Opponents say it is risky business
San Juan Bautista officials approved an $11.3 million bond on
Sept. 16 that is predicted to cost nearly $26 million to repay and
will fund upgrades to the city’s water and wastewater system,
according to documents from San Juan City Council.
Upgrades include a new water tank, increasing storage capacity
from 300,000 gallons to 1.2 million gallons; some new water and
sewer pipes; improved water quality and decreased salt in the
wastewater stream, said Stephen Julian, interim city manager for
San Juan Bautista.
Opponents say it is risky business
San Juan Bautista officials approved an $11.3 million bond on Sept. 16 that is predicted to cost nearly $26 million to repay and will fund upgrades to the city’s water and wastewater system, according to documents from San Juan City Council.
Upgrades include a new water tank, increasing storage capacity from 300,000 gallons to 1.2 million gallons; some new water and sewer pipes; improved water quality and decreased salt in the wastewater stream, said Stephen Julian, interim city manager for San Juan Bautista.
The bond is a kind known as a certificate of participation (COP), according to the documents. Unlike a general obligation bond, a COP does not require voter approval.
“They’re very commonly used in California,” said Doug Dove, president of Bartle Wells, a financial analyst for San Juan officials.
City officials could not lose their water or sewer treatment facilities due to an inability to repay the bond, Dove said. The collateral is future water and wastewater sales.
A national credit rating agency is reviewing the project, Dove said. The city’s interest rate will depend on the credit rating that the analyst assigns the project. A better credit rating means a lower interest rate.
“You normally get it approved before you get a rating,” Dove said. “We’re estimating right now about 6.1 percent.”
That would mean San Juan officials would make annual payments of between $716,000 and $745,000, according to the documents.
Future residents are the ones who will bear the cost of repaying the COP, said Robert Paradice, a San Juan councilman who voted against the project.
“That’s also known as kicking the can down the road, because we don’t have to pay for it,” Paradice said. “I’m 73 years old. I won’t be around to see it. But still.”
Current water and sewer fees are high enough to make payments on the COP, Julian said.
“Is it tight?,” Julian asked. “It’s always tight in a small town.”
Water and sewer fees were raised to fund San Juan’s portion of the water and wastewater project that would have been paid for in part by an Economic Development Administration grant.
Bartle Wells staff have been working with San Juan city officials since 2005, Dove said. They completed a study on rate increases for a water and wastewater project that would have been funded in part by a $3.8 million Economic Development Administration grant (EDA), he said.
After working for more than a decade to obtain the grant, city officials lost it about a year ago, Dove said.
In March, city officials applied for a state loan from the Infrastructure and Economic Development Bank, Dove said.
In June, before receiving any notice on the loan application, city officials put the water and wastewater project out to bid, Dove said.
“We were still hoping that the [Intrastructure Bank loan] would come through,” Dove said.
In early August, city officials were notified that they did not receive the state loan. On Aug. 19, city officials received the construction bids.
“They have 60 days to award the contract,” Dove said. “They need to have the funds on hand to award the contract, hence we’re, you know, using this form of financing.”
Although city officials are not obligated to award a contract, they need to start construction on certain projects to avoid losing an $883,000 grant from CalTrans officials, Dove said.
“If they’re not in construction by December, they will lose the grant,” Dove said. “Part of the project that was bid out involves storm drain improvement, road improvement and curb and gutter. That’s being funded by the CalTrans grant.”
There are other reasons for the COP, said Jolene Cosio, a former planning commissioner for San Juan Bautista.
“They’re so embarrassed about losing the $3.8 million grant that they’re doing whatever they can to get this started,” Cosio said. “To me it’s like buying a home with no down payment and filling it up with furniture on your credit card. You know what happens when you do that. You lose your home.”
The COP is the only option, Julian said.
“It’s not the kind of thing that you can do piecemeal,” Julian said.
Paradise voted against the project because there was not enough information presented for him to make a decision, he said.
“That was sort of a fast meeting,” Paradice said. “If I could’ve, I would have said, ‘Can we table this and come back?'”
He wanted to see a report about the condition of current wells, Paradise said.
“If we had a major problem with our water system, we would have to spend financial capitol to fix that and fall behind of payment,” Paradice said.
City officials need to upgrade the city’s water and wastewater system to meet current wastewater standards.
City officials are out of compliance due to the high salt content of the wastewater stream. They received a cease and desist order from Regional Water Quality Control Board staff in 2001, according to the documents.
In July, city officials received an $18,000 fine for violating wastewater quality standards.
Instead of treating their wastewater, San Juan officials will improve water quality, Julian said.
The goal is to reduce the use of water softeners, because water softeners add salt, and that salt ends up in wastewater.
A machine will mix water from the three wells and process it using pellets that remove salt, Julian said. The byproduct is a white, sand-like substance.
“It’s a relatively inexpensive process,” Julian said. “It accomplishes what we need to do, which is get the hardness down.”
San Juan officials do not know what they will do with the by product, Julian said. It might be possible to use the byproduct as grit, a substance that aids digestion in birds.
