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ADMINISTRATIVE
COMMITTEE |
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2. |
CONSIDER EXPENDITURE OF
BUDGETED FUNDS TO ENTER INTO AN AGREEMENT WITH URBAN FUTURES, INC. TO PROVIDE
FINANCIAL ADVISORY SERVICES RELATED TO DEBT FINANCING FOR THE AQUIFER STORAGE
AND RECOVERY PROJECT, PHASE 1 |
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Meeting
Date: |
September 11, 2007 |
Budgeted: |
Yes |
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From: |
David A.
Berger, |
Program/ |
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General
Manager |
Line Item No.: Debt Service |
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Prepared
By: |
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Cost Estimate: |
$34,500 |
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General Counsel Approval: N/A |
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Committee Recommendation: The Administrative Committee reviewed this item on September 11, 2007 and recommended ___________________. |
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CEQA Compliance: N/A |
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SUMMARY: Over the past few months, District staff has been evaluating various alternatives to secure debt issuance funding of approximately $2,800,000 for completion of the Aquifer Storage & Recovery (ASR) Phase 1 Project. However, as discussed in the background section of this report, staff has thus far been unsuccessful in finding a suitable financing mechanism. With any type of financing, the District will ultimately incur costs for a financial advisor, underwriter, bond counsel, etc. Due to the difficulty in finding suitable financing for this program, staff feels it is necessary to engage a financial advisor at this time. At staff’s request, Urban Futures, Inc. (UFI) has submitted a proposal to provide professional financial advisory services to the District for an amount not-to-exceed $34,500 for a debt-issuance of up to $3,000,000 (Exhibit 2-A). The quoted fee is based on their standard fee schedule which is a sliding scale based on the dollar amount of the issuance. UFI will only be compensated if and when financing is obtained, and at that time the fee would be paid out of the financing proceeds. UFI is a respected firm that has served over 150 government entities in various capacities. Once a suitable financing mechanism is identified, staff will report back to the Board and request additional authorizations as required.
RECOMMENDATION: District staff recommends that the Board authorize the General Manager to enter into an agreement with Urban Futures, Inc. for an amount not-to-exceed $34,500 to provide financial advisory services related to obtaining financing for the ASR Phase 1 Reclamation Project. The Administrative Committee considered this item on September 11, 2007 and voted __ to __ to recommend _______________________.
BACKGROUND: The Fiscal Year 2005-06 budget included a user fee increase of 1.2% (from 7.125% to 8.325%) to provide funding to pay debt service on amounts to be borrowed through a pooled debt issuance to complete Phase 1 of the ASR Project, as well as other ASR costs and water supply projects. The user fee increase became effective October 14, 2005 and has already generated approximately $600,000 in additional user fee revenues for the ASR Project. The Fiscal Year 2007-08 budget includes $1,703,000 in anticipated expenditures for ASR Project Phase 1 work, with the total cost to complete Phase 1 estimated be $2,800,000. This amount also includes funds already spent in Fiscal Year 2006-07. At the January 25, 2007 Board Meeting, the Board adopted Resolution 2007-01 Declaring the Official Intent to reimburse expenditures from the Proceeds of Tax Exempt Securities. That Resolution will allow the District to reimburse the General Operating Reserve for funds spent on the ASR Phase 1 work completed subsequent to the Resolution, but prior to receiving the funds from a debt issuance. At the June 18, 2007 Board meeting, the Board adopted Resolutions 2007-09 and 2007-10 which authorized the District to participate in a tax-exempt pooled bond financing program through the California Statewide Communities Development Authority (CSCDA). Subsequent to adoption of those two resolutions, the CSCDA financing program’s bond counsel determined that the District could not participate in the CSCDA tax-exempt pooled financing program because the ultimate recipient of the water injected by the ASR facilities would be California American Water, which is a private, for-profit company. Since that time, District staff has pursued various other alternatives and has determined that professional expertise is needed to assist in securing the most cost effective financing.
EXHIBITS
2-A Proposal of Urban Futures, Inc. dated August 24, 2007
U:\staff\word\committees\Admin\2007\20070911\02\item2.doc