AgdaPkt 2020-10-26 Joint SA PFA - Laserfiche WebLink

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6.C. - Page 3 of 57 ANALYSIS SBWMA was formed contractually as a joint powers agency under the provisions of the California Government Code that allow public agencies to jointly exercise common powers to achieve efficiency and economy in service delivery. Its authority and function is governed by the terms of the JPA, as is each Member's participation in the agency. When the Members formed the agency, they anticipated that at some point a Member Agency might want to withdraw, and provided a mechanism for doing so that would allow the Member Agency to leave while protecting the interests of the remaining Members. Section 15.1 provides that a Member Agency may not withdraw until it has given notice, liquidated its portion of any existing financial obligations as of the date of withdrawal, and received approval to withdraw from 4/5 of the other Member Agencies. During its meeting on August 20, 2020, the Board thoroughly considered, with the aid of agency staff and agency financial consultants (KNN Public Finance), the agency's existing debt obligations, and how to determine Atherton's proportional share of them. Based on the information presented, it concluded that the only existing debt obligations were the outstanding 2019 series A and B bonds, and adopted the methodology proposed by the financial consultants (use of franchise tonnage) to determine Atherton's proportionate share of the debt. Using this method, the Board concluded Atherton's liquidation cost is $2,203,016 ($2,103,016 to defease the bonds, and $100,000 in costs). As noted earlier, this amount is subject to adjustment based on market conditions at the time of liquidation. SBWMA's bond counsel (Stradling Yocca Carlson & Rauth) raised no additional legal issues relating to the defeasance. KNN Public Finance indicated that Atherton's withdrawal should have no rating impact, as it was known as a risk at the time of the bond issuance in 2019. In its resolution determining Atherton's liquidation cost, the Board also recommended to the Member Agencies that they approve Atherton's withdrawal, provided the liquidation amount is paid prior to December 31, 2020. The Board made this recommendation because, assuming Atherton pays the liquidation cost and defeases its portion of the bonds prior to December 311t, it will have met the requirements of Article 15, and there would be no basis for withholding consent. FISCAL IMPACT If Atherton pays the required amount and obtains the necessary approval of ten Member Agencies, its withdrawal from SBWMA will be effective December 31, 2020. According to the terms of the JPA, once a Member Agency withdraws, it is no longer a part of SBWMA and thus no longer responsible for ongoing expenses. This will have a fiscal impact on the remaining eleven Member Agencies because, commencing January 1, 2021, the remaining Member Agencies will be responsible for the ongoing operational costs of SBWMA. Tip fee revenue from each Member Agency covers SBWMA's fixed and variable costs. After adjusting for Atherton's variable costs, SBWMA staff calculates that Atherton's withdrawal will result in an annual net shortfall in operating funds of approximately $146,760 that would need to be reallocated amongst the Members. SBWMA staff will recommend that the SBWMA Board address this shortfall through a tip fee adjustment of $0.52 per ton for all franchise material. To put this in perspective, the Page 3 of 5 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 34