Morro Bay Residents Call for More Oversight of City Staff
by Kari Olsen
Morro Bay residents continue to call for increased oversight of City staff by the mayor and council in light of concerns regarding potential waste of public funds. Residents assert that the City's budget shortfall is a result not only of decreased revenues, but of mismanagement, and have asked that the council pay closer attention to the procedures followed and decisions made by the staff.
Examples of staff decisions cited by residents include awards of lucrative City contracts without a competitive bidding process, the choice and recommendation of a vendor to perform wastewater treatment plant upgrade work, a wastewater treatment plant upgrade technology recommendation, a long-term giveaway of City water, the order of a stream interference study on a dry stream, two boat yard design projects conducted by staff without first ensuring that the planned locations were viable, and the violation of a California Coastal Commission decision.
City Contract Award Process
In recent years, Morro Bay City staff members have awarded a number of contracts for professional services without obtaining competitive bids. Some residents assert that without competitive bidding, taxpayers may potentially pay more than necessary for goods and services. In an 8/28/08 email to a resident, Morro Bay City Attorney Rob Schultz said, "Contracts for professional services are not subject to competitive bidding requirements. see Gov't. Code Section 4526."
Although the code cited does not indicate that competitive bidding is required, it does not state that bidding is not allowed. California government code section 4526 says that contracts for some types of professional services "shall be on the basis of demonstrated competence and on the professional qualifications necessary for the satisfactory performance of the services required." The code further states, " . . . local agency heads contracting for private architectural, landscape architectural, professional engineering, environmental, land surveying, and construction project management services may adopt by ordinance, procedures that assure that these services are engaged on the basis of demonstrated competence and qualifications for the types of services to be performed and at fair and reasonable prices to the public agencies. Furthermore, these procedures shall assure maximum participation of small business firms, as defined by the Director of General Services pursuant to Section 14837."
City contracts awarded in recent years without competitive bidding include those for the nitrate studies on both City well fields, the Ashurst stream interference study, the concession to operate the State Park Marina, and boat yard design services.
Wastewater Treatment Plant Upgrade Contract Process
The staff recommendation to award the WWTP upgrade design contract to Montgomery, Watson and Harza (MWH) has been criticized by residents who question the legality of the process by which the choice was made. The vendor evaluation committee, composed of Morro Bay City staff, Cayucos CSD staff, and a retired City of Pismo Beach employee, voted to recommend awarding the contract to the highest bidder; not the lowest responsible bidder as required by the Morro Bay Municipal Code.
A staff report issued by Wastewater Treatment Plant Manager Bruce Keogh, stated, "It is important to note that the contract award is based on professional qualifications and not the low bid, per the California Government Code (CGC), Chapter 10 of the CGC, Sections 4526-4529 mandates local agencies throughout California to select applicable professional consultant services on the basis of demonstrated competence and professional qualifications." Documentation produced during the evaluation process shows that the evaluation committee considered all five bidders to be competent and qualified.
City of Morro Bay Municipal Code Title 3 requires that contracts go to the "lowest responsible bidder." Some residents assert that a bidder that is "competent and qualified" is "responsible." Based upon statements in Mr. Keogh's report, it appears that staff have treated the state code content as though that code and the Morro Bay lowest-responsible-bidder requirement are mutually exclusive.
The law firm Nossaman LLP has published the following legal opinion on its website: "Local agencies in California are generally subject to a requirement to select design professionals based on qualifications (Gov. Code § 4526), and many agencies are required to award construction contracts to the low bidder. It is possible to meld these two requirements--with qualifications of the designer considered in a prequalification phase of the procurement, and with the contract awarded to the low bidder among the prequalified proposers that have submitted a technically acceptable proposal."
Some residents assert that this opinion indicates that the staff should have recommended awarding of the contract to the lowest bidder, as all five firms were competent and qualified. They further assert that the choice of the highest bidder constitutes a waste of taxpayer funds.
Wastewater Treatment Plant Upgrade Technology Recommendation
The recommendation that staff presented to the Morro Bay-Cayucos Joint Powers Authority (JPA) was for a design using older technology. Newer, more cost-effective, and environmentally-friendly technology is in use in other communities. Some residents have questioned why it was not investigated and recommended by staff.
