A tiny SLO County CSD considers calling it quits, plagued by lawsuits, regulatory hurdles

After 61 years providing San Simeon’s water and sewage, the tiny town’s community services district directors want to know if they can hand some or all of those responsibilities to another agency.

In a 3-1 vote cast by the board of directors Thursday night, the district voted to pursue ditching its water and sewage responsibilities.

Director Michael Donahue was the lone “no” vote, saying that, rather than just relinquishing control of water and wastewater-treatment services, the board should consider dissolving the district altogether.

For years, some residents and property owners in the tiny town have maintained that their community services district should do that — disband completely — for a variety of reasons ranging from mismanagement and lawsuits to stringent, seemingly intractable requirements from higher-up governmental agencies.

The CSD is currently facing at least seven more lawsuits, long and bitter intra-community conflicts and those knotty requirements, such as finding a new spot in the narrow, three-quarter-mile-long town for its wastewater-treatment plant.

Most recently, the CSD came under fire after bouncing a $42,500 check to Ron Hurlbert of Nevada, the first of two partial payments on a lawsuit settlement for the district allegedly encroaching on Hurlbert’s property. The check has cleared, but another is due in January.

Now, the district’s beleaguered board members want to know if the community would be better served with another entity in control, and if so, how to accomplish that.

As the San Simeon board heard from its interim general manager Patrick Faverty, San Luis Obispo County District 2 Supervisor Bruce Gibson and Rob Fitzroy, executive director of the Local Agency Formation Commission, that has to be the bottom line for the board’s ultimate decision: What is best for the community?

Fitzroy said the district will need to consider “what needs to be fixed right now, what would the most appropriate course of action be, (and) can the district fix itself?”

“How would it change the levels of service?” the LAFCO director asked the board to consider. “CSDs generally exist because the community wants better service and more local control.”

Divesting water, sewer services wouldn’t be a fast process

The divesting or dissolving process likely would take a year or more, Fitzroy said in a phone interview with The Tribune on Wednesday. He reiterated that several times at the meeting as well.

There’s a lot of work to be done before that happens, Gibson told The Tribune on Tuesday.

The county — which most at the full-house meeting seemed to feel would be the logical agency to take over — would need complete details about the district’s finances, infrastructure and much more.

“The county does not automatically take over the services,” Gibson, who spent 10 years as a LAFCO commissioner, told the board. “We don’t take those responsibilities over until we go through a substantial process and the Board of Supervisors considers the issue.”

Getting the answer involves a long and complex process capped by finding an agency willing and able to assume any or all of those responsibilities, Fitzroy said, because the CSD can’t just walk away from them. Nailing down that agreement probably would require finally completing some detailed studies already underway and possibly some others.

The district can’t even submit an official request to divest or disband until it has those commitments in place, he emphasized, and meanwhile, a mandated municipal service review that had already begun is on hold.

The CSD district staff’s report described “a multi-year process with significant input from the relevant state and local agencies and the public,” and the board must first decide “whether to dedicate staff time, resources and whether to incur the financial costs” such an action would entail.

There was no indication during the meeting of how much those costs might be.

“It’s difficult to estimate since we do not yet know what would be proposed” Fitzroy told The Tribune before the meeting. “The district would need to pay for LAFCO application fees, any potential studies required by LAFCO and any associated wind up/wind down costs with dissolution or divestiture.”

If LAFCO should approve the application, voters and property owners can protest and maybe even stop the changes.

“If more than 25% of the community protest, but less than 50%, then LAFCO’s decision goes to a vote of the people,” Fitzroy said. “If more than 50% protest, LAFCO’s decision is null and void and the process stops.”

Why does the San Simeon district want to hand off water and sewer services?

The four-member CSD board seemed united about seeking change.

“This is exploratory, investigative … we want to start the process,” Director Jacqueline Diamond said. “It doesn’t mean we’ll move forward with it. We’ve had a lot of mismanagement in the past, and we’re trying to overcome that for the betterment of the community … trying to see if this would be a better option.”

Director Holly Le even asked what would happen if the board members simply resigned.

“The district would still exist as an entity, but would have no functional way to continue conducting business,” District counsel Nubia Goldstein said. “State law allows the Board of Supervisors to appoint people to serve on the board, to fill those vacancies.”

That is assuming it can find candidates willing to run, Goldstein added.

With a population of about 420 people, getting any voters to run for a spot on the five-person board of directors has been difficult for decades. A recent state law mandating that the small community be divided up into voting districts means most San Simeon election districts have only a few registered voters in them.

Once elected, getting directors to stay has been tough, with numerous resignations plaguing the board for years.

San Simeon CSD faces water quality issues, delays and regulatory hurdles

The small North Coast CSD has had its share of struggles over the years — with no end in sight for some of the more major issues.

San Simeon’s water quality issues and occasional shortages of drinking water during long droughts prompted the board to install a water-reclamation facility in 2012, which has created some legal and other problems.

Some property owners frustrated by more than 40 years of waiting to get the water meters they need to build and others who have issues with the district’s water reclamation facility have filed lawsuits. A couple have already won in court.

Ongoing contretemps with, legal challenges to and even charges brought by the San Luis Obispo County District Attorney against the previous general manager, Charles Grace, and his firm, cost the district a big grant and caused a lot of dissension in the community.

The state Coastal Commission and the Regional Water Control Board, among others, are also leaning hard on the district to comply with some costly requirements, including the need to find a new location for the sewage-treatment plant in the tiny seaside community that’s surrounded by Hearst Ranch land, a large state park and the sea.

The issues piling up have some community members concerned about the future of the beleaguered district — though at least one person encouraged the board to hold fast.

“Please do not walk away,” Julie Tacker said during the meeting. “This board has worked very hard. I appreciate all of you going through what you’ve been facing. This has been a tumultuous time. You are ‘fact finding.’ I think that’s prudent in terms of the many challenges you have.”