HomeMy WebLinkAbout11-06-19 Board Packet 1
OTAY WATER DISTRICT
AND
OTAY WATER DISTRICT FINANCING AUTHORITY BOARD OF DIRECTORS MEETING
DISTRICT BOARDROOM
2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CALIFORNIA WEDNESDAY
November 6, 2019
3:30 P.M.
AGENDA
1. ROLL CALL 2. PLEDGE OF ALLEGIANCE
3. OBSERVE A MOMENT OF SILENCE IN HONOR OF THE LATE UNITED STATES HOUSE OF REPRESENTATIVE ELIJAH CUMMINGS 4. APPROVAL OF AGENDA
5. APPROVE THE MINUTES OF THE REGULAR BOARD MEETING OF JULY 3, 2019 6. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JURIS-
DICTION BUT NOT AN ITEM ON TODAY'S AGENDA CONSENT CALENDAR 7. ITEMS TO BE ACTED UPON WITHOUT DISCUSSION, UNLESS A REQUEST IS
MADE BY A MEMBER OF THE BOARD OR THE PUBLIC TO DISCUSS A PARTICU-
LAR ITEM: a) AWARD TWO (2) PROFESSIONAL SERVICE CONTRACTS FOR AS-NEEDED ENVIRONMENTAL SERVICES WITH HELIX ENVIRONMENTAL PLANNING,
INC. AND ICF JONES & STOKES, INC., EACH IN THE AMOUNT NOT-EXCEED $500,000; THE TOTAL AMOUNT OF THE TWO (2) CONTRACTS WILL NOT EXCEED $500,000 DURING FISCAL YEARS 2020-2022 (ENDING JUNE 30, 2022)
b) AWARD A CONSTRUCTION CONTRACT WITH PIPERIN CORPORATION FOR THE 1200 PRESSURE ZONE IMPROVEMENTS – PHASE I PROJECT IN AN ANOMUNT NOT-TO-EXCEED $151,990
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c) AWARD TWO (2) PROFESSIONAL SERVICE CONTRACTS FOR AS-NEEDED
HYDRAULIC MODELING SERVICES WITH WOOD RODGERS AND WATER SYSTEMS CONSULTING, INC., EACH IN AN AMOUNT NOT-TO-EXCEED $175,000 FOR FISCAL YEARS 2020 AND 2021; THE TOTAL AMOUNT OF THE TASKS UNDER THE TWO CONTRACTS WILL NOT EXCEED $175,000
d) APPROVE CHANGE ORDER NO. 1 TO REDUCE THE CONSTRUCTION CONTRACT WITH ADVANCED INDUSTRIAL SERVICES, INC. IN THE AMOUNT OF $261,330.20 FOR THE 803-2 RESERVOIR INTERIOR/EXTERIOR COATINGS AND UPGRADES PROJECT
e) REJECT ALL BIDS FOR THE CONSTRUCTION OF THE 850-1 RESERVOIR (P2543) AND RECYCLED WATER STORAGE TANK (R2120) INTERIOR/EXTERIOR COATINGS AND UPGRADES PROJECT
f) APPROVE CHANGE ORDER NO. 4 TO THE EXISTING CONSTRUCTION
CONTRACT WITH PACIFIC HYDROTECH CORPORATION IN THE AMOUNT OF $49,157.89 FOR THE 870-2 PUMP STATION REPLACEMENT PROJECT g) APPROVE AN INCREASE TO THE BUDGET OF CIP P2574 (VISTA VEREDA
WATERLINE REPLACEMENT PROJECT) IN AN AMOUNT NOT-TO-EXCEED $145,000 (FROM $1,640,000 TO $1,785,000); AND, APPROVE CHANGE ORDER NO. 2 TO THE EXISTING CONSTRUCTION CONTRACT WITH CASS CONSTRUCTION, INC. dba CASS ARRIETA IN AN AMOUNT NOT-TO-EXCEED $115,213.59 FOR THE VISTA VEREDA AND HIDDEN MESA ROAD WATER
LINE REPLACEMENT PROJECT h) APPROVE THE 2019 FIVE-YEAR UPDATE OF THE DISTRICT’S SEWER SYSTEM MANAGEMENT PLAN
i) APPROVE THE PURCHASE OF FIVE (5) FLEET VEHICLES THROUGH VARIOUS SOUTHERN CALIFORNIA CAR DEALERSHIPS IN THE AMOUNT OF $223,353.94 j) APPROVE THE ISSUANCE OF A PURCHASE ORDER TO VOLVO
CONSTRUCTION EQUIPMENT IN AN AMOUNT NOT-TO-EXCEED $145,155 FOR THE PURCHASE OF ONE (1) PORTABLE EMERGENCY GENERATOR k) APPROVE A TWO-YEAR AGREEMENT, PLUS THREE (3) ONE-YEAR OPTIONS, WITH PAYMENTUS TO PROVIDE PHONE PAYMENT SERVICES IN
AN AMOUNT NOT-TO EXCEED $250,000 ($50,000 ANNUALLY) l) ADOPT RESOLUTION NO. 4372 ESTABLISHING POLICY 54, DISCONTINUATION OF WATER SERVICE FOR DELINQUENT ACCOUNTS; AND, ADOPT ORDINANCE NO. 576 TO AMEND SECTION 34, ISSUANCE AND
PAYMENT OF WATER BILLS AND APPENDIX A OF THE DISTRICT’S CODE OF ORDINANCES EFFECTIVE JANUARY 1, 2020
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ACTION ITEMS
8. FINANCE AND ADMINISTRATION a) APPROVE THE AUDITED FINANCIAL STATEMENTS, INCLUDING THE INDE-PENDENT AUDITORS’ UNQUALIFIED OPINION, FOR THE FISCAL YEAR
ENDED JUNE 30, 2019 (DYCHITAN) b) ADOPT RESOLUTION NO. 4373 APPROVING THE EXECUTION OF CERTAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTS IN CONNECTION WITH THE ISSUANCE BY THE OTAY WATER DISTRICT FINANCING AUTHORITY OF
ITS 2019 WASTEWATER REVENUE BONDS IN AN AMOUNT NOT-TO-EXCEED $3,500,000 (FAKHOURI) 9. RECESS OTAY WATER DISTRICT BOARD MEETING
10. CONVENE OTAY WATER DISTRICT FINANCING AUTHORITY BOARD MEETING
a) ADOPT RESOLUTION NO. 2019-01 APPROVING THE EXECUTION OF CER-TAIN DOCUMENTS AND AUTHORIZING CERTAIN ACTS IN CONNECTION WITH THE ISSUANCE OF 2019 WASTEWATER REVENUE BONDS IN AN
AMOUNT NOT-TO-EXCEED $3,500,000 (FAKHOURI)
11. ADJOURN OTAY WATER DISTRICT FINANCING AUTHORITY BOARD MEETING 12. RECONVENE OTAY WATER DISTRICT BOARD MEETING
13. ENGINEERING AND WATER OPERATIONS a) APPROVE THE SEPTEMBER 24, 2019 PURCHASE AGREEMENT FOR $508,000 FOR THE CAMPO ROAD AND HILLSIDE DRIVE PROPERTY IN
JAMUL (KENNEDY) b) REPORT ON FORMING A WORKING GROUP BETWEEN OTAY WATER DIS-TRICT AND SWEETWATER AUTHORITY TO EXPLORE THE POTENTIAL AND FEASIBILITY OF USING RECYCLED WATER TO AUGMENT EXISTING LOCAL
SUPPLIES AVAILABLE TO OUR MUTUAL CUSTOMERS (KENNEDY) 14. BOARD a) APPROVE AN AGREEMENT WITH THE LAW FIRM OF ARTIANO SHINOFF
ABED BLUMENFELD CARELLI SLEETH & WADE, A PROFESSIONAL CORPO-RATION, FOR A TERM OF TWO (2) YEARS THROUGH DECEMBER 31, 2021, TO PROVIDE GENERAL COUNSEL SERVICES TO THE DISTRICT (WATTON) b) DISCUSS THE 2019 AND 2020 BOARD MEETING CALENDARS
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INFORMATIONAL ITEMS 15. THE FOLLOWING ITEM IS PROVIDED TO THE BOARD FOR INFORMATIONAL PUR-POSES ONLY. NO ACTION IS REQUIRED ON THE FOLLOWING AGENDA ITEM:
a) REPORT ON THE LATEST ACTUARIAL VALUATION, AS OF JUNE 30, 2019, PERFORMED ON THE NET COST OF THE ENHANCEMENT OF THE RETIREE HEALTHCARE BENEFITS; AND, THE ACTUARIAL EVALUATION DETERMIN-ING THE NET COST OR SAVINGS OF THE OTHER POST EMPLOYMENT BEN-EFIT PLAN ENHANCEMENT VERSUS THE INCREASED EMPLOYEE CONTRI-
BUTION TO THE CALIFORNIA PUBLIC EMPLOYEE RETIREMENT SYSTEM (FAKHOURI) REPORTS
16. GENERAL MANAGER’S REPORT
17. SAN DIEGO COUNTY WATER AUTHORITY UPDATE 18. DIRECTORS' REPORTS/REQUESTS
19. PRESIDENT’S REPORT/REQUESTS RECESS TO CLOSED SESSION
20. CLOSED SESSION
a) PUBLIC EMPLOYMENT [GOVERNMENT CODE §54957] TITLE: GENERAL MANAGER b) LIABILITY CLAIMS [GOVERNMENT CODE §54956.95]
CLAIMANT: FRANCISCO MONTES DE OCA AGENCY CLAIMED AGAINST: OTAY WATER DISTRICT
c) CONFERENCE WITH LEGAL COUNSEL – POTENTIAL LITIGATION [GOVERN-MENT CODE §54956.9] 1 CASE
d) CONFERENCE WITH LEGAL COUNSEL – PENDING LITIGATION [GOVERN-MENT CODE §54956.9] OTAY WATER DISTRICT v. CITY OF SAN DIEGO; CASE NO. 37-2017-00019348-CU-WM-CTL
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RETURN TO OPEN SESSION
21. REPORT ON ANY ACTIONS TAKEN IN CLOSED SESSION. THE BOARD MAY ALSO TAKE ACTION ON ANY ITEMS POSTED IN CLOSED SESSION 22. ADJOURNMENT
All items appearing on this agenda, whether or not expressly listed for action, may be deliberated and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the District’s
website at www.otaywater.gov. Written changes to any items to be considered at the open meeting, or to any attachments, will be posted on the District’s website. Copies of the Agenda and all attachments are also available through the District Secretary by contacting her at (619) 670-2280.
If you have any disability which would require accommodation in order to enable you to partici-pate in this meeting, please call the District Secretary at (619) 670-2280 at least 24 hours prior to the meeting.
Certification of Posting
I certify that on November 1, 2019 I posted a copy of the foregoing agenda near the regu-
lar meeting place of the Board of Directors of Otay Water District, said time being at least 72
hours in advance of the regular meeting of the Board of Directors (Government Code Section
§54954.2).
Executed at Spring Valley, California on November 1, 2019.
/s/ Susan Cruz, District Secretary
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MINUTES OF THE BOARD OF DIRECTORS MEETINGS OF THE OTAY WATER DISTRICT AND OTAY WATER DISTRICT FINANCING AUTHORITY
July 3, 2019
1.The meeting was called to order by President Thompson at 3:34 p.m.
2.ROLL CALL
Directors Present: Croucher, Gastelum, Robak, Smith and Thompson
Staff Present: General Manager Mark Watton, Attorney Jeanne Blumenfeld, Chief of Engineering Rod Posada, Chief Financial Officer Joe
Beachem, Chief of Administration Adolfo Segura, Asst. Chief
of Engineering, Dan Martin, Asst. Chief of Operations Jose Martinez, Asst. Chief of Finance Kevin Koeppen, District Secretary Susan Cruz and others per attached list.
3.PLEDGE OF ALLEGIANCE
4.APPROVAL OF AGENDA
A motion was made by Director Smith, and seconded by Director Gastelum and
carried with the following vote:
Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None
Absent: None
to approve the agenda.
5.PRESENTATION OF THE WATERSMART LANDSCAPE CONTEST “BEST IN
DISTRICT” AWARD TO BOB AND SHAN CISSELL
Director Robak presented this year’s WaterSmart Landscape Contest award for,
Best in District, to Bob and Shan Cissell of La Mesa. He stated that Mr. & Mrs.Cissell indicated that they drew a lot of their inspiration for their landscape project
from the Water Conservation Garden (WCG) located on the campus of Cuyamaca
College in El Cajon. They converted 2500 square feet of grass into a water efficientlandscape which has decreased its water use by an average of 33% and hasreduced their water bill by 25% to 30%. They were presented with a certificate ofrecognition, a gift card for $250 to a Garden Nursery of their choice, and a bag of
gardening tools.
Ms. Cissell thanked the District for the award. She shared that her husband took agardening class at the WCG where he was inspired to develop a plan to converttheir landscape to a low water use landscape. He implemented his plan himself and
AGENDA ITEM 4
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repurposed items in their garden. For example, the roots that were growing underground in pipes in their yard were used in the arches in the pergola. She stated that the conversion of their garden is still ongoing. 6. APPROVE THE MINUTES OF THE REGULAR BOARD MEETING OF APRIL 3,
2019
A motion was made by Director Robak, and seconded by Director Gastelum and carried with the following vote:
Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson
Noes: None Abstain: None Absent: None
to approve the minutes of the regular meeting of April 3, 2019.
7. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JURISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA
No one wished to be heard. President Thompson presented a certificate of recognition to General Manager Watton. He thanked him for his fifteen (15) years of dedicated service to the District
and each member of the board thanked General Manager Watton for his service
and leadership to the District. CONSENT CALENDAR
8. ITEMS TO BE ACTED UPON WITHOUT DISCUSSION, UNLESS A REQUEST IS
MADE BY A MEMBER OF THE BOARD OR THE PUBLIC TO DISCUSS A PARTICULAR ITEM: A motion was made by Director Smith, and seconded by Director Croucher and
carried with the following vote:
Ayes: Directors Croucher, Gastelum, Robak, Smith and Thompson Noes: None Abstain: None
Absent: None
to approve the following consent calendar items: a) APPROVE AN INCREASE TO THE CIP P2619 BUDGET IN THE AMOUNT
OF $300,000 AND AWARD A CONSTRUCTION CONTRACT TO
THARSOS, INC. FOR THE TEMPORARY LOWER OTAY PUMP STATION REDUNDANCY PROJECT IN AN AMOUNT NOT-TO-EXCEED $1,647,000
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b) APPROVE THE ISSUANCE OF A PURCHASE ORDER TO CORTECH ENGINEERING FOR THE PURCHASE OF A PORTABLE TRAILER MOUNTED VARIABLE FREQUENCY DRIVE PUMP IN AN AMOUNT NOT-TO-EXCEED $453,000
ACTION ITEMS
9. BOARD a) DISCUSSION OF 2019 BOARD MEETING CALENDAR
There were no changes to the board meeting calendar. INFORMATIONAL ITEMS
10. THIS ITEM IS PROVIDED TO THE BOARD FOR INFORMATIONAL PURPOSES
ONLY. NO ACTION IS REQUIRED ON THE FOLLOWING AGENDA ITEM. a) CONSERVATION PROGRAM UPDATE
Communications Officer Tenille Otero reviewed the various conservation programs
and services offered through the District, the San Diego County Water Authority (CWA) and the Metropolitan Water District of Southern California (MWD). Please reference attachment A to the staff report for the details of Ms. Otero’s presentation.
Director Smith indicated that MWD noted that disadvantaged communities
throughout the MWD service area were not taking advantage of the rebate for low-flush toilet replacement. MWD decided to provide a new program which provides a $250 incentive for toilet replacement specifically for those disadvantaged based on income. He stated that all the rebate vouchers were spoken for within 18 minutes of
being posted on MWD’s website.
There was discussion that disadvantaged homeowners did not receive the benefit of the rebates which was the objective of the new program. The rebates, instead, went to apartment owners in disadvantaged communities. It was suggested that
possibly a recommendation for a policy change can be proposed to MWD to reserve
such rebates for low income homeowner occupants in the first 60-days of posting (with a limit per person) to allow homeowner occupants an opportunity to take advantage of the vouchers. It was noted that the rebate vouchers were utilized by several disadvantaged communities in San Diego. The Otay WD service area does
not have communities that would qualify as disadvantaged.
REPORTS 11. GENERAL MANAGER’S REPORT
General Manager Watton reviewed handouts that were provided on the dais for each member of the board (see attached). He also presented information from his report which included an update on the financial advisor/consultant for the deferred compensation plan, deferred compensation plan review, security enhancements to
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customer services, public services conference room and lobby areas, City of Chula Vista sewer billing, and water sales and purchase. Staff responded to comments and questions from the board. 12. SAN DIEGO COUNTY WATER AUTHORITY UPDATE
Director Smith reported that CWA approved their budget of $1.687 billion for fiscal years 2020-2021. He stated the rate increase for untreated water has been determined to be 4.8% and the increase for treated water will be 4.3%. CWA utilized $38 million from their rate stabilization fund which reduced the water rate
increase by $95/acre foot. He also shared that CWA will not need to purchase
carbon credits and that CWA does sell its carbon credits because of its hydro facility in Rancho Penasquitos. He indicated with regard to MWD that the focus is no longer on the WaterFix
project, but on Governor Newsom’s Water Portfolio Plan. He stated that the plan is
a big change in the State’s water future and each of the agencies are reviewing their water resources plans and he feels that CWA is ahead in this area. He stated that they have also selected an Ethics Officer and have updated all their ethics policies.
Lastly, he reported on the possibility of member agencies utilizing MWD’s pipes during an emergency to transport water to another member agency when there are waterline breaks from natural disasters. It was discussed that this is something that is usually accomplished through agreements. Some agencies are hesitant in doing
this because of liability and water quality issues, but it is something that should be
discussed. Director Croucher added to the CWA report that settlement discussions with MWD are continuing and that they have received a thirty-day extension. He stated that
CWA hosted an event celebrating their 75th Anniversary and there will be continued
highlights of this milestone throughout the year. He stated that CWA will be meeting with California Governor Newsom’s office to discuss his Water Portfolio Plan and shared that AB1588, a bill sponsored by Otay WD and CWA to provide Veterans credit for their military experience and education towards water industry
certification requirements, has cleared MWD’s objections. He noted that the
proposed legislation on the water tax has failed once again, but there are still legislators who are supportive of implementing some type of tax. He reported that CWA’s AAA financial rating has been reaffirmed by Standard & Poor’s and lastly shared that the recruitment process for a new CWA general manager is ongoing
and Avery and Associates has been engaged to assist with the recruitment process.
13. DIRECTORS' REPORTS/REQUESTS Director Smith indicated that he attended the District’s regular board meeting, the
Engineering Operations & Water Resources Committee, and the East County
Caucus meeting. Director Croucher stepped off the dais at 5:04 p.m. and Director Smith exited the meeting at 5:06 p.m.
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Director Gastelum reported that he attended the Albondigas monthly meeting, Chula Vista Chamber of Commerce meeting where they discussed utilities, Council of Water Utilities meeting and his regular District meetings.
Director Croucher stepped back on the dais at 5:07 p.m.
Director Robak indicated that he attended the South County Albondigas meeting where CWA board chair, Mr. Jim Madaffer, spoke about the proposed North Pipeline Project. He also shared that he attended CWA’s 75th Anniversary
Celebration where he had the opportunity to speak with Ms. Amy Chen, MWD’s
representative at CWA. He indicated that he listened to a CWA committee meeting online and he heard Otay WD Director Smith, who is a member of the committee, asking some very good questions.
14. PRESIDENT’S REPORT
President Thompson’s report is attached. He also shared that the General Managers and Presidents of the south agencies meet periodically, and he has asked General Manager Watton if he could invite a CWA representative to present
information on the Imperial Valley Pipeline to this group. He lastly shared that one
of the roles of the board is to perform the General Manager’s evaluation. He stated that he has started that process and that the board should be receiving the evaluation materials in the next few days.
OTAY WATER DISTRICT FINANCING AUTHORITY
15. NO MATTERS TO DISCUSS There were no items scheduled for discussion for the Otay Water District Financing
Authority board.
16. ADJOURNMENT With no further business to come before the Board, President Thompson adjourned
the meeting at 5:26 p.m.
___________________________________
President ATTEST:
District Secretary
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President’s Report
Mitch Thompson
July 3, 2019
Board Meeting
# Date Meeting Purpose
1 4-Jun SCEDC Board Meeting Represented the District at their Monthly
Meeting
2 5-Jun OWD Regular Board Meeting Monthly Board Meeting
3 14-Jun Committee Agenda Briefing
Met w/ General Manager Watton to
review items that will be presented at the
June committee meetings
4 20-Jun
Mexican American Business
Professionals Association Monthly
Meeting
Represented the District at the monthly
meeting
5 21-Jun Otay Mesa Chamber Member
Breakfast
Provided a presentation on Otay Water
District and AB1588
6 26-Jun Chula Vista Chamber Infrastructure
Committee Meeting Represented the District at the meeting
7 27-Jun Board Agenda Briefing
Met with General Manager Watton and
General Counsel Shinoff to review items
that will be presented at the July Board
Meeting
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Lisa Coburn-Boyd
Environmental Compliance
Specialist
PROJECT: Various DIV. NO. All
APPROVED BY: Bob Kennedy, Engineering Manager
Dan Martin, Assistant Chief, Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Award of Two (2) Professional Services Contracts for As-Needed
Environmental Services to Helix Environmental Planning, Inc.
and ICF Jones & Stokes, Inc. for Fiscal Years 2020-2022
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
award two (2) professional service contracts for As-Needed
Environmental Services and to authorize the General Manager to
execute two agreements with Helix Environmental Planning, Inc.
(Helix) and ICF Jones & Stokes, Inc. (ICF), each in an amount not-to-
exceed $500,000. The total amount of the two (2) contracts will not
exceed $500,000 during Fiscal Years 2020-2022 (ending June 30, 2022).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to enter into
two (2) professional services contracts for As-Needed Environmental
Services with Helix and ICF, with each contract in an amount not-to-
exceed $500,000 for Fiscal Years 2020-2022. The total amount of the
two (2) contracts will not exceed $500,000 during Fiscal Years 2020-
2022.
AGENDA ITEM 7a
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ANALYSIS:
The District will require the services of two (2) professional
environmental consultants on an as-needed basis in support of Capital
Improvement Program (CIP) and Operations and Maintenance projects for
Fiscal Years 2020-2022. It is more efficient and cost effective to
issue as-needed contracts for environmental services, which will
provide the District with the ability to obtain consulting services
in a timely and efficient manner. This concept has also been used in
the past for other disciplines, such as engineering design,
construction management, geotechnical, and electrical services.
The District staff will identify tasks and request cost proposals
from the two (2) consultants during the contract period. Each
consultant will prepare a detailed scope of work, schedule, and fee
for each task order, with the District evaluating the proposals based
upon qualifications and cost. The District will enter into
negotiations with the consultants, selecting the proposal that has
the best value for the District. Upon written task order
authorization from the District, the selected consultant shall then
proceed with the project, as described in the scope of work.
The table below lists several projects that are estimated to require
as-needed environmental services for Fiscal Years 2020-2021:
CIP DESCRIPTION
ESTIMATED
COST
P2460 I.D. 7 Trestle & Pipeline Demolition CEQA
Compliance $25,000
R1253 RWCWRF Industrial General Permit Level 2 ERA
Compliance Technical Report $12,000
P2494 CEQA/NEPA Compliance for OWD Habitat
Conservation Plan $15,000
P1253 As-needed Bird Surveys during Breeding Season $10,000
P1253 Biological & Cultural Resources Monitoring for
District O&M Projects $12,000
P2083 Restoration of Temporary Construction
Vegetation Impacts at 870-2 PS Site $10,000
P1253 Annual Forcemain Road & Air-Vac Vegetation
Maintenance & Low-effect HCP Report for USFWS $10,000
TOTAL: $94,000
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Staff believes that a $500,000 cap on each of the As-Needed
Environmental Services contracts is adequate for upcoming projects,
while still providing a buffer for any unforeseen tasks. Some
examples of unforeseen tasks that have cropped up in the past are the
environmental compliance (monitoring & regulatory agency
coordination) for pipeline breaks, studies to investigate process
control or regulatory issues at the Ralph W. Chapman Water
Reclamation Facility, Air Pollution Control District permitting
issues, and preparation of SWPPP’s (stormwater pollution prevention
plans) for District construction projects.
The As-Needed Environmental Services contracts do not commit the
District to any expenditure until a task order is approved to perform
the work. The District does not guarantee work to the consultants,
nor does the District guarantee to the consultants that it will
expend all the funds authorized by the contract on professional
services.
The District solicited environmental services by placing an
advertisement on the Otay Water District’s website and using BidSync,
the District’s online bid solicitation website on July 8, 2019. The
advertisement was also placed in the Daily Transcript. Ten (10)
firms submitted a Letter of Interest and a Statement of
Qualifications. The Request for Proposal (RFP) for Environmental
Services was sent to all ten (10) firms resulting in six (6)
proposals received on August 8, 2019. They are as follows:
• Chambers Group (San Diego, CA)
• Environmental Intelligence (San Diego, CA)
• Helix Environmental Planning (La Mesa, CA)
• ICF (San Diego, CA)
• RECON Environmental (San Diego, CA)
• Rincon Consultants (San Diego, CA)
Firms that submitted Letters of Interest (LOI), but did not propose,
were The Altum Group, Gutierrez-Canales Engineering, PC, KMEA, and
PaleoWest.
In accordance with the District’s Policy 21, staff evaluated and
scored all written proposals and interviewed the top four (4) firms
on September 24, 2019. Helix and ICF received the highest scores
based on their experience, understanding of the scope of work,
proposed method to accomplish the work, and their composite hourly
rate. Both consultants have provided similar services to the
District in the past as well as to other local agencies and are
readily available to provide the services required. A summary of the
complete evaluation is shown in Attachment B.
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Helix and ICF submitted the Company Background Questionnaire, as
required by the RFP, and staff did not find any significant issues.
In addition, staff checked their references and performed an internet
search on the company. Staff found the references to be excellent
and did not find any outstanding issues with the internet search.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The funds for these contracts will be expended on a variety of
projects, as previously noted above. These contracts are for as-
needed professional services based on the District's need and
schedule, and expenditures will not be made until a task order is
approved by the District for the consultant's services on a specific
CIP or Operations & Maintenance project.
Based on a review of the financial budget, the Project Manager
anticipates that the budgets will be sufficient to support the
professional as-needed consulting services required for the CIP and
Operations & Maintenance projects noted above.
The Finance Department has determined that the funds to cover these
contracts will be available as budgeted for these projects.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
manner” and the General Manager’s Vision, "To be a model water agency
by providing stellar service, achieving measurable results, and
continuously improving operational practices."
GRANTS/LOANS:
Not applicable.
LEGAL IMPACT:
None.
LC-B/BK/DM/RP:jf
P:\WORKING\As Needed Services\Engineering Design\FY 2020-2022\Staff Report\BD_11-06-2019_Staff
Report_Award of As-Needed Environmental Services (LCB-BK).docx
Attachments: Attachment A – Committee Action
Attachment B – Summary of Proposal Rankings
ATTACHMENT A
SUBJECT/PROJECT:
Various
Award of Two (2) Professional Services Contracts for As-
Needed Environmental Services to Helix Environmental
Planning, Inc. and ICF Jones & Stokes, Inc. for Fiscal
Years 2020-2022
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff recommended that the Board authorize the General Manager
to execute two contracts for as-needed environmental services,
with ICF and Helix Environmental, for an amount not-to-exceed
$500,000 for each firm over a period of three fiscal years (FY
2020-2022) ending June 30, 2022.
• Staff stated that the District began using an as-needed
environmental consultant about fourteen years ago and it has
proven to be an efficient and effective way to address
environmental issues, particularly those that are time-
sensitive. It was noted that having two firms under contract
will further increase cost-effectiveness as each firm will
submit proposals for task orders.
• Staff discussed the selection process and indicated that ICF and
Helix Environmental received the highest overall scores.
Although each firm will be awarded a contract for $500,000, the
amount expended between the two firms for the three-year period
of the contracts will not exceed that budgeted amount.
• In response to a question from the Committee, Legal Counsel
confirmed that it is appropriate to consider qualifications and
rates when evaluating consultant proposals and to seek the best
value for the District.
• The Committee requested that staff clarify the $94,000 for
Fiscal Year 2020-2021 as the overall recommendation is to award
a $500,000 contract for three fiscal years (2020-2022) ending
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June 30, 2022. Staff stated that the $94,000 is for work that
has already been identified in the first fiscal year of the
contract. However, staff recommended a $500,000 contract for
three fiscal years to cover additional funds for any unforeseen
project issues or emergencies that may occur annually. It was
noted in the staff report that the As-Needed Environmental
Services contracts do not commit the District to any expenditure
until a task order is approved to perform the work.
• In response to a comment from the Committee regarding the
process in rating fees, staff provided a brief description of
how the fees scoring have evolved since 2007. It was discussed
that at a later date, staff will provide a discrete presentation
of the District’s fees scoring process to the Committee.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
Qualifications of Team
Responsiveness, Project Understanding
Technical and Management Approach
INDIVIDUAL SUBTOTAL - WRITTEN
AVERAGE SUBTOTAL - WRITTEN Proposed Fee*Consultant's Commitment to DBE
AVERAGE TOTAL WRITTEN
Additional Creativity and Insight
Strength of Project Manager
Presentation, Communication Skills
Quality of Response to Questions
INDIVIDUAL TOTAL - ORAL AVERAGE TOTAL ORAL
30 25 30 85 85 15 Y/N 100 15 15 10 10 50 50 150 Poor/Good/ Excellent
Lisa Coburn-Boyd 26 22 25 73
Jeff Marchioro 27 21 25 73
Kent Payne 25 20 23 68
Chad Thompson 25 20 23 68
Jake Vaclavek 25 23 26 74
Lisa Coburn-Boyd 26 21 24 71
Jeff Marchioro 27 20 24 71
Kent Payne 25 21 23 69
Chad Thompson 25 21 22 68
Jake Vaclavek 26 23 26 75
Lisa Coburn-Boyd 29 24 29 82 14 14 9 9 46
Jeff Marchioro 29 24 29 82 14 15 10 9 48
Kent Payne 28 24 27 79 13 14 9 9 45
Chad Thompson 28 23 27 78 13 13 9 8 43
Jake Vaclavek 28 24 27 79 13 13 8 8 42
Lisa Coburn-Boyd 29 24 29 82 14 15 10 10 49
Jeff Marchioro 28 24 29 81 14 15 10 10 49
Kent Payne 28 24 27 79 14 14 9 9 46
Chad Thompson 28 23 27 78 14 13 9 8 44
Jake Vaclavek 28 24 27 79 14 14 9 9 46
Lisa Coburn-Boyd 27 24 27 78 12 12 8 8 40
Jeff Marchioro 27 23 26 76 12 13 8 8 41
Kent Payne 27 23 25 75 11 12 8 7 38
Chad Thompson 26 23 24 73 12 12 7 7 38
Jake Vaclavek 27 24 26 77 12 11 7 7 37
Lisa Coburn-Boyd 27 23 26 76 11 10 6 7 34
Jeff Marchioro 27 22 26 75 11 12 8 7 38
Kent Payne 26 24 26 76 10 10 7 7 34
Chad Thompson 26 22 25 73 11 11 6 7 35
Jake Vaclavek 27 24 27 78 12 12 8 8 40
Firm RECON Helix Rincon ICF Env. Intel.Chambers
Fee $135 $114 $124 $126 $126 $118
Score 1 15 9 7 7 13
Note: The fees were evaluated by comparing rates for seven (7) positions. The sum of these rates are noted in the above table.
7
Excellent140Y158095
RATES SCORING CHART
Excellent13447
116
121Rincon769Y8536
ORAL
RECON 76 1 Y 77 39
Y
45
Chambers Group
MAXIMUM POINTS
71
EI Y 78
84
ICF
Helix
8780
REFERENCES
13
7
WRITTEN
84
71
ATTACHMENT B
Y
78
TOTAL SCORE
FIRM NOT INTERVIEWED
FIRM NOT INTERVIEWED
SUMMARY OF PROPOSAL RANKINGS
As-needed Environmental Services 2020-2022
P:\Working\As Needed Services\Environmental\FY2020-2022\Selection Process\Summary of Proposal Rankings - 2020-2022 As-Needed Environmental Services
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Jeff Marchioro
Senior Civil Engineer
PROJECT: P2653-
001103
DIV. NO. 5
APPROVED BY: Bob Kennedy, Engineering Manager
Dan Martin, Assistant Chief of Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Award of a Construction Contract to Piperin Corporation for
the 1200 Pressure Zone Improvements – Phase I Project
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
authorize the General Manager to execute a construction contract with
Piperin Corporation (Piperin) for the 1200 Pressure Zone Improvements
–Phase I Project in an amount not-to-exceed $151,990 (see Exhibit A
for Project location).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to enter into a
construction contract with Piperin for the 1200 Pressure Zone
Improvements – Phase I Project in an amount not-to-exceed $151,990.
ANALYSIS:
On July 3, 2019, the District awarded a purchase order to Cortech
Engineering located in San Diego, California teamed with PremierFlow
AGENDA ITEM 7b
2
located in Tulsa, Oklahoma to build a Portable Trailer Mounted
Variable Frequency Drive (VFD) Pump. The trailer build is currently
in the submittal and shop drawing phase. Cortech/PremierFlow
anticipates delivery of the trailer to the District in February 2020.
The first deployment of the Portable Trailer Mounted VFD Pump will be
at the 1200-1 Pump Station/978-1 Reservoir site in support the 1200-1
Reservoir Interior & Exterior Coating Project (CIP P2533) starting
late fall next year. The trailer pump is needed because the 1200
Pressure Zone will be temporarily operated as a closed hydropneumatic
system while the 1200-1 Reservoir will be offline for approximately
six (6) months. The 1200-1 Reservoir is the sole Reservoir serving
the 1200 Pressure Zone without redundancy.
The first phase of the 1200 Pressure Zone Improvements Project
includes connections for the Portable Trailer Mounted VFD Trailer
Pump at the 1200-1 Pump Station/978-1 Reservoir site. Also, the
existing driveway will be widened, and an existing vault will be
demolished to provide access and a location to operate the trailer
pump at the site.
Staff prepared the bid documents in-house.
On September 18, 2019, the Project was publicly advertised for bid
using BidSync, an online bid solicitation website. The Project was
also advertised in the Daily Transcript. BidSync provided electronic
distribution of the Bid Documents, including specifications, plans,
and addendum. A Pre-Bid Meeting was held on September 25, 2019,
which was not attended by any contractors. Two addenda were sent out
to all bidders and plan houses to address questions and
clarifications to the contract documents during the bidding period.
Staff reached out to twenty-five (25) contractors directly via email
and telephoned several contractors to encourage them to submit a bid.
Bids were publicly opened on October 9, 2019, with the following
results:
CONTRACTOR TOTAL BID
AMOUNT
1 Piperin Corporation (Escondido, CA) $151,990.00
2 Tharsos, Inc. (La Mesa, CA) $169,000.00
3 Charles King Company (Signal Hill, CA) $183,798.00
The Engineer’s Estimate is $150,000.
3
A review of the bids was performed by District staff for conformance
with the contract requirements and determined that Piperin was the
lowest responsive and responsible bidder. Piperin holds a Class A,
General Engineering, Contractor’s License in the State of California,
which meets the contract document’s requirements, and is valid
through August 31, 2021. The reference checks indicated a very good
to excellent performance record on similar projects. An internet
background search of the company was performed and revealed no
outstanding issues with this company.
Staff verified that the bid bond provided by Piperin is valid. Staff
will also verify that Piperin’s Performance Bond and Labor and
Materials Bond are valid prior to execution of the contract.
The second phase of the 1200 Pressure Zone Improvements Project
includes replacement of the existing 1200-1 Pump Station below grade
discharge header and other existing pump station improvements
facilitated by deployment of the Portable Trailer Mounted VFD Pump at
the 1200-1 Pump Station/978-1 Reservoir site next year. The second
phase will be bid separately on a schedule similar to the 1200-1
Reservoir Interior & Exterior Coating Project (CIP P2533).
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The total budget for CIP P2653, as approved in the FY 2020 budget, is
$325,000. Total expenditures, plus outstanding commitments and
forecast including this contract, are $213,632. See Attachment B for
budget detail.
Based on a review of the financial budgets, the Project Manager
anticipates that the budget for CIP P2653 is sufficient to support
the Project.
The Finance Department has determined that, under the current rate
model, 100% of the funding is available from the Betterment Fund.
GRANTS/LOANS:
Engineering staff researched and explored grants and loans and found
none available for this Project.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
manner” and the General Manager’s Vision, "To be a model water agency
4
by providing stellar service, achieving measurable results, and
continuously improving operational practices."
LEGAL IMPACT:
None.
JM/BK:jf
P:\WORKING\CIP P2653 1200 PZ Improvements\Staff Reports\BD 11-06-19 Staff Report 1200PZ Phase I.docx
Attachments: Attachment A – Committee Action
Attachment B – Budget Detail
Exhibit A – Location Map
ATTACHMENT A
SUBJECT/PROJECT:
P2653-001103
Award of a Construction Contract to Piperin Corporation for
the 1200 Pressure Zone Improvements – Phase I Project
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff recommended that Board authorize the General Manager to
execute a construction contract with Piperin Corporation
(Piperin) for the 1200 Pressure Zone Improvements – Phase I
Project in an amount not-to-exceed $151,990.
• In response to a question from the Committee, staff stated that
Piperin has performed work with the City of San Diego and the
Olivenhain Water District. Staff performed reference checks,
which indicated a very good to excellent performance record.
• It was noted that Piperin built the Cuyamaca College
Water/Wastewater Outdoor Water Distribution System.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
ATTACHMENT B – Budget Detail
SUBJECT/PROJECT:
P2653-001103
Award of a Construction Contract to Piperin Corporation for
the 1200 Pressure Zone Improvements – Phase I Project
10/9/2019
Budget
325,000
Planning
Standard Salaries 28,850 28,850 - 28,850
Total Planning 28,850 28,850 - 28,850
Design 001102
Standard Salaries 3,913 1,913 2,000 3,913
Total Design 3,913 1,913 2,000 3,913
Construction
151,990 - 151,990 151,990 Piperin
6,080 - 6,080 6,080 CM @4%
7,600 - 7,600 7,600 Inspection @5%
7,600 - 7,600 7,600 Staff Time @5%
7,600 - 7,600 7,600 Contingency @5%
Total Construction 180,870 - 180,870 180,870
Grand Total 213,634 30,764 182,870 213,634
Vendor/Comments
Otay Water District
p2653-1200 Pressure Zone Improvements
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
OTAY WATER DISTRICT1200-1 PRESSURE ZONE IMPROVEMENTSLOCATION MAP
EXHIBIT A
CIP P2653F
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STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Stephen Beppler
Senior Civil Engineer
PROJECT: Various DIV. NO. All
APPROVED BY: Bob Kennedy, Engineering Manager
Dan Martin, Assistant Chief, Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Award of Two (2) Professional Services Contracts for As-Needed
Hydraulic Modeling Services for Fiscal Years 2020 and 2021
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
award two (2) professional service contracts for As-Needed Hydraulic
Modeling Services and to authorize the General Manager to execute two
(2)agreements with Wood Rodgers and Water Systems Consulting Inc.
(WSC), each in an amount not-to-exceed $175,000 for Fiscal Years 2020
and 2021. The total amount of the tasks under the two contracts will
not exceed $175,000.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to enter into
two (2) professional services contracts for As-Needed Hydraulic
Modeling Services with Wood Rodgers and WSC, each in an amount not-
to-exceed $175,000 for Fiscal Years 2020 and 2021 (ending June 30,
2021). The total amount of tasks under the two contracts will not
exceed $175,000.
AGENDA ITEM 7c
2
ANALYSIS:
The District will require the professional services of two (2)
hydraulic modeling consultants on an as-needed basis in support of
Capital Improvement Program (CIP) projects, developer funded studies,
engineering planning studies, and Information Technology studies for
Fiscal Years 2020 and 2021. These services will also be used to
integrate GIS updates into the existing model and support Operations
in the field. The As-Needed Hydraulic Modeling Services contracts
will provide the District with the ability to obtain consulting
services in a timely and efficient manner and on an as-needed basis.
The District will require the expertise of hydraulic modeling
consultants to maintain the current potable water, recycled water,
and sanitary sewer hydraulic models already developed and updated
under the Water Resources Master Plan. This will include integrating
new facilities or GIS updates into the model and performing planning
studies for the Engineering, Operations, and Information Technology
departments. The consultants will perform fire flow calculations in
support of new or existing developments and prepare developer funded
studies.
It is more efficient and cost effective to issue contracts on an as-
needed basis. This concept has also been used in the past for other
disciplines like civil engineering design, geotechnical, electrical,
and environmental services.
The District staff will identify tasks for specific projects and
request cost proposals from the two (2) consultants during the
contract period. Each consultant will prepare a detailed scope of
work, schedule, and fee for each task order, with the District
evaluating the proposals based upon qualifications and cost. The
District will enter into negotiations with the consultants, selecting
the proposal that has the best value for the District. Upon written
task order authorization from the District, the selected consultant
shall then proceed with the project as described in the scope of
work.
The CIP projects that are estimated to require hydraulic modeling
services for Fiscal Years 2020 and 2021, at this time, are listed
below:
CIP DESCRIPTION
ESTIMATED
COST
P2453 SR-11 Utility Relocations $15,000
P2639 Vista Diego Hydro-pneumatic Pump Station
Replacement $15,000
3
P2640 Portable Trailer Mounted VFD Pumps $20,000
P2652 520 to 640 Pressure Zone Conversion $20,000
R2123 Repurpose Otay Mesa Recycled Water Lines $15,000
S2069 Cottonwood Sewer Pump Station Expansion $15,000
TOTAL: $100,000
The hydraulic modeling services scopes for the above projects are
estimated from preliminary information and past projects.
Staff believes that a $175,000 cap on each of the As-Needed Hydraulic
Modeling Services contracts is adequate, while still providing a
buffer for unforeseen tasks. Fees for professional services will be
charged to the CIP projects or to the Fiscal Year Operations budget.
The As-Needed Hydraulic Modeling Services contracts do not commit the
District to any expenditure until a task order is approved to perform
the work. The District does not guarantee work to the consultants,
nor does the District guarantee to the consultants that it will
expend all the funds authorized by the contract on professional
services.
The District solicited hydraulic modeling services by placing an
advertisement on the Otay Water District’s website and using BidSync,
the District’s online bid solicitation website, on July 30, 2019.
The advertisement was also placed in the Daily Transcript. Six (6)
firms submitted a Letter of Interest and a Statement of
Qualifications. The Request for Proposal (RFP) for Hydraulic
Modeling Services was sent to all six (6) firms resulting in five (5)
proposals received on September 12, 2019. They are as follows:
• Akel (Fresno, CA)
• Hazen and Sawyer (San Diego, CA)
• Mission Consulting Services (Santee, CA)
• Wood Rodgers (San Diego, CA)
• Water Systems Consulting, Inc. (San Diego, CA)
In accordance with the District’s Policy 21, staff evaluated and
scored all written proposals. Wood Rodgers and WSC received the
highest scores based on their experience in hydraulic modeling,
understanding of the scope of work, proposed method to accomplish the
work, and their composite weighted hourly rate [this rate is obtained
by adjusting their rates for the five requested positions
proportionally by the percentage indicated for Principal-in-Charge
(5%), Project Manager (35%), Hydraulic Modeler (40%), GIS Technician
(15%) and Office Support (5%)]. Wood Rodgers and WSC were the most
qualified consultants with the best overall proposals. WSC currently
holds one of the District’s as-needed hydraulic modeling contracts
4
and has performed very well. The District has not previously worked
with Wood Rodgers on any projects, but they provide similar services
to other water agencies in California and their project manager has
prior District experience while with another engineering firm. Both
consultants are readily available to provide the services required.
A summary of the complete evaluation is shown in Attachment B.
Wood Rodgers and WSC submitted the Company Background Questionnaire,
as required by the RFP, and staff did not find any significant
issues. In addition, staff checked their references and performed an
internet search on the company. Staff found the references to be
excellent and did not find any outstanding issues with the internet
search.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The funds for these contracts will be expended from a variety of
projects, as previously noted above, and from the FY 2020 and FY 2021
operating budgets. These contracts are for as-needed professional
services based on the District’s need and schedule, and expenditures
will not be made until a task order is approved by the District for
the consultant’s services on a specific CIP or operating project.
The total amount of tasks under the two contracts will not exceed
$175,000.
Based on a review of the financial budget, the Project Manager
anticipates that the budgets will be sufficient to support the
professional as-needed consulting services required for the CIP and
operating projects noted above.
The Finance Department has determined that the funds to cover these
contracts will be available as budgeted for these projects.
STRATEGIC GOAL:
This project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
manner” and the General Manager’s Vision, "To be a model water agency
by providing stellar service, achieving measurable results, and
continuously improving operational practices."
GRANTS/LOANS:
Not applicable.
5
LEGAL IMPACT:
None.
SB/BK:jf
P:\WORKING\As Needed Services\Hydraulic Modeling\Fiscal Year 20-21\Staff Report\BD_11-06-2019_Staff
Report_Award of As-Needed Hydraulic Modeling Services (SB-BK).docx
Attachments: Attachment A – Committee Action
Attachment B – Summary of Proposal Rankings
ATTACHMENT A
SUBJECT/PROJECT:
Various
Award of Two (2) Professional Services Contracts for As-
Needed Hydraulic Modeling Services for Fiscal Years 2020
and 2021
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff recommended that the Board award two (2) professional
service contracts for As-Needed Hydraulic Modeling Services and
to authorize the General Manager to execute two (2) agreements
with Wood Rodgers and Water Systems Consulting Inc. (WSC), each
in an amount not-to-exceed $175,000 for Fiscal Years 2020 and
2021. The total amount of the tasks under the two contracts
will not exceed $175,000.
• In response to a question from the Committee, staff discussed
the Review Panel’s qualifications and knowledge of evaluating
and scoring the project’s written proposals. The Review Panel
consisted of District staff members from various departments as
follows:
o Ming Zhao, GIS Manager
o Eid Fakhouri, Finance Manager, Treasury & Accounting
Services
o Juan Tamayo, Recycled Water Program Supervisor
o Steve Beppler, Senior Civil Engineer
o Charles Mederos, Water Systems Supervisor
• The Committee inquired about the Project Manager’s eligibility
to participate in the Review Panel. Staff indicated that
Policy 21, Section IV.A.3 states the following:
o “…The Project Manager may be part of the review panel, if
the General Manager or his/her designee (other than the
Project Manager) opens and scores the cost proposal.”
7
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
ATTACHMENT B – Summary of Proposal Rankings
SUBJECT/PROJECT:
Various Award of Two (2) Professional Services Contracts for As-
Needed Hydraulic Modeling Services for Fiscal Years 2020
and 2021
WRITTEN
REFER-
ENCES Qualifications
of Team
Responsiveness
and Project Understanding
Technical and
Management Approach
INDIVIDUAL
SUBTOTAL - WRITTEN
AVERAGE
SUBTOTAL - WRITTEN
Proposed
Fee*
Consultant's
Commitment to DBE
TOTAL -
WRITTEN
MAXIMUM POINTS 30 25 30 85 85 15 Y/N 100 Poor/Good/ Excellent
Akel
Ming Zhao 22 24 22 68
67 1 Y 68
Eid Fakhouri 25 20 22 67
Juan Tamayo 25 20 23 68
Steve Beppler 25 18 24 67
Charles
Mederos 23 20 22 65
Hazen
Ming Zhao 23 24 23 70
66 7 Y 73
Eid Fakhouri 22 22 24 68
Juan Tamayo 22 20 22 64
Steve Beppler 21 20 22 63
Charles Mederos 22 22 20 64
MCS
Ming Zhao 22 23 22 67
67 15 Y 82
Eid Fakhouri 22 21 23 66
Juan Tamayo 23 21 24 68
Steve Beppler 20 22 23 65
Charles
Mederos 22 23 22 67
Wood Rodgers
Ming Zhao 26 22 26 74
77 9 Y 86 E
Eid Fakhouri 27 25 28 80
Juan Tamayo 27 25 28 80
Steve Beppler 27 23 27 77
Charles
Mederos 24 24 26 74
WSC
Ming Zhao 27 25 26 78
80 7 Y 87 E
Eid Fakhouri 29 25 29 83
Juan Tamayo 28 25 29 82
Steve Beppler 29 24 28 81
Charles Mederos 26 25 26 77
RATES SCORING CHART
Firm Akel Hazen MCS Wood Rodgers WSC
Wt Hr Fee $168 $154 $135 $149 $155
Score 1 7 15 9 7
*Note: Review Panel does not see or consider proposed fee when scoring other categories. The proposed fee is scored by District staff not on the Review Panel.
STAFF REPORT
TYPE MEETING:Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY:Dan Martin
Assistant Chief of Engineering
PROJECT: P2565-001103 DIV. NO.5
APPROVED BY: Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT:Approval of Change Order No. 1 to reduce the Construction
Contract with Advanced Industrial Services, Inc. in the amount
of $261,330.20 for the 803-2 Reservoir Interior / Exterior
Coatings & Upgrades Project
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
approve Change Order No. 1 to reduce the construction contract with
Advanced Industrial Services, Inc. in the amount of $261,330.20 for
the 803-2 Reservoir Interior / Exterior Coatings & Upgrades Project
(see Exhibit A for Project Location).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to execute
Change Order No. 1 to reduce the construction contract with Advanced
Industrial Services, Inc. in the amount of $261,330.20 for the 803-2
Reservoir Interior / Exterior Coatings & Upgrades Project.
AGENDA ITEM 7d
2
ANALYSIS:
The 803-2 Reservoir is a 2.0 million gallon potable water storage
facility that serves portions of Rancho San Diego. It is one of
three (3) steel tanks in the 803 pressure zone. The 803-2 Reservoir
was originally constructed in 1980, and was last recoated on both
interior and exterior in 2000.
The District’s Corrosion Control Program (CCP) reservoir maintenance
schedule identified that the 803-2 Reservoir was due to be recoated
on both the interior and exterior surfaces. An in-service internal
and external inspection, which was performed by CSI Services, Inc.,
confirmed the need to replace the interior and exterior Reservoir
coatings. The inspection of the Reservoir’s interior also indicated
the potential for significant structural repairs to the rafter and
girder system that supports the Reservoir’s roof. It has been noted
on previous reservoir coating projects that the existing coatings
mask the condition of the structural elements and that the blast
inspection that is performed as part of the coating project reveals
the extent of structural repair required.
Staff developed plans and specifications and advertised a
construction contract on September 4, 2018 to complete the interior
and exterior coating work. This construction contract also included
structural allowance items to address risk associated with structural
repairs of the roof’s support system.
At the November 7, 2018 Board meeting, the Board awarded a
construction contract in the amount of $951,690.00 to Advanced
Industrial Services, Inc. As a first order of work on the
Reservoir’s interior the contractor performed an inspection blast on
the Reservoir’s rafters and girders. A detailed inspection by the
District’s consultant structural engineer revealed that the
Reservoir’s rafters and girders were in good condition and that fewer
than anticipated structural repairs were required. Structural work
performed on the Project included the installation of a new center
halo support, replacement of twenty-five of the outer rafter supports
in the area where the ceiling connects to the Reservoir shell, and
trimming of the inner rafters in the area of the Reservoir’s center
vent to remove corrosion and allow for proper coating. As a result,
a significant portion of the planned structural allowance work was
not required.
Change Order No. 1 (Exhibit B), which serves to close out the
construction contract and is the subject of this staff report,
includes the following eleven (11) items:
3
1.Provides 47 calendar day time extension for work performed
under the contract’s Bid Item 17 Structural Modification
Allowance;
2.Deletion of Bid Item 12 work associated with 30 outer rafters;
3.Deletion of Bid Item 13 work associated with 10 inner rafters;
4.A decrease to Bid Item 17 Structural Modification Allowance;
5.Deletion of Bid Item 18 work associated with 5 girders;
6.Deletion of Bid Item 19 work associated with 15 8-inch diameter
steel patches;
7.Installation of a stabilized construction entrance at the
access gate road;
8.Surface preparation and coating to the Reservoir drain gate
valve (provides 11 calendar days);
9.Reimbursement for removal and replacement of damaged asphalt
concrete pavement;
10.Reimbursement for additional inspection costs outside normal
work hours;
11.Provides 32 calendar day time extension due to weather/site
access impacts.
In total, the credit associated with the items in Change Order No. 1
is $261,330.20. Time impacts associated with this change are also
provided in Exhibit B. In total, the ninety (90) additional days
added to the contract will result in a revised total contract
duration of 263 calendar days.
The 803-2 Reservoir was placed back into service on September 6,
2019.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The total budget for CIP P2565, as approved in the FY 2019 budget, is
$1,200,000. Total expenditures, plus outstanding commitments and
forecast, are $991,757. See Attachment B for the budget detail.
Based on a review of the financial budget, the Project Manager
anticipates that the Project will be completed within the budget
amount of $1,200,000.
The Finance Department has determined that, under the current rate
model, 100% of the funding is available from the Replacement Fund.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
4
manner” and the General Manager’s Vision, "To be a model water agency
by providing stellar service, achieving measurable results, and
continuously improving operational practices."
LEGAL IMPACT:
None.
DM/RP:jf
P:\WORKING\CIP P2565 803-2 Reservoir Int-Ext Coating & Upgrades\Staff Reports\BD 11-06-19\BD 11-06-19
Staff Report CO No 1 for 803-2 Reservoir Coating Project.docx
Attachments: Attachment A – Committee Action
Attachment B – Budget Detail
Exhibit A – Project Location for 803-2 Reservoir
Exhibit B – Change Order No. 1
ATTACHMENT A
SUBJECT/PROJECT:
P2565-001103
Approval of Change Order No. 1 to reduce the Construction
Contract with Advanced Industrial Services, Inc. in the
amount of $261,330.20 for the 803-2 Reservoir Interior/
Exterior Coatings & Upgrades Project.
