A South County community services district is losing about $40,000 each year because it is underbilling a South County sewage treatment plant.
Now, the administrator of the South San Luis Obispo County Sanitation District is reviewing how much the district pays its member agencies for billing after Oceano Community Services District officials noticed their rate is low and outdated.
Plant administrator John Wallace acknowledged the rate needs to be updated. But, he said, sewer rates would have to be increased to pay what Oceano officials say it costs them to provide the service.
In the 2011-12 fiscal year, which ended June 30, the Oceano Community Services District charged $4,930 for costs associated with adding a fixed sewer charge onto its utility bills and then passing the money to the sanitation district.
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But Oceano District General Manager Tom Geaslen estimated the total costs the district incurs are closer to $45,000 a year — a 900 percent increase compared to the previous billing cost.
To accommodate that increase, the sanitation district would have to impose a 9 percent rate increase on ratepayers, Wallace said in a staff report to the three-member sanitation district board.
Geaslen said he calculated the amount using a formula that he said Wallace’s company, Wallace Group, uses to invoice the sanitation district.
“It must be recognized that the OCSD provides a valuable service to the (sanitation district) that in my opinion has been deeply discounted for no viable reason,” Geaslen wrote in a letter to Wallace in July.
Geaslen said he learned about the outdated rate because of a budget discrepancy that happened before his tenure at the district.
Oceano’s budget still included a revenue estimate of $30,000 for the billing services, but at this time there’s no agreement between the services district and the sanitation district to raise the rate.
Wallace is now studying other options, including handling the billing in house, asking the county to add the sewage fees to biannual property tax bills, or finding a standard process to calculate billing costs for the three communities served by the district.
The sanitation district serves about 38,000 residents in Arroyo Grande, Grover Beach and Oceano. The sewage plant’s residential rate is $14.86 a month.