BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2167 HEARING: 6/13/12
AUTHOR: Hill FISCAL: No
VERSION: 6/6/12 TAX LEVY: No
CONSULTANT: Weinberger
BAY AREA WATER SUPPLY AND CONSERVATION AGENCY'S BONDS
Allows the Bay Area Water Supply and Conservation Agency to
issue bonds to repay the costs of capital facilities.
Background and Existing Law
Although owned and operated by the City and County of San
Francisco, the Hetch Hetchy system is a regional asset that
delivers water to millions of Bay Area residents. When the
suburban water purveyors wanted to help finance
improvements to the Hetch Hetchy system, the Legislature
created the San Francisco Bay Area Regional Water System
Financing Authority (SB 1870, Speier, 2002). To coordinate
the suburban purveyors' efforts, the Legislature created
the Bay Area Water Supply and Conservation Agency (BAWSCA)
(AB 2058, Papan, 2002).
BAWSCA is a regional water district created to help protect
the health, safety and economic well-being of 1.7 million
residents, businesses and community organizations in
Alameda, San Mateo and Santa Clara counties who depend on
the San Francisco Bay Area regional water system. BAWSCA
is governed by a 26-member Board of Directors comprised of
members representing the 24 cities and water districts that
are member agencies of BAWSCA, and two private utilities
that also have appointees to the board, Stanford University
and California Water Service Company.
State law allows BAWSCA to issue bonds by adopting an
ordinance approved by a 2/3 vote of its board members. The
agency may use bond proceeds to construct, reconstruct, or
improve any works carried out by the agency. The agency
also can make bond proceeds available to other local public
agencies on mutually satisfactory terms and conditions to
assist in the construction, reconstruction, or improvement
of works to furnish water to agency members.
AB 2167 -- 6/6/12 -- Page 2
A 2009 agreement between San Francisco and BAWSCA's member
agencies, which are the wholesale customers of the San
Francisco Regional Water System, requires that the
wholesale customers repay their shares of the system's
existing capital assets over the term of the agreement.
The agreement also provides that the amount the wholesale
customers owe can be prepaid through BAWSCA.
BAWSCA officials want the Legislature to amend the Agency's
special act to allow it to issue bonds to repay San
Francisco for the costs of existing capital assets under
the terms of the 2009 agreement.
Proposed Law
Assembly Bill 2167 allows BAWSCA to prepay all or any
portion of any unpaid principal balance relating to
specified capital assets, on behalf of BAWSCA members, as
provided in the July 2009 Water Supply Agreement.
AB 2167 allows BAWSCA to acquire from the City and County
of San Francisco, and allows the City and County of San
Francisco to sell, the right to receive amounts payable by
BAWSCA members under the July 2009 Water Supply Agreement.
If the agency acquires, and the City and County of San
Francisco sells, the rights to specified payments, AB 2167
requires the City and County of San Francisco, upon request
by the agency, to continue collecting the amounts payable
by BAWSCA members under the July 2009 Water Supply
Agreement in accordance with that agreement's terms. San
Francisco must transfer the amounts it collects to the
agency on a monthly basis, or on a periodic basis agreed to
by both the agency and San Francisco. AB 2167 requires
that the amounts the agency receives from San Francisco
must be applied to pay debt service on specified bonds
issued by the agency and to satisfy all of its other
obligations related to the bonds. The agency can
distribute any amounts not needed for its bond obligations
to BAWSCA members. The agency can condition this
distribution upon BAWSCA members' agreement to waive
specified prepayment rights that the members may have under
the July 2009 Water Supply Agreement.
AB 2167 -- 6/6/12 -- Page 3
AB 2167 allows BAWSCA to use bond proceeds to:
Construct, reconstruct, or improve any works
carried out by the agency on behalf of a BAWSCA
member.
Assist in the repayment of any existing capital
assets, if those assets were designed and intended, in
whole or in part, to furnish water to BAWSCA members,
whether those assets were carried out jointly by the
agency and other public agencies, or solely by those
other public agencies.
Prepay an unpaid principal balance relating to
specified capital assets, on behalf of BAWSCA members,
as provided in the July 2009 Water Supply Agreement.
Acquire from the City and County of San Francisco
the right to receive all or a portion of the amounts
payable to BAWSCA members under the July 2009 Water
Supply Agreement.
Pay the bonds' costs of issuance.
Fund reserve funds securing the bonds.
AB 2167 allows BAWSCA, in addition to other authority
granted by state law, to:
Impose reasonable rates, fees, and charges on
BAWSCA members for any program or service provided or
work performed by the agency.
Impose rates, fees, and charges on BAWSCA members
and any entity that subsequently serves a BAWSCA
member's service area in an amount necessary, together
with other funding sources, to pay debt service on
specified bonds and to satisfy all other obligations
related to those bonds, including maintaining reserve
funds and complying with financial covenants.
Distribute any amounts collected that are not
needed for the purposes of this article to BAWSCA
members.
AB 2167 requires the City and County of San Francisco to
collect any rates, fees, and charges imposed by the agency
pursuant to a specified statute as a surcharge under the
July 2009 Water Supply Agreement.
The bill defines "BAWSCA members" as Stanford University,
the California Water Service Company, Alameda County Water
District, City of Brisbane, City of Burlingame, Coastside
County Water District, City of Daly City, City of East Palo
AB 2167 -- 6/6/12 -- Page 4
Alto, Estero Municipal Improvement District, Guadalupe
Valley Municipal Improvement District, City of Hayward,
Town of Hillsborough, City of Menlo Park, Mid-Peninsula
Water District, City of Millbrae, City of Milpitas, City of
Mountain View, North Coast County Water District, City of
Palo Alto, Purissima Hills Water District, City of Redwood
City, City of San Bruno, City of San Jose, City of Santa
Clara, City of Sunnyvale, and Westborough Water District.
The bill defines "July 2009 Water Supply Agreement" as the
water supply agreement by and between the City and County
of San Francisco and the BAWSCA members, as amended or
supplemented.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Historically low interest rates
make it possible for BAWSCA to save millions of dollars for
its member agencies and their customers by pre-paying the
capital facilities costs that its members agreed to pay
over the term of a 2009 agreement with San Francisco. AB
2167 amends the statutes that govern BAWSCA to give the
agency two prepayment options:
BAWSCA could prepay all or a portion of the capital
costs on behalf of its members, or
BAWSCA could acquire from San Francisco the right
to receive all or a portion of the amount payable by
BAWSCA members under the 2009 agreement.
In addition to saving BAWSCA members as much as $35
million, these financing options also will increase San
Francisco's reserves, potentially reducing future increases
in water rates for customers in San Francisco.
2. Technical amendment . To clarify AB 2167's provisions,
the Committee may wish to consider making the following
technical amendment to AB 2167:
On page 3, line 21, strike out "to" and insert "by"
Assembly Actions
AB 2167 -- 6/6/12 -- Page 5
Assembly Local Government Committee: 8-0
Assembly Floor: 74-0
Support and Opposition (6/7/12)
Support : Bay Area Water Supply and Conservation Agency;
San Francisco Public Utilities Commission.
Opposition : Unknown.