Law of Unintended Consequences The following is a letter recently read into the record at the March 9th CSD meeting by Rob Shipe, one of the Los Osos 46 CDO recipients. He brings up some important points that all people living in the prohibition zone of Los Osos should pay attention to. I found it telling that he notes that he discussed some of "these issues with the Water Board's prosecution staff and their response is they don't know and this is not their intent. " That remark alone should cause red flags to fly out of everyone's pockets and go down on the field. . . . didn't know and not their intent. As Rob notes, there will be a meeting March 13 of fellow CDO folks and for all interested parties (which includes most of Los Osos.) Dear Neighbor,
We are writing you regarding the proposed Cease and Desist Orders (CDOs). Like you, we are defendants in the Regional Water Board’s attempt to issue CDOs against individuals. We are residents of Los Osos, who love our town. We were not a part of any pro or anti-sewer group, or pro or anti CSD group. We have stayed on the sidelines in the past, but now, like you, we have been drafted into this situation with the CDOs.
In researching this issue, there are a several items we want to share with you regarding the proposed Cease and Desist Orders. CDOs are intended for businesses polluting our water, not residences using a septic tank. Even if you have no issues with pumping your septic tank every other month, there are other unintended consequences of accepting the CDO on you and your property.
We have spoken with local banks and mortgage brokers. Some lenders will not grant a loan against a property with a CDO. Of the one’s that will, the general consensus is that while they will normally loan up to 75% on a loan to value ratio, with a Cease and Desist Order on your property, they would most likely only approve a 40% loan to value ratio. In addition, appraisers believe that properties with a CDO attached will definitely see a drop in value. For example, a home with a $500,000 value would normally be able to borrow up to $375,000. With a CDO attached, the lender would only approve a $200,000 loan at the same value. However a 20% decrease in property value would further decrease that amount to $160,000. That will be $215,000 you will no longer be able to borrow against your home. 
The ability to get a loan will also affect a potential buyer's ability to purchase your property. Homeowner's who wish to sell will have to deal only with individuals who can afford to put 60% of the value as a down payment. This would effectively stifle demand and further lower your property value.
The State Water Code prohibits anyone with a CDO from entering into contracts valued over $5000, with the State. In the Water Board's random sampling of 50 Los Osos properties, no conventional businesses inside the prohibition zone were named as a defendant. However, there are many home based and small business owners that live within the Prohibition Zone. If these CDOs go into effect, this will threaten the livelihood of business owners in our community.
Having a CDO on your property puts you just one step away from fines up to $1000 a day, assessments, and other issues we have not yet discovered. You may not be concerned with these issues. You may not own your own business, you may not be interested in selling your home and you may not need to refinance -- now.
What about in the future? This Order, once placed, will remain in effect until the Water Board chooses to release it. Where will you, or your heirs, be at that time? Will you need to refinance to connect to the sewer? What about your neighbors? Do they own a business? What if they have to sell their home? Their potential profit will be decreased and your new neighbor will be purchasing undervalued land with large amounts of cash. We are only the first wave. Your neighbors will be next.
Our intention is not to scare you, but rather to inform you. We did not understand these consequences. Neither did the Water Board. We have addressed these issues with the Water Board's prosecution staff and their response is they don't know and this is not their intent.
The Water Board took this path because they wanted to wake up the community. We are now awake. Are you? We are committed to working with the Water Board and all others willing to clean up the water in Los Osos.
We are not trying to pick a fight, but we cannot continue to stand by the wayside. We believe there are better ways to address the concerns of the Water Board. According to their own Water Quality Enforcement Procedures, there are other avenues to achieve the same outcome without the unintended consequences of Cease and Desist Orders.
We are writing to inform you of these unintended consequences of a Cease and Desist Order placed on you and your property. Even if you agree to pump, you should make sure the Cease and Desist Order is not used as the method of enforcement. We are working to stop the Cease and Desist Orders unintended consequences on everyone’s behalf. We could use your help, even if it is only one more voice on April 28th saying that Cease and Desist Orders are not the way to enforce this. The CDO is a heavy-handed enforcement tool designed to punish businesses and governmental bodies, not individuals.
If you have any questions, we will be happy to try to answer them. Our contact info is below, or you can meet us at Sunnyside Elementary School, 880 Manzanita St., on Monday, March 13th at 7 pm. We are working with other Los Osos Residents in addressing these issues. We look forward to talking with you soon.
________________________________ ________________________________Rob Shipe, CDO Defendant Tim Rochte, CDO Defendant
507 Highland Drive
Home office: 528-6772
Rhian Gulassa, CDO Defendant Jim Salio, CDO Defendant
 Before CDO After CDO Available Loan Amount
Home value $500,000 Pre CDO Value $500,000 Pre CDO $375,000
Pre CDO L:V x 75% Less value (20%) -$100,000 Post CDO -$160,000
Available $375,000 Post CDO Value $400,000 Equity no longer $215,000
Loan Amount Pre CDO Post CDO L:V x 40% available to borrow
L:V = Loan to Value Loan Amount Post CDO