Mayor: Only a Bit of $144-Million Debt Impacts Our Ability to Provide Vital Services

Mayor Sam Allevato explains how the debt load affects San Juan Capistrano residents.

In a sluggish economy that continues to impact many across the nation, there's certainly a lot of talk about debt. 

The same is true in San Juan Capistrano, where a lot of discussion is centered on the amount of our outstanding debt, how it's repaid and how it affects the city's ability to provide basic services.

The city, community redevelopment agency and our water and sewer department are three entities that issue long-term debt but are separate and distinct capital and operational areas. They each issue debt for specific purposes, usually for long-term capital assets, such as buildings, and projects designed to provide long-term benefits. Each of these budgets is designed to repay the debt yearly and is funded from various sources. None of these entities is issuing debt to pay the bills each month or to fund day-to-day operations. 

To clear the air of any misconceptions the community may have, here's a brief overview of the $144 million in long-term obligations.

The only obligation we have that could negatively impact the city's ability to provide vital services are those that impact the city’s general fund, a catchall account for basic services, such as public safety.

In 1994, the city of San Juan Capistrano acquired the old fire station complex in the Mission Flats neighborhood with a 30-year note and makes payments of about $24,000 annually. The outstanding amount on this note is about $193,000.

We also have debt in our water and sewer department, which operates via a budget separate from the general fund. The water operations have approximately $63 million in outstanding long-term debt.

This debt was issued to build many water systems—including the groundwater recovery plant—the avenues through which we deliver water to the community and which were long overdue for replacement.

Revenue to pay for this infrastructure is generated from water and sewer bills—rates for which are approved through a public process—not through taxes.

In 1990 and again in 2008, San Juan Capistrano residents voted to issue general obligation bonds to preserve and enhance open space. Today, there are voter-approved bonds of just under $4 million related to the 1990 initiative, and $30 million in bonds issued in 2010 for the most recent initiative—a total of $33 million.  These bonds are repaid only from voter-approved special taxes, and, like our water fund, do not impact the city’s general fund or any discretionary tax revenues generated in our community to provide services.

The Community Redevelopment Agency is a separate legal entity from the city. Because our community has a redevelopment agency, a portion of your regular taxes that would otherwise go to the county or state are retained and used locally for the benefit of our community. The agency issues bonds and other long-term financing mechanisms to help remove blight, stimulate development and pay for public infrastructure improvements that would not otherwise be possible.

This debt is repaid from the redevelopment agency’s share of your basic property taxes generated by these activities and is scheduled to be repaid over the life of the redevelopment agency.

Right now, the redevelopment agency has approximately $47 million of outstanding debt. Again, these obligations are not repaid from the city’s general fund share of the regular taxes revenues that could otherwise be used to provide city services.  There are no special taxes levied by the city or the redevelopment agency for these obligations. In other words, if the redevelopment agency or its obligations did not exist, your property taxes would not be any lower.    

As you can see, other than the open-space bonds approved by about 70 percent of  voters, no special taxes have been levied by the City Council. A very small portion—$193,000 of the outstanding amount—is paid from the city’s portion of the basic taxes paid in our community. 

smoothpuss2 March 14, 2011 at 09:54 PM
Mayor Allevato, apparently you forgot about the 3 million dollar bond you are seeking the courts to approve to pay the Scalzo's. That is a direct City debt. Let me rephrase that. It is an obligation of the taxpayers. In addition, what about the 18 million dollar water bond you are going to seek approval for. That is 21 million dollars for the taxpayers to pay. Oh conveniently you did not mention that total obligation. Please Mayor Allevato. I forgot, you are the same person that thought paying Joe Tait $324,000 a year was a bargain. Mayor Allevato, at the end of this year, our City (read taxpayers) will have almost 200 million in debt thanks to you. Aren't you the one who thought after paying interest only for 20 years to the Kinoshitas thought it was a great idea to renew those two notes for another 10 years interest only. After 30 years of paying on those two notes, we will still owe the original principal balance. Please Mayor Allevato, do the right thing and stop incurring more debt and pay the debt that we have.
JessC March 15, 2011 at 05:07 AM
Mayor Allevato, would you be so cavalier about this whole debt issue if this was your money? It is always easy to shrug it off when it is other people’s money. As a homeowner, would you ever make INTEREST ONLY payments on your home mortgage for 20 years? And, at the end of the 20 years, refinance the whole note for another 10 years for INTEREST ONLY? How would you feel if at the end of 30 years, after paying several times more than your original mortgage and you don't own your home? My guess is that you would not be very happy.
rick lyons March 15, 2011 at 05:43 PM
Mayor Allevato, please resign. With your thinking that this much debt is ok, with your thinking that another 50 plus million (you did not include the auto dealers) is ok, we do not need your policies and thinking in our City Respectfully, please resign.
TheJellyFish March 24, 2011 at 01:32 AM
How come all the other cities don't have the debt that Sam Juan has?
smoothpuss2 May 30, 2011 at 02:23 PM
Mayor Allevato, the City has so much debt that they are unable to issue another bond (18 million dollar bond) as the City has no way to repay the bond. Nice going. Thank you Mayor Allevato and Mark Nielsen for your out of control spending.


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