Under Threat of Lawsuit, San Juan Council Will Get 2nd Legal Opinion

Under the threat of litigation, the City Council voted Tuesday night to hire an outside attorney and get a second legal opinion regarding the city staff’s position that the city does not owe residents a partial refund on their water rates.

A group of 23 residents has demanded that the city refund 10 percent of the 40 percent hike in water rates the council authorized last year. The city staff had anticipated that part of the increased fees would cover annual payments for $18 million in bonds needed to make several big-ticket improvements to the city’s recycled water and sewer infrastructure.

However, with $8 million in debt, the city’s water department has postponed issuing the bonds and must use revenues from residents’ water bills just to keep itself afloat, said Ann Bui, a consultant with Black and Veatch who wrote the city’s 2010 rate study.

“The first obligation of the utility is to pay its bills,” Bui said.

City Attorney Omar Sandoval, who , told the council that the resolution it passed last year authorizing the rate hikes did not predicate them on just the new projects but primarily on projected revenues and costs of running the water department.

Therefore, the city doesn’t owe anyone any refunds, he said.

But several residents begged to differ and made it clear that the final arbiter may be judge or jury.

“Each year for the next 30 years, you’re charging $1.334 million” for debt service on no debt, said resident John Perry. He said he has already contacted the Howard Jarvis Taxpayers Association and will also contact several lawyers.

“I believe it will probably have to be proved in court that the taxpayers, the rate payers, were wrongly charged,” Perry said.

Resident Ian Smith said the City Council has received bad legal advice on this issue. “It behooves you to seek a second legal opinion whether this is something you want to continue contesting, because I have a horrible feeling this is going to end up in court.”

The council voted 3-1, with Councilman Larry Kramer objecting and Mayor Sam Allevato absent, to get that second opinion, at a cost not to exceed $5,000.

In other business, the council formalized its decision not to dissolve the Community Redevelopment Agency despite . The council voted 2-1, with Councilman Derek Reeve dissenting and John Taylor recusing himself because he owns property in or near parcels slated for redevelopment, to direct the staff to “re-establish” the redevelopment agency.

Under this new version of the redevelopment agency, the city will not be able to issue more debt and during the course of the agency’s life will have about $4 million to use for new projects—but not until about 2023, said Chief Financial Officer/Treasurer Cynthia Russell.

Reeve said his dissent comes down to a philosophical difference. “I think it’s time to put this bureaucracy to bed, and I think cities without redevelopment agencies are better served.”

His comments echoed those of several residents who also urged the city to ditch the redevelopment agency. Tony Brown and Clint Worthington said the private sector can rejuvenate blighted areas just fine without a redevelopment agency.

But Kramer disagreed, saying the city needs to keep as much control as it can over the properties it owns and wants to develop.

The council will consider an ordinance to re-establish the redevelopment agency at a special meeting Aug. 11 and again on Aug. 16.

In other news, the City Council:

• Heard a request from resident Nancy Meraz that the council look into providing faster enforcement of animal-control issues. She regularly reports dogs locked in hot cars, and slow response time resulted in the loss of several of them. City Manager Karen Brust vowed to get in touch with Meraz.
• Received news that the Irvine Museum will permanently loan five giclée paintings of the Capistrano Valley landscape to display in . Sheri Merkle, representing local resident Joan Irvine Smith, said the council will be able to choose the paintings.
• Denied the claim of Camino del Rio residents Steve and Patricia Cohon, who believe the city owes them $150,000 for property damage incurred during the .