“We paid to build it, but we don’t own it”;

By John Perry

If you live in San Juan Capistrano, I am sure you have noticed that your monthly water bills have significantly increased over the past several years. The City has not fully disclosed the reasons for the never-ending upward spiral of the cost of water so I set out to learn why. After reviewing documents obtained through Public Records Act requests, here’s what I found;

Since 2002 SJC water ratepayers have been making payments on a series of bonds issued by our water department for approximately 74 million dollars, at least half of which was spent on infrastructure to build the Ground Water Recovery Plant (“GWRP”). I am still waiting for additional documentation requested from the City to determine how the other half of the bond money was spent.

The documentation indicates that although we paid to build it, we don’t own the GWRP. According to a memo written by then-City Manager George Scarborough and the 2010 Urban Water Management Plan written by City-hired water consultants Malcolm Pirnie and adopted by the City Council, we are only leasing the GWRP for the local water authority, the San Juan Basin Authority (“SJBA”).

At the end of the lease, and after spending 138 million dollars on bond costs, we will turn over the plant and the wells to the SJBA and we will have no more than the 20% water rights granted to us in the first place.

I also learned that with the exception of one year with record rainfall, the GWRP NEVER produced to its design capacity. In other words, it didn’t do what it was supposed to. Rather than holding the design/build firm accountable however, our City let them off the hook, despite the fact that we could have used insurance to help foot the cost of the underperforming facility.

City Attorney Omar Sandoval tried to defend the lease agreement by claiming that this is just a typical business transaction. Left unanswered is how this benefits the ratepayers of San Juan, given the tremendous cost being borne by the 11,000 households whose water bills have increased significantly.

The City Councils’ justification for building the GWRP was that it would make us “water independent”. But we’ll never be water independent since we don’t own it.

Even if the GWRP finally began producing to its design capacity, at what cost? By the end of the lease it will have cost us 138 million dollars. It costs us ratepayers 4.9 million per year just to make the bond payments.

So why make such a terrible deal on behalf of San Juan ratepayers? Although not clearly spelled out in writing, several long time residents I spoke with believe the deal was structured at least in part to provide water capacity “on paper” for the Rancho Mission Viejo Company to gain approval for the massive development they are building east of our City. This makes sense since developers must demonstrate capacity for such services as water and roads.

Whatever the true reason, the San Juan water customers who are paying the bills deserve to know the truth about the GWRP; how it came into existence, what it has cost and what mistakes were made by City Councils and staff that got us into this ongoing mess while accumulating a deficit of 8 million dollars.

This is the first in a four part series about the GWRP. Stay tuned for next month’s installment “The Beginning”, which covers the inception and building of the GWRP.

Editor’s note: We encourage comments from the public and may be reached via email at: eboard@ccsense.com. You may also post comments on our website, under each article.


Anonymous said...

So if we dont own it we cant sell it? How do we get out from under this scam? SJC taxpayers get up in the morning to go to work to support Allevato's boss Tony Moiso's Ranch or support his work base with food,medical,WIC!

Anonymous said...

Who's responsible for making this deal? heads should roll on this one.

Anonymous said...

Hey John, you're wrong.

Editorial Board said...

Dear "Anonymous"-

In response to your comment, "Hey John, you're wrong"; please provide documentation to back up your assertion that Mr. Perry is wrong, and why you believe he is wrong.

Prior to printing the article, we at the Editorial Board reviewed numerous documents, including the 2010 Water Management Plan approved by the City Council and the memo from former City Manager George Scarborough, in which the lease deal was outlined. These documents and others support Mr. Perry's contention that the City entered into a lease with the San Juan Basin Authority in which the City agreed to float the bonds to build the Ground Water Recovery Plant and that at the end of our lease, the City agreed to turn over the facility, the wells, etc that we paid to build.

While no one knows with certainty why the City agreed to foot the bill for building the facility, Mr. Perry did state that Council members over the years have claimed that the Ground Water Recovery Plant would make us "water independent". He also pointed out that cannot be the case if we paid to build a facility that we will ultimately turn over to the San Juan Basin Authority, as supported by the documents. He made no representation about whether the council members believed this statement to be true, he merely stated the facts.

Unfortunately, the City did not have the benefit of foresight so could not know how much the bond debt would contribute to the already hefty debt that the City is now struggling to repay (a combined total of over $150 million at last count).

We are open to being corrected if you can demonstrate where the documentation that he has cited is wrong.

Thank you,

Editorial Board, Capistrano Common Sense

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