San Juan Capistrano residents will see an increase in their water rates next month as the Santa Margarita Water District’s Board of Directors voted Wednesday, Aug. 2, to implement new charges for services, while also greenlighting plans to initiate a new water rate study.
In a unanimous vote, the board adopted a resolution to impose the adjusted charges on San Juan’s ratepayers this month for potable water, recycled water and wastewater services, with the new rates being reflected in water bills this September.
The rate increases, which are based on a Cost of Service and Rate Study, are expected to provide the water district with an overall revenue increase of 7% each year for the next three years, which officials argue is necessary to help fund overdue capital improvement costs to San Juan’s water system infrastructure.
“We have about $40 million worth of capital improvements over the next few years,” SMWD General Manager Dan Ferons said Wednesday night. He added that the district has about $23 million in reserves.
“So, we are looking at this process, looking forward to how we create enough money to keep the system operating and also get it back up to speed as to how it should be maintained,” Ferons said. “It has been underfunded for the last five or six years.”
Addressing the question of what kind of fiscal impact the district faces by further delaying increases, Ferons said ratepayers would eventually see an even greater increase down the road.
It “primarily means a greater increase in the future as you’re going to catch up,” Ferons said. “So right now, we’re looking at a 7% average increase—varies as we mentioned—but it’d be about $11 per month in residential customers on top of what we’re already proposing if we don’t do the rate increase now.”
The adjustment of rates comes nearly two years since the City of San Juan Capistrano annexed its water utilities to the water district. District officials have noted that the city deferred maintenance of the infrastructure while not raising rates since July 2018.
“The rate increase planning goals were to raise funds to be able to repair and rehabilitate the system (and) cover increased operating costs,” said Ferons, who later added that since the district assumed responsibility for the town’s water utilities, it’s invested about $7 million in capital improvements.
According to the district, the rate increases’ impact on customers will vary by water usage.
A typical single-family residential customer for instance is expected to see their monthly bill rise from $119 to an estimated $126—a roughly 6% increase. A low-user single-family residence will be looking at an estimated 34% increase with their bills jumping from $78 to $105.
For multi-family residences that use a common meter, a typical unit would see their bill rise from $59 to an estimated $75 a month, while typical single meters for multi-family residences are expected to see a monthly bill of $89 a month, up from $61.
The board’s vote Wednesday night follows its decision at a July 12 meeting to hold off on implementing the rate increases in response to protests from numerous residents and members of San Juan’s business and nonprofit community, such as the Shea Center.
The nonprofit Shea Center, which helps clients with disabilities and mental health issues through equestrian therapeutic riding, had expressed concerns over its annual water bill. Including a portion of the rate study that called for an increase in fire service rates based on capital charges, the Shea Center’s annual bill would have jumped to a projected $45,000, up from its previous cost of $15,000.
“We support paying our fair share. We’re not opposed to paying increased rates. What we are opposed to is the fact that these rates, as proposed, are like a poorly built home on an even worse foundation,” said Shea Center CEO Dana Butler-Moburg, who was among a chorus of people who spoke against the new rates Wednesday night.
As part of the board’s vote, it limited the fire service charge increase to a basic fixed cost as opposed to adding the capital charge component—which Moburg called a “welcome aspect.”
“The proposal not to implement the capital component of the rate study for our fire meter owners is a welcome aspect, and instead of a 288% increase in our total water bill, our water bill will only be a 62% increase—only,” Moburg said.
Touching on the city’s decision to defer maintenance over the years, Dana Vasquez, the San Juan Capistrano head of school for Fairmont Schools, encouraged the board to not “punish” the people of San Juan for the city’s actions.
“I sincerely have faith in this water district to do the right thing and not punish the residents and business owners of San Juan Capistrano for the mismanagement and mistake of the city,” Vasquez said.
According to the district, it received 28 valid letters protesting the rates. It also received 22 invalid letters, meaning it came from those with addresses outside of the district.
Ahead of vote to approve the rate increases, Board President Frank Ury noted that had rate increases been imposed over the previous five years, the residents and businesses wouldn’t be seeing as much of an increase in their bills as what’s being projected.
“We’re not arguing that it should be 0%, 2% or 7%. There is catch-up work that needs to be done and what we’re doing is trying to smooth that over,” Ury said. There are expenses that have not been incurred by folks in San Juan and that needs to be caught up because we cannot continue going down the road of doing nothing.”
During the mid-July meeting, board members elected to continue their discussion over the raised rates to Wednesday night’s meeting so they could consider additional options such as whether to initiate a new rate study.
On Wednesday, the board voted unanimously to commence a new Cost of Service Study by issuing a request for proposals to find a consultant interested in taking on the tasks of developing new rates.
According to Ferons, the district is looking to spend about $300,000 to cover the independent consultant, the potential outreach and legal costs, and issue an RFP. The entire process of obtaining a new study, he also said, is likely to take 12 to 15 months.