One firm offering state-of-the-art wastewater treatment facilities is California-based PERC Water. PERC representatives spoke during public comment at the 03/08/10 Morro Bay City Council meeting and were subsequently invited to give a presentation at the Morro Bay Business and Community forum later that week. Forum attendees expressed surprise and concern that PERC Water had not been considered for the contract.
PERC Water representatives stated that they could build a complete replacement wastewater recycling facility from the ground up for about $10 million less than the cost that has been estimated for the facility the staff recommended, and for which design recently began. According to information provided on its website and in the presentation to the Business and Community Forum, PERC guarantees fixed capital cost, operating cost, and delivery schedule for the facilities it builds. Residents assert that no such guarantees were offered in the project contract that the staff negotiated with MWH, and which the JPA voted to award based on staff recommendation.
PERC Water also states that its facilities occupy only a fraction of the land area required for plants that use older technologies, and are "neighbor-friendly," meaning that they produce minimal odor and noise. Residents state that similar claims cannot be made for the staff-recommended project. PERC also advertises that its facilities produce high-quality effluent ready for use in irrigation.
According to PERC Water representatives, dependence on an out-of-date schedule posted on the City website kept them from entering the competition sooner. However, some residents have asked why City staff research did not identify firms like PERC as contenders for the job. They assert that the staff should have recommended a firm that uses technologies with the potential to save taxpayer dollars and provide a more efficient and neighbor-friendly facility. PERC wastewater recycling plants have been in operation for over 10 years in Arizona, California, and New Mexico.
Some residents stated that although they have seen no proof that there was improper influence exerted, two documented facts have raised additional concerns. The first is the fact that a member of the evaluation committee that recommended MWH is a former MWH employee. The second is the fact that the Mayor's brother is the CFO of an MWH sub-contractor working on the project. The Keogh staff report that contains the recommendation to award the contract to MWH appears to indicate that the firm was involved in developing the MWH proposal. The report contains this statement: "MWH brought in RRM Design Group early in the process and the review committee thought MWH presented the best overall vision for the project and its surrounding environment." MWH documentation names RRM Design Group as one of its "Teaming Partners" for the Morro Bay project. Some have stated they would have preferred that Wade and Peters recuse themselves from any decisions due to their connections.
City Water Giveaway
For many years, the City of Morro Bay has provided free City water to the Roandoak communal living facility, located outside City limits on Chorro Creek Road. The water was given in exchange for the right to use City well 9A which is located on Roandoak property. However, the City does not use well 9A and residents assert that taxpayers have received nothing in return for the gift of water to the facility.
On August 10, 1982 the City of Morro Bay entered into an agreement with Roandoak to "extract water from the existing well and any future wells the City may drill on the property." In exchange for the use of the water from City wells located on Roandoak property, the City agreed to supply water to Roandoak, free of charge, from the existing or any future wells located on the property, domestic water for residences and adjoining structures in an amount not to exceed 1,100,000 gallons per month, prorated on a daily basis.
An email dated 1/28/2008, from Morro Bay staff member Bill Boucher to consultant Timothy Cleath, addresses the issue: "Good morning. a random matter has again arisen. we acquired chorro well 9A via an agreement with roandoak of god. in exchange for use of this well we give the property 1 million gallons per month of free water and grazing and recreational rights to our adjacent 5 acre parcel. it may be time for us to terminate this agreement and i'd like your input on what you think the loss of well 9A would mean to us over the long haul. we've not really used this well for quite a few years and assessing it's worth is timely. b" There is no evidence that the City pursued the matter further at the time.
The only City well that has ever existed on Roandoak property is well 9A. Contrary to the agreed terms, the water supplied to Roandoak for domestic purposes was not from well 9A. Instead, the facility has been supplied with City water. Well 9A has not been used in recent years by the Roandoak or by the City.
Until the issue was raised by residents, no action was taken toward terminating the agreement. Recently the issue was brought to the City Council, which voted to initiate termination proceedings. Meanwhile, Morro Bay water customers have unknowingly paid the water bills for the controversial facility.
Stream Interference Study of Questionable Value
In late summer, 2009, a staff-ordered stream interference study was conducted on a dry stream. Residents have questioned the purpose and value of the project.
For about two weeks in late July and early August, 2009, Cleath-Harris Geologists personnel were observed working with Morro Bay City staff in the Ashurst well field, located near the end of Chorro Creek Road. Their observed activities included installation of rented and permanent pipes and the pumping of over 2 million gallons of water from the wells. The water was dumped in a nearby field.
