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6.C. - Page 14 of 57 Reallocation of 2019B New Money Debt Service (DS) to Meinber Agencies Staff recommends the Board reject this option because there is no contractual support for this approach in the language of the JPA. Under Article 15, if debt is issued prior to withdrawal ("any and all existing debts, ... by the date of withdrawal"), that debt is to be included in the calculation of proportionate share of debt obligations. Atherton was a Member Agency in 2019 when the bonds were issued by SBWMA; thus, it is responsible for its share of the debt. The fact that it will not reap the benefit of future improvements if it withdraws from the JPA is not a reason to excuse Atherton from responsibility for its share. In withdrawing from SBWMA, Atherton is choosing to forego future benefits - the JPA language does not provide for remaining Member Agencies to subsidize this choice. Option 3 - Partial Defeasance of 2019 bonds based on exclusion of 20198 (new money) bonds plus a hypothetically -reduced franchise tonnage percentage (estimated cost $903,623). Option 3 is Atherton's proposed approach. It consists of determining Atherton's proportionate share by first excluding the 2019B (new money) bonds (discussed above), and then factoring in a hypothetical reduction in Atherton's future portion of the franchise tonnage if it were to remain a member. Under this approach, in Scenario 4, NHA estimates that Atherton's liquidation amount would be $903,623. In its Notice of Intent to Withdraw, Atherton asks that SBWMA consider this amount as the appropriate liquidation cost. Staff believes this number does not comply with the requirements of Article 15 for several reasons. First, as discussed above, Atherton's obligation to defease its portion of the 2019B (new money) bonds should not be excused because this is an indebtedness incurred while Atherton was a Member of SBWMA, and Atherton is contractually obligated to liquidate its portion of the debt in full as a condition of withdrawal. Secondly, the assumption that Atherton's share of the franchise tonnage would decline in the future if it were to remain a Member of SBWMA is speculative and unsupported by any evidence; it does not constitute a reasonable basis to reduce its current, definable debt obligation. If the Board were to select this option, the $1,204,552 balance of Atherton's debt obligation would be apportioned amongst the remaining Member Agencies. Similar to the chart above, the far right column of the chart below shows what each Member Agency's additional cost would be: SBWMA BOD PACKET 8/20/2020 AGENDA ITEM: 5A - p6 45 Avg. Annual DS with Atherton Prepayment Avg. Annual DS without Atherton Prepayment Annual Difference Total DS with Atherton Pfepayment Total DS Without Atherton Prepayment Total Difference Belmont $89,419 $92,415 $2,996 $983,644 $1,016,566 $32,958 Burlingame $216,415 $223,666 $7,251 $2,380,564 $2,460,325 $79,765 Comity $57,028 $58,939 $1,911 $627,313 $648,332 $21,019 No_ Fait Oaks $55,600 $57,463 $1,863 $611,601 $632,044 $20,493 East Palo Alto $98,752 $102,061 13,349 $1,086,269 $1,122,666 $36,397 Foster City $108,280 $111,908 $3,628 $1,191,077 $1,234,987 $39,909 FElla6arm►gh $53,707 $55,506 $1,800 $590,776 $610,571 $19,795 Menlo Park $227,894 $235,530 $7,636 $2,506,834 $2,590,826 $83,996 Redwood City $360,318 $372,391 $12,073 $3,963,495 $4,496,294 $132,804 San Carlos $142,452 $147,225 $4,773 $1,566,970 $1,619,474 $52,504 San Mateo $401,268 $414,713 $13,445 $4,413,448 $4,561,846 $147,897 West Bay Sanitary $28,149 $29,092 $443 $309,640 $320,015 $10,375 Total 51,839,281 $1,900,909 561,628 $20,232,088 $20,910,000 $677,912 Staff recommends the Board reject this option because there is no contractual support for this approach in the language of the JPA. Under Article 15, if debt is issued prior to withdrawal ("any and all existing debts, ... by the date of withdrawal"), that debt is to be included in the calculation of proportionate share of debt obligations. Atherton was a Member Agency in 2019 when the bonds were issued by SBWMA; thus, it is responsible for its share of the debt. The fact that it will not reap the benefit of future improvements if it withdraws from the JPA is not a reason to excuse Atherton from responsibility for its share. In withdrawing from SBWMA, Atherton is choosing to forego future benefits - the JPA language does not provide for remaining Member Agencies to subsidize this choice. Option 3 - Partial Defeasance of 2019 bonds based on exclusion of 20198 (new money) bonds plus a hypothetically -reduced franchise tonnage percentage (estimated cost $903,623). Option 3 is Atherton's proposed approach. It consists of determining Atherton's proportionate share by first excluding the 2019B (new money) bonds (discussed above), and then factoring in a hypothetical reduction in Atherton's future portion of the franchise tonnage if it were to remain a member. Under this approach, in Scenario 4, NHA estimates that Atherton's liquidation amount would be $903,623. In its Notice of Intent to Withdraw, Atherton asks that SBWMA consider this amount as the appropriate liquidation cost. Staff believes this number does not comply with the requirements of Article 15 for several reasons. First, as discussed above, Atherton's obligation to defease its portion of the 2019B (new money) bonds should not be excused because this is an indebtedness incurred while Atherton was a Member of SBWMA, and Atherton is contractually obligated to liquidate its portion of the debt in full as a condition of withdrawal. Secondly, the assumption that Atherton's share of the franchise tonnage would decline in the future if it were to remain a Member of SBWMA is speculative and unsupported by any evidence; it does not constitute a reasonable basis to reduce its current, definable debt obligation. If the Board were to select this option, the $1,204,552 balance of Atherton's debt obligation would be apportioned amongst the remaining Member Agencies. Similar to the chart above, the far right column of the chart below shows what each Member Agency's additional cost would be: SBWMA BOD PACKET 8/20/2020 AGENDA ITEM: 5A - p6 45