San Simeon in line to lose previously approved grant funds, again

September 7, 2021

By KAREN VELIE

San Simeon Community Services District is in line to lose $500,000 in grant funding because it appears district officials falsified information in the grant applications, and failed to meet grant requirements.

After initially dismissing allegations that the San Simeon Community Services District violated competitive bidding rules related to government grants, in late 2020 San Luis Obispo County opened an investigation into three state grants the county is responsible for administrating. The investigation was mounted shortly after the National Fish and Wildlife Foundation accused San Simeon officials of knowingly applying for $250,000 in grants they were not eligible for, and which were rescinded in 2020.

San Simeon CSD began applying for grants for upgrades to its water system in 2016. Two years later, during a June 18, 2018 San Simeon CSD Board meeting, then 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 even though government code requires contracts over $45,000 to go out to bid.

On Dec. 21, 2020, the county ordered the district to respond to a lengthy list of questions and records requests regarding three state grants approved in the past four years. In addition to asking questions about the district’s lack of a competitive bidding process, the county’s questions also focused on the factors that led up to San Simeon CSD building its water treatment facility on the Hearst Ranch without an easement.

In 2020, five years after the district built its water treatment plant, the owners of Hearst Ranch hired a licensed surveyor to find out if the water facility encroached on their land. The surveyor determined 560 square feet of the district’s reverse osmosis facility is on the Hearst Ranch Conservation Easement.

The county’s investigation looked into state Integrated Regional Water Management grants for $362,431, $177,750 and $500,000. While the district already spent the first two grants, the $500,000 grant had not yet been disbursed.

County staff determined San Simeon CSD officials failed to secure an easement with the Hearst Ranch. As a result, county staff is recommending the SLO County Board of Supervisors rescind the $500,000 grant, according to an Aug. 24 letter from the county to the state.

It is also possible the state could ask the district to return the two earlier grants.

San Simeon CSD Chair Gwen Kellas responded by contracting with a surveyor in an attempt to refute the Hearst Ranch survey. However, Kellas signed the contract on Aug. 31 for a second survey without board approval as required by law. After San Simeon resident Hank Krzcuik discovered the illicit contract, the San Simeon CSD Board of Directors is planning to approve a now-unsigned contract at their Thursday board meeting.

“The Hearst encroachment easement agreement should have been signed months ago to protect almost $1 million in grant funding,” Krzcuik posted on Nextdoor. “Instead, we have this perverse game. With the handling of grants and what happened here and so much else, the word that comes to define our district management is unscrupulous, meaning having or showing no moral principles; not honest or fair.”