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
•Staff provided an analysis of the project’s scope of work and
noted that a significant portion of the planned structural
allowance work was not required. Page 2 of the staff report
provides details of the project’s analysis.
•Staff indicated that Change Order No. 1 serves to close out the
construction contract and includes eleven (11) items. Page 3 of
the staff report provides details of each item. In total, the
credit associated with Change Order No. 1 is $261,330.20.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
ATTACHMENT B – Budget Detail
SUBJECT/PROJECT:
P2565-001103
Approval of Change Order No. 1 to reduce the Construction
Contract with Advanced Industrial Services, Inc. in the
amount of $261,330.20 for the 803-2 Reservoir Interior /
Exterior Coatings & Upgrades Project.
9/23/2019
Budget
1,200,000
Planning
Standard Salaries 8,918 8,918 -8,918
Service Contracts 2,695 2,695 -2,695 CSI SERVICES
3,140 3,140 -3,140 ICF JONES & STOKES INC
50 50 -50 PETTY CASH CUSTODIAN
Total Planning 14,803 14,803 -14,803
Design
Standard Salaries 21,067 21,067 -21,067
Service Contracts 87 87 -87 DAILY JOURNAL CORP
Equipment Charge --
Total Design 21,154 21,154 -21,154
Construction
Standard Salaries 140,000 123,897 16,103 140,000
Construcion Contract 951,690 595,740 355,950 951,690 ADVANCED INDUSTRIAL SERVICES, INC.
(261,330) - (261,330) (261,330) CHANGE ORDER NO. 1
Service Contracts 30,240 20,160 10,080 30,240 ALYSON CONSULTING
50,000 46,464 3,536 50,000 CSI SERVICES INC.
1,800 1,080 720 1,800 GEOCON INC.
20,240 8,240 12,000 20,240 WATCHLIGHT
948 948 -948 MAYER REPROGRAPHICS
5,018 5,018 -5,018 NV5 INC.
2,000 688 1,312 2,000 CLARKSON LABORATORY
5,195 5,195 -5,195 CORE & MAIN LP 595
- - -
Project Contingency 10,000 - 10,000 10,000 CONTINGENCY
Total Construction 955,800 807,429 148,371 955,800
Grand Total 991,757 843,386 148,371 991,757
Vendor/Comments
Otay Water District
P2565 - 803-2 Reservoir Interior/Exterior Coating
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
OTAY WATER DISTRICT803-2 Reservoir Interior/Exterior Coating & UpgradesLocation Map
EXHIBIT A
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CIP P2565
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Contract / P.O. Change Order No. 1 page 2 of 4
Description of Work
Description
Increase Decrease Time
Item No. 1:
This Change Order provides for time related to the use of Bid Item 17 –
Structural Modification Allowance associated with the structural repairs per
BI 17 – Work Order 01.
$0.00 $0.00 47
Item No. 2:
This Change Order decreases the amount allocated for Bid Item 12, Outer
Rafter & Roof to Shell Connection Replacement by $99,000.00 to a new
authorized amount of $0.00. (Delete 30 EA at $3,300.00/EA)
$99,000.00 0
Item No. 3:
This Change Order decreases the amount allocated for Bid Item 13, Inner
Rafter Replacement by $23,000.00 to a new authorized amount of
$23,000.00. (Delete 10 EA at $2,300.00/EA)
$23,000.00 0
Item No. 4:
This Change Order decreases the amount allocated for Bid Item 17,
Structural Modification Allowance by $10,250.00 to a new authorized
amount of $69,750.00.
$10,250.00 0
Item No. 5:
This Change Order decreases the amount allocated for Bid Item 18, Girder
Replacement by $125,000.00 to a new authorized amount of $0.00. (Delete
5 EA at $25,000.00/EA)
$125,000.00 0
Item No. 6:
This Change Order decreases the amount allocated for Bid Item 19, 8-inch
Diameter 5/16-inch Thick Steel Patches by $9,000.00 to a new authorized
amount of $0.00. (Delete 15 EA at $600.00/EA)
$9,000.00 0
Item No. 7:
This Change Order provides for installation of a stabilized construction
entrance at the access road gate.
$10,830.00 0
Item No. 8:
This Change Order provides for surface preparation and coating application
to a new tank drain gate valve.
$750.00 11
Item No. 9:
Reimbursement for grinding removal ($1.50/SF) and replacement
($15.00/SF) of damaged asphalt concrete paving at the 803-2 Reservoir.
(Credit 335 SF at $16.50/SF)
$5,527.50 0
Item No. 10:
Reimbursement for additional inspection costs outside normal work hours
per Section 00800-1.2 at the 803-2 Reservoir.
$1,132.70 0
Item No. 11:
Add 32 calendar days due to weather impacts per Contract Specifications
00700-8.5
$0.00 $0.00 32
Sub Total Amount $11,580.00 $272,910.20 90
Total Net Change Order Amount $261,330.20
Contract / P.O. Change Order No. 1 page 3 of 4
Revisions to: BID SCHEDULE
Item # Description Quantity Unit Unit Price Amount
12 Outer Rafter & Roof to Shell Connection Replacement 0 EA $3,300 $0.00
13 Inner Rafter Replacement 10 EA $2,300 $23,000.00
17 Structural Modification Allowance 1 LS LS $69,750.00
18 Girder Replacement 0 EA $25,000 $0.00
19 8-inch Diameter 5/16-inch Thick Steel Patches 0 EA $600 $0.00
Reason:
Item No. 1:
The Contract Bid Item No. 17, Structural Modification Allowance, was utilized to account for additional scope associated with
structural repairs. Costs were accounted via the Contractual Allowance; however, it was agreed that the added scope resulted
in a 47 (forty-seven) calendar day extension to the Contract. This change is necessary to provide the time extension agreed
upon to resolve all costs associated with relevant Contractor Change Order Requests.
Item No. 2:
The Contract Bid Item No. 12, Outer Rafter to Shell Connection Replacement, required a quantity adjustment resulting from
field conditions.
Item No. 3:
The Contract Bid Item No. 13, Inner Rafter Replacement, required a quantity adjustment resulting from field conditions.
Item No. 4:
The Contract Bid Item No. 17, Structural Modification Allowance, was used to the maximum extent practical and is no longer
required.
Item No. 5:
The Contract Bid Item No. 18, Girder Replacement, required a quantity adjustment resulting from field conditions.
Item No. 6:
The Contract Bid Item No. 19, 8-inch Diameter 5/16-inch Steel Patches, required a quantity adjustment resulting from field
conditions.
Item No. 7:
During initial winter storms concern was raised regarding the potential to track mud from the unimproved access road on to the
County roadway. This concern resulted in the determination to stabilize the access road entrance with geofabric and 3-inch
minus rock. This change order is required to provide for the additional scope.
Item No. 8:
During punchlist development it was determined to replace the existing discharge gate valve. The valve replacement was
performed by District forces however it was provided with only a shop coating. To provide a consistent coating service life it
was determined to incorporate surface preparation and coating application to the new valve. This change order is required to
provide for the additional scope.
Item No. 9:
The Contractor damaged existing asphalt concrete paving at the 803-2 Reservoir. In lieu of replacing the damaged asphalt
concrete paving the contractor elected to utilize the District’s FY2018 As-Needed Asphaltic Concrete Paving Services Contract
pricing to reimburse the District for the associated repair cost. This change order is required to reimburse the District for costs
associated with damaged asphalt concrete replacement at the 803-2 Reservoir.
Item No. 10:
Contract Documents Section 00800-1.2 provides for reimbursement of additional expenses of Owner’s personnel and
inspection services resulting from work outside normal working hours. The Contractor requested and was granted
authorization to work overtime with the provision for reimbursement of additional inspection costs. The average delta between
overtime and regular time inspection costs is $17.70/hr. A total of 64 hours of overtime inspection was provided requiring
premium time reimbursement. This change order is required to reimburse the District for additional costs associated with
providing inspection outside normal working hours as requested by the Contractor.
Contract / P.O. Change Order No. 1 page 4 of 4
Item No. 11:
Contract Documents Section 00700-8.5 provides for no cost time extensions due to weather impacts on the project progress.
On February 14, 2019 Sweetwater Authority began releasing water from Loveland Reservoir to flow into Sweetwater
Reservoir. This release impacted the contractor’s ability to access the project site as the project access road traversed the
creek carrying the Loveland Reservoir release flows. The condition ended on March 13, 2019 resulting in a 32 (thirty-two)
calendar day weather impact.
803-2 Reservoir Interior/Exterior Coating & Upgrades Project: P2565
Consultant/Contractor: Advanced Industrial Services Subproject: 001103
APPROVED
C.O. AMOUNT BY DATE DESCRIPTION TYPE C.O.
1 ($261,330.20) GM
Close out change order to credit District for
unused allowances, payment for a stabilized
construction entrance, and add 90 days for
structural work and weather impacts.
Contractor
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
1920
Total C.O.'s To Date: ($261,330.20) -27.5%
Original Contract Amount:$951,690.00
Current Contract Amount:$690,359.80
Month Net C.O.$Limit Authorization Absolute C.O.$ C.O. %
9/19 ($261,330.20) $2,000 Insp ($261,330.20) -27.5%
$5,000 PM/Sr. Engr.0.0%
$10,000 DivM 0.0%
$20,000 Chief 0.0%
$75,000 GM 0.0%
>$75000 Board 0.0%
CHANGE ORDER LOG
P:\WORKING\CIP P2565 803-2 Reservoir Int-Ext Coating & Upgrades\Construction\Change
Orders\190924_COLOG 1 9/26/2019
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Kevin Cameron
Associate Civil Engineer
PROJECT: P2543-001103
R2120-001103
DIV. NO. 3
APPROVED BY: Bob Kennedy, Engineering Manager
Dan Martin, Assistant Chief of Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Reject all Construction Bids for the 850-1 Reservoir &
Recycled Water Storage Tank Interior/ Exterior Coatings &
Upgrades Project
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
reject all bids for the construction of the 850-1 Reservoir (P2543) &
Recycled Water Storage Tank (R2120) Interior/Exterior Coatings &
Upgrades Project (see Exhibit A for Project location).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to reject all
bids for the construction of the 850-1 Reservoir (P2543) & Recycled
Water Storage Tank (R2120) Interior/Exterior Coatings & Upgrades
Project.
ANALYSIS:
The 850-1 Reservoir is a 1.15 million gallon potable water storage
facility that serves portions of Spring Valley. It is one of four
AGENDA ITEM 7e
2
(4) steel tanks in the 850 Pressure Zone. The 850-1 Reservoir was
originally constructed in 1959 and was last recoated on the interior
in 2003 and the exterior in 1995. The Recycled Water Storage Tank is
a 430,000-gallon steel tank and located at the Ralph Chapman Water
Recycling Facility. The tank has a concrete floor, welded steel
shell, and a floating cover. The tank, built in 1979, has had only
coating spot repairs performed over the years, most recently in March
of 2015.
The District’s corrosion consultant maintains a Corrosion Control
Program (CCP) that addresses the installation, maintenance, and
monitoring of corrosion protection systems for the District’s steel
reservoirs and buried metallic piping. The CCP included a reservoir
maintenance schedule that showed the 850-1 Reservoir was due to be
recoated on both the interior and exterior surfaces. In addition to
replacing the coatings of the reservoirs, structural upgrades will be
added to comply with the current American Water Works Association
(AWWA) and the Occupational Safety and Health Administration
standards for both Federal (OSHA) and State (Cal-OSHA) levels.
The Recycled Water Storage Tank was evaluated in 2015 by HDR. Spot
repairs were performed at that time, but as noted in the report,
these were a temporary solution until a more extensive coating
rehabilitation could be performed. HDR recommended complete removal
and replacement of the internal and external coatings. Structural
upgrades were also recommended for the overflow and drain pipe.
The Project was advertised on September 10, 2019 using BidSync, the
District’s online bid solicitation website, on the Otay Water
District’s website, and in the Daily Transcript. A Pre-Bid Meeting
was held on September 19, 2019, which was attended by four (4)
contractors and vendors. Four (4) addenda were sent out to all
bidders and plan houses to address questions and clarifications to
the contract documents during the bidding period. Bids were publicly
opened on October 3, 2019, with the following results:
CONTRACTOR TOTAL BID AMOUNT
1 Advanced Industrial Services, Inc.
Los Alamitos, CA $1,426,900.00
2 Paso Robles Tank, Inc.
Hemet, CA
$1,666,000.00*
*Non-Responsive
See below
The Engineer's Estimate is $1,017,000.
3
A review of the bids was performed by District staff for conformance
with the contract requirements. During the review of the bids, staff
found that Bid List Page 00400-4 was missing from Paso Robles Tank’s
(PRT) bid and only Bid List Pages 00400-5 & 00400-6 were provided.
The missing page contained costs for bid items related to the 850-1
Reservoir. Staff determined that PRT’s bid is non-responsive.
After analyzing the lowest bid submitted by Advanced Industrial
Services, Inc. (AIS), staff noted that the cost for the coating work
was higher than expected. The Engineer’s Estimate for the coating
work was based on bids over the previous four years on this type of
work. Coating costs over that period have averaged $9.10 per square
foot for interior work, and $7.60 per square foot for exterior work.
The low bid cost for this project was $21.40 per square foot for the
interior and $23.55 per square foot for exterior work. AIS stated
that the higher prices are a result of higher labor costs in order to
retain qualified craftsman and higher material costs.
This project was bid later in the year, and staff believes many
contractors were already committed to other projects, which may have
resulted in receiving only 2 bids. Staff believes that rebidding the
project earlier next calendar year will induce more competitive bids.
Delaying the recoating of the two tanks will not adversely affect the
integrity of the facilities. The coatings, while in poor condition,
will still protect the facilities in the short-term.
Staff is recommending to reject all bids since the second bid was
nonresponsive, and the low bid price was twice as high per square
foot as previous contracts.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None
GRANTS/LOANS:
Engineering staff researched and explored grants and loans and found
none available for this Project.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
manner” and the General Manager’s Vision, "To be a model water agency
4
by providing stellar service, achieving measurable results, and
continuously improving operational practices."
LEGAL IMPACT:
None.
KC/BK:jf
P:\WORKING\CIP P2543 - 850-1 Reservoir Int-Ext Coating\Staff Reports\11-6-19, Staff Report Reject All
Bids for 850-1 Reservoir & Recycled Tank Coating_kc-bk .docx
Attachments: Attachment A – Committee Action
Attachment B-1 – Budget Detail for P2543
Attachment B-2 – Budget Detail for R2120
Exhibit A – Project Location Map
ATTACHMENT A
SUBJECT/PROJECT:
P2543-001103
R2120-001103
Reject all Construction Bids for the 850-1 Reservoir &
Recycled Water Storage Tank Interior/ Exterior Coatings &
Upgrades Project
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff discussed the project’s background and bidding process.
It was indicated that the District received two (2) bids; one
from Advanced Industrial Services (AIS) and one from Paso Robles
Tank (PRT). A summary of the bids is shown on page 2 of the
staff report.
• Staff stated that AIS submitted the lowest bid. The PRT bid was
missing the first page of the bid list; therefore, staff
determined their bid to be unresponsive.
• As stated in the staff report, after analyzing the lowest bid
submitted by AIS, staff noted that the cost for the coating work
was significantly higher than the Engineer’s Estimate. Details
of the Engineer’s Estimate and AIS’ estimate is provided on page
3 of the staff report.
• Staff recommended to reject all bids since PRT’s bid was
nonresponsive, and the low bid price from AIS was twice as high
per square foot as previous contracts.
• Staff believes that rebidding the project earlier next calendar
year will induce more competitive bids.
• The Committee commented that contractors invest a lot of time,
effort, and money to submit bids and shared their concerns of
the District rejecting all bids at this time. This action may
discourage other contractors to submit bids to the District in
the future. In response, staff believes that contractors would
submit bids in the future as the Otay Water District has a
positive reputation for being a responsible and excellent
agency/vendor.
• The Committee inquired if the District anticipates an increase
in future project budgets as a result of the current bidding
climate. Staff stated that they are looking at all of the
budgets to see if adjustments need to be made, but it is
anticipated that there will be a larger pool of competition and
a better response from contractors for these two CIP projects
that may result in a lower price.
• The Committee recommended that staff re-bid this project in
spring as it would give the District enough time to evaluate the
bidding climate and the impact on next year’s CIP budget.
• In response to a question from the Committee, staff stated that
the cost to re-bid this project is approximately $5,000.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
ATTACHMENT B-1 – Budget Detail for P2543
SUBJECT/PROJECT:
P2543-001103
R2120-001103
Reject all Construction Bids for the 850-1 Reservoir &
Recycled Water Storage Tank Interior/ Exterior Coatings &
Upgrades Project
9/25/2019
Budget
940,000
Planning
Standard Salaries 10,000 9,571 429 10,000
Service Contracts 1,850 1,850 - 1,850 HDR
Total Planning 11,850 11,421 429 11,850
Design
Standard Salaries 22,000 8,106 13,894 22,000
Service Contracts 2,090 2,090 - 2,090 WATER SYSTEMS CONSULTING, INC
Total Design 24,090 10,196 13,894 24,090
Construction
Standard Salaries 100,000 125 99,875 100,000
Construcion Contract 621,250 - 621,250 621,250 CONSTRUCTION CONTRACTOR (Engineer's Estimate)
Service Contracts 32,000 - 32,000 32,000 CONSTRUCTION MANAGEMENT
45,000 - 45,000 45,000 COATING INSPECTION
1,500 - 1,500 1,500 WELDING INSPECTION
20,000 - 20,000 20,000 SECURITY
1,000 - 1,000 1,000 MAYER REPROGRAPHICS
5,000 - 5,000 5,000 STRUCTURAL ENGINEER
750 - 750 750 CLARKSON LABORATORY
Project Closeout 3,000 - 3,000 3,000 CLOSEOUT
Project Contingency 31,063 - 31,063 31,063 5% CONTINGENCY
Total Construction 860,563 125 860,438 860,563
Grand Total 896,503 21,742 874,761 896,503
Vendor/Comments
Otay Water District
P2543 - 850-1 Reservoir Interior/Exterior Coating
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
ATTACHMENT B-2 – Budget Detail for R2120
SUBJECT/PROJECT:
P2543-001103
R2120-001103
Reject all Construction Bids for the 850-1 Reservoir &
Recycled Water Storage Tank Interior/ Exterior Coatings &
Upgrades Project
9/26/2019
Budget
575,000
Planning
Standard Salaries 5,000 968 4,032 5,000
Total Planning 5,000 968 4,032 5,000
Design
Standard Salaries 35,000 27,377 7,623 35,000
Service Contracts 11,371 11,371 - 11,371 PSOMAS
Total Design 46,371 38,748 7,623 46,371
Construction
Standard Salaries 45,000 - 45,000 45,000
Construcion Contract 395,750 - 395,750 395,750 CONSTRUCTION CONTRACTOR (Engineer's Estimate)
Service Contracts 15,000 - 15,000 15,000 CONSTRUCTION MANAGEMENT
20,000 - 20,000 20,000 COATING INSPECTION
1,500 - 1,500 1,500 WELDING INSPECTION
20,000 - 20,000 20,000 SECURITY
500 - 500 500 MAYER REPROGRAPHICS
750 - 750 750 CLARKSON LABORATORY
Project Closeout 3,000 - 3,000 3,000 CLOSEOUT
Project Contingency 19,788 - 19,788 19,788 5% CONTINGENCY
Total Construction 521,288 - 521,288 521,288
Grand Total 572,659 39,716 532,943 572,659
Vendor/Comments
Otay Water District
R2120 - RWCWRF Filtered Water Storage Tank Improvements
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
OTAY WATER DISTRICT850-1 RESERVOIR & RECYCLED WATER STORAGE TANKINTERIOR/EXTERIOR COATINGS & UPGRADESLOCATION MAP
EXHIBIT A
CIP R2120
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OWDHEADQUARTERS
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Dan Martin
Assistant Chief of Engineering
PROJECT: P2083-001103
P2562-001103
DIV. NO.2
APPROVED BY: Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Approval of Change Order No. 4 to the Construction Contract
with Pacific Hydrotech Corporation for the 870-2 Pump Station
Replacement Project
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
approve Change Order No. 4 to the existing construction contract with
Pacific Hydrotech Corporation (Pacific Hydrotech) in the amount of
$49,157.89 for the 870-2 Pump Station Replacement Project (Project)
(see Exhibits A and B for Project location).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To obtain Board authorization for the General Manager to execute
Change Order No. 4 in the amount of $49,157.89 to the construction
contract with Pacific Hydrotech for the 870-2 Pump Station
Replacement Project.
AGENDA ITEM 7f
2
ANALYSIS:
The District’s existing High Head (870-1) and Low Head (571-1) Pump
Stations constructed in 1962 and 1966, respectively, have reached the
end of their useful lives. The 870-2 Pump Station Project will
replace these facilities and includes replacement of existing
Reservoir inlet/outlet piping, construction of recirculation system
pumps, and a chloramine disinfection booster system. Improvements of
the access road and the installation of utilities for electrical,
gas, sewer, and communication services are also included.
The 870-2 Pump Station Replacement Project also includes the
replacement of the 571-1 Reservoir (36.7 MG) floating cover and
liner. The 571-1 Reservoir was originally built in 1967. In 1993
the District retrofitted the existing Reservoir to install a
reservoir liner and floating cover. The existing liner and floating
cover were more than 24 years old and nearing the end of their useful
lives. As part of the overall Project, the existing Reservoir outlet
stub-out piping located beneath the Reservoir was replaced, which
will allow the new 870-2 Pump Station to simultaneously perform its
primary function (pump from the 571-1 Reservoir to the 870-1
Reservoir), recirculate the 571-1 Reservoir, and also achieve a
future function (pump from the 571-1 Reservoir to the 624 Pressure
Zone). The replacement of the cover and liner under this Project
mitigates having to take this critical Reservoir out of service a
second time within the next few years.
The demolition of the Low Head and High Head Pump Stations will be
completed at a later date (not part of this Project) when the new
870-2 Pump Station has been brought on line and completed its
warranty period.
At the July 5, 2017 Board Meeting, the Board awarded a construction
contract in the amount of $16,925,900.00 to Pacific Hydrotech. Since
the award of the construction contract, three (3) change orders have
been approved.
Change Order No. 1, which totaled $26,269.83, compensated the
contractor for changes associated with the 571-1 Reservoir cover and
liner improvements. These changes included provisions for additional
cover buoyancy floats; replacement of existing unsalvageable batten
bar anchor bolts; contractor reservoir disinfection in lieu of
contract specified District disinfection; weather related days; and
an adjustment to the contract milestone date for the 571-1 Reservoir.
In total, Change Order No. 1 added 27 days to the contract.
3
Change Order No. 2, which totaled $48,698.12, compensated the
contractor for changes including the following: modifications to the
new electric meter room to accommodate San Diego Gas & Electric
accessibility requirements; modifications to provide two (2) 250-
gallon aqueous ammonia tanks in lieu of one (1) 550-gallon tank to
better serve station operations; provisions for two (2) 30-inch
magnetic flow meters in lieu of ultrasonic flow meters to provide
more resiliency and flexibility with anticipated flow conditions; and
repairs to an existing rectifier electrical conduit adjacent to the
access road. Change Order No. 2 also addressed contract time
including weather days. In total, Change Order No. 2 added 16 days
to the contract.
Change Order No. 3, which totaled $64,864.00, compensated the
contractor for several changes including the following:
modifications to the dimensions of the backup generator concrete
foundation pad; addition of structural support members for the
heating, ventilation, and air-conditioning (HVAC) equipment and
emergency generator muffler; revisions to the stations louvers and
associated masonry; installation of door louvers for the compressor
room doors; increasing the discharge piping on the 570 zone
(recirculation) pumps to 18-inches; revisions to provide a sewn
protective thermal insulation jacket with clips for the emergency
generator muffler and exhaust piping; modifying the emergency
generator exhaust roof penetration to simplify future muffler
removal/servicing; and consolidation of exterior lighting controls in
a new contactor and control panel. Change order No. 3 also addressed
contract time including weather days. In total, Change order No. 3
added 25 days to the contract.
Change Order No. 4, which is the subject of this staff report,
provides for the following twenty-eight (28) items as detailed in the
attached Exhibit C:
1. Modifying the existing cathodic rectifier to support the needs
of the new station
2. HVAC modifications to the restroom and compressor room
3. An additional 4-inch gate valve on the fence irrigation system
4. Surge protection for station’s indoor devices
5. Modifications to the surge tank concrete foundation pad
6. Single face Type G LED exit light fixtures
7. A chemical resistant coating in the chemical metering pump
containment area
8. Surge protection for Lighting Control Panel No. 1
9. Additional pipe supports for above ground piping within the
station
10. Additional Pump Room exhaust fan
11. Spare pump engine catalysts
12. Dimensional adjustments to the steel suction pipe transitions
between cement mortar lined pipe and epoxy lined pipe
13. Addition of lighting within the SDG&E service entrance room
4
14. Provisions for additional roof drains in lieu of scuppers above
the generator room
15. Modifications to HVAC duct work within the electrical room
16. Modifications of busduct routings between the electrical
equipment and the backup generator equipment
17. Relocation of the chemical analyzers from the main pump room to
the sodium hypochlorite room
18. Installation of two 2-inch pressure reducing valves at the
building entrance for potable and non-potable waterlines
19. Installation of additional disassembly flanges for the in-line
heat exchanger
20. Installation of a cove base between the drywall and the floor
in the bathroom
21. Installation of flexible connections between all coolant and
natural gas connections for both engines
22. Installation of gusset plates in lieu of knee bracing for the
suction header walkway
23. Installation of a 1-hour fire rating door between the generator
room and the pump room
24. Fireproofing pipe and construction openings between all rooms
of the station
25. Additional R-Value testing of Alta Road soils and a structural
paving section recommendation as required by the County of San
Diego
26. Adjustments to contract time for weather (8 days)
27. Credit for unused Environmental/Regulatory Compliance allowance
28. Credit for unused Reservoir Improvement Allowance
In total, the cost associated with the items in Change Order No. 4 is
$49,157.89. Time impacts associated with this change are also
provided in Exhibit C. In total, the forty-four (44) additional days
added to the contract will result in a revised total contract
duration of 912 calendar days.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The total budget for CIP P2083, as approved in the FY 2020 budget, is
$18,950,000. Total expenditures, plus outstanding commitments and
forecast, including this contract, are $18,949,826. See Attachment
B-1 for the budget detail.
The total budget for CIP P2562, as approved in the FY 2019 budget, is
$2,900,000. Total expenditures, plus outstanding commitments and
forecast, including this contract, are $2,898,236. See Attachment B-
2 for the budget detail.
Based on a review of the financial budget, the Project Manager
anticipates that the budgets are sufficient to support the Project.
5
The Finance Department has determined that, under the current rate
model, 100% of the funding will be available from the Replacement
Fund for CIP P2083 and for CIP P2562.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
manner” and the District’s Vision, “To be a model water agency by
providing stellar service, achieving measurable results, and
continuously improving operational practices.”
LEGAL IMPACT:
None.
DM:jf
P:\WORKING\CIP P2083 870-2 Pump Station Replacement\Staff Reports\BD 11-06-19\BD 11-06-19 Staff Report CO No. 4 for
870-2 PS.docx
Attachments: Attachment A – Committee Action
Attachment B1 – P2083 Budget Detail
Attachment B2 - P2562 Budget Detail
Exhibit A – 870-2 Pump Station Project Location
Exhibit B - 870-2 Pump Station Project Detail Map
Exhibit C – Change Order No. 4
ATTACHMENT A
SUBJECT/PROJECT:
P2083-001103
P2562-001103
Approval of Change Order No. 4 to the Construction Contract
with Pacific Hydrotech Corporation for the 870-2 Pump
Station and the 571-1 Reservoir Floating Cover and Liner
Replacement Projects
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff discussed the background of the project and recommended
that the Board approve Change Order No. 4 to the existing
construction contract with Pacific Hydrotech Corporation
(Pacific Hydrotech) in the amount of $49,157.89 for the 870-2
Pump Station Replacement Project.
• Details of Change Order Nos. 1-3 are provided on pages 2 and 3
of the staff report.
• Staff discussed Change Order No. 4. See pages 3 and 4 of the
staff report for details. Staff stated that in total, there
were twenty-eight (28) items and the cost associated with the
items in Change Order No. 4 is $49,157.89. It was noted that
time impacts associated with this change are provided in
Exhibit C. There were forty-four (44) additional days added to
the contract, which will result in a revised total contract
duration of 912 calendar days.
• The Committee commented that Change Order No. 4 had an increase
in the project’s design. Staff indicated that the station’s
change order revisions were to primarily enhance future
operations and maintenance. It was noted that staff has
discussed station design issues associated with the exterior
yard piping with the project’s design firm and that the District
will receive credit associated with those items.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
ATTACHMENT B-1 – P2083 Budget Detail
SUBJECT/PROJECT:
P2083-001103
P2562-001103
Approval of Change Order No. 4 to the Construction Contract
with Pacific Hydrotech Corporation for the 870-2 Pump
Station and the 571-1 Reservoir Floating Cover and Liner
Replacement Projects
Date: 10/02/19
Budget
18,950,000
Planning
Consultant Contracts 80,000 59,391 20,609 80,000 HELIX ENVIRONMNTL PLANNING INC
17,094 17,094 - 17,094 JONES & STOKES ASSOCIATES INC
211,034 211,034 - 211,034 ICF JONES & STOKES INC
Regulatory Agency Fees 2,109 2,109 - 2,109 CA DEPT OF FISH & WILDLIFE
720 720 - 720 CALIFORNIA REGIONAL WATER
1,570 1,570 - 1,570 SAN DIEGO COUNTY WATER AUTH
1,760 1,760 - 1,760 STATE WATER RESOURCES
Service Contracts 2,260 2,260 - 2,260 COUNTY OF SAN DIEGO
164 164 - 164 SAN DIEGO DAILY TRANSCRIPT
505 505 - 505 THE SAN DIEGO UNION-TRIBUNE
Standard Salaries 210,000 197,612 12,388 210,000
Fixed Asset 580,444 580,444 - 580,444
Total Planning 1,107,661 1,074,664 32,997 1,107,661
Design 001102
Consultant Contracts 136 136 - 136 THE WATCHLIGHT CORPORATION
4,850 4,850 - 4,850 BURKETT & WONG ENGINEERS INC
14,068 14,068 - 14,068 SOUTHERN CALIFORNIA SOIL
3,034 3,034 - 3,034 RICK ENGINEERING COMPANY
4,625 4,625 - 4,625 ROGER B WOODHULL
22,149 22,149 - 22,149 NINYO & MOORE GEOTECHNICAL AND
10,484 10,484 - 10,484 HUNSAKER & ASSOCIATES
6,086 6,086 - 6,086 HDR ENGINEERING INC
682,870 682,870 - 682,870 CAROLLO ENGINEERS INC
7,974 7,974 - 7,974 AEGIS ENGINEERING MGMT INC
Regulatory Agency Fees 3,694 3,694 - 3,694 SAN DIEGO GAS & ELECTRIC
20,000 18,348 1,652 20,000 COUNTY OF SAN DIEGO
Service Contracts 98 98 - 98 DAILY JOURNAL CORPORATION
Standard Salaries 677,054 677,054 - 677,054
Supplier Contracts 5,350 5,350 - 5,350 INLAND AERIAL SURVEYS INC
Total Design 1,462,472 1,460,820 1,652 1,462,472
Construction
Construction Contracts - - -
13,796,719 11,285,751 2,510,968 13,796,719 PACIFIC HYDROTECH CORPORATION
50,368 - 50,368 50,368 Pacific Hydrotech Co. CO No. 4
726,143 593,987 132,156 726,143 PACIFIC WESTERN BANK
Consultant Contracts 418,010 395,413 22,597 418,010 CAROLLO ENGINEERS INC
1,319 1,319 - 1,319 NINYO & MOORE GEOTECHNICAL AND
9,225 9,225 - 9,225 NV5 INC
17,623 17,623 - 17,623 RBF CONSULTING
780,772 653,858 126,914 780,772 MICHAEL BAKER INT'L INC
438 438 - 438 NINYO & MOORE GEOTECHNICAL
OTHER AGENCY FEES 15,000 6,731 8,269 15,000 COUNTY OF SAN DIEGO
164,774 164,774 - 164,774 SAN DIEGO GAS & ELECTRIC
Professional Legal Fees 276 276 - 276 ARTIANO SHINOFF
280 280 - 280 STUTZ ARTIANO SHINOFF
Service Contracts 3,628 3,628 - 3,628 MAYER REPROGRAPHICS INC
119 119 - 119 SAN DIEGO DAILY TRANSCRIPT
Standard Salaries 210,000 169,016 40,984 210,000
20,000 - 20,000 20,000 Security System
20,000 - 20,000 20,000 AT&T Connection
Contingency 145,000 - 145,000 145,000 1.0% of Construction Contract
Total Construction 16,379,693 13,302,436 3,077,257 16,379,693
Grand Total 18,949,826 15,837,920 3,111,906 18,949,826
Vendor/Comments
Otay Water District
p2083-PS -870-2 Pump Station
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
ATTACHMENT B-2 – P2562 Budget Detail
SUBJECT/PROJECT:
P2083-001103
P2562-001103
Approval of Change Order No. 4 to the Construction Contract
with Pacific Hydrotech Corporation for the 870-2 Pump
Station and the 571-1 Reservoir Floating Cover and Liner
Replacement Projects
Date: 10/02/2019
Budget
2,900,000
Planning
Regulatory Agency Fees 50 50 - 50 PETTY CASH CUSTODIAN
Total Planning 50 50 - 50
Design 001102
Standard Salaries 51,320 51,320 - 51,320
Total Design 51,320 51,320 - 51,320
Construction
Standard Salaries 30,000 15,916 14,084 30,000
150,000 129,300 20,700 150,000 MICHAEL BAKER INT'L INC
(1,210) - (1,210) (1,210) Pacific Hydrotech Co. CO No. 4
2,415,726 2,384,358 31,368 2,415,726 PACIFIC HYDROTECH CORPORATION
127,143 125,493 1,651 127,143 PACIFIC WESTERN BANK
206 206 - 206 CLARKSON LAB & SUPPLY
125,000 - 125,000 125,000 Project Contingency 4.9%
Total Construction 2,846,866 2,655,273 191,593 2,846,866
Grand Total 2,898,236 2,706,643 191,593 2,898,236
Vendor/Comments
Otay Water District
p2562-Res - 571-1 Reservoir Cover/Liner Replac
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
OTAY WATER DISTRICT870-2 PUMP STATIONLOCATION MAP
EXHIBIT A
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Contract / P.O. Change Order No. 4 page 2 of 6 Description of Work
Description
Increase Decrease Time
Item No. 1: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for modifications to the cathodic system per COR 14 and RFP 005. $39,606.00 0
Item No. 2: Charges attributable to the 870-2 PS (CIP 2083). The Change Order provides for HVAC modifications to the restroom and compressor room per RFI 138 and COR 46.
$3,953.00 1
Item No. 3: Charges attributable to the 870-2 PS (CIP 2083). The Change Order provides an additional 4-inch gate valve on the fence irrigation system per COR 48. $1,028.00 1
Item No. 4: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides surge protection for indoor devices per COR 49. $34,253.00 0
Item No. 5: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for modifications to the surge tank concrete foundation pad per COR 50.
$3,079.00 1
Item No. 6: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides single face Type G LED exit light fixtures per COR 53. $1,681.00 0
Item No. 7: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides a chemical resistant coating in the chemical metering pump containment area per COR 58.
$7,536.00 4
Item No. 8:
Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides modifications to lighting controller LC-1 per COR 60. $832.00 0
Item No. 9: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides additional pipe supports in the pump room per COR 61. $18,305.00 2
Item No. 10: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for the addition of exhaust fan EF-4 to the Pump Station per COR 62.
$19,206.00 3
Item No. 11: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides spare gas engine exhaust catalyst and make-up oil storage tanks per COR 63.
$25,256.00 3
Item No. 12: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for modifications to the sizes of specified Victaulic couplings on the suction piping per COR 64.
$37,576.00 5
Item No. 13: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides additional Type A fixtures to the electrical service entrance (SES-1) room per COR 65.
$3,124.00 0
Item No. 14: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for incorporation of two primary roof drains and two overflow roof drains per COR 66.
$4,748.00 1
Contract / P.O. Change Order No. 4 page 3 of 6 Item No. 15: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for relocation of the HVAC ductwork in the electric room per COR 67.
$2,102.00 1
Item No. 16: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for reorientation of the electrical busway in the emergency generator room per COR 68.
$9,557.00 2
Item No. 17: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for relocation of two chemical analyzers per COR 69. $12,347.00 2
Item No. 18: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides two 2-inch pressure reducing valves per COR 70. $4,059.00 1
Item No. 19: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for additional disassembly flanges on pump engine coolant piping per COR 71.
$12,599.00 3
Item No. 20: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides a cove base in the restroom per COR 72.$1,138.00 0
Item No. 21: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides flexible connections for engine coolant and natural gas piping to the pump engines per COR 73.
$7,250.00 2
Item No. 22: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides support gussets on the aluminum platform above the suction piping per COR 74.
$2,913.00 1
Item No. 23: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides 1-hour fire labeling at the generator room interior door per COR 75. $2,392.00 0
Item No. 24: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides firestopping between the chemical rooms and generator room and adjacent rooms per COR 76.
$9,679.00 3
Item No. 25: Charges attributable to the 870-2 PS (CIP 2083). This Change Order provides for additional testing to perform an R-value analysis of existing soil and pavement section recommendation to the County per COR 77.
$540.00 0
Item No. 26: Add eight (8) calendar days due to weather impacts per Contract Specifications 00700-8.5. $0.00 $0.00 8
Item No. 27: Charges attributable to the 870-2 PS (CIP 2083). This Change Order decreases the amount allocated for Bid Item 19, Environmental/Regulatory Compliance Allowance by $135,179.00 to a new authorized amount of $14,821.00.
$135,179.00 0
Item No. 28: Charges attributable to the 571-1 (CIP 2562). This Change Order decreases the amount allocated for Bid Item 23, Reservoir Improvement Allowance by $1,210.00 to a new authorized amount of $48,789.89.
$1,210.11 0
Contract / P.O. Change Order No. 4 page 4 of 6 Sub Total Amount $225,153.00 $175,995.11 44
Total Net Change Order Amount $49,157.89
Revisions to: BID SCHEDULE
Item # Description Quantity Unit Unit Price Amount
19 Environmental/Regulatory Compliance Allowance 1 LS LS $14,821.00
23 Reservoir Improvement Allowance 1 LS LS $48,789.89
Reason: Item No. 1: During submittal review it was determined that the existing cathodic rectifier can provide adequate cathodic protection to the new piping with modifications. This Change Order is required to realize the credit for deleting the contractual deep well and rectifier while adding modifications to allow the existing rectifier to provide required cathodic protection resolving all costs associated with COR 14 and RFP 005. Item No. 2: The Contract did not provide supply air for the compressor room necessary to avoid generating negative pressure in the room or restroom necessary to provide a source of ventilation. This change order provides for the needed ventilation modifications resolving all costs associated with RFI 138 and COR 046. Item No. 3: The Contract did not include a below ground gate valve on the 4-inch fence irrigation system. It was determined to incorporate a below grade gate valve at the connection to the buried pipe to facilitate maintenance and redundancy of the above grade isolation valve. This change order provides for the added valve resolving all costs associated with COR 048. Item No. 4: During submittal review it was determined that incorporation of surge protection for indoor devices was required. This change order is required to provide the additional instrumentation surge protection as identified in Submittal 112 resolving all costs with COR 019. Item No. 5: The Contract included a 15-foot by 10-foot structural concrete foundation pad for the surge tank. Subsequent to submittal approval it was determined that a 20-foot by 11-foot structural concrete foundation pad was required to support the surge tank and provide required anchor bolt edge distances. This change order provides for the required structural concrete foundation pad size revision resolving all costs with COR 050. Item No. 6: The Contract Documents specified double sided exist signs by model number in locations where mounting to a wall was required. RFI 178 was issued to clarify the requirements resulting in the determination to order single sized exit signs for installation and provide the District with the purchased double-sided exit signs. This change order is required to provide and install the single sided exist signs and resolve all costs associated with RFI 178 and COR 053. Item No. 7: The Contract Documents did not provide a chemically resistant coating inside the chemical rooms. It was determined to incorporate a chemical resistant coating in the containment area beneath the chemical metering pumps to facilitate maintenance while increasing the concrete service life. This change order is required to implement the modification and resolve all costs associated with COR 030. Item No. 8: During the review of Submittal 201 comments were returned resulting in scope modifications. Modifications to lighting control panel LC-1 included addition of a surge protection device, circuit breaker and wiring modifications. This change order is required to implement the modification and resolve all costs associated with COR 060.
Contract / P.O. Change Order No. 4 page 5 of 6 Item No. 9: The Contract Documents included pipe supports necessary for structural support of above ground piping within the pump station. During construction it was determined that additional supports were required to facilitate removal of serviceable valves and pump control valves resulting in the determination to install additional supports necessary to support future maintenance activities. This change order is required to implement the modification and resolve all costs associated with COR 061. Item No. 10: After review of pump motor and angle drive heat loads the designer issued design clarification 03 to incorporate an additional exhaust fan in the pump room to mitigate heat gain during summer months in the pump room resulting in structural, roofing, electrical and mechanical modifications associated with incorporation of exhaust fan EF-4. This change order is required to implement the modification and resolve all costs associated with RFP 010 and COR 62. Item No. 11: Resulting from regulatory requirements and review of start-up procedures a risk of fouling new pump engine catalysts was determined to be a possibility and catalyst replacement lead time would detrimentally impact the required start-up schedule. This realization resulted in the determination to order a spare set of catalyst for both engines prior to start-up. Additionally, it was determined that incorporation of make-up oil tanks would simplify future maintenance activities. This change order is required to implement the modification and resolve all costs associated with COR 63. Item No. 12: During submittal review concern was raised with suction piping flow characteristics. Resulting from discussions and submittal reviews, steel pipe dimensions were adjusted to ensure that internal dimensions between cement mortar lined pipe and epoxy pipe transitioned as smoothly as possible. These dimensional adjustments resulted in increasing the specified sizes of required Victaulic couplings for all 870 and 570 zone pumps. This change order is required to implement the modification and resolve all costs associated with COR 64. Item No. 13: During an inspection by San Diego Gas & Electric, lighting was required to be installed in the service entrance room (SES-1) prior to establishment of electrical service resulting in the requirement for additional conduit, wire and an additional Type A light fixture. This change order is required to implement the modification and resolve all costs associated with COR 65. Item No. 14: The Contract provided two roof scuppers for roof drainage including overflow protection above the generator room. It was determined to convert the scupper design to two new primary and two overflow roof drains providing consistency with other locations on the pump station roof. This change order is required to implement the modification and resolve all costs associated with COR 66. Item No. 15: The Contract provided new HVAC ductwork centered in the new electric room. Subsequent to electric cable tray installation it was realized that the new ductwork impacted safe working conditions at the new cable tray. This realization resulted in the determination to relocate the new ductwork away from the cable tray providing the needed workroom. This change order is required to implement the modification and resolve all costs associated with COR 67. Item No. 16: The Contract provided busduct conductor routings between the electrical equipment and backup generator equipment. Subsequent to installation of the emergency generator muffler concern was raised with the proximity between the busduct routing and muffler due to generated heat during extended engine operation. The concern resulted in the determination to relocate the busduct to mitigate potential heat impacts ensuring the long-term serviceability of the electrical connection. This change order is required to implement the modification and resolve all costs associated with COR 68. Item No. 17: The Contract provided for chemical analyzers to be located in the main pump room. Field review with District personnel resulted in a request to relocate the analyzers to the sodium hypochlorite room to simplify access and maintenance activities. This change order is required to implement the modification and resolve all costs associated with COR 69. Item No. 18: The Contract did not provide for pressure reducing valves (PRV) on the new potable and non-potable waterlines inside the pump station resulting in the determination to incorporate two new 2-inch PRVs at the entrance to the building to increase the service life of the new building interior water distribution piping. This change order is required to implement the modification and resolve all costs associated with COR 70. Item No. 19: The Contract provided a single disassembly flange on each pipe to the in-line heat exchanger. During installation it was determined that an additional disassembly flange was needed on each pipe due to the required pipe configuration to facilitate future removal of the in-line heat exchanger. This change order is required to implement the modification and resolve all costs associated with COR 71.
Contract / P.O. Change Order No. 4 page 6 of 6 Item No. 20: The Contract did not provide a transition between the bottom of the drywall and floor in the bathroom. It was determined to incorporate a cove base material to mitigate moisture damage to the walls during bathroom floor cleaning. This change order is required to implement the modification and resolve all costs associated with COR 72. Item No. 21: The Contract did not provide flexible connections between the pump engines and steel pipe carrying engine coolant and natural gas. Resulting from a concern regarding how engine vibration would impact the long-term serviceability of the steel piping a determination was made to incorporate a flanged flexible connection between all coolant and natural gas connections to both engines. This change order is required to implement the modification and resolve all costs associated with COR 73. Item No. 22: The Contract specified knee bracing to stabilize the aluminum walkway above the suction piping. Suction header piping conflicts precluded the installation of knee braces resulting in the need to install gusset plates. This change order is required to implement the modification and resolve all costs associated with COR 74. Item No. 23: The Contract specified a 1-hour fire wall surrounding the generator room and chemical rooms. The door between the generator room and pump room was not specified with a 1-hour rating as required to achieve the required fire separation resulting in the requirement to secure a third-party fire rating stamp on the door and frame. This change order is required to implement the modification and resolve all costs associated with COR 75. Item No. 24: The Contract specified a 1-hour fire wall surrounding the generator room and chemical rooms. Details for fireproofing pipe and construction openings between the rooms was not specified resulting in the requirement to secure a fire proofing subcontractor to provide and install fireproofing materials to ensure the separation requirements are achieved. This change order is required to implement the modification and resolve all costs associated with COR 76. Item No. 25: The County inspector required a R-value test of Alta Road soils and a recommendation of a structural paving section for required
paving repair work from the Contractor’s soils firm. This change order is required to implement the modification and resolve all costs associated with COR 77. Item No. 26: Contract Documents Section 00700-8.5 provides for no cost time extensions due to weather impacts on the project progress. Weather impacted the project eight (8) days between March 1, 2019 and August 31, 2019. The project was impacted on March 14, April 29, 30, May 10, 16, 20, 21 and 22, 2019 due to weather. Item No. 27: The Contract Bid Item No. 19, Environmental/Regulatory Compliance Allowance, has been used to the maximum extent practical and is no longer required. Item No. 28: The Contract Bid Item No. 19, Reservoir Improvement Allowance, has been used to the maximum extent practical and is no longer required.
870-2 Pump Station Replacement Project Project: P2083/P2562
Consultant/Contractor: Pacific Hydrotech Corporation Subproject: 001103
APPROVED
C.O. AMOUNT BY DATE DESCRIPTION TYPE C.O.
1 $26,269.83 GM 5/18/2018
Change order provides for additional buoyancey floats,
anchor bolts, and a modified disinfection procedure for the
571-1 Reservoir. Also addresses contract time for weather.
Contractor
2 $48,698.12 GM 1/29/2019
Electric service room modifications; ammonia storage
modifications; replace ultrasonic flow meters with magnetic
type; relocate existing rectifier power conduit; and weather
days
Contractor
3 $64,864.00 Board 4/4/2019
Bathroom fixtures; backup generator concrete foundation
pad modifications; HVAC muffler support structural members;
louver and pilaster modifications; door louvers; increase pump discharge pipe size to 18-inch; modify emergency
generator thermal insulation; emergency generator exhaust
roof penetration; esterior lighting controls modifications;
weather days.
Contractor
4 $49,157.89 Board
Change order addresses 28 specific items including but not
limited to surge protection for indoor devices, additional pipe
supports, exhaust fan for EF-4, spare exhaust catalyst,
modifications to victaulic couplings, relocation of chemical
analyzers. Also includes time adjustments and weather days.
Contractor
5
6
7
8
9
10
11
12
13
14
15
16
17
18
1920
Total C.O.'s To Date: $188,989.84 1.1%
Original Contract Amount:$16,925,900.00
Current Contract Amount:$17,114,889.84
Month Net C.O.$ Limit Authorization Absolute C.O.$ C.O. %
10/19 $49,157.89 $2,000 Insp $49,157.89 0.3%
$5,000 PM/Sr. Engr. 0.0%
$15,000 Asst. Chief 0.0%
$20,000 Chief 0.0%
$75,000 GM 0.0%
>$75,000 Board 0.0%
CHANGE ORDER LOG
P:\WORKING\CIP P2083 870-2 Pump Station Replacement\Construction\Change Orders\COLOG_1910011 10/2/2019
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Dan Martin
Assistant Chief of Engineering
PROJECT: P2574-001103
P2625-001103
DIV. NO. 5
APPROVED BY: Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Approval to Increase the Overall Budget for CIP P2574 in an
amount not-to-exceed $145,000.00 and Approval of Change Order
No. 2 in an amount not-to-exceed $115,213.59 to the
Construction Contract with Cass Arrieta for the Vista Vereda
(CIP P2574) and Hidden Mesa Road (CIP P2625) Water Line
Replacement Project
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board):
1.Approve to increase the CIP P2574 budget (Vista Vereda
Waterline Replacement Project) in an amount not-to-exceed
$145,000.00 (from $1,640,000.00 to $1,785,000.00).
2.Approve Change Order No. 2 to the existing construction
contract with Cass Construction, Inc. dba Cass Arrieta (Cass
Arrieta) in an amount not-to-exceed $115,213.59 for the Vista
Vereda and Hidden Mesa Road Water Line Replacement Project (see
Exhibit A for Project location).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To approve to increase the overall CIP P2574 project budget in an
amount not-to-exceed $145,000.00 and to obtain Board authorization
for the General Manager to execute Change Order No. 2 in an amount
not-to-exceed $115,213.59 to the construction contract with Cass
Arrietta for the Vista Vereda and Hidden Mesa Road Water Line
Replacement Project.
AGENDA ITEM 7g
2
ANALYSIS:
The District provides water distribution service and sanitary sewer
collection service in the Jamacha drainage basin located in the
northern area of the District. The existing 12-inch Cement Mortar
Lined and Coated (CML&C) Steel pipe that serves as the distribution
main for the western portion of the 978 Pressure Zone along Vista
Vereda to Hidden Mesa Road was constructed in 1959. Several water
main breaks have occurred in the area that have led to a
determination that the pipeline has reached the end of its useful
life and should be replaced. The original pipeline was constructed
in easements prior to any development in the area. Over the years,
with the subdivision of properties and construction of homes, the
difficult to access easements are no longer a desirable location for
placing an important transmission water main. This project moves the
transmission main for this area into Hidden Mesa Road.
The project scope of work generally consists of construction along
Vista Vereda and Hidden Mesa Road of approximately 3,700 linear feet
of 12-inch Polyvinyl chloride (PVC) water line and 400 linear feet of
8-inch PVC water line, including appurtenances, restoration of
services, surface restoration, traffic control, and all testing and
inspection as required by the Contract Documents.
At the November 7, 2018 Board Meeting, the Board awarded a
construction contract in the amount of $2,848,364.00 to Cass Arrieta.
Since the award of the construction contract, there has been one (1)
Change Order approved under the authority of the General Manager for
the contract.
Change Order No. 1, which totaled $45,750.67, compensated the
contractor for several items associated with the Hidden Mesa Water
line construction including: additional cut and cap of the existing
mainline to minimize future customer impacts; realignment of the
planned main to resolve utility conflicts; additional asphalt paving
as required by the County permit; and reconciliation of unused
allowance items. Contract time was also adjusted for weather impacts
and for impacts due to the added work. In total, Change Order No. 1
added twenty-nine (29) calendar days to the contract.
Change order No. 2 (Exhibit B), which is the subject of this staff
report includes the following ten (10) items:
1. Mainline grade revisions to the profile of the planned water
main within Vista Vereda due to existing utilities.
3
2. Revisions to the alignment, profile, and sequence of connection
for the planned water main tie-in at the Vista Vereda/Vista
Grande intersection. This change also included encasement of
the existing sewer to meet the State Water Resource Control
Board – Division of Drinking Water separation requirements.
3. Adjusting Bid Item Bid Item 47, Rock Removal by Hydraulic
Breaker Method due to field conditions.
4. Adjusting Bid Item 48, Rock Removal by Chemical Breaking Method
due to field conditions.
5. Adjusting Bid Item 49, Caving Soil Over-Excavation due to field
conditions.
6. Adjusting Bid Item 50, Additional Potholes due to field
conditions.
7. Adjusting Bid Item 51, Utility Crossings Not Identified on
Plans Greater Than 4-Inch in Diameter due to field conditions.
8. Adjusting Bid Item 52, Relocated/Reconstruct Sewer Laterals due
to field conditions.
9. Adjusting Bid Item 53, Dewatering to Sewer System due to field
conditions.
10. Adjusting Bid Item 54, Unknown or Unidentified Utilities
Allowance due to field conditions.
In total, the cost associated with the items in Change Order No. 2 is
$115,213.59. Time impacts associated with this change are also
provided in Exhibit B. In total, the ninety-three (93) additional
calendar days added to the contract will result in a revised total
contract duration of 332 calendar days.
