Chico is facing potential litigation related to properties outside of city limits being connected to the sewer system without authorization.

The Butte Local Agency Formation Commission oversees boundary changes to cities and local districts. In a letter to the city manager, the commission said that 62 properties were illegally connected without approval.The issue was brought before the City Council at its Tuesday meeting.

The commission gave an ultimatum to the council in December, asking them to come up with a plan by Jan. 3.

It proposed two options to solve the problem or said legal action might be considered: the city could either enter into a master agreement that would annex the Chapman, Mulberry, Forest Avenue and East Lassen Avenue unincorporated areas, or the unauthorized connections can be addressed one-by-one.

Both options are untenable for the city right now, said Mark Wolfe, community development director.

“The fact is that right now, we don’t have the staff to do that,” Wolfe said. “In addition, the city isn’t in a position right now to consider taking on the fiscal obligations that would be part of these island annexations.”

The commission’s request seemed unreasonable considering the short time frame allotted and that the fact that city has had major changes to the staff over the last few years, said Vice Mayor Mark Sorensen.

“When I read this letter, to say that I had a negative reaction is a massive understatement,” Sorensen said.

Council member Mary Goloff suggested a summit to engage with the commission, and sit down at the table to find a solution that works for both parties.

“This latest letter is kind of a demand letter and I’d like to think we can back up a step,” Goloff said.

A representative from the commission, Executive Officer Stephen Lucas, countered that a lot of time has been spent trying to solve these annexation issues.

“The commission is at the point now — after 3 plus years of working through this –that they feel like that dialogue has already occurred,” Lucas said.

The City Council directed that the staff pursue a different solution but no specifics were provided.

Also on Tuesday, the City Council unanimously approved new labor contracts for four of the city’s nine employee unions. The savings to the city over the next two to three years is over $2 million, said Mark Orme, assistant city manager.

The majority of those savings come from the firefighters union – about $1.8 million over the next three years. Employees are taking a major hit, Orme said.

“It shows the amazing ability for our employees to step up when needed,” he said.

Bill Hall can be reached at [email protected] or @thebillhall on Twitter.