Legal fees skyrocketed from $33,000 in 2005 to $413,000 in 2013 for the small sewer plant with 10 employees and annual revenues of $3 to $4 million. Reserves of $11m were drained, while the district broke promises to the Water Board to update the plant.

A spill resulted in a fine of $1.1m and Surfriders reported poor water quality. Meanwhile, the Grand Jury called out a conflict of interest.

Local officials questioned Arroyo Grande and Grover Beach mayors Tony Ferrara and John Shoals who refused to make changes and defended their positions.

Then Oceano Community Services District board member Jim Hill resigned because he couldn’t sanction the corruption at the sewer district and Oceano Community Services District. Fellow director Lori Angello continued to assert a conflict of interest but was outnumbered by Ferrara and Grover Beach Mayor Pro Tem Bill Nicolls.

Debbie Peterson

In 2013, then Grover Beach mayor Debbie Peterson presented a review of the Grand Jury audit, and other reports to the board. The review highlighted red flags and suggested a forensic audit and restructuring the district. Soon after, John Wallace retired and the district was reorganized.

John Clemons, the current superintendent, was hired and a part time team of an administrator and two engineers. Within two months, the nearly bankrupt plant rebounded, halving chlorine costs and changing annual operating losses of $1m to income of $1m.

From 2013 to 2016, the plant ran very well, regaining financial stability and producing the best statistics since 2000. However, the board refused to do a forensic audit. After over a year of public pressure the board hired renowned investigator Carl Knudson to investigate past practices. Even with limited scope, Knudson identified multiple issues and recommended submitting his findings to law enforcement.

The board sent Knudson’s report to District Attorney Dan Dow. In February 2017, the DA’s office charged John Wallace with two felony and two misdemeanor charges of conflict of interest.

Late in 2015, the part time administrator retired and the board appointed John Clemons as acting administrator in addition to his role as superintendent.

In 2016, the board hired Gerhardt Hubner as a full-time administrator. Since then morale has sunk to the point of multiple investigations, a formal complaint to the board by two operators, and half the staff unionizing. Legal costs are averaging over $20,000 a month; far more than agencies much larger. The bylaws were amended to prevent any one of the three directors from agendizing any matter, quashing any minority view.

Hubner’s total package is $200,000 a year with full pay plus insurance for him and his family after three years. The board said his salary was offset because he could manage plant redundancy and reclamation projects. Hubner is a geologist; not an engineer, or a qualified sewer operator. He hires consultants to project manage. Many recommendations of investigator Carl Knudson have not been implemented.

AG Mayor Jim Hill

Despite these red flags and public complaints, the board refuses to reprimand or remove Hubner. Instead, they have joined the investigation into the one board member, Arroyo Grande Mayor Jim Hill, who stood up for his principles and was vindicated by Knudson.

Hubner’s draconian approach to management, his rare appearances at the plant, lack of knowledge of sewer plant operation, and excessive legal costs are the past practices of John Wallace whereby staff and directors who didn’t fall in line with him were ostracized and disposed of.

The irony is that the investigation into the mayor of Arroyo Grande was raised the day the district attorney announced Wallace’s arraignment. Hubner goes way back with John Wallace, having worked with him on the cleanup of Avila Beach and throughout the county.

Mayor John Shoals supports Hubner and Wallace, as he has since 2002, voting against Hill at almost every turn.

For three years, Shoals refused to replace his designee, Bill Nicolls, whose wife is now the alternate for Mayor Shoals in Grover Beach, despite requests from the council majority. For the past two years, Shoals dragged his feet in settling the $1.1 million fine and over $1 million in legal fees due to the 2010 spill, refusing to consider an investigation until public pressure became unavoidable.

It takes research and diligence to stay engaged with the activities of local government. It’s the only way to prevent inequities and misuse of funds that we depend on for health and safety. Please take the time to exercise your responsibility to our community and pay attention – it will pay off for all of us in more representative government and honest representation.

The South San Luis Obispo County Sanitation District Board meets on the first and third Wednesdays of each month at 6:30 p.m. in the Grover Beach council chambers at 154 S. 8th Street in Grover Beach. Agendas for the meetings are available on the Sunday before each meeting. Past meetings can be viewed at SLO-SPAN.org.

Patricia Price is a long-time resident of Arroyo Grande and regular sanitation district board meeting attendee.

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After years of the public pleading with the board to “get out of the litigation business” the Sanitation District continues to soar past its legal budgetary projections again this year. For too many years the boards protected John Wallace by fighting the Water Board, spending more than the fine on legal maneuvers, they simply and prolonged the inevitable and paid the $1.1 million fine. Lawyers were the only winners.

Once again, as Patricia points out, the district is heading down a costly legal path, for now they are skirting formal litigation, but I would expect it. The legal tab is again on the rise and it’s time for the board to look at the root of the new problem. Hubner.

Since Hubner was hired, all key projects seem to have stalled. Yet, he’s been on a spending spree; leasing a trailer, outfitting it with furniture, phones, computers, internet, and cameras to watch over employees and who comes and goes from the plant. While the personnel policy update, which was near completion when he arrived, is still incomplete. The Arroyo Grande sewer bridge project remains in limbo and the Redundancy Project is struggling in the permit stage. Labor relations have collapsed; four different employees filing grievances and/or complaints and the remaining four members opting to bring on a union to negotiate for and protect them. That equates to the entire staff being unhappy.

The board is the fiduciary of this district, they answer to the ratepayers who depend upon them for sound decisions. This arrangement with Hubner is unhealthy and should be terminated.

Well stated Ms. Price! I was a bit later in discovering this problem but from what I have seen, your evaluation is pretty accurate.

Patricia Price has provided a detailed statement on the obvious corruption at the Sanitation District. Both Jim Hill and Debbie Peterson have been cruelly condemned for exposing the problem. This matter now rests with the District Attorney (DA) as it pertains to Wallace’s involvement.

But this involvement by the DA may be merely a “narrow window” that appears to have metastasized in this one government agency – the sewer district. The implications here are serious and need meeting the “fresh air” of exposure to either establish or deny the specified corruption that appears to apply in many ways.

Is this over the DA’s reach to establish the facts here?

What a shock,John Schoals. And anyone else? Who is the Supervisor of this hot stinking garbage fire? I am so glad to have moved out of town.

This well-written piece brings so many thoughts to mind. Seems like districts throughout the County have been rife with corruption. Perhaps responsibility for water and sewer needs to go back to the County where there is more expertise, accountability, and oversight?

There are many who chastise for continuing to bring up the past. Good practice to move on, but if our elected representatives don’t change the corruption remains and the bad practices of the past remain. If we don’t remind one another to pay attention we will continue to get fleeced.

It’s funny how history does that when you fail to learn from the past.