San Luis Obispo studies private sewer lateral options as city tracks declining spills

San Luis Obispo staff presented an update to the city’s wastewater collection infrastructure renewal strategy and private sewer lateral programs at a study session where council offered direction but made no formal decisions.

Aaron Floyd, the city’s utilities director, and Chris Lehman, deputy director for wastewater, described the long-range plan and an updated hydraulic model that identifies current capacity-constrained areas. Jeff Pels, a consultant with West Yost, supported the analysis. Chris Lehman summarized the purpose: "This is the long range plan for the collection system," and said the model looks out through buildout to 2035.

Staff highlighted a sharp drop in sewer spills: from a peak of 35 spills in 2021 to one recorded in 2025 so far. That improvement coincided with public and private infrastructure investments, including a Water Resource Recovery Facility (WARF) upgrade and targeted collection-system repairs. The WARF equalization capacity was doubled as part of plant upgrades; staff said WARF-related capital investments tied to this inflow problem total about $5,700,000 and the city averages roughly $1,400,000 a year on collection system work.

The discussion focused on three policy alternatives for managing new wastewater flow from development in constrained areas:

- Continue the current wastewater flow offset program, under which developers offset added flow by paying for private lateral repairs elsewhere in the constrained area; staff also proposed administrative improvements such as a voluntary, anonymous "matchmaking" list of properties willing to have laterals replaced to ease offsets.

- Dissolve the offset program and rely on an inspection-upon-sale requirement that would require lateral replacement if an inspection shows failure (or be coupled with other retrofit triggers).

- Retain the offset program but supplement it with required replacements identified through inspection-upon-sale, and expand the city's voluntary inspection incentives.

Chris Lehman explained the offset approach at a high level: "You generate this much flow. You offset by fixing that much flow. So a net neutral impact on the system." He acknowledged the practical difficulty of matching a developer with multiple private property owners and said staff proposes a new matchmaking/opt-in list to make the process easier.

Public commenters urged different approaches. Local developer Damien Mavis said the matter comes down to "basic fairness" and argued that property owners should be responsible for private laterals; he opposed developers being required to replace unrelated private laterals. Developer and contractor commenters said the offset program can act as a barrier to infill housing and urged inspection-on-sale as a fairer mechanism; the SLO Chamber urged dissolving the offset program and moving to inspection-on-sale. Rachel Whalen of the SLO Chamber told the council the Chamber supports "dissolving the wastewater flow offset program and requiring replacement of private sewer laterals located in capacity constrained areas during the inspection upon sale process."

Staff described existing private sewer lateral programs: a voluntary replacement rebate funded at $420,000 per year, an inspection-upon-sale program that has produced over 1,000 inspections since inception with about 30% rated poor and under 1% classified as failed, and the developer offset program that averages roughly 75 lateral replacements per year. Flood-control and system upgrades have helped: staff noted two formerly constrained areas are recommended for removal from the constrained map based on recent work; a smaller proposed area would remain or be managed via targeted capital projects.

Council members pressed staff for clearer policy tradeoffs. Council member Marks said, "You guys are the subject matter experts," and asked for staff guidance on why council policy decisions are needed. Vice Mayor Shoresman asked staff to briefly explain the offset program and the proposed matchmaking fix. Council members discussed timing for required retrofits if inspection-on-sale were adopted and whether to allow six months to a year to complete mandated replacements so sales do not stall.

Staff asked for direction to proceed: update the constrained-area map for planning commission review and return to council, expand inspection rebates for targeted areas to close data gaps, and refine program details including legal review of potential changes to rebate structure and contracting. Mayor Stewart and council members signaled interest in keeping or refining the offset program rather than immediately dissolving it, directing staff to return with more details and legal analysis. No formal policy change was adopted at the session.

The council and staff agreed to additional outreach to developers, realtors and affected neighborhoods, and to return with more refined options (including cost estimates, legal advice on rebates and in-lieu approaches, and a clearer definition of inspection grading) in a future meeting.