Department of Water Resources
A daily compilation of significant news articles and comment
June 4, 2007
4. Water Quality
State will hold Los Osos CSD to fines owed; Services district owes more than $6.6 million for missing deadlines in the failed sewer project
San Luis Obispo
By Sona Patel, staff writer
State attorneys say they won’t back off from fighting for millions of dollars in fines Los Osos’ bankrupt services district owes the regional water board for taking too long to build a sewer.
The state Attorney General’s Office — which serves as legal counsel for the Regional Water Quality Control Board — said the agency is legally entitled to more than $6.6 million after the Los Osos Community Services District missed key deadlines on the progress of a sewer.
Construction on a sewer began in 2005 but was stopped quickly by new district board members elected in a recall vote in which campaigns focused on financial and environmental concerns about that project.
After halting work, the district was fined for not following a time schedule enforced by the regional water board. The district filed for federal bankruptcy protection in August 2006 as a way to deal with the fines and other debts totaling a little more than $40 million.
Helen Arens, one of the state attorneys overseeing the regional board’s claim, said the debt incurred by missing deadlines enforced by the board are not a claim for money and therefore cannot be discharged under bankruptcy law. Citing binding court decisions, Arens said “a regulatory obligation to perform certain acts to ameliorate an ongoing hazard is not a dischargeable debt.”
“If there is money, the regional board expects payment,” Arens said. “As the (water board) has previously made clear, however, its overriding priority has been, and remains, the construction and operation of a wastewater treatment plant.”
The district’s bankruptcy attorney, Jay Michaelson, said certain dischargeable debts like the ones cited by the Attorney General’s Office do not apply in cases filed under Chapter 9, the part of federal law that deals with municipal bankruptcies.
“There is nothing in Chapter 9 bankruptcy code that would make that debt not dischargeable,” Michaelson said. “We have an ongoing obligation not to pollute, but we believe we can discharge the financial obligation.”
The regional water board holds the third largest stake in the U.S. Bankruptcy Court proceeding, according to a list of the 20 highest claims.
The state water board — which oversees the regional agency —also holds a claim for a defaulted $6.5 million advanced from a $135 million state loan to the district. #
http://www.sanluisobispo.com/news/local/story/57915.html
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