Community Corner
City Hopes to Turn Off Water Utility's Spigot of Red Ink
The city manager and utilities director will review 25 recommendations offered by a consultant. Water rates will stay the same for now. But the utility's debt runs into the millions and no end is in sight.
Now that a consulting firm has finished auditing San Juan Capistrano's debt-plagued water utility -- which was $8 million in the red last summer -- the city is ready to consider 25 recommendations to get out of the mire.
On Tuesday, the City Council reviewed report from Ralph Andersen & Associates, which was to figure out why the utility suddenly plunged into debt last year.
The report described a “perfect storm,” as Councilman Sam Allevato put it, of circumstances that led to the fiscal carnage:
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- Merging with the financially struggling Capistrano Valley Water District
- Improvements needed for the groundwater treatment plant
- A decline in the economy
- Weather
- Conservation
- Loss of subsidies from the Metropolitan Water District of Southern California
- Contamination from MTBEs and the cost to shut down wells for an extended period of time and costs to
The council voted 4-1, with Councilman Derek Reeve opposed, to have and , both fairly new to the city and both experienced with water utilities, to review the auditor’s recommendations.
Their analysis will then go to the Utilities Commission before heading to the City Council for possible action, the council decided.
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With the information now in hand, “we need to move ahead,” Allevato said. “We need to look at all of our options and keep all of our options open.”
Among the 25 suggestions Andersen made are:
- Update the 2009 water rate study
- Share or contract with a water-rate analyst
- Shorten the time between rate studies
- The Financial Services Department should focus only on financial affairs
- Refinance some of its debt
- Reexamine the life expectancy of equipment
- Extend the expected useful life of the Groundwater Recovery Plant from 60 to 75 years
- Provide more timely reports to the Utilities Commission
“At this point, I’m a little reluctant to say what we should do with the rates,” said Mayor Larry Kramer. The city’s Groundwater Recovery Plant’s . The council should sit on possible rate changes for at least six months, he said.
The water division's financial situation is slowly improving, said John Goss, project manager for Andersen. Although the city won’t know until it audits the books, he predicts 2011-12 will see a $6-million deficit, down from last year’s $8-million hole.
Several residents spoke about the audit, lamenting its findings.
Former Mayor Roy Byrnes said he didn’t believe any malfeasance was to blame for the water utility’s woes.
“It’s a matter of size, not a matter of competency,” Brynes said. The small city of San Juan Capistrano doesn’t have any business trying to run a big-city-type of operation, such as a groundwater recovery plant.
But resident Ian Smith detected bad judgment in City Council members who have historically spent money like “drunken sailors.”
“This and other councils acted inadequately and ineptly. Where is the transparency that you all seem to promote but never comply?” Smith asked.
For his part, Goss couldn’t say for sure when the water utility will be back in the black. Such prognostications were beyond the scope of the audit.
“I can’t tell you when you are getting out of this; 2011 is turning out better than the initial data we looked at,” Goss said, adding, “I have no crystal ball.”