This action was subsequently found to have violated California State Water Resources Control Board (SWRCB) decision 1633, which states in part, "'For the protection of fish and wildlife habitat and other public trust resources in Chorro Creek and Morro Bay, beginning when deliveries are available from the State Water Project Permittee shall: Cease all diversions from wells 9, 9A, 10, 10A, 12 and 16 or from any wells constructed and operated as replacement wells for the Ashurst well field, whenever surface flow measured in Chorro Creek downstream of the Ashurst well field is less than 1.4 cubic feet per second."
At the time of the July/August activity at the well field, nearby residents observed and reported that the surface stream flow was zero. The stream was completely dry. When residents reported the activity at the well field and the lack of surface stream flow to the City Council, the test immediately stopped. To date, no report on the study has been provided by the consultant who conducted the test. Invoices from Cleath Harris Geologists and an equipment rental firm included charges totaling $32,008.
Meanwhile, Chorro Valley resident John Jones noticed that the City had been running well 11A, near the end of Canet Road, for long periods during dry conditions. This also violated SWRCB decision 1633. A complaint was filed with the SWRCB Water Rights Division. The City hired the firm of Ellison, Schneider & Harris L.L.P. to assist in dealing with SWRCB Water Rights investigators. Invoices from the law firm to date total $46,196.00.
The SWRCB investigation has been temporarily suspended due to the retirement of the investigator who was working on the case, but assessment of financial penalties against the City for violation of Decision 1633 is still possible.
Redevelopment Feasibility Study at Odds With Financial Consultant Recommendations
In May, 2008, Management Partners, Inc., a financial consulting firm, issued its study, "City of Morro Bay, CA Assessment of City Organization and Financial Options". The study was commissioned to help the City deal with its budget shortfall.
On page 83 of the study, the consultants state, "All economic development programs require years of effort and investment with important actions to be taken at critical moments. The City must position itself in advance to take the appropriate actions as they present themselves. The greatest opportunity for improvements is the development of the power plant site and the Chevron properties. Activity at the Chevron property is already slowing, making sale of the property likely."
Recommendation 37 from the study advises formation of a redevelopment agency. Recommendation 38 states, "Proactively develop a strategic plan to redevelop City-owned harbor property, the power plant, and Chevron properties. With the reduction of activity in the Chevron property and its plan for eventual sale, the City must act quickly to define a redevelopment area in order to create tax advantages for its eventual redevelopment. That tax incentive may be a critical element in attracting developers to the site."
City staff issued a request for proposal (RFP) for a redevelopment agency feasibility study and the consulting firm Urban Futures, Inc. was chosen to do the work. The guidance given to Urban Futures consultants by City staff does not appear to have focused on the properties recommended by the financial experts. In their formal proposal document, dated August 27, 2008, Urban Futures consultants stated, "City staff has provided UFI with an exhibit showing an "area of interest (included here as Attachment B). This proposal is based upon the geography included in the area of interest. With proposal preparation in mind, UFI staff met with City staff, and participated in a preliminary field reconnaissance of the area of interest and other areas of the community."
The areas of interest highlighted on Attachment B consist primarily of residential neighborhoods. In the end, the areas appearing in the final Redevelopment Feasibility Study were mainly residential. The power plant, Chevron, and City-owned harbor properties targeted by the Management Partners consultants were missing.
Residents complained that the Redevelopment Feasibility Study criteria for identifying "blight" (such as irregular lot shape) were seriously flawed, and protested the focus on residential areas. The residents demanded that the project be scrapped. Bowing to public pressure, the City Council canceled the project. The rejected study cost approximately $80,000
Failed Boat Yard Projects
Since the original Embarcadero boat yard was shut down and replaced by a shopping center, the Morro Bay Harbor Department has attempted, for approximately 13 years, to find a new site for the facility. Twice during that period, after time and money were spent on facility design, it was discovered that there were serious problems with the intended locations.
In the first attempt, about two years and $40,000 were spent on the planning and design for a facility to be placed at a location that was later discovered to be owned by the power plant. A 9/20/07 memo from the Harbor Director to the Harbor Advisory Board, subject "Boat Repair/Dry Storage Facility Development" states, in part, "At your August meeting, we noted that the Coastal Commission has determined that virtually all of the property west of the MBPP is environmentally sensitive habitat (ESH). The City disputes this designation, but we must recognize that this could preclude any development anywhere except in the areas that are currently developed, i.e. Coleman Park. Since the August meeting we have determined that the City did not acquire all of the old Den Dulk property when we reached the overall settlement agreement with the MBPP. The MBPP owners retained the middle parcel. This complicates proceeding with a boat repair/storage facility on this middle parcel".
