ITEM:		CONSENT CALENDAR
9.	AUTHORIZE FIRST SUPPLEMENT TO PROFESSIONAL SERVICES AGREEMENT DATED JANUARY 17, 2013 BETWEEN DISTRICT AND SIDLEY AUSTIN LLP RELATING TO PUBLIC FINANCING OF A PORTION OF THE CAL-AM DESAL PROJECT
Meeting Date:			April 20, 2015	Budgeted:	Partial
From:			David J. Stoldt	Program/	Cal-Am Desal Project
			General Manager	Line Item No.:	1-9-1
Prepared By:			David J. Stoldt	Cost Estimate:	$60,000 (FY2015) Up to $400,000 (FY2016) Reimbursable
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: At its January 14, 2013 Special Meeting, the Board authorized the hiring of Sidley Austin to provide documentation in support of expert testimony by the District and the Mayors’ Authority 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’s testimony under cross-examination April 10-11, 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 required legislation to be passed, which occurred in September 2014.

To implement the financing, there are two additional phases of work as described in the Background section below. Phase 1 is expected to cost $400,000 to $500,000. Of that, $60,000 expected to be expended in FY 2015 is already budgeted and unexpended. The remainder would need to be budgeted in FY 2016.

Phase 2 is expected to cost $300,000 to $400,000 and will be budgeted most likely in FY 2017. However, the Board is not being asked to authorize Phase 2 at this time.

Both expenditures are subject to reimbursement from bond proceeds, thereby replenishing District reserves.

RECOMMENDATION: The General Manager recommends that the Board of Directors approve additional services from Sidley Austin not to exceed $460,000 and subject to reimbursement from bond proceeds

BACKGROUND: Sidley Austin has been advisor to the District on bond counsel matters since the 1992 Reclamation Project financing.

The original scope of the engagement was limited to preliminary issues regarding the proposed securitization financing for a desalination facility to be owned and constructed by Cal-Am Water.

As the matter has progressed, it is evident that the District will require an expanded scope of legal services. This letter will supplement the scope of services and the fee-related portions of the Agreement.

Scope of Representation. As financing counsel to the District, the Firm’s scope of service will include the following additional services:

Phase I. Structuring and Financing Order.

(a) Advise on the filing and processing of a financing order application before the California Public Utilities Commission, including in coordination with regulatory counsel to Cal-Am:

· drafting of the application, related testimony and the form of a financing order, revising the same and preparing the same for submission to the Commission; and

· drafting responses to interrogatories, supplemental testimony, and related advice and activities;

(b) Advise with respect to the structuring of the securitization; and

(c) Advice in response to inquiries from Cal-Am, other public participant, interveners, the rating agencies and other interested parties concerning the structure and mechanics of the securitization.

The District understands that the Application will be submitted by Cal-Am and that Cal-Am’s regulatory counsel will assume the lead role in the filing of the Application and in related proceedings.

Phase II. Bond Issuance.

(a) Assist in finalizing structure of financing, including the establishment of a joint powers agreement issuer if necessary;

(b) Draft all financing documents, including: (i) “first-tier” documents, including sale agreement, administration agreement, servicing agreement and trust agreement for the issuance of the notes (Cal-Am Documents), and (ii) “second-tier” documents, including note purchase agreement and trust agreement (Issuer Documents);

(c) Draft offering materials, including official statement, term sheet and continuing disclosure agreement;

(d) Advise on compliance with securities laws, including SEC Rule 17g-5;

(e) Deliver customary legal opinions for a securitization transaction to the District, rating agencies and underwriters, including (i) true sale/non-consolidation; non-impairment; security interest; debt-for-tax; and opinions addressing such other transactions matters relating to Cal-Am or otherwise as appropriate and agreed to by the parties (First-Tier Opinions) and (ii) validity and tax exemption (traditional bond counsel opinion); non-impairment; bankruptcy; and such other transactional matters relating to the Issuer as appropriate (Second Tier Opinions);

(f) Advise in response to inquiries from rating agencies and investors with respect to the securitization offering; and

(g) Rendering such other advice as the District reasonably requests.

EXHIBIT

None

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