Oceano Community Services district board moves forward to sell water

Ever since Oceano officials made it clear at services district board meetings over the past few months that they were thinking of selling some of the community’s water, interested buyers have lined up.

Last week, the Oceano Community Services District board gave its general manager the go-ahead to negotiate with two developers of projects that could add hundreds of homes and hotel rooms to Pismo Beach, if property is annexed into that city.

The district board also voted to move ahead with water and sewer rate increases for its 2,121 residential and commercial customers. But Oceano officials said that by selling water, they’ll avoid steeper rate hikes previously proposed for the community.

Board members rejected a proposal to sell at least 100 acre-feet of its water allocation from Lopez Lake to Arroyo Grande, which is searching for additional water to serve its long-term needs.

Arroyo Grande’s City Council on Tuesday will discuss whether it wants to work with Oceano to develop a proposal to purchase groundwater or state water, City Manager Steve Adams said.

The Oceano district receives its water from Lopez Lake, located east of Arroyo Grande, the state and groundwater.

It has 1,953 acre-feet available but uses only about 900 acre-feet a year, mainly from Lopez Lake and state water. An acre-foot of water can serve several single-family homes for a year.

Dealing with developers

The district board gave General Manager Raffaele Montemurro direction to negotiate the sale of 300 acre-feet of state water with two separate developers of projects that could be annexed into the city of Pismo Beach.

John King, developer of the Price Canyon proposal, is one of the developers. He wrote to Oceano on Dec. 2 on behalf of himself, Rick Loughead and West Coast Housing Group.

Their proposal could eventually add hundreds of homes, hotel rooms and a golf course to about 1,700 acres north of the city along Price Canyon Road — a plan that requires nearly 600 acre-feet of water.

King requested to negotiate the purchase of 200 acre-feet of water, for which he suggested paying $1 million, plus an annual rate charge that’s yet to be determined.

Pismo Beach city officials would need to be involved in any water-purchase talks involving state water, because private developers could not buy water directly from the state.

Larry Persons, who represents the stalled Los Robles Del Mar development, wrote to Oceano on Dec. 1, seeking to acquire 100 acre-feet of state water.

For that, it would pay Oceano’s costs for six months of holding the water — the exact amount was not available Friday — plus $5,000 for staff and legal expenses and $500,000 after the project is annexed into Pismo Beach.

The San Luis Obispo Local Agency Formation Commission, which has to approve such annexations, in 2008 denied the Los Robles del Mar annexation because there wasn’t enough water to meet the needs of the proposed development, which included a private school, 60 senior citizen homes and 252 single-family homes.

That school, Coastal Christian, on Tuesday obtained preliminary approval from the county Board of Supervisors to use an on-site well to provide the campus water.

David Church, the commission’s executive director, said Friday that 100 acre-feet of water would likely cover the project’s water demand.

If negotiations are successful and the Oceano board moves forward, the money could be used to pay for needed capital improvements, such as waterline replacement projects, and to repay more than $1 million the district borrowed from its water and sewer funds to meet annual operating deficits, board member Jim Hill said.

“We absolutely have to sell this water, or we’re going to go bankrupt, or the water rates are going to double from what they are now,” Hill said. “The only sane thing, in my view, to do is to sell some of our excess entitlement. We can help our neighboring communities who are low on water and can give our ratepayers a break.”

Rate hikes

Water and sewer rates could also increase under a proposal approved by the board Wednesday.

For a residential customer using 20 units of water, a bimonthly bill could increase to $92.04 from $78.24, and to $99 in 2014-15. A unit of water is 100 cubic feet of water.

Sewer customers would see their bill increase to $17.27 from $9.25.

Both are lower than the long-term rates proposed in a rate study by Newport Beach-based Tuckfield & Associates, which proposed sewer rates increase to $18.65 in 2014.

For a similar residential customer, the bimonthly water rates would rise to about $115 by mid-2014.

Community ratepayers now have 45 days to protest the proposed rates. If a simple majority protests the rates, the board will have to find a different proposal.

Reach Cynthia Lambert at 781-7929. Stay updated on Twitter by following @SouthCountyBeat.