As of October 1, 2019, the Vista Vereda and Hidden Mesa Road Water
Line Replacement Project is approximately 92% complete. It is
anticipated that additional Change Orders for unforeseen items may
occur during the completion of the remaining 8% of the construction
contract work. The budget increase of $145,000.00 is requested to
fund Change Order No. 2, provide for Project support, and reestablish
a project contingency in anticipation of unforeseen items. If
additional unforeseen items are encountered that result in a Change
Order, staff will bring the Change Order forward for Board approval.
4
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The total budget for CIP P2574, as approved in the FY 2019 budget, is
$1,640,000. Total expenditures, plus outstanding commitments and
forecast including this contract, are $1,784,176. See Attachment B1
for budget detail. Based on a review of the financial budgets, the
Project Manager anticipates that with a budget increase of $145,000,
CIP P2574 will be completed within the new budget amount of
$1,785,000.
The total budget for CIP P2625, as approved in the FY 2019 budget, is
$2,210,000. Total expenditures, plus outstanding commitments and
forecast including this contract, are $2,207,579. See Attachment B2
for budget detail. Based on a review of the financial budget, the
Project Manager anticipates that CIP P2625 will be completed within
the budget amount of $2,210,000.
The Finance Department has determined that 100% of the funding for
CIP P2574 and CIP P2625 will be available in the Replacement Reserve.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsive
manner” and the District’s Vision, “To be a model water agency by
providing stellar service, achieving measurable results, and
continuously improving operational practices.”
LEGAL IMPACT:
None.
DM/RP:jf
P:\WORKING\CIP P2574 12-Inch PL Replacement, 978 Zone, Vista Vereda\Staff Reports\Board 11-06-19\BD 11-
06-19 Staff Report Vista Vereda-Hidden Mesa CO 2.docx
Attachments: Attachment A – Committee Action
Attachment B1 – P2574 Budget Detail
Attachment B2 – P2625 Budget Detail
Exhibit A – Location Map
Exhibit B – Change Order No. 2
ATTACHMENT A
SUBJECT/PROJECT:
P2574-001103
P2625-001103
Approval to Increase the Overall Budget for CIP P2574 in an
amount not-to-exceed $145,000.00 and Approval of Change
Order No. 2 in an amount not-to-exceed $115,213.59 to the
Construction Contract with Cass Arrieta for the Vista
Vereda (CIP P2574) and Hidden Mesa Road (CIP P2625) Water
Line Replacement Project
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff provided a background of the project and discussed Change
Order No. 1. Details of Change Order No. 1 are provided on
page 2 of the staff report.
• Staff also discussed Change Order No. 2. Details of this change
order are provided on pages 2 and 3, and Exhibit B, of the staff
report. In total, the cost associated with the ten (10) items
in Change Order No. 2 is $115,213.59. Staff noted that time
impacts associated with this change are also provided in Exhibit
B. In total, ninety-three (93) additional calendar days were
added to the contract and will result in a revised total
contract duration of 332 calendar days.
• As noted in the staff report, the budget increase of $145,000
for CIP P2574 is requested to fund Change Order No. 2, provide
for Project support, and reestablish a project contingency in
anticipation of unforeseen items.
• In response to a question from the Committee regarding mainline
pipe grade revisions, staff stated that the as-built location
for the existing 16” main elevation was higher than anticipated.
Staff determined it was necessary to encase the existing sewer
and modify the new pipeline profile by increasing the depth to
meet the State Water Resources Control Board – Division of
Drinking Water separation requirements.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
ATTACHMENT B1 – P2574 Budget Detail
SUBJECT/PROJECT:
P2574-001103
P2625-001103
Approval to Increase the Overall Budget for CIP P2574 in an
amount not-to-exceed $145,000.00 and Approval of Change
Order No. 2 in an amount not-to-exceed $115,213.59 to the
Construction Contract with Cass Arrieta for the Vista
Vereda (CIP P2574) and Hidden Mesa Road (CIP P2625) Water
Line Replacement Project
10-Oct-19
Budget
1,640,000
Planning
Consultant Contracts 1,224 1,224 - 1,224 HELIX ENVIRONMNTL PLANNING INC
1,121 1,121 - 1,121 ICF JONES & STOKES INC
1,900 1,900 - 1,900 WATER SYSTEMS CONSULTING INC
Regulatory Agency Fees 2,331 2,331 - 2,331 COUNTY OF SAN DIEGO
50 50 - 50 PETTY CASH CUSTODIAN
Service Contracts 154 154 - 154 STAR-NEWS PUBLISHING CO
Standard Salaries 80,799 80,799 - 80,799
Total Planning 87,579 87,579 - 87,579
Design 001102
Consultant Contracts 147,150 147,150 - 147,150 RICK ENGINEERING COMPANY
3,487 3,487 - 3,487 NINYO & MOORE GEOTECHNICAL
28,582 28,582 - 28,582 NINYO & MOORE GEOTECHNICAL AND
2,612 2,612 - 2,612 HUNSAKER & ASSOCIATES
12,559 12,559 - 12,559 C BELOW INC
- - - -
Service Contracts 40 40 - 40 DAILY JOURNAL CORPORATION
1,000 1,000 - 1,000 CHICAGO TITLE COMPANY
Standard Salaries 137,099 137,099 - 137,099
Total Design 332,529 332,529 - 332,529
Construction
Construction Contracts 5,000 1,094 3,906 5,000 CLARKSON LAB & SUPPLY INC
1,037,954 792,342 245,612 1,037,954 CASS CONSTRUCTION INC
115,214 - 115,214 115,214 CHANGE ORDER NO 2
Consultant Contracts 10,000 6,860 3,140 10,000 RICK ENGINEERING COMPANY
16,000 - 16,000 16,000 ALYSON CONSULTING
Regulatory Agency Fees 4,000 - 4,000 4,000 COUNTY OF SAN DIEGO
Service Contracts 900 900 - 900 MAYER REPROGRAPHICS INC
Standard Salaries 125,000 114,995 10,005 125,000
50,000 - 50,000 50,000 Contingency (4.8%)
Total Construction 1,364,068 916,191 447,876 1,364,068
Grand Total 1,784,176 1,336,300 447,876 1,784,176
Vendor/Comments
Otay Water District
P2574 - PL 12" 978 Zone, Vista Vereda
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
ATTACHMENT B2 – P2625 Budget Detail
SUBJECT/PROJECT:
P2574-001103
P2625-001103
Approval to Increase the Overall Budget for CIP P2574 in an
amount not-to-exceed $125,000.00 and Approval of Change
Order No. 2 in an amount not-to-exceed $115,213.59 to the
Construction Contract with Cass Arrieta for the Vista
Vereda (CIP P2574) and Hidden Mesa Road (CIP P2625) Water
Line Replacement Project
10-Oct-19
Budget
2,210,000
Planning
Standard Salaries 815 815 - 815
Total Planning 815 815 - 815
Design 001102
Consultant Contracts 12,559 12,559 - 12,559 C BELOW INC
- - -
2,612 2,612 - 2,612 HUNSAKER & ASSOCIATES
118,540 118,540 - 118,540 RICK ENGINEERING COMPANY
Service Contracts 40 40 - 40 DAILY JOURNAL CORPORATION
Standard Salaries 65,824 65,824 - 65,824
Total Design 199,575 199,575 - 199,575
Construction
Construction Contracts 1,856,161 1,759,225 96,936 1,856,161 CASS CONSTRUCTION INC
4,416 4,416 - 4,416 CLARKSON LAB & SUPPLY INC
Consultant Contracts 3,679 3,679 - 3,679 RICK ENGINEERING COMPANY
60,000 59,115 885 60,000 ALYSON CONSULTING
For Ops Only - Contracted Services 2,000 2,000 - 2,000 RICK POST WELD & WET TAPPING
Regulatory Agency Fees 10,034 10,034 - 10,034 COUNTY OF SAN DIEGO
Service Contracts 900 900 - 900 MAYER REPROGRAPHICS INC
Standard Salaries 40,000 34,565 5,435 40,000
30,000 - 30,000 30,000 Contingency (1.6%)
Total Construction 2,007,190 1,873,934 133,256 2,007,190
Grand Total 2,207,579 2,074,323 133,256 2,207,579
Vendor/Comments
Otay Water District
P2625 - PL - 12" 978 Zone in Hidden Mesa Road
Committed Expenditures
Outstanding
Commitment &
Forecast
Projected Final
Cost
Contract / P.O. Change Order No. 2 page 2 of 3
Description of Work
Description
Increase Decrease Time
Item No. 1:
This Change Order provides for mainline pipe grade revisions per RFI 005
and COR 006. (CIP 2574)
$24,185.09 3
Item No. 2:
This Change Order provides for alignment, profile, sewer encasement and
connection revisions per RFI 008 and COR 006. (CIP 2574)
$151,710.50 90
Item No. 3:
This Change Order decreases the amount allocated for Bid Item 47, Rock
Removal by Hydraulic Breaker Method by $900.00 to a new authorized
amount of $95.00. (Delete 180 CY at $5.00/CY) (CIP 2574)
$900.00 0
Item No. 4:
This Change Order decreases the amount allocated for Bid Item 48, Rock
Removal by Chemical Breaking Method by $700.00 to a new authorized
amount of $0.00. (Delete 100 CY at $7.00/CY) (CIP 2574)
$700.00 0
Item No. 5:
This Change Order decreases the amount allocated for Bid Item 49, Caving
Soil Over-Excavation by $32,000.00 to a new authorized amount of $0.00.
(Delete 400 CY at $80.00/CY) (CIP 2574)
$32,000.00 0
Item No. 6:
This Change Order decreases the amount allocated for Bid Item 50,
Additional Potholes by $510.00 to a new authorized amount of $2,295.00.
(Delete 2 EA at $255.00/EA) (CIP 2574)
$510.00 0
Item No. 7:
This Change Order decreases the amount allocated for Bid Item 51, Utility
Crossings Not Identified on Plans Greater Than 4-Inch in Diameter by
$6,240.00 to a new authorized amount of $4,160.00. (Delete 6 EA at
$1,040.00/EA) (CIP 2574)
$6,240.00 0
Item No. 8:
This Change Order decreases the amount allocated for Bid Item 52,
Relocated/Reconstruct Sewer Laterals by $6,900.00 to a new authorized
amount of $0.00. (Delete 2 EA at $3,450.00/EA) (CIP 2574)
$6,900.00 0
Item No. 9:
This Change Order decreases the amount allocated for Bid Item 53,
Dewatering to Sewer System by $200.00 to a new authorized amount of
$0.00. (Delete 200 LF at $1.00/LF) (CIP 2574)
$200.00 0
Item No. 10:
This Change Order decreases the amount allocated for Bid Item 54, Unknown
or Unidentified Utilities Allowance by $13,232.00 to a new authorized amount
of $4,561.00. (CIP 2574)
$13,232.00 0
Sub Total Amount $175,895.59 $60,682.00 93
Total Net Change Order Amount $115,213.59
Contract / P.O. Change Order No. 2 page 3 of 3
Revisions to: BID SCHEDULE
Item # Description Quantity Unit Unit Price Amount
47 Rock Removal by Hydraulic Breaker Method 19 CY $5.00 $95.00
48 Rock Removal by Chemical Breaking Method 0 CY $7.00 $0.00
49 Caving Soil Over-Excavations 0 CY $80.00 $0.00
50 Additional Potholes 9 EA $255.00 $2,295.00
51 Utility Crossing Not Identified on Plans Greater Than 4-Inch in
Diameter 4 EA $1,040.00 $4,160.00
52 Relocate/Reconstruct Sewer Laterals 0 EA $3,450.00 $0.00
53 Dewatering to Sewer System 0 LF $1.00 $0.00
54 Unknown or Unidentified Utilities Allowance 1 LS LS 4,561.00
Reason:
Item No. 1:
Subsequent to evaluating pothole information on Vista Vereda, RFI 005 was issued to requesting information on resolution of
utility conflicts. The additional utility information resulted in the determination to modify the pipeline profile increasing the depth
as shown in the RFI response. This Change Order is necessary to resolve all costs and time associated with implementation of
this work scope.
Item No. 2:
Subsequent to pothole information in Vista Grande Road utility conflicts with the proposed new pipeline profile were revealed
requiring revisions to the planned profile and alignment per the response to RFI 008. The needed revision also adjusts a
connection location requiring additional pipe to be installed and alters the sequence of work resulted in the requirement to test
the Vista Grande pipe as a separate section resulting in added costs. The pipeline revisions required contact with the State
Water Resource Control Board – Division of Drinking Water (DDW) for resolution to pipeline separation requirements. The DDW
requirements incorporated a reinforced concrete encasement of a section of sewer pipe facilitating installation of the new
waterline. This Change Order is necessary to resolve all costs and time associated with implementation of this work scope.
Item No. 3:
The Contract Bid Item No. 47, Rock Removal by Hydraulic Breaker Method, required a quantity adjustment resulting from field
conditions.
Item No. 4:
The Contract Bid Item No. 48, Rock Removal by Chemical Breaking Method, required a quantity adjustment resulting from field
conditions.
Item No. 5:
The Contract Bid Item No. 49, Caving Soil Over-Excavations, required a quantity adjustment resulting from field conditions.
Item No. 6:
The Contract Bid Item No. 50, Additional Potholes, required a quantity adjustment resulting from field conditions.
Item No. 7:
The Contract Bid Item No. 51, Utility Crossing Not Identified on Plans Greater Than 4-Inch in Diameter, required a quantity
adjustment resulting from field conditions.
Item No. 8:
The Contract Bid Item No. 52, Relocate/Reconstruct Sewer Laterals, required a quantity adjustment resulting from field
conditions.
Item No. 9:
The Contract Bid Item No. 53, Dewatering to Sewer System, required a quantity adjustment resulting from field conditions.
Item No. 10:
The Contract Bid Item No. 54, Unknown or Unidentified Utilities Allowance, required a quantity adjustment resulting from field
conditions.
870-2 Pump Station Replacement Project Project: P2574/P2625
Consultant/Contractor: Cass Construction, Inc. dba Cass Arrietta Subproject: 001103
APPROVED
C.O. AMOUNT BY DATE DESCRIPTION TYPE C.O.
1 $45,750.67 GM 10/8/2019
Change order No. 1 addresses 13 items including the cut
and cap of mainline, several minor field modifications, interconnect piping revisions west of Hidden Mesa Trail,
additional trench resurfacing as required by the County of
San Diego, credits for unused allowances, and adjustments
in contract time due to changes and weather.
Contractor
2 $115,213.59 Board
Change Order No. 2 addresses 10 items including revisions
to the alignment due to utility conflicts in Vista Vereda; utility
conflicts at the intersection of Vista Vereda and Vista
Grande; and credits for unused allowances. The change
order also provides an adjustments in contract time.
Contractor
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
1920
Total C.O.'s To Date: $160,964.26 5.7%
Original Contract Amount:$2,848,364.00
Current Contract Amount:$3,009,328.26
Month Net C.O.$ Limit Authorization Absolute C.O.$ C.O. %
10/19 $115,213.59 $2,000 Insp $115,213.59 4.0%
$10,000 PM/Sr. Engr. 0.0%
$20,000 DivM 0.0%
$25,000 Chief 0.0%
$35,000 AGM 0.0%
$75,000 GM 0.0%
>$75,000 Board 0.0%
CHANGE ORDER LOG
P:\WORKING\CIP P2574 12-Inch PL Replacement, 978 Zone, Vista Vereda\Construction\Change
Orders\COLOG 1 10/10/2019
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Lisa Coburn-Boyd
Environmental Compliance
Specialist
PROJECT: S1210-
025000
DIV. NO. 3,5
APPROVED BY: Bob Kennedy, Engineering Manager
Dan Martin, Assistant Chief, Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Statewide General Waste Discharge Requirements for Sanitary
Sewer Systems – Approval of the 2019 Five Year Update of the
Otay Water District’s Sewer System Management Plan
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
approves the 2019 five Year update of the District’s Sewer System
Management Plan (SSMP).
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
The California State Water Resources Control Board Order No. 2006-
003-DWQ, Statewide General Waste Discharge Requirements for Sanitary
Sewer Systems requires a five year update and re-certification of the
SSMP developed for the District under the Order.
AGENDA ITEM 7h
2
ANALYSIS:
On May 2, 2006, the State Water Resources Control Board (SWRCB)
issued Order No. 2006-003, the Statewide General Waste Discharge
Requirements (WDRs) for sanitary sewer systems. These WDRs are the
regulatory mechanism for all agencies that own or operate sanitary
sewer collection systems greater than one mile in length that collect
and/or convey untreated or partially treated wastewater to a publicly
owned treatment facility. The ultimate goal of the WDRs is to reduce
the frequency and volume of sanitary sewer overflows (SSO’s) by
requiring Districts, sewer agencies, cities, and other entities to
properly operate, maintain, and manage their wastewater collection
system.
According to the WDRs, each agency must develop and implement a
system-specific SSMP and re-certify the document every five (5)
years. The District’s SSMP was finalized and approved by the Board on
July 1, 2009. The Board of Directors approved the first five-year
re-certification of the SSMP on January 7, 2015. This is the second
five-year recertification. The SSMP has been updated with new
exhibits and the most recent CIP sewer project list. Many of the
supporting documents for the SSMP are now kept on the District’s
intranet for quick and easy access. The WDR’s also require internal
bi-annual audits of the SSMP to identify deficiencies and evaluate
the effectiveness of the plan. The most recent audit was completed
in April, 2018. Staff concluded that the SSMP continues to be
effective and incorporated minor updates to the SSMP as a result of
this audit. The next audit will occur in April, 2020.
Staff recommends that the Board approve the 2019 update of the
District’s SSMP which satisfies the state Waste Discharge
Requirements of recertification every five years. The completed SSMP
is included as Attachment B.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsible
manner” and the General Manager’s Vision, "To be a model water agency
by providing stellar service, achieving measurable results, and
continuously improving operational practices."
3
GRANTS/LOANS:
Not applicable.
LEGAL IMPACT:
None.
LC-B/BK:jf
P:\WORKING\CIP S1210 (SSMP & WWMP)\Subproject 025000 - SSMP\Staff Reports\BD 11-06-19_SSMP Update
Recert. Staff Report (LCB-BK).docx
Attachments: Exhibit A – OWD Sewer System Map
Attachment A – Committee Action
Attachment B – 2019 SSMP Update
ATTACHMENT A
SUBJECT/PROJECT:
S1210-025000
Statewide General Waste Discharge Requirements for Sanitary
Sewer Systems – Approval of the 2019 Five Year Update of
the Otay Water District’s Sewer System Management Plan
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23, 2019,
and the following comments were made:
• Staff provided a background of the District’s Sewer System
Management Plan (SSMP). It was noted that in 2006, the State
Water Resources Control Board issued Statewide General Waste
Discharge Requirements (WDR) for sanitary sewer systems. Page 2
of the staff report provides details of the SSMP background.
• As stated in the staff report, the District’s SSMP was finalized
and approved by the Board in 2009. The first five-year re-
certification of the SSMP was approved by the Board on
January 7, 2015.
• Staff indicated that the most recent update of the SSMP includes
new and updated exhibits and the most recent CIP sewer project
list.
• It was noted that internal bi-annual audits of SSMPs are
required to identify deficiencies and evaluate the effectiveness
of the plan. Staff stated that the most recent audit of the
District’s SSMP was completed in April 2018. It was determined
that the SSMP continues to be effective and incorporated minor
updates to the plan as a result of the audit.
• Staff recommended that the Board approve the 2019 update of the
District’s SSMP, which satisfies the WDR of recertification
every five years.
Following the discussion, the committee supported staff’s
recommendation and presentation to the full board as a consent item.
Exhibit A
SEWER SYSTEM MANAGEMENT PLAN
for the
OTAY WATER DISTRICT
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA 91978-2004
www.otaywater.gov
Version VII
October, 2019
ATTACHMENT B
2
Table of Contents
Section SSMP Component Page
I .....................................Goals 3
II.....................................Organization 5 5
III....................................Legal Authority 10
IV ...................................Operations and Maintenance Program 14
V ....................................Design and Construction Standards 25
VI ...................................Emergency Response Plan 26
VII ..................................FOG Control Plan 34
VIII.................................System Evaluation and Capacity Assurance 38
IX ...................................Monitoring, Measurement and Program 42
X. ...................................Program Audits 45
XI.………………………………..Communication Program 52
XII.……………………………….Documents and Procedures 57
XIII……………………………….Record of Revisions 64
Exhibits
II-A..................................District Organizational Chart 8
II-B..................................SSO Response & Reporting Work Flow Plan 9 5
IV-A.................................OWD Sanitary Sewer System 17
IV-B.................................OWD Facility Map Example 18
IV-C.................................POSM Report 19
VI-A.................................SSO Response & Reporting Work Flow Description 28
VI-B.................................SSO Response & Reporting Work Flow Plan 31
VII...................................Warm Spot Maintenance Sites 36
VIII..................................OWD CIP Budget & Schedule 41
X.…………………………………..Audit Checklist 47
XI..…………………………………Communication & Media Examples 55
3
SECTION I - GOALS
The Requirement
The goal of the SSMP is to provide a plan and schedule to properly manage,
operate, and maintain all parts of the sanitary sewer system. This will help to reduce
and prevent sanitary sewer overflows (SSOs), as well as mitigate any SSOs that do
occur.
Goals
1. Properly manage, operate and maintain all parts of the wastewater
collection system to provide reliable and uninterrupted service 99% of the
time.
2. Provide adequate capacity for the Otay Water District (District) to convey
peak flows and reduce annual inflow and infiltration in the collection
system.
3. Take all feasible steps to eliminate or reduce SSOs to less than two (2) per
year, declining over time to zero.
4. Mitigate the impact of SSOs utilizing safe, practical, proven and effective
methods.
5. Set up Overflow Emergency Response Program and provide Operations
and Maintenance (O & M) training for all personnel who are involved in
responding to Sewer System Overflows.
DISTRICT BACKGROUND
Sanitary Sewage Collection, Treatment and Disposal
The District provides sewer service to approximately 15,000 customers located in
the northern section of the District. The District operates and maintains the sewage
collection system serving Rancho San Diego, Singing Hills and portions of Mount
Helix within the Middle Sweetwater River Basin, also known as the Jamacha Basin.
Residential customers comprise 97.5% of the customer base. Commercial accounts,
including restaurants comprise 2.5% of the sewer customer base.
Growth per year is anticipated to be less than 1% in future years. Wastewater
collection within the Jamacha Basin is provided by two agencies: the Otay Water
4
District and the County of San Diego Sanitation District. Customers in the basin, not
served by either agency, dispose of their sewage through septic tanks.
After the sewage has been collected by the District, iabout 80% of the wastewater is
sent to the District’s Ralph W. Chapman Water Recycling Facility (RWCWRF)
treatment plant where the District produces recycled water. The solid by-product of
this treatment process is called sludge and it is discharged by the District to the San
Diego Metropolitan Wastewater (Metro) and the County of San Diego Sanitation
District systems.
Sanitary Sewage Overflow Reduction
The District is fully committed to reducing SSOs in order to decrease the risk to both
human health and the environment. The number and size of SSOs generally can be
reduced, if not prevented, through the application of sound and appropriate
operation, infrastructure maintenance, and management principles to wastewater
collection systems.
In accordance with SWRCB, Order No. 2006-0003 of May 2006 entitled, and
associated supplements and regional requirements to, “Statewide General Discharge
Requirements for Sanitary Sewer Systems,” all sanitary sewer systems over one mile
in length are required to implement a Sanitary Sewer System Management Plan
(SSMP).
The District took formal board action on November 7, 2007 to approve their Plan
and Schedule to implement their District-wide Sewer System Management Plan
(SSMP).
In addition, the District will follow the requirements of the San Diego Region’s
supplements to the “Statewide General Discharge Requirements” pursuant to their
letter of March 2007.
The District has developed and will implement this District-wide SSMP. It includes
the applicable elements that provide for the proper and cost effective management,
operation, and maintenance of its collection systems, while taking into consideration
risk management and cost benefit analysis.
The District has already implemented measures to reduce SSOs, and utilizes the
statewide electronic reporting system for SSOs.
5
SECTION II - ORGANIZATION
Requirement
The referenced State Order requires the following:
(a) The name of the responsible or authorized representatives as described in
Section J of the May 2006 Order.
(b) The names and telephone numbers for management, administrative, and
Maintenance positions responsible for implementing specific measures in the
SSMP program. The SSMP must identify lines of authority through an
organization chart or similar document with a narrative explanation; and
(c) The chain of communication for reporting SSOs, from receipt of a complaint
or other information, including the person responsible for reporting SSOs to
the State and Regional Water Board and other agencies if applicable (such as
County Health Officer, County Environmental Health Agency, Regional Water
Board, and/or State Office of Emergency Services (OES)).
Supporting Documents
A narrative of the organizational responsibilities, a list of the key staff members and
an organizational chart is included in this section.
a. List of responsible staff members in the
District and the Operations Department. List of Management and Responsible District Staff
District Organizational Chart of Operations
Department
b. Phone list of responsible staff members. Phone List of Responsible District Staff and
Management
c. The chain of communication for reporting
SSOs. Otay Water District Sanitary Sewer Overflow
Response and Reporting Work Flow Plan.
6
Otay Water District
Operations Department
List of Management and Responsible District Staff:
General Manager is responsible for the overall operation of the District and all of
its employees, finances, functions and operations. Reports directly to the District’s
Board of Directors.
Chief, Water Operations and/or Assistant Chief, Water Operations will
ensure that new and rehabilitated assets meet required standards, will assure that
staff is trained as required by SSMP standards, will prepare for working with District
field crews to handle emergencies when contractors are involved and provide verbal
reports to the Board and General Manager’s office.
Utility Maintenance Supervisor and/or Reclamation Plant Supervisor
manages field operations and maintenance activities, provides relevant information
to agency management, prepares and implements contingency plans, leads
emergency response, investigates and reports SSOs and trains field crews
Assistant Chief, Water Operations and/or Systems Operations Manager
oversees all work needed to complete the operations training required by the SSMP,
compiles and includes the updated operations information into the SSMP and
coordinates with the assigned Engineering Staff, oversees all field operations,
responses, activities and reports to the Chief, Water Operations.
Lead Reclamation Plant Operator staffs preventive maintenance activities,
mobilizes and responds to notification of stoppages and SSOs (mobilizes sewer
cleaning equipment, bypass pumping equipment, and portable generators).
Reclamation Plant Operator(s) responding to a spill is responsible for applying
best management practices for spill containment until the Utility Workers arrive with
collection system maintenance equipment. The Reclamation Plant Operator
provides the Utility Workers with any additional information on the spill obtained
after they arrive on site. The plant operator also operates/troubleshoots lift station
equipment and/or uses blockage-removal hand tools to remove the cause or lessen
the severity of the spill. Additionally, the plant operator captures all field data used
for reporting and forwards it to the Lead Operator and/or Plant Supervisor
Utility Crew Workers assigned to the collection system on a long-term basis are
responsible for responding to the spill when notified, removing blockages, and
determining the cause of the spill. After normal working hours the standby
Reclamation Plant Operator directly notifies the standby-duty Utility Crew Leader
who will then call their standby Utility Worker crew to respond to the overflow site.
7
Customer Service Staff who receive a call about a spill or potential spill from an
outside or inside source during normal working hours, creates a CMMS work request
for the Reclamation Plant Supervisor, and makes immediate contact with the
supervisor or Lead Reclamation Plant Operator, or any available Reclamation Plant
Operator. After normal business hours the answering service receives a call from an
outside source and notifies the standby duty Reclamation Plant Operator
The names and telephone numbers for management, administrative, and
maintenance positions responsible for implementing specific measures in the SSMP
program are listed below followed by an organization chart (Exhibit II-A) which
identifies lines of authority. A work flow plan (Exhibit II-B) is also included to identify
the correct response to a spill.
Phone List of Responsible District Staff and Management
General Manager 619-670-2280
Chief, Water Operations 619-670-2224
Asst. Chief, Water Operations 619-670-2235
Systems Operations Manager 619-670-2230
Utility Maintenance Supervisors 619-670-2285
619-670-2229
Reclamation Plant Supervisor 619-670-2271
Lead Reclamation Plant Operator 619-670-2272
Customer Service 619-670-2222
24-hour Phone 619-670-2207
8
EXHIBIT II-A
District Organizational Chart of Operations Department
Otay Water District
Board of Directors
General Manager
Chief, Water Operations
-------------------------------------
Asst. Chief of Operations
Asst. Chief of Operations
-------------------------------------
System Operations Manager
Reclamation Plant Supervisor
-------------------------------------
Utility Maintenance Supervisor
Reclamation Plant Operator
---------------------------------
Utility Workers
9
CMMS Work Request Forwarded
EXHIBIT II-B
Sanitary Sewer Overflow Response and Reporting Work Flow Plan
OR OR
CUSTOMER SERVICE
Creates a CMMS Work Request
Outside Source or
Operations/Field Staff
Observes Sewer Spill
REC PLANT
SUPERVISOR
LEAD REC PLANT
OPERATOR
RECLAMATION
PLANT OPERATOR
SYSTEM
OPERATIONS
MANAGER
and
UTILITY
SERVICES
MANAGER
and/or
CHIEF OF
OPERATONS
LEAD / REC PLANT
OPERATOR
Monitors capture of overflow
report data
UTILITY CREW LEADER
and/or
UTIITY MAINTENANCE
SUPERVISOR
calls in their stand-by
UTILITY WORKERS
to respond to the overflow
DESIGNATED
REGULATORY
AGENCIES NOTIFIED
LEAD/REC PLANT
OPERATOR – Creates an
internal preliminary report
REC PLANT SUPERVISOR
Reviews internal preliminary report
LEAD/REC PLANT OPERATOR
Enters data in CIQWS under the
“submit data” status
SYSTEM OPERATIONS MANAGER
and/or CHIEF OF OPERATIONS
Reviews and accepts report data submitted and
updates the report status to “ready to clarify”
After Hours
Answering Service
Notifies Stand-by
Crew
Dispatched to SSO Informs OPS of SSO Updates Supvsr
of SSO
Spill Reported
10
SECTION III – LEGAL AUTHORITY
Requirement
Each Enrollee must demonstrate, through sanitary sewer system use ordinances,
service agreements, or other legally binding procedures, this it possesses the
necessary legal authority to:
(a) Prevent illicit discharges into its sanitary sewer system;
(b) Require that sewers and connections be properly designed and
constructed;
(c) Ensure access for maintenance, inspection, or repairs for portions of the
lateral owned or maintained by the Public Agency;
(d) Limit the discharge of fats, oils, and grease and other debris that may
cause blockages, and
(e) Enforce any violation of its sewer ordinance.
Existing Legal Authority
The District possesses the necessary legal authority to prevent, require, ensure, limit
and enforce specific features and operations required by the State Order. A
summary of the relevant sections of the District Code of Ordinances and other
adopted documents is shown in the table below.
Legal Authority to:
Existing
Authority:
a. Prevent illicit discharges into sanitary sewer system
CO: § 52.04 &
b. Requires that sewers and connections be properly
designed and constructed
CO: § 60.08
c. Ensures access for maintenance, inspection or repairs for all portions served
by the District, and to determine if they are complying with the rules of the
District concerning sewer services
CO: § 51.03
d. Limit the discharge of fats, oils and grease and other debris that may cause
blockages
CO: § 52.06
e. Enforce any violation of District sewer policies
CO: § 52.03
11
OTAY WATER DISTRICT CODE OF ORDINANCE
52.04 PROHIBITIONS AGAINST DISCHARGE OF OBJECTIONABLE WASTES
It shall be unlawful for any person to discharge or permit the discharge of any
substance into the District sewer system that could cause a public nuisance or hazard to
life, or that could be harmful to the District sewer system or its wastewater reclamation
facilities or processes. Discharge of the following into the District sewer system is
expressly prohibited:
gasoline, cleaning solvent, fuel, oil;
ashes, sand, cinders, rocks;
tar, plastics, other water insoluble viscous materials;
mineral oils, lubricating oils;
feathers, hair;
rags, sanitary napkins, disposable diapers;
broken glass, metal, wood and plastic shavings;
unground garbage;
swimming pool drainwater;
wastes which contain or result in the production of toxic, corrosive and
explosive gases;
animal or dairy waste;
cesspool and septic tank wastes;
or any other substance, material or liquid that could be harmful to the
District sewer system.
52.05 GUIDELINES TO DETERMINE ACCEPTABILITY OF WASTES
The following provisions and the values set forth herein are not to be regarded
or construed as regulating or limiting the quantity or characteristics of any specific
wastes which may be received into the sewer system, but such shall serve as a guide in
implementing this Section for regulation of the use of the District sewer system and for
determination of acceptability of waste into the sewer system. In considering the
following sewage characteristics, the dilution effect of the sewage at the point of
discharge or any affected part of the system, and whether or not unusual attention or
expenses would be required to handle such material in the sewer system, shall be taken
into consideration:
A. The discharge into the District sewer system of any water or waste having
an average daily flow greater than one percent (1%) of the average daily flow at the
sewage treatment plan shall be subject to review.
B. The temperature of industrial waste discharged into the sewer system
should not exceed 140 degrees Fahrenheit.
C. Industrial wastes having a grease and oil concentration in excess of 200
ppm will be considered on a case-by-case basis to determine if the sewer system can
12
safely receive said wastes.
D. Industrial discharge of toxic or radioactive wastes into the sewer system
will be considered on a case-by-case basis.
E. Industrial discharge of wastes having a biochemical oxygen demand
(BOD) in excess of 300 ppm will be considered on a case-by-case basis to determine if
the sewer system can safely receive said wastes.
F. Industrial discharge of wastes having suspended solids in excess of 300
ppm will be considered on a case-bycase basis to determine if the sewer system can
safely receive said wastes. To make such determination, the following procedures shall
apply:
1. Where warranted, installation of an appropriate manhole for purposes of
sampling the final industrial waste discharge may be required.
2. The source to be used for the chemical and bacteriological analysis shall be
the "Standard Methods for the Examination of Water and Sewage," latest
edition, approved by the Joint Committee of the Public Health Association,
Federation of Sewage and Industrial Waste Association and American Water
Works Association.
60.08 REQUIREMENT FOR APPROVED PLANS AND CONSTRUCTION
AGREEMENT
A. Developer shall prepare detailed engineering drawings for construction of
the proposed system shown on the tentative map and submit such drawings to the
District for review and approval. Each system shall provide for water service and/or
sewer service, where applicable, to each lot in a subdivision and to each parcel in a
parcel map development. The utility system proposed shall not be detrimental in any
way to operation of the District utility system and shall conform to the requirements of
the approved SAMP.
B. The General Manager shall review the construction drawings and either
accept, reject, or revise them for compliance with District standards and specifications.
Upon approval of the drawings, the General Manager shall return them to the
Developer with the following: (i) District estimates for construction costs and the
amount of additional District deposit; (ii) the required standard District agreement for
installation of water or sewer facilities; and (iii) the amount of security required to
guarantee performance of the agreement.
C. Developer shall return to the District the revised drawings, if required, the
executed subdivision construction agreement, together with the required deposits and
security, either cash, surety bond, or letter of credit, acceptable to the General
Manager, and the grant of easements or rights-of-way that may be required. If such
are complete, and the proposed subdivision has been annexed into an Improvement
13
District, the Construction Agreement for the project will be authorized by the General
Manager.
D. Upon approval of the construction agreement by the General Manager,
the Developer shall submit the mylar construction plans for signature by the General
Manager.
51.03 INSPECTION OF CUSTOMER PREMISES
Authorized District personnel shall have unrestricted access at reasonable hours
to all premises served by District sewers for inspection and testing purposes, and to
determine whether the customer is complying with the rules, regulations and
ordinances of the District concerning sewer services.
52.06 DISCHARGE OF INDUSTRIAL WASTE
Any person or governmental agency desiring to discharge industrial wastes into
the District sewer system shall obtain a permit from the District for the discharge of said
wastes. The District may require installation of on-site facilities by the discharger for
purposes of pretreatment of sewage before industrial waste can be discharged into the
District sewer system.
52.03 ENFORCEMENT OF DISTRICT RULES AND REGULATIONS
The General Manager shall enforce rules and regulations set forth in this Code
relating to District sewer service. The General Manager shall be authorized to take such
action as he deems necessary for preservation of public health or safety, or for the
protection of public or private property. The General Manager may suspend sewer
service to any customer using the District sewer system in a manner that would endan-
ger the public health or safety, or public or private property. In suspending such
service, the Customer's connection to the District sewer system may be severed. If
danger is imminent, the General Manager may act immediately to suspend sewer
service coincident with giving notice or warning to the customer.
14
SECTION IV – OPERATIONS AND MAINTENANCE PROGRAM
Requirement
(a) Maintain an up-to-date map of the sanitary sewer system, showing all gravity line
segments and manholes, pumping facilities, pressure pipes and valves, and applicable
stormwater conveyance facilities;
(b) Describe routine preventative operation and maintenance activities by staff and
contractors, including a system for regular maintenance and cleaning of sanitary sewer
system with more frequent cleaning and maintenance targeted at know problem areas.
The Preventative Maintenance program should have a system to document scheduled
and conducted activities, such as work orders;
(c) Develop a rehabilitation and replacement plan to identify and prioritize system
deficiencies and implement short-term and long-term rehabilitation actions to address
each deficiency. The program should include regular visual and TV inspections of
manholes and sewer pipes, and a system for ranking the condition of sewer pipes and
scheduling rehabilitation. Rehabilitation and replacement should focus on sewer pipes
that are at risk of collapse or prone to more frequent blockages due to pipe defects.
Finally, the rehabilitation and replacement plan should include a capital improvement
plan that addresses proper management and protection of the infrastructure assets.
The plans shall include a time schedule for implementing the short- and long-term plans
plus a schedule for developing the funds needed for the capital improvement plan;
(d) Provide training on a regular basis for staff in sanitary sewer system operations and
maintenance, and require contractors to be properly trained; and
(e) Provide equipment and replacement part inventories, including identification of
critical replacement parts.
15
Supporting Documents
A summary of the District’s measures and activities related to this section and the
supporting official documents are shown in Table IV.
Table IV – Operations & Maintenance Program Supporting Documents
Items Required Supporting Documents
a. Maintain an up-to-date map of the
sanitary sewer system
Water and Sanitary Sewer Facility Maps
Created via GIS Maintained by In-
House Engineering Department.
Note: These documents are updated as
necessary to reflect modifications and
additions to the utility system.
b. Describe routine preventative
operation and maintenance
activities by staff and contractors
Otay Water District Operation and
Maintenance Procedures—Preventative
Maintenance Schedule set up to
address wastewater conveyance
facilities requiring more maintenance
than normal based upon past District
records.
c. Develop a rehabilitation and
replacement plan to identify and
prioritize system deficiencies and
implement short-term and long term
rehabilitation actions to address each
deficiency
The District’s yearly Capital
Improvement Program includes
planned short term and long term
rehabilitation and replacement
wastewater facilities improvements that
reflect the prioritized needs of the
District over the planning horizon.
d. Provide training on a regular basis
for staff in sanitary sewer
system operations and maintenance,
and require contractors to
be properly trained
Otay Water District Operation and
Maintenance
Procedures—Training per Collection
System Procedures Manual. Conduct
regular training of contractors/vendors.
e. Provide equipment and replacement
part inventories, including identification
of critical replacement parts.
Otay Water District Operation and
Maintenance
Procedures - Equipment and Parts
Inventory.
16
Sanitary Sewer System Mapping
The District’s Sanitary Sewer System is maintained on a modern Geographic
Information System (GIS), capable of providing a wireless link from the District’s
computer server to operations crews located throughout the District’s service area. In
addition, each crew has the District’s sewer system loaded on their laptop computers in
the rare event that they are out of range of the wireless connections.
The District’s Sanitary Sewer System is shown in Exhibit IV-A. This exhibit includes the
District’s primary collection mains, lift stations, force mains and 1.3 MGD water
reclamation plant.
Exhibit IV-B is a typical 400 scale Facility Map sheet that has been completed for the
entire District Sewer System. These sheets provide a hard copy of the District’s sewer
system to assist Operations staff in servicing the wastewater collection system’s and the
District’s customers’ needs.
Routine Preventative Maintenance Activities
In order to proactively reduce repairs and the chance for SSO events within the
District’s service area, the Operations Department staff has developed a detailed list of
preventative maintenance procedures for their wastewater collection and treatment
system. All preventative and corrective maintenance of the collection system are
captured at the asset level by utilizing Computerized Maintenance Management System
(CMMS) work orders. The District also uses Pipeline Observation System Management
(POSM) data collection software to track any closed circuit television (CCTV)
observations and cleaning of the sewer collection system. An example of a POSM report
is included as Exhibit IV-C. Specific elements of the preventative maintence procedures
includes the following elements:
Sewer Main Cleaning
The objective of the sewer main cleaning program is to clean the entire system once
every two years using a Vactor brand high-velocity combination truck. Each
appurtenance in the sewer collection system is assigned a unique asset number. All
preventative and corrective maintenance of the collection system is captured at the
asset level by utilizing CMMS work orders.
17
Exhibit IV – A Otay Water District Sanitary Sewer System
18
Exhibit IV – B Otay Water District Facility Map Example
19
Exhibit IV-C POSM Report
20
Exhibit IV-C POSM Report, continued
21
Manhole Inspection
Regular high-velocity cleaning of gravity sewer mains and inspections of manholes is
scheduled by utilizing CMMS work order templates that have been created for the entire
system. These work order templates are organized into groups in the order in which
cleaning should take place throughout the three sections of the system, Calavo
Gardens, Hidden Mountain, and Rancho San Diego. All manholes are inspected as the
sewer main is cleaned. Work orders are manually created by the operators as
maintenance is completed.
Preventative maintenance and inspection of manholes in remote easements and
environmentally sensitive areas as well as the five lift stations have been scheduled with
a higher frequency. Work orders are automatically generated for these assets by the
CMMS. Maintenance activities for lift station include valve and pump component
replacements, oil and belt changes, and wet well cleaning. Maintenance for manholes
includes overall condition assessment, debris removal, herbicide application, and minor
structural repairs.
Additional Cleaning for High Maintenance Areas
Regular cleaning of enhanced maintenance areas is scheduled and determined by
conditions observed during past inspections and preventative and corrective
maintenance conducted in the field. Work orders for these areas are automatically
generated by the CMMS on a weekly, monthly, semi-annual, and annual basis. A list of
these sewer mains and manholes is continuously updated and evaluated by the
operators as maintenance is performed throughout the system.
Force Main Inspection and Cleaning
Conditions of force mains are determined by routine lift station calibration on a yearly
basis to identify changes in capacity and discharge head pressure. Work orders for
these activities are automatically generated by the CMMS.
Treatment Plant Preventative Maintenance
The preventative maintenance program for the Sewage Treatment (Reclamation) Plant
is documented through automatically generated CMMS work orders scheduled on a
weekly, bi-weekly, monthly, semi-annual, and yearly basis.
Rehabilitation and Replacement Prioritization
The District’s yearly Capital Improvement Program (CIP) includes detailed planned short
term and long term rehabilitation and replacement of wastewater facilities
improvements that reflect the prioritized needs of the District over the planning horizon.
22
Project are described and funded each year so that they can be designed in-house or
out-sourced for design and constructed prior to a sewer facility failure occurring and
resulting in a SSO event. CIP projects are prioritized upon immediate need and the
consequences of failure, on a scale of 1 to 10, with a score of 10 reflecting the highest
priority and in the most immediate need of replacement.
Short term and long term rehabilitation and replacement plans are reflected in the CIP
effort as a wide range of projects, ranging from immediate and high priority projects to
low priority, long range projects. The process to determine whether to rehabilitate
versus replace is included within each project’s Preliminary Design Report phase (30%
complete phase). The primary decision is the impact of a facility failure and threat of a
SSO event if the facility is not rehabilitated or replaced within a certain period of time.
Manholes identified as needing minor repairs after inspection, (i.e. grade elevation,
cover/ring and exterior re-grouting, cover replacement, minor bench and channel
repairs and inflow issues) are performed by the collection system and utility
maintenance section staff. Manhole repair work with factors such as high traffic areas,
deep manholes, and accessibility issues are considered for contracting to an outside
service. Manholes with more critical conditions are identified and placed on a list for
outsourced rehabilitation by a contracted service. Condition defects such as internal
grouting needs, concrete degradation, infiltration, and manholes which need to be
replaced fall into this category. All work is documented at the asset level in the CMMS.
Funds are budgeted on a yearly basis to cover the costs of these manhole rehabilitation
options.
Gravity sewer pipeline and manhole conditions are observed and documented during
the course of the District’s CCTV inspection program. Televised sewer main and
manhole inspection records are downloaded into the District’s GIS and CMMS
applications. The engineering department evaluates these records to determine which
appurtenances will be addressed in-house or entered into a replacement CIP program
for the following year.
Regular Training for Sanitary Sewer System Staff
Collection System and Reclamation Plant section staff responsible for maintaining the
sewer mains and lift stations are regularly trained in both maintenance procedures and
general safety policies and procedures. Training is provided by section supervisors and
leads, the District Safety and Security Administrator, other designated employees, and
by outsourced training facilities. Additional training is also required through a District-
contracted online training firm. Examples of some of the regular training courses are
listed below:
Confined Space Entry General Safety (Initial before entry) [Refresher every 2
years]
23
AC Pipe & Annual Refresher - (Annual refresher course)
Trenching & Shoring - Competent Person - (Initial seminar before working in
trenches < 4') [Refresher every 3 years + periodic on-line refresher]
Vehicle Incident Reporting Procedure, Report Form, and Fleet-Vehicle Driving &
Parking - (Annual Review - Supervisor's call)
Utility Worker II positions assigned to the collection system section on a long-term basis
are required to maintain a Collection System Maintenance Grade I certification
administered by the California Water Environment Association (CWEA). All collection
system and reclamation plant section staff are trained in all written procedures related
to the collection system as appropriate for their job responsibilities. Staff also utilizes
industry standard training manuals, vendor and CWEA training events, and
manufacturer equipment manuals. Routine safety training for maintenance-related
activities is scheduled by the Safety and Security Administrator and the Reclamation
Plant and Utility Maintenance section supervisors according to regulatory and District
requirements. Additional on-the-job maintenance and operation training is provided to
a new section member by a more experienced operator. Additionally, details describing
methods and techniques needed for specific recurring maintenance activities in the
collection system are listed in the CMMS work order templates for sections in which
they will need to be applied.
All training records for District staff and required proof of certification are maintained on
the District’s Intranet system and are available upon request.
Vendors are required to adhere to all Cal-OSHA safety standards when contracted for
work by the District. In some circumstances, such as confined space entries and
working within the reclamation plant, District policy requires that vendors receive
additional documented safety training prior beginning their work.
Additionally, staff is trained in collection system-specific activities using procedures
located electronically on the Otay Information System (OIS) and as hardcopy in the
Collection System Procedures Manual.
Equipment and Replacement Part Inventories
Materials used for emergency response and repairs are available at the Sewage
Treatment (Reclamation) Plant, the Operations Warehouse, and the Operations Main
Storage Yard. Materials are routinely inventoried to verify adequate supplies.
Equipment used for emergency response is in use or stored at the District’s Reclamation
Plant and Operations Main Yard. Routine preventative maintenance is performed for all
equipment and is documented in CMMS.
Other resources which can be used to respond to a sewage spill include contractors
who are able to provide repairs and services and suppliers to provide repair supplies.
24
Additionally, the District has entered into a Shared Services Agreement with
surrounding local water and wastewater agencies to provide equipment and personnel
in the event of an emergency. Agency and vendor contact information is included in
approved response procedures where appropriate.
A list of all equipment, materials, and supplies used for preventative and corrective
maintenance in the collection system is maintained on the Districts intranet system and
updated periodically. This comprehensive inventory of equipment used accounting of
equipment used and also includes a list of traffic equipment . The sewer pipeline and
lift station inventory items are considered critical replacement parts.
25
SECTION V - DESIGN AND CONSTRUCTION STANDARDS
Requirement
a. Design and construction standards and specifications for the installation of
new sanitary sewer systems, pump stations and other appurtenances; and for
the rehabilitation and repair of existing sanitary sewer systems; and
b. Procedures and standards for inspecting and testing the installation of new
sewers, pumps, and other appurtenances and for rehabilitation and repair
projects.
Supporting Documents
The District has adopted the Water Agency Design Guidelines (WASD) and the Water
Agency Standards (WAS) as the District’s design and construction standards, and
specifications for construction details to install, rehabilitate, repair, test and inspect new
and existing sewers and pump stations constructed within the District’s service area.
These design and construction standards can be found online, on the website, San
Diego Water Agency Standards (www.sdwas.org). Each design guideline document,
standard design drawings and standard specifications can be found at the following
locations on the website:
Design Guidelines
Gravity Sewer Pipeline: sdwas.org/Design-Guidelines#Sewerdesign (Sect. 6.1)
Sewer Manholes and Cleanouts: sdwas.org/Design-Guidelines#Sewerdesign (Sect. 6.2)
Sewer Laterals: sdwas.org/Design-Guidelines#Sewerdesign (Sect. 6.3)
Pressure Systems (Force Mains): sdwas.org/Design-Guidelines#Sewerdesign (Sect. 6.4)
Standard Specifications
Standard Specifications for Potable Water, Recycled Water and Sewer Facilities:
sdwas.org/Standard-Specifications
Standard Drawings
Standard Drawings for Potable Water, Recycled Water and Sewer Facilities:
sdwas.org/Standard-Drawings/Standard-Drawings-Sewer
26
SECTION VI - EMERGENCY RESPONSE PLAN
Requirement
Each Enrollee shall develop and implement an overflow emergency response plan that
identifies measures to protect public health and environment. At a minimum, this plan
must include the following:
(a) Proper notification procedures so that the primary responders and regulatory
agencies are informed of all SSOs in a timely manner;
(b) A program to ensure an appropriate response to all overflows;
(c) Procedures to ensure prompt notification to appropriate regulatory agencies
and other potentially affected entities (e.g. health agencies, Regional Water
Boards, water suppliers, etc.) of all SSOs that potentially affect public health or
reach the waters of the State in accordance with the MRP. All SSOs shall be
reported in accordance with this MRP, the California Water Code, other State
Law, and other applicable Regional Water Board WDRs or NPDES permit
requirements. The SSMP should identify the officials who will receive immediate
notification;
(d) Procedures to ensure that appropriate staff and contractor personnel are
aware of and follow the Emergency Response Plan and are appropriately trained;
(e) Procedures to address emergency operations, such as traffic and crowd
control and other necessary response activities; and
(f) A program to ensure that all reasonable steps are taken to contain and
prevent the discharge of untreated and partially treated wastewater to waters of
the United States and to minimize or correct any adverse impact on the
environment resulting from the SSOs, including such accelerated or additional
monitoring as may be necessary to determine the nature and impact of the
discharge.
27
Supporting Documents
The Otay Water District has developed the enclosed narrative entitled “Exhibit VI-A
Sanitary Sewer Overflow Response and Reporting Work Flow Description” describing
the roles and duties of each staff member during a SSO event.
In addition the District developed their own “Sanitary Sewer Overflow Response and
Reporting Work Flow Plan”, included here as Exhibit VI-B. District Operations staff have
been instrumental in the development of the plan since its inception in 2004 through its
initial October 2007 revision, the May 2009 revision, and continues to present day. The
plan contains all of the elements required by the SSMP.
The policy requires that District employees report all wastewater overflows found and to
take the appropriate action to secure the wastewater overflow area, relieve the cause
of the overflow, and ensure that the affected area is cleaned as soon as possible to
minimize health hazards to the public and protect the environment. The District’s goal is
to respond to sewer system overflows during the regularly scheduled workday within 30
minutes.
After hours response time is dependent on the location of the assigned stand-by
personnel but the typical response time is generally less than one hour.
28
Exhibit VI—A
Sanitary Sewer Overflow Response and Reporting
Work Flow Description
Customer Service: During normal working hours Customer Service receives a
call from an outside or inside source and creates a CMMS
work request to the Reclamation Plant Operators.
After normal business hours the answering service receives a
call from an outside source and notifies the standby duty
Reclamation Plant Operator
Reclamation Plant Supervisor:
The supervisor dispatches Lead/Reclamation Plant Operator
to the site and informs the Utility Maintenance Supervisor(s),
System Operations Manager and/or the Chief of Operations.
The Lead/Reclamation Operators on site inform the
Reclamation Plant Supervisor of the characteristics of the
spill in order to assess the need for additional District
resources or if outside services may be needed.
The Reclamation Plant Supervisor monitors the capture of
overflow report data and supervises the compilation of a
draft report. The Supervisor notifies the designated
regulatory agencies as required by the waste discharge
permit reporting program’s classification of spills. The
supervisor reviews the preliminary report data with the Lead
Operator prior to online reporting via the State Water
Resources Control Board’s online California Integrated Water
Quality System (CIWQS). The Reclamation Plant Supervisor
and the Lead Reclamation Plant Operator are authorized
CIWQS data-submitters
Lead Reclamation Plant Operator:
The Lead Reclamation Plant Operator monitors the capture
of overflow report data in the field and updates the
Reclamation Plant Supervisor with the current status of the
spill so that the need for additional District resources and/or
outside services can be determined.
The Lead Reclamation Plant Operator creates an internal
preliminary report and enters the data into the CIQWS under
the “submit data” status after review with the Reclamation
29
Plant Supervisor and/or the Utility Maintenance
Supervisor(s). Additionally the lead operator is responsible
for performing all spill response activities of the Reclamation
Plant Supervisor in his/her absence or as directed.
