County asks to lift desal credit limit
Request comes despite lack of financing plan
Jim Johnson
Monterey Herald
01/08/2012
The Board of Supervisors will be asked Tuesday to allow unrestricted access to a California American Water-backed credit line and approve a bid for low-interest state financing for the $400 million Regional Desalination Project.
This comes despite the apparent absence of a resolution among project partners on a number of issues, including the viability of the project agreements, questions about financing and ongoing legal challenges.
It also ignores the supervisors' previous order requiring a series of conditions, most notably the completion of a financing plan, before the Cal Am credit line could be tapped beyond limits set in March.
County Counsel Charles McKee, who has taken a lead role in the mediation process, characterized the requests as a way to position the county and its Water Resources Agency to be ready to proceed, if needed, once the mediation is complete.
"If we're able to come out of the mediation with the Water Resources Agency still taking an active role in the project, there are things we will have to do very quickly, including appropriate financing for the project and the Coastal Commission permit," McKee said.
The project — a partnership between the Marina Coast Water District, Cal Am and the Water Resources Agency — faces a 2016 deadline for a state-ordered cutback in pumping from the Carmel River.
"We need to be prepared to move forward very quickly," McKee said. "We're trying to make sure the county is in the best position both legally and practically — legally, if there's a challenge, and practically, so we can move water to the Peninsula."
Warned of default
The requests, set for the board's afternoon session, include lifting the supervisors' $286,000 cap on tapping Cal Am's $8 million credit line so the Water Resources Agency can pay for previous work on the project and future tasks, and authorization to submit an application to the Clean Water State Revolving Fund to provide a bridge loan for the project until a long-term funding source is secured.
If the cap is lifted, the water agency would use the funds to pay $696,000 for work already done by project manager RMC Water and Environment and $455,000 for other expenses incurred despite the credit line cap. The money would also go toward future work, such as preparing the state loan application, completing the Coastal Development Permit application and getting a slant test well ready for construction.
For all of that, there is $3.1 million left in the Cal Am credit line.
In a staff report for the credit line request, the supervisors are warned that the Water Resources Agency "is now in danger of materially defaulting on its obligations" under the project agreements because of the outstanding bills, "which could lead to a claim of project default."
A project default, according to the staff report, would render the county ineligible to recover its costs thus far, and "it is certain" that project partners Cal Am and Marina Coast would sue for their project costs, too.
State loan
Supervisor Dave Potter said the credit line request is intended to pay expenses already accrued and the county would not move forward with the rest of the spending until there was a resolution from the project mediation.
"The board's not saying it's moving forward on the project yet," Potter said. "We just need to pay our bills."
Potter said the financing plan depends on access to the state's low-interest loan program, and the county needs to get in line to qualify for the money.
