ITEM:		ACTION ITEM
16.	CONSIDER ADOPTION OF RESOLUTION 2013-05 IN SUPPORT OF LEGISLATION TO FACILITATE A PUBLIC CONTRIBUTION TOWARDS FINANCING THE MONTEREY PENINSULA WATER SUPPLY PROJECT
Meeting Date:			May 20, 2013	Budgeted:	N/A
From:			David J. Stoldt	Program/	N/A
			General Manager	Line Item No.:	N/A
Prepared By:			David J. Stoldt	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: At its April 24, 2013 meeting the Legislative Advocacy Committee voted 3 to 0 to recommend approval and release of the proposed legislation. At its May 13, 2013 meeting, the Administrative Committee voted 2 to 0 to recommend approval and release of the proposed legislation.
CEQA Compliance: N/A

SUMMARY: In its October 2012 “Public Agency Participation Proposals” to California American Water (Cal-Am) as part of the CPUC proceeding A.12-04-019 and the Governance Concepts and Capital Financing Alternatives included in testimony submitted on February 22, 2013, the District has proposed a contribution of public funds toward the desalination facility component of the Monterey Peninsula Water Supply Project.

The District’s testimony under cross-examination April 10 and 11, 2013, reinforced the viability of a public contribution of funds and focused in on a financing mechanism called “securitization” whereby a non-bypassable surcharge would be collected on Cal-Am bills and dedicated to the repayment of Ratepayer Relief Bonds. Such a financing structure would significantly reduce the cost of the desalination project to ratepayers. The structure is further described in Exhibit 16-A of this packet. The structure requires legislation to be passed. Proposed legislation and a Resolution for its approval are attached as Exhibit 16-B.

RECOMMENDATION: The General Manager recommends that the Board of Directors adopt Resolution 2013-05 and approve the form of legislation attached thereto.

BACKGROUND: The District has made several proposals with respect to financing the Cal-Am desalination facility. The proposed Ratepayer Relief Bonds have been determined to be the best mechanism for doing so. There are many examples undertaken by the electric utilities in California and elsewhere, and the mechanism has been reviewed by the credit rating agencies. The proposal would enable the use of tax-exempt financing secured solely by a non-bypassable surcharge collected on the Cal-Am bills and would not be secured by a pledge of District rates, fees, or charges, hence would not require a Proposition 218 hearing. The financing would only be used for permanent or “take-out” financing after construction of the project has already begun, thereby minimizing risk. However, such financing would only occur if the CPUC decision directs that it be examined and that market conditions at the time of the financing show savings to the ratepayers.

The District has been paying the costs of developing the Ratepayer Relief Bonds proposal from budgeted funds derived by the Water Supply Charge adopted in June 2012.

EXHIBITS

16-A Cal-Am Ratepayer Relief Bonds (Securitization) Description

16-B Resolution 2013-05 and Form of Proposed Legislation

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U:\dstoldt\Board Items and Exhibits\2013\5-20\Item 19.docx