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ITEM: |
ACTION
ITEMS |
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17. |
CONSIDER REQUEST FROM DIRECTOR BROWER TO SECURE A $2 MILLION LINE OF
CREDIT TO FUND DEVELOPMENT OF WATER SUPPLY PROJECTS |
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Meeting
Date: |
May 19, 2008 |
Budgeted: |
No |
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From: |
Darby
Fuerst, |
Program/ |
N/A |
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General
Manager |
Line Item No.: |
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Prepared
By: |
Rick
Dickhaut |
Cost Estimate: |
$500 |
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General Counsel Approval: Yes |
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Committee Recommendation: The Administrative Committee considered this item on May 13, 2008 and recommended approval. |
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CEQA Compliance: N/A |
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SUMMARY: In
response to a request from Director Brower that the Board consider
securing a $2 million line of credit as discussed in the background section of
this staff note, District staff has done some preliminary research with a
couple of area banks. Although a bank
would need to do a careful review of the last three years of the District’s
audited financial statements before committing to issue a letter of credit,
preliminary indications are that it should not be a problem. The District would most likely qualify for a
line of credit with a variable interest rate that would be tied to the Wall
Street Prime Rate with a margin from the rate depending on the District’s
credit worthiness. The banks have
indicated that the costs to establish a line of credit would be minimal,
possibly as low as a $250 documentation fee.
They also indicated there would be no ongoing costs, other than interest
if the credit line is used. If the Board
decides to go forward with Director Brower’s request, staff will proceed to
gather detailed information from a minimum of three banks.
RECOMMENDATION: The Administrative Committee reviewed this item at its May 13, 2008 meeting and voted 3 to 0 to recommend approval for staff to proceed. The Committee further recommended that when all information is available, staff should bring this matter back to the Board for final approval at a future meeting.
BACKGROUND: Director
Brower has requested that the Board direct staff to secure a $2 million line of
credit to fund potential startup costs associated with the MPWMD 95-10 Project
(desalination project in the Sand City area) if it is deemed feasible by the
preliminary studies currently under way.
The amount borrowed via the line of credit would be repaid from either
an increased user fee, a portion of debt issuance proceeds for the project,
other revenue increases or a combination of these sources.
U:\staff\word\boardpacket\2008\2008boardpackets\20080519\ActionItems\17\item17.doc