Capistrano Taxpayers Association Fact Sheet - Water Rates
Why is the CTA initiating legal action with the City over tiered water rates?
· CTA believes the City has illegally imposed a tiered water rate structure in violation of Proposition 218.
· Proposition 218 was passed by the voters in 1996 to compel cities to collect only the actual cost for essential services such as water, trash, etc.
· The CTA contends that tiers 2 through 4 are not based on cost of service but rather, are designed to penalize residents for not meeting City-imposed water conservation goals.
What is the “Phantom Bond” and why should taxpayers care?
· The City planned to sell $18 million in municipal bonds (which water users repay with interest) to finance recycled water pipelines/equipment and to expand the Ground Water Recovery Plant (GWRP).
· The city included $1,300,000 per year for 30 years in debt payments (principal + interest) to fund the bond repayment, which was passed on in our water rates.
· The city was unable to sell the bonds because their reserves were too low, so the bond sale was cancelled. However, the money intended to repay the bonds is still being collected as part of our water rate increase. It is kept by the city and used for other purposes such as salaries, pensions, and other operational costs.
What is the Ground Water Recovery Plant and why is it costing taxpayers millions of dollars extra every year to operate?
· The GWRP was constructed by the city in 2002. The City’s stated reason for building the plant was to treat contaminated water from below San Juan Creek to produce drinking water. The GWRP initially cost $35 million to construct and was funded by selling municipal bonds. The cost to pay back the bonds is $2,900,000 per year for 30 years.
· The GWRP has failed to meet its design output of water for 7 of the 8 years it has been operating. It has been responsible for creating an $8.2 million operating deficit in 2010.
· The cost to produce water from the GWRP is about $1,400 per acre foot. We can purchase water from the Metropolitan Water District for about $800 per acre foot.
· The CTA believes the city should purchase water from the least costly supplier.