Meeting Date:

January 23, 2019





David J. Stoldt,


Cal-Am Desal Project


General Manager

Line Item No.:     



Prepared By:

David J. Stoldt

Cost Estimate:

Not to exceed $104,000


General Counsel Approval:  N/A

Committee Recommendation:  N/A

CEQA Compliance:  This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.


SUMMARY:  On September 13, 2018 the California Public Utilities Commission (CPUC) issued its decision regarding construction of the Monterey Peninsula Water Supply Project.  The decision stated:


“Financing elements specifically authorized in this decision include: 1) the construction funding charge (also referred to as “Surcharge 2”) with specific requirements as to review for reasonableness and prudency as set forth below; 2) SRF debt; 3) public agency contribution or securitized debt (referred to as Securitization here and in the Comprehensive Settlement); and 4) equity.” (emphasis added)


The ordering language in the decision went on to say:


“24. California-American Water Company shall file an application with the Commission requesting issuance of a financing order to allow for the securitization financing option consistent with this decision.”


The decision’s Conclusions of Law state:


“18. The Commission should, as authorized by Senate Bill (SB) 936, Chapter 482, issue financing orders to facilitate the recovery, financing, or refinancing of water supply costs, defined to mean reasonable and necessary costs incurred or expected to be incurred by a qualifying water utility. The Commission should find that the bonds would provide savings to water customers on the Monterey Peninsula, which will allow the Monterey Peninsula Water Management District to issue water rate relief bonds. Savings from these bonds should result from the lower interest rates that would apply to this financing compared to market-rate financing.”


The District would contract with the underwriter for the eventual bond issue, but pay for services required during the 12 months expected to structure the financing and achieve a financing order on a current basis, because the date of the issuance of bonds is unknown and could be imperiled by lawsuits. If the bonds are never issued, then the District will have paid from budgeted funds under project 1-9-1.  The District entered into a similar contract with the same firm in 2013 in order to advance the financing concept further and to provide expert testimony during the December 2013 hearings.


The contract will not start until the District and Cal-Am meet and provide additional clarity on the timeline to apply for a Financing Order at the CPUC.  The underwriter will begin to work with the District, District’s Bond Counsel, the rating agencies, and Cal-Am to develop a secure credit and to ensure issuance of the Financing Order.  The contract also provides for services on other potential District financings.  If such additional advice happens during the period during which the securitization and the Financing Order are developed such additional services are included in the estimated $80,000.  If the securitization does not get initiated or is stalled or suspended, then other additional services are capped at $24,000.  Hence, there is a possibility that such services become “de-linked” so the maximum potential budget is $104,000


RECOMMENDATION:  The General Manager recommends that the Board of Directors approve the hiring of Raymond James Associates to provide lead underwriting services for the Water Rate Relief Bonds, with near-term services not to exceed $104,000 over the 12-16 months required to develop the securitization.



3-A      Draft Underwriting Agreement