ADMINISTRATIVE COMMITTEE
5.	Consider FUNDING RECYCLED WATER STORAGE TANK REHABILITATION FOR RECLAMATION PROJECT
Meeting Date:		May 13, 2019	Budgeted:	Yes
From:		Dave Stoldt,	Program/	Water Supply Projects
		General Manager	Line Item No.:	TBD
Prepared By:		Dave Stoldt	Cost Estimate:	$1,000,000
General Counsel Approval: N/A
Committee Recommendation: The Administrative Committee reviewed this item on May 13, 2019 and recommended _______________.
CEQA Compliance: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines section 15378.

SUMMARY: The original Reclamation Project facilities are approximately 25 years old, which means that major renewal and replacement will likely be required in the coming years. When the District’s certificates of participation (COPs) are paid off in 2022, the project partners will be in a position to fund reserves for renewal and replacement within the cost of water while still reducing the annual budget due to savings in debt service. Until then, major replacement projects will have impacts on the annual budget and cost of water. One such project is the current need for approximately $1.6 million for rehabilitation of the Recycled Water Storage Tank adjacent to Poppy Hills. This amount will be required later this calendar year to undertake this much needed project, but is too much to absorb in the proposed 2019-20 fiscal year Reclamation Project budget.

At its April 26, 2019 meeting the Reclamation Project Financial Officers Working Group met to discuss funding options. The District was asked if it would, once again, act in its traditional role as funding agent to the project.

As you may recall, the Monterey Peninsula Water Management District’s role in the 1992 Reclamation Project financing was to issue the $33,900,000 COPs in the public markets, secured by Net Operating Revenues under the Water Purchase Agreement, derived from water sales by the District to the Del Monte Forest recycled water customers. Further, the COPs are secured by a commercial bank letter of credit, additionally backed by a corporate guaranty of the Pebble Beach Company. For major renewal and replacement such as the tank rehabilitation, a similar financing structure would be utilized. However, while $1.6 million is too much to be included in an annual budget, it is too small to merit an issuance of new debt in the public markets. Instead, the District proposes use of the same financing structure, but funded internally by the District as described in Exhibit 5-A, attached.

The Pebble Beach Company approved the terms contained in Exhibit 5-A on May 2^nd and the Reclamation Management Committee considered the topic at its meeting on May 8^th (to be reported at the District’s May 13^th Administrative Committee meeting.)

RECOMMENDATION: Staff recommends the Board of Directors approve a two-year funding agreement with the Reclamation Project subject to the terms contained in Exhibit 5-A.

EXHIBIT

5-A Terms and Conditions of Funding Agreement

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