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The city of San Juan Capistrano will begin negotiating the transfer of its water utilities with Santa Margarita Water District.

During its meeting on Tuesday, Feb. 19, the City Council unanimously selected Santa Margarita for exclusive negotiations in regard to the city’s efforts to annex its water and wastewater services.

Dan Ferons, Santa Margarita’s general manager, said the agency is excited for the opportunity to continue working with San Juan Capistrano. He believes the two entities already have a good relationship based on the two working on a local watershed project and because the district is currently contracted to provide water-metering services.

“We think we have a good long-term relationship with the city, we think that we are a good partner and make a good fit, so we’re excited to get to this next step,” Ferons said following Tuesday’s meeting.

Because of increasing costs and the difficulty of providing water and wastewater services, the city has been looking to transfer its Utilities Department to another agency. In April 2016, the council enlisted the help of the Orange County Local Agency Formation Commission (LAFCO) to look into restructuring options under a Municipal Service Review.

LAFCO found that since 2014, the average monthly rate per household has risen by roughly 16 percent, with ratepayers currently paying a monthly average of $146.

City Council, in 2014, approved 5 percent increases in water bills for each of the five subsequent years.

Councilmember Derek Reeve warned that if the city doesn’t transfer its water utilities, ratepayers would see a “dramatic rate increase” on July 1, 2020. Rates would need to be increased, he explained, to pay for capital investments to the utilities infrastructure.

“That would not happen if we transfer the utility to a facility that specializes in running a utility,” Reeve said. “It is in the best interest of the residents to let (an agency) run this utility.”

Santa Margarita was one of three agencies looking to take over water services from the city. Moulton Niguel Water District and South Coast Water District were also in the running.

While the councilmembers spoke highly of all three agencies, they leaned toward Santa Margarita.

“I’ve actually been a customer of Moulton Niguel, and they’ve provided exceptional customer service at a low rate. … I’m more inclined to move forward with Santa Margarita,” Mayor Pro Tem Troy Bourne said, later explaining, “I’m actually inspired a little bit by the approach to increasing and diversifying our water supply here locally. … In my gut, it feels right to try to conserve everything we can here locally and use what we can here locally.”

Currently, Santa Margarita and South Coast are working with San Juan Capistrano on the San Juan Watershed Project, an endeavor that includes many other agencies and nearby cities to capture local stormwater runoff. When completed, the Watershed Project will provide 5.6 billion gallons of reliable water for 50,000 families each year. The project is also expected to utilize the city’s Groundwater Recovery Plant.

Initially, the council was expected to select an agency to negotiate with during its previous Feb. 5 meeting. However, after listening to the concerns of the public, councilmembers agreed to hold off on the decision for a couple of weeks.

Ken Al-Imam, the city’s chief financial officer, had previously explained to the council that the negotiations phase of the water annexation process is expected to take approximately six months to complete.

Reeve stressed on Feb. 19 that selecting Santa Margarita for negotiations doesn’t mean a final decision has been made as to which agency will absorb the utilities department. If the negotiations between the city and Santa Margarita fall through, Reeve added, the council will move on to another district.

“We are going to have a few months to have very intense negotiations and getting down to brass tacks, if you will,” Reeve said.

This story has been updated to correct the spelling of Dan Ferons’ name. 

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