Meeting Date:

November 12, 2019





David J. Stoldt




General Manager

Line Item No.:     



Prepared By:

David J. Stoldt

Cost Estimate:



General Counsel Approval:  N/A


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


SUMMARY:  On November 6, 2018, voters within the Water Management District passed initiative Measure J by 56% (23,757 voted yes) to 44% (18,810 voted no). 


In December 2018, the Board authorized the hiring of eminent domain attorneys.  At its February 21, 2019 meeting the Board authorized District Counsel to hire a Valuation and Cost of Service Study Consultant, an Investor-owned Utility Consultant, and an Investment Banker.  These services were augmented by the District’s already existing Bond Counsel and Proposition 218 Outside Counsel. 


Measure J directed that the following Rule 19.8 be added to the District Rules and Regulations, Regulation I, General Provisions:


Rule 19.8. Policy of Pursuing Public Ownership of Monterey Peninsula Water Systems


A.                  It shall be the policy of the District, if and when feasible, to secure and maintain public ownership of all water production, storage and delivery system assets and infrastructure providing services within its territory.


B.                  The District shall acquire through negotiation, or through eminent domain if necessary, all assets of California American Water, or any successor in interest to California American Water, for the benefit of the District as a whole.


C.                  The General Manager shall, within nine (9) months of the effective date of this Rule 19.8, complete and submit to the Board of Directors a written plan as to the means to adopt and implement the policy set forth in paragraph A, above. The plan shall address acquisition, ownership, and management of all water facilities and services within and outside the District, including water purchase agreements as appropriate. The plan may differentiate treatment of non-potable water services.


The requirement for a written plan was satisfied at the Board’s August 19, 2019 meeting, but the financial feasibility analysis was not complete at that time due to challenges receiving data in support of the “replacement cost” valuation approach.  Exhibit 2-A (attached) is the Preliminary Valuation and Cost of Service Analysis Report prepared by Raftelis, the Valuation and Cost of Service Study Consultant.  Also attached as Exhibit 2-B is letter of confidence from Barclays, the District’s Investment Banker.


Principle conclusions of the Raftelis report include:


·         The water system total value estimate plus adjustments is approximately $513 million.


·         The cost of service modeling results indicate that significant annual reductions in revenue requirements and projected monthly water bills.


·         Based on the information and estimates summarized in the report, which are reasonable considering the currently available information, the acquisition of the Monterey Water System by MPWMD appears to be economically feasible.


Principle conclusion of the Barclays letter include:


·         Barclays has reviewed the financial results forecasted by Raftelis and concludes that given the assumptions for capital and operational costs, revenues and rates established by the District and Raftelis, the District is able to finance the proposed purchase of the System based on comparisons with financing structures and coverage margins for similar water systems.


The reader should fully review Exhibits 2-A and 2-B for detail behind such conclusions.



2-A      Preliminary Valuation and Cost of Service Analysis Report

2-B      Barclay’s Letter of Confidence