Accusations of budget manipulation surface among south O.C. water agencies embroiled in lawsuit

The Moulton Niguel Water District has issued a letter accusing other South Orange County Wastewater Authority agencies of manipulating the 2017-18 fiscal year budget to influence a current lawsuit.

Representatives from the authority’s public agencies that serve Laguna Beach residents were among the majority that want the group’s attorneys to review the letter, which also includes other accusations.

SOCWA’s 10 board members, including Laguna Beach Mayor Toni Iseman, South Coast Water District General Manager Andy Brunhart, and Emerald Bay Service District General Manager Mike Dunbar, met Thursday in Dana Point to discuss the July 24 letter from Moulton Niguel, among other matters on the agenda.

In a 9-1 vote, the SOCWA board directed its lawyers to review and address allegations from Moulton and report back at a future date.

In the letter signed by Moulton Niguel’s Assistant General Manager Matt Collings, the district alleges the budget, which SOCWA adopted June 14, contains “unauthorized changes from what was approved,” resulting in the district being overcharged.

SOCWA collects and treats sewage from more than 500,000 homes via three treatment plants and produces recycled water.

In the early stages of Thursday’s meeting Brunhart suggested SOCWA legal counsel and staff review the letter and provide a response.

Collings, though, wanted an answer immediately.

“It’s a timeliness issue,” Collings said in response to Brunhart’s motion. “I don’t know how we can pay an invoice that we believe to be incorrect.”

In May, the city of Laguna Beach, South Coast Water District, SOCWA and Emerald Bay Service District filed a lawsuit against Moulton Niguel in Orange County Superior Court, alleging Moulton failed to pay more than $755,000 in bills for infrastructure projects of a wastewater treatment facility in Aliso Canyon, the Daily Pilot reported at the time.

The total of past due bills dating to July 2016 is now up to $927,606, according to an amended complaint filed July 21.

The amount covers Moulton Niguel’s share of costs to repair and maintain the coastal treatment plant, which handles 6.7 million gallons of raw sewage per day, the suit said. Moulton Niguel shares ownership of the plant with Laguna, South Coast and Emerald Bay.

Collings has said Moulton Niguel has not sent water to the treatment plant in years and that funding improvements to a facility it does not use does not benefit taxpayers. He has said Moulton continues to make general, operations and maintenance payments.

When asked to respond to allegations SOCWA and other agencies are trying to influence the lawsuit’s outcome, SOCWA spokesman Steve Greyshock said, “The biggest threat to an organization is when a member does not pay its bills.”

Moulton Niguel, which serves Aliso Viejo, Mission Viejo, Laguna Hills, Laguna Niguel, and Dana Point, also claimed that SOCWA staff added a glossary of terms to the budget without board discussion and that the terms, such as capital assets, contain definitions that conflict with Generally Accepted Accounting Principles, known as GAAP.

Back-and-forth discussions among board members fed a curious dialogue. Board members debated whether repairs should be categorized as operations and maintenance or more extensive infrastructure “capital” projects.

“There are times when a repair extends the life of an asset,” SOCWA board Chairman Dan Ferons said. “If you go out and oil a pump station that is not a [capital project]. If you put a new pump on, it may be adding to capital.”

“If you put a new pump in, that is a replacement,” Collings said.

“If we put a welded patch on a pipe, I’m not extending the useful life of a pipe.”

The SOCWA board voted 7 to 3 to remove the list of terms from the budget.

bryce.alderton@latimes.com

Twitter: @AldertonBryce