Why Cayucos pulled out of sewage project with Morro Bay

The Cayucos Sanitary District voted unanimously Thursday to withdraw its commitment to partner with the city of Morro Bay on the construction and operation of a new sewage treatment facility.

The district’s board held a special meeting to adopt a resolution to pull out from the joint project planned for a site near northern Morro Bay and, instead, to pursue building its own treatment plant elsewhere, likely on the outskirts of Cayucos.

Cayucos’ district manager Rick Koon said the split came down to a lack of an ownership share for Cayucos and governance power, contending that Morro Bay was seeking to assume too much of the authority in a joint facility.

“The resolution reflects the huge concerns of the community with the governance structure,” Koon said. “This is a big project, and big dollars are going to be spent. We have a problem with not having a say in how those dollars are going to be spent.”

The two agencies had previously agreed to partner and share costs to build a plant on property called Rancho Colina, off Highway 41 a mile east of the Morro Bay city limits.

Currently, Morro Bay and Cayucos jointly share the use of a deteriorating, aging sewage treatment plant near the ocean in Morro Bay. The city of Morro Bay holds a 60 percent ownership stake and Cayucos has a 40 percent ownership in that plant.

The Morro Bay City Council and Cayucos Sanitary District also currently hold joint powers authority — meaning they have a 50-50 percentage in decisions affecting the operation of the facility.

Morro Bay has nearly 6,000 customers for sewage treatment services, and Cayucos Sanitary has about 2,500 customers.

In the construction of the new sewage treatment and reclamation facility, Morro Bay is seeking to assume full ownership of the plant, which could be managed by a seven-member board composed of five Morro Bay City Council representatives and two Cayucos district board representatives, Morro Bay City Manager David Buckingham said.

An alternative option would be a purveyor-customer relationship under which Morro Bay would provide Cayucos with sewage treatment service with a similar rate structure for residents of both communities.

“Most people purchase a utility (service) without owning part of it,” Buckingham said. “Many cities and jurisdictions do the same, purchasing wastewater treatment and other services from other cities.”

In passing its resolution Thursday, however, the Cayucos board rejected both options. Koon said the seven-member board proposal was never formally presented.

On Friday, Morro Bay officials responded with a statement saying “the city of Morro Bay remains committed to working cooperatively” with Cayucos on a regional plant.

Mayor Jamie Irons said it was inaccurate for Cayucos officials to maintain they had no say in the process for planning for the new plant.

“Cayucos has had a say thus far, and we wouldn’t design and build a project that doesn’t suit the needs of Cayucos,” Irons said. “To say they wouldn’t have input is 100 percent inaccurate.”

Morro Bay officials noted that Cayucos has shared in planning, and cited almost $600,000 the city of Morro Bay has spent on multiple engineering studies that included requirements for Cayucos.

The city had suggested Morro Bay cover 70 percent of the costs and Cayucos 30 percent in the planning of the new wastewater treatment plant.

The estimated cost to build the facility at Rancho Colina is about $102 million, while it’s unknown how much a Cayucos plant would cost.

Buckingham said he believes a second plant would cost well over the $30 million share Cayucos residents would pay if they bought into the Rancho Colina project.

“Building two facilities will cost ratepayers more in Morro Bay and Cayucos,” Buckingham said.

Buckingham estimates that Morro Bay ratepayers will have to pay about 15 percent more for the new sewage treatment plant without Cayucos’ participation.

But in its resolution, the Cayucos district board wrote that it believes the management structure of the Morro Bay sewer project is “fundamentally unfair and unacceptable to Cayucos.”

Also in its resolution, the board wrote that “controlling costs and thereby minimizing sewer service rate increases is best achieved by having direct Cayucos oversight of all aspects of the planning, design, construction, management and operation of a wastewater treatment facility and related appurtenances.”

Koon, the Cayucos district’s manager, said Cayucos will pursue plans for a smaller facility that would allow analysis of various technologies and water recycling methods that could best serve its needs.

“Even if we have to pay the same or more, our residents want to (build a facility independently),” Koon said. “Having ownership in a huge capital improvement project means you can govern your own rates.”

This story was originally published May 1, 2015 at 12:11 PM with the headline "Why Cayucos pulled out of sewage project with Morro Bay."