ITEM:		ACTION ITEM
24.	CONSIDER AMENDMENT TO CARMEL AREA WASTEWATER DISTRICT/PEBBLE BEACH COMMUNITY SERVICES DISTRICT RECLAMATION PROJECT AGREEMENTS
Meeting Date:			June 17, 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: N/A
CEQA Compliance: N/A

SUMMARY: Existing Reclamation Project Agreements dated as of December 15, 2004, for Sale of Recycled Water between the Monterey Peninsula Water Management District (MPWMD) and the contracting users of water from the Wastewater Reclamation Project (Project) for the Del Monte Forest area will pay for recycled water a monthly quantity charge based on the quantity of water used and calculated in the same manner as the quantity charge established for similarly-situated potable water users of water supplied by California American Water Company (Cal-Am), until the Certificates of Participation (COP's) sold to finance the Project are paid in full. After payment of the COP's, the charges for recycled water are to be set at a level sufficient to pay but not exceed the Operation and Maintenance Expenses for that Water Year, including prudent reserves for unanticipated Project operating expenses and future capital projects. Retirement of the COP's is scheduled to occur on July 1, 2022.

In other words, the price of recycled water is linked to the potable water rates approved for Cal- Am by the California Public Utilities Commission. Revenue from the rates thus set have to date also been insufficient to pay in full the ongoing financing costs for the Project, requiring the Pebble Beach Company (PBC) as guarantor to cover the unpaid financing costs. However, Cal- Am rates have increased and sharp increases are expected between now and 2022. To obtain recycled water sale revenue sufficient to pay all Project costs, including operating, capital, reserves, and financing, and to avoid the uncertainty and costs of participating in complex Cal- Am rate-making proceedings, PBC and the water users intend to de-link the price of recycled water from Cal-Am rates for potable water on the terms set forth in an amended agreement to purchase recycled water.

With approval and adoption of the proposed amendments, an example of which Exhibit 24-A is attached, starting July 1, 2013, the price of recycled water from the Project will be set based on an annual budget developed by the Reclamation Management Committee to fully cover all operating, capital, reserve, and financing costs of the Project on an annual basis, including the following: all costs to produce the recycled water, prudent reserves for unanticipated Project expenses and projected future Project capital costs, all principal installments on the COP’s due on or after July 1, 2013, all interest payments on the COP’s due on or after July 1, 2013, all Bond Carrying Costs (including Letter of Credit fees paid by PBC) on the COP’s due on or after July 1, 2013, revenue sufficient to reimburse PBC, amortized pro rata over the remaining life of the COP's, for PBC’s prior funding of Bond Carrying Costs (including Letter of Credit fees paid by PBC) in the aggregate amount of approximately $5,520,000 (such fees are recoverable under the existing Project agreements), administrative costs or charges of MPWMD, CAWD, and PBCSD, subject to the provisions of section 2.2 of the Agreement for Sale of Recycled Water.

The attached Exhibit 24-A is just one “Amended and Restated Agreement for Sale of Recycled Water.” There will be a similar agreement enacted for each recycled water user.

RECOMMENDATION: The General Manager recommends the Board approve and adopt the proposed amendments, subject to additional nonmaterial changes to be reviewed by the General Counsel and General Manager.

EXHIBITS

24-A Proposed Amended and Restated Agreement for Sale of Recycled Water

24-B Proposed Revision to Exhibit C

24-C Proposed Exhibit F

24-D Proposed Exhibit G

24-E Proposed Exhibit H

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