EXHIBIT 4-A

 

Draft Partnership Concepts

Between MRWPCA, MPWMD, and Cal-Am for

Groundwater Replenishment Project

 

 

Near-Term Needs for MRWPCA Project

 

FY 2012/13:    $1,323,100

FY 2013/14:    $2,938,400

 

 

Background on Orange County Project

 

·         The Orange County Water District’s “Groundwater Replenishment System” was jointly funded with Orange County Sanitation District for design and construction.

 

·         $481 million was funded as $93 million in grants and $388 million by the two parties.

 

·         OCWD owns the facility.

 

·         OCSD supplies treated wastewater to OCWD at no cost.

 

·         OCWD manages and funds O&M of the facility.

 

·         Metropolitan Water District of Southern California subsidizes O&M.

 

 

Proposal for MRWPCA Project

 

·         Jointly fund near-term needs from pay-as-you go funds.  MPWMD provides up to half of FY 2012/13 costs.  Does not require an increase in User Fee budget for FY2012/13.  All costs reimbursable from future bond proceeds.  Do small borrowing in FY2013/14 and larger borrowing as needed to complete the project.

 

·         MPWMD support is contingent upon successful implementation of alternative revenue collection mechanism by June 2012.

 

·         Project owned by MRWPCA.

 

·         Recycled water purchased by MPWMD upon injection to Basin.

 

·         Dilution water arrangements to be determined once new regulations released.  (TBD)

 

·         Cal-Am purchases water from MPWMD annually upon withdrawal.  Must purchase minimum annual amount sufficient to cover debt service and O&M costs, regardless of whether actual quantities are withdrawn.

 

·         MPWMD provides municipal debt financing based on alternative revenue collection mechanism described above, and Cal-Am contract.  Simple financing JPA is formed.  May require allocation of State volume-cap for private activity purposes.

 

·         MPWMD has rights to review costs and activities related to planning, design, construction, operations, and maintenance. 

 

 

Agreements and Contracts Required

 

·         Joint Participation MOU – To describe responsibilities of the parties going forward.  Agreement between MRWPCA, MPWMD, and Cal-Am

 

·         Storage and Recovery Agreement – To set forth water quality requirements and rights of storage and recovery.  MRWPCA must take liability for water quality.  Agreement is between MRWPCA/MPWMD, jointly, and the Watermaster

 

·         Recycled Water Purchase Agreement – Provides mechanism for MRWPCA recovery of O&M costs.  Between MRWPCA and MPWMD. 

 

·         Dilution Water Supply Agreement – To be determined once regulations are clarified.

 

·         Wholesale Water Sales Agreement – Provides mechanism for MPWMD recovery of O&M costs, including pass-through to MRWPCA, and debt service.  Agreement is between MPWMD and Cal-Am.

 

·         Joint Powers Agreement – Simple financing JPA agreement between the two public agencies.

 

·         Construction and Operations Agreement – To define the uses of bond proceeds, the O&M requirements going forward, and the review and participation rights of MPWMD in oversight of use of funds.

 

·         Bond Indenture/Trust Agreement – MPWMD will define its pledged revenues, rate covenant, and other security provisions to secure the financing, including the Wholesale Water Sales Agreement.

 

 

Examples of “Take-or-Pay” Wholesale Water Purchase Agreements

 

California Water Services Company has an agreement with Kern County Water Agency whereby the Company is obligated to purchase fixed volumes of water each year.  Under the agreement, the Company is obligated to pay the annual Capital Facilities Charge and the Treated Water Charge regardless of whether it can use the water, and even if the Agency is unable to produce an adequate amount of water.

 

California Water Services Company has an agreement with Stockton East Water District that requires the Company make a fixed annual payment and does not vary with the quantity of water delivered by the District. 

 

California Water Services Company has an agreement with Santa Clara Valley Water District that requires the Company to purchase minimum annual amounts of water.  The Company is obligated to pay for the minimum quantity regardless of whether it can use the water.

San Jose Water Company purchases water from Santa Clara Valley Water District under a master contract expiring in 2051.  While not specifically tied to a financing, the contract has minimum deliveries that, in effect, guarantee the District a revenue stream.  However, the deliveries and prices are re-set on a periodic basis.

 

San Luis Obispo Flood Control and Water Conservation District has “Delivery Contracts” with 5 participants, each of which is allocated debt service and O&M proportionate to each Participant’s proportionate Nacimiento water Delivery Entitlement Share.

 

The Woodbridge Irrigation District entered into an agreement with the City of Lodi in support of financing the District’s 2007 capital improvement project.  Under the Lodi Water Sales Agreement, the City will make quarterly payments to the District for a defined annual amount of water, and irrespective of whether the District has water available for delivery to the City.

 

American Water Works’ regulated subsidiaries maintain agreements with other water purveyors for the purchase of water to supplement their water supply. The subsidiaries purchased water expense under these types of agreements amounted to approximately $107,121,000 during 2010. The estimated annual commitment related to the minimum quantities of water purchased is expected to approximate $51,600,000 in 2011, $47,409,000 in 2012, $46,095,000 in 2013, and $46,077,000 in 2014.  These contracts should be examined to see if any of them were used to provide security for financing public agency projects.

 

 

 

 

 

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