A subsequent project ran into similar trouble. At the 10/26/09 City Council meeting, in response to questions posed by Councilmember Smukler, Harbor Director Rick Algert responded that the latest boat yard project had run into trouble when the California Coastal Commission (CCC) stated that the target location was in ESHA.
The subject was discussed in the 2/04/10 Harbor Advisory Board meeting. Board member Luffee inquired about the location of the yard in ESHA, and was told that the Coastal Commission assigned the ESHA designation to any dune system, and that all or most of the proposed boat yard project was located on the dune system. It was noted that the only way the project might be placed in the currently targeted location would be to determine mitigation projects or tradeoffs. The Coastal Commission had recommended locating the facility elsewhere
At the same meeting, Mr. Algert stated that "the project did not qualify for last year's stimulus funds due to lack of readiness". When asked by Board member Cunningham if the project would have received stimulus money had it been ready, Algert stated that was likely because "this is exactly the type of project that was being funded."
The Board voted to continue moving forward with the project, but to cap expenditures at $25,000 for the current fiscal year.
Un-permitted Embarcadero Road Extension Widening and Storage Yard Construction
In November, 2009, a resident complained to the California Coastal Commission (CCC) about the widening and paving of the Embarcadero Road extension and the establishment, near the end of the road, of an un-permitted Harbor Department storage yard in ESHA. The CCC official contacted regarding the complaint stated that it will be investigated the next time CCC personnel are in the area.
In March, 2006, the CCC approved a permit, with special conditions, for the Harborwalk. Conditions included restriction of the Embarcadero Road extension to a maximum width of 22 feet.
A CCC staff report accompanying the Harborwalk permit application states, in part, "The City has indicated its opposition to the requirement that the extension of the Embarcadero roadway be limited to a width of 22 feet, on the basis that, at some time in the future, the City would like to improve the Embarcadero extension and include adjacent bike paths, for an overall width of about 32 feet. In light of this future project, the City would like to construct the portion of the Embarcadero extension as part of this project to the same dimensions. Several problems are raised by this proposal. First, it will increase impacts to adjacent dune habitats beyond that which is necessary to accommodate the currently proposed project. Second, the proposed future improvements were previously considered by the Commission and recommended for deletion in the Commission's comments to the California Energy Commission regarding proposed upgrades to the Duke Energy Facility. Third, it is premature to assume that the Commission will approve the future roadway expansion, particularly in light of its ESHA impacts and prior reviews. Therefore, the commission is not in support of the City's request to allow the Embarcadero extension to be constructed to a width of 32 feet."
In June, 2006, three months after the CCC decision was issued, a resident observed heavy equipment on the Embarcadero Road extension and learned that the roadway was being widened and paved with "red rock". The resident took photographs of the work in progress. At present, the width of the roadway is approximately 42 feet.
More recently, residents also noticed that a Harbor Department storage yard had been established near the end of the Embarcadero Road extension. They questioned whether the Harbor Department had obtained the proper permits to set up the facility in ESHA.
In answer to a resident request for documents showing that the City was permitted to widen the road width in excess of 22 feet, and to build the storage yard near its end, the Morro Bay City Attorney indicated that there were no such documents.
In reference to a map showing the location of the storage yard, he stated, "The area represented by the red rectangle on your map has been used historically for City storage. The construction contractor for the Harborwalk project made use of this existing City storage area during construction as their lay down and storage area. The storage area has not increased in size and has historically been used for City impounds from the Harbor Department." The resident was also informed that there were no NPDES permits obtained for the roadway project.
Residents subsequently informed the City Council of their findings, and provided them with the photographic evidence from June, 2006. Some of the photographs are of the area where the storage yard is now located. They show that there was no storage yard there at the time. Residents stated that the photographic evidence constituted proof that the yard had to have been constructed after the June, 2006, and thus was not an area that had been "historically" used for storage purposes.
Destruction of ESHA and violating a CCC order could subject the City to financial penalties and force taxpayers to shoulder the costs of restoring the damaged habitat.
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