By Jennifer Grimes

Triplicate staff writer

An investigation into the Pacific Shores Water District has been dropped by one state agency, but will continue with two agencies capable of shutting it down.

Last year the California Coastal Commission, the State Attorney General's Office and the Local Agency Formation Commission began a probe into the operations of the water district, located in Del Norte County near Lake Earl and Kellogg Beach.

In question is whether the water district is spending tax money legally and whether the district is operating outside of the initial permit granted to it by the Coastal Commission and LAFCO.

After some months, legal counsel for the Coastal Commission advised the investigation stopped because the district's possible violations of the law were not in its jurisdiction.

The Pacific Shores Water District was formed along with its board of directors about 14 years ago, purportedly to develop and provide water and sewer service to the undeveloped Pacific Shores Subdivision.

So far, the water district has not achieved that goal, despite 14 years of collecting taxes from lot owners.

andquot;No permit was issued allowing them to exist as a water district from the commission,andquot;so the commission has no say on the district's legality, since it hasn't built anything in the coastal zone yet, said Jim Baskin coastal planner for the Coastal Commission.

Instead, the group got a temporary permit from the Coastal Commission and conditions were set before a formal permit would be issued.

One of those conditions, said Baskin, was the completion of a special study to determine the subdivision's environmental condition and development potential.

andquot;They never did the special study to determine whether buildings could up,andquot; therefore no permit was issued, said Baskin.

Though the water district was required to get such a permit back in the 1980's when it formed, it is now not a requirement as long as no construction is involved.

So the Coastal Commission is out of it.

The Local Agency Formation Commission (LAFCO) and the Attorney General?s office, however, are charged with investigating any wrongdoing.

LAFCO both allows service district's to form and initiates the forceful disbanding of districts. The Attorney General's office would prosecute any cases of fraud or misuse of taxpayer money. Both agencies will continue the probe.

A few specific circumstances are or will be under scrutiny by the Attorney General?s office, according to Baskin:

? Whether the amount of tax assessment the district charges is excessive.

? Whether the tax money is spent or saved for the purpose of installing a water system.

? Whether tax money the district collects can be spent on the legal fees it has incurred from two different lawfirms in its mission to sue the state and Del Norte County Board of Supervisors over the rising waters of Lake Earl.

? Whether the tax money can be spent on attorney's hired to file an application with the Army Corps of Engineers to breach Lake Earl.

? Whether it's appropriate for the board members of the district to reside in Southern California and purportedly hold monthly meetings there, far outside the actual area the district it is designed to serve.

LAFCO will begin an evaluation and review of every services district in Del Norte County, but only after Gov. Gray Davis sets guidelines for the reviews.

Members of the Del Norte LAFCO include Crescent City Council members C. Ray Smith and Jack Burlake and county supervisors Jack Reese and Clyde Eller with citizen at large Donald Micheletti.