ITEM:		ACTION ITEM
23.	AUTHORIZE UTILIZATION OF DISTRICT CREDIT FOR PURE WATER MONTEREY FINANCING
Meeting Date:			April 20, 2015	Budgeted:	N/A
From:			David J. Stoldt, General Manager	Program/	Groundwater Replenishment Project
				Line Item No.:	1-5-1
Prepared By:			David J. Stoldt	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: To finance and build the Pure Water Monterey water supply project will require a borrowing from either the State Revolving Fund or the public tax-exempt debt market. In either case, the project must demonstrate an investment-grade creditworthiness that provides investors the comfort of knowing the debt will be repaid under all circumstances.

While the wholesale water purchase agreement (WPA) whereby Cal-Am will purchase the output will provide a revenue source, Cal-Am has indicated that it will not commit to pay for water it does not receive. That is, a “take-or-pay” style agreement where they would ensure the payment of debt service even if service was interrupted, which was the model for the WPA with Marina Coast Water District in the Regional Desalination Project, is not available for this project. Therefore, to ensure payment of debt service during an outage or interruption in delivery of water will require a back-up form of revenue. The Monterey Regional Water Pollution Control Agency is not in a position to tap sewer ratepayers for water service, hence it would fall to the Water Management District to use its revenue raising capacity as a potential future source of revenue to cover the payment of fixed debt and operations and maintenance costs during an interruption in water deliveries.

Doing so could subject the District to undertaking a Proposition 218 protest hearing to raise rates and charges at some point in the future. The existing Water Supply Charge would likely not be sufficient to cover annual debt service and other fixed costs. However, the charge could be used to build up a “rate stabilization” reserve to provide such coverage, which might forestall the need for a new Prop 218 protest hearing process.

RECOMMENDATION: The General Manager recommends that the Board of Directors approve a pledge of the District’s revenue-raising capacity in support of the long-term capital financing of the Pure Water Monterey project.

EXHIBIT

None

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