Thousand Oaks Mired in Costs for Sewer Spill

Faced with mounting legal bills and the specter of huge fines for a massive winter sewer spill, city officials may soon have to dip into the general fund or raise sewer rates to pay the tab.

Because city officials are not certain that insurance policies will cover the costs associated with the 86-million-gallon spill, top city staff members are considering how the city should pay for legal bills and fines, which could reach several million dollars.

State and federal officials are investigating the circumstances leading to the February spill, which occurred when fierce El Nino rains rushing down a narrow canyon washed out a 30-foot section of sewer line. Investigators believe the spill could have been avoided had the aging sewer line been replaced before the stormy winter, while city officials contend that the spill was a natural occurrence.

Either way, the aftermath is proving expensive: State regulators are recommending that Thousand Oaks be slapped with a $2.1-million fine, the largest such punishment in California history. The city has already allocated $400,000 for legal expenses, and additional appropriations are expected.

“Obviously, the fine and legal fees aren’t something that we’ve had before, so we haven’t budgeted for them,” said City Atty. Mark Sellers.

Sellers and city Finance Director Bob Biery said raising sewer rates would be the most equitable way to cover costs associated with the February spill, because some Thousand Oaks residents who pay taxes into the general fund get their sewer service elsewhere and thus should not pay for a problem related to the Hill Canyon Wastewater Treatment Plant.

However, the City Council could opt to use the general fund or reserves to cover the sewer tab. On advice from their attorneys, all City Council members reached last week declined to comment on the matter.

“I think we’re all concerned about having to make a decision about how to pay” for the fine and legal fees, Biery said. “My belief is that it would be an obligation of the waste-water fund because the break is a waste-water-related issue. The council could make some other interpretation. It’s up to them.”

Because the $7.5-million annual waste-water operating account is a so-called enterprise fund--a self-supporting entity--there are two ways to raise more money for it: hiking either developer fees or user fees.

How much fees have to be increased and what proportion of the fee hike would fall on whose shoulders is “yet to be determined,” Biery said.

Concerns about using the general fund to cover lawyers’ fees and possible fines is one of fairness, not legality, Sellers said.

“It’s certainly legal to use the general fund if the council wants to,” Sellers said. “It’s a general fund--but that’s also the fund that pays for police officers and operating the libraries.”

Insurance Questions

Ken Schechter, the budget officer in neighboring Simi Valley, agreed it would probably be most fair to use waste-water monies instead of tapping the general fund to pay any sewer spill fees.

“That seems most responsible,” said Schechter, adding that he would defer to the city attorney’s advice.

Thousand Oaks already has filed flood, liability and “errors and omissions” claims with its various insurance carriers. Although the carriers have not yet answered the claims, Sellers said he was not optimistic that the policies would cover all the legal fees and fines.

“Obviously, insurance is for unexpected losses,” Sellers said. “However, policies do contain a number of exclusions, such as for the discharge of pollutants, that we must carefully look at and evaluate. . . . I’m sure the insurance carriers are going to go over those with a fine-toothed comb.”

Even before paying any fines, much of the $400,000 Thousand Oaks has set aside for legal expenses has already been spent on four top-flight legal firms representing the city and its elected officials in connection with federal and state probes. Sellers anticipates asking for another allocation in the coming weeks.

Later this summer, the city’s lawyers will try to dissuade appointed state water officials from imposing the $2.1-million fine recommended by staffers. That amount could be upheld, raised or lowered by the members of the Los Angeles Regional Water Quality Control Board at a hearing scheduled today. However, the city has asked for more time to prepare for the hearing and will probably get an extension until June 29 or Aug. 3, according to a regional board spokeswoman.

Top city staffers are already trying to figure how they would plug the hole if a state proposal to eliminate the vehicle licensing fee--which generates about $4.5 million a year for Thousand Oaks--passes. The city got some respite Tuesday night, when property owners agreed to keep paying about $2.2 million a year in lighting and landscaping assessments.

No matter what the legal fee and fine total grows to, residents will suffer, said taxpayers advocate H. Jere Robings.

“Bottom line, there’s only one source of money for the city--that’s the taxpayers,” he said.

If fees are raised, it could prove an expensive irony, Robings believes.

Robings is among a group of residents and officials who fault Councilwoman Elois Zeanah--and to a lesser extent former Councilwoman Jaime Zukowski and her successor, Linda Parks--for holding up a $75-million sewer-plant upgrade during a two-year stalemate. The upgrade was endorsed in its original form last summer.

Zeanah and her allies argued that the upgrade was overly lavish and that residents’ user fees should not be hiked to pay for the ultimate waste-water treatment plant.

Another Breakdown

Parks and Zeanah point out that the ruptured pipeline was scheduled for repair for about a decade before the spill occurred. They believe replacement of vulnerable pipelines, which they favored, was tacked onto an unnecessarily opulent upgrade to pressure them.

“I see an irony that there were council members who refused to improve the facility to hold down rates, and now, because of their actions, we’re going to end up paying these horrendous fines that will cause an increase in fees,” Robings said.

Resident Wayne Possehl of the Citizens Action Network couldn’t disagree more.

“Linda and Elois have been trying to save residents from higher rates for years,” he said.

“If the actions of the city are deemed to have caused the spill, then the city will have to pay the fine. There is no correlation between what Linda and Elois have done in fighting to keep the city’s fees as low as possible and the break in that sewer line.”