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WATER SUPPLY PLANNING COMMITTEE |
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ITEM: |
ACTION ITEM |
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1. |
DEVELOP RECOMMENDATION TO
THE BOARD ON AUTHORIZATION OF A CONTRACT FOR FINANCIAL CONSULTANT RELATED TO
CONTRIBUTION OF PUBLIC FUNDS FOR CALIFORNIA AMERICAN WATER DESALINATION
PROJECT |
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Meeting Date: |
September 16, 2013 |
Budgeted: |
Yes |
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From: |
David J. Stoldt |
Program/ |
Cal-Am Desal Project |
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General Manager |
Line Item No.: |
1-9-1 |
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Prepared By: |
David J. Stoldt |
Cost Estimate: |
$250,000 but in phases; $90,000 Phase 1 |
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General Counsel Approval: N/A |
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Committee Recommendation: The Administrative Committee reviewed this item on September 9, 2013 and recommended approval. |
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CEQA Compliance: N/A |
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SUMMARY: In October 2012, both the District and the Mayors’ Authority submitted “Public Agency Participation Proposals” to California American Water (Cal-Am) as part of the CPUC proceeding A.12-04-019. The District submitted both Governance Concepts and an Evaluation of Capital Financing Alternatives. Since that time, the District has worked with the Authority in promoting the District’s idea of a contribution of public financing to decrease the cost to ratepayers.
In the July 31, 2013 ”Large” Settlement Agreement the Parties agreed to proceed with a form of public contribution known as Securitization. This form of financing could entail $44 million to $119 million of debt issued by the District and secured by payments of another debt issuance issued by a special purpose entity and secured by surcharges on the Cal-Am bill. There are many layers of complexity and specialized consulting services are required. The section of the Settlement Agreement relating to Securitization is attached as Exhibit 1-A. The District has entered into discussions with Charles Atkins to serve in the role of consultant to the District for this purpose. Mr. Atkin’s biography is attached as Exhibit 1-B. A proposed scope of services and fee structure (Exhibit 1-C) indicates three phases of work totaling $250,000, however the initial Phase 1 work, expected to last 11 months is not to exceed $90,000. Additional phases could be delayed or determined not to proceed. Costs will be recovered from the issuance of the debt, however if the debt is not issued, then the District will have incurred a portion of the costs out-of-pocket. The debt will only be issued if, at the time of the financing, significant savings to the ratepayers can be shown.
RECOMMENDATION: The Committee should recommend that the Board of Directors approve the hiring of Charles Atkins to provide financial services consulting and the expenditure of up to $250,000 and to proceed only with Phase 1 - $90,000 – at this time. The Administrative Committee recommended approval on a 3-0 vote at its meeting on September 9, 2013.
ADDITIONAL BACKGROUND: The District previously hired Raymond James and Associates, an investment banking firm represented by Robert Larkins, and Sidley Austin, a Bond Counsel law firm represented by Eric Tashman, to serve on this financing team. It is fully expected that those to firms will remain part of the overall Securitization team.
1-A Overview of Settlement
Agreement as it relates to a Securitization Public Contribution
1-B Biography of Charles Atkins
1-C Scope of Services and Fee Proposal
U:\staff\Board_Committees\WSP\2013\20130916\01\item1.docx