Reclamation Plant Operator:
The Reclamation Plant Operator(s) responding to the spill is
responsible for applying best management practices for spill
containment until the Utility Workers arrive with collection
system maintenance equipment. The Reclamation Plant
Operator provides the Utility Workers with any additional
information on the spill after they arrive on site. The plant
operator also operates/troubleshoots lift station equipment
and/or uses blockage-removal hand tools to remove the
cause or lessen the severity of the spill. Additionally, the
plant operator captures all field data used for reporting and
forwards it to the Lead Operator and/or Plant Supervisor
Utility Worker:
The Utility Workers assigned to the collection system on a
long-term basis are responsible for responding to the spill
when notified, removing blockages, and determining the
cause of the spill
After normal working hours the standby Reclamation Plant
Operator directly notifies the standby-duty Utility Crew
Leader who will then call their standby Utility Worker crew to
respond to the overflow site
System Operations Manager:
The System Operations Manager reviews report data
submitted by the Lead Reclamation Plant Operator and/or
the Reclamation Plant Supervisor prior to updating the
report status to “ready to certify.” The System Operations
Manager is a Legally Responsible Official for the District and
certifies all sanitary sewer overflow reports in the CIWQS
after the report has been submitted for certification by the
Reclamation Plant Supervisor or the Lead Reclamation Plant
Operator
Chief/Asst. Chief of Operations:
The Chief/Asst. Chief of Operations is also a Legally
Responsible Official for the District and may certify final
30
reports in the CIWQS in the absence of the System
Operations Manager
General Manager: The General Manager is a Legally Responsible Official. The
Chief of Operations and System Operations Manager are
duly authorized representatives of the General Manager.
31
CMMS Work Request Forwarded
Exhibit VI—B
Sanitary Sewer Overflow Response and Reporting
Work Flow Plan
OR OR
CUSTOMER SERVICE
Creates an CMMS Work Request
Outside Source or
Operations/Field Staff
Observes Sewer Spill
REC PLANT
SUPERVISOR
LEAD REC PLANT
OPERATOR
RECLAMATION
PLANT OPERATOR
SYSTEM
OPERATIONS
MANAGER
and/or
CHIEF OF
OPERATONS
and/or
ASST. CHIEF
OF
OPERATIONS
LEAD / REC PLANT
OPERATOR Monitors capture of
overflow report data
UTILITY CREW LEADER
calls in their stand-by
UTILITY WORKERS
to respond to the overflow
DESIGNATED
REGULATORY
AGENCIES NOTIFIED
LEAD/REC PLANT
OPERATOR – Creates an
internal preliminary report
REC PLANT SUPERVISOR
Reviews internal preliminary report
LEAD/REC PLANT OPERATOR
Enters data in CIQWS under the
“submit data” status
SYSTEM OPERATIONS MANAGER
and/or CHIEF OF OPERATIONS
Reviews and accepts report data submitted and
updates the report status to “ready to clarify”
After Hours
Answering Service
Notifies
Stand-by Crew
Dispatched to SSO Informs
OPS of SSO Updates
Suprvisr of SSO
Spill Reported
32
(d) Emergency Response Plan Training for Staff: Training for sanitary sewer overflow
response is provided regularly to prepare participants for the conditions of an
emergency, to visualize and practice response roles and to address procedural conflict
and difficulties. Training includes the following techniques:
Tabletop Exercise: After review and discussion of established spill response
procedures, a sewage spill event is simulated without the use of equipment or
deployment of resources. A facilitator verbally explains the steps taken.
Exercise effectiveness is determined by feedback from participants and impact on
revisions to plans, procedures, and systems.
Emergency Response Drills: A sewage spill event is simulated with the use of
equipment and deployment of resources. Controllers monitor and record actions.
This type of exercise not only allows for the re-evaluation of response
procedures, but it also tests equipment, response time, training, resource and
staff capabilities. All drills have follow-up meetings to critique strength and
weaknesses and to recommend improvements.
(e) Procedures to Address Traffic and Crowd Control During SSO Events: Traffic control
equipment will be employed whenever there is a need to divert traffic around a sewer
spill. Traffic control equipment is stored at the reclamation plant and operations main
yard. Equipment includes barricades, delineators, lighted sign-boards, traffic cones,
lighted signs, flashers, and utility vehicles. Assistance with traffic control has been set
up in advance with contracts with vendors to be used during responses to spills such as
televised inspection contractors, pumping service vendors, and nearby agencies that
participate in the District’s Shared Services Agreement.
Crowd control can be handled similar to traffic control with the additional use of sewer
spill notification signs, caution tape, and materials to rope-off an area affected by the
spill until cleanup is completed.
(f) Program to Contain and Prevent the Discharge of Wastewater to Waters of the
United States: The District’s primary objective in sewer spill response is to protect the
public health and the environment. Materials and equipment used for sewer spill
response for the prevention of wastewater reaching Waters of the United States are
stored at the reclamation plant in a designated area for sewer system maintenance and
emergencies. Methods used to divert, contain and recover sewer flow from storm
drains and bodies of water are listed in the Collection System Sewer Spill & Response
procedure. Some of these methods and material include:
1. Use sandbags, fiber rolls and/or straw waddles to reduce spill volume to storm
drains and bodies of water.
2. Dig diversion trenches and/or install silt fences to direct flow away from storm
drains and bodies of water.
33
3. Build earth dams and detention ponds to contain wastewater flow until it can be
recovered.
4. Use vactor truck to recover spill volume where possible.
5. Use pumps to transfer flow away from storm drains and bodies of water.
The operation and maintenance training program ensures that these best management
practices are reviewed, rehearsed, and updated during table-top exercises and
emergency drills, and any time there is a significant change in equipment or operation
of the collection system. Additionally, an CMMS-generated work order has been created
for the annual review of spill-response procedures.
34
SECTION VII—FOG CONTROL PLAN
Requirement
Each Enrollee shall evaluate its service area to determine whether a FOG control
program is needed. If an Enrollee determines that a FOG program is not needed, the
Enrollee must provide justification for why it is not needed. If FOG is found to be a
problem, the Enrollee must prepare and implement a FOG source control program to
reduce the amount of these substances discharged to the sanitary sewer system. This
plan shall include the following as appropriate:
(a) An implementation plan and schedule for a public education outreach program
that promotes proper disposal of FOG;
(b) A plan and schedule for the disposal of FOG generated within the
sanitary sewer system service area. This may include a list of acceptable disposal
facilities and/or additional facilities needed to adequately dispose of FOG
generated within a sanitary sewer system service area;
(c) The legal authority to prohibit discharges to the system and identify measures to
prevent SSOs and blockages caused by FOG;
(d) Requirements to install grease removal devices (such as traps or
interceptors), design standards for the removal devices, maintenance
requirements, BMP requirements, record keeping and reporting requirements;
(e) Authority to inspect grease producing facilities, enforcement authorities, and
whether the Enrollee has sufficient staff to inspect and enforce the FOG
ordinance;
(f) An identification of sanitary sewer system sections subject to FOG
blockages and establishment of a cleaning maintenance schedule
for each section; and
(g) Development and implementation of source control measures for
all sources of FOG discharged to the sanitary sewer system for
each section identified in (f) above.
35
FOG Control Program
The Fats Oil and Grease (FOG) Program is normally a component of a SSMP for a
wastewater collection agency with a large number of commercial customers and/or a
history of FOG SSO events. The Otay Water District has carefully evaluated its service
area and has determined that a FOG Control Program is not necessary for the District at
this time based upon its SSO history and customer profile. The County of San Diego,
whose sewer system (Spring Valley Sanitation District) intermingles with the District’s
sewer system has also determined that a FOG Control Program is not necessary.1
The District has not had any SSO events due to FOG since before work began on the
SSMP in 2007. The District has a total of 125 non-residential sewer customers and of
those customers, only 26 are related to the food business. These 26 food-related sewer
customers consist of a range of commercial customers from small convenience stores to
a shopping center with a large grocery store and several small restaurants. Only six of
the food-related businesses are actual restaurants. FOG may also be contributed by
residential customers and several residential areas within the District system have
historically experienced grease build-ups due to suspected catering operations being
operated out of residences.
Identification of “Warm Spots” and Schedule of Maintenance
District Operations staff has reviewed its customer base and have identified specific
locations where FOG is more likely to be contributed to the wastewater collection
system. Historical records of the locations where FOG has caused problems in the past
have also been used for this effort. This information is used to specify the locations,
referred to as “warm spots” , that are in need of increased maintenance in order to
better avoid the chance of a SSO event. Exhibit VII details the locations of these
identified warm spots and the schedule for their maintenance.
Conclusion
The District’s efforts for addressing FOG related issues has been through the
identification of areas where these issues could be a problem and a proactive
preventative maintenance program with routine cleaning to prevent any SSO’s related
to FOG. Sewer customer communication regarding FOG issues through billing inserts
and the Ditrict’s website have also been used. Therefore, a formal FOG Program will not
be included in this SSMP at this time until more evidence of SSO events and increased
maintenance due to FOG are experienced by the District. If and when that occurs, the
District will draft, adopt and implement a FOG Program as part of their SSMP.
1 County of San Diego, Sewer System Management Plan, June 2015:
https://www.sandiegocounty.gov/content/dam/sdc/dpw/SAN_DIEGO_COUNTY_SANITATION_DISTRICT/SDCSD_SSM
P_2015.pdf
36
Exhibit VII
WARM SPOT MAINTENANCE SITES
37
Exhibit VII
WARM SPOT MAINTENANCE SITES – Cont.
38
SECTION VIII—SYSTEM EVALUATION AND CAPACITY ASSURANCE
PLAN
Requirement
Each Enrollee shall prepare and implement a capital improvement plan (CIP) that will
provide hydraulic capacity of key sanitary sewer system elements for dry weather peak
flow conditions, as well as the appropriate design storm or wet weather event. At a
minimum, the plan must include:
(a) Evaluation: Actions needed to evaluate those portions of the sanitary sewer
system that are experiencing or contributing to an SSO discharge caused by
hydraulic deficiency. The evaluation must provide estimates of peak flows
(including flows from SSOs that escape from the system) associated with
conditions similar to those causing overflow events, estimates of the capacity of
key system components, hydraulic deficiencies (including components of the
system with limiting capacity) and the major sources that contribute to the peak
flows associated with overflow events;
(b) Design Criteria: Where design criteria do not exist or are deficient, undertake
the evaluation identified in (a) above to establish appropriate design criteria; and
(c) Capacity Enhancement Measures: The steps needed to establish a short-
and long-term CIP to address identified hydraulic deficiencies, including
prioritization, alternatives analysis, and schedules. The CIP may include
increases in pipe size, I/I reduction programs, increases and redundancy in
pumping capacity, and storage facilities. The CIP shall include an
implementation schedule and shall identify sources of funding.
(d) Schedule: The Enrollee shall develop a schedule of completion dates for all
portions of the capital improvement program developed in (a)-(c) above. This
schedule shall be reviewed and updated consistent with the SSMP review and
update requirements as described in Section D. 14.
39
System Evaluation
The District completed a Sewer Model Calibration Capacity Analysis and System
Assessment in 2006. This study involved open channel flow metering for H20MAP-
Sewer model calibration and a capacity assessment for present as-built conditions as
well as build-out conditions. The study determined capacity issues and prioritized areas
for closed circuit television inspections.
The District has had engineering consulting firms under contract since 2007 for the
inspection and condition assessment of the District’s entire sewer system. The
consultants have performed field evaluations of the District’s existing system by
performing Sanitary Sewer CCTV Inspection and Condition Assessment for pipelines
identified as priorities (1) and (2) in the 2006 Sewer Model and System Assessment
study. Televised inspection of sewer lines, investigation and analysis of the existing
sewer system, rehabilitation recommendations for operational improvements, and
rehabilitation prioritizing of the District’s sewer pipelines and associated manholes has
been performed. A rehabilitation priority list has been created and is being used by the
District to develop an annual “Rehabilitation and Replacement Program”.
Design Criteria
The system evaluation conducted in the 2006 Sewer Model Capacity Analysis and
System Assessment and the results of the District’s ongoing CCTV Inspection and
Condition Assessment have provided the design criteria necessary to address any
deficiencies in the District’s sewer system that could result in or contribute to an SSO
discharge.
Capacity Enhancement Measures
Projects to address hydraulic deficiencies in the District’s system have been identified
based on the results of the two studies discussed above. These deficiencies have been
incorporated into a table that prioritizes them on the basis of most critical to least. A
number of the projects will be completed by Operations staff as maintenance projects.
The larger and more complex projects are designated as CIP projects. The sewer
projects have been included into the District’s CIP program which covers a six-year time
frame and is updated annually. The projects designated as most critical are either in
construction or under development. All of the identified deficiencies will be corrected
through either the Operations maintenance program or the District’s CIP program.
Although this may take several years, the District is committed to making the changes
necessary to increase the reliability of the system. The existing schedule for sewer
project implementation is included as Exhibit VIII.
In 2013, The District prepared a Wastewater System Master Plan (WWMP). This
comprehensive examination of all aspects of the District’s wastewater system
40
incorporates the information from the CCTV Inspection and Condition Assessment and
updated the 2006 Sewer Model Analysis. The 2013 WWMP included recommendations
that have been incorporated into the rehabilitation and replacement projects of the
District’s ongoing CIP program.
Schedule
The schedule for completion of all sewer project components of the CIP program is
included as Exhibit VIII.
41
Exhibit VIII – Otay Water District CIP Budget and Schedule - FY 2020-2026
CIP
Number
Project Title Start End Cost
(X1000)
S2024 Campo Road Sewer Main Replacement
Planning
7/1/10 12/31/14 $170
Design
1/1/15 6/30/17 $1,330
Construction
7/1/17 6/30/21 $9,030
S2045 Fuerte Drive Sewer Relocation
Planning
7/1/16 7/29/16 $5
Design
8/1/16 7/31/17 $65
Construction
8/3/17 6/30/20 $300
S2048 Hillsdale Road Sewer Repairs
Planning
Design
7/1/16 7/29/16 $50
Construction
7/1/17 6/30/20 $670
S2049 Calavo Basin Sewer Rehabilitation - Phase 2
Planning
7/1/16 9/30/19 $30
Design
10/1/19 1/31/21 $120
Construction
2/1/21 6/30/23 $850
S2050 Rancho San Diego Basin Sewer Rehabilitation - Phase 2
Planning
7/1/18 6/30/23 $30
Design
7/1/23 8/31/24 $200
Construction
9/1/24 6/30/27 $820
S2054 Calavo Basin Sewer Rehabilitation - Phase 3
Planning
7/1/23 6/30/26 $20
Design
7/1/26 6/30/27 $180
Construction
7/1/27 6/30/30 $900
S2066 Rancho San Diego Basin Sewer Rehabilitation - Phase 3
Planning
7/1/24 6/30/27 $40
Design
7/1/27 6/30/28 $160
Construction
7/1/28 6/30/30 $700
S2069 Cottonwood Sewer Pump Station Renovation
Planning
7/1/19 12/31/20 $30
Design
1/1/21 6/30/22 $420
Construction
7/1/22 6/30/25 $1,350
S2070 Hidden Mtn. Sewer Pump Station Wet Well Renovation
Planning
7/1/19 9/30/19 $5
Design
10/1/19 12/31/19 $25
Construction
1/1/20 6/30/21 $150
42
SECTION IX—MONITORING, MEASUREMENT, AND PROGRAM
MODIFICATIONS
Requirement
The Enrollee shall:
(a) Maintain relevant information that can be used to establish and prioritize
appropriate SSMP activities;
(b) Monitor the implementation and, where appropriate, measure the effectiveness
of each element of the SSMP;
(a) Assess the success of the preventative maintenance program;
(b) Update program elements, as appropriate, based on monitoring or performance
evaluations; and
(c) Identify and illustrate SSO trends, including: frequency, location, and volume.
43
Process
The following describes the process and methods by which the District will monitor the
effectiveness of the SSMP program and implement necessary modifications to the Plan.
Maintain, Monitor and Measure SSMP Elements
The District will track a number of performance indicators in order to evaluate the long-
term effectiveness of SSMP elements and for reporting to the Water Board in the
Annual SSO Report. These performance indicators are listed below in Table IX.
As the historic record grows, future annual reports to the Water Board will include trend
plots for key measures. Performance measures related to maintenance activities will be
tabulated and charted in the annual collection system report.
Table IX. SSMP Performance Indicators
Indicator
Number of SSO’s (by season) Wet season
Dry season
Number of SSO’s (by volume) <10 gal.
10-99 gal.
100-999 gal.
>1000 gal.
SSO Volume Total
Recovered
Total volume conveyed to plant
Total vol. SSO/ Total vol. conveyed to plant
Cause of SSO
#SSO’s per mile of sewer per year
Vol. SSO’s per mile per year
Avg. Emergency Response Time
Number of SSO’s (by volume)
Business hours
Non-business hours
Maintenance Activities (lineal ft/yr) Televised Inspection
Top-down Cleaning
Smoke Inspection
44
It should be noted that in measuring an outcome that is characterized by a relatively
small number of events (e.g. number of annual wet weather SSOs), it is important to
recognize that statistical variability may dominate short-term trends and that true
causal relationships are likely to be evident only over the long term.
Assessment of Preventative Maintenance Program
Sewer system maintenance activities are tracked in the District’s CMMS system. This
data can be retrieved and assembled into report form to identify trends and help to
evaluate effectiveness of the program. On an annual basis, the District shall evaluate
the effectiveness of its preventative maintenance program and adjust the program as
needed.
Update Program Elements
It is the District’s intention that the SSMP remain a living document and that it be
regularly updated to reflect program or organizational changes, new regulatory
requirements, and other changing conditions. District staff will review the SSMP on a
regular basis and update the document with any significant changes.
Identify and Illustrate SSO Trends
The District maintains information related to actual SSO’s in its CMMS system. When an
actual SSO event occurs, a detailed report is completed and the information is entered
into CMMS. This enables District staff to analyze the information as necessary to identify
any SSO trends.
SSMP Modifications
The District will update the SSMP periodically to ensure that the information maintained
in the plan is current. In particular, routine updates will be made to the contact names
and phone numbers for District Staff responsible for the implementation of specific
SSMP programs. The SSMP will also be modified as necessary to maintain program
effectiveness and continual compliance with the Waste Discharge Requirements.
The SSMP will be officially updated on an annual basis and a comprehensive update and
re-certification will occur every five (5) years.
45
SECTION X—SSMP PROGRAM AUDITS
Requirement
The Enrollee shall:
Conduct periodic internal audits, appropriate to the size of the system and the number
of the SSO’s. At a minimum, these audits must occur every two years and a report
must be prepared and kept on file. This audit shall focus on evaluating the
effectiveness of the SSMP and the Enrollee’s compliance with the SSMP requirements,
including identification of any deficiencies in the SSMP and steps to correct them.
46
SSMP Audit Program
The District’s plan is to conduct bi-annual audits of its SSMP in conjunction with the
bi-annual review and update of the SSMP. Each audit will use the Audit Checklist
(Exhibit X).
The audit will include, but not be limited to the following:
1. Review of the progress made on the development of SSMP elements
2. Review of the status of any SSMP programs implemented
3. Identifying the success of any SSMP programs implemented
4. Description of system improvements made within the two-year audit period
5. Description of planned system improvements for the upcoming two years
6. Review of the data for any SSO occurrences.
The results of the bi-annual audit using the will be compiled in a report and kept on file.
47
Exhibit X – AUDIT CHECKLIST
SSMP Evaluation Checklist for FY 20_
SSMP Section
Yes
No
Update
Needed
in
SSMP
Actions & Notes
Section I - Goals
Are the goals stated in the SSMP
still appropriate and accurate?
Was service reliable &
uninterrupted 99% of the time
over the period?
Were SSO’s less than two (2)
per year?
Section II - Organization
Is the District’s organizational
chart current?
Is the chain of communication
for SSO response current?
Is the SSMP phone list up-to-
date and accurate?
Section III – Legal Authority
Does the SSMP contain up-to-
date information about the
District’s legal authority?
Does the District have sufficient
legal authority to control sewer
use and maintenance?
Section IV – Operations and Maintenance Program
Mapping
Does the SSMP reference the
current process and procedures
for maintaining the District’s
sewer collection system maps?
48
Resources
Does the District allocate
sufficient funds for the effective
operation, maintenance and
repair of the wastewater
collection system and is the
current budget structure
documented in the SSMP?
Preventative Maintenance
Does the SSMP describe the
current preventative maintenance
activities and the system for
prioritizing the cleaning of sewer
lines?
Were all of the preventative
maintenance activities generated
by the District’s IMS completed
as scheduled?
Are the District’s preventative
maintenance activities sufficient
and effective in minimizing
SSO’s and blockages?
Rehabilitation and Replacement
Has the District’s scheduled
inspections and condition
assessment system been
effective in locating, identifying,
and addressing any system
deficiencies?
Have the CIP sewer
rehabilitation and replacement
projects begun design and/or
construction as scheduled?
Maintenance Equipment
Are contingency equipment and
replacement parts sufficient to
respond to
emergencies and properly
conduct regular maintenance?
49
Training and Certification
Is adequate training being
provided to staff to maintain a
knowledgeable and safe
workplace?
Are the training procedures and
logs for the staff up-to-date in
the SSMP?
Are Operations and Maintenance
personnel properly certified by
CWEA to perform their work
and is this documented in the
SSMP?
Section V – Design and Construction Standards
Does the SSMP contain up-to-
date information about the
District’s design and
construction standards and
specifications?
Are the design and construction
standards and the testing and
inspection standards for new and
rehabilitated facilities
sufficiently up-to-date and
comprehensive?
Section VI – Overflow Emergency Response Plan
Is the District’s SSO Emergency
Response Plan, that establishes
procedures for emergency
response, notification, and
reporting, effective and current?
Has the District staff been
properly trained on the
procedures of the SSO
Emergency Response Plan?
Based on recent experience, has
the Emergency Response Plan
been effective in handling SSO’s
and safeguarding public health
and the environment?
50
Section VII – Fats, Oils, and Grease (FOG) Program
Does the District SSMP identify
sections of the collection system
subject to FOG blockages,
establish a cleaning schedule and
address source control measures
to minimize these blockages?
Does the District have sufficient
legal authority to prohibit
discharges to the collection
system and to inspect grease-
producing facilities?
Section VIII – System Evaluation and Capacity Assurance Plan
Has the District evaluated the
hydraulic deficiencies in the
system, established sufficient
design criteria and recommended
both short and long term
capacity enhancement and
improvement projects?
Does the District’s CIP establish
a schedule of approximate
completion dates for both short
and long-term improvements and
is the schedule reviewed and
updated to reflect current
budgetary capabilities and
activity accomplishments?
Section IX – Monitoring, Measurement, and Program Modifications
Are the performance parameters
shown for each of the SSMP
elements adequate for
monitoring the effectiveness of
these elements?
Are the methods for measuring
each of the performance
parameters sufficient to properly
evaluate the success of each
SSMP element?
Does the description of the
process for modifying the SSMP
continue to be valid?
Section X – SSMP Audits
Will the SSMP audit be
conducted every two years as
required?
51
Are the results of the audit
compiled in a report and the
information utilized to improve
the performance of the SSMP?
Section XI – Communication Program
Does the SSMP contain up-to-
date information about the
District’s public outreach
activities?
Has the District effectively
communicated with the public
and other agencies about the
SSMP and addressed any
feedback?
Date Completed: _____________________________
By: _________________________________________
Title: _______________________________________
52
SECTION XI—COMMUNICATION PROGRAM
Requirement
The Enrollee shall:
(a) Communicate on a regular basis with the public on the development,
implementation, and performance of its SSMP. The communication system shall
provide the public the opportunity to provide input to the District as the program
is developed and implemented.
(b) The District shall also create a plan of communication with systems that are
tributary and/or satellite to the District‘s sanitary sewer system.
53
Public Education and Outreach
Purpose
This section of the SSMP discusses the District’s efforts to educate and inform the public
regarding the proper use of the District’s sanitary system. The goal of these
communication efforts is to facilitate public awareness of sanitary sewer system issues
and to provide the public with the opportunity to provide input to the District’s SSMP as
it is developed and implemented.
Communication System
The following is a summary of the District’s efforts to educate, inform and engage the
public’s participation in the proper utilization of the District’s sanitary sewer system and
comply with the SSMP requirements.
Otay Water District Official Website
The District has a website (www.otaywater.gov) that is used to inform the public about
District activities. The main page provides access to diverse information and includes a
link to information about the sanitary sewer system. There is a link on the website to
access selected District publications where the public is able to view the SSMP
document and another link for providing comments to the District. Additionally, the
main page has a section for announcements which will be utilized to notify the public of
any important activities related to sewer system management.
Public Meetings
The District holds a Board of Directors meeting on the first Wednesday of each month.
These meetings are held in the Board Room at the District’s headquarters at 2554
Sweetwater Springs Boulevard, Spring Valley, California, 91978, and the public is invited
and encouraged to attend. The Board meetings provide a forum for citizens to provide
input on particular programs within the District during the Public Participation portion of
the meeting. Copies of the Board Meeting Agenda are made readily available to the
public from the District’s website. Certification and subsequent re-certification of the
completed SSMP is required by the Board of Directors during a public Board of Directors
meeting.
Project specific meetings may also be convened with community leaders, community
groups and other citizens to discuss sewer related projects and efforts. These meetings
provide citizens with the opportunity to learn about the District’s activities, voice any
concerns they may have, and receive clarification on a variety of issues. Project specific
meetings are usually arranged by the District’s specific Project Manager for each sewer
project.
54
Other Outreach Media Efforts
The District also uses several additional forms of media to educate and inform the
public regarding impacts to the District’s sanitary sewer system. These include the
following:
1. Instagram (#otaywater) and twitter (@OtayWater) posts
2. District newsletter mailed quarterly to customers
3. Brochures distributed at community events
4. Bill stuffers
5. Sewer project construction signs located near construction areas.
6. Door hangars
Examples of the website, newsletter articles and a project construction sign are
included in Exhibit XI.
Communication with Tributary and/or Satellite Collection Systems
The District communicates regularly with the agencies that operate the collection
systems tributary to the District’s collection system (County of San Diego, Padre Dam
Water District).
55
Exhibit XI - COMMUNICATION MEDIA EXAMPLES
Sewer Construction
Project Sign
Sewer System Information
on District Website
56
Customer Newsletter Articles
57
SECTION VIII— DOCUMENTS & PROCEDURES
A. SPILL NOTIFICATION
1. Collection System Sewer Spill Response & Notification
2. Sewer Overflow Notification Guidelines
3. OES Requested Spill Information
4. Sanitary Sewer Overflow Water Quality Monitoring Program
(All of the following documents, as listed below, are available on the District’s Intranet)
B. SAFETY
1. Vactor Truck Safety
2. Treatment Plant Entry and Exit
3. Directions to Cottonwood Meadows Lift Station
4. Directions to Hidden Mountain Lift Station
5. Directions to Russell Square Lift Station
6. Directions to Steele Canyon Lift Station
7. Directions to Calavo Gardens Lift Station
C. COLLECTION SYSTEM & T-PLANT ALARM SYSTEMS
1. Acknowledging Lift Station Auto Dialer Alarms
2. Lift Station Communications Failures
3. Scada Network System Failure
D. COLLECTIONS & EQUIPMENT OPERATIONS
1. CCTV Operation
2. Vactor Lubrication & Maintenance
3. Steele Canyon Lift Station Periodic Inspection
4. Cottonwood Meadows Lift Station Periodic Inspection
5. Cottonwood Meadows Emergency Contingency Plan
6. Hidden Mountain Lift Station Periodic Inspection
7. Russell Square Lift Station Periodic Inspection
8. Calavo Gardens Lift Station Weekly Inspection
9. Silverado Emergency Sewer Lift Station Activation
10. Refilling Bioxide Tanks
58
A. SPILL NOTIFICATION
1. Collection System Sewer Spill Response & Notification
Water Operations Department
Department Procedures – Section 3244
Page 1 of 5 No.
RWCWRF – Collection System Sewer Spill Response &
Notification
Approval Date:
August 23, 2001
Latest Revision Date:
March 28, 2019
Purpose:
In accordance with the “California Regional Water Quality Control Board, San Diego Region,
Monitoring and Reporting Program No. 2006-0003-DWQ as revised by order No. WQ 2008-
0002-EXEC, Sanitary Sewer Overflow Reporting Procedures for Sewage Collection Agencies,”
the District is required to report to certain agencies any spills that reach reportable quantities or
fall within special circumstances through the California Integrated Water Quality System
(CIWQS). Although reportable quantities and special circumstances are summarized herewith, it
is important that the reader becomes well acquainted with the Monitoring and Reporting
Program No. 2006-0003-DWQ, as amended in 2013 under Order No. WQ 2013-0058-EXEC.
Procedure:
1. Otay Water District reclamation staff will conduct initial response and evaluation of any
report of a sanitary sewer discharge within its sewer jurisdiction.
2. District staff must utilize all appropriate PPE prior to any physical investigation.
3. If discharge is confirmed, staff will identify sewer overflow jurisdiction.
If spill is not within District jurisdiction, notify the responsible agency and
document the time and contact information into the appropriate IMS work order.
If the spill is within District jurisdiction, note if the actual blockage is occurring
from a District, County-owned or private appurtenance. Consider that a
blockage in a nearby County-owned manhole could cause a backup in the
District collection system.
4. Contact immediate Supervisor and:
If the overflow is caused by a blockage or lift station equipment failure, follow
the standby duty notification protocol for the Utility Maintenance and/or
Pump/Electrical sections.
The Utility Workers assigned to the collection system section may be called to
respond in lieu of the Utility Maintenance standby personnel if available for
immediate response.
If possible, use special tools such as a grabber or clam shell to open the channel
and allow flow through blockage until the Vactor crew arrives.
59
5. Visually estimate the amount of spill utilizing the spill picture guide, or use pumping
hours at pump station if appropriate.
6. The Reclamation Supervisor or Lead Reclamation Plant Operator will notify the
appropriate agencies as described in the attached notification guide.
7. Contain spillage if possible. Use sand bags and/or dirt to dam up sewage until Vactor
truck can vacuum it up.
8. If any amount of spill impacts the creek and/or storm drains, the Lead Reclamation Plant
Operator or Supervisor will notify the environmental authorities per the attached
notification guidelines.
9. Disinfection: If public contact is probable receive direction from the Department of
Environmental Health (DEH) on how to proceed.
2. Sewer Overflow Notification Guidelines
Sanitary Sewer Overflow Reporting Categories
Category 1 - Discharges of untreated or partially treated wastewater of any volume resulting
from an enrollee’s sanitary sewer system failure or flow condition that:
Reach surface water and/or reach a drainage channel tributary to a surface water; or
Reach a Municipal Separate Storm Sewer System (MS4) and are not fully captured and
returned to the sanitary sewer system or not otherwise captured and disposed of properly.
Any volume of wastewater not recovered from the MS4 is considered to have reached
surface water unless the storm drain system discharges to a dedicated storm water or
groundwater infiltration basin (e.g., infiltration pit, percolation pond).
Category 2 - Discharges of untreated or partially treated wastewater of 1,000 gallons or
greater resulting from an enrollee’s sanitary sewer system failure or flow condition that do not
reach surface water, a drainage channel, or a MS4 unless the entire SSO discharged to the storm
drain system is fully recovered and disposed of properly.
Category 3 - All other discharges of untreated or partially treated wastewater resulting from an
enrollee’s sanitary sewer system failure or flow condition.
Private Lateral Sewage Discharge (PLSD) - Discharges of untreated or partially
treated wastewater resulting from blockages or other problems within a privately owned sewer
lateral connected to the enrollee’s sanitary sewer system or from other private sewer assets.
PLSDs that the enrollee becomes aware of may be voluntarily reported to the California
Integrated Water Quality System (CIWQS) Online SSO Database.
60
Notification Requirements
Category 1
1. For any Category 1 SSO greater than or equal to 1,000 gallons that results in a discharge to a
surface water or spilled in a location where it probably will be discharged to surface water,
either directly or by way of a drainage channel or MS4, the enrollee shall, as soon as
possible, but not later than two (2) hours after (A) the enrollee has knowledge of the
discharge, (B) notification is possible, and (C) notification can be provided without
substantially impeding cleanup or other emergency measures, notify the Cal Office of
Emergency Services (OES) and obtain a notification control number. The information that
may be requested by OES is provided below (after Agency Contact information).
2. Following the initial notification to Cal OES and until such time that an enrollee certifies the
SSO report in the CIWQS Online SSO Database, the enrollee shall provide updates to Cal
OES regarding substantial changes to the estimated volume of untreated or partially treated
sewage discharged and any substantial change(s) to known impact(s).
3. PLSDs: The enrollee is strongly encouraged to notify Cal OES of discharges greater than or
equal to 1,000 gallons of untreated or partially treated wastewater that result or may result in
a discharge to surface water resulting from failures or flow conditions within a privately
owned sewer lateral or from other private sewer asset(s) if the enrollee becomes aware of the
PLSD.
Reporting Requirements
Category 1 and Category 2
1. Submit the draft report into CIWQS as soon as possible but no later than 3 business days
after becoming aware of SSO and certify report within 15 calendar days of SSO end date.
2. In the event of a Category 1 SSO in which 50,000 gallons or greater are spilled to surface
waters, a SSO Technical Report must be submitted within 45 calendar days after the end date
of the SSO. The details required in the SSO technical report are detailed in the MMR, Order
No. WQ 2013-0058-EXEC.
Category 3
1. All SSOs that meet the criteria above for Category 3 SSOs shall be reported to the CIQWS
online database and certified within 30 calendar days after the end of the calendar month in
which the SSO occurs (example; all Category 3 SSO’s occurring in the month of February
must be entered into the database and certified by March 30)
Private Lateral Sewage Discharges
1. All other sewer discharges that are caused by blockages or other problems within a privately
owned lateral may be reported to the Online SSO Database based upon the Enrollee’s
discretion.
2. If the Private Lateral sewage discharge is recorded in the SSO Database, the Enrollee must
identify the sewage discharge as occurring and caused by a private lateral, and the
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responsible party (other than Enrollee) should be identified, if known. Certification of PLSD
reports is not required.
Water Quality Monitoring Requirements
Category 1
1. In the event of a Category 1 SSO in which 50,000 gallons or greater are spilled to surface
waters, water quality sampling must be conducted within 48 hours after initial SSO
notification. The sampling will be conducted according to the enrollees SSO Water Quality
Monitoring Program.
2. Water Quality results are required to be uploaded into CIQWS.
Agency Contact Numbers in the Event of a Spill
Office of Emergency Services (OES)
Emergency Notification Controller: (800) 852-7550
Fax: (916) 845-8910
www.oes.ca.gov/Operational/OESHome.nsf/1?OpenForm
County of San Diego/Dept. of Environmental Health Services (DEH)
Keith Kezer, Proposition 65 Coordinator: (858) 495-5579
Normal Working Hours (Monday - Friday 8:30 am to 5:00 pm)
Emergency after hours: (858) 565-5255
Fax: (858) 694-3670
Keith.kezer@sdcounty.ca.gov
P.O. Box 129261
San Diego, CA 92112-9261
Sweetwater Authority
When a sewage spill occurs that has the potential to impact the Sweetwater Reservoir, make
phone calls in the order listed below until contact is made. Leave voicemails until contact is
made and follow-up with e-mails to all of the contacts on the list.
Contact Title E-mail Address Office Phone Cell Phone
Justin Brazil Dir. Water Quality jbrazil@sweetwater.org 619-409-6812 619-729-7346
Plant Operator Plant Operators 619-409-6800
Giovanni Outlaw Plant Supervisor goutlaw@sweetwater.org 619-409-6803 619-980-6829
Davis Doane Maint. Supervisor ddoane@sweetwater.org 619-409-6807 619-322-4758
Mark Hatcher Lab Supervisor mhatcher@sweetwater.org 619-409-6813 619-797-0630
California Regional Water Quality Control Board (CRWQCB)
Office: (619) 516-1990
Fax: (619) 516-1994
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CA Regional Water Quality Control Board (CRWQCB) – Electronic Reporting
SSO-WDR Compliance Electronic Reporting on California Integrated Water Quality System
(CIQWS) file path www.CIWQS
1. CIWQS login
2. Specify Sanitary System
3. Reporting New SSO
4. Enter Information
5. Label as “work in progress”, “draft”, ”ready to certify” or “certified”.
The CIQWS SSO database will automatically generate an e-mail notification with
customized information about the SSO upon initial reporting of the SSO and final
certification for all Category 1 SSO’s E-mails will be sent to the appropriate Regional Water
Board.
3. OES Requested Spill Information
To satisfy notification requirements for each applicable SSO, the enrollee shall provide the
information requested by Cal OES before receiving a control number. Spill information
requested by Cal OES may include:
i. Name of person notifying Cal OES and direct return phone number.
ii. Estimated SSO volume discharged (gallons).
iii. If ongoing, estimated SSO discharge rate (gallons per minute).
iv. SSO Incident Description:
a. Brief narrative.
b. On-scene point of contact for additional information (name and cell phone number).
c. Date and time enrollee became aware of the SSO.
d. Name of sanitary sewer system agency causing the SSO.
e. SSO cause (if known).
v. Indication of whether the SSO has been contained.
vi. Indication of whether surface water is impacted.
vii. Name of surface water impacted by the SSO, if applicable.
viii. Indication of whether a drinking water supply is or may be impacted by the SSO.
ix. Any other known SSO impacts.
x. SSO incident location (address, city, state, and zip code).
63
4. Sanitary Sewer Overflow Water Quality Monitoring Program
This monitoring program will be implemented for a Category I SSO in which 50,000 gallons or
greater are spilled to surface water and must be conducted as soon as possible but no later than
48 hours after initial SSO notification.
Sanitary Sewer Overflow Sampling Procedure
Obtain SSO field sampling kit from the RWCWRF laboratory.
Determine the point where the spill entered waterway and photograph location if possible.
Don the PPE from the sample kit in preparation for taking samples.
Grab samples will be collected by submerging a properly cleaned sample collection container
provided by the laboratory directly in the sewerage flow.
Collected sewerage will be transferred from the collection container to the preserved
Laboratory-supplied sample bottles being careful not to overfill the bottles so as not to
flush out any preservative.
To maintain sample integrity and prevent cross-contamination, sample collection
personnel will abide by the following protocols:
• Collect samples (for laboratory analysis) only in laboratory-provided sample containers
and remove the cap from each bottle immediately before collecting a sample;
• Wear clean, powder-free nitrile gloves when collecting samples;
• Change gloves whenever something not known to be clean has been touched and between
sites.
The most important aspect of grab sampling is to collect a sample that represents the entire
sewerage overflow stream. Collect samples well away from the bank (preferable where water is
visibly flowing) and 6” below the surface. Avoid sampling debris or scum layer from the surface
or disturbing bottom sediment.
Typically, samples are collected by dipping the collection container in the sewerage flow paths
and streams as noted below.*
• For small sewerage streams and flow paths, simply dip the bottle facing upstream until
full.
• For larger stream that can be safely accessed, collect a sample in the middle of the flow
stream by directly dipping the mouth of the bottle. Once again making sure that the
opening of the bottle is facing upstream as to avoid any contamination by the sampler.
• For larger sewerage streams that cannot be safely waded, pole-samplers may be needed to
safely access the representative flow.
• Avoid collecting samples from ponded, sluggish or stagnant water.
• Do not stand upstream of the sampling point within the flow path.
Once samples have been collected, take a photograph of the sampling location if possible.
* Note that depending upon the specific analytical test, some containers may contain preservatives. These
containers should never be dipped into the stream, but filled indirectly from the pole sampler.
64
Record of Revisions
Version Date Notes
I - Initial 07/01/2009
II -After 2 year
audit
10/12/2012 Minor revisions & updates
III- 5-year Update 10/01/2014 Minor revisions & updates
IV - After 2 year
audit
01/29/2016 Removed training records, maintained
electronically.
V - After 2 year
audit
04/20/2018 Removed appendices, maintained
electronically.
VI – After SSO
event
04/02/2019 Updated Spill response procedure to include
Sweetwater Authority contact numbers.
VII – 5-year Update 10/03/2019 Update of exhibits and CIP projects
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY:
Jose Martinez,
Assistant Chief of Water
Operations
PROJECT:
P2282
DIV. NO. All
APPROVED BY:
Pedro Porras, Chief Water Operations
Mark Watton, General Manager
SUBJECT: AUTHORIZE THE PURCHASE OF FIVE (5) FLEET VEHICLES
GENERAL MANAGER’S RECOMMENDATION:
Authorize the General Manager to issue purchase orders to:
•Fairview Ford in the amount of $39,873.02 for the purchase of
one (1) 2020 Ford F-250 Pick-up Truck;
•Ford of Chula Vista in the amount of $127,424.06 for the
purchase one (1) 2020 Ford F-550 Class 5 Dual Rear Wheel Truck
and two (2) 2020 Ford F-150 Pick-up Trucks; and,
•Penske Ford in the amount of $56,056.86 for the purchase of
one (1) 2020 Ford F-450 Truck Cab and Chassis.
For a total of five (5) fleet vehicles and a total cost of
$223,353.94.
COMMITTEE ACTION:
See Attachment “A.”
PURPOSE:
To obtain Board authorization to purchase five (5) fleet
replacement vehicles from the vendors specified with the lowest
responsive quotes.
ANALYSIS:
There are eight (8) vehicles included in the approved FY20 budget.
The requested five (5) vehicles will replace the following units:
AGENDA ITEM 7i
• #83 (1992 Ford F-800 Flat Bed Truck – 80,300 miles)
• #120 (2001 Ford F-550 Cab & Chassis – 75,540 miles)
• #149 (2003 Ford E-350 Utility Van – 68,400 miles)
• #169 (2007 Ford F-150 Water System Truck – 100,500 miles)
• #200 (2010 Ford F-150 Water System Truck – 95,248 miles)
These vehicles have met the District’s vehicle replacement program
criteria of seven (7) years and/or 100,000 miles.
The replacement for Unit #83 will support staff in Utility
Maintenance as a flat-bed transport or for larger materials and
equipment. Unit #120 is utilized by Fleet Maintenance staff to
perform field maintenance on generators and engines located
throughout the District’s service area, primarily at pump
stations. Unit #149 is utilized by SCADA Instrumentation staff to
perform field maintenance on all field instrumentation and PLCs.
Lastly, Units #169 & #200 are assigned to Water Systems Operators
tasked with operating the water distribution system and when
responding to emergencies.
Quotes were solicited for five (5) vehicles via BidSync, the
District’s purchasing solicitation system. Multiple quotes were
received and are shown below. Prices received include all
applicable fees, taxes, and delivery.
Funding for these purchases is included in CIP P2282, Vehicle
Capital Purchases Program.
Two (2) 2020 Ford F-150 Trucks
Dealer Bid Price
Ford of Chula Vista – Chula Vista, CA $65,132.98
Penske Ford – La Mesa, CA $70,679.41
Wayne Gossett Ford dba Encinitas Ford –
Encinitas, CA $70,686.85
Fritts Ford – Riverside, CA $72,809.09
Fairview Ford – San Bernardino, CA No Bid
Theodore Robbins Ford – Costa Mesa, CA No Bid
One (1) 2020 Ford F-250 Truck
Dealer Bid Price
Fairview Ford – San Bernardino, CA $39,873.02
Theodore Robbins Ford – Costa Mesa, CA $39,930.13
Ford of Chula Vista – Chula Vista, CA $41,107.83
Fritts Ford – Riverside, CA $42,028.02
Wayne Gossett Ford dba Encinitas Ford –
Encinitas, CA $46,226.17
Penske Ford – La Mesa, CA $47,210.52
One (1) 2020 Ford F-450 Truck Cab & Chassis
Dealer Bid Price
Penske Ford – La Mesa, CA $56,056.86
Ford of Chula Vista – Chula Vista, CA $58,464.88
Wayne Gossett Ford dba Encinitas Ford –
Encinitas, CA $61,420.67
Fairview Ford – San Bernardino, CA No Bid
Fritts Ford – Riverside, CA No Bid
Theodore Robbins Ford – Costa Mesa, CA No Bid
One (1) 2020 Ford F-550 Class 5 Dual Rear Wheel Truck
Dealer Bid Price
Ford of Chula Vista – Chula Vista, CA $62,291.08
Fairview Ford – San Bernardino, CA $63,579.77
Wayne Gossett Ford dba Encinitas Ford –
Encinitas, CA $64,006.67
Fritts Ford – Riverside, CA $64,493.11
Penske Ford – La Mesa, CA $66,461.20
Theodore Robbins Ford – Costa Mesa, CA No Bid
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The total cost for the five (5) vehicles is $223,353.94, which
will be charged against the Vehicle Capital Purchases CIP P2282.
The total cost will not exceed budgeted funding.
The Finance Department has determined that 100 percent of the funds
are available in the replacement fund.
The following expenditure summary shows the eight (8) vehicles
which were budgeted in CIP P2282 for FY20, including the five (5)
vehicles being requested in this staff report:
Total CIP P2282 Vehicle Replacements
FY20 Budget: $439,000.00
Five (5) Fleet Trucks - Proposed $223,353.94
Two (2) Compact Trucks - Purchased $58,993.66
One (1) Class 5 Bucket Truck - Budgeted $130,000.00
Projected CIP P2282 FY20 Under Budget: $26,652.40
STRATEGIC GOAL:
Operate the system to meet demand twenty-four (24) hours a day,
seven (7) days a week.
LEGAL IMPACT:
None.
Attachment A - Committee Action
Attachment B – Photos of Vehicles
ATTACHMENT A
SUBJECT/PROJECT: AUTHORIZE THE PURCHASE OF FIVE (5) FLEET VEHICLES
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is requesting that the board approve the purchase of five
(5) fleet vehicles through various Southern California Car
dealerships in the amount of $222,353.94.
• Staff reviewed information in the staff report.
• Staff indicated, in response to an inquiry from the Committee,
that the vehicles meet the District’s vehicle replacement
criteria which staff determined, based on maintenance costs,
resale value and usable life. Based on a joint review by
Operations and Finance staff of District’s actual historical
maintenance costs, staff have determined at seven (7) years
and/or 100,000 miles, the District can get the best value in
terms of resale and vehicles are replaced before they require
higher cost maintenance for non-commercial vehicles.
• It was indicated in response to another inquiry from the
Committee, that the District utilizes Ford for mid-sized truck
needs as they have proven to be reliable and it standardizes the
fleet, reducing the number of spare parts the District needs to
stock, which keeps costs down.
Upon completion of the discussion, the committee supported staff’s
recommendation and presentation to the full board on the consent
calendar.
Ford F-550 Dual Rear Wheel Flat Bed
ATTACHMENT B
Ford F-450 Cab & Chassis
Ford F-150
Ford F-250
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Jose Martinez, Assistant
Chief of Water Operations
PROJECT:
P2286
DIV. NO. All
APPROVED BY:
Pedro Porras, Chief Water Operations
Mark Watton, General Manager
SUBJECT: APPROVAL TO PURCHASE ONE (1) PORTABLE EMERGENCY GENERATOR
GENERAL MANAGER’S RECOMMENDATION:
That the Board authorize the General Manager to issue a purchase
order to Volvo Construction Equipment in the amount not-to-exceed
$145,155.00 for the purchase of one (1) portable emergency
generator.
COMMITTEE ACTION:
See Attachment “A.”
PURPOSE:
To obtain Board authorization to purchase one (1)portable
emergency generator.
ANALYSIS:
Included in the approved FY20 budget, as item 12 under Capital
Purchases, is one (1) portable emergency generator. This generator
is designed to operate as a back-up power source for the District’s
new Portable Trailer Mounted VFD Pumps. The generator will prevent
disruption of water service when critical facilities are off-line
for extended periods of time, such as the 1200-1 Pump
Station. Additionally, the generator can be deployed at four (4)
existing Hydropneumatic Pump Stations and two (2) existing small
AGENDA ITEM 7j
Pump Stations, each supplying a pressure zone fed by a single
gravity reservoir with no redundancy.
The portable emergency generator is designed to operate as a back-
up power source for the District’s various critical facilities,
including, but not limited to: Pump Stations, Hydropneumatic
Stations, Lift Stations, and the Emergency Operations Center
(EOC). The generator supports the District’s Strategic Key
Performance Indicators (KPIs) associated with emergency
preparedness.
This purchase will be made in accordance with the District’s
Purchasing Manual Section 6.2.3 Cooperative/Joint Purchases
through Sourcewell (formerly known as National Joint Power
Alliance) contract with Doosan Portable Power, which was
competitively awarded. Sourcewell is a service cooperative
government agency that performs cooperative purchasing on behalf
of its member agencies. A quote was received for $145,155.00 from
Volvo Construction Equipment, Doosan Power Equipment’s authorized
dealer, for one (1) new Doosan Model G325WCU portable generator,
which includes all applicable fees, taxes, delivery, testing, and
training.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
Based on preliminary research, the projected purchase budget for
the one (1) portable generator is $145,000.00. Although the quote
received was $155.00 higher than projected ($145,155.00), this
will not exceed the total CIP P2286’s budget as a result of savings
in other charges on this CIP.
The total FY20 project budget for CIP P2286 Field Equipment
Purchases is $203,000.00. Existing expenditures and current
encumbrances for the CIP, including the portable generator, are
$202,083.00.
Based on the evaluation, CIP P2286 budget is enough to complete
the budgeted purchase. The Finance Department has determined that
100 percent of the funds are available in the replacement fund.
Expenditure Summary:
CIP P2286 FY20 Field Equipment Budget $203,000.00
Proposed - One (1) portable generator $145,155.00
Purchased - Two (2) 460 Gallon Diesel
Fuel Trailers
$33,928.00
Budgeted - Chemical Pump Skid for the
640 Disinfection System
$11,000.00
Budgeted - Replacement Flow Meter for
Recycled System Force Main
$12,000.00
Total Projected CIP P2286 FY20
Under Budget: $917.00
STRATEGIC GOAL:
Operate the system to meet demand twenty-four (24) hours a day,
seven (7) days a week.
LEGAL IMPACT:
None.
Attachments: Attachment A - Committee Action
Attachment B – Photo of Generator
ATTACHMENT A
SUBJECT/PROJECT: APPROVAL TO PURCHASE ONE (1) PORTABLE EMERGENCY GENERATOR
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is requesting that the Board approve the issuance of a
purchase order to Volvo Construction Equipment in the amount not-
to-exceed $145,155 for the purchase of one (1) portable emergency
generator.
• Staff reviewed information in the staff report.
• Staff indicated that the Doosan generator was selected as it
standardizes the District’s portable generator suite. Its layout
and operations will be similar to the District’s two (2) existing
Doosan emergency gensets and additional training will not be
required for its operation and maintenance. Fleet shop staff is
also familiar with the Cummins Diagnostic and Maintenance
Principles for the engines.
• Staff noted that the existing Doosan generators have performed
well during planned and unplanned events.
• In response to an inquiry from the Committee, staff indicated
that the anticipated usable life of the generator is
approximately 15 years as it will only be utilized as standby for
emergencies.
Upon completion of the discussion, the committee supported staff’s
recommendation and presentation to the full board on the consent
calendar.
Doosan G325WCU Portable Generator
ATTACHMENT B
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Andrea Carey
Customer Service Manager
PROJECT: DIV. NO. All
APPROVED BY: Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Authorize the General Manager to Negotiate and Enter into an
Agreement with Paymentus for Phone Payment Services
GENERAL MANAGER’S RECOMMENDATION:
That the Board authorize the General Manager to negotiate and enter
into a two-year agreement, plus three (3) one-year options, with
Paymentus to provide phone payment services in an amount not to
exceed $250,000 ($50,000 annually).
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
Authorize the General Manager to negotiate and enter into a two-year
agreement, plus three (3) one-year options, with Paymentus to provide
phone payment services in an amount not to exceed $250,000 ($50,000
annually).
ANALYSIS:
The District accepts approximately 2,700 payments per month through
the automated phone system. The contract for the District’s current
vendor, Paymentus, will expire in March 2020. In preparation, staff
sent out a Request for Proposal (RFP)through the District’s online
solicitation portal, BidSync. Nine responses were received and all
were evaluated on background and experience; ability to perform the
required services; implementation, training, and support; and
estimated monthly cost. The ratings for all items, excluding cost,
are below:
AGENDA ITEM 7k
Vendor Overall Service Rating (70 pts Max)
Paymentus 68
Forte Payment Systems 62.33
Value Payment Systems 62
MTI 59
AutoScribe Corporation 58
Infosend, Inc 56.01
JPMorgan Chase 55.67
[JB1]
Two additional vendors were not qualified based on the information
provided and, after the initial review, were not included in the
final cost comparison evaluation.
In order to evaluate all qualified vendors, staff based the monthly
cost on current payment volumes and averages. Below is the average
monthly cost, from lowest to highest, of each vendor based on costs
presented in the RFP:
Vendor Monthly Cost
Paymentus $3,624.50
MTI $4,185.00
Value Payment Systems $5,647.50
Infosend, Inc $5,803.75
Forte Payment Systems $6,068.00
JPMorgan Chase $6,165.03
AutoScribe Corporation $6,215.13
Paymentus scored the highest in overall service rating and
affordability. Paymentus has agreed to keep the fees for credit and
debit cards the same as the previous contract and is offering a
reduction in their transaction fees for bank withdrawals from $.25 to
$.20. They are also offering to keep their prices fixed throughout
the length of the contract.
District staff that works closely with Paymentus report excellent
service and the District has not received negative feedback from
District customers using the phone payment service. Paymentus
currently handles payment processing for over 200 companies in
California including Sweetwater Authority, Padre Dam, and Olivenhain.
Staff has reached out to these local agencies and all expressed
satisfaction with Paymentus.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The annual cost for Paymentus services is expected to be
approximately $46,000 this year, which has been fully budgeted[JB2].
Based on historical numbers, staff expects an increase in phone
payment volume and credit card use. This will increase the overall
charges but will not exceed the average annual contract limit of
$50,000.
