Water district is obligated to pay its share of costs for Laguna wastewater treatment plant until 2030, judge says

The city of Laguna Beach and the Moulton Niguel Water, South Coast Water and Emerald Bay Service districts share ownership in the Coastal Treatment Plant at Aliso Creek, pictured. Moulton Niguel wants to divest itself, saying it doesn’t send wastewater to the plant.
(Courtesy of South Orange County Wastewater Authority)

In a preliminary decision, a judge ruled this week that the Moulton Niguel Water District is obligated to pay its share of the costs associated with a wastewater treatment facility in Laguna Niguel until 2030, the first step in settling a dispute going back to 2016, when Moulton Niguel challenged the way the facility would be managed and tried to obtain more voting power.

Wednesday’s ruling in a bench trial that began in November determined a definitive end date for the contract binding four south Orange County service providers that jointly own and manage the Coastal Treatment Plant at Aliso Creek and clarified the criteria for how the members of the joint powers authority vote on budget items.

The Moulton Niguel district is “legally obligated to pay its proportional share of all costs, including capital costs and items necessary to maintain and operate the Coastal Treatment Plant until Feb. 19, 2030,” Riverside County Superior Court Judge Randall Stamen wrote.

“Today’s decision is a clear win for our residents, the environment, ocean water quality and the sanctity of contracts between partners,” Michael Dunbar, general manager of the Emerald Bay Service District, said in a statement Wednesday.

The South Orange County Wastewater Authority and members Emerald Bay Service District, South Coast Water District and city of Laguna Beach filed a lawsuit against Moulton Niguel in May 2017, alleging it violated contractual agreements as an authority member and failed to pay $755,871 in bills for infrastructure projects at the treatment facility. The monetary figure had increased to more than $2 million as of January this year.

Moulton Niguel responded with its own suit in August 2017, alleging that Laguna Beach and the South Coast and Emerald Bay districts had breached a contract by requiring Moulton Niguel to pay for infrastructure improvements it did not vote to approve.

The work would help extend the life of the Coastal Treatment Plant, which treats 6.7 million gallons of raw sewage per day, according to Moulton Niguel.

Moulton Niguel’s complaint says the agency doesn’t currently send water to the plant and doesn’t intend to use it “at any time in the near future.”

The dispute was set off when Moulton Niguel voted against the adoption of the South Orange County Wastewater Authority’s 2016 budget. It was the lone “no” vote, and Moulton Niguel proposed that SOCWA transition from each agency getting one vote to a weighted voting system, which would have given Moulton Niguel the most voting power.

Moulton Niguel said it wanted to extricate itself from the agreements and financial obligations associated with the wastewater facility, according to Stamen’s ruling. The district argued in court documents that the contract should expire in 2026.

“This ruling sets the parameters of Moulton Niguel’s potential divestment from the Coastal Treatment Plant,” Dunbar said. “If Moulton Niguel wants out of its contract early, it must come to the table in good faith. We will not accept any offer that threatens the integrity of the plant or places Moulton Niguel’s financial responsibilities on the backs of our taxpayers. But we remain open to fair and equitable proposals that make sense for both sides.”

Moulton Niguel said in a statement Wednesday that the judge’s decision “supports our ongoing efforts to protect our ratepayers’ dollars and delivers our customers a win by establishing a Feb. 19, 2030, end date to the agreement, thereby saving millions of dollars.”

Regardless of the clash among the districts and Moulton Niguel’s interest in getting out of the contract, the treatment plant needs to be maintained, SOCWA and the member agencies said in a statement Wednesday.

“The plaintiffs were forced to litigate once Moulton Niguel’s delinquency began to threaten the safe operations of the facility and public health at local beaches,” according to the statement.

Laguna Beach City Manager John Pietig has said improvements to the plant are vital to prevent sewage spills.

In 1976, a subcommittee consisting of Laguna Beach, Emerald Bay Service District, Moulton Niguel Water District and South Coast Water District began exploring the idea of building a wastewater treatment facility. The study resulted in the Coastal Treatment Plant, and in 1980 an agreement was entered by the agencies to allow for its construction and a subsequent 50-year term of operation.

The contract’s expiration became a central point of the recent trial, resulting in Stamen’s ruling that the contract stands until February 2030.

If Moulton Niguel chooses to accept the ruling and pays the invoices, the lawsuit would not need to proceed to a second phase, the plaintiffs said. Phase 2 would be tried before a jury to determine whether there were breaches of the contract and any resulting damages.

Matt Coolings, Moulton Niguel’s assistant general manager, declined to comment on how Moulton Niguel would respond to the ruling, saying its board of directors would have to be consulted. But he emphasized that the preliminary ruling did not identify a breach of contract or specific financial obligations.

“The central issue from the SOCWA lawsuit continues to be the Coastal Treatment Plant is too big, too expensive and too burdensome, resulting in millions of dollars of subsidies by our customers who receive no benefit,” Moulton Niguel said in its statement. “We look forward to having SOCWA plan for a smarter and more efficient wastewater plant that will meet everyone’s needs.”