Monterey County plans independent analysis of desalination project financing
Jim Johnson
Monterey Herald
03/30/2011
As a financing plan is being prepared for the proposed seawater desalination project, county officials will hire their own expert to conduct an independent analysis of the funding arrangements.
County Counsel Charles McKee said Tuesday his office has decided to enlist Palo Alto-based Nixon Peabody to conduct a separate analysis of the financing plan after supervisors expressed concerns.
McKee said a contract is being finalized and will be paid for through the county's general fund without formal board approval. He said he doesn't believe the county will seek reimbursement from the project partners.
McKee said county officials want to be sure potential buyers of the desal project bonds don't mistakenly think the county is backing the bonds. He underscored that the county and the county Water Resources Agency are separate legal entities.
The Water Resources Agency, which is collaborating with California American Water and the Marina Coast Water District on the $400 million project, has hired Citigroup Global Markets as its bond underwriter to work with Marina Coast's bond underwriter on a financing plan. The agency has also enlisted Minnesota-based Piper Jaffray to do an independent analysis of the plan. A financing plan is to be reviewed by the supervisors by the end of April.
Supervisor Lou Calcagno said it makes sense to have another independent expert review the financing.
"We believe it's in the county's best interests to have a completely independent firm (conducting a financing analysis)," he said. "We want to be doubly sure this is a good plan."
Supervisor Jane Parker agreed the county should do whatever it can, especially with such an important, and expensive, project.
"I wish I felt this was not necessary, but in a situation like this where there's so much at stake ... the board feels we have an extra duty to go the extra mile on behalf of the ratepayers," Parker said. "We're sort of where the buck stops."
Parker again expressed concerns about public oversight of the project, this time in relation to a county response to the civil grand jury's suggestion that an independent financial oversight committee be formed. In its response, the county indicated the project is already subject to the usual public oversight of both the Water Resources Agency and Marina Coast.
But Parker said she is worried that won't be enough to give adequate protection to ratepayers, who will end up paying the project costs through increased water bills and surcharges.
Supervisors have directed the Water Resources Agency to deliver, in open session, monthly updates on the project's financing, progress, litigation and advisory committee deliberations.
Citigroup has suggested the project could not be financed at preferred rates until key risk factors are addressed, including water rights litigation, proof of the viability of brackish water wells that would feed the desalination plant, and state Coastal Commission approval.
