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Posted on: August 23, 2019

Capistrano Dispatch: City Approves Framework for Potential Water Transfer Agreement

Disparch City Approves MOU

The Capistrano Dispatch
August 23, 2019
By Shawn Raymundo

The city’s plans to annex its utilities department took another step forward Tuesday, Aug. 20, as councilmembers approved a framework that will be the basis for a potential agreement to have Santa Margarita Water District take over water and sewer services in San Juan Capistrano.

With Councilmember Derek Reeve absent from the meeting, the council unanimously voted in favor of certifying the Memorandum of Understanding that outlines the major deal points of what will eventually be part of an official annexation agreement and application for approval by the Orange County Local Agency Formation Commission (LAFCO).

“I think the combination of the two agencies being one is going to be great, and I feel good moving forward on this,” Councilmember John Taylor said. Mayor Pro Tem Troy Bourne echoed those sentiments.

“I feel like what we have in front of us right now . . . that this was the right direction and a really fair agreement,” he said.

One of the major deal points in the MOU includes a commitment by Santa Margarita to invest $25 million to improve and rehabilitate the city’s infrastructure over the next decade. Such a pledge, the city asserts, would directly benefit San Juan ratepayers.

According to the MOU, there’s also a provision for the water district to gradually reduce the average service charges for both water and sewer rates. And San Juan will have representation on SMWD’s board, as ratepayers will get to vote for members in at-large elections.

“Should SMWD transition to by-district elections, SMWD commits to drawing voting district boundaries in a manner that will not dilute the voting power of San Juan Capistrano residents, to the extent allowed by law,” the city states in its report for the MOU.

Under the potential agreement, should Santa Margarita absorb the city’s utilities department, 16 of the 20 full-time city employees would transfer to the water district. The other four full-time employees of the city are anticipated to be laid off.

“Details regarding the impacts of the transfer are currently under discussion with SMWD and the City’s employee associations,” the report explains.

With the transfer of the water services, SMWD will also receive all of the city’s assets related to utilities, including “water rights and related liabilities associated with the City’s water and sewer systems,” the city notes.

The council unanimously voted to enter into exclusive negotiations with SMWD during its Feb. 19 meeting. The MOU is the latest step in the city’s efforts to transfer its water services, a process that  began in 2016, when the council voted to have LAFCO look into restructuring options under a Municipal Service Review.

The city’s decision to annex its utilities department stemmed from increasing costs and the difficulty of providing water and wastewater services. In its review, LAFCO found that since 2014, the average monthly rate per household had risen by roughly 16 percent, with ratepayers currently paying a monthly average of $146.

With the council’s approval, the MOU will go before SMWD’s board for consideration during its scheduled meeting on Friday, Aug. 23. If the SMWD board also approves the MOU, both agencies will begin to develop the annexation agreement and LAFCO application, which could be submitted in the fall.

Assuming all goes according to plan and LAFCO approves the application, the city estimates the water annexation to be executed next spring.

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