Recently, I read in an article an opinion about our city’s water factory [groundwater recovery plant] that I sense could be shared by others in town. The interviewee stated:
. . . investing in the plant (water factory) will have long-term benefits for the city ... 'We’re paying for our future.'
This sounds sensible, however I wonder if the writer really knows much about the water factory. Yes, the water factory provides some long-term benefits. If you are an investor, the water factory provides a nice return on over $80,000,000 in city bonds. If you are a resident, you get to pay the investors off over the next 25 to 30 years.
In looking at the benefits of the water factory, you must understand up front the city of San Juan Capistrano does not own its water factory. The plant is owned by the San Juan Basin Authority. The San Juan Basin Authority is made up of four neighboring water agencies. Our town represents 25 percent of the Basin Authority.
Our prior mayor, Mark Neilsen, says we own the water factory because it sits in our parking lot. This is not true. The Basin Authority holds the pink slip on the water factory today and forever.
Briefly, our City Hall has indebted its residents with over $80 million in the past eight years. Five months ago, City Hall had spent $8.2 million more than it had on the water factory.
Today, November 2012, our City Hall is ordering $3 million in stuff to hang on its water factory. This $11.2 million is on top of the $80 million residents already owe.
The Register newspaper reports the water factory costs $4.6 million per year to sit in our City Hall parking lot and do nothing. This will add up to $142.6 million by 2035. The good news is San Juan residents only have to pay 25 percent of this amount, which is $35.6 million in taxes.
Now, let’s see how much it costs residents to run the water factory. Today’s capital cost is $2,941,002 per year. This is kind of a fixed cost so I’ll project it out 31 years which comes to $91.1 million.
So what’s the water factory going to cost the residents of San Juan Capistrano when we have to give it back to the Basin Authority in 2035? Well, let’s see what we have:
- $80 million in bonds to pay
- $8.2 million in debt
- $3* million in new stuff
- $35.6 million in taxes
- $91.1 million in capital costs
- $217.9 million O/A
* Note: City Hall will say this is free funds. It’s OK you can make the total $214.9 million.
Now, I must say our City Hall is working on a deal with the Basin Authority to keep the water factory until 2060 for a dollar ($1) per year.
So what’s the benefit to residents? NOTHING. Residents still have to pay for their water. City Hall still only owns 25 percent of the water factory BUT City Hall stands to save $2.9 million per year in capital operating costs.
Wow, this is a big deal for City Hall. Residents pay more than $200 million so City Hall can make $2.9 million per year starting 23 years from now. If City Hall or anyone disputes these numbersk they don’t know what they are talking about or they are not being honest.
If you are looking at investing in a long-term benefit for our town, the water factory is not it. The water factory is an extremely expensive source of water. And the water factory has been and will always be an undependable source of water.
Basically, our City Hall has spent more than $100 million on the water factory to date and it hasn’t produced a penny in benefits. It’s OK for City Hall to give the water factory back to the Basin Authority.