STRATEGIC GOAL:
Evaluate the most cost effective and efficient processes and tools to
communicate service related issues to customers.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
ATTACHMENT A
SUBJECT/PROJECT:
Authorize the General Manager to Negotiate and Enter into
an Agreement with Paymentus for Phone Payment Services
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is requesting that the Board approve a two-year agreement,
plus three (3) one-year options, with Paymentus to provide phone
payment services in an amount not-to-exceed $250,000 ($50,000
annually).
• Staff presented information in the staff report.
• In response to an inquiry from the Committee, staff indicated
should the board approve this agreement with Paymentus, they are
delegating the three (3) one-year renewal options to the General
Manager.
Upon completion of the discussion, the committee supported staff’s
recommendation and presentation to the full board on the consent
calendar.
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Andrea Carey
Customer Service Manager
PROJECT: DIV. NO. All
APPROVED BY: Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Adopt Resolution No. 4372 establishing Policy 54,
Discontinuation of Water Service for Delinquent Accounts; and
Adopt Ordinance No. 576 to amend Section 34, Issuance and
Payment of Water Bills and Appendix A of the District’s Code
of Ordinances effective January 1, 2020
GENERAL MANAGER’S RECOMMENDATION:
That the Board adopt Resolution No. 4372 establishing Policy 54,
Discontinuation of Water Service for Delinquent Accounts; and adopt
Ordinance No. 576 to amend Section 34, Issuance and Payment of Water
Bills and Appendix A of the District’s Code of Ordinances effective
January 1, 2020.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To comply with recently adopted legislation created by Senate Bill
998, requiring a written policy for the District’s disconnection for
non-payment procedures.
ANALYSIS:
In September 2018, Governor Jerry Brown signed Senate Bill 998
establishing the addition of Chapter 6, Discontinuation of
Residential Water Service, to Part 12 of Division 104 of the Health
and Safety Code. In addition to already existing state law regarding
disconnection of water service, there are additional regulations set
forth within this new Chapter. As an urban water supplier, the
District is required to comply with these new regulations on and
after February 1, 2020.
AGENDA ITEM 7l
Currently, the District’s disconnection procedures, located in
Section 34 of the District’s code of Ordinances, were adopted based
on requirements set forth in California Government Code Sections
60370-60375.5. With the changes made to the Health and Safety Code,
the District will now need to ensure its disconnection procedures
meet the requirements of both Codes.
The following are items within Chapter 6 of the Health and Safety
Code that will require a change to the District’s existing
procedures:
1) The District is now required to have a written policy on the
discontinuation of residential service for nonpayment available
in English, Spanish, Vietnamese, Chinese, Tagalog, Korean, and
any other language spoken by more than 10 percent of the
customers in the District’s service area. The policy must be
posted on the District’s website.
2) The District must post the number of annual discontinuations on
its website and report that number to the State Water Resources
Control Board.
3) The District shall not discontinue residential water service for
nonpayment until a payment by a customer has been delinquent for
60 days. Currently, this requirement is 45 days.
4) The District must contact the customer named on the account by
telephone or mailed written notice no less than seven business
days before discontinuation of residential service for
nonpayment. Currently, the requirement is to give at least 48
hours notification prior to service termination either via
telephone or mailed notice.
5) If the District is unable to make contact via telephone or if
the mailed written notice is returned as undeliverable, the
District must visit the residence and leave, in a conspicuous
place, notice of imminent discontinuation of residential service
for nonpayment and the District’s written policy on the
discontinuation of service.
6) The District cannot discontinue water service for nonpayment to
a residential service if all the following conditions are met:
a. The customer, or tenant of the customer, submits to the
District the certification of a primary care provider that
discontinuation of water service will be life threatening
to, or pose serious threat to the health and safety of, a
resident of the premises where residential service is
provided.
b. The customer demonstrates that he or she is financially
unable to pay for residential service within the District’s
normal billing cycle. The customer shall be deemed
financially unable to pay if any member of the customer’s
household is a current recipient of CalWORKS, CalFresh,
general assistance, Medi-Cal, Supplemental Security
Income/State Supplementary Payment Program, or California
Special Supplemental Nutrition Program for Women, Infants,
and Children, or the customer declares that the household’s
annual income is less than 200 percent of the federal
poverty level.
c. The customer is willing to enter into an amortization
agreement, alternative payment schedule, or a plan for
deferred or reduced payment as determined by the District.
7) If, after 60 days, the customer fails to comply with the payment
arrangement described in #6c or does not pay his or her current
bill for at least 60 days, the District will need to post a
final notice of intent to disconnect service at a conspicuous
location at the property. Disconnection cannot occur any
earlier than five days from the posting of this notice.
8) All written notices required in Chapter 6 of the Health and
Safety Code shall also be provided in English, Spanish,
Vietnamese, Chinese, Tagalog, Korean, and any other language
spoken by more than 10 percent of the customers in the
District’s service area.
9) For a customer that demonstrates household income below 200
percent of the federal poverty line, a reconnection fee cannot
exceed fifty dollars ($50), with an annual adjustment for
changes in the Consumer Price Index beginning January 1, 2021.
In order to comply with the above requirements, Policy 54,
Discontinuation of Water Service for Delinquent Accounts, has been
created and Section 34, Issuance and Payment of Water Bills, and
Appendix A have been modified. Based on input from the District’s
Legal Counsel, Section 34 has been modified to only include a brief
outline of the District’s billing and collection procedures. Policy
54 is a comprehensive document detailing the District’s billing,
collection, and discontinuation procedures as required by the Health
and Safety Code. Although SB 998 pertains solely to residential
accounts, the District has historically maintained the same
disconnection procedures for both residential and commercial
accounts. Policy 54 maintains the disconnection procedures
previously defined in Section 34 and adds the additional requirements
for residential customers.
Modifications to current notices will be made to ensure all conform
to these new regulations. Staff will be working with a translation
company to have all required written notices translated into the
required languages.
Staff is recommending one fee associated with this process, the
delinquency tag fee, which is charged when a Field Technician is
required to visit the property to hand-deliver a disconnection
notice, be changed from $15 to $25 to reflect current staffing costs
and additional notices that will need to be delivered. A visit to
the property is rare as the District uses phone calls and/or mailed
postcards as the official notification format. Under the new
regulations, a copy of Policy 54 will need to be included with any
hand delivered notices.
Although these changes add complexity to the disconnection process,
staff does not feel it will significantly impact the District’s
ability to collect. Currently, District customers are given multiple
notifications about delinquent balances (texts, emails, phone calls,
and, if necessary, mailed post cards). Customer Service makes every
effort to assist any customer who calls prior to disconnection with
appropriate payment extensions or arrangements, and customers with a
note from a medical professional stating water is necessary for
health are given additional time to pay as needed.
Bad debt expense will be the financial area primarily impacted by the
new legislation. In FY 2019, residential bad debt expense was
approximately $75,000 or 0.1% of the potable operating budget.
Currently, most residential customers are disconnected between 50 and
55 days delinquent. Under the new legislation, customers will be
disconnected at 60 days delinquent, which equates to an additional 5
to 10 days of water use. Staff estimates that these additional days
will result in a $12,000 proportionate increase in annual bad debt
expense. Translation services are estimated to be a one-time cost of
$4,000.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The changes mentioned in this report go into effect in January 2020,
and staff has incorporated the projected financial impact in the FY
2020 budget and six-year rate model.
STRATEGIC GOAL:
Commitment to customer-centered service is our highest priority.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Resolution No. 4372
Exhibit 1 – Policy No. 54
C) Ordinance No. 576
Exhibit 1 – Section 34 Strike-through
Exhibit 2 – Section 34 Proposed
Exhibit 3 – Appendix A Strike-through
Exhibit 4 – Appendix A Proposed
ATTACHMENT A
SUBJECT/PROJECT:
Adopt Resolution No. 4372 establishing Policy 54
Discontinuation of Water Service for Delinquent Accounts;
and Adopt Ordinance No. 576 to amend Section 34, Issuance
and Payment of Water Bills and Appendix A of the District’s
Code of Ordinances effective January 1, 2020
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is requesting that the Board adopt Resolution No. 4372
establishing Policy 54, Discontinuation of Water Service for
Delinquent Accounts; and adopt Ordinance No. 576 to amend Section
34, Issuance and Payment of Water Bills and Appendix A of the
District’s Code of Ordinances effective January 1, 2020.
• Staff presented information in the staff report.
• In response to an inquiry from the Committee, staff indicated the
new statute states that a customer’s water service cannot be shut
off if the customer has certification from their primary care
provider that it would be life threatening or pose a serious
threat to the health and safety of a resident of the premises.
The new requirements also indicates that customers not only need
documentation from a primary care provider, but they must also
show that they are in one of the financial positions listed on
the bottom of page 6 and top of page 7 in Exhibit 1 of the staff
report. Staff indicated that it is very rare that the District
receives such a certification/documentation.
• Staff indicated that the changes in Exhibit 1 provides the
District the ability to ask for documentation from the customer’s
primary care provider if a customer claims it would be life
threatening or pose a serious threat to the health and safety of
a resident on their premises. The District, however, would not
necessarily require the medical documentation unless the
situation requires it. The District generally would move
directly to working with customers on a payment plan when they
are having difficulty paying their water bills.
• Staff indicated that customers must still pay their water bill
and the District will work with customers on a payment plan. If
they do not honor their payment plan, the District can shut their
water service off.
Upon completion of the discussion, the committee supported staff’s
recommendation and presentation to the full board on the consent
calendar.
Page 1 of 2
RESOLUTION NO.4372
WHEREAS, Senate Bill No. 998, establishing the addition of
Chapter 6, Discontinuation of Residential Water Service, to Part
12 of Division 104 of the Health and Safety Code, establishes
the requirement of a written policy on discontinuation of
residential service for nonpayment; and
WHEREAS, prior to the passage of Senate Bill No. 998,
Chapter 6, Discontinuation of Residential Water Service, to Part
12 of Division 104 of the Health and Safety Code, a policy on
discontinuation of residential service for nonpayment was not
required; and
WHEREAS, the Otay Water District Board of Directors has
been presented with Policy No. 54 Discontinuation of Water
Service for Delinquent Accounts, to establish a policy for
discontinuation of service for nonpayment; and
WHEREAS, Policy No. 54 has been reviewed and considered by
the Board, and it is in the interest of the District to adopt
Policy No. 54;
WHEREAS, a copy of the proposed policy is attached as
Exhibit 1 to this resolution; and
A RESOLUTION OF THE BOARD OF DIRECTORS OF
THE OTAY WATER DISTRICT TO COMPLY WITH
SENATE BILL No. 998 BY ADOPTING POLICY
NO.54 DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS OF THE
DISTRICT’S CODE OF ORDINANCES
Page 2 of 2
WHEREAS, staff plans to start complying with Senate Bill
No. 998 on January 1, 2020.
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by
the Board of Directors of the Otay Water District that the
proposed Discontinuation of Water Service for Delinquent
Accounts policy, incorporated herein as Exhibit 1, shall become
effective on January 1, 2020.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
Otay Water District at a board meeting held this 6th day of
November 2019, by the following vote:
Ayes:
Noes:
Abstain:
Absent:
_______________________
President
ATTEST:
____________________________
District Secretary
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 1 of 8
I.PURPOSE
This Discontinuation of Water Service for Delinquent Accounts Policy
(Policy) has been established to adhere to the laws regarding
discontinuation of water service for residential customers due to non-
payment of their water bill as required by Government Code § 60370 et
seq. and Health & Safety Code § 116900 et seq. (California Senate Bill
No. 998).
II.BACKGROUND
California Senate Bill No. 998 requires an urban or community water
system, that supplies water to more than 200 service connections, to
have a written policy that provides for discontinuation of residential
water service for nonpayment. In the event that a water bill becomes
delinquent, the District will apply this Policy for the collection of
delinquent accounts, including notifications, fee assignments, and
discontinuation of service. The District can be contacted by phone at
(619)670-2222 to discuss options for avoiding discontinuation of water
service for nonpayment under the terms of this policy.
III.POLICY
ISSUANCE, DUE DATE, AND FINAL PAYMENT DATE OF STATEMENT OF CHARGES FOR
SERVICE
A.Issuance of Statements. Statements for water service or
other charges will be mailed or presented as soon as
practicable after the water meter has been read and the
applicable charges have been determined.
B.Due Date. Each statement issued by the District for such
charges shall be due and payable on the date of mailing or
other presentation to the customer.
C.Final Payment Date. All charges in each statement must be
paid on or before the final payment date shown on the
statement, which shall be at least 20 calendar days
following the date of mailing or presentation of the
statement.
D.Payment of Charges.
1.Place of Payment. Payments shall not be credited to a
customer's account until cash, check, credit card, draft,
electronic funds transfer, money order, or any other
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 2 of 8
acceptable form of payment that will be honored by a bank,
has been received by the District at the District business
office during regular office hours. Deposit of payment in
the mail or at a location other than the District business
office shall not be credited to a customer's account until
it is received at the business office.
2. Returned Check Charges. A returned payment charge (see
Appendix A, 34.01 D.2. for charge) shall be added to a
customer's account in each instance where payment has been
made to the District with a check, draft, credit card, or
any other acceptable form of payment that has not been
honored upon presentment to the bank upon which it is drawn.
DELINQUENT ACCOUNTS
A. For Non-Payment of Charges. If full payment of a statement
for a water service account is not received at the District
business office on or before the final payment date, the
account shall become delinquent on the day following the
final payment date.
B. Late Payment Charge. A late payment charge (see Appendix A,
policy 54 for charge) shall be added to a delinquent account
as of the date the account becomes delinquent, and such
charge(s) shall become an inseparable part of the amount due
as of that time. A late payment charge shall not be added
to any account that has no outstanding delinquencies.
C. Notice of Delinquency. A Delinquency Notice shall be mailed
to each customer whose account is delinquent. The
Delinquency Notice shall notify the customer that service
will be turned off and discontinued unless payment is made.
The Delinquency Notice shall indicate the amount due,
including late payment charges, and that the total amount
must be paid within thirty (30) calendar days from the date
of mailing or presentation of the Delinquency Notice to the
customer, or service will be discontinued.
D. Record of Delinquent Accounts. The District maintains
records of delinquent accounts. Each year one delinquency
shall be removed from the record of each account that has
one or more delinquencies.
E. Partial Payment on Delinquent Account. A partial payment on
a delinquent account may be accepted and credited to a
customer's account. However, the partial payment shall not
cause removal of the account from a delinquent status and
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 3 of 8
furthermore, the partial payment shall not preclude the
meter from being turned off for delinquency.
F. Financial Arrangements for Delinquent Accounts.
1. Continuation of Service. The General Manager, Chief
Financial Officer, or any person delegated by the General
Manager, may authorize continuation of service for a
delinquent account if financial arrangements, satisfactory
to the District, have been established.
2. Requirement of Deposit Due to Repeated Delinquencies.
If payments on a customer account have become delinquent
five or more times, or if a meter has been turned off three
or more times for non-payment of charges, the General
Manager, Chief Financial Officer, or any person delegated by
the General Manager, shall be authorized to require the
customer to make a deposit with the District in cash, or any
other form satisfactory to the General Manager. The deposit
amount shall be established at the discretion of the General
Manager and the Chief Financial Officer but shall not exceed
two times the highest monthly bill during the twelve (12)
months preceding the date of demand for a deposit.
a. Handling of Deposit. A deposit for a delinquent
account shall not earn interest and shall only be
applied to reduce or satisfy amounts due the District
in the event of termination of service. A deposit does
not constitute payment for service bills and the
customer shall be required to comply with bill payment
requirements to continue receiving service.
b. Refund of Deposit. A deposit required under this
Section shall be refunded to the customer as provided
in Section 25.04.A.
G. Liens against Property for Delinquent Charges
Upon written notice to the property owner, a lien against the
property may be secured for unpaid bills. One or both of the
following lien procedures may apply:
1. Judgement Lien. In case any charges for water or other
services remain unpaid, the amount of the unpaid charges may
in the discretion of the District be secured at any time by
filing for recording in the office of the county recorder, a
certificate specifying the amount of such charges and the
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 4 of 8
name and address of the person liable therefor. The lien
acquired thereby shall attach to all property within the
County that is owned or thereafter acquired by the person
with the delinquent account. Such lien shall have the force,
priority, and effect of a judgment lien, and shall continue
for 10 years from the filing date, unless released or
discharged sooner. The lien may be extended, within 10 years
from the filing of the certificate or within 10 years from
the date of the last extension of the lien, by filing a new
certificate in the office of the county recorder. A lien
processing fee will be applied to any account against which
a lien is filed (see Appendix A, policy 54 for charge).
2. Tax Lien. Any unpaid charges or fees that are at least 60
days past due on July 1, may become part of the annual taxes
levied upon the property upon which service is provided. In
addition, if the charges remain unpaid by July 1, the
outstanding charges, plus a delinquent tax roll fee (see
Appendix A, policy 54 for the charge) will be added to the
“secure tax roll” of the County of San Diego for collection.
These lien procedures shall be in addition to any termination of
service procedures.
H. Termination and Reinstatement of Water Service for Delinquent
Accounts
1. Termination of Service. If payment is not made in
accordance with a Delinquency Notice, and the account
remains unpaid for at least 60 days, residential service
may be discontinued. The water meter or meters for said
delinquent account may be turned off and locked.
a. The District shall contact the customer(s) named
on the account by telephone or written notice no
less than seven (7) business days before
discontinuation of termination service.
b. The District shall make a reasonable, good faith
effort to contact an adult person residing at the
premises identified on the account by telephone or
in person, at least 48 hours prior to any
termination of service. A delinquency tag fee
will be charged (see Appendix A, policy 54 for
charge) to the bill for a contact made in person.
2. Procedures for Occupants or Tenants to Become Customers of
the District
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 5 of 8
a. Scope. This section only applies when a property
owner, landlord, manager, or operator of a
residential service address is listed as the
customer of record and has been issued a notice of
intent to discontinue water service due to
nonpayment.
b. Where an owner or manager is listed by the Dis-
trict as the customer of record of the service,
the District shall, in good faith, make every
effort to inform the actual users of the services
when the account is in arrears by means of a
Notice of Termination of Service that service will
be terminated in ten days.
c. Agreement to District Terms and Conditions of
Service. The District will make service available
to the actual residential occupants if each
occupant agrees to the terms and conditions of
service and meets the requirements of the
District’s rules and regulations. Notwithstanding,
if one or more of the occupants are willing and
able to assume responsibility for the subsequent
charges to the account to the satisfaction of the
District, the District will make service available
to the occupants who have met those requirements.
d. Verification of Tenancy. In order for the amount
due on the delinquent account to be waived, an
occupant who becomes a customer will verify that
the delinquent account customer of record is or
was the landlord, manager, or agent of the
dwelling. Verification may include, but is not
limited to, a lease or rental agreement, rent
receipts, a government document indicating that
the occupant is renting the property, or
information disclosed pursuant to Section 1962 of
the Civil Code, at the discretion of the District.
3. Residential water service shall not be terminated for
non-payment in any of the following situations:
a. During an investigation by the District of a
customer dispute or complaint. Any residential
customer who has initiated a complaint or
requested an investigation within five days of
receiving the disputed bill or who has, within 13
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 6 of 8
days of the mailing of the notice that the
customer's service will be terminated for non-
payment, or made a request for extension of the
payment period of a bill asserted to be beyond the
means of the customer to pay in full during the
normal period for payment, shall be given an
opportunity for a review by the General Manager,
Chief Financial Officer, or any person designated
by the General Manager. The review shall include
consideration of whether the customer shall be
permitted to amortize the unpaid balance of the
account over a reasonable period of time, not to
exceed 12 months. No termination of service shall
be affected for any customer who complies with an
amortization agreement, if the customer also keeps
the account current as charges accrue in each
subsequent billing period.
Any customer, whose complaint or request for an
investigation has resulted in an adverse
determination by the District, may appeal the
determination to the Board.
b. When a customer has been granted an extension of
the period for payment of a bill.
c. In addition, the District will not terminate water
service if all the following conditions are met:
1. The customer, or a tenant of the customer,
submits certification from a primary care
provider, as that term is defined in
subparagraph (A) of paragraph (1) of
subdivision (b) of Section 14088 of the Welfare
and Institutions Code, that discontinuation of
water service would be life threatening or pose
a serious threat to the health and safety of a
resident of the premises; and
a. The customer is financially unable to pay
within a normal billing cycle. This can be shown
by either:
Demonstrating that someone in the household is
a recipient of one of the following programs:
• CalWorks
• CalFresh
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 7 of 8
• General assistance
• Medi-Cal
• Supplemental Security Income/State
Supplementary Payment Program
• California Special Supplemental Nutrition
Program for Women, Infants, and Children
• Or declaring under penalty of perjury that
household income is less than 200% of the
federal poverty level; and
b. The customer is willing to enter into an
alternative payment arrangement, including an
extension, amortization, or alternative payment
schedule with respect to the delinquent charges.
c. For customers who meet conditions a. and b.
above, the District will offer one of the
following options, to be selected by the
District in its discretion: (i) an extension for
payment, (ii) amortization of the outstanding
balance or (iii) an alternative payment
schedule.
d. Termination of service.
1. If the customer fails to comply with an
amortization agreement, alternative payment
schedule, payment extension for 60 days or
more, or if the customer does not pay his or
her current residential service charges for
at least 60 days, residential service may be
discontinued no sooner than five (5) business
days after the District posts a final notice
of intent to disconnect services in a
prominent and conspicuous location at the
property. A delinquency tag fee will be
charged (see Appendix A, policy 54 for
charge) to the bill for a contact made in
person.
2. Termination of service shall not occur on any
Friday, Saturday, Sunday, legal holiday, or
OTAY WATER DISTRICT BOARD OF DIRECTORS POLICY
Subject Policy Number Date Adopted Date Revised
DISCONTINUATION OF WATER SERVICE FOR
DELINQUENT ACCOUNTS
54
Page 8 of 8
at any time during which the business offices
of the District are not open to the public.
4. Reinstatement of Service. Reinstatement of service
will occur during normal business hours of Monday through
Friday 8:00am and 5:00pm. Water service terminated for
delinquency may not be reinstated until all amounts due and
payable, including late payment charges and lock charges,
have been paid at the District business office, or unless
credit arrangements satisfactory to the District have been
made. Accounts that have payments received at the District
office after 4:30pm may not have service restored until the
next business day.
5. Meter Lock Charge. A lock charge will be assessed to
any account that has been terminated for non-payment. The
charge to terminate service is set forth in Appendix A,
34.02 C.
References
A. California Water Code div. 1, ch. 1, § 106.3
B. California Health & Safety Code, div. 104, part 2, ch. 6,
§ 116900 et seq. (SB 998 [2018])
C. California Government Code, tit. 6, div. 1, § 60370 et seq.
D. California Civil Code div. 3, part 2, title 2, § 1632
1
ORDINANCE NO. 576
AN ORDINANCE OF THE BOARD OF DIRECTORS OF
THE OTAY WATER DISTRICT
AMENDING SECTION 34, ISSUANCE AND PAYMENT OF WATER BILLS AND
APPENDIX A OF THE DISTRICT’S CODE OF ORDINANCES
BE IT ORDAINED by the Board of Directors of Otay Water
District that the District’s Code of Ordinances Section 34,
Issuance and Payment of Water Bills; and Appendix A be amended
as per Exhibits 1, 2, 3 & 4 (attached).
NOW, THEREFORE, BE IT RESOLVED that the new proposed
Section 34, Issuance and Payment of Water Bills (Exhibit 2) and
Appendix A (Exhibit 4) of the Code of Ordinances shall become
effective on January 1, 2020.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
the Otay Water District at a regular meeting duly held this 6th
day of November 2019, by the following roll call vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
________________________________
President
ATTEST:
________________________
District Secretary
34-1
SECTION 34 ISSUANCE AND PAYMENT OF WATER BILLS
34.01 ISSUANCE, DUE DATE AND FINAL PAYMENT DATE OF
STATEMENT OF CHARGES FOR SERVICE
A.Issuance of Statements. Statements for water
service or other charges will be mailed or
presented as soon as practicable after the water
meter has been read and the applicable charges have
been determined.
B.Due Date.Each statement issued by the District
for such charges shall be due and payable on the
date of mailing or other presentation to the
customer.
C.Final Payment Date. All charges in each statement
must be paid on or before the final payment date
shown on the statement, which shall be at least 20
calendar days following the date of mailing or
presentation of the statement.
D.Payment of Charges.
1. Place of Payment. Payments shall not be
credited to a customer's account until cash, check,
credit card, draft, electronic funds transfer,
money order, or any other acceptable form of
payment that will be honored by the bank has been
received by the District at the District business
office during regular office hours. Deposit of
payment in the mail or at a location other than the
District business office shall not be credited to a
customer's account until received at the business
office.
2.Returned Check Charges. A returned payment
charge (see Appendix A, 34.01 D.2. for charge)
shall be added to a customer's account in each
instance where payment has been made to the
District with a check, draft, credit card or any
other acceptable form of payment that has not been
honored upon presentment to the bank upon which it
is drawn.
34.02 DELINQUENT ACCOUNTS
A.For Non-Payment of Charges. If full payment of a
statement for a water service account is not
received at the District business office on or
before the final payment date, the account shall
become delinquent.
34-2
B. Late Payment Charge. A late payment charge (see
Appendix A, 34.02 B. for charge) of the total
amount delinquent shall be added to each delinquent
account at the time any amount becomes delinquent,
provided that the charge shall not be made on any
account which at that time has no delinquencies of
record. When a late payment charge is made, such
shall be added to the delinquent account as of the
date the account becomes delinquent and such
charges shall become an inseparable part of the
amount due as of that time.
C. Notice of Delinquency. A delinquency notice shall
be mailed to each customer whose account is
delinquent, notifying the customer that service
will be turned off unless payment is made. The
notice shall indicate the amount due, including
late payment charges, and that the total amount
must be paid within fifteen (15) calendar days from
the date of mailing or presentation of the notice
to the customer, or service will be discontinued.
D. Record of Delinquent Accounts. The District
maintains records of delinquent accounts. Each
year one delinquency shall be removed from the
record of each account that has one or more
delinquencies.
E. Partial Payment on Delinquent Account. A partial
payment on a delinquent account may be accepted and
credited to a customer's account; however, the
partial payment shall not cause removal of the
account from a delinquent status and furthermore,
the partial payment shall not preclude the meter
from being turned off for delinquency.
F. Financial Arrangements for Delinquent Accounts.
1. Continuation of Service. The General Manager,
Chief Financial Officer, or any person delegated by
the General Manager, may authorize continuation of
service to a delinquent account if financial
arrangements, satisfactory to the District, have
been established.
2. Requirement of Deposit Due to Repeated
Delinquencies. If payments on a customer account
have become delinquent five or more times, or if a
meter has been turned off three or more times for
non-payment of charges, the General Manager, Chief
Financial Officer, or any person delegated by the
General Manager, shall be authorized to require the
customer to make a deposit with the District, in
34-3
cash or any other form satisfactory to the General
Manager. The deposit amount shall be established
at the discretion of the General Manager and the
Chief Financial Officer, but shall not exceed two
times the highest monthly bill during the twelve
(12) months preceding the date of demand for a
deposit.
(a) Handling of Deposit. A deposit shall not earn
interest and shall only be applied to reduce
or satisfy amounts due the District in the
event of termination of service. A deposit
does not constitute payment for service bills
and the customer shall be required to comply
with bill payment requirements to continue
receiving service.
(b) Refund of Deposit. A deposit required under
this Section shall be refunded to the customer
as provided in Section 25.04.A.
G. Liens against Property for Delinquent Charges
Upon written notice to the property owner, a lien
against the property may be secured for unpaid bills.
One or both of the following lien procedures may apply:
1. Judgement Lien. In case any charges for water or
other services remain unpaid, the amount of the unpaid
charges may, in the discretion of the District, be
secured at any time by filing for record in the Office
of the County Recorder, a certificate specifying the
amount of such charges and the name and address of the
person liable therefore. The lien acquired thereby
shall attach to all property within the County that is
owned or thereafter acquired by the person. Such lien
shall have the force, priority and effect of a
judgment lien and shall continue for 10 years from the
filing date, unless released or discharged sooner. The
lien may be extended, within 10 years from the filing
of the certificate or within 10 years from the date of
the last extension of the lien, by filing a new
certificate in the Office of the County Recorder. A
service charge will be applied to any account where a
lien is filed (see Appendix A 34.02 G.1. for charge).
2. Tax Lien. Any unpaid charges or fees that are at
least 60 days past due on July 1, may become part of
the annual taxes levied upon the property upon which
service is provided. In addition, if the charges
remain unpaid by July 1, the outstanding charges, plus
34-4
a service charge (see Appendix A 34.02 G.2. for
charge) will be added to the “secure tax roll” of the
County of San Diego for collection.
These lien procedures shall be in addition to any
termination of service procedures.
H. Termination and Reinstatement of Water Service
Under Delinquent Accounts
1. Termination of Service. The water meter or
meters under delinquent accounts may be turned off
and locked if payment has not been made in
accordance with the Notice of Delinquency.
(a) Where an owner or manager is listed by the
District as the customer of record of the
service, the District shall make every good
faith effort to inform the actual users of the
services when the account is in arrears by
means of a notice that service will be
terminated in ten days. The notice shall
further inform the actual users that they have
the right to become customers of the District
without being required to pay the amount due
on the delinquent account.
(b) Residential water service shall not be termi-
nated for non-payment in any of the following
situations:
(1) During an investigation by the District
of a customer dispute or complaint. Any
residential customer who has initiated a
complaint or requested an investigation
within five days of receiving the
disputed bill, or who has, within 13 days
of the mailing of the notice that the
customer's service will be terminated for
non-payment, or made a request for exten-
sion of the payment period of a bill
asserted to be beyond the means of the
customer to pay in full during the normal
period for payment, shall be given an
opportunity for a review. The review
shall include consideration of whether
the customer shall be permitted to
amortize the unpaid balance of the
account over a reasonable period of time
not to exceed 12 months. No termination
of service shall be affected for any
customer complying with an amortization
agreement, if the customer also keeps the
34-5
account current as charges accrue in each
subsequent billing period.
Any customer, whose complaint or request
for an investigation has resulted in an
adverse determination by the District,
may appeal the determination to the
Board.
(2) When a customer has been granted an
extension of the period for payment of a
bill.
(3) On the certification of a licensed physi-
cian and surgeon that to do so will be
life threatening to the customer and the
customer is financially unable to pay for
service within the normal payment period
and is willing to enter into an amortiza-
tion agreement to pay the unpaid balance
of any bill asserted to be beyond the
means of the customer over a period not
to exceed 12 months.
(c) The ten-day notice of proposed termination may
not be sent to the customer until at least 19
days from the date of mailing of the bill for
services. The ten-day period shall not com-
mence until five days after the mailing of the
notice.
(d) The District shall make a reasonable, good
faith effort to contact an adult person resid-
ing at the premises of the customer by tele-
phone or in person, at least 48 hours prior to
any termination of service. A charge (see
Appendix A, 34.02 H.1. (d) for charge) shall
be added to the bill for a contact made in
person.
(e) Every notice of termination of service
pursuant to subdivisions (a) and (c) shall
include all of the following information:
(1) The name and address of the customer
whose account is delinquent.
(2) The amount of the delinquency.
(3) The date by which payment or arrangements
for payment is required in order to avoid
termination.
34-6
(4) The procedure by which the customer may
initiate a complaint or request an inves-
tigation concerning service or charges,
except that if the bill for service con-
tains a description of that procedure,
then the notice is not required to
contain that information.
(5) The procedure by which the customer may
request amortization of the unpaid
charges.
(6) The procedure for the customer to obtain
information on the availability of finan-
cial assistance including private, local,
state or federal sources, if applicable.
(7) The telephone number of a representative
of the District who can provide
additional information or institute
arrangements for payment.
(f) If a residential customer fails to comply with
an amortization agreement, the District shall
not terminate service without giving notice to
the customer at least 48 hours prior to termi-
nation of the conditions the customer is
required to meet to avoid termination, but the
notice does not entitle the customer to
further investigation by the District.
(g) Termination of service shall not occur on any
Friday, Saturday, Sunday, legal holiday or at
any time during which the business offices of
the District are not open to the public.
(h) No termination of service may be affected
without compliance with this section and any
service wrongfully terminated shall be
restored, without charge, for the restoration
of service.
(See California Government Code Section 60373.)
2. Reinstatement of Service. Water service
terminated for delinquency may not be reinstated
until all amounts due and payable, including late
payment charges and meter "turn-on" charges, have
been paid at the District business office, or
unless credit arrangements satisfactory to the
District have been made.
34-7
3. Meter "Turn-On" Charge. A "turn-on" charge
shall be made for turning on any meter which has
previously been turned off for a delinquent
account. The charge to turn-on a meter is set
forth in Appendix A, 34.02 H.3.
34-1
SECTION 34 ISSUANCE AND PAYMENT OF WATER BILLS
34.01 ISSUANCE, DUE DATE, AND FINAL PAYMENT DATE OF
STATEMENT OF CHARGES FOR SERVICE
A.Issuance of Statements. Statements for water
service or other charges will be mailed or presented
as soon as practicable after the water meter has
been read and the applicable charges have been
determined.
B.Due Date. Each statement issued by the District for
such charges shall be due and payable on the date of
mailing or other presentation to the customer.
C.Final Payment Date. All charges in each statement
must be paid on or before the final payment date
shown on the statement, which shall be at least 20
calendar days following the date of mailing or
presentation of the statement.
D.Payment of Charges.
1. Place of Payment. Payments shall not be
credited to a customer's account until cash, check,
credit card, draft, electronic funds transfer, money
order, or any other acceptable form of payment that
will be honored by the bank has been received by the
District at the District business office during
regular office hours. Deposit of payment in the
mail or at a location other than the District
business office shall not be credited to a
customer's account until it is received at the
business office.
2.Returned Check Charges. A returned payment
charge (see Appendix A, 34.01 D.2. for charge) shall
be added to a customer's account in each instance
where payment has been made to the District with a
check, draft, credit card or any other acceptable
form of payment that has not been honored upon
presentment to the bank upon which it is drawn.
34.02 DELINQUENT ACCOUNTS
A.If full payment of a statement for a water service
account is not received at the District business
office on or before the final payment date, the
account shall become delinquent, a late payment
charge will be assessed and the customer’s service
may be terminated, the water may be turned off and
locked. Please see Policy 54, Discontinuation of
34-2
Water Service for Delinquent Accounts for additional
information.
B. Reinstatement of Service. Reinstatement of
service will occur during normal business hours of
Monday through Friday 8:00am and 5:00pm. Water
service terminated for delinquency may not be
reinstated until all amounts due and payable,
including late payment charges and lock charges,
have been paid at the District business office, or
unless credit arrangements satisfactory to the
District have been made. Accounts that have payments
received at the District office after 4:30pm may not
have service restored until the next business day.
C. Meter Lock Charge. A lock charge will be
assessed to any account that has been terminated for
non-payment. The charge to terminate service is set
forth in Appendix A, 34.02 C.
Section #Code #Fee Description Meter Size
9 9.04 A.1.District Annexation Processing Fee $827.54
9.04 B.
Annexation Fees for Water Annexations
into Otay Water District Boundaries
Districtwide
Annexation Fee
3/4"$2,104.11
1"$5,260.28
1-1/2"$10,520.55
2"$16,832.88
3"$33,665.76
4 $52,602.75
6"$105,205.50
8"$168,328.80
10"$241,972.65
9.04 C.4.
Annexation Fees for Annexations to Sewer
Improvement Districts per EDU $1,151.04
10 10.01 Waiver Request $50.00
23 23.04 Backflow Certification
- Second Notification $10.00
- Third Notification $25.00
- Third Notification (hand delivered)$45.00
- Reconnection $50.00
- Reconnection (if test performed with technician present)$150.00
- Initial Filing Fee (New applicants for
addition to the list of approved backflow
prevention device testers)$25.00
- Renewal Filing Fee (to remain on list of
approved backflow prevention device
testers)Annually $10.00
25 25.03 A. Set-up Fees for Accounts $15.00
25 25.03 B.
Monthly MWD & CWA Fixed System
Charges (1)3/4"$15.56
1"$28.89
1-1/2"$65.31
2"$111.10
3"$236.29
Otay Water District
Appendix A
Charges
(1)All Water used in December and billed in January 2020.
EXHIBIT 3
Section #Code #Fee Description Meter Size Charges
25 25.03 B.
Monthly MWD & CWA Fixed System
Charges (1) (continued)4" $378.38
6" $774.56
8" $1,250.83
10" $1,800.41
25 25.03 C.1.
Domestic Residential Monthly Fixed
System Charges (1)3/4" $18.87
1" $26.67
1-1/2" $46.13
2" $69.49
25 25.03 C.2.
Multi-Residential Monthly Fixed System
Charges (1)3/4" $41.49
1" $58.59
1-1/2" $101.38
2" $152.67
3" $289.53
4" $443.54
6" $871.38
8" $1,384.73
10" $1,983.62
25 25.03 C.3.
Business and Publicly-Owned Monthly
Fixed System Charges (1)3/4" $39.08
1" $55.19
1-1/2" $95.50
2" $143.82
3" $272.73
4" $417.79
6" $820.82
8" $1,304.36
10" $1,868.46
25 25.03 C.4.3/4" $33.00
1" $46.61
1-1/2" $80.65
2" $121.44
3" $230.32
4" $352.85
6" $693.20
8" $1,101.58
10" $1,577.99(1) All Water used in December and billed in January 2020.
Irrigation and Commercial Agricultural
Monthly Fixed System Charges (1)
Section #Code #Fee Description Meter Size Charges
25 25.03 C.5.
- Irrigation 3/4" $33.95
1" $47.95
1-1/2" $82.97
2" $124.94
3" $236.94
4" $362.99
6" $724.02
8" $1,133.22
10" $1,623.32
25 25.03 C.6.
- Commercial 3/4" $40.21
1" $56.78
1-1/2" $98.27
2" $148.00
3" $280.65
4" $429.92
6" $844.62
8" $1,342.20
10" $1,922.69
25 25.03 D.1.(b) Domestic Residential Water Rates (1)Unit Charge
1-10 $3.31
11-22 $5.91
23 or more $7.63
25 25.03 D.2.(b)
Multi-Residential Water Rates - Per
Dwelling Unit (1)0-4 $3.09
5-9 $5.61
10 or more $6.90
25 25.03 D.3.(b)
Business and Publicly-Owned Water Rates
(1)All Units $3.92
25 25.03 D.4.(c)
Irrigation and Commercial Agricultural
Using Potable Water Rates (1)All Units $5.72
25 25.03 D.5.(c)Recycled Irrigation Water Rates (1)All Units $4.65
25 25.03 D.6.(c)Recycled Commercial Water Rates (1)All Units $3.29
(1) All Water used in December and billed in January 2020.
Recyled Monthly Fixed System Charges (1)
Recyled Monthly Fixed System Charges (1)
Section #Code #Fee Description Meter Size Charges
25 25.03 D.7.(b)
Potable Temporary and Construction
Water Service Rates (1)All Units $11.44
25 25.03 D.8.(b)
Recycled Temporary and Construction
Water Service Rates (1)All Units $9.30
25 25.03 D.10.(b) Tank Trucks Water Rates (1)All Units $11.44
25 25.03 D.11.(c)
Application Fee for Water Service Outside
District Boundaries $500.00
25 25.03 D.11.(d)
Water Rate for Service Outside District
Boundaries (1)All Units $11.44
25 25.03 D.12.(b)
Application Fee for Water Service Outside
an Improvement District $275.00
25 25.03 D.12.(c)
Water Rate for Service Outside
Improvement District (1)All Units $11.44
25 25.03 D.13.(c) Fire Service Monthly Charge 3" or less $22.55
more than 4"$30.38
25 25.03 D.14.(b)Government Fee Per Unit $0.42
25 25.03 D.15.(b)Interim Service Water Rate(1)All Units $11.44
25 25.03 E.Energy Charges for Pumping Water (1)
Per 100 ft of lift
over 450 ft per
unit $0.06
25 25.04 A.Deposits for Non-Property Owners 3/4"$100.00
1"$200.00
1-1/2"$250.00
2"$400.00
3"$1,000.00
4"$1,350.00
6"$3,300.00
8"$7,000.00
10"$10,000.00
(1) All Water used in December and billed in January 2020.
Section #Code #Fee Description Meter Size Charges
28 28.01 B.1.Capacity Fees and Zone Charge
Districtwide
Capacity Fee
- All IDs excluding Triad 3/4" $7,660.34
1" $19,150.85
1-1/2" $38,301.70
2" $61,282.72
3" $122,565.44
4 $191,508.50
6" $383,017.00
8" $612,827.20
10" $880,939.10
- TRIAD 3/4" $5,746.79
1" $14,366.98
1 -1/2" $28,733.95
2" $45,974.32
3" $91,948.64
4 $143,669.75
6" $287,339.50
8" $459,743.20
10" $660,880.85
28 28.01 B.2.New Water Supply Fee
- All IDs including Triad 3/4" $831.53
1" $2,078.83
1-1/2" $4,157.65
2" $6,652.24
3" $13,304.48
4" $20,788.25
6" $41,576.50
8" $66,522.40
10" $95,625.95
28 28.02 Installation and Water Meter Charges Meter Size Meter Cost Installation Total
Meter
Box/Vault
(if Needed)
- Potable (Non-Irrigation)3/4" x 7.5"$236.25 $112.11 $348.36 $95.18
3/4" x 9"$251.53 $112.11 $363.64 $95.18
1"$304.86 $112.11 $416.97 $95.18
1.5"$495.51 $112.11 $607.62 $215.76
2"$710.01 $112.11 $822.12 $215.76
3"$2,212.68 $674.99 $2,887.67 $3,848.86
4"$3,843.08 $674.99 $4,518.07 $3,848.86
6"$6,638.04 $1,066.20 $7,704.24 $3,848.86
8"$8,293.74 $1,634.92 $9,928.66 $5,521.46
10"$11,927.94 $1,634.92 $13,562.86 $5,521.46
Section #Code #Fee Description Meter Size Charges
28 28.02
- Potable/Recycled Irrigation 3/4" x 7.5"$236.25 $112.11 $348.36 $242.55
3/4" x 9"$251.53 $112.11 $363.64 $242.55
1"$304.86 $112.11 $416.97 $242.55
1.5"$495.51 $112.11 $607.62 $242.55
2"$710.01 $112.11 $822.12 $242.55
3"$1,531.40 $674.99 $2,206.39 $3,848.86
4"$2,981.40 $674.99 $3,656.39 $3,848.86
6"$5,367.49 $1,066.20 $6,433.69 $3,848.86
8"$7,150.46 $1,634.92 $8,785.38 $5,521.46
10"$10,147.04 $1,634.92 $11,781.96 $5,521.46
- Combined Fire and Domestic 4"$9,143.03 $674.99 $9,818.02 $3,848.86
6"$12,168.57 $1,066.20 $13,234.77 $3,848.86
8"$17,692.22 $1,634.92 $19,327.14 $5,521.46
10"$24,144.03 $1,634.92 $25,778.95 $5,521.46
31 31.03 A.1.
Requirement of Deposit for Temporary
Meters 3/4"$156.85
1"$184.78
1-1/2"$379.62
2"$2,046.00 4"$1,986.00
6"$2,465.00
- Construction Trailer Temporary Meter 2"$2,046.00
- Tank Truck Temporary Meter
(Ordinance No. 372)2"$850.00
31 31.03 A.4.Temporary Meter Install & Removal 3/4" - 4" (on hydrant)$150.00
4" - 6"$806.00
8" - 10"Actual Cost
31 31.03 A.5.
Temporary Meter Move Fee
(includes backflow certification)3/4" - 4"(on hydrant)$150.00
4" - 6" $806.00
8" - 10"Actual Cost
33 33.07 A.
Customer Request for Meter Test
(Deposit)5/8", 3/4" & 1"$60.00
1-1/2" & 2 "$120.00
3" & Larger $300.00
34 34.01 D.2. Returned Check Charges $25.00
Installation and Water Meter Charges (continued)
Section #Code #Fee Description Meter Size Charges
34 34.02 B.Late Payment Charge
5% of
Delinquent
Balance
34 34.02 G.1.Lien Processing Fee 50.00
34 34.02 G.2.Delinquent Tax Roll Fee 40.00
34 34.02 H.1.(d)Delinquency Tag $15.00
34 34.02 H.3.Meter "Turn-On" Charge $50.00
53 53.03 A.1.Sewer Capacity Fee within an ID $3,379.23
53 53.03 A.2.Sewer Capacity Fee per EDU outside an ID $5,781.67
53 53.03 B.1.Sewer Connection Fee - Russell Square $7,500.00
53 53.03 B.2.Monthly Sewer Service Charge - Russell Square $200.00
53 53.10 & 11 Set-up Fees for Accounts $15.00
53 53.10 Residential Sewer Rates (2)
Rate multiplied
by winter
average units $2.93
53 53.10
Residential Monthly Fixed Sewer System
Charges (2)5/8", 3/4" & larger $16.38
53 53.10 A.4.
Residential Sewer Without Consumption
History 5/8", 3/4" & larger $37.80
53 53.10 B.2.Multi-Residential Sewer Rates (2)
Rate multiplied
by winter
average units $2.93
53 53.10 B.2.
Multi-Residential Monthly Fixed Sewer
System Charges (2).75"$16.38
1"$40.94
1.5"$81.88
2"$131.00
3"$245.64
4"$409.40
6"$818.79
8" $1,310.08
10"$1,883.23
(2) Sewer billed beginning January 1, 2020.
Section #Code #Fee Description Meter Size Charges
53 53.10 B.3.
Monthly Multi-Residential Sewer Rates
without Consumption History (2) Per dwelling unit $19.20
53 53.11 Commercial and Industrial Sewer Rates
Rate
multiplied by Low Strength $2.93
annual avg.Medium Strength $3.64
units High Strength $5.01
53 53.11
Commercial and Industrial Monthly Fixed
Sewer System Charges (2).75"$16.38
1"$40.94
1.5"$81.88
2"$131.00
3"$245.64
4"$409.40
6"$818.79
8" $1,310.0810"$1,883.23
60 60.03
Issuance of Availability Letters for Water
and/or Sewer Service $75.00
72 72.04 A.1.
Locking or Removing Damaged or
Tampered Meters
- To Pull and Reset Meter 3/4" - 2"$200.00
- Broken Curbstop or Tabs 3/4" - 1"Actual Cost
- If Customer uses Jumper 3/4" - 1"Actual Cost
- Broken Lock/Locking Device 3/4" - 1"$68.00
- Broken Curbstop or Tabs 1.5" - 2"Actual Cost
- To Pull and Reset Meter 3"Actual Cost
- To Pull and Reset Meter 4"Actual Cost
- To Pull and Reset Meter 6"Actual Cost
- To Pull and Reset Meter 8"Actual Cost
- To Pull and Reset Meter 10"Actual Cost
72 72.05 D. Type I Fine
- First Violation $100.00
- Second Violations $200.00
- Third or each additional violation of that
same ordinance or requirement within a
twelve-month period $500.00
(2) Sewer billed beginning January 1, 2020.
Section #Code #Fee Description Meter Size Charges
72 72.05 D. Type II Fine $5,000.00
Type III Fine $500.00
Type IV Fine $500.00
State Water
Code
#71630 & Annual Board
Resolution #4142
Water Availability/Standby Annual Special
Assessment Charge $10.00
$30.00
$3.00
$3.00
State Water
Code
#71630 & Annual Board
Resolution #4142
Sewer Availability/Standby Annual Special
Assessment Charge $10.00
$30.00
Annual
Board
Resolution
General Obligation Bond Annual Tax
Assessment $0.005
Policies
5B Copies of Identifiable Public Records $0.20/page
Per acre for outside I.D. & greater
than one mile from District
facilities.
Less than one acre
I.D. 18
Per acre I.D. 18
8 1/2" x 11"
Per $1000 of assessed value for
I.D. 27
Less than one-acre Outside I.D.
and greater than one mile from
District facilities.
Fine up to amount specified per
each day the violation is identified
or continues.
Fine up to amount specified per
each day the violation is identified
or continues.
Less than one-acre all I.D.s &
Outside an I.D.
Per acre in I.D. 22
The cost for all other copy sizes
is the direct cost of duplication.
Will not exceed per each day the
violation is identified or continues.
Section #Code #Fee Description Meter Size
9 9.04 A.1.District Annexation Processing Fee $827.54
9.04 B.
Annexation Fees for Water Annexations
into Otay Water District Boundaries
Districtwide
Annexation Fee
3/4"$2,104.11
1"$5,260.28
1-1/2"$10,520.55
2"$16,832.88
3"$33,665.76
4 $52,602.756"$105,205.50
8"$168,328.80
10"$241,972.65
9.04 C.4.
Annexation Fees for Annexations to Sewer
Improvement Districts per EDU $1,151.04
10 10.01 Waiver Request $50.00
23 23.04 Backflow Certification
- Second Notification $10.00
- Third Notification $25.00
- Third Notification (hand delivered)$45.00
- Reconnection $50.00
- Reconnection (if test performed with technician present)$150.00
- Initial Filing Fee (New applicants foraddition to the list of approved backflow
prevention device testers)$25.00
- Renewal Filing Fee (to remain on list
of approved backflow prevention device
testers)Annually $10.00
25 25.03 A. Set-up Fees for Accounts $15.00
25 25.03 B.
Monthly MWD & CWA Fixed System
Charges (1)3/4"$15.56
1"$28.89
1-1/2"$65.312"$111.10
3"$236.29
Otay Water District
Appendix A
Charges
(1)All Water used in December and billed in January 2020.
EXHIBIT 4
Section #Code #Fee Description Meter Size Charges
25 25.03 B.
Monthly MWD & CWA Fixed System
Charges (1) (continued)4" $378.38
6" $774.56
8" $1,250.83
10" $1,800.41
25 25.03 C.1.
Domestic Residential Monthly Fixed
System Charges (1)3/4" $18.871" $26.67
1-1/2" $46.13
2" $69.49
25 25.03 C.2.
Multi-Residential Monthly Fixed System
Charges (1)3/4" $41.49
1" $58.59
1-1/2" $101.38
2" $152.67
3" $289.53
4" $443.54
6" $871.38
8" $1,384.73
10" $1,983.62
25 25.03 C.3.
Business and Publicly-Owned Monthly
Fixed System Charges (1)3/4" $39.08
1" $55.19
1-1/2" $95.50
2" $143.82
3" $272.734" $417.79
6" $820.82
8" $1,304.36
10" $1,868.46
25 25.03 C.4.3/4" $33.00
1" $46.61
1-1/2" $80.65
2" $121.44
3" $230.32
4" $352.85
6" $693.20
8" $1,101.58
10" $1,577.99
Irrigation and Commercial Agricultural
Monthly Fixed System Charges (1)
(1) All Water used in December and billed in January 2020.
Section #Code #Fee Description Meter Size Charges
25 25.03 C.5.
- Irrigation 3/4" $33.95
1" $47.95
1-1/2" $82.97
2" $124.94
3" $236.94
4" $362.99
6" $724.02
8" $1,133.22
10" $1,623.32
25 25.03 C.6.
- Commercial 3/4" $40.21 1" $56.78
1-1/2" $98.27
2" $148.00
3" $280.65
4" $429.92
6" $844.62
8" $1,342.2010" $1,922.69
25 25.03 D.1.(b) Domestic Residential Water Rates (1)Unit Charge
1-10 $3.31
11-22 $5.91 23 or more $7.63
25 25.03 D.2.(b)
Multi-Residential Water Rates - Per
Dwelling Unit (1)0-4 $3.09
5-9 $5.61
10 or more $6.90
25 25.03 D.3.(b)
Business and Publicly-Owned Water
Rates (1)All Units $3.92
25 25.03 D.4.(c)
Irrigation and Commercial Agricultural
Using Potable Water Rates (1)All Units $5.72
25 25.03 D.5.(c)Recycled Irrigation Water Rates (1)All Units $4.65
25 25.03 D.6.(c)Recycled Commercial Water Rates (1)All Units $3.29
Recyled Monthly Fixed System Charges (1)
Recyled Monthly Fixed System Charges (1)
(1) All Water used in December and billed in January 2020.
Section #Code #Fee Description Meter Size Charges
25 25.03 D.7.(b)
Potable Temporary and Construction
Water Service Rates (1)All Units $11.44
25 25.03 D.8.(b)
Recycled Temporary and Construction
Water Service Rates (1)All Units $9.30
25 25.03 D.10.(b) Tank Trucks Water Rates (1)All Units $11.44
25 25.03 D.11.(c)
Application Fee for Water Service Outside District Boundaries $500.00
25 25.03 D.11.(d)
Water Rate for Service Outside District
Boundaries (1)All Units $11.44
25 25.03 D.12.(b)
Application Fee for Water Service Outside
an Improvement District $275.00
25 25.03 D.12.(c)
Water Rate for Service Outside
Improvement District (1)All Units $11.44
25 25.03 D.13.(c) Fire Service Monthly Charge 3" or less $22.55
more than 4"$30.38
25 25.03 D.14.(b)Government Fee Per Unit $0.42
25 25.03 D.15.(b)Interim Service Water Rate(1)All Units $11.44
25 25.03 E.Energy Charges for Pumping Water (1)
Per 100 ft of lift
over 450 ft per unit $0.06
25 25.04 A.Deposits for Non-Property Owners 3/4"$100.00
1"$200.00
1-1/2"$250.00
2"$400.00
3"$1,000.00
4"$1,350.00
6"$3,300.00
8"$7,000.00
10"$10,000.00
(1) All Water used in December and billed in January 2020.
