Audit Report Critical of Financial Staff

By Jim Reardon 

In what is perhaps the most detailed insight into why our water bills are so high, the independent audit report by Ralph Anderson & Associates reveals a debt-ridden, mismanaged water enterprise that has been operating inefficiently and in the red for many years.

The report is especially critical of financial staff led by CFO Cindy Russell, stating;

- "It appears that cash balances of the fund were not completely disclosed to the governing body in such a manner that they would understand that there was a deficit of over $5 million [estimated at $8 million] at the end of FY 2010" 

- "The city should determine if the existing staff has the time and/or the ability to accurately forecast operating results of the water utility and if not, bring in outside competencies." 

- "The issuance of debt (bonds) appears to have occurred without consideration of the impact of increased expenses of these (bond) issues." 

The audit report also addresses the “papering over” of debt, stating,
"The city should not rely on 'one-time' resources including the CHEVRON settlement to 'paper over' the underlying financial issues faced by the utility." Our City has a long-standing practice of “papering over” debt with borrowed money. As has been stated to the Council at numerous meetings, this is like paying a credit card with a credit card and has no doubt contributed to the more than $150 million City debt we now have. To read the entire report, click on this link: .

The report goes on to state: 

"The water utility has not been operating efficiently from a financial perspective as it continues to have substantial losses and has not met operating expenses with operating revenues… This has also resulted in substantial amounts of property taxes and developer fees being used to provide operating capital instead of providing a source of revenue for ongoing infrastructure projects." 
- Audit Report by Ralph Anderson & Co.

An Open Letter to San Juan residents about Water

By Roy L. Byrnes, M.D, former Mayor, San Juan Capistrano 

I’m plenty mad and you should be also. You and I have been betrayed; entrapped in a water scam. We’ve been deceived into paying extra, unwarranted charges for our water. I’m referring to the excessive costs of making our own water from the Ground Water Recovery Plant (GWRP). This is an ill-conceived political boondoggle which costs us about $1,600 to produce one acre foot of water when that same acre foot of water can be bought from the Metropolitan Water District for $861 -- . $700 per acre foot being thrown away! Multiply $700 by 4,800 acre feet annually and you’ll see that we’re throwing overboard about $3.4 million due to incompetent City Hall leadership and political shenanigans. Have you looked at your water bills recently? If you think it’s bad now, just wait; it’s bound to get worse.

How did this happen?

Our leaders were told (and foolishly believed) that our city should have its own “private” source of water from its own private ground water recycling plant in the event that some event (political? sociological? or drought?) should cause the Metropolitan Water District (“MWD”) (which is the source for 90% of Southern California water), to sharply curtail our allotment.

I believe the truth is different. If the MWD is forced to drastically reduce its water allocation, our allotment would be reduced by the same amount of water we’re currently producing with our water plant. So, in the event of severe water restrictions, San Juan Capistrano will be just as “dry” as neighboring cities –with or without our water recycling plant.

Keep your emails and letters coming!

Of all the letters and emails received from CCS readers, the high cost of water is the most common. The stories are eerily similar; residents receive an unreasonably high water bill and when they complain to the City, they are visited by a City employee who tells them they must have a “slab leak”. After paying a leak detection service to determine there is no slab leak, the City threatens to shut off their water service if they don’t pay the outrageous (and what in many cases appears to be unjustified) water bill.

Sound familiar? If so, we want to hear from you! Please email us at: and let us know how much your water bill has increased and whether you were told by the City that you must have a “slab leak” only to find that you do not.

Here are some excerpts from recent letters and emails received from CCS readers about their water bills:

"Kudos to you for exposing the ridiculous and apparently illegal billing system!" 

"The city's "tiered" water billing system is as phony as a $3.00 bill. I think the City is trying to balance their budget on ratepayers like me."

SJC residents announce formation of the Capistrano Taxpayers Association

A group of local residents recently announced it has filed for incorporation of a new non-profit public interest organization, the Capistrano Taxpayers Association (CTA).

The organization was the brainchild of local residents who have an interest in assuring that governing bodies comply with State and Federal regulations and legislation such as Proposition 218, the tiered water billing system and the Brown Act, among others. The CTA intends to challenge elected officials and bureaucrats who spend taxpayer monies to assure that the public interest is protected.

In addition, the group plans to monitor the voting records of elected officials especially with respect to taxation issues and will provide a “report card” to voters to use as an election guide.

The CTA will offer Associate Memberships and will seek to build a legal defense fund through contributions from individuals and businesses. Please visit their website at:  for more information.

The Ground Water Recovery Plant-Part III

This is the third installment of a four-part series
The mid-years: 2005 to 2008 

By John Perry 

In 2004 the City signed a 20-year contract with ECO Systems Corporation to design, build and operate the Ground Water Recovery Plant (“GWRP”). The operation phase was for a fixed price of $1.1 million per year (plus a cost of living escalator). ECO Systems was to produce 4800 acre feet (AF) of water, maintain the facility and fix any defects that might appear. The City thought it carried little risk as special insurance purchased by the City would pay off the $35 million bond owed to the San Juan Basin Authority (SJBA) if the contractor defaulted on the contract and the project would be terminated.

Due to record rainfall during the winter of 2005/06 the GWRP generated its design standard of nearly 4800 AF of water, but in 2006/07, things began to go badly. Under the contract, ECO Systems was required to drill 8 wells to supply the GWRP with enough water to produce to its design capacity, but two of the wells drilled were not viable and the contract required the City to cover the cost of drilling any additional wells. The City Council voted against drilling the 2 additional wells, instead relying on just 6 wells to supply the water needed to operate the GWRP. This was a costly mistake since the GWRP barely produced to capacity even with record rainfall.

The decision to supply less water than what was needed sealed the fate of the GWRP. The contractor could not be penalized for failure to meet the design output and the City was forced to purchase water from the Metropolitan Water District (“MWD”) to make up the shortfall. This cost the rate payers millions of dollars and during the period 2002 to 2008, water rates increased by 71.58%.
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