SLO County found nothing wrong, now forced to investigate

December 30, 2020


San Luis Obispo County spent years dismissing allegations the San Simeon Community Services District violated competitive bidding rules related to government grants. Now, the state of California has ordered the county to investigate because it serves as the administrator for three grants.

Allegations that the district had failed to seek bids for contract work began circulating through the community in 2017. Area residents and local activists asked both San Simeon officials and SLO County Counsel to look into the district’s alleged failures to put large contracts out to bid. However, public officials rebuffed their attempts.

San Simeon CSD began applying for grants for upgrades on its water system in 2016. Two years later, during a June 18, 2018 San Simeon CSD Board meeting, district manager Charles Grace asked the board to approve a $225,960 no-bid contract.

The contract, for engineering and design of a potable water reservoir, would go to Phoenix Engineering, according to the minutes of the meeting. The board voted unanimously to approve Grace’s request.

During public meetings, residents complained that the district had failed to comply with Governments Code 4529.12, that “all architectural and engineering services shall be procured pursuant to a fair, competitive selection process.” San Simeon CSD officials replied that the contract was not for engineering or design, but for professional services, allowing them to sole source the work.

Before the board meeting, San Simeon resident Henry Krzciuk reached out to the State Controllers Office for clarification of the bidding requirement. State Policy Analyst Alexandria Green noted in an email that even if the contract was for professional services and not for engineering or design, it would still have to go out to bid if the cost exceeded $45,000. In this case, the contract was for $225,960.

SLO County became involved in July 2019, when it entered into an agreement with the San Simeon CSD to administer and distribute the grant. The agreement was approved by SLO County Counsel Rita Neal.

Krzciuk then asked Neal to investigate the awarding of the no-bid contract. He forwarded the email from the State Controllers Office about the requirement to put contracts for professionals service over $45,000 out to bid while noting district legal counsel Natalie Frye Laacke and Jeffrey Minnery had supported the decision not to put the contract out to bid, according to the Sept. 30, 2020 letter to Neal. Minnery and Frye Laacke are members of the law firm of Adamski, Moroski, Madden, Cumberland & Green.

“There is no evidence of a fair, competitive selection process for this engineering work as required by the grant agreement and state law,” Krzciuk wrote in the letter. “Multiple objections to this sole-sourcing are on record.”

On Oct. 14, Neal informed Krzciuk she was not going to investigate the issue based on Minnery’s interpretation of the law and the state controller’s email, which conflicted with Minnery’s interpretation.

“In reviewing the information, it appears that you disagree with the legal interpretation made by the attorney for the San Simeon CSD as well as the information provided to you by the State Controller’s Office,” Neal wrote, making it appear the state agreed with Minnery.

Krzciuk turned to the State Department of Water Resources, which had provided the grant, to investigate the failure to bid the contract. That resulted in the state ordering the county, as administrator of the grant, to conduct an investigation.

On Dec. 21, the county ordered the district to respond to a lengthy list of questions and records requests regarding three state grants the state approved in the past four years, according to a letter from John Diodati, SLO County’s interim public works director. In addition to asking questions about the district’s lack of a competitive bidding process, the county’s questions also appear to focus on the factors that led up to the San Simeon CSD building its water treatment facility on the Hearst Ranch without an easement.

The county’s six-page information inquiry spotlights three state Integrated Regional Water Management grants for $362,431, $177,750 and $500,000. One of which was awarded based on San Simeon’s disadvantaged community status.

SLO County’s questions and document request includes:

  • A copy of the SSCSD’s current procurement policy and the policy in effect at the time it contracted with Phoenix Civil Engineering to perform work on the Well Head Treatment Project
  • A survey showing the location of the Well Head Treatment Project
  • Information regarding when any member of the SSCSD Board or SSCSD staff became aware of the Well Head Treatment Project or any portion thereof being constructed on land not owned by the SSCSD in fee said fact or the possibility thereof and if and when the SSCSD provided notification to the District or DWR
  • Documentation of the process by which the SSCSD selected Phoenix Civil Engineering to perform work on the Reservoir Expansion Project.
  • The Land Use Permit and Grading Permit from County of San Luis Obispo
  • A detailed written response supported by a legal analysis of applicable statutes, including, but not limited to, Government Code Section 4529.12, and should be accompanied by any and all information that the SSCSD has in support of its response.
  • A detailed written response if the Well Head Treatment Project complied with standard condition for both the Proposition 84 Funding Agreement and the Proposition 84 Grant Agreement and whether the Well Head Treatment Project was constructed entirely on San Simeon CSD property as stated in both the Funding Agreement and the Grant Agreement.

San Simeon CSD officials have until Jan. 20, 2021 to comply with the county’s request for information.