Section #Code #Fee Description Meter Size Charges
28 28.01 B.1.Capacity Fees and Zone Charge
Districtwide
Capacity Fee
- All IDs excluding Triad 3/4" $7,660.34
1" $19,150.85
1-1/2" $38,301.70
2" $61,282.72 3" $122,565.44
4 $191,508.50
6" $383,017.00
8" $612,827.20
10" $880,939.10
- TRIAD 3/4" $5,746.791" $14,366.98
1 -1/2" $28,733.95
2" $45,974.32
3" $91,948.64
4 $143,669.75
6" $287,339.50
8" $459,743.20
10" $660,880.85
28 28.01 B.2.New Water Supply Fee
- All IDs including Triad 3/4" $831.53
1" $2,078.83
1-1/2" $4,157.652" $6,652.24
3" $13,304.48
4" $20,788.25
6" $41,576.50
8" $66,522.40
10" $95,625.95
28 28.02 Installation and Water Meter Charges Meter Size Meter Cost Installation Total
Meter
Box/Vault
(if Needed)
- Potable (Non-Irrigation)3/4" x 7.5"$236.25 $112.11 $348.36 $95.18
3/4" x 9"$251.53 $112.11 $363.64 $95.18
1"$304.86 $112.11 $416.97 $95.18
1.5"$495.51 $112.11 $607.62 $215.76
2"$710.01 $112.11 $822.12 $215.76
3"$2,212.68 $674.99 $2,887.67 $3,848.864"$3,843.08 $674.99 $4,518.07 $3,848.86
6"$6,638.04 $1,066.20 $7,704.24 $3,848.86
8"$8,293.74 $1,634.92 $9,928.66 $5,521.46
10"$11,927.94 $1,634.92 $13,562.86 $5,521.46 (1) All Water used in December and billed in January 2020.
Section #Code #Fee Description Meter Size Charges
28 28.02
- Potable/Recycled Irrigation 3/4" x 7.5"$236.25 $112.11 $348.36 $242.55
3/4" x 9"$251.53 $112.11 $363.64 $242.55
1"$304.86 $112.11 $416.97 $242.55
1.5"$495.51 $112.11 $607.62 $242.55
2"$710.01 $112.11 $822.12 $242.55
3"$1,531.40 $674.99 $2,206.39 $3,848.86
4"$2,981.40 $674.99 $3,656.39 $3,848.86
6"$5,367.49 $1,066.20 $6,433.69 $3,848.86
8"$7,150.46 $1,634.92 $8,785.38 $5,521.46
10"$10,147.04 $1,634.92 $11,781.96 $5,521.46
- Combined Fire and Domestic 4"$9,143.03 $674.99 $9,818.02 $3,848.86
6"$12,168.57 $1,066.20 $13,234.77 $3,848.86
8"$17,692.22 $1,634.92 $19,327.14 $5,521.46
10"$24,144.03 $1,634.92 $25,778.95 $5,521.46
31 31.03 A.1.
Requirement of Deposit for Temporary
Meters 3/4"$156.85
1"$184.78
1-1/2"$379.62
2"$2,046.00 4"$1,986.00
6"$2,465.00
- Construction Trailer Temporary Meter 2"$2,046.00
- Tank Truck Temporary Meter
(Ordinance No. 372)2"$850.00
31 31.03 A.4.Temporary Meter Install & Removal 3/4" - 4" (on hydrant)$150.00
4" - 6"$806.00 8" - 10"Actual Cost
31 31.03 A.5.
Temporary Meter Move Fee
(includes backflow certification)3/4" - 4"(on hydrant)$150.00
4" - 6" $806.00
8" - 10"Actual Cost
33 33.07 A.
Customer Request for Meter Test
(Deposit)5/8", 3/4" & 1"$60.00
1-1/2" & 2 "$120.00
3" & Larger $300.00
34 34.01 D.2. Returned Check Charges $25.00
34 34.02 C Meter Lock Charge $50.00
Installation and Water Meter Charges (continued)
Section #Code #Fee Description Meter Size Charges
53 53.03 A.1.Sewer Capacity Fee within an ID $3,379.23
53 53.03 A.2.Sewer Capacity Fee per EDU outside an ID $5,781.67
53 53.03 B.1.Sewer Connection Fee - Russell Square $7,500.00
53 53.03 B.2.Monthly Sewer Service Charge - Russell Square $200.00
53 53.10 & 11 Set-up Fees for Accounts $15.00
53 53.10 Residential Sewer Rates (2)
Rate multiplied by winter average
units $2.93
53 53.10
Residential Monthly Fixed Sewer System
Charges (2)5/8", 3/4" & larger $16.38
53 53.10 A.4.
Residential Sewer Without Consumption
History 5/8", 3/4" & larger $37.80
53 53.10 B.2.Multi-Residential Sewer Rates (2)
Rate multiplied by winter average
units $2.93
53 53.10 B.2.
Multi-Residential Monthly Fixed Sewer
System Charges (2).75"$16.38
1"$40.94
1.5"$81.88
2"$131.00
3"$245.64
4"$409.40
6"$818.79
8" $1,310.08
10"$1,883.23
53 53.10 B.3.
Monthly Multi-Residential Sewer Rates
without Consumption History (2) Per dwelling unit $19.20
53 53.11 Commercial and Industrial Sewer Rates
Rate
multiplied by Low Strength $2.93
annual avg.Medium Strength $3.64
units High Strength $5.01(2) Sewer billed beginning January 1, 2020.
Section #Code #Fee Description Meter Size Charges
53 53.11
Commercial and Industrial Monthly Fixed
Sewer System Charges (2).75"$16.38
1"$40.94
1.5"$81.88
2"$131.00
3"$245.64
4"$409.40
6"$818.79
8" $1,310.08
10"$1,883.23
60 60.03 Issuance of Availability Letters for Water $75.00
72 72.04 A.1.Locking or Removing Damaged or
- To Pull and Reset Meter 3/4" - 2"$200.00
- Broken Curbstop or Tabs 3/4" - 1"Actual Cost
- If Customer uses Jumper 3/4" - 1"Actual Cost
- Broken Lock/Locking Device 3/4" - 1"$68.00
- Broken Curbstop or Tabs 1.5" - 2"Actual Cost
- To Pull and Reset Meter 3"Actual Cost
- To Pull and Reset Meter 4"Actual Cost
- To Pull and Reset Meter 6"Actual Cost
- To Pull and Reset Meter 8"Actual Cost
- To Pull and Reset Meter 10"Actual Cost
72 72.05 D. Type I Fine
- First Violation $100.00
- Second Violations $200.00 - Third or each additional violation of that
same ordinance or requirement within a $500.00
72 72.05 D. Type II Fine $5,000.00
Type III Fine $500.00
Type IV Fine $500.00
Will not exceed per each day the
violation is identified or continues.
Fine up to amount specified per
each day the violation is identified
Fine up to amount specified per
each day the violation is identified
(2) Sewer billed beginning January 1, 2020.
Section #Code #Fee Description Meter Size Charges
State Water
Code
#71630 & Annual Board
Resolution #4142
Water Availability/Standby Annual Special
Assessment Charge $10.00
$30.00
$3.00
$3.00
State Water
Code
#71630 & Annual Board
Resolution #4142
Sewer Availability/Standby Annual Special
Assessment Charge $10.00
$30.00
Annual General Obligation Bond Annual Tax $0.005
Policies
5B Copies of Identifiable Public Records $0.20/page
54 Late Payment Charge
5% of
Delinquent
Balance
54 Lien Processing Fee 50.00
54 Delinquent Tax Roll Fee 40.00
54 Delinquency Tag $25.00
The cost for all other copy sizes is
the direct cost of duplication.
Per $1000 of assessed value for
Less than one-acre Outside I.D.
Less than one-acre all I.D.s &
Outside an I.D.
Per acre for outside I.D. & greater
Less than one acre
I.D. 18
Per acre I.D. 18
8 1/2" x 11"
Per acre in I.D. 22
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Marissa Dychitan
Senior Accountant
PROJECT: DIV. NO. All
APPROVED BY: Eid Fakhouri, Finance Manager
Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Approve the Audited Financial Statements for the Fiscal Year
Ended June 30, 2019
GENERAL MANAGER’S RECOMMENDATION:
That the Board approve the Audited Financial Statements (Attachment
B)including the Independent Auditors’ unqualified opinion, for the
fiscal year ended June 30, 2019.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To inform the Board of the significant financial events which
occurred during the fiscal year ended June 30, 2019 as reflected in
the audited financial statements.
ANALYSIS:
Teaman, Ramirez & Smith, Inc., performed the audit and found that, in
all material respects, the financial statements correctly represent
the financial position of the District. They found no material
errors in the financial records or statements (Attachment D).
AGENDA ITEM 8a
2
Total Assets:
Total assets decreased by $6.5 million or 1.17% during fiscal year 2019
to $548.0 million, due to depreciation and the $31.8 million advance
funding to CALPERS which was partially offset by investment in capital
infrastructure and Water Revenue Bond proceeds.
Deferred Outflows & Deferred Inflows:
Deferred outflows increased by $28.9 million or 233.57% due to advance
payment to CALPERS that will be recognized as a reduction to pension
liability in fiscal year 2020 while deferred inflows increased by $0.2
million or 0.01%.
Total Liabilities & Net Positions:
Total liabilities increased by approximately $22.1 million from the
previous fiscal year, to $199.9 million. This is attributable to the
issuance of 2018 Water Revenue Bonds, partially offset by the annual
debt payments of $4.0 million.
The net position increased by $0.1 million or 0.01% to $387.6 million
as June 30, 2019.
Capital Contributions:
Capital contributions for fiscal year 2019 were $9.4 million. This
consists of developers contributing $5.8 million in capacity fees and
$2.7 million in contributed fixed assets; and $0.4 million in
reimbursements from Caltrans. Ratepayers also paid $0.5 million in
availability fees, which are considered a part of capital
contributions.
Results of Operations:
Operating revenues decreased by $5.5 million or 5.66%, mainly as a
result of the overall decrease in water sales volume.
Cost of water sales decreased by $2.3 million or 3.62% due to
decreases in water sales volume and unit purchase costs.
Non-Operating Revenues & Expenses:
Non-operating revenues increased by $2.6 million or 33.09% for
Fiscal year 2019 due to increases in investment income, taxes and
capacity fee drawdown from capital contribution to CIPs that did not
qualify as capital expense.
3
Non-operating expenses increased by $3.2 million or 63.70% due to
increases in interest expense and CIP expenses that did not qualify
as capital expense.
Conclusion:
In summary the overall audit process was a success and the auditors
found no material errors or misstatement in the District’s financial
statements.
Additional Audit Correspondence:
As a part of completing the audit engagement, Teaman, Ramirez and
Smith, Inc., also provided the following letters summarizing their
observations and conclusions concerning the District’s overall
financial processes:
• Management Letter: The auditors did not identify any
deficiencies in internal controls that they considered to be
material weaknesses. (Attachment C).
• Audit Committee Letter: This letter describes overall aspects
of the audit, including audit principles, performance,
dealings with management, and significant findings or issues.
There were no transactions entered by the District during the
year for which there was a lack of authoritative guidance or
consensus. All significant transactions have been recognized
in the financial statements in the proper period.
There were no disagreements with management concerning
financial accounting, reporting, or auditing matters, and
there were no significant difficulties in dealing with
management in performing the audit. (Attachment D).
• Report on Applying Agreed-Upon Procedures: A review of the
District’s investment portfolio at year end, and a sample of
specific investment transactions completed throughout the
fiscal year were performed and there were no exceptions to
compliance from the District’s Investment Policy. (Attachment
E).
FISCAL IMPACT:
None.
4
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning, formalized financial policies, enhanced budget
controls, fair pricing, debt planning, and improved financial
reporting.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Audited Annual Financial Statements
C) Management Letter
D) Audit Committee Letter
E) Report on Applying Agreed-Upon Procedures
ATTACHMENT A
SUBJECT/PROJECT:
Approve the Audited Financial Statements for the Fiscal
Year Ended June 30, 2019
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is recommending that the Board approve the District’s
audited financial statements, including the Independent Auditors’
unqualified opinion for the fiscal year (FY) ended June 30, 2019.
• Teaman, Ramirez & Smith, Inc. performed the audit and found that,
in all material respects, the financial statements correctly
represent the financial position of the District.
• Staff provided a review of the District’s financials for the year
ending June 30, 2019 and indicated:
− Total assets decreased $6.5 million to $548 million due
mainly to the $31.8 million advance payment to the CALPERS
plan and depreciation, which was partially offset by Water
bond proceeds and investments in capital infrastructures.
− Cash and investments decreased from $89.1 million to $75.1
million. The decrease was due to lower than anticipated
revenue from water sales and the advance payment to the
CALPERS plan.
− Total liabilities increased by $22.1 million, which is
attributable to the issuance of $32.4 million Water Revenue
Bonds, Series 2018 for the construction of water systems and
advance refund of $6.9 million of the 1996 Certificates of
Participation. This was partially offset by $4 million in
principal payment of long-term debt.
− Capital contributions for the year totaled $9.4 million,
which consists of developers contributing $5.8 million in
capacity fees and $2.7 million in contributed fixed assets,
$.5 million in availability fees from ratepayers and $0.4
million from Caltrans for utility relocation reimbursements.
− Operating revenues decreased $5.5 million while water costs
decreased $2.3 million due to overall decrease in sales
volume brought about by above average rainfall.
− Depreciation decreased by $.7 million while general and
administrative expenses increased by $.6 million.
− The Districts Net Position as of June 30, 2019 was $387.6
million.
• It was indicated that the auditors found no material errors in
the financial records or statements and there were no
transactions entered into by the District during the year for
which there is lack of authoritative guidance or consensus.
• Messrs. Joshua Calhoun, Partner, and Rick Gallo, Auditor in
Charge, of Teaman Ramirez & Smith, Inc., attended the meeting and
provided a review of the audit process and results of the audit:
− Mr. Calhoun indicated that his firm will be issuing an
“unmodified report” or clean opinion on the financial
statements. Their issuance of an unmodified report
indicates that they found no issues with the financial
statements and they believe the statements are fairly
stated. This is the highest level opinion that can be
received on an audit.
− GASB 75, related to Other Post Employee Benefits (OPEB), was
implemented last year. Now that there are two years of
information available, page 59 of the Financial Statements
presents the net OPEB liability for FY’s 2018 and 2017.
This portion of the financials will eventually yield up to
10 years of information and will be a good tool to see how
the District’s decisions and changing assumptions and
factors are impacting the District’s financial statements.
− He noted that GASB is the standards setting board for
accounting and on page 22 of the District’s financials, a
list of upcoming GASB standards and methodologies is
presented. He noted that GASB 87, related to leases, will
be one of the more impactful standards as staff will need to
catalogue all the District leases and develop amortization
schedules in preparation for the implementation of the
standard in FY 2021.
− The financials also expand the standard disclosure related
to the additional pension contribution of $31.8 million.
Given the timing of the measurement periods of the financial
statements and the valuation, this is included in the
deferred outflow as it is expected to be recognized against
the liability within one or two years once CalPERS comes out
with their future valuation reports.
− He explained on page 56 to 58 of the Financials, note number
13 was expanded this year to include a separate section for
wastewater services to comply with future debt disclosure
requirements for all water/wastewater related debt.
− He noted along with the financial statements, the audit firm
issues several reports:
o Management Letter which reviews internal controls and
financial compliance which is required under government
auditing standards. His firm had no findings or
exceptions to report.
o Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of
Financial Statements which reviews internal controls
and compliance with the law. There were no issues to
report on either internal controls or financial
compliance.
o Agreed-Upon Procedures Report indicates their firms
review of investment transactions in relation to the
District’s Investment Policy and State Law. His firm
found no instances of non-compliance.
o SAS 114 Report which provides the auditors an
opportunity to report to the board what transpired on
the audit; if there were problems, if staff was
unresponsive, material misstatements, opinion shopping,
etc. He stated that there were no issues or problems
during the audit. He stated that his firm has nothing
to report.
• In response to an inquiry from the Committee, Mr. Calhoun
indicated that their firm did request that the Finance and
Administration Committee (Audit Committee) members complete a
fraud questionnaire. The questions in the questionnaire are
standard in all audits and each year they do ask the committee
members if they are aware of any fraud occurring at the District.
They do change some questions in the questionnaire every few
years.
• The Committee thanked Mssrs. Calhoun and Gallo for their work on
the audit and complimented the Finance staff for the successful
outcome of the audit.
Upon completion of the discussion, the committee accepted staffs’
report and supported presentation to the full board as an action item.
OTAY WATER DISTRICT
FINANCIAL STATEMENTS
WITH
REPORT ON AUDIT BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2019 and 2018
TABLE OF CONTENTS
Years Ended June 30, 2019 and 2018
Page
Number
Independent Auditors’ Report 1 - 2
Management’s Discussion & Analysis 3 - 10
Basic Financial Statements:
Statements of Net Position 11 - 12
Statements of Revenues, Expenses, and Changes in Net Position 13
Statements of Cash Flows 14 - 15
Notes to Financial Statements 16 - 58
Required Supplementary Information:
Schedule of Changes in the Net OPEB Liability and Related Ratios 59
Schedule of Contributions 60
Schedule of Changes in the Net Pension Liability and Related Ratios 61
Schedule of Plan Contributions 62
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Richard A. Teaman, CPA David M. Ramirez, CPA Javier H. Carrillo, CPA Bryan W͘Daugherty, CPA Joshua :͘Calhoun, CPA
4201 Brockton AveŶƵĞ Suite 100Riverside CA 92501 951.274.9500d > 951.274.7828 FAX www.trscpas.com
Emphasis of Matters
As described in Note 1 to the basic financial statements, as of June 30, 2019, the District adopted the provisions of
Governmental Accounting Standards Board Statement No. 89, Accounting for Interest Cost Incurred before the End of a
Construction Period. Our opinion is not modified with respect to this matter.
As described in Note 1 to the basic financial statements, as of June 30, 2018, the District adopted the provisions of
Governmental Accounting Standards Board Statement No. 75, Accounting and Financing Reporting for Postemployment
Benefits Other Than Pensions. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis
and required supplementary information on pages 3-10 and 59-62 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the information for consistency with
management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 24, 2019, on our
consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions
of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.
Riverside, California
October 24, 2019
MANAGEMENT’S DISCUSSION AND ANALYSIS
3
As management of the Otay Water District (the “District”), we offer readers of the District’s financial statements, this
narrative overview, and analysis of the District’s financial performance during the fiscal year ending June 30, 2019. Please
read it in conjunction with the District’s financial statements that follow Management’s Discussion and Analysis. All
amounts, unless otherwise indicated, are expressed in millions of dollars.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements, which are
comprised of the following: 1) Statements of Net Position, 2) Statements of Revenues, Expenses, and Changes in Net
Position, 3) Statements of Cash Flows, and 4) Notes to the Financial Statements. This report also contains other
supplementary information in addition to the basic financial statements.
The Statements of Net Position presents information on the District’s assets, deferred outflows of resources, liabilities, and
deferred inflows of resources, with the difference reported as Total Net Position. Over time, increases or decreases in net
positions may serve as a useful indicator of whether the financial position of the District is improving or weakening.
The Statements of Revenues, Expenses and Changes in Net Position presents information showing how the District’s net
position changed during the most recent fiscal year. All changes in net positions are reported as soon as the underlying event
giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in
this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but
unused vacation leave).
The Statements of Cash Flows presents information on cash receipts and payments for the fiscal year. The Notes to the
Financial Statements provides additional information that is essential to a full understanding of the data supplied in each of
the specific financial statements listed above.
Financial Highlights
The assets and deferred outflows of resources of the District exceeded its liabilities and deferred inflows of resources at the close of the most
recent fiscal year by $387.6 million (net position). Of this amount, $28.7 million (unrestricted net position) may be used to meet the
District’s ongoing obligations to residents and creditors.
Total assets decreased by $6.5 million or 1.17% during Fiscal Year 2019, to $548.0 million, due primarily to depreciation and a $31.8
million advance payment to CALPERS plan, reducing the District’s unfunded pension liability. These reductions are partially offset by
Water Bond proceeds and investments in capital infrastructure.
MANAGEMENT’S DISCUSSION AND ANALYSIS
4
In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary
information concerning the District’s progress in funding its obligation to provide retirement benefits to its employees.
Financial Analysis:
As noted, net position may serve, over time, as a useful indicator of an entity’s financial position. In the case of the District,
assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $387.6 million at the close
of the most recent fiscal year.
The largest portion of the District’s net position, $354.6 million (91%), reflects its investment in capital assets, plus unused
debt proceeds, less any remaining outstanding debt used to acquire those assets. The District uses these capital assets to
provide services to customers; consequently, these assets are not available for future spending. Although the District’s
investment in its capital assets is reported effectively as a resource, it should be noted that the resources needed to repay the
debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
5
Statements of Net Position
(In Millions of Dollars)
2019 2018 2017
Assets
Current and Other Assets $ 89.7 $ 103.6 $ 112.9
Capital Assets 458.3 450.9 450.2
Total Assets 548.0 554.5 563.1
Deferred Outflows of Resources
Deferred Amount on Refunding 0.0 0.0 0.2
Deferred Actuarial Pension Costs 39.0 10.2 10.7
Deferred Actuarial OPEB Costs 2.2 2.2 0.0
Total Deferred Outflows of Resources 41.2 12.4 10.9
Liabilities
Long-Term Debt Outstanding 114.3 91.2 95.6
Net Pension Liability 48.4 49.6 45.2
Net OPEB Liability 3.4 4.7 0.0
Other Liabilities 33.8 32.4 28.2
Total Liabilities 199.9 177.9 169.0
Deferred Inflows of Resources
Deferred Actuarial Pension Costs 1.2 0.9 3.8
Deferred Actuarial OPEB Costs 0.5 0.6 0.0
Total Deferred Inflows of Resources 1.7 1.5 3.8
Net Position (1)
Net Investment in Capital Assets 354.6 355.6 351.0
Restricted for Debt Service 4.3 4.2 4.3
Unrestricted 28.7 27.7 45.9
Total Net Position $ 387.6 $ 387.5 $ 401.2
The District’s operations and population continue to grow, albeit at slower rates than the housing boom years. Much of this
growth has and will continue to occur in the residential sector, especially in the area of multi-family dwellings, as well as in
the commercial area. The District still has available land to develop unlike other parts of the County, as well as low
unemployment and job creation, which has spurred the development in the service area.
In FY 2019, the District’s Capital Assets increased by $18.9 million before accumulated depreciation. (See Note 4 in the
Notes to Financial Statements). The District also saw an increase in long-term debt of $23.1 million due to the issuance of
the 2018 Water Revenue Bonds partially offset by annual debt service payments (See Note 5 in the Notes to Financial
Statements).
Deferred outflows of Resources increased by $28.8 million in FY 2019 and by $1.5 million in FY 2018. The significant
increase in FY 2019 is due to the $31.8 additional funding to CALPERS which will reduce the Net Pension Liability in FY
2020.
MANAGEMENT’S DISCUSSION AND ANALYSIS
6
At the end of FY 2019, the District can report positive balances in all categories of net position. This situation also held true
for the prior two fiscal years.
Statements of Revenues, Expenses, and Changes in Net Position
(In Millions of Dollars)
2019 2018 2017
Water Sales $ 86.8 $ 92.6 $ 83.7
Wastewater Revenue 3.0 2.9 3.0
Connection and Other Fees 2.2 2.0 1.8
Non-operating Revenues 10.5 7.9 10.1
Total Revenues 102.5 105.4 98.6
Depreciation Expense 16.8 17.5 17.8
Other Operating Expenses 86.9 88.3 78.8
Non-operating Expenses 8.1 5.0 7.7
Total Expenses 111.8 110.8 104.3
Loss Before Capital
Contributions (9.3) (5.4) (5.7)
Capital Contributions 9.4 9.5 5.6
Change in Net Position 0.1 4.1 (0.1)
Beginning Net Position, As Previously Stated 387.5 401.2 401.3
Prior Period Adjustment 0.0 (17.8) 0.0
Beginning Net Position, As Restated 387.5 383.4 401.3
Ending Net Position $ 387.6 $ 387.5 $ 401.2
Water Sales decreased by $5.8 million in FY 2019 due to a decrease in units sold as the result of above average rainfall.
Water Sales increased by $8.9 million in FY 2018 due to increases in units sold and water rates.
Other Operating Expenses decreased by $1.4 million in FY 2019 and increased by $9.5 million in FY 2018, predominantly
due to the decrease and increase in water units purchased as a result of changes in water sales volumes in FY 2019 and FY
2018, respectively.
Certain planning and environmental study costs associated with capital projects, such as the North & South District
Interconnection in 2019, and recycled permanent moratorium in Otay Mesa for 2018, do not qualify as capital costs under
Generally Accepted Accounting Principles and are included in the miscellaneous (non-operating) expenses of the District.
For FY 2019 and FY 2018, those expenses were $3.3 million and $0.9 million, respectively.
Connection and Other Fees increased by $0.2 million in FY 2019 and FY 2018. Capital Contributions decreased by $0.1
million in FY 2019 brought about by the steady economy as compared to an increase of $3.9 million in FY 2018.
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2019 2018 2017
Taxes and Assessments $ 4.7 $ 4.5 $ 4.1
Rents and Leases 1.4 1.4 1.4
Other Non-operating Revenue 4.4 2.0 4.6
Total Non-operating Revenues $ 10.5 $ 7.9 $ 10.1
The District’s total non-operating revenues increased by $2.6 million in FY 2019 due to increases in investment earnings,
taxes and transfer of capacity revenue from capital contribution to fund project expenditures that do not qualify as capital
expenditures. Total non-operating revenues in FY 2018 decreased by $2.2 million due to decreases in investment income,
capacity fee revenue and an increase in losses from capital asset disposals.
Capital Assets and Debt Administration
The District’s capital assets (net of accumulated depreciation) as of June 30, 2019, totaled $458.3 million. Included in this
amount is land, which is a non-depreciable asset. The District’s net capital assets increased by 1.64% and .16% for FY 2019
and FY 2018 respectively.
MANAGEMENT’S DISCUSSION AND ANALYSIS
8
Capital Assets
(In Millions of Dollars)
As indicated by figures in the table above, majority of capital assets added during both fiscal years were related to the water
and sewer systems. In addition, majority of the cost of construction-in-progress is also related to water systems. Additional
information on the District’s capital assets can be found in Note 4 of the Notes to Financial Statements.
In November 2018, the District issued $32.4 million in Water Revenue Bonds, Series 2018 to provide funds for construction
of water storage, treatment and transmission facilities and advance refunded $6.9 million of the 1996 Certificates of
Participation. As of June 30, 2019, approximately $15.3 million of the bond proceeds remain in cash and investments.
At June 30, 2019, the District had $114.3 million in outstanding debt (net of $4.7 million of maturities occurring in FY 2020),
which consisted of the following:
General Obligation Bonds $ 2.2
Revenue Bonds 112.1
Total Long-Term Debt $ 114.3
Additional information on the District’s long-term debt can be found in Note 5 of the Notes to Financial Statements.
Prior Period Adjustment
The Governmental Accounting Standards Board (GASB) issued Statement No. 75, “Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions - an amendment of GASB Statement No. 45”, for periods beginning after June
15, 2017. The District implemented these standards in FY 2018. The result of the implementation of these standards was to
decrease the net position at July 1, 2017 by $17.8 million, which recognizes net OPEB liability, deferred outflows of
resources, deferred inflows of resources, and expenses related to the OPEB plan.
2019 2018 2017
Land $ 14.4 $ 14.4 $ 14.4
Construction in Progress 33.2 17.6 14.2
Potable Water System 488.8 484.2 483.8
Recycled Water System 114.8 114.7 112.3
Sewer System 48.5 48.2 44.5
Field Equipment 8.6 8.5 9.0
Buildings 19.2 20.1 20.6
Transportation Equipment 3.5 3.4 3.3
Communication Equipment 3.4 3.5 3.4
Office Equipment 16.8 17.7 17.6
751.2 732.3 723.1
Less Accumulated
Depreciation (292.9) (281.4) (272.9)
Net Capital Assets $ 458.3 $ 450.9 $ 450.2
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
Fiscal Year 2019-2020 Budget
Economic Factors
The San Diego region imports 80% of its potable supply, so factors such as local rainfall as well as weather conditions
elsewhere in the western portion of the nation can affect the region. San Diego received above average rainfall in FY 2019,
and the District anticipates an average rainfall pattern in the coming years.
Between 2008 and 2016, the District’s water sales declined for the District by nearly 30%. This decrease was driven by
many factors including the economic downturn caused by the great recession, increases in the price of imported water, State
mandated cuts in potable water use due to the prolonged statewide drought, and reductions as a result of increasing
conservation efforts. Decreases in water sales during this period were offset by corresponding decreases in water purchases
and District managed costs such as reduced employee count and internal cost cuts, achieved through automation and
streamlining of processes. Due to record rain and snowfall, the state mandated conservation ended in FY 2017. Above
average rainfall has led to water sales volume decreasing 7.4% in 2019 while an increase of 9.0% in 2018 was due to the
removal of state mandates, dry winters and increased development. The District is budgeting an 8.3% sales volume decrease
in FY 2020 compared to the FY 2019 budget. The FY 2019 budget assumed that rainfall would be less than average and
comparable to FY 2018. The FY 2020 budget is based on 3-year average sales volumes.
The District continues to respond to the challenges presented by growth, State mandates, and the potential of drought, by
creating new opportunities and new organizational efficiencies. By utilizing and continuing to refine its Strategic Business
Plan, it has captured the Board of Director’s vision and united its staff in a common mission. The District has achieved
several significant accomplishments due to its successful adherence to its Strategic Business Plan. The District is not only
poised to continue successfully providing an affordable, safe, and reliable water supply for the people of its service area but is
set to reap the rewards of greater efficiencies and economies of scale.
The District is currently at about 69% of its projected ultimate population, serving approximately 225,000 people. Long-
term, this percentage should continue to increase as the District's service area continues to develop and grow. By 2050, the
District is projected to serve approximately 308,000 people, with an average daily demand of 46 million gallons per day
(MGD). Currently, the District services the needs of this growing population by purchasing water from the San Diego
County Water Authority (CWA), who in turn purchases its water from the Metropolitan Water District (MWD) and the
Imperial Irrigation District (IID).
Otay takes delivery of the water through several connections of large diameter pipelines owned and operated by CWA. The
District currently receives treated water from CWA directly and from the Helix Water District via a contract with CWA. In
addition, the District has an emergency agreement with the City of San Diego to purchase water in the case of a shutdown of
the main treated water source. The City of San Diego also has a long-term contract with the District to provide recycled
water for landscape and irrigation usage. Through innovative agreements like these, benefits can be achieved by both parties
by using excess capacity of another agency, and diversifying local supply, thereby increasing reliability.
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
Financial
The District is budgeted to deliver approximately 26,949.2 acre-feet of potable water to 51,034 potable customer accounts
during FY 2019-2020. Management feels that these projections are realistic after accounting for low growth, supply changes,
and a focus on conservation. A combination of factors, including weather patterns and economic uncertainty, have created
challenges in developing projections for the current fiscal year. Unemployment is currently at historical lows and there is
minimal distressed activity in the commercial and residential resale market. The housing market has experienced higher
demand compared to the previous years and unemployment is at record lows. District staff projects that over the next six
years the District will sell another 2,600 meters which translates to 3,230 equivalent dwelling units (EDUs). This growth is
estimated to increase sales volumes by an average of 1% per year over the next five years. While all these factors impact the
region’s water usage, people’s need for water remains an underlying constant. Staff continues working diligently on
developing new water supplies as they work through the financial impacts of conservation and the modest economic
turnaround.
Management is unaware of any other conditions that could have a significant impact on the District’s current financial
position, net position, or operating results.
Contacting the District’s Financial Management
This financial report is designed to provide a general overview of the Otay Water District’s finances for the Board of
Directors, customers, creditors, and other interested parties. Questions concerning any of the information provided in the
report or requests for additional information should be addressed to the District’s Finance Department, 2554 Sweetwater
Springs Blvd., Spring Valley, CA 91978-2004.
2019 2018
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)34,024,168$ 24,147,997$
Restricted Cash and Cash Equivalents (Notes 1 and 2)19,114,137 80,477
Investments (Note 2)18,951,991 30,866,180
Board Designated Investments (Note 2)2,537,589 29,879,617
Restricted Investments (Notes 1 and 2)460,060 4,166,548
Accounts Receivable, Net 11,787,954 12,109,378
Accrued Interest Receivable 341,518 295,947
Taxes and Availability Charges Receivable, Net 187,203 215,704
Restricted Taxes and Availability Charges Receivable, Net 38,070 27,480
Inventories 775,546 822,737
Prepaid Items and Other Receivables 1,493,831 1,018,820
Total Current Assets 89,712,067 103,630,885
Capital Assets (Note 4):
Land 14,403,823 14,406,778
Construction in Progress 33,149,164 17,618,059
Capital Assets, Net of Depreciation 410,756,360 418,825,726
Total Capital Assets, Net of Depreciation 458,309,347 450,850,563
Total Assets 548,021,414 554,481,448
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)39,022,818 10,186,229
Deferred Actuarial OPEB Costs (Note 8)2,209,574 2,202,004
Total Deferred Outflows of Resources 41,232,392$ 12,388,233$
Continued
STATEMENTS OF NET POSITION
JUNE 30, 2019 AND 2018
The accompanying notes are an integral part of this statement.
11
2019 2018
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 5)4,725,000$ 4,040,000$
Accounts Payable 14,061,824 15,437,565
Accrued Payroll Liabilities 639,247 694,859
Other Accrued Liabilities 5,519,259 4,089,640
Customer and Developer Deposits 3,601,094 3,340,010
Accrued Interest 1,826,242 1,380,446
Unearned Revenues 135,223 233,251
Liabilities Payable from Restricted Assets:
Restricted Accrued Interest 36,733 45,200
Total Current Liabilities 30,544,622 29,260,971
Non-current Liabilities:
Long-term Debt (Note 5):
General Obligation Bonds 2,156,789 2,823,143
Certificates of Participation - 6,893,293
Revenue Bonds 112,114,228 81,465,550
Net Pension Liability 48,388,906 49,582,316
Net OPEB Liability 3,415,025 4,710,492
Other Non-current Liabilities 3,337,674 3,117,705
Total Non-current Liabilities 169,412,622 148,592,499
Total Liabilities 199,957,244 177,853,470
DEFERRED INFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)1,157,175 936,234
Deferred Actuarial OPEB Costs (Note 8)544,777 539,449
Total Deferred Inflows of Resources 1,701,952 1,475,683
NET POSITION
Net Investment in Capital Assets 354,639,520 355,628,577
Restricted for Debt Service 4,248,007 4,247,025
Unrestricted 28,707,083 27,664,926
Total Net Position 387,594,610$ 387,540,528$
STATEMENTS OF NET POSITION - CONTINUED
JUNE 30, 2019 AND 2018
The accompanying notes are an integral part of this statement.
12
2019 2018
OPERATING REVENUES
Water Sales 86,756,222$ 92,595,195$
Wastewater Revenue 2,961,157 2,865,520
Connection and Other Fees 2,234,787 2,013,057
Total Operating Revenues 91,952,166 97,473,772
OPERATING EXPENSES
Cost of Water Sales 60,065,964 62,321,213
Wastewater 2,784,579 2,501,240
Administrative and General 24,070,648 23,445,578
Depreciation 16,807,797 17,466,318
Total Operating Expenses 103,728,988 105,734,349
Operating Income (Loss)(11,776,822)(8,260,577)
NON-OPERATING REVENUES (EXPENSES)
Investment Earnings 1,978,392 723,860
Taxes and Assessments 4,671,182 4,481,719
Availability Charges 723,246 697,724
Gain (Loss) on Disposal of Capital Assets (1,058,571)(1,709,538)
Rents and Leases 1,384,211 1,439,247
Miscellaneous Revenues 2,800,613 2,255,605
Donations (118,040)(123,050)
Interest Expense (4,713,883)(3,941,321)
Miscellaneous Expenses (3,293,055)(900,247)
Total Non-operating Revenues (Expenses)2,374,095 2,923,999
Income (Loss) Before Capital Contributions (9,402,727)(5,336,578)
Capital Contributions 9,456,809 9,506,192
Change in Net Position 54,082 4,169,614
Total Net Position, Beginning, As Previously Reported 387,540,528 401,186,989
Prior Period Adjustment (Note 14)- (17,816,075)
Total Net Position, Beginning, As Restated 387,540,528 383,370,914
Total Net Position, Ending 387,594,610$ 387,540,528$
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEARS ENDED JUNE 30, 2019 AND 2018
The accompanying notes are an integral part of this statement.
13
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 90,299,887$ 95,612,497$
Receipts from Connections and Other Fees 2,234,787 2,013,057
Receipts from Property Rents and Leases 1,384,211 1,316,197
Other Receipts 2,702,585 2,183,296
Payments to Suppliers (63,834,433)(61,807,704)
Payments to Employees (54,403,110)(21,689,670)
Other Payments (3,411,095)(899,502)
Net Cash Provided By (Used For) Operating Activities (25,027,168)16,728,171
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Receipts from Taxes and Assessments 4,689,093 4,495,002
Net Cash Provided By (Used For) Noncapital and Related
Financing Activities 4,689,093 4,495,002
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Capital Contributions 6,788,777 9,254,970
Proceeds from Sale of Capital Assets 50,119 77,684
Proceeds from Debt Related Taxes and Assessments 723,246 697,724
Proceeds from Long-Term Debt 35,145,512 -
Principal Payments on Long-Term Debt (10,940,000)(3,820,000)
Interest Payments and Fees (4,708,034)(4,427,336)
Acquisition and Construction of Capital Assets (22,707,238)(19,388,972)
Net Cash Provided By (Used For) Capital and Related
Financing Activities 4,352,382 (17,605,930)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 1,932,821 643,924
Proceeds from Sale and Maturities of Investments 43,170,616 12,631,381
Purchase of Investments (207,913)(10,142,153)
Net Cash Provided By (Used For) Investing Activities 44,895,524 3,133,152
Net Increase (Decrease) in Cash and Cash Equivalents 28,909,831 6,750,395
Cash and Cash Equivalents - Beginning 24,228,474 17,478,079
Cash and Cash Equivalents - Ending 53,138,305$ 24,228,474$
Continued
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2019 AND 2018
The accompanying notes are an integral part of this statement.14
2019 2018
Reconciliation of Operating Income (Loss) to Net Cash Flows
Provided By (Used For) Operating Activities:
Operating Income (Loss)(11,776,822)$ (8,260,577)$
Adjustments to Reconcile Operating Income to
Net Cash Provided By (Used For) Operating Activities:
Depreciation 16,807,797 17,466,318
Receipts from Property Rents and Leases 1,384,211 1,316,197
Miscellaneous Revenues 2,702,585 2,183,296
Miscellaneous Expenses (3,411,095) (899,502)
(Increase) Decrease in Accounts Receivable 321,424 263,462
(Increase) Decrease in Inventory 47,191 (85,552)
(Increase) Decrease in Prepaid Items and Other Receivables (475,011) (56,801)
(Increase) Decrease in Deferred Actuarial Pension Costs (28,836,589) 494,900
(Increase) Decrease in Deferred Actuarial OPEB Costs (7,570) 82,416
Increase (Decrease) in Accounts Payable (1,375,741) 3,893,151
Increase (Decrease) in Accrued Payroll and Related Expenses (55,612) (90,637)
Increase (Decrease) in Other Accrued Liabilities 1,429,619 318,137
Increase (Decrease) in Customer and Developer Deposits 261,084 (111,680)
Increase (Decrease) in Prepaid Capacity Fees 219,969 43,392
Increase (Decrease) in Net OPEB Liability (1,295,467) (1,834,367)
Increase (Decrease) in Net Pension Liability (1,193,410) 4,332,872
Increase (Decrease) in Deferred Actuarial Pension Costs 220,941 (2,866,303)
Increase (Decrease) in Deferred Actuarial OPEB Costs 5,328 539,449
Net Cash Provided By (Used For) Operating Activities (25,027,168)$ 16,728,171$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 34,024,168$ 24,147,997$
Restricted Cash and Cash Equivalents 19,114,137 80,477
Total Cash and Cash Equivalents 53,138,305$ 24,228,474$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 2,668,032$ 251,222$
Change in Fair Value of Investments and Recognized Gains/Losses (685,227) 360,248
Amortization Related to Long-term Debt 431,482 364,678
STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED JUNE 30, 2019 AND 2018
The accompanying notes are an integral part of this statement.15
16
NOTE DESCRIPTION PAGE
1 Reporting Entity and Summary of Significant Accounting Policies..……….. 17 - 25
2 Cash and Investments………………………………………………………... 26 - 30
3 Fair Value Measurements…………………………………………..………... 31 - 32
4 Capital Assets…………………………………………………..……………. 33 - 34
5 Long-Term Debt………………………………………………….…………. 35 - 40
6 Net Position………………………………………………………………….. 40
7 Defined Benefit Pension Plan……………………………………………….. 40 - 46
8 Other Post Employment Benefits………………………..…………............... 47 - 52
9 Water Conservation Authority………………………………………............. 52 - 53
10 Commitments and Contingencies……………………………………………. 53
11 Risk Management……………………………………………………………. 54 - 55
12 Interest Expense……………………………………………………................ 55
13 Segment Information………………………………………………..……….. 55 - 58
14 Prior Period Adjustment…………………………………………..………..... 58
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
17
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Reporting Entity
The reporting entity Otay Water District (the “District”) includes the accounts of the District, Otay Service
Corporation (the “Corporation”) and the Otay Water District Financing Authority (the “Financing Authority”).
The Otay Water District (the “District”) is a public entity established in 1956 pursuant to the Municipal Water
District Law of 1911 (Section 711 et. Seq. of the California Water Code) for the purpose of providing water and
sewer services to the properties in the District. The District is governed by a Board of Directors consisting of five
directors elected by geographical divisions based on District population for a four-year alternating term.
The District formed the Otay Service Corporation on June 21, 1993, a nonprofit public benefit corporation duly
organized and existing under the laws of the State of California. The Service Corporation was formed to assist the
District in the financing of public capital improvements.
The District formed the Financing Authority on March 3, 2010 under the Joint Exercise of Powers Act, constituting
Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the California
Government Code. The Financing Authority was formed to assist the District in the financing of public capital
improvements.
The financial statements present the District and its component units. The District is the primary government unit.
Component units are those entities which are financially accountable to the primary government, either because the
District appoints a voting majority of the component unit’s board, or because the component units will provide a
financial benefit or impose a financial burden on the District. The District has accounted for the Service
Corporation and Financing Authority as “blended” component units. Despite being legally separate, the Service
Corporation and Financing Authority are so intertwined with the District that they are in substance, part of the
District’s operations. Accordingly, the balances and transactions of these component units are reported within the
funds of the District. Separate financial statements are not issued for the Service Corporation and the Financing
Authority.
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various financial
statements. Basis of accounting refers to “when” transactions are recorded regardless of the measurement focus
applied. The accompanying financial statements are reported using the economic resources measurement focus, and
the accrual basis of accounting. Under the economic measurement focus all assets and liabilities (whether current or
noncurrent) associated with these activities are included on the Statements of Net Position. The Statements of
Revenues, Expenses and Changes in Net Position present increases (revenues) and decreases (expenses) in total net
position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded
when a liability is incurred, regardless of the timing of related cash flows.
The District reports its activities as an enterprise fund, which is used to account for operations that are financed and
operated in a manner similar to a private business enterprise, where the intent of the District is that the costs (including
depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered
primarily through user charges.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
18
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
The basic financial statements of the Otay Water District have been prepared in conformity with accounting principles
generally accepted in the United States of America. The Governmental Accounting Standards Board (GASB) is the
accepted standard setting body for governmental accounting financial reporting purposes.
Net position of the District is classified into three components: (1) net investment in capital assets, (2) restricted net
position, and (3) unrestricted net position. These classifications are defined as follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and reduced by the
outstanding balances of notes or borrowing that are attributable to the acquisition of the assets, construction, or
improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt
attributable to the unspent proceeds are not included in the calculation of the net investment in capital assets.
Restricted Net Position
This component of net position consists of net position with constrained use through external constraints imposed by
creditors (such as through debt covenants), grantors, contributions, or laws or regulations of other governments or
constraints imposed by law through constitutional provisions or enabling legislation.
Unrestricted Net Position
This component of net position consists of net position that do not meet the definition of “net investment in capital
assets” or “restricted net position”.
The District distinguishes operating revenues and expenses from those revenues and expenses that are non-operating.
Operating revenues are those revenues that are generated by water sales and wastewater services while operating
expenses pertain directly to the furnishing of those services. Non-operating revenues and expenses are those revenues
and expenses generated that are not associated with the normal business of supplying water and wastewater treatment
services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are earned. Taxes and
assessments are recognized as revenues based upon amounts reported to the District by the County of San Diego, net of
allowance for delinquencies of $25,030 at June 30, 2019 and $27,020 at June 30, 2018.
Additionally, capacity fee contributions received which are related to specific operating expenses are offset against
those expenses and included in Cost of Water Sales in the Statements of Revenues and Expenses and Changes in Net
Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant
proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and
unrestricted - net position, a flow assumption must be made about the order in which the resources are considered to be
applied.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
19
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
It is the District’s practice to consider restricted - net position to have been depleted before unrestricted - net position is
applied, however it is at the Board’s discretion.
C) New Accounting Pronouncements
Implemented as of June 30, 2019
Governmental Accounting Standard Board Statement No. 83
In November of 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. This Statement was
issued to address the criteria for the recognition and measurement of the liability and corresponding deferred
outflows of resources associated with certain asset retirement obligations (AROs). An ARO is a legally enforceable
liability associated with the retirement of a tangible capital asset. Statement No. 83 is effective for reporting periods
beginning after June 15, 2018. Currently, this Statement has no effect on the District’s financial statements.
Governmental Accounting Standard Board Statement No. 88
In March of 2018, GASB issued Statement No. 88, Certain Disclosures Related to Debt, including Direct
Borrowings and Direct Placements. This Statement was issued to improve the information that is disclosed in the
notes to government financial statements related to debt, including direct borrowings and direct placements. This
Statement requires that additional essential information related to debt be disclosed in notes to financial statements,
including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements
related to significant events of default with finance-related consequences, significant termination events with
finance-related consequences, and significant subjective acceleration clauses. Statement No. 88 is effective for
fiscal years beginning after June 15, 2018. Currently, this Statement has no effect on the District’s financial
statements.
Governmental Accounting Standard Board Statement No. 89
In June of 2018, GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a
Construction Period. This Statement was issued to (1) to enhance the relevance and comparability of information
about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost
incurred before the end of a construction period. This Statement requires that interest cost incurred before the end of
a construction period be recognized as an expense in the period in which the cost is incurred for financial statements
prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a
construction period will not be included in the historical cost of a capital asset reported in a business-type activity or
enterprise fund. Statement No. 89 is effective for fiscal years beginning after December 15, 2019. The District
elected to early implement this Statement in the 2019 fiscal year which is reflected in the District’s financial
statements.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
20
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Implemented as of June 30, 2018
Governmental Accounting Standard Board Statement No. 75
In June of 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits
Other Than Pensions. This Statement was issued to improve accounting and financial reporting for postemployment
benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by
governmental employers about financial support for OPEB that is provided by other entities. This Statement
replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers
and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit
Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans.
The provisions of this Statement are effective for fiscal years beginning after June 15, 2017. This Statement has
been implemented in the District’s financial statements.
Governmental Accounting Standard Board Statement No. 81
In March of 2016, GASB issued Statement No. 81, Irrevocable Split Interest Agreements. This statement was
issued to improve accounting and financial reporting for irrevocable split-interest agreements by providing
recognition and measurement guidance for situations in which a government is a beneficiary of the agreement.
Split-interest agreements are a type of giving agreement used by donors to provide resources to two or more
beneficiaries, including governments. Split-interest agreements can be created through trusts—or other legally
enforceable agreements with characteristics that are equivalent to split-interest agreements—in which a donor
transfers resources to an intermediary to hold and administer for the benefit of a government and at least one other
beneficiary. This Statement requires that a government that receives resources pursuant to an irrevocable split-
interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement.
Furthermore, this Statement requires that a government recognize assets representing its beneficial interests in
irrevocable split-interest agreements that are administered by a third party, if the government controls the present
service capacity of the beneficial interests. This Statement requires that a government recognize revenue when the
resources become applicable to the reporting period. The requirements of this Statement are effective for reporting
periods beginning after December 15, 2016. Currently, this statement has no effect on the District’s financial
statements.
Governmental Accounting Standard Board Statement No. 82
In March of 2016, GASB issued Statement No. 82, Pension Issues – An Amendment of GASB Statements No. 67,
No. 68, and No. 73. This statement was issued to address certain issues that have been raised with respect to
Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for
Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the
Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Specifically,
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
21
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Implemented as of June 30, 2018
Governmental Accounting Standard Board Statement No. 82 - Continued
this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary
information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial
Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to
satisfy employee (plan member) contribution requirements. Prior to the issuance of this Statement, Statements 67
and 68 required presentation of covered-employee payroll, which is the payroll of employees that are provided with
pensions through the pension plan, and ratios that use that measure, in schedules of required supplementary
information. This Statement amends Statements 67 and 68 to instead require the presentation of covered payroll,
defined as the payroll on which contributions to a pension plan are based, and ratios that use that measure. This
Statement also clarifies the term deviation used in Actuarial Standards of Practice and payments made by the
employer to satisfy contribution requirements. The requirements of this Statement are effective for reporting
periods beginning after June 15, 2016, except for the requirements of this Statement for the selection of assumptions
in a circumstance in which an employer’s pension liability is measured as of a date other than the employer’s most
recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that
employer in the first reporting period in which the measurement date of the pension liability is on or after June 15,
2017. The District has implemented GASB No. 82 which is reflected in the District’s financial statements.
Governmental Accounting Standard Board Statement No. 85
In March of 2017, GASB issued Statement No. 85, Omnibus 2017. This Statement addresses practice issues that
have risen from the implementation of certain GASB Statements; primarily pension and OPEB related measurement,
recognition, timing, and reporting issues. Other issues include blending of component units for governments whose
primary activity is business-type, goodwill reporting, classifying real estate held by insurance entities and measuring
particular investments at amortized cost. This Statement is effective for reporting periods beginning after June 15,
2017. Currently, this statement has no effect in the District’s financial statements.
Governmental Accounting Standard Board Statement No. 86
In May of 2017, GASB issued Statement No. 86, Certain Debt Extinguishment Issues. This Statement expands upon
GASB No. 7 Advance Refundings Resulting in Defeasance of Debt which defines debt defeased in substance and the
criteria for the trusts used to extinguish debt. This Statement establishes essentially the same requirements for when
a government places cash and other monetary assets acquired with only existing resources in an irrevocable trust to
extinguish the debt. This Statement is effective for reporting periods beginning after June 15, 2017. Currently, this
statement has no effect on the District’s financial statements.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
22
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Pending Accounting Standards
GASB has issued the following statements which impact the District’s financial reporting requirements in the future:
i. GASB 84 – “Fiduciary Activities”, effective for fiscal years beginning after December 15, 2018.
ii. GASB 87 – “Leases”, effective for fiscal years beginning after December 15, 2019.
iii. GASB 90 – “Majority Equity Interests – an amendment of GASB Statements No. 14 and No. 61”, effective
for fiscal years beginning after December 15, 2018.
iv. GASB 91 – “Conduit Debt Obligations”, effective for fiscal years beginning after December 15, 2020.
D) Deferred Outflows / Inflows of Resources
In addition to assets, the Statements of Net Position will sometimes report a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net
position that applies to a future period(s) and so will not be recognized as an outflow of resources
(expense/expenditure) until then. The District has two items that qualify for reporting in this category, deferred
actuarial pension costs and deferred actuarial OPEB costs are items that are deferred and recognized as an outflow of
resources in the period the amounts become available.
In addition to liabilities, the Statements of Net Position will sometimes report a separate section for deferred inflows of
resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net
position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time.
The District has two items that qualify for reporting in this category. Accordingly, the items, deferred actuarial pension
costs and deferred actuarial OPEB costs, are deferred and recognized as an inflow of resources in the period that the
amounts become available.
E) Statements of Cash Flows
For purposes of the Statements of Cash Flows, the District considers all highly liquid investments (including
restricted assets) with a maturity period, at purchase, of three months or less to be cash equivalents.
F) Investments
Investments are stated at their fair value, which represents the quoted or stated market value. Investments that are
not traded on a market, such as investments in external pools, are valued based on the stated fair value as
represented by the external pool. All investments are stated at their fair value, the District has not elected to report
certain investments at amortized costs.
G) Inventory and Prepaid Items
Inventory consists primarily of materials used in the construction and maintenance of the water and sewer system and is
valued at weighted average cost. Both inventory and prepaid items use the consumption method whereby they are
reported as an asset and expensed as they are consumed.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
23
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
H) Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated historical cost where no
historical records exist. Infrastructure assets in excess of $20,000 and other capital assets in excess of $10,000 are
capitalized if they have an expected useful life of two years or more. The District will also capitalize individual
purchases under the capitalization threshold if they are part of a new capital program. The cost of purchased and self-
constructed additions to utility plant and major replacements of property are capitalized. Costs include materials, direct
labor, transportation, and such indirect items as engineering, supervision, employee fringe benefits, overhead, and
interest incurred during the construction period. Repairs, maintenance, and minor replacements of property are charged
to expense. Donated assets are capitalized at their acquisition value on the date contributed.
The District capitalizes interest on construction projects up to the point in time that the project is substantially
completed. Capitalized interest for fiscal years ending June 30, 2019 of $0 (Implemented GASB 89) and June 30, 2018
of $266,959 was included in the cost of water system assets and is depreciated on the straight-line basis over the
estimated useful lives of such assets.
Depreciation is calculated using the straight-line method over the following estimated useful lives:
Water System 15-70 Years
Field Equipment 2-50 Years
Buildings 30-50 Years
Communication Equipment 2-10 Years
Transportation Equipment 2-7 Years
Office Equipment 2-10 Years
Recycled Water System 50-75 Years
Sewer System 25-50 Years
I) Compensated Absences
It is the District’s policy to record vested or accumulated vacation and sick leave as an expense and liability as benefits
accrue to employees.
