Committee to Begin Talks on Paying for Desalination Plant

Members of a Ventura City Council committee will begin talks today about how to pay for Ventura’s proposed desalination plant, which is expected to substantially increase residents’ water bills.

The Utilities Committee, which is composed of three members of the City Council, will meet to discuss financing options for a seawater desalination plant that the majority of the voters favored in an advisory vote on Nov. 3.

A city-ordered engineering study has estimated that it would cost $30.4 million a year for 30 years to build and maintain the facility. If financing is done over a 30-year period at 8% interest, residents’ water bills will increase as much as 75% to fund it, according to the study.

“There is no way people are ever going to have cheap water like they have now,” said Councilwoman Cathy Bean. “We have grown beyond our ability to provide local water.”

In a non-binding measure, Ventura residents voted 55% to 45% in favor of building a desalination plant to produce 7,000 acre-feet of water annually. An acre-foot is enough water for two families of four for a year.

Last week, the council voted to abide by the voters’ wishes and move forward with the project. The plant is expected to be one of the largest and costliest desalting facilities outside the Middle East.

The council must later decide whether to finance the desalination plant through general obligation bonds, revenue bonds, or issuing certificates of participation. The bonds are usually issued for a period of 20 or 30 years, and are used to fund large projects.

No matter which option is eventually selected, city officials said they expect residents to pay more for their water in a few years--either through increased property taxes or increased water rates.

The Utilities Committee will begin reviewing options today, but is not expected to make a recommendation to the council “for quite awhile,” said Councilman Tom Buford, committee chairman.

A recommendation will come later when committee members have more information about how much the desalination plant will cost, Buford said. Cost estimates for building a desalination plant have ranged from $33 million to $55 million.

General obligation funds, which require approval by two-thirds of the voters, are considered to be the most secure and would charge the lowest interest of the three options. They would be paid off through property tax assessment.

However, Buford predicted that general obligation funds would be quickly rejected as an option by the City Council because of Proposition 13 inequities. Because of Proposition 13, a family that uses the same amount of water as their neighbors would have to pay more if their property tax is higher, Buford said. “That’s not going to fly,” he said.

Revenue bonds, like general obligation bonds, would require voter approval, but only a simple majority would be needed. The bond would be paid off by increasing water rates. The last time Ventura issued a revenue bond was in 1973.

Councilwoman Bean said she doesn’t like the idea of waiting for a revenue bond to be put on a ballot and favors issuing certificates of participation instead. The City Council has dithered for years over what kind of long-term water source the city should have, Bean said.

Certificates of participation are similar to bonds and can be issued by a majority vote of the City Council. Like revenue bonds, the certificates would also be funded by increased water rates. Certificates have become increasingly popular as a way of funding public works projects because they do not require voter approval, said Finance Director Terry Adelman.

The choice between revenue bonds and certificates of participation will probably be political, rather than financial, because the difference to the ratepayers “probably won’t be noticeable,” Adelman said.

Buford, who said he has not made up his mind, noted that revenue bonds may be politically safer than certificates.

“From a political standpoint,” Buford said, “you could get hammered for the rest of your life about building a project in which you didn’t get voter participation.”