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ADMINISTRATIVE COMMITTEE |
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9. |
AUTHORIZE CONTRACT FOR ACCOUNTING
SERVICES RELATED TO GROUNDWATER REPLENISHMENT PROJECT DEBT EQUIVALENCE |
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Meeting Date: |
September 9, 2013 |
Budgeted: |
Yes |
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From: |
David J. Stoldt |
Program/ |
TBA |
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General Manager |
Line Item No.: |
TBA |
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Prepared By: |
David J. Stoldt |
Cost Estimate: |
Not to exceed $10,000 |
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General Counsel Approval: N/A |
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Committee Recommendation: N/A |
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CEQA Compliance: N/A |
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SUMMARY: The successful permanent financing of the Groundwater Replenishment (GWR) project will depend on a secure contract for the purchase of potable product water by Cal-Am. That contract will be known as a Water Purchase Agreement (WPA). If improperly crafted, a WPA might be considered a capital lease under accounting rules and be treated as debt and potentially add to the cost of water and to the revenue required from ratepayers, as well.
In the July 31, 2013 ”Large” Settlement Agreement the Parties agreed to proceed expeditiously with development of a WPA. There are many layers of complexity and specialized Bond Counsel services are required. The section of the Settlement Agreement relating to GWR is attached as EXHIBIT 5-A to an earlier staff note on the Consent Calendar. Discussion relating to an issue known as “Debt Equivalence” appears in section 4.4 therein. A District technical memorandum describing the debt equivalence issue is attached as Exhibit 9-A. The General Manager is requesting authorization to expend up to $10,000 to have its accounting firm serve in this capacity. If Hayashi and Wayland is deemed to be unqualified, the District CFO would be directed to find an alternate firm. Costs will be recovered from the issuance of the debt, however if the GWR project does not go forward and debt is not issued, then the District will have incurred the costs out-of-pocket. If the issue of Debt Equivalence remains unresolved and requires a formal opinion from a larger-tier accounting firm, the Board will be approached at that time for an additional authorization.
RECOMMENDATION: The General Manager recommends that the Committee recommend that the Board of Directors authorize contracting for accounting services related to Debt Equivalence under a WPA for GWR and the expenditure of up to $10,000.
9-A Technical Memorandum 2013-01: The “Debt Equivalence”
Issue
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