Taxpayers Watch, a vocal political opponent of the Los Osos services district board, said it would settle a lawsuit against the agency as part of a plan that would give the county control over the town’s contentious sewer project.

But the citizens group said it would continue fighting for the dissolution of the Los Osos Community Services District should the plan, and its accompanying legislation by Assemblyman Sam Blakeslee, R-San Luis Obispo, fail.

Taxpayers Watch — made up in part by district board members ousted in a Sept. 27 recall — gathered enough petition signatures to trigger a Local Agency Formation Commission hearing on whether to dissolve the district, which could lead to an election on the issue. A hearing is set for July 6.

The group also successfully challenged Measure B, a plan approved by voters in the same election that blocked the agency from building a sewer plant on a contested midtown plot.

District officials say they will appeal that ruling.

If the district settles with Taxpayers Watch instead, the group would decrease attorney fees the district would have to pay the citizen group from $30,000 to $25,000 as part of the settlement, according to spokeswoman Joyce Albright. It’s customary in settlements to have one side pay for attorney fees.

If the district were to lose in court, a judge could require it to pay higher attorney fees.

Albright said that at the July hearing the group would ask the commission charged with potentially dissolving the district to wait until August to decide.

"I think this is really encouraging," Blakeslee said. "It would be easy to retain an adversarial posture. They wouldn’t be willing to stand down unless they really believed in this (proposed plan)."

District board member Julie Tacker declined to speak about Taxpayers Watch’s announcement, but said the public would tell the board how it should proceed when Blakeslee’s legislation is finalized.

Blakeslee’s plan would give the county control over the project, solve funding and regulatory concerns for the county, and protect taxpayers countywide from sewer construction costs and the district’s estimated $40 million in debts and 17 lawsuits.

Go to sanluisobispo.com to see the letter from Taxpayers Watch supporting Assemblyman Sam Blakeslee’s bill.