Top story of 2005: Los Osos CSD puts its hopes for '06 in land sale

Editor's note: Here is the story Tribune staff chose as the biggest story of the year in 2005. The article, originally published on Jan. 1, 2006, is reprinted below.

Los Osos officials say they will sell the property where a midtown sewer treatment plant would have been built in order to avoid bankruptcy in 2006 — and at the same time attempt to heal a community rift that threatens the existence of the town's government.

The Los Osos Community Services District is coming off a year in which contractors broke ground on a sewer project 30 years in the making, only to be thwarted by a recall election that replaced the majority of the district's board members.

Following a narrow victory, the new board stopped construction and set in motion a maelstrom that could envelop the town in the coming year.

The district's top problems fall into three groups:

• Facing a mounting financial burden, including massive construction bills and the potential of millions of dollars in fines, district leaders say they will remain solvent by selling the controversial Tri-W property and suing a variety of parties they believe owe them money.
• Because the current sewer project sits at a standstill, regional water officials say they will take water quality enforcement action against individual property owners. But they've offered no more specifics on that threat.
• A citizen-led effort to dissolve the district and return Los Osos to county jurisdiction could go before voters in November.

The question of bankruptcy

According to its staff's own analysis, the Los Osos Community Services District has enough money to stay afloat for between a year and 18 months, said district President Lisa Schicker.

But that's assuming the district does not have to pay the tens of millions of dollars that state and regional water officials say it owes.

Schicker said the district has several plans to address its mounting bills.

First, the district will try to sell off the Broderson and Tri-W properties — which were key components of the previous sewer project — to pay for the more than $4 million in work already completed on the project. (The district has not performed an appraisal of the properties. But it purchased the Tri-W site in 2000 for $3.3 million and the Broderson site in 2002 for $4.4 million.)

"The site is a dead issue. We're not going to build there," she said.

Schicker said the district will pursue a claim against the project's design firm for an alleged illegal contract and will continue its court fight to avoid having to promptly repay a $6.4 million loan from the state.

Plus, the district will continue to legally challenge the more than $11 million in fines it faces from the state Regional Water Quality Control Board later this month.

Most of all, Schicker said, the district wants to avoid talking about bankruptcy.

"We're really watching the money; our staff is really conscious of it," she said. "We're not interested in the B word right now."

The district says it has not addressed finances in a public meeting since November because it has been focusing on legal issues. The district's current finances will be presented publicly to the board in late January.

Enforcement against owners

Roger Briggs, the regional water quality board's executive director, said his agency will bring some kind of enforcement action against individual septic tank owners in Los Osos, a community of more than 14,000 people.

But he said it is too early to discuss what form the action will take.

Briggs said the board could fine septic tank owners. It could also force owners to pump their tanks, or even stop using them altogether, which would force a home's residents to use a portable toilet.

"That's not terribly practical," acknowledged Briggs.

He confirmed that the regional water board is looking at a phased approach that would target owners whose septic tanks pose the highest risk to the environment — for example, because the tanks are close to surface or ground water.

Or, the board could simply target owners at random.

Briggs said the number of enforcement actions against owners will increase over the year, but it's a process that will take time because of the potentially high volume of cases.

District fights to survive

If they get a county commission's approval, members of the group Taxpayers Watch could begin gathering signatures to dissolve the district as early as mid-January.

"We've got to stop them (the district board members) before they've totally drained all the funds out of that CSD," said Joyce Albright, chairwoman for Taxpayers Watch. The group has among its members some of the recalled board members. It roundly opposes the direction of the current board.

Ten percent of the approximately 10,000 voters in the Los Osos Community Services District, which was formed in 1998 to give residents more control over the sewer, need to sign that petition before the group can bring it before the county's Local Agency Formation Commission.

If the district can counter with signatures from 25 percent of the voters, residents will decide whether to dissolve in a November election.

But if it can't, then the commission, which is made up of seven representatives from county, city, and community services district governments, would make the ultimate decision.

Schicker said district officials know how important it is to improve community relations in the next year.

Over the coming months board members, whom Schicker described as "ambassadors for reconciliation," will take part in informal coffees and town hall-style meetings as a way to reach out to residents.

"It's really important that we do it right, that we improve the discourse with all stakeholders," she said. "Without doing that, we think we'll fail just like everyone else has failed."