A federal bankruptcy judge Tuesday approved a $1.3 million settlement in a lawsuit filed in the aftermath of a 2005 decision to stop construction of a sewer system in Los Osos.
In the agreement, the Los Osos Community Services District and its attorneys agreed to restore $1.3 million in district funds that plaintiffs Taxpayers Watch allege were misappropriated from dedicated accounts to pay legal fees, plaintiff’s attorney Kate Neiswender said.
The parties in the lawsuit reached a settlement agreement in April, and Judge Robin Riblet approved it Tuesday. The bulk of the money will be paid through the district’s insurance policy.
“A lot of things that went on over the last few years resulted in unfortunate consequences,” said Dan Gilmore, CSD general manager. “I think everyone was well-intentioned, but it’s in the district’s best interest to put as many of these things behind us as we can.”
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Taxpayers Watch sued the district in 2005 after three of the district’s board members were ousted in a recall election and the new board — consisting of Lisa Schicker, Chuck Cesena, John Fouche, Steve Senet and Julie Tacker — stopped construction of the sewer started several months earlier by the previous board.
Stoppage of the sewer resulted in numerous legal challenges. The plaintiffs argued that the board took $1.4 million from accounts earmarked for municipal bond payments and emergency services to pay legal fees.
“This settlement is very close to the goal of Taxpayers Watch to restore the $1.4 million wrongfully spent,” said Joyce Albright, president and founder of the group.
Only Senet and Cesena remain on the district board. The sewer project has since been taken over by the county Public Works Department, which recently received final regulatory approval for a new project.
Settlement of the case leaves only a lawsuit against the district by state water officials over the aborted sewer project. The district also filed bankruptcy because of fines and legal fees.
Reach David Sneed at 781-7930.