The Phantom Bond

Clint Worthington

In February 2010 the City increased our water rates to pay for an $18 million bond that was to be sold to raise money for improvements to our water enterprise. By May, 2011 the City had collected $1,663,000.00 from SJC water users to re-pay the bond debt.

There's only one problem; the $18 million water bond was never issued, yet the City continues to collect around $111,000 per month from SJC water users to pay for the bond that was never issued.

At the May 3, 2011 City Council meeting, four of the five council members (with Councilman Reeve dissenting) voted to approve transferring the $1,663,000 collected for the never-issued water bond from the City’s Water Enterprise Fund to the City’s general fund.

The City has never reduced the water rates and is still collecting from the water users to pay for that $18 million bond that was never issued.

Common sense and Proposition 218 require that when monies are collected for a specific service and they are not used for that service, they must be returned to the original fee payer. Despite repeated requests, the City has never returned the $1,663,000 to the water users that it collected, nor has the City reduced the water rates that were originally raised to pay for the $18 million bond.  If you are wondering why the bond was never issued, the May 3, 2011 City staff report to the City Council stated that they will not be able to issue the bond because the Water Enterprise fund is not financially able to pay the bond back as all of the fund reserves are gone and in fact, the fund is $8.2 million in the red.

Let me recap this for you: The City raised the water rates to collect for a bond. The City is financially unable to issue that bond (They can't qualify for the loan) and took the money collected for the bond and put it in the City’s general fund. The City has refused to refund the money to the water users and continues to collect the money for the bond that was never issued.

Does this bother you as much as it does me? If so, be sure to join us at the “Meet & Greet” with Constitutional Law Scholar, Political Science Professor and current SJC Council member Derek Reeve on June 10 (see flyer inserted into this issue for details) to discuss what can be done about this increase to our water rates.

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