June 30, 2019
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Compensated
Absences $ 2,807,614 $ 1,637,194 $ 1,432,953 $ 3,011,855 $ 301,186
Current portion is reflected in accrued payroll liabilities and remainder in other non-current liabilities on the
Statements of Net Position.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
24
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
I) Compensated Absences - Continued
June 30, 2018
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Compensated
Absences $ 2,733,700 $ 1,596,084 $ 1,522,170 $ 2,807,614 $ 280,761
Current portion is reflected in accrued payroll liabilities and remainder in other non-current liabilities on the
Statements of Net Position.
J) Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as they will be
funded from restricted assets.
K) Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when it is probable that
the accounts will be uncollectible. Uncollectible accounts are determined by the allowance method based upon prior
experience and management’s assessment of the collectability of existing specific accounts. The allowance for
doubtful accounts was $96,944 for 2019 and $223,005 for 2018.
L) Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of $1.00 per $100
assessed valuation, under the provisions of Proposition 13. Tax rates for voter-approved indebtedness are excluded
from this limitation.
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The County’s tax
calendar year is July 1 to June 30. Property taxes attach as a lien on property on January 1. Taxes are levied on July 1
and are payable in two equal installments on November 1 and February 1, and become delinquent after December 10
and April 10, respectively.
M) Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions,
and pension expense, information about the fiduciary net position of the District’s California Public Employees’
Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans’ fiduciary net position have
been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including
refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms.
Investments are reported at fair value.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
25
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
N) Other Post-Employment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB
expense, information about the fiduciary net position of the District’s plan (OPEB Plan) and additions to/deductions
from the OPEB Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit
payments are recognized when currently due and payable in accordance with the benefit terms. Investments are
reported at fair value.
Generally accepted accounting principles require that the reported results must pertain to liability and asset information
within certain defined timeframes. For this report, the following timeframes are used:
2019 2018
Valuation Date June 30, 2018 June 30, 2017
Measurement Date June 30, 2018 June 30, 2017
Measurement Period July 1, 2017 to June 30, 2018 July 1, 2016 to June 30, 2017
O) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets,
deferred outflows of resources, liabilities, and deferred inflows of resources, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
P) Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
26
2) CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and Local laws
governing the investment of funds under the control of the organization, protect the principal of investments entrusted, and
generate income under the parameters of such policies.
Cash and Investments are classified in the accompanying financial statements as follows:
2019 2018
Statements of Net Position:
Cash and Cash Equivalents $ 34,024,168 $ 24,147,997
Restricted Cash and Cash Equivalents 19,114,137 80,477
Investments 18,951,991 30,866,180
Board Designated Investments 2,537,589 29,879,617
Restricted Investments 460,060 4,166,548
Total Cash and Investments $ 75,087,945 $ 89,140,819
Cash and Investments consist of the following:
2019 2018
Cash on Hand $ 2,950 $ 2,950
Deposits with Financial Institutions 1,218,516 754,437
Investments 73,866,479 88,383,432
Total Cash and Investments $ 75,087,945 $ 89,140,819
Investments Authorized by the California Government Code and the District’s Investment Policy
The table below identifies the investment types that are authorized for the District by the California Government Code
(or the District’s Investment Policy, where more restrictive). The table also identifies certain provisions of the California
Government Code (or the District’s Investment Policy, where more restrictive) that address interest rate risk, credit risk,
and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are
governed by the provisions of debt agreements of the District, rather than the general provisions of the California
Government Code or the District’s Investment Policy.
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1) In One Issuer
U.S. Treasury Obligations 5 years None None
U.S. Government Sponsored Entities 5 years None None
Certificates of Deposit 5 years 15% None
Corporate Medium-Term Notes 5 years 10% None
Commercial Paper 270 days 10% 10%
Money Market Mutual Funds N/A 10% None
County Pooled Investment Funds N/A None None
Local Agency Investment Fund (LAIF) N/A None None
(1) Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
27
2) CASH AND INVESTMENTS - Continued
Investments Authorized by Debt Agreements
Investments of debt proceeds held by the bond trustee are governed by provisions of the debt agreements, rather than the
general provisions of the California Government Code or the District’s Investment Policy.
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment.
Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest
rates. One of the ways that the District manages its exposure to interest rate risk is by purchasing investments with shorter
durations than the maximum allowable under the District’s Investment Policy and by timing cash flows from maturities, so
that a portion of the portfolio is maturing or coming close to maturity evenly over time, as necessary, to provide the cash
flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the District’s investments to market interest rate fluctuations are
provided by the following tables that show the distribution of the District’s investments by maturity as of June 30, 2019 and
2018.
June 30, 2019 Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $ 31,670,612 $ 27,673,372 $ 3,997,240 $ - $ -
Local Agency Investment Fund (LAIF) 41,855,272 41,855,272 - - -
San Diego County Pool 281,000 281,000 - - -
Money Market Funds 59,595 59,595 - - -
Total $ 73,866,479 $ 69,869,239 $ 3,997,240 $ - $ -
June 30, 2018 Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $ 64,967,885 $ 27,845,100 $ 27,313,861 $ 9,808,924 $ -
Local Agency Investment Fund (LAIF) 11,204,070 11,204,070 - - -
San Diego County Pool 12,131,000 12,131,000 - - -
Money Market Funds 80,477 80,477 - - -
Total $ 88,383,432 $ 51,260,647 $ 27,313,861 $ 9,808,924 $ -
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
28
2) CASH AND INVESTMENTS - Continued
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.
This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is
the minimum rating required by (where applicable) the California Government Code or the District’s Investment Policy, or
debt agreements, and the Moody’s ratings as of June 30, 2019 and 2018.
June 30, 2019 Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA A-1 Rated
U.S. Government Sponsored Entities $ 31,670,612 N/A $ 31,670,612 $ - $ - $ -
Local Agency Investment Fund (LAIF) 41,855,272 N/A - - - 41,855,272
San Diego County Pool 281,000 N/A - - - 281,000
Money Market Funds 59,595 N/A - - 59,595 -
Total $ 73,866,479 $ 31,670,612 $ - $ 59,595 $ 42,136,272
June 30, 2018 Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA A-1 Rated
U.S. Government Sponsored Entities $ 64,967,885 N/A $ 64,967,885 $ - $ - $ -
Local Agency Investment Fund (LAIF) 11,204,070 N/A - - - 11,204,070
San Diego County Pool 12,131,000 N/A - - - 12,131,000
Money Market Funds 80,477 N/A - - 80,477 -
Total $ 88,383,432 $ 64,967,885 $ - $ 80,477 $ 23,335,070
Concentration of Credit Risk
The investment policy of the District contains various limitations on the amounts that can be invested in any one type or
group of investments and in any issuer, beyond that stipulated by the California Government Code, Sections 53600 through
53692. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that
represent 5% or more of total District investments as of June 30, 2019 and 2018:
June 30, 2019
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 5,986,340
Federal National Mortgage Association U.S. Government Sponsored Entities $ 19,689,152
Federal Farm Credit Banks U.S. Government Sponsored Entities $ 3,995,820
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
29
2) CASH AND INVESTMENTS - Continued
Concentration of Credit Risk - Continued
June 30, 2018
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 13,877,960
Federal Home Loan Mortgage Corp U.S. Government Sponsored Entities $ 13,789,744
Federal National Mortgage Association U.S. Government Sponsored Entities $ 23,423,521
Federal Farm Credit Banks U.S. Government Sponsored Entities $ 11,890,740
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government
will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an
outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g.,
broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities
that are in the possession of another party. The California Government Code and the District’s Investment Policy do not
contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other
than the following provision for deposits: The California Government Code requires that a financial institution secure
deposits made by state or local government units by pledging securities in an undivided collateral pool held by a depository
regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the
collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows
financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured
public deposits.
As of June 30, 2019, $1,570,995 and as of June 30, 2018, $555,267 of the District’s deposits with financial institutions in
excess of federal depository insurance limits, were held in collateralized accounts.
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the
District’s investment in this pool is reported in the accompanying financial statements at amounts based upon District’s pro-
rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that
portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded
on an amortized cost-basis.
The LAIF is a special fund of the California State Treasury through which local governments may pool investments. The
District may invest up to $65,000,000 in the fund. Investments in LAIF are highly liquid, as deposits can be converted to
cash within twenty-four hours without loss of interest. Investments with LAIF are secured by the full faith and credit of the
State of California. The yield of LAIF for the quarter ended June 30, 2019 was 2.57%. The estimated amortized cost and
fair value of the LAIF pool at June 30, 2019 was $105,633,660,465 and $105,814,483,092. The District’s share of the pool
at June 30, 2019 was approximately 0.03955%. The yield of LAIF for the quarter ended June 30, 2018 was 1.90%. The
estimated amortized cost and fair value of the LAIF pool at June 30, 2018 was $88,964,875,827 and $88,798,232,977. The
District’s share of the pool at June 30, 2018 was approximately 0.0126%.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
30
2) CASH AND INVESTMENTS - Continued
San Diego County Pooled Fund
The San Diego County Pooled Investment Fund (SDCPIF) is a pooled investment fund program governed by the County of
San Diego Board of Supervisors, and administered by the County of San Diego Treasurer and Tax Collector. Investments
in SDCPIF are highly liquid as deposits and withdrawals can be made at anytime without penalty, determined on an
amortized cash basis, the same as the fair value of the District’s position in the pool.
The County of San Diego’s bank deposits are either federally insured or collateralized in accordance with the California
Government Code. Pool detail is included in the County of San Diego Comprehensive Annual Financial Report (CAFR).
Copies of the CAFR may be obtained from the County of San Diego Auditor-Controller’s Office – 1600 Pacific Coast
Highway, San Diego California 92101.
Restricted Cash and Cash Equivalents
2019 2018
Debt Service:
Water Revenue Bond Series 2010A $ 1,044,426 $ 22,024
Water Revenue Bond Series 2010B 2,743,521 58,453
Water Revenue Bond Series 2018 15,326,190 -
Total $ 19,114,137 $ 80,477
Board Designated Investments
Investments are Board restricted for the cost of the following District projects:
2019 2018
New Water Supply $ 2,537,589 $ 1,341,075
Replacement - 28,538,542
Total $ 2,537,589 $ 29,879,617
Restricted Investments
2019 2018
Debt Service:
General Obligation Bond ID No. 27-2009 $ 460,060 $ 487,087
Water Revenue Bond Series 2010A - 1,014,684
Water Revenue Bond Series 2010B - 2,664,777
Total $ 460,060 $ 4,166,548
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
31
3) FAIR VALUE MEASUREMENTS
Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurements and Application,
provides the framework for measuring fair value. The framework provides a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value with Level 1 given the highest priority and Level 3 the lowest
priority. The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the organization has
the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly. Level 2 inputs include the following:
a. Quoted prices for similar assets or liabilities in active markets.
b. Quoted prices for identical or similar assets or liabilities in markets that are not active.
c. Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield
curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks,
and default rates).
d. Inputs that are derived principally from or corroborated by observable market data by correlation or other means
(market-corroborated inputs).
Level 3 inputs are unobservable inputs for the asset or liability.
Fair value of assets measured on a recurring basis at June 30, 2019 and 2018, are as follows:
June 30, 2019
Significant Other
Observable Inputs
Fair Value (Level 2) Uncategorized
U.S. Government Sponsored Entities
$ 31,670,612
$ 31,670,612
$ -
Local Agency Investment Fund (LAIF) 41,855,272 - 41,855,272
San Diego County Pool 281,000 - 281,000
Money Market Funds 59,595 59,595 -
Total $ 73,866,479 $ 31,730,207 $ 42,136,272
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
32
3) FAIR VALUE MEASUREMENTS - Continued
June 30, 2018
Significant Other
Observable Inputs
Fair Value (Level 2) Uncategorized
U.S. Government Sponsored Entities
$ 64,967,885
$ 64,967,885
$ -
Local Agency Investment Fund (LAIF) 11,204,070 - 11,204,070
San Diego County Pool 12,131,000 - 12,131,000
Money Market Funds 80,477 80,477 -
Total $ 88,383,432 $ 65,048,362 $ 23,335,070
Investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is
used to value securities based on the securities’ relationship to benchmark quoted prices. Uncategorized investments do
not fall under the fair value hierarchy as there is no active market for the investments.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
33
4) CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2019:
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated:
Land $ 14,406,778 $ - $ (2,955) $ 14,403,823
Construction in Progress 17,618,059 22,707,240 (7,176,135) 33,149,164
Total Capital Assets,
Not Depreciated 32,024,837 22,707,240 (7,179,090) 47,552,987
Capital Assets, Being Depreciated:
Infrastructure 647,074,001 7,980,161 (2,988,133) 652,066,029
Field Equipment 8,518,901 803,018 (749,209) 8,572,710
Buildings 20,080,216 270,320 (1,107,797) 19,242,739
Transportation Equipment 3,429,304 338,220 (241,576) 3,525,948
Communication Equipment 3,514,315 101,878 (198,275) 3,417,918
Office Equipment 17,649,987 353,273 (1,221,689) 16,781,571
Total Capital Assets,
Being Depreciated 700,266,724 9,846,870 (6,506,679) 703,606,915
Less Accumulated Depreciation:
Infrastructure 243,900,677 14,960,831 (1,882,398) 256,979,110
Field Equipment 6,819,064 314,198 (747,520) 6,385,742
Buildings 9,505,939 516,862 (1,107,797) 8,915,004
Transportation Equipment 2,627,069 201,495 (240,561) 2,588,003
Communication Equipment 2,860,523 252,845 (198,275) 2,915,093
Office Equipment 15,727,726 561,566 (1,221,689) 15,067,603
Total Accumulated
Depreciation 281,440,998 16,807,797 (5,398,240) 292,850,555
Total Capital Assets,
Being Depreciated, Net
418,825,726
(6,960,927)
(1,108,439)
410,756,360
Total Capital Assets, Net $ 450,850,563 $ 15,746,313 $ (8,287,529) $ 458,309,347
Depreciation expense for the year ended June 30, 2019 was $16,807,797.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
34
4) CAPITAL ASSETS - Continued
The following is a summary of changes in Capital Assets for the year ended June 30, 2018:
Beginning Ending
Balance Additions Deletions Adjustments1 Balance
Capital Assets, Not Depreciated:
Land $ 14,389,187 $ - $ - $ 17,591 $ 14,406,778
Construction in Progress 14,201,511 19,344,410 (15,927,862) - 17,618,059
Total Capital Assets,
Not Depreciated 28,590,698 19,344,410 (15,927,862) 17,591 32,024,837
Capital Assets, Being Depreciated:
Infrastructure 640,641,602 14,875,150 (9,312,310) 869,559 647,074,001
Field Equipment 8,988,620 60,471 (530,190) - 8,518,901
Buildings 20,576,125 635,154 (243,913) (887,150) 20,080,216
Transportation Equipment 3,286,998 278,472 (136,166) - 3,429,304
Communication Equipment 3,371,041 155,636 (12,362) - 3,514,315
Office Equipment 17,620,584 554,553 (525,150) - 17,649,987
Total Capital Assets,
Being Depreciated 694,484,970 16,559,436 (10,760,091) (17,591) 700,266,724
Less Accumulated Depreciation:
Infrastructure 235,280,822 15,735,932 (7,597,237) 481,160 243,900,677
Field Equipment 7,036,892 307,889 (525,717) - 6,819,064
Buildings 9,596,983 509,171 (119,055) (481,160) 9,505,939
Transportation Equipment 2,608,206 155,029 (136,166) - 2,627,069
Communication Equipment 2,627,246 245,639 (12,362) - 2,860,523
Office Equipment 15,728,569 512,658 (513,501) - 15,727,726
Total Accumulated
Depreciation 272,878,718 17,466,318 (8,904,038) - 281,440,998
Total Capital Assets,
Being Depreciated, Net
421,606,252
(906,882)
(1,856,053)
(17,591)
418,825,726
Total Capital Assets, Net $ 450,196,950 $ 18,437,528 $ (17,783,915) $ - $ 450,850,563
1 Adjustments are related to recategorization of capital assets during the fiscal year.
Depreciation expense for the year ended June 30, 2018 was $17,466,318.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
35
5) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2019 are as follows:
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 $ 3,390,000 $ - $ 635,000 $ 2,755,000 $ 650,000
Unamortized Bond Premium 68,143 - 16,354 51,789 -
Net General Obligation Bonds 3,458,143 - 651,354 2,806,789 650,000
Certificates of Participation:
1996 Certificates of Participation 7,600,000 - 7,600,000 (1) - -
1996 COPS Unamortized Discount (6,707) - (6,707) - -
Net Certificates of Participation 7,593,293 - 7,593,293 - -
Revenue Bonds:
2010 Water Revenue Bonds Series A 7,880,000 - 975,000 6,905,000 1,015,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2013 Water Revenue Refunding Bonds 4,560,000 - 685,000 3,875,000 715,000
2016 Water Revenue Refunding Bonds 31,170,000 - 1,045,000 30,125,000 1,100,000
2018 Water Revenue Bonds - 32,435,000 - 32,435,000 1,245,000
2010 Series A Unamortized Premium 465,009 - 74,400 390,609 -
2013 Bonds Unamortized Premium 496,493 - 96,097 400,396 -
2016 Bonds Unamortized Premium 3,244,048 - 178,572 3,065,476 -
2018 Bonds Unamortized Premium - 2,710,512 72,765 2,637,747 -
Net Revenue Bonds 84,170,550 35,145,512 3,126,834 116,189,228 4,075,000
Total Long-Term Liabilities $ 95,221,986 $ 35,145,512 $ 11,371,481 $ 118,996,017 $ 4,725,000
(1) This amount includes a bond refunding of $6,900,000.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
36
5) LONG-TERM DEBT - Continued
Long-term liabilities for the year ended June 30, 2018 are as follows:
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 $ 3,995,000 $ - $ 605,000 $ 3,390,000 $ 635,000
Unamortized Bond Premium 84,498 - 16,355 68,143 -
Net General Obligation Bonds 4,079,498 - 621,355 3,458,143 635,000
Certificates of Participation:
1996 Certificates of Participation 8,200,000 - 600,000 7,600,000 700,000
1996 COPS Unamortized Discount (7,452) - (745) (6,707) -
Net Certificates of Participation 8,192,548 - 599,255 7,593,293 700,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 8,820,000 - 940,000 7,880,000 975,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2013 Water Revenue Refunding Bonds 5,220,000 - 660,000 4,560,000 685,000
2016 Water Revenue Refunding Bonds 32,185,000 - 1,015,000 31,170,000 1,045,000
2010 Series A Unamortized Premium 539,411 - 74,402 465,009 -
2013 Bonds Unamortized Premium 592,588 - 96,095 496,493 -
2016 Bonds Unamortized Premium 3,422,619 - 178,571 3,244,048 -
Net Revenue Bonds 87,134,618 - 2,964,068 84,170,550 2,705,000
Total Long-Term Liabilities $ 99,406,664 $ - $ 4,184,678 $ 95,221,986 $ 4,040,000
General Obligation Bonds
In June 1998, the District issued $11,835,000 of General Obligation Refunding Bonds. The proceeds of this issue, together
with other lawfully available monies, were to be used to establish an irrevocable escrow to advance refund and defease in
their entirety the District’s previous outstanding General Obligation Bond issue. In November 2009, the District issued
$7,780,000 of General Obligation Refunding Bonds Improvement District No. 27-2009 to refund the 1998 issue. The
proceeds from the bond issue were $7,989,884, which included an original issue premium of $209,884. An amount of
$7,824,647, which consisted of unpaid principal and accrued interest, was deposited into an escrow fund. Pursuant to an
optional redemption clause in the 1998 bonds, the District was able to redeem the 1998 bonds, without premium at any time
after September 1, 2009. On December 15, 2009 the 1998 bonds were refunded.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
37
5) LONG-TERM DEBT - Continued
General Obligation Bonds - Continued
These bonds are general obligations of Improvement District No. 27 (ID 27) of the District. The Board of Directors has the
power and is obligated to levy annual ad valorem taxes without limitation, as to rate or amount for payment of the bonds
and the interest upon all property which is within ID 27 and subject to taxation. The General Obligation Bonds are payable
from District-wide tax revenues. The Board may utilize other sources for servicing the bond debt and interest.
The Improvement District No. 27-2009 General Obligation Refunding Bonds have interest rates from 3.00% to 4.00% with
maturities through Fiscal Year 2023.
Future debt service requirements for the bonds are as follows:
For the Year Ended
June 30, Principal Interest
2020 $ 650,000 $ 97,200
2021 680,000 70,600
2022 705,000 42,900
2023 720,000 14,400
$ 2,755,000 $ 225,100
Certificates of Participation (COPS)
In June 1996, COPS with face value of $15,400,000 were sold by the Otay Service Corporation to finance the cost of
design, acquisition, and construction of certain capital improvements. An installment purchase agreement between the
District, as Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and interest
associated with the COPS. The installment payments are to be paid from taxes and net revenues, as described in the
installment agreement. The certificates bear interest at a variable weekly rate not to exceed 12%. The variable interest rate
is tied to the 30-day LIBOR index and the Securities Industry and Financial Markets Association (SIFMA) index. An
irrevocable letter of credit facility is necessary to market the District’s variable rate debt. This facility is with Union Bank
and covers the outstanding principal and interest. The facility expires on June 29, 2020. The installment payments are to be
paid annually at $350,000 to $1,100,000 from September 1, 1996 through September 1, 2026. The interest rate at June 30,
2018 was 1.50% and during the 2019 fiscal year these COPS were advanced refunded.
The COPS debt issue contain various covenants and restrictions, principally that the District fix, prescribe, revise and collect
rates, fees and charges for the Water System which will at lease sufficient to yield, during each fiscal year, taxes and net
revenues equal to one hundred twenty-five percent (125%) of the debt service for such fiscal year. The District was in
compliance with these rate covenants for the fiscal year ended June 30, 2019.
Certificate of Participation (COPS) Advanced Refunding
In November 2018, the District issued $32,435,000 in Water Revenue Bonds, Series 2018, with interest rates of 3% to 5%
which a portion of the proceeds was used to advance refund $6,900,000 of the 1996 Certificates of Participation. Bond
proceeds of $6,900,000 were used to advance refund the 1996 Certificates of Participation on November 1, 2018 to fully
repay the obligation. The net savings and economic gain (loss) from this current advance refunding is unavailable due to
the 1996 Certificates of Participation having a variable interest rate.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
38
5) LONG-TERM DEBT - Continued
Water Revenue Bonds
In April 2010, Water Revenue Bonds with a face value of $50,195,000 were sold by the Otay Water District Financing
Authority to provide funds for the construction of water storage and transmission facilities. The bond issue consisted of two
series; Water Revenue Bonds, Series 2010A (Non-AMT Tax Exempt) with a face value of $13,840,000 plus a $1,078,824
original issue premium, and Water Revenue Bonds, Series 2010B (Taxable Build America Bonds) with a face value of
$36,355,000. The Series 2010A bonds are due in annual installments of $785,000 to $1,295,000 from September 1, 2012
through September 1, 2025; bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of
$1,365,000 to $3,505,000 from September 1, 2026 through September 1, 2040; bearing interest at 6.377% to 6.577%.
Interest on both Series is payable on September 1, 2010 and semiannually thereafter on March 1st and September 1st of each
year until maturity or earlier redemption. The installment payments are to be made from taxes and net revenues of the
Water System as described in the installment purchase agreement, on parity with the payments required to be made by the
District for the 1996 Certificates of Participation described above and the 2013 and 2016 Water Revenue Refunding Bonds
described below.
The proceeds of the bonds will be used to fund the project described above as well as to fund reserve funds of $1,030,688
(Series 2010A) and $2,707,418 (Series 2010B). $542,666 was used to fund various costs of issuance.
The original issue premium is being amortized over the 14-year life of the Series 2010A bonds. Amortization for the year
ending June 30, 2019 was $74,400 and for June 30, 2018 was $74,402. The amortizations are included in interest expense.
The unamortized premium at June 30, 2019 is $390,609 and at June 30, 2018 is $465,009.
The 2010 Water Revenue Bonds contains various covenants and restrictions, principally that the District fix, prescribe,
revise and collect rates, fees and charges for the Water System which will at least be sufficient to yield, during each fiscal
year, taxes and net revenues equal to one hundred twenty-five percent (125%) of the debt service for such fiscal year. The
District was in compliance with these rate covenants for the fiscal years ended June 30, 2019 and 2018.
In June 2013, the 2013 Water Revenue Refunding Bonds were issued to defease the 2004 Refunding Certificates of
Participation. The bonds were issued with a face value of $7,735,000 plus a $984,975 original issue premium. The bonds
are due in annual installments of $660,000 to $835,000 from September 1, 2013 through September 1, 2023; bearing
interest at 1% to 4%. The installment payments are to be made from taxes and net revenues of the Water System, on parity
with the payments required to be made by the District for the 1996 and 2016 Water Revenue Bonds and the 2010A and
2010B described above.
The original issue premium is being amortized over the 11 year life of the Series 2013 bonds. Amortization for the year
ending June 30, 2019 was $96,097 and for June 30, 2018 was $96,095. The amortizations are included in interest expense.
The unamortized premium at June 30, 2019 is $400,396 and at June 30, 2018 is $496,493.
In May 2016, Water Revenue Refunding Bonds were issued to defease the 2007 Revenue Certificates of Participation. The
bonds are due in annual installments of $1,200,000 to $2,235,000 from September 1, 2016 through September 1, 2036;
bearing interest of 2% to 5%. The bonds were issued with a face value of $33,385,000 plus $3,630,950 original issue
premium. The savings between the cash flow required to service, the old debt and the cash flow required to service the new
debt is $5,664,140 and represent an economic gain on refunding of $4,538,175.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
39
5) LONG-TERM DEBT - Continued
Water Revenue Bonds - Continued
The original issue premium is being amortized over the 20 year life of the Series 2016 bonds. Amortization for the year
ending June 30, 2019 was $178,572 and for June 30, 2018 was $178,571. The amortizations are included in interest
expense. The unamortized premium at June 30, 2019 is $3,065,476 and at June 30, 2018 is $3,244,048.
In November 2018, Water Revenue Bonds were issued to provide funds for construction of water storage, treatment and
transmission facilities and to refinance the 1996 Certificates of Participation. The bonds are due in annual installments of
$775,000 to $1,915,000 from September 1, 2019 through September 1, 2043; bearing interest of 3% to 5%. The bonds were
issued with a face value of $32,435,000 plus $2,710,512 original issue premium.
The original issue premium is being amortized over the 25 year life of the Series 2018 bonds. Amortization for the year
ending June 30, 2019 was $72,765. The amortization expense is included in interest expense. The unamortized premium at
June 30, 2019 is $2,637,747.
The total amount outstanding at June 30, 2019 and aggregate maturities of the revenue bonds for the fiscal years subsequent
to June 30, 2019, are as follows:
For the Year
2010 Water Revenue Bond
Series A 2010 Water Revenue Bond
Series B
Ended June 30, Principal Interest Principal Interest
2020 $ 1,015,000 $ 323,112 $ - $ 2,371,868
2021 1,065,000 271,112 - 2,371,868
2022 1,120,000 216,488 - 2,371,868
2023 1,175,000 159,113 - 2,371,868
2024 1,235,000 98,862 - 2,371,868
2025-2029 1,295,000 33,994 6,000,000 11,123,436
2030-2034 - - 9,925,000 8,425,226
2035-2039 - - 13,635,000 4,590,581
2040-2041 - - 6,795,000 453,977
$ 6,905,000 $ 1,102,681 $ 36,355,000 $ 36,452,560
For the Year
2013 Water Revenue
Refunding Bonds
2016 Water Revenue
Refunding Bonds
2018 Water Revenue
Refunding Bonds
Ended June 30, Principal Interest Principal Interest Principal Interest
2020 $ 715,000 $ 140,700 $ 1,100,000 $ 1,119,831 $ 1,245,000 $ 1,424,913
2021 745,000 111,500 1,155,000 1,063,456 1,310,000 1,361,038
2022 775,000 81,100 1,215,000 1,004,206 1,370,000 1,294,038
2023 805,000 49,500 1,285,000 941,706 1,455,000 1,223,413
2024 835,000 16,700 1,350,000 875,831 1,650,000 1,145,787
2025-2029 - - 7,845,000 3,300,031 7,575,000 4,471,312
2030-2034 - - 9,655,000 1,611,809 6,220,000 2,935,237
2035-2039 - - 6,520,000 286,219 6,550,000 1,596,500
2040-2044 - - - - 5,060,000 450,331
$ 3,875,000 $ 399,500 $ 30,125,000 $ 10,203,089 $ 32,435,000 $ 15,902,569
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
40
5) LONG-TERM DEBT - Continued
Revenues Pledged
The District has pledged a portion of future water sales revenues to repay its Water Revenue Bonds and Certificates of
Participation. Total principal and interest remaining on the water revenue bonds and certificates of participation is
$173,755,399 payable through fiscal year 2044. For June 30, 2019, principal and interest paid by the water sales revenues
were $3,405,000 and $4,593,173, respectively. For June 30, 2018, principal and interest paid by the water sales revenues
were $3,215,000 and $4,268,091, respectively.
6) NET POSITION
Designations of Net Position
In addition to the restricted net position, a portion of unrestricted net position, have been designated by the Board of
Directors for the following purposes as of June 30, 2019 and 2018:
2019 2018
Designated Betterment $ 2,204,313 $ 2,293,440
Replacement Reserve 18,650,150 20,510,569
Designated Expansion 7,155 -
Designated New Supply Fund 406,545 325,645
Employee Benefits Reserve 276,168 262,404
Total $ 21,544,331 $ 23,392,058
7) DEFINED BENEFIT PENSION PLAN
A) General Information about the Pension Plans
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the District’s Plan, agent multiple-
employer defined benefit pension plans administered by the California Public Employees’ Retirement System
(CalPERS), which acts as a common investment and administrative agent for its participating member employers.
Benefit provisions under the Plans are established by State statute and District resolution. CalPERS issues publicly
available reports that include a full description of the pension plans regarding provisions, assumptions and
membership information that can be found on the CalPERS website.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to
plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service,
equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50
with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
41
7) DEFINED BENEFIT PENSION PLAN - Continued
A) General Information about the Pension Plans - Continued
Benefits Provided - Continued
The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional
Settlement 2W Death Benefit. The cost of living adjustments for the plan are applied as specified by the Public
Employees’ Retirement Law.
The Plans’ provisions and benefits in effect at June 30, 2019 and 2018 are summarized as follows:
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7% at 55 2% at 62
Benefit Vesting Schedule 5 years service 5 years service
Benefit Payments Monthly for life Monthly for life
Retirement Age 50 – 55+ 52 – 67+
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5%
Required Employee Contribution Rates (2019 and 2018) 8% 6.25%
Required Employer Contribution Rates
2019 37.436% 37.436%
2018 34.246% 34.246%
Employees Covered
The following employees were covered by the benefit terms for the Plan:
2019 2018
Inactive Employees or Beneficiaries Currently Receiving Benefits 183 175
Inactive Employees Entitled to But Not Yet Receiving Benefits 131 140
Active Employees 133 134
Total 447 449
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates
for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1
following notice of a change in the rate. Funding contributions for the Plan are determined annually on an actuarial
basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the
costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued
liability. The District is required to contribute the difference between the actuarially determined rate and the
contribution rate of employees.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
42
7) DEFINED BENEFIT PENSION PLAN - Continued
B) Net Pension Liability
The District’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s
fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2018 and 2017, using the
annual actuarial valuations as of June 30, 2018 and 2017, respectively, rolled forward to June 30, 2018 and 2017,
respectively, using standard update procedures. A summary of principal assumptions and methods used to
determine the net pension liability is shown below:
Actuarial Assumptions
The total pension liabilities in the June 30, 2018 and 2017 actuarial valuations were determined using the following
actuarial assumptions:
2019 2018
Valuation Date June 30, 2017 June 30, 2016
Measurement Date June 30, 2018 June 30, 2017
Actuarial Cost Method Entry-Age Normal Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 7.15% 7.15%
Inflation 2.5% 2.75%
Salaries Increases Varies(1) Varies(1)
Mortality Rate Table CalPERS Membership Data(2) CalPERS Membership Data(4)
Post Retirement Benefit Increase See Footnote(3) See Footnote(5)
(1) Depending on age, service and type of employment.
(2) The mortality table used was developed based on CalPERS-specific data. The table includes 15 years of
mortality improvements using the Society of Actuaries Scale 90% of scale MP 2016. For more details on this
table, please refer to the December 2017 experience study report (based on CalPERS demographic data from
1997 to 2015) that can be found on the CalPERs website.
(3) Contract COLA up to 2% until Purchasing Power Protection Allowance Floor on Purchasing Power applies,
2.50% thereafter.
(4) The mortality table used was developed based on CalPERS-specific data. The table includes 20 years of
mortality improvements using the Society of Actuaries Scale BB. For more details on this table, please refer to
the 2014 experience study report.
(5) Contract COLA up to 2.75% until Purchasing Power Protection Allowance Floor on Purchasing Power applies,
2.75% thereafter.
All other actuarial assumptions used in the valuations were based on the results of an actuarial experience study for
the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience
Study report may be accessed on the CalPERS website at www.calpers.ca.gov under Forms and Publications.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
43
7) DEFINED BENEFIT PENSION PLAN - Continued
B) Net Pension Liability - Continued
Change of Assumptions
In the June 30, 2017 valuation, the accounting discount rate was reduced from 7.65 percent to 7.15 percent.
Discount Rate
The discount rate used to measure the total pension liability at June 30, 2018 and 2017 measurement dates was
7.15% for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount
rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be
different from the actuarially assumed discount rate. The tests revealed the assets would not run out. Therefore, the
7.15% discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The
long term expected discount rate of 7.15% is applied to all plans in the Public Employees Retirement Fund (PERF).
The stress test results are presented in a detailed report called “GASB 68 Crossover Testing Report” that can be
obtained from the CalPERS website.
The long-term expected rate of return on pension plan investments was determined using a building-block method in
which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment
expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term
market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’
asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11+
years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the
present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single
equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated
using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent
rate calculated above and adjusted to account for assumed administrative expenses.
The following table reflects the long-term expected real rate of return by asset class.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
44
7) DEFINED BENEFIT PENSION PLAN - Continued
B) Net Pension Liability - Continued
Discount Rate - Continued
Asset Class(a)
Assumed
Asset Allocation
Real Return
Years 1 - 10(b)
Real Return
Years 11+(c)
2018 2017 2018 2017 2018 2017
Global Equity 50.0% 47.0% 4.80% 4.90% 5.98% 5.38%
Global Fixed Income 28.0% 19.0% 1.00% 0.80% 2.62% 2.27%
Inflation Assets/Sensitive - 6.0% 0.77% 0.60% 1.81% 1.39%
Private Equity 8.0% 12.0% 6.30% 6.60% 7.23% 6.63%
Real Estate 13.0% 11.0% 3.75% 2.80% 4.93% 5.21%
Infrasture and Forestland - 3.0% - 3.90% - 5.36%
Liquidity 1.0% 2.0% - -0.40% -0.92% -0.90%
Total 100% 100%
(a) In the System’s CAFR, Fixed Income in included in Global Debt Securities; Liquidity is included in Short-
term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt
Securities. (b) An expected inflation of 2.00% used for this period. (c) An expected inflation of 2.92% used for this period.
C) Changes in the Net Pension Liability
The changes in the Net Pension Liability for the Plan for June 30, 2019:
Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Beginning Balance $ 130,809,611 $ 81,227,295 $ 49,582,316
Changes in the Year:
Service Cost 2,528,271 - 2,528,271
Interest on the Total Pension Liability 9,168,092 - 9,168,092
Changes in Benefit Terms - - -
Changes in Assumptions (1,312,634) - (1,312,634)
Differences Between Actual and Expected
Experience
461,917
-
461,917
Net Plan to Plan Resource Movement - (203) 203
Contributions - Employer - 4,441,517 (4,441,517)
Contributions - Employees - 1,015,008 (1,015,008)
Net Investment Income - 6,949,676 (6,949,676)
Benefit Payments, Including Refunds of
Employee Contributions
(5,995,949)
(5,995,949)
-
Administrative Expense - (126,575) 126,575
Other Miscellaneous Income/(Expense) - (240,367) 240,367
Net Changes 4,849,697 6,043,107 (1,193,410)
Ending Balance $ 135,659,308 $ 87,270,402 $ 48,388,906
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
45
7) DEFINED BENEFIT PENSION PLAN - Continued
C) Changes in the Net Pension Liability - Continued
The changes in the Net Pension Liability for the Plan for June 30, 2018:
Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Beginning Balance $ 119,095,572 $ 73,846,128 $ 45,249,444
Changes in the Year:
Service Cost 2,556,902 - 2,556,902
Interest on the Total Pension Liability 8,836,284 - 8,836,284
Changes in Benefit Terms - - -
Changes in Assumptions 7,308,486 - 7,308,486
Differences Between Actual and Expected
Experience
(1,208,593)
-
(1,208,593)
Contributions - Employer - 4,105,810 (4,105,810)
Contributions - Employees - 1,014,329 (1,014,329)
Net Investment Income - 8,149,097 (8,149,097)
Benefit Payments, Including Refunds of
Employee Contributions
(5,779,040)
(5,779,040)
-
Administrative Expense - (109,029) 109,029
Net Changes 11,714,039 7,381,167 4,332,872
Ending Balance $ 130,809,611 $ 81,227,295 $ 49,582,316
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the District for the Plan, calculated using the discount rate for the
Plan, as well as what the District’s net pension liability would be if it were calculated using a discount rate that is 1-
percentage point lower or 1-percentage point higher than the current rate:
2019 2018
1% Decrease 6.15% 6.15%
Net Pension Liability $ 66,284,590 $ 67,205,545
Current Discount Rate 7.15% 7.15%
Net Pension Liability $ 48,388,906 $ 49,582,316
1% Increase 8.15% 8.15%
Net Pension Liability $ 33,516,191 $ 34,980,142
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS
financial reports.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
46
7) DEFINED BENEFIT PENSION PLAN - Continued
D) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the years ended June 30, 2019 and 2018, the District recognized pension expense of $6,855,984 and $6,413,616.
At June 30, 2019 and 2018, the District reported deferred outflows of resources and deferred inflows of resources
related to pensions from the following services:
Deferred Outflows
of Resources
Deferred Inflows of
Resources
2019 2018 2019 2018
Pension contributions subsequent to measurement date $ 36,665,042 $ 4,452,147 $ - $ -
Differences between actual and expected experience 296,947 - (313,339) (936,234)
Changes in assumptions 1,894,792 4,601,639 (843,836) -
Net difference between projected and actual earnings
on pension plan investments
166,037
1,132,443
-
-
Total $ 39,022,818 $ 10,186,229 $ (1,157,175) $ (936,234)
$36,665,042 reported as deferred outflows of resources related to contributions subsequent to the measurement date
will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Those contributions
include a $31,800,000 additional payment to reduce the District’s unfunded pension liability. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized
as pension expense as follows:
Deferred
Year Ended Outflow/(Inflows)
June 30 of Resources
2019 $ 2,286,620
2020 (20,789)
2021 (825,349)
2022 (239,881)
2023 -
Thereafter -
E) Payable to the Pension Plan
At June 30, 2019 and 2018, the District reported a payable of $44,905 and $88,989, respectively, for the outstanding
amount of contributions to the pension plan required for the years ended June 30, 2019 and 2018. These payables
are reflected in the accrued payroll liabilities on the Statements of Net Position.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
47
8) OTHER POST EMPLOYMENT BENEFITS (OPEB)
Plan Description
The District’s defined benefit postemployment healthcare plan, (DPHP), provides medical benefits to eligible retired
District employees and beneficiaries. DPHP is part of the Public Agency portion of the California Employers’ Retiree
Benefit Trust Fund (CERBT), an agent multiple-employer plan administered by California Public Employees’
Retirement System (CalPERS), which acts as a common investment and administrative agent for participating public
employers within the State of California. CalPERS issues a separate Comprehensive Annual Financial Report. Copies of
the CalPERS’ annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento,
California 95814.
Prior to the plan agreements signed in 2011, the eligibility in the plan was broken into 3 tiers, employees hired before
January 1, 1981, employees hired on or after January 1, 1981 but before July 1, 1993 and employees hired on or after
July 1, 1993. Board members elected before January 1, 1995 are also eligible for the plan. Eligibility also includes age
and years of service requirements which vary by tier. Benefits include up to 100% medical and/or dental premiums for
life for the retiree for Tier I, II or III employees, and up to 100% spouse premium until death of retiree or age 65
whichever is greater and dependent premium up to age 19 depending on the tier.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of consecutive
service and unrepresented employees hired before January 1, 2013 are eligible after 15 years. Survivor benefits are
covered beyond Medicare.
Employees Covered
As of June 30, 2018 and 2017 actuarial valuations, the following current and former employees were covered by the
benefit terms under the Plan:
Active employees 131
Inactive employees or beneficiaries currently receiving benefits 79
Inactive employees entitled to, but not yet receiving benefits -
Total 210
Contributions
The annual contribution is based on the actuarially determined contribution. For the fiscal years ended June 30, 2019
and 2018, the District’s cash contributions were $2,049,038 and $2,054,208, respectively, in payments to the trust and
the estimated implied subsidy was $160,536 and $147,796, respectively, resulting in total payments of $2,209,574 and
$2,202,004, respectively.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
48
8) OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Net OPEB Liability
The District’s net OPEB liability was measured as of June 30, 2018 and 2017 and the total OPEB liability used to
calculate the net OPEB liability was determined by actuarial valuations dated June 30, 2018 and 2017 based on the
following actuarial methods and assumptions:
Actuarial Assumptions
Discount Rate 7.00%
Inflation 2.75%
Salary Increases 3.0% plus merit
Investment Rate of Return 7.00%
Mortality Rate(1) Derived using CalPERS Membership Data for all funds
Pre-Retirement Turnover(2) Derived using CalPERS Membership Data for all funds
Healthcare Trend Rate 6.00% HMO/6.50% PPO decreasing to 5.00% HMO/5.00% PPO
Notes:
(1) Pre-retirement mortality information was derived from data collected during 1997 to 2011 CalPERS Experience Study
dated January 2014 and post-retirement mortality information was derived from the 2007 to 2011 CalPERS Experience
Study. The Experience Study Reports may be access on the CalPERS website www.calpers.ca.gov under Forms and
Publications.
(2) The pre-retirement turnover information was developed based on CalPERS specific data. For more details, please refer to
the 2007 to 2011 Experience Study Report. The Experience Study Report may be accessed on the CalPERS website
www.calpers.ca.gov under Forms and Publications.
The long-term expected rate of return on OPEB plan investments was determined using a building block method in which
best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and
inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of
return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected
inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset
are summarized in the following table for the June 30, 2018 and 2017 actuarial valuations:
Long-term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 57.0% 5.5%
REITs 8.0% 3.65%
Global Fixed Income 27.0% 2.35%
Commodities 3.0% 1.75%
TIPS 5.0% 1.50%
Total 100%
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
49
8) OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Discount Rate
The discount rate used to measure the total OPEB liability was 7.00% for the June 30, 2018 and 2017 actuarial valuations.
The projection of cash flows used to determine the discount rate assumed that District contributions will be made at rates
equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position
was projected to be available to make all projected OPEB payments for current active and inactive employees and
beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of
projects benefit payments to determine the total OPEB liability.
Changes in the OPEB Liability
The changes in the net OPEB liability for the Plan are as follows:
June 30, 2019 Increase (Decrease)
Total OPEB
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net OPEB
Liability/(Asset)
(c) = (a) - (b)
Balance at June 30, 2018
(Valuation Date June 30, 2017) $ 26,449,527 $ 21,739,035 $ 4,710,492
Changes Recognized for the Measurement Period:
Service Cost 735,655 - 735,655
Interest 1,864,967 - 1,864,967
Changes of Assumptions - - -
Contributions - Employer - 2,202,004 (2,202,004)
Net Investment Income - 1,734,626 (1,734,626)
Benefit Payments (1,085,586) (1,085,586) -
Administrative Expenses - (11,784) 11,784
Other Expenses - (28,757) 28,757
Net Changes 1,515,036 2,810,503 (1,295,467)
Balance at June 30, 2019
(Measurement Date June 30, 2018)
$ 27,964,563
$ 24,549,538
$ 3,415,025
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
50
8) OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Changes in the OPEB Liability - Continued
June 30, 2018 Increase (Decrease)
Total OPEB
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net OPEB
Liability/(Asset)
(c) = (a) - (b)
Balance at June 30, 2017
(Valuation Date June 30, 2016) $ 25,037,076 $ 18,492,217 $ 6,544,859
Changes Recognized for the Measurement Period:
Service Cost 687,528 - 687,528
Interest 1,764,343 - 1,764,343
Changes of Assumptions - - -
Contributions - Employer - 2,284,420 (2,284,420)
Net Investment Income - 2,011,985 (2,011,985)
Benefit Payments (1,039,420) (1,039,420) -
Administrative Expense - (10,167) 10,167
Net Changes 1,412,451 3,246,818 (1,834,367)
Balance at June 30, 2018
(Measurement Date June 30, 2017)
$ 26,449,527
$ 21,739,035
$ 4,710,492
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following presents the net OPEB liability of the District if it were calculated using a discount rate that is one
percentage point lower or one percentage point higher than the current rate, for the measurement periods ended June 30,
2018 and 2017:
2019
(2018 Measurement Period)
2018
(2017 Measurement Period)
1% Decrease
Net OPEB Liability $ 7,750,569 $ 8,830,538
Current Discount Rate
Net OPEB Liability $ 3,415,025 $ 4,710,492
1% Increase
Net OPEB Liability $ 195,486 $ 1,378,817
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
51
8) OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates
The following presents the net OPEB liability of the District if it were calculated using health care cost trend rates that
are one percentage point lower or one percentage point higher than the current rate, for measurement periods ended June
30, 2018 and 2017:
1% Decrease
(5.00% HMO/5.50% PPO
Decreasing to
4.00% HMO/4.00% PPO)
Current Healthcare Cost
Trend Rates
(6.00% HMO/6.5% PPO
Decreasing to
5.00% HMO/5.00% PPO)
1% Increase
(7.00% HMO/7.50% PPO
Decreasing to
6.00% HMO/6.00% PPO)
2019 Net OPEB Liability (Asset) $ (550,596) $ 3,415,025 $ 8,456,194
(2018 Measurement Period)
2018 Net OPEB Liability $ 1,158,335 $ 4,710,492 $ 9,214,495
(2017 Measurement Period)
OPEB Plan Fiduciary Net Position
CERBT issues a publicly available financial report that may be obtained from the California Public Employees
Retirement System Executive Office, 400 P Street, Sacramento, California 95814.
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense
systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are
categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future
OPEB expense.
The recognition period differs depending on the source of the gain or loss:
Net difference between projected and actual
earnings on OPEB plan investments
5 years
All other amounts Expected average remaining service lifetime (EARSL)
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
52
8) OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal years ended June 30, 2019 and 2018, the District recognized OPEB expense of $(177,250) and $(39,299),
respectively. As of fiscal years ended June 30, 2019 and 2018, the District reported deferred outflows of resources
related to OPEB from the following sources:
Deferred Outflows
of Resources
Deferred Inflows of
Resources
2019 2018 2019 2018
OPEB contributions subsequent to measurement date $ 2,209,574 $ 2,202,004 $ - $ -
Changes in assumptions - - - -
Net difference between projected and actual earnings
on OPEB plan investments
-
-
(544,777)
(539,449)
Total $ 2,209,574 $ 2,202,004 $ (544,777) $ (539,449)
The $2,209,574 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2018
measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending June 30,
2020. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as expense as
follows:
Deferred
Year Ended Outflow/(Inflows)
June 30, of Resources
2020 $ 169,910
2021 169,910
2022 169,911
2023 35,046
2024 -
Thereafter -
9) WATER CONSERVATION AUTHORITY
In 1999, the District formed the Water Conservation Garden Authority (the “Authority”), a Joint Powers Authority, with
other local entities to construct, maintain and operate a xeriscape demonstration garden in the furtherance of water
conservation. The authority is a non-profit public charity organization and is exempt from income taxes. During the years
ended June 30, 2019 and 2018, the District contributed $118,040 and $123,050, respectively, for the development,
construction and operation costs of the xeriscape demonstration garden.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
53
9) WATER CONSERVATION AUTHORITY - Continued
A summary of the Authority’s June 30, 2018 audited financial statement is as follows (latest report available):
Assets $ 1,230,627
Liabilities 34,000
Net Position $ 1,196,627
Revenues, Gains and Other Support $ 540,783
Expenses 594,203
Changes in Net Position $ (53,420)
10) COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District had committed to capital projects under construction with an estimated cost to complete of $2,245,835 and
$21,974,525 at June 30, 2019 and 2018, respectively.
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are pending against the
District. In the opinion of the staff and counsel, all such matters are adequately covered by insurance, or if not so covered,
are without merit or are of such kind, or involved such amounts, as would not have significant effect on the financial
position or results of operations of the District if disposed of unfavorably.
Refundable Terminal Storage Fees
The District has entered into an agreement with several developers whereby the developers prepaid the terminal storage fee
in order to provide the District with the funds necessary to build additional storage capacity. The agreement further allows
the developers to relinquish all or a portion of such water storage capacity. If the District grants to another property owner
the relinquished storage capacity, the District shall refund to the applicable developer $746 per equivalent dwelling unit
(EDU). There were 17,867 EDUs that were subject to this agreement. At June 30, 2019, 1,750 EDUs had been
relinquished and refunded, 15,143 EDUs had been connected, and 974 EDUs have neither been relinquished nor connected.
At June 30, 2018, 1,750 EDUs had been relinquished and refunded, 15,086 EDUs had been connected, and 1,031 EDUs
have neither been relinquished nor connected.
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of District facilities.
The developers agree to make certain improvements and after the completion of the projects the District agrees to reimburse
such improvements with a maximum reimbursement amount for each developer. Contractually, the District does not incur
a liability for the work until the work is accepted by the District. As of June 30, 2019 and 2018, none of the outstanding
developer agreements had been accepted.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
54
11) RISK MANAGEMENT
General Liability
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors and omissions,
and natural disasters. Beginning in July 2003, the District began participation in an insurance pool through the Special
District Risk Management Authority (SDRMA). SDRMA is a not-for-profit public agency formed under California
Government Code Sections 6500 et. Seq. SDRMA is governed by a board composed of members from participating
agencies. The mission of SDRMA is to provide renewable, efficiently priced risk financing and risk management services
through a financially sound pool. The District pays an annual premium for commercial insurance covering general liability,
excess liability, property, automobile, public employee dishonesty, and various other claims. Separate financial statements
of SDRMA may be obtained at Special District Risk Management Authority, 1112 “I” Street, Suite 300, Sacramento, CA
95814.
General and Auto Liability, Public Officials’ Errors and Omissions and Employment Practices Liability: Total risk
financing limits of $10 million combined single limit at $10 million per occurrence, subject to the following deductibles:
$25,000 per occurrence for third party general liability property damage;
$1,000 per occurrence for third party auto liability property damage;
50% co-insurance of cost expended by SDRMA, in excess of $10,000 up to $50,000, per occurrence, as respects
any employment practices claim or suit arising in whole or any part out of any action involving discipline,
demotion, reassignment or termination of any employee of the member.
Employee Dishonesty Coverage: Total of $1,000,000 per loss includes Public Employee Dishonesty, Forgery or Alteration
and Theft, Disappearance and Destruction coverage’s effective July 1, 2017 and 2018.
Property Loss: Replacement cost, for property on file, if replaced, and if not replaced within two years after the loss, paid
on an actual cash value basis, to a combined total of $1 billion per occurrence, subject to a $1,000 deductible per
occurrence, effective July 1, 2017 and 2018.
Boiler and Machinery: Replacement cost up to $100 million per occurrence, subject to a $1,000 deductible, effective July
1, 2017 and 2018.
Public Officials Personal Liability: $500,000 each occurrence, with an annual aggregate of $500,000 per each
elected/appointed official to which this coverage applies, subject to the terms, conditions and exclusions as provided in the
Memorandum of Coverage’s, deductible of $1,000 per occurrence, effective July 1, 2017 and 2018.
Comprehensive and Collision: On selected vehicles, with deductibles of $250/$500 or $500/$1,000, as elected; ACV limits;
fully self-funded by SDRMA; Policy No. LCA - SDRMA – 2017-18 and 2018-19, effective July 1, 2017 and 2018.
Workers’ Compensation Coverage and Employer’s Liability: Statutory limits per occurrence for Workers’ Compensation
and $5.0 million for Employer’s Liability Coverage, subject to the terms, conditions and exclusions as provided in the
Memorandum of Coverage, effective July 1, 2017 and 2018.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
55
11) RISK MANAGEMENT - Continued
General Liability - Continued
Cyber Coverage: $2,000,000 Annual Aggregate Limit of Liability for each Insured/Member for Information Security &
Privacy Liability. Policy includes at $25,000 deductible per claim.
Health Insurance
Beginning in January 2008, the District began providing health insurance through SDRMA covering all of its employees,
retirees, and other dependents. SDRMA is a pooled medical program, administered in conjunction with the California State
Association of Counties (CSAC).
Adequacy of Protection
During the past four fiscal (claims) years none of the above programs of protection have had settlements or judgments that
exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage
from coverage in the prior year.