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About time the County was called to account. The supervisors have been asleep on the job. Every year they approve district budgets via the consent agenda with not a question asked. The County is the auditor of all special districts per state law and handles many of their funds. The County Auditor is neglecting his responsibility to the people of the County.

No one in the San Simeon CSD is being held accountable for this or the grant recissions or the encroachment on Hearst property.

General Manager Grace successfully pushed this sole sourcing and multiple prior sole sourcings to the same Phoenix Civil Engineering. A lot of money involved here. Present San Simeon CSD Chair Kellas voted for this sole sourcing. Both were informed along with District Counsel that what they were doing violated State laws and subsequently the Grant agreement, all to no avail.

San Simeon CSD tried to game the system again using word games and more. When the General Manager was first challenged, he tried to say they could sole source a quarter million of engineering work using the California Uniform Public Construction Cost Accounting Act. The General Manager could not even get the initials right and District Counsel was seen trying to look it up on her cell phone. Brillant. Except NO services can be purchased under CUPCCAA.

The General Manager then switched the sales pitch calling this engineering work “professional services”. Government Code writers were smart enough to head off this maneuver. In the same area of Government Code Section 4525 (d) states: “Architectural, landscape architectural, engineering, environmental, and land surveying services” INCLUDES THOSE PROFESSIONAL SERVICES an architectural, landscape architectural, ENGINEERING, environmental, or land surveying nature as well as incidental services that members of these professions and those in their employ may logically or justifiably perform.” State law includes “Professional Services” from engineering companies.

NOTE: County staff also calls engineering services “professional services” BUT unlike San Simeon CSD, County staff follows the law and puts large engineering jobs like this out to bid.

Just reeks of malfeasance and corruption…

The San Luis Coastal Unified School District did the exact same thing in the early 1990s when it hired Vanir Construction Management to oversee $100 million of Measure A construction projects as the construction manager. Assistant Superintendent Rory Livingston never did give a good reason why the firm was chosen; there was never a request for proposals or any type of advertising or a scintilla of consideration of anyone. The excuse was it was for “professional services.” The firm walked away with millions of dollars. A complete waste!

So, was anybody physically hurt or had their property seriously affected? Did anyone pay more taxes than they should have? I guess not.

Still a great piece of reporting in a place where very little happens. Kudos to Ms. Velie.

Of course someone was harmed. The taxpayers of California (Prop 84 and Prop 1 funds come from you and me), the whole community of San Simeon, the grant provider and grant program are all harmed.

Without competitive bidding, grant funds (paid for by our tax dollars) do not go as far as they could. If a proper bidding process was done and the lowest bid from a qualified firm was used, there would be grant dollars left on the table for other communities that also qualify for these grants — getting the biggest bang for the taxpayers buck.

The Hearst Corp. was also harmed, their property was stolen without their knowledge and now the ratepayers of San Simeon have to pay to clean that legal mess up.

CCN reporting on this and the previous grants rescinded shine a light on a very tiny community’s fraud and corruption.

San Simeon has a population of less than 600 people. What, they lost $5 each in property taxes? And, don’t attempt to make me feel sorry for the Hearst Corp.

I wonder where “Julie’s” outrage is over corporate property taxes in this state which have not been raised to inflation levels in 41 years?

Actually, in the case of the San Luis Coastal scam, every local firm that could have done the job was harmed by not having a chance to be considered for the job. The late Mike Maino, of Maino Construction, went before the Board and offered to perform the same construction management services for considerably less. This man, whose firm built so many of the district’s schools, all of which are still standing except for those the district tore down, was laughed at.

People run for various boards for good reasons but are often tasked with jobs and decisions that are well beyond their scope of knowledge and end up making horrible costly decisions. There are many examples of this and the smaller the government entity the worse it gets.

My, my, my… Just pulled out a Sunday, September 21, 2014 issue of The Tribune ($2.00)

and above the fold was this:

A.G. Council plans to hire investigator

Remember when the AG City Council and Tim Carmel decided they were going to do their own little (nothing to see here folks) investigation of the Adams/McClish tea party at city hall?

It’s the same old, sorry song. These people are NOT to be trusted.

San Simeon has “Disadvantaged Community Staus”? A crappy mobile home goes for almost 300K!

Great reporting Karen. Once again another example of overpaid bureaucrats and consultants hiding behind their arrogant opinions. It appears the law is pretty clear as pointed out by Mr. Krzcuik. Ms. Neal our $30K a month counsel clearly missed this one.

And…….another CSD in San Luis Obispo County has taken advantage of the “good old boy” network that runs the show there. This article has many in California Valley laughing out loud. And Oceano…..and…..

Paso Robles

Los Osos…