Santa Margarita Water District (SMWD) is Orange County’s second-largest water district, providing water and wastewater treatment services to more than 155,000 residents and businesses in Mission Viejo, Rancho Santa Margarita, Coto de Caza, Las Flores, Ladera Ranch, and Talega.

SMWD Improvement Districts click to enlarge

The District is divided into eight improvement districts that encompass approximately 52,000 acres of land. Improvement districts function as operating units of SMWD, and each improvement district’s facilities are funded with its own bonds, so residents of older neighborhoods don’t have to pay for facilities in new neighborhoods. These districts also allow SMWD to meet the diverse needs of specific service areas, factoring in land use, topography, ownership lines, water supply and wastewater treatment needs.

SMWD has issued General Obligation Bonds to fund the water and sanitation infrastructure for the various improvement districts (with the exception of Talega which issued Community Facility District bonds to finance the infrastructure). General Obligation Bonds are issued for the development of specific facilities and are paid for by the area directly benefiting from the facilities.

As of June 30, 2009, SMWD had $207,635,000 outstanding in General Obligation Bonds issued between 1994 through 2009, with final maturities ranging from years 2011 to 2038. Debt service payments (principal and interest) are established at the time the bond is sold, and are collected through the County of Orange Treasurer-Tax Collector via property tax bills. SMWD received a favorable credit rating in October 2009 in anticipation of a future refunding of our 1997 General Obligation Bonds. This refunding will lower interest rates, therefore reducing the amount being collected for this issue.

SMWD develops the annual tax rates based only on assessed values of land as prepared by the County of Orange Assessor’s Office. SMWD does not use individual changes in a homeowner’s land value to calculate its annual tax rates, but utilizes the total land value for the entire improvement district. Since the rate is based on per $100 of assessed land values, the calculation is quite simple; total debt service divided by total assessed land value/100. This rate produces adequate revenues to meet SMWD’s obligation to its bond holders. You may see variances in the tax rates in your area and the amounts of tax levied on your property this year.

As shown in the table below, several improvement district areas have experienced significant decreases in land values based on the January 1, 2009 Assessor records. While the calculation remains the same, the decrease in assessed values in conjunction with the General Obligation Bonds issued in 2009 for water reliability projects, has resulted in an increase to SMWD’s annual tax rates.

How could these increases to SMWD’s tax rates impact you? Impacts can be quite different to each rate payer. If your assessed value has decreased in amounts similar to the table below, you may see a minimal increase. If you have been in your home a few years, you may see an increase in your home’s assessed values - which coupled with the increased SMWD tax rate - would result in higher amounts levied on your property by SMWD.

Why were General Obligation Bonds issued by SMWD in 2009?
The District issued General Obligation Bonds in 2009 to fund water supply projects that will substantially increase the reliability of our system. These water supply reliability projects include the Upper Chiquita Reservoir (scheduled for completion in late 2010); interconnections with other water districts; and the development of an additional water supply (currently, all of South Orange County’s drinking water is purchased from The Metropolitan Water District of Southern California). These projects will help to diversify SMWD’s water supply and provide for sufficient local storage in the event of a service disruption or emergency.

Several factors helped determine the timing for SMWD to issue the bonds in mid-2009, including tightening water supply conditions throughout the State and substantially reduced construction costs for the planned Upper Chiquita Reservoir (actual construction cost is nearly $10 million under the original project cost estimate).

If you have any additional questions regarding your tax bill, please call the SMWD Finance Department at 949-459-6588.