HomeMy WebLinkAbout1988-09-06; City Council; 9631; JPA Finance Citys Cost of Phase IV ExpansionCIP* OF CARLSBAD — AGEND'SBILL
MTG. 9/6/88
PERT. FIN
TITLE: FORMATION OF JOINT POWERS
AUTHORITY TO ISSUE BONDS
TO FINANCE CITY'S SHARE OF
ENCINA PHASE IV EXPANSION
Os
-Jo
ou
RECOMMENDED ACTION:
Adopt Resolution No.authorizing the staff to work with other Encina
members to form a JPA to issue bonds to finance the City's portion of the cost
of the Phase IV expansion.
ITEM EXPLANATION:
The Encina Water Pollution Control Facility will be constructing improvements to
expand the treatment capacity from 22.5 to 36.0 MGD . The total project cost
will be approximately $48.8 million. The table below shows the share of the
expansion allocated to each of the six participants in the Encina Sewage
Treatment Plant.
City of Carlsbad
City of Vista
Buena Sanitation District
San Marcos Water District
Leucadia Water District
Encinitas Sanitary District
TOTAL PROJECT COST
$11,278,000
5,020,000
6,181.000
11,902,000
12,898,000
1,513.000
$48,792,000
23.115%
10.29%
12.67%
24.39%
26.435%
3 .10%
As part of the financing plan, Encina has asked all agencies to provide a
guarantee that funds will be available by the commencement of construction in
April, 1989. The City of Carlsbad, City of Vista and Buena Sanitation District
are unable to guarantee that funds in the amount shown will be available by the
required date. In addition, the Leucadia Water District has indicated that a
cash flow problem may exist.
The City of Carlsbad^s position is such that even if all projects were canceled
and only Encina received funding, the City would have a maximum of $8.5 million
available for this project, about $3 million short of the required $11.3
million. Also, a decision to allocate all available resources to this single
project would delay other competing projects such as the Solids Management
Program, Calavera Hills Water Reclamation Plant, Vista-Carlsbad interceptor arid
various lift station replacements. Carlsbad appears to have no alternative to
seeking debt financing of this facility.
The need to debt finance the Encina project will place an additional cost into
the sewer CTP. This cost will require the City to consider a sewer connection
fee increase sooner than might otherwise have been necessary. During the
structuring of the bond issue, the sewer connection fee will be reviewed.
Recommendations on fee increases will be placed before the City Council before
the bonds are sold in early 1989.
These entities have held several meetings to discuss the possibility of forming
a Joint Powers Authority (JPA) for the purpose of issuing bonds (or COP's) for
their share of the project cost. Tom Clark of Stradling, Yocca, Carlson and
Rauth met with this group during July arid provided some guidance and insight on
the process of forming such a JPA.
BEST
COPY
Page 2 of AB tt
The City of Carlsbad will be financing its share of the Phase IV costs using a
debt issue of some sort since current cash balances are not sufficient to fund
this project and the other capital improvements planned for the sewer system in
the next five years. Staff is recommending that the City Council direct staff
to work with the other Encina members intending to use debt financing for this
project in an effort to form a single purpose JPA. The JPA would be authorized
to issue sufficient bonds (or COP's) to finance the construction costs of the
participating JPA members. Repayment of the debt would be based on the members'
share of the total issue. All costs related to the issue would be included in
the issue.
FISCAL IMPACT:
The formation of the JPA provides an advantage to each member agency by reducing
the net cost of issuance for each agency. Joint issues primarily provide lower
legal, printing and trustee fees as well as the ability to negotiate a better-
deal from the underwriter because of the larger size of the issue. Exact
savings cannot be accurately predicted; however, they should range from 1/2% to
1% of the total issue.
The advantage to the City of Carlsbad is the ability to split the issue costs
with other JPA members rather than bearing the total burden ourselves.
The City is unable to fund its share of the expansion project without debt
financing at least some portion of the costs. The addition of debt issue and
interest costs to the CIP will force the City to revise the sewer connection fee
sooner than would have otherwise been anticipated. No estimate of the effect on
sewer connection fees is available at this time.
EXHIBITS:
Resolution No. QQ*3**b authorizing City staff to work with other Encina members
to form a JPA for the purpose of financing a portion of the Phase IV expansion.
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RESOLUTION NO. 88-326
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD. CALIFORNIA. AUTHORIZING THE CITY
STAFF TO WORK WITH OTHER ENCINA MEMBER AGENCIES
TO FORM A SINGLE PURPOSE JOINT POWERS AUTHORITY
FOR THE PURPOSE OF FINANCING A PORTION OF THE
ENCINA PHASE IV EXPANSION COSTS
WHEREAS, the members of the Encina Water Pollution Control Facility
have elected to build a 13.5 MGD expansion to the existing Encina sewage
treatment plant; and
WHEREAS, the City of Carlsbad's share of the expansion cost will be
approximately $11.3. million; and
WHEREAS, the City of Carlsbad and other Encina members find it necessary
to issue bonds to finance their share of the construction costs; and
WHEREAS, it is in the interest of the City of Carlsbad to form a Single
Purpose Joint Powers Authority with other members of the Encina agency in order
to share debt issue costs, thereby reducing the total cost to any single entity;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Carlsbad, California, that the City staff is hereby authorized to meet with
members of the Encina agency, to pursue the formation of a Single Purpose Joint
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Powers Authority, and to return to the City Council with documents for the
formation of such Joint Powers Authority for Council review arid approval.
PASSED. APPROVED, AND ADOPTED at a regular meeting of the Carlsbad City
Council held on the 6th day of September 1988, by the following vote, to wit
AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Larson
NOES: None
ABSENT: None
ATTEST
ALETM L. EMJTJJi'KRANg? City Clerk
-RSREN R. KUNDTZ, Deputy City Clerk
(SEAL)