AgdaPkt 2012-12-03 - Laserfiche WebLink

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6.2.B. - Page 1 RE PO RT To the Honorable Mayor and City Council From the Cit Mana er December 3, 2012 SUBJECT Bay Area Water Supply and Conservation Agency debt refunding RECOMMENDATION Adopt, by resolution, authorization for the Bay Area Water Supply and Conservation Agency (BAWSCA) to prepay the City's portion of a $367 million debt owed by the BAWSCA members to the City and County of San Francisco (San Francisco) and to agree to make wholesale water purchase surcharge payments to BAWSCA in order to repay the City's share (1.8%) of bonds to be sold by BAWSCA which will provide BAWSCA with the source of funds to prepay the debt owed to San Francisco. BACKGROUND Redwood City contracts with San Francisco to purchase water pursuant to a Water Supply Agreement dated July 2009 (the WSA). Redwood City is also a member of BAWSCA, which represents the interests of all the 24 cities and water districts, and two private entities (Stanford University and California Water Company) (collectively, the Wholesale Customers or Members), that purchase water wholesale from the San Francisco regional water system. Pursuant to the WSA, the Wholesale Customers agreed to pay San Francisco for capital improvements undertaken by San Francisco prior to their entering into the WSA (Prior Debt). The Prior Debt was to be repaid over a 25-year period at a fixed interest rate of 5.13%. Approximately $367 million of the Prior Debt remains outstanding of which about 1.8% is attributable to Redwood City. Each Wholesale Customer pays for its share of the Prior Debt in the form of a capital cost recovery charge which is one of many components used to establish the annual wholesale water rate it pays to San Francisco. The WSA provides that the Wholesale Customers, acting through BAWSCA, may prepay capital debt payments due to San Francisco. BAWSCA is authorized by statute to issue bonds in order to make this prepayment. BAWSCA proposes to issue bonds in an amount sufficient to prepay the Prior Debt and to impose a wholesale water purchase surcharge on participating Members, to be collected by San Francisco as part of its monthly water bill, to repay their respective shares of the bonds issued by BAWSCA to pay off the Prior Debt. On the advice of its financial advisor, BAWSCA believes that Members could realize net present value (NPV) debt service savings of at least 6% and possibly as much as 9%. The Government Finance Officers Association has adopted a minimum NPV savings target of 3% of the par amount of refunding bonds as a "best practices" standard. Total NPV savings are expected to equal or exceed this best practices standard.