By City Councilman John Perry
The San Juan Capistrano City Council has initiated a study with legal and engineering consultants to investigate possible alternate structures for the city’s current Utility Services Department. Over the last decade, it has become difficult and costly to meet regulatory requirements imposed on cities and special districts that provide water, wastewater and storm water services. Many cities have opted to explore alternate ways of continuing these services.
The current City Council set three goals for its study to see if it’s possible to:
- Reduce current water, service charge and sewer rates.
- Minimize future water rate increases.
- Improve the level of service for all customers.
The city of San Juan Capistrano has a particular problem that is not easy to deal with. In 2004, the City Council, at that time, decided to build a ground water recovery plant (GWRP) that would tap into the aquifer that lies beneath the San Juan Creek. The water in this aquifer is highly contaminated with minerals and salt that must be removed before the water can be used for human consumption.
The water in the basin is managed by the San Juan Basin Authority (SJBA) through a permit issued by the State of California. The funding to construct the GWRP was obtained through a sale of $35 million in revenue bonds by the SJBA. In 2004, the city signed a 35-year lease agreement with the SJBA to operate and maintain the GWRP. The annual lease payments of over $2 million are part of the water rates paid by city water customers. The city doesn’t own the GWRP; it leases it from the SJBA for a 35-year period then has an option for another 35 years at $1 per year.
The GWRP has been in operation for 11 years and has consistently produced water that is more costly than that available from the Metropolitan Water District. Past City Councils justified the additional cost of the GWRP production as being necessary to supply the community with local water during earthquakes and drought.
Now, in an epic drought, the plant is able to produce only a fraction of its capacity because of the low water levels in the aquifer. The water rates required to pay the lease to SJBA, coupled with the ever increasing cost of production to run the plant, have increased at nearly 10 percent per year over the last 10 years with no end in sight. The water rates in San Juan Capistrano are significantly higher than the surrounding water districts.
How can the City Council goals for its study be achieved? What are the alternates considered in the study?
- The existing water system could be annexed to a nearby larger water district to achieve economies of scale to spread the cost of the water utility, including the bonds, to a larger base of customers.
- The existing water system could be leased to a nearby water district with the city retaining ownership but having the expertise of the water district to more efficiently operate the system.
- The city could regionalize the utility with other San Juan Basin members to spread the lease payments and operational costs. All members would share the water production as part of the Joint Powers Authority.
When all of the study results are finalized, the City Council will determine the best alternate with full public involvement and guidance along the way.