12) INTEREST EXPENSE
Interest expense for the years ended June 30, 2019 and 2018 are as follows:
2019 2018
Amount Expensed $ 4,713,883 $ 3,941,321
Amount Capitalized as a Cost of
Construction Projects - 266,959
Total Interest $ 4,713,883 $ 4,208,280
13) SEGMENT INFORMATION
The District has issued Water Revenue Bonds in previous fiscal years to finance certain capital improvements. While
water and wastewater services are accounted for jointly in these financial statements, the investors in the Water Revenue
Bonds rely solely on the revenues of the water services for repayment.
CNOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
56
13) SEGMENT INFORMATION - Continued
Summary financial information for the water and wastewater services is presented for June 30, 2019 and 2018:
Condensed Statements of Net Position
June 30, 2019 and 2018
Water Services Wastewater Services
2019 2018 2019 2018
ASSETS
Cash and Investments $ 72,508,971 $ 83,936,096 $ 2,578,974 $ 5,204,723
Accounts Receivable, Net 11,577,454 11,937,362 210,500 172,016
Other Current Asset 2,801,868 2,346,388 34,300 34,300
Capital Assets 428,856,190 425,858,728 29,453,157 24,991,835
Total Assets 515,744,483 524,078,574 32,276,931 30,402,874
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs 36,957,507 9,760,597 2,065,311 425,632
Deferred Actuarial OPEB Costs 2,105,670 2,098,510 103,904 103,494
Total Deferred Outflows of Resources 39,063,177 11,859,107 2,169,215 529,126
LIABILITIES
Accounts Payable 13,882,636 14,537,105 179,188 900,460
Other Miscellaneous Liabilities 5,515,011 4,345,073 643,495 439,426
Other Current Liabilities 10,324,292 9,038,907 - -
General Obligation Bonds 2,156,789 2,823,143 - -
Certificates of Participation - 6,893,293 - -
Revenue Bonds 112,114,228 81,465,550 - -
Net Pension Liability 46,167,836 47,296,682 2,221,070 2,285,634
Net OPEB Liability 3,263,717 4,489,099 151,308 221,393
Other Non-current Liabilities 3,337,674 3,117,705 - -
Total Liabilities 196,762,183 174,006,557 3,195,061 3,846,913
DEFERRED INFLOWS OF RESOURCES
Deferred Actuarial Pension Costs 1,125,287 916,299 31,888 19,935
Deferred Actuarial OPEB Costs 519,135 514,095 25,642 25,354
Total Deferred Inflows of Resources 1,644,422 1,430,394 57,530 45,289
NET POSITION
Net Investment in Capital Assets 325,186,363 330,636,742 29,453,157 24,991,835
Restricted for Debt Service 4,248,007 4,247,025 - -
Unrestricted 26,966,685 25,616,963 1,740,398 2,047,963
Total Net Position $ 356,401,055 $ 360,500,730 $ 31,193,555 $ 27,039,798
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
57
13) SEGMENT INFORMATION - Continued
Condensed Statements of Revenues, Expenses and Changes in Net Position
For the Years Ended June 30, 2019 and 2018
Water Services Wastewater Services
2019 2018 2019 2018
Operating Revenues
Water Sales $ 86,756,222 $ 92,595,195 $ - $ -
Wastewater Revenue - - 2,961,157 2,865,520
Connection and Other Fees 2,222,393 2,009,084 12,394 3,973
Total Operating Revenues 88,978,615 94,604,279 2,973,551 2,869,493
Operating Expenses
Cost of Water Sales 60,065,964 62,321,213 - -
Wastewater - - 2,784,579 2,501,240
Administrative and General 24,070,648 23,445,578 - -
Depreciation 15,973,877 16,462,306 833,920 1,004,012
Total Operating Expenses 100,110,489 102,229,097 3,618,499 3,505,252
Operating Income (Loss) (11,131,874) (7,624,818) (644,948) (635,759)
Non-operating Revenues (Expenses)
Investment Earnings 1,845,805 656,472 132,587 67,388
Taxes and Assessments 4,671,182 4,480,930 - 789
Availability Charges 671,428 646,323 51,818 51,401
Gain (Loss) on Sale of Capital Assets (1,030,346) (1,527,679) (28,225) (181,859)
Rents and Leases 1,384,211 1,439,247 - -
Miscellaneous Revenues 2,407,989 2,255,605 392,624 -
Donations (118,040) (123,050) - -
Interest Expense (4,713,883) (3,941,321) - -
Miscellaneous Expenses (3,288,540) (893,623) (4,515) (6,624)
Total Non-operating Revenues (Expenses) 1,829,806 2,992,904 544,289 (68,905)
Income (Loss) Before Capital Contributions
and Transfers
(9,302,068)
(4,631,914)
(100,659)
(704,664)
Capital Contributions 9,416,804 9,469,083 40,005 37,109
Transfers In (Out) (4,214,411) - 4,214,411 -
Change in Net Position (4,099,675) 4,837,169 4,153,757 (667,555)
Total Net Position, Beginning,
As Previously Reported
360,500,730
372,812,297
27,039,798
28,374,692
Prior Period Adjustment - (17,148,736) - (667,339)
Total Net Position, Beginning , As Restated 360,500,730 355,663,561 27,039,798 27,707,353
Total Net Position, Ending $ 356,401,055 $ 360,500,730 $ 31,193,555 $ 27,039,798
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
58
13) SEGMENT INFORMATION - Continued
Condensed Statements of Cash Flows
For the Years Ended June 30, 2019 and 2018
Water Services Wastewater Services
2019 2018 2019 2018
Net Cash Provided/(Used) by:
Operating Activities $ (23,286,064) $ 15,788,039 $ (1,741,104) $ 940,132
Non-capital and Related Financing Activities 474,682 4,495,002 4,214,411 -
Capital and Related Financing Activities 9,584,026 (16,598,410) (5,231,644) (1,007,520)
Investing Activities 42,137,187 3,065,764 2,758,337 67,388
Net Increase (Decrease) in
Cash and Cash Equivalents
28,909,831
6,750,395
- -
Cash and Cash Equivalents, Beginning 24,228,474 17,478,079 - -
Cash and Cash Equivalents, Ending $ 53,138,305 $ 24,228,474 $ - $ -
14) PRIOR PERIOD ADJUSTMENT
In the fiscal year 2018, the prior period adjustment of $17,816,075 relates to the implementation of GASB Statement 75
for postemployment benefits other than pensions. According to GASB Statement 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions, which was implemented by the District in the 2018 fiscal
year, recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses related to OPEB
plan.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2019 and 2018
CREQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2019 and 2018
59
Schedule of Changes in the Net OPEB Liability and Related Ratios for
Measurement Periods Ended June 30,
Measurement Period 2018 2017
Total OPEB Liability
Service Cost $ 735,655 $ 687,528
Interest on the Total OPEB Liability 1,864,967 1,764,343
Actual and Expected Experience Difference - -
Changes in Assumptions - -
Changes in Benefit Terms - -
Benefit Payments (1,085,586) (1,039,420)
Net Change in Total OPEB Liability 1,515,036 1,412,451
Total OPEB Liability - Beginning 26,449,527 25,037,076
Total OPEB Liability - Ending (a) $ 27,964,563 $ 26,449,527
Plan Fiduciary Net Position
Contributions - Employer $ 2,202,004 $ 2,284,420
Net Investment Income 1,734,626 2,011,985
Benefit Payments (1,085,586) (1,039,420)
Administrative Expenses (11,784) (10,167)
Other Expenses (28,757) -
Net Change in Plan Fiduciary Net Position 2,810,503 3,246,818
Plan Fiduciary Net Position - Beginning 21,739,035 18,492,217
Plan Fiduciary Net Position - Ending (b) $ 24,549,538 $ 21,739,035
Net OPEB Liability - Ending (a)-(b) $ 3,415,025 $ 4,710,492
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 87.8% 82.2%
Covered Payroll $ 12,969,485 $ 12,513,000
Net OPEB Liability as a Percentage of Covered-employee Payroll 26.3% 37.6%
Notes to Schedule:
Historical information is required only for measurement periods for which GASB 75 is applicable. Future years’ information
will be displayed up to 10 years as information becomes available. Contributions are determined by an actuarial valuation based
on eligible participants’ estimated medical and dental benefits.
REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2019 and 2018
60
Schedule of Contributions
Last Ten Fiscal Years’
Fiscal Year Ended June 30, 2019 2018
Actuarially Determined Contribution (ADC) $ 1,065,019 $ 1,116,418
Contributions in Relation to the ADC (2,209,574) (2,202,004)
Contribution Deficiency (Excess) $ (1,144,555) $ (1,085,586)
Covered-Employee Payroll $ 13,092,319 $ 12,969,485
Contributions as a percentage of covered-employee payroll 16.88% 16.98%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019 were from the
June 30, 2018 actuarial valuation.
Methods and assumptions used to determine contributions:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period Level percent of payroll over a closed rolling 15-year period
Asset Valuation Method Market value
Inflation 2.75%
Payroll Growth 3.00% plus merit
Investment Rate of Return 7.00% per annum
Healthcare Cost-trend Rates 6.00% HMO/6.5% PPO decreasing to 5.00% HMO/5.00% PPO
Retirement Age Tier 1 employees - 2.7% at 55 and Tier 2 employees - 2.0% at 62.
The probabilities of Retirement are based on the 2014 CalPERS Experience
Study for the period from 1997 to 2011.
Mortality Pre-retirement mortality probability based on 2014 CalPERS 1997-2011
Experience Study covering CalPERS participants. Post-retirement mortality
probability based on CalPERS Experience Study 2007-2011 covering
participants in CalPERS.
Historical information is required only for measurement periods for which GASB 75 is applicable.
Future years’ information will be displayed up to 10 years as information become available.
Contributions are determined by an actuarial valuation based on eligible participants’ medical and dental benefits.
REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2019 and 2018
61
Schedule of Changes in the Net Pension Liability and Related Ratios
Last 10 Years1
Measurement Period2 2017-2018 2016-2017 2015-2016 2014-2015 2013-2014
TOTAL PENSION LIABILITY
Service Cost $ 2,528,271 $ 2,556,902 $ 2,298,617 $ 2,250,860 $ 2,330,709
Interest 9,168,092 8,836,284 8,575,275 8,229,312 7,907,915
Changes of Benefit Terms - - - - -
Changes of Assumptions (1,312,634) 7,308,486 - (1,996,819) -
Difference Between Expected and Actual
Experience 461,917 (1,208,593) (613,440) (981,200) -
Benefit Payments, Including Refunds of
Employee Contributions
(5,995,949)
(5,779,040)
(5,448,218)
(5,288,251)
(4,885,406)
Net Change in Total Pension Liability 4,849,697 11,714,039 4,812,234 2,213,902 5,353,218
Total Pension Liability - Beginning 130,809,611 119,095,572 114,283,338 112,069,436 106,716,218
Total Pension Liability - Ending (a) $ 135,659,308 $ 130,809,611 $ 119,095,572 $ 114,283,338 $ 112,069,436
PLAN FIDUCIARY NET POSITION
Net Plan to Plan Resource Movement $ (203) $ - $ - $ - $ -
Contributions - Employer 4,441,517 4,105,810 3,819,770 3,557,098 3,137,174
Contributions - Employee 1,015,008 1,014,329 1,010,337 1,007,023 1,074,954
Net Investment Income 6,949,676 8,149,097 369,214 1,601,760 10,874,999
Benefit Payments, Including Refunds of
Employee Contributions
(5,995,949)
(5,779,040)
(5,448,218)
(5,288,251)
(4,885,406)
Administrative Expense (126,575) (109,029) (45,185) (83,511) -
Other Changes in Fiduciary Net Position (240,367) - - - -
Net Change in Fiduciary Net Position 6,043,107 7,381,167 (294,082) 794,119 10,201,721
Plan Fiduciary Net Position - Beginning 81,227,295 73,846,128 74,140,210 73,346,091 63,144,370
Plan Fiduciary Net Position - Ending (b) $ 87,270,402 $ 81,227,295 $ 73,846,128 $ 74,140,210 $ 73,346,091
Plan Net Pension Liability/(Asset) -
Ending (a) - (b) $ 48,388,906 $ 49,582,316 $ 45,249,444 $ 40,143,128 $ 38,723,345
Plan Fiduciary Net Position as a Percentage
of the Total Pension Liability
64.33%
62.10%
62.01% 64.87% 65.45%
Covered Payroll $ 12,969,485 $ 12,829,415 $ 12,767,963 $ 12,451,513 $ 12,276,578
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll
373.10%
386.47%
354.40%
322.40%
315.42%
1 Measurement period 2017-18 (fiscal year 2018-2019) was the fifth year of implementation; therefore, only five years are shown.
2 Historical information is required only for measurement periods for which GASB 68 is applicable
Notes to Schedule:
Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which
occurred after June 30, 2016. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service
Credit (a.k.a. Golden Handshakes).
Changes of Assumptions: For the 2019 and 2017 fiscal years, there were no changes. For the 2018 fiscal year, the accounting
discount rate reduced from 7.65% to 7.15%. For the 2016 fiscal year, amounts reported reflect an adjustment the discount rate
of 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014,
amounts reported were based on the 7.5% discount rate.
REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2019 and 2018
62
E 30, 2017 and 2016
Schedule of Plan Contributions1
Fiscal Year
2018-2019
Fiscal Year
2017-18
Fiscal Year
2016-17
Fiscal Year
2015-16
Fiscal Year
2014-15
Actuarially Determined Contribution2 $ 4,865,042 $ 4,452,147 $ 4,105,810 $ 3,819,770 $ 3,557,098
Contributions in Relation to the Actuarially
Determined Contribution2
(36,665,042)
(4,452,147)
(4,105,810)
(3,819,770)
(3,557,098)
Contribution Deficiency (Excess) $ (31,800,000) $ - $ - $ - $ -
Covered Payroll3 $ 13,092,319 $ 12,969,485 $ 12,829,415 $ 12,767,963 $ 12,451,513
Contributions as a Percentage of Covered
Payroll3
280.05%
34.33%
32.00%
29.92%
28.57%
1 Historical information is required only for measurement periods for which GASB 68 is applicable.
2 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers
may choose to make additional contributions toward their unfunded liability. Employer contributions for such plans exceed
the actuarially determined contributions.
3 Includes one year’s payroll growth using 3.00% payroll assumption.
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2018-19 were from
the June 30, 2016 public agency valuations.
Actuarial Cost Method Entry Age Normal
Amortization Method/Period For details see June 30, 2016 Funding Valuation Report
Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2016 Funding Valuation
Report
Discount Rate 7.375%
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Payroll Growth 3.00%
Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative Expenses; includes
Inflation
Retirement Age
The probabilities of Retirement are based on the 2010 CalPERS Experience
Study for the period from 1997 to 2007
Mortality
The probabilities of mortality are based on the 2010 CalPERS Experience
Study for the period from 1997 to 2007. Pre-retirement and Post-retirement
mortality rates include 5 years of projected mortality improvement using Scale
AA published by the Society of Actuaries.
REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2019 and 2018
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Richard A. Teaman, CPA David M. Ramirez, CPA Javier H. Carrillo, CPA Bryan W͘Daugherty, CPA Joshua :͘Calhoun, CPA
4201 Brockton AveŶƵĞ Suite 100Riverside CA 92501 951.274.9500d > 951.274.7828 FAX www.trscpas.com
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control
or on compliance. This report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the District’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Riverside, California
October 24, 2019
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Richard A. Teaman, CPA David M. Ramirez, CPA Javier H. Carrillo, CPA Bryan W͘Daugherty, CPA Joshua :͘Calhoun, CPA
4201 Brockton AveŶƵĞ Suite 100Riverside CA 92501 951.274.9500d > 951.274.7828 FAX www.trscpas.com
Management’s estimation of defined benefit pension obligation is based on an actuarial valuation.
We evaluated the key factors and assumptions used to develop the defined benefit pension obligation
in determining that it is reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement
users. The most sensitive disclosures affecting the financial statements were:
The disclosure of the fair value of investments in Notes 2 and 3 to the financial statements represents
amounts susceptible to market fluctuation.
The disclosure of capital assets in Note 4 to the financial statements is based on historical information
which could differ from actual useful lives of each capitalized item.
The disclosure of other post employment benefits and the net OPEB liability in Note 8 to the financial
statements represents management’s estimate based on an actuarial valuation. Actual results could differ
depending on these key factors and assumptions used for the actuarial valuation.
The disclosure of defined benefit pension plan in Note 7 to the financial statements represents
management’s estimate based on an actuarial valuation. Actual results could differ depending on
these key factors and assumptions used for the actuarial valuation.
The financial statement disclosures are neutral, consistent and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other
than those that are clearly trivial, and communicate them to the appropriate level of management. None of the
misstatements detected as of a result of audit procedures were material, either individually or in the aggregate, to the
financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter,
whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s
report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation
letter dated October 24, 2019.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters,
similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting
principle to the District’s financial statements or a determination of the type of auditor’s opinion that may be
expressed on those statements, our professional standards require the consulting accountant to check with us to
determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards,
with management each year prior to retention as the District’s auditors. However, these discussions occurred in the
normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to management’s discussion and analysis, Schedule of Changes in the Net
OPEB Liability and Related Ratios, Schedule of Contributions, Schedule of Changes in the Net Pension Liability
and Related Ratios, and Schedule of Plan Contributions, which are required supplementary information (RSI) that
supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the
methods of preparing the information and comparing the information for consistency with management’s responses
to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were not engaged to report on the introductory and statistical sections, which accompany the financial
statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit
of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.
As part of the audit, we assisted with the preparation of the financial statements and related notes and state
controllers report preparation. However, these services, does not constitute an audit under Government Auditing
Standards and are considered nonaudit services. Management has reviewed, approved, and accepted responsibility
for the results of these services.
Restriction on Use
This information is intended solely for the use of the Board of Directors and management of the District and is not
intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
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4201 Brockton AveŶƵĞ Suite 100Riverside CA 92501 951.274.9500d > 951.274.7828 FAX www.trscpas.com
2
4. Confirm the par or original investment amount and market value for the four investments selected
above with the custodian or issuer of the investments.
Finding: No exceptions were noted as a result of our procedures.
5. Select two investment earnings transactions that took place during the year and recompute the earnings
to determine if the proper amount was received.
Finding: Selected the following investment earnings transactions: interest earned on FANM
Bond on November 19, 2018 and interest earned on FFCB Bond on June 6, 2019. No
exceptions were noted as a result of our procedures.
6. Trace amounts received for transactions selected at #5 above into the District’s bank accounts.
Finding: No exceptions were noted as a result of our procedures.
7. Select five investment transactions (buy, sell, trade or maturity) occurring during the year under review
and determine that the transactions are permissible under the District’s investment policy.
Finding: We selected the following investment transactions: FHLMC Note sold on July 18,
2018, FHLB Bond matured on August 13, 2018, FHLM Note matured on April 26,
2019, FHLB Bond matured on May 24, 2019, and FFCB Bond matured on June 6,
2019. Those transactions were permissible under the District’s investment policy. No
exceptions were noted as a result of our procedures.
8. Review the supporting documents for the five investments selected at #7 above to determine if the
transactions were appropriately recorded into the District’s general ledger.
Finding: No exceptions were noted as a result of our procedures.
This agreed-upon procedures engagement was conducted in accordance with attestation standards established by
the American Institute of Certified Public Accountants. We were not engaged to, and did not, conduct an audit or
review, the objective of which would be the expression of an opinion or conclusion, respectively, on the
investments of the District for the fiscal year ending June 30, 2019. Accordingly, we do not express such an
opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention
that would have been reported to you.
This report is intended solely for the information and use of the Board of Directors and senior management of the
Otay Water District and is not intended to be and should not be used by anyone other than these specified parties.
Riverside, California
October 24, 2019
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Eid Fakhouri, Finance Manager W.O./G.F. NO:DIV. NO.All
APPROVED BY: Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Otay Water District Adoption of Resolution No. 4373,
Authorizing the General Manager and Chief Financial Officer
to Approve the Execution of Certain Documents and Authorizing
Certain Acts in Connection with the Issuance by the Otay
Water District Financing Authority of its 2019 Wastewater
Revenue Bonds, in an Amount Not To Exceed $3,500,000
GENERAL MANAGER’S RECOMMENDATION:
That the Board adopt Resolution No. 4373 authorizing the General
Manager and Chief Financial Officer to approve the execution of
certain documents and authorizing certain acts in connection with the
issuance by the Otay Water District Financing Authority of its 2019
Wastewater Revenue Bonds, in an amount not to exceed $3,500,000.
COMMITTEE ACTION:
None.
PURPOSE:
To obtain Board’s authorization to secure repayment of up to
$3,500,000 of Otay Water District Financing Authority (“Authority”)
2019 Wastewater Revenue Bonds with Net Revenues of the Wastewater
System, to fund $3.0 million of the District’s six-year Wastewater
System CIP Program and authorize the President, General Manager,
District Secretary, and the Chief Financial Officer to execute and
deliver related documents and take other related actions necessary
for the issuance of the 2019 Wastewater Revenue Bonds.
ANALYSIS:
AGENDA ITEM 8b
The Authority was formed in 2010 to assist the District with
financing capital improvements. Staff is recommending that the
Authority issue Wastewater Revenue Bonds and secure the bonds with
Installment Payments payable by the District to the Authority from
Net Revenues of the Wastewater System.
The bonds will be used to fund $3.0 million in Capital Improvement
Program (CIP) expenditures of the wastewater system, which will
result in the District maintaining targeted reserve levels in
accordance with the District’s Reserve Policy. Staff estimates that
the actual amount of the bonds will be $3,165,000 to fund $3.0
million of CIP projects, approximately $105,000 of debt issuance
costs, and $60,000 of anticipated original issue discount. Staff
will not issue more debt than is needed for these purposes.
On April 4, 2018, the Board adopted Reimbursement Resolution No.4344
allowing for reimbursement of certain expenditures from the proceeds
of tax-exempt wastewater debt. The Board adopted the FY 2020 budget
in anticipation that the financing would occur in FY 2020, as the
proposed wastewater bonds would be necessary to maintain wastewater
reserves at targeted levels. On August 7, 2019, staff obtained
approval from the Board to proceed to issue wastewater bonds to fund
the recommended amount of $3.0 million, with an anticipated 2nd issue
of bonds to fund a further $3.0 million in two years. This staff
report describes the final actions necessary to issue the first
series of bonds.
The bond proceeds will be used to reimburse the District for $3.0
million of the total cost of the Campo Road Sewer replacement project
(S2024).
For this bond issue, the District engaged:
• Harrell & Company Advisors to serve as Municipal Advisor,
• Hilltop Securities to serve as the Underwriter,
• Hawkins, Delafield & Wood LLP to serve as Bond and Disclosure
Counsel.
As part of this process, Suzanne Harrell of Harrell & Company and
Robin Thomas of Hilltop Securities reviewed three debt options and
analyzed the costs and benefits of each option. A summary of these
options, including staff’s recommendation, and cost/benefit of each
option is below:
Option 1 – Non-Rated Public Offering
Staff and the District’s Financial Advisor are recommending the
District proceed with a non-rated public offering. Under this option
the average annual debt service is $161,000. The recommendation is
being made because this option provides the District with the most
flexibility for the wastewater operation. Wastewater currently has
no debt, but is projecting the need to issue additional debt in two
years. The flexible terms established in this proposed issuance will
establish the baseline for additional bond issues in the near future.
The rate covenant for the non-rated issue will be lower than might be
required to achieve a rating for the bonds. This is important,
particularly with the wastewater system, because it will make it
easier to smooth out rate increases in the event of significant cost
increases. This is a real concern as much of the wastewater costs
are not within the District’s direct control. This flexibility is
also desirable as the customer base is relatively small and creates a
dynamic where larger rate increases are more of a possibility.
Due to the flat yield curve and a compressed spread between rated and
non-rated utility bonds, there is very little difference in yields
between a non-rated bond and a rated bond. The difference is
considered worth paying for the added flexibility in rate setting
going forward. One of the Board’s mandates has always been rate
smoothing, and this would give the Board a tool to achieve that.
Option 2 – Rated Public Offering
Under this option, the net average annual debt service would be
approximately $159,000. While this option is a slightly lower cost
option, it provides less flexibility in rate setting than the non-
rated option. As noted, having less flexibility may adversely impact
future wastewater rates. This option also requires the funding of a
reserve fund to secure debt payments, which would be used to offset
the final bond payment in 30 years if not needed.
Option 3 – Private Sale
As staff noted in its August 2019 presentation to the Board, there
was only one lender offering a 30-year term on a private placement.
This option results in an annual average debt service of $162,000.
This option was not recommended as it is the most costly, carries a
risk in that specific terms of a private sale are unknown until
negotiated with the lender, and there is a lack of competition to get
the most beneficial terms with only one lender offering a 30-year
term.
Based on the recommended debt issuance and the anticipated second
issuance of bonds in FY 2022, the table below shows the projected
annual debt service coverage for the following four years:
Fiscal
Year
2021 2022 2023 2024
DSC 3.26 2.56 2.10 2.51
The District may also establish a Rate Stabilization Fund for the
wastewater bonds. This is another tool that the Board can utilize to
offset rate spikes generated by unanticipated costs or revenue
reductions from decreased water usage.
A tentative timeline of events related to the debt issuance is below.
Finance Committee Approval
of Financing Documents
October 23, 2019
Board Approval of Financing
Documents
November 6, 2019
Bond Pricing/Set Interest
Rate
November 14, 2019
Closing Document Signing December 2, 2019
Closing December 5, 2019
Documents to be Approved
The Bonds will be issued by the Authority and secured by Installment
Payments payable by the District to the Authority from Net Revenues of
the wastewater system. The following financing documents are approved
in form by the resolution:
• Installment Purchase Agreement, by and between the Authority and
the District;
• Preliminary Official Statement, including a Continuing Disclosure
Agreement; and
• Bond Purchase Agreement between the Authority, the District and
the Underwriter.
The General Manager and the Chief Financial Officer are authorized by
the resolution to execute a Bond Purchase Agreement for the sale of
the Bonds within the following parameters: (1) the par amount of the
Bonds cannot exceed $3,500,000, (2) the true interest cost must be
less than 3.5% and (3) the underwriters’ discount cannot exceed 0.75%
of the par amount of the Bonds.
The draft documents are included with this report for review by the
Board. The preliminary official statement was prepared by staff and
the Municipal Advisor, with input from the District’s bond counsel
and disclosure counsel. The Board’s review of the description of the
Wastewater System, the Metro System and the Risk Factors contained in
the preliminary official statement is requested prior to printing on
or about November 7, 2019.
Financial Analysis
The $3.0 million debt funding of the CIP will ensure the District
maintains its reserves at targeted levels. The cost of the
principal, plus interest payments will be $4.8 million over the
thirty-year period, which equates to an average annual debt service
of $161,000. In FY 2020, there will be one interest-only payment of
$20,000, and in FY 2021, there will be 2 interest-only payments
totaling $86,000, to give the District an opportunity to smooth rate
increases in preparation for the full annual debt service together
with the projected debt service of the planned 2nd issue in 2 years.
The following table provides the anticipated size of the bond issue,
including funding of the costs of issuance.
Cost of Issuance $ 105,000
Project Fund (Net Proceeds) 3,000,000
Total Bond Proceeds 3,105,000
Original Issue Discount 60,000
Par Amount of Bonds Issued $3,165,000
Costs of issuance include bond counsel fees, municipal advisor fees,
disclosure counsel fees, underwriting costs, and trustee fees. All
upfront costs associated with the Bonds will be paid out of Bond
proceeds.
The estimated par amount will be subject to prevailing market
conditions at the time of sale. Therefore, a par amount of $3,165,000
is being estimated but the actual issue size may be higher if the
Bonds are priced with a higher original issue discount or with an
original issue premium based on investor preference at the time of
sale.
Conclusion
That the Board adopt Resolution No. 4373 authorizing the General
Manager and Chief Financial Officer to approve the execution of
certain documents and authorizing certain acts in connection with the
issuance by the Otay Water District Financing Authority of its 2019
Wastewater Revenue Bonds, in an amount not to exceed $3,500,000.
The Authority Board has separately been presented with a resolution
approving documents and its actions relating to the Bonds.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
All bond costs will be paid by the bond proceeds. Estimated annual
debt service has been incorporated into the District’s budget rate
model so this debt issuance does not put any added rate pressure
other than what has already been incorporated into the rate
projections.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning and debt planning.
LEGAL IMPACT:
None.
Attachments:
A) Authority Resolution No. 4373
B) Indenture of Trust
C) Installment Sale Agreement
D) Preliminary Official Statement
E) Bond Purchase Agreement
ATTACHMENT A
SUBJECT/PROJECT:
Otay Water District Adoption of Resolution No. 4373,
Authorizing the General Manager and Chief Financial Officer
to Approve the Execution of Certain Documents and
Authorizing Certain Acts in Connection with the Issuance by
the Otay Water District Financing Authority of its 2019
Wastewater Revenue Bonds, in an Amount Not To Exceed
$3,500,000
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were
made:
• Staff is recommending that the Board adopt Resolution No.
4373 authorizing the General Manager and Chief Financial
Officer to approve the execution of certain documents and
authorizing certain acts in connection with the issuance by
the Otay Water District Financial Authority of its 2019
Wastewater Revenue Bonds, in an amount not-to-exceed
$3,500,000.
• Staff reviewed information in the staff report.
• Currently, the Wastewater System does not have outstanding
debt. With this issuance, the District will have an
estimated debt coverage covenant of 115%, and a target
ratio of 150%. Based on the recommended debt issuance and
the projected rate increases, the District will be in
compliance with the debt coverage covenant.
• The estimated timing for the closing of the bond issuance
is currently December 5th, 2019.
• Staff introduced the District’s Municipal Advisor, Ms.
Suzanne Harrell of Harrell & Company Advisors. Ms. Harrell
indicated in August 2019, the Board had directed staff to
pursue $6 million of financing for the sewer CIP with $3
million issued today and another $3 million to be issued in
two (2) years allowing the District time to smooth its
sewer rates.
• Ms. Harrell and Ms. Robin Thomas of Hilltop Securities, who
serves as the District’s Underwriter for this issuance,
identified three (3) possible debt options. Ms. Harrell
reviewed the three possible debt options and their
cost/benefit (please reference page 3 of the staff report).
• Staff is proposing Option 1, a non-rated public offering,
which would allow the District to meet emergency costs with
flexibility on rates as it allows the District to maintain
a lower debt coverage ratio (115% versus 120%).
• Staff noted that the District is also performing a Cost of
Service Study on sewer services and will be proposing a
change in how bills are calculated to make sewer revenues
more stable and not as subject to changes in annual
rainfall.
• In response to an inquiry from the Committee, it was
indicated that the interest rate on the bond would be
approximately 3.20% for a rated bond and 3.30% for a non-
rated bond, which would be about $2,000 per year in debt
service.
• It was indicated that the draft documents for the issuance
are included with the staff report and it is requested that
the board review the Official Statement, particularly the
description of the wastewater system and the risks.
• It was noted that a redemption provision has been included
in the bond documents to allow the District the option to
redeem the bonds should its sewer system be
sold/consolidated with another provider. The District has
no expectation that its sewer system will be
sold/consolidated, the provision just provides the District
the option/ability to redeem the bonds within the first
ten-years of issuance as the bonds are not subject to
redemption during that period. There would be a redemption
premium and, thus, the provision would not have a price
impact on the bonds.
• In response to an inquiry from the Board, it was indicated
that the District is not designating this issuance as a
Bank Qualified, Section 265 Bond, because the target buyers
of this bond will not be banks as the issuance will be a
non-rated issuance. It was indicated in response to
another inquiry from the Committee that a Bank Qualified
Bond would be similar to a private placement bond. Ms.
Harrell estimated that, thus, the rate for a Bank Qualified
Bond issuance with a 15-year term would be approximately
2.7% for a AA rated organization. It was noted that the
District’s sewer financials would likely earn a rating of
BBB+.
• At the Committee’s request, staff reviewed the criteria for
selecting Hilltop Securities to serve as the District’s
Underwriter. Staff indicated that they reviewed the firm’s
presence in the municipal bond market segment, the
qualifications of the individual team members, and, because
this is a small issuance, the firm’s ability to sell the
bonds in the retail market. Additionally, Hilltop
Securities has a wide breadth in terms of tier 1 and 2 bond
buyers; and provided the best pricing overall.
• Staff also reviewed the selection process for Hawkins
Delafield & Wood LLP (HDW) to serve as Bond and Disclosure
Counsel. It was indicated that staff issued an RFP and
received five responses. The proposals were reviewed for
public sector expertise (wastewater in particular), beadth
of the team, expertise in tax laws, the number of years the
firm has been performing the services, location of their
offices to assure they could attend the District’s
meetings, and references. They met all the qualifications
and were the lowest qualified bidder. HDW has offices
nationwide, with three offices in California (Los Angeles,
San Francisco and Sacramento). Ms. Christina Togle of HDW,
Bond Counsel, was in attendance of the meeting.
• It was indicated in response to another inquiry from the
Committee that the bonds would likely be sold in the retail
market to California individuals in the first 15 years of
the issuance, and the remainder would go to separately
managed accounts because the size of the issuance is very
small.
Upon completion of the discussion, the committee supported
staffs recommendation an presentation to the full board as an
action item.
Hawkins Delafield & Wood LLP
10/17/2019
3394470.9 043520 RSIND
RESOLUTION NO. 4373
RESOLUTION OF THE BOARD OF DIRECTORS OF OTAY WATER DISTRICT
APPROVING, AUTHORIZING AND DIRECTING EXECUTION OF CERTAIN
FINANCING DOCUMENTS AND DIRECTING CERTAIN RELATED ACTIONS IN
CONNECTION WITH FINANCING CERTAIN IMPROVEMENTS TO THE
DISTRICT’S WASTEWATER SYSTEM
WHEREAS, for the purpose of raising funds necessary to finance certain public, capital
improvements (the “Improvements”) to the wastewater system of the Otay Water District (the
“District”), the District will authorize the issuance by the Otay Water District Financing
Authority (the “Authority”) of wastewater revenue bonds under the provisions of Article 4
(commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code
of the State of California (the “Act”), to be designated as the Otay Water District Financing
Authority 2019 Wastewater Revenue Bonds (the “Bonds”);
WHEREAS, the Bonds will be issued pursuant to the terms of an Indenture of Trust by
and between the MUFG Union Bank, N.A. as trustee (the “Trustee”) and the Authority (the
“Indenture”);
WHEREAS, pursuant to an Installment Sale Agreement by and between the District and
the Authority (the “Installment Sale Agreement”), the District will make installment payments to
the Authority as the purchase price for the Improvements, and the Authority will use the
installment payments made by the District to the Authority pursuant to the Installment Sale
Agreement to pay debt service on the Bonds;
WHEREAS, there has been prepared a draft of a Preliminary Official Statement
containing information to be used in connection with the offering and sale of the Bonds;
WHEREAS, there has been prepared a draft of a Bond Purchase Agreement for the sale
and purchase of the Bonds by and among the District, the Authority and Hilltop Securities Inc.
(the “Underwriter”);
WHEREAS, in order to assist the Underwriter of the Bonds in complying with Rule
15c2-12 of the Securities and Exchange Commission, the District will undertake certain
continuing disclosure obligations pursuant to a continuing disclosure agreement to be executed
by the District (the “Continuing Disclosure Agreement”);
WHEREAS, the District has duly considered such transactions and wishes at this time to
approve certain matters relating to these transactions in the public interest of the District;
WHEREAS, pursuant to Section 5852.1 of the Government code of the State of
California, the District has received certain representations and good faith estimates from the
District’s municipal advisor, Harrell & Company Advisors, LLC (the “Municipal Advisor”), and
the District has disclosed such good faith Estimates as set forth on Exhibit A attached hereto;
2
3394470.9 043520 RSIND
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of Otay Water
District, as follows:
Section 1. Significant Public Benefits. Pursuant to the Act, the Board of
Directors hereby finds and determines that the issuance of the Bonds and the transactions related
thereto will result in significant public benefits within the contemplation of Section 6586 of the
Act.
Section 2. Approval of Installment Sale Agreement and Indenture. The
Board hereby approves the form of the Installment Sale Agreement on file with the Secretary of
the Board, with such additions thereto and changes therein as the President of the Board, Vice
President of the Board, District General Manager or District Chief Financial Officer (each, a
“Designated Officer”), may deem necessary, desirable or appropriate upon consultation with the
bond counsel, the execution of which by the District shall be conclusive evidence of the approval
of any such additions and changes. The Designated Officers, each acting alone or in
combination, are hereby authorized and directed to execute, and the Secretary of the Board is
hereby authorized to attest, as appropriate, the Installment Sale Agreement and such other
agreements, documents and certificates as may be necessary or desirable to effectuate the
purposes of this resolution and the financing herein authorized, including, without limitation,
such other agreements, documents and certificates as may be required by the Installment Sale
Agreement. The Board hereby authorizes the performance by the District of its obligations
under the Installment Sale Agreement and approves the form of the Indenture.
Section 3. Maximum Bond Parameters. The Board hereby approves the
issuance of the Bonds by the Authority and the District’s obligation to pay installment payments
equal to the debt service on the Bonds; provided that the principal amount of Bonds may not
exceed $3,500,000 the maximum true interest cost of the Bonds may not exceed 3.5% per
annum, and the final maturity of the Bonds may not exceed September 1, 2049.
Section 4. Approval of Preliminary Official Statement. The Board hereby
approves the preparation of, and hereby authorizes the Designated Officers, each acting alone, to
deem final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, as
amended (except for permitted omissions), the preliminary form of the Official Statement
describing the Bonds (the “Preliminary Official Statement”) on file with the Secretary of the
Board, together with such changes or additions as the Designated Officer may deem necessary,
desirable or appropriate upon consultation with bond counsel. The Board hereby approves the
distribution of the Preliminary Official Statement. The Designated Officers, each acting alone or
in combination, are hereby authorized to execute the final form of the Official Statement with
such changes or additions as the Designated Officers deem necessary, desirable or appropriate
upon consultation with bond counsel, and the execution of the final Official Statement by the
District shall be conclusive evidence of the approval of any such additions and changes. The
Board hereby authorizes the distribution of the final Official Statement.
Section 5. Approval of Continuing Disclosure Agreement. The Board hereby
approves the Continuing Disclosure Agreement in the form attached as an Appendix to the
Preliminary Official Statement on file with the Secretary of the Board, together with such
changes thereto as the Designated Officers deem necessary, desirable or appropriate upon
3
3394470.9 043520 RSIND
consultation with bond counsel, the execution of which by the District shall be conclusive
evidence of the approval thereof. The Designated Officers, each acting alone or in combination,
are hereby authorized and directed to execute the Continuing Disclosure Agreement, with such
changes, insertions and omissions as may be approved by the Designated Officer executing the
Continuing Disclosure Agreement.
Section 6. Approval of Negotiated Bond Sale; Bond Purchase Agreement.
The Board hereby approves the negotiated sale of the Bonds to the Underwriter in the form of
the Bond Purchase Agreement by and among the Underwriter, District and Authority on file with
the Secretary, together with such additions thereto and changes therein as the Designated
Officers deem necessary, desirable or appropriate upon consultation with bond counsel to the
Authority, the execution of which by the Authority shall be conclusive evidence of the approval
of any such additions and changes. The Designated Officers, each acting alone, are hereby
authorized and directed to execute, and the Secretary is hereby authorized and directed to attest,
the final form of the Bond Purchase Agreement for and in the name of and on behalf of the
District; provided that the principal amount of the Bonds shall not exceed $3,500,000 and the
underwriter's discount (exclusive of any original issue discount) may not exceed 0.75%. The
District hereby authorizes the performance by the Authority of its obligations under the Bond
Purchase Agreement.
Section 7. Further Actions. The Designated Officers, the Secretary and any
and all other officers of the District, each acting alone or in combination, are hereby authorized
and directed, for and in the name of and on behalf of the District, to do any and all things and
take any and all actions, including selecting and appointing a bond trustee, execution and
delivery, or acknowledgement and agreement, of any and all documents, assignments,
certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and
documents, which they, or any of them, may deem necessary or advisable in order to
consummate the lawful issuance and sale of the Bonds and the consummation of the transactions
as described herein.
Section 8. Effective Date. This Resolution shall take effect from and after the
date of its passage and adoption.
4
3394470.9 043520 RSIND
PASSED, APPROVED AND ADOPTED by the Board of Directors of Otay
Water District at a special board meeting held the 6th day of November 2019, by the following
vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
______________________________
President of the Board
ATTEST:
______________________________
Secretary of the Board
5
3394470.9 043520 RSIND
EXHIBIT A
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
GOOD FAITH ESTIMATES
Pursuant to Section 5852.1 of the Government Code of the State of California, the following
information was obtained from Harrell & Company Advisors, LLC, as the municipal advisor of the bonds
defined above (the “Bonds”), for consideration prior to the authorization in the foregoing Resolution of
the proposed Bonds:
1. True Interest Cost of the Bonds. Assuming an aggregate principal amount of the Bonds
in the amount of $3,165,000 is sold to effectuate the financing and based on market interest rates
prevailing at the time of preparation of this information, a good faith estimate of the true interest cost of
the Bonds, which means the rate necessary to discount the amounts payable on the respective principal
and interest payment dates to the purchase price received for the Bonds, is 3.08%.
2. Finance Charge of the Bonds. Assuming such a principal amount of the proposed Bonds
is sold and based on market interest rates prevailing at the time of preparation of this information, a good
faith estimate of the Finance Charge of the Bonds, which means the sum of all fees and charges paid to
third parties (or costs associated with the issuance of the Bonds), from proceeds of the Bonds, is
$105,000.
3. Amount of Proceeds to be received. Assuming such aggregate principal amount of the
proposed Bonds required to effectuate the financing is sold and based on market interest rates prevailing
at the time of preparation of this information, a good faith estimate of the amount of proceeds expected to
be received by the District for sale of the Bonds less the Finance Charge of the Bonds described in 2
above and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $3,000,000.
4. Total Payment Amount. Assuming such aggregate principal amount of the proposed
Bonds are sold and based on market interest rates prevailing at the time of preparation of this information,
a good faith estimate of the total payment amount, which means the sum total of all payments the issuer
will make to pay debt service on the Bonds calculated to the final maturity of the Bonds, is $4,782,000
and the annual cost to administer the Bonds not paid with the proceeds of the Bonds, calculated to the
final maturity of the Bonds, is $125,000.
Attention is directed to the fact that the foregoing information constitutes good faith estimates
only. The actual interest cost, finance charges, amount of proceeds and total payment amount may vary
from the estimates above due to variations from these estimates in the timing of Bond sales, the amount of
Bonds sold, the amortization of the Bonds sold and market interest rates at the time of each sale. The date
or dates of sale and the amount of Bonds sold will be determined by the District based on need for funds
and other factors. The actual interest rates at which the Bonds will be sold will depend on the bond market
at the time of sale. The actual amortization of the Bonds will also depend, in part, on market interest rates
at the time of each sale. Market interest rates are affected by economic and other factors beyond the
District’s control.
Hawkins Delafield & Wood LLP
Draft of 10/15/2019
3394469.7 043520 RSIND
INDENTURE OF TRUST
Dated as of __________, 2019
By and between
OTAY WATER DISTRICT FINANCING AUTHORITY
and
MUFG UNION BANK, N.A.,
as Trustee
Relating to the
$[Par Amount]
Otay Water District Financing Authority
2019 Wastewater Revenue Bonds
(i)
3394469.7 043520 RSIND
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01. Definitions..........................................................................................................2
Section 1.02. Authorization ...................................................................................................13
Section 1.03. Interpretation ....................................................................................................13
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds ....................................................................................13
Section 2.02. Terms of the Bonds ..........................................................................................15
Section 2.03. Form and Execution of Bonds .........................................................................16
Section 2.04. Transfer and Exchange of Bonds .....................................................................16
Section 2.05. Book-Entry System ..........................................................................................17
Section 2.06. Registration Books ...........................................................................................19
Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen ....................................................19
Section 2.07. CUSIP Numbers...............................................................................................19
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the Bonds ......................................................................................20
Section 3.02. Application of Proceeds of Sale of the Bonds .................................................20
Section 3.03. Establishment and Application of Costs of Issuance Fund ..............................20
Section 3.04. Project Fund .....................................................................................................21
Section 3.05. Validity of Bonds .............................................................................................21
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Terms of Redemption ......................................................................................21
Section 4.02. Selection of Bonds for Redemption .................................................................22
Section 4.03. Notice of Redemption ......................................................................................22
Section 4.04. Rescission of Redemption................................................................................23
Section 4.05. Execution of New Bonds Upon Partial Redemption of Bonds ........................24
Section 4.06. Effect of Redemption .......................................................................................24
TABLE OF CONTENTS
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3394469.7 043520 RSIND
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Security for the Bonds; Bond Fund .................................................................24
Section 5.02. Allocation of Revenues ....................................................................................25
Section 5.03. Application of Interest Account .......................................................................25
Section 5.04. Application of Principal Account ....................................................................25
Section 5.06. Application of Redemption Fund.....................................................................26
Section 5.07. Investments ......................................................................................................26
Section 5.08. Valuation and Disposition of Investments .......................................................27
ARTICLE VI
COVENANTS OF THE AUTHORITY
Section 6.01. Punctual Payment.............................................................................................28
Section 6.02. Extension of Payment of Bonds .......................................................................28
Section 6.03. Against Encumbrances.....................................................................................28
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment ...............................28
Section 6.05. Accounting Records .........................................................................................29
Section 6.06. Limitation on Additional Obligations ..............................................................29
Section 6.07. Tax Covenants .................................................................................................29
Section 6.08. Enforcement of Installment Sale Agreement ...................................................30
Section 6.09. Waiver of Laws ................................................................................................30
Section 6.10. Further Assurances...........................................................................................30
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default .............................................................................................30
Section 7.02. Acceleration; Other Remedies .........................................................................31
Section 7.03. Application of Revenues and Other Funds After Default ................................31
Section 7.04. Trustee to Represent Bond Owners .................................................................32
Section 7.05. Limitation on Bond Owners’ Right to Sue ......................................................32
Section 7.06. Absolute Obligation of Authority ....................................................................33
Section 7.07. Termination of Proceedings .............................................................................33
Section 7.08. Remedies Not Exclusive ..................................................................................34
Section 7.09. No Waiver of Default.......................................................................................34
TABLE OF CONTENTS
(continued)
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3394469.7 043520 RSIND
ARTICLE VIII
THE TRUSTEE
Section 8.01. Appointment of Trustee ...................................................................................34
Section 8.02. Acceptance of Trusts; Removal and Resignation of Trustee ...........................34
Section 8.03. Merger or Consolidation ..................................................................................35
Section 8.04. Liability of Trustee ..........................................................................................36
Section 8.05. Right to Rely on Documents ............................................................................38
Section 8.06. Preservation and Inspection of Documents......................................................39
Section 8.07. Compensation and Indemnification .................................................................39
ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
Section 9.01. Amendments Permitted ....................................................................................40
Section 9.02. Effect of Supplemental Indenture ....................................................................41
Section 9.03. Endorsement of Bonds; Preparation of New Bonds ........................................42
Section 9.04. Amendment of Particular Bonds ......................................................................42
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture .....................................................................................42
Section 10.02. Discharge of Liability on Bonds ......................................................................43
Section 10.03. Deposit of Money or Securities with Trustee ..................................................43
Section 10.04. Unclaimed Funds .............................................................................................44
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues .....................................................44
Section 11.02. Limitation of Rights to Parties and Bond Owners ...........................................45
Section 11.03. Funds and Accounts .........................................................................................45
Section 11.04. Waiver of Notice; Requirement of Mailed Notice ...........................................45
Section 11.05. Destruction of Bonds .......................................................................................45
Section 11.06. Severability of Invalid Provisions ....................................................................45
Section 11.07. Notices .............................................................................................................45
Section 11.08. Evidence of Rights of Bond Owners ...............................................................46
Section 11.09. Disqualified Bonds...........................................................................................47
Section 11.10. Money Held for Particular Bonds ....................................................................47
Section 11.11. Waiver of Personal Liability ............................................................................47
Section 11.12. Successor Is Deemed Included in All References to Predecessor ...................47
TABLE OF CONTENTS
(continued)
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3394469.7 043520 RSIND
Section 11.13. Execution in Several Counterparts...................................................................48
Section 11.14. Payment on Non-Business Day .......................................................................48
Section 11.15. Governing Law ................................................................................................48
Section 11.16 U.S.A. Patriot Act ............................................................................................47
3394469.7 043520 RSIND
INDENTURE OF TRUST
This INDENTURE OF TRUST (this “Indenture”), dated for convenience as of
________________, 2019, is by and between the OTAY WATER DISTRICT FINANCING
AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the
State of California (the “Authority”), and MUFG UNION BANK, N.A., a national banking
association organized and existing under the laws of the United States of America, with a
corporate trust office in Los Angeles, California, being qualified to accept and administer the
trusts hereby created (the “Trustee”).
WHEREAS CLAUSES:
1. Otay Water District (the “District”) presently operates facilities and property for
collection of wastewater within its service area (the “Wastewater Operations”).
2. The Authority has been formed for the purpose, among others, of issuing its
revenue bonds to finance the acquisition, construction and improvement of certain public capital
improvements in and for the benefit of the District.
3. The Authority and the District desire to raise funds necessary to finance certain
improvements to the Wastewater Operations.
4. In order to obtain funds for these purposes, the Authority has authorized the
issuance of its Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the
“Bonds”), in the aggregate principal amount of $[Principal Amount], under this Indenture and
under Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of
California, commencing with Section 6584 (the “Bond Law”).
5. The Bonds will be payable from Installment Payments made under an Installment
Sale Agreement dated as of ______________, 2019 (the “Installment Sale Agreement”) by and
between the Authority, as seller, and the District, as purchaser.
6. In order to provide for the authentication and delivery of the Bonds, to establish
and declare the terms and conditions upon which the Bonds are to be issued and to secure the
payment of the principal thereof, premium (if any) and interest thereon, the Authority has
authorized the execution and delivery of this Indenture.
7. The Authority has found and determines, and hereby affirms, that all acts and
proceedings required by law necessary to make the Bonds, when executed by the Authority,
authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special
obligations of the Authority, and to constitute this Indenture a valid and binding agreement for
the uses and purposes herein set forth in accordance with its terms, have been done and taken,
and the execution and delivery of this Indenture have been in all respects duly authorized.
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AGREEMENT:
In order to secure the payment of the principal of and the interest and redemption
premium (if any) on all the Outstanding Bonds under this Indenture according to their tenor, and
to secure the performance and observance of all the covenants and conditions therein and herein
set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be
issued and received, and in consideration of the premises and of the mutual covenants herein
contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other
valuable considerations, the receipt of which is hereby acknowledged, the Authority and the
Trustee do hereby covenant and agree with one another, for the benefit of the respective Owners
from time to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms set forth in this Indenture shall have the meanings
assigned to them in this Section 1.01.
“Additional Payments” means the amounts payable by the District under Section 4.7 of
the Installment Sale Agreement.
“Additional Revenues” means, with respect to the issuance of any Parity Obligations, any
or all of the following amounts:
(a) An allowance for Net Revenues from any additions or improvements to or
extensions of the Wastewater Operations to be made with the proceeds of such Parity
Obligations and also for Net Revenues from any such additions, improvements or
extensions which have been made from moneys from any source but in any case which,
during all or any part of the latest Fiscal Year or for any more recent consecutive 12-
month period selected by the District, were not in service, all in an amount equal to the
estimated additional average annual Net Revenues to be derived from such additions,
improvements and extensions for the first 36-month period in which each addition
improvement or extension is respectively to be in operation.
(b) An allowance for Net Revenues arising from any increase in the charges
made for service from the Wastewater Operations which has been adopted prior to the
incurring of such Parity Obligations but which, during all or any part of the latest Fiscal
Year or for any more recent consecutive 12-month period selected by the District, was
not in effect, in an amount equal to the total amount by which the Net Revenues would
have been increased if such increase in charges had been in effect during the whole of
such Fiscal Year or 12-month period.
“Annual Debt Service” means, as of the date of any calculation and with respect to the
Installment Payments or any Parity Obligations, as the case may be, the sum obtained for the
current or any future Fiscal Year during the Term of the Installment Sale Agreement by totaling
the following amounts for such Fiscal Year:
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(a) the aggregate amount of the Installment Payments coming due and
payable in such Fiscal Year pursuant hereto, except to the extent payable from any
security deposit pursuant to Section 7.1 of the Installment Sale Agreement; and
(b) the principal amount of all outstanding Parity Obligations, if any, coming
due and payable by their terms in such Fiscal Year.
“Authority” means the Otay Water District Financing Authority, a joint exercise of
powers authority duly organized and existing under the laws of the State of California.
“Authorized Representative” means:
(a) with respect to the Authority, its the President of the Board, Vice President
of the Board, Authority Executive Director or Authority Treasurer/Auditor, each acting
alone or in combination; and
(b) with respect to the District, its President of the Board, Vice President of
the Board, District General Manager or District Chief Financial Officer, each acting alone
or in combination.
“Bond Counsel” means (a) Hawkins Delafield & Wood LLP, or (b) any other attorney or
firm of attorneys appointed by or acceptable to the District of nationally recognized experience
in the issuance of obligations-the interest on which is excludable from gross income for federal
income tax purposes under the Tax Code.
“Bond Fund” means the fund by that name established and held by the Trustee under
Section 5.01.
“Bond Law” means the provisions of Article 4 of Chapter 5, Division 7, Title 41 of the
Government Code of the State of California, commencing with Section 6584, as in effect on the
Closing Date or as thereafter amended in accordance with its terms.
“Bonds” means the Otay Water District Financing Authority 2019 Wastewater Revenue
Bonds, in the original principal amount of $[Principal Amount].
“Business Day” means any day (i) other than a Saturday or a Sunday or (ii) any other
day on which commercial banks located in the city in which the Office of the Trustee is located
are authorized or required by law to close.
“Closing Date” means ______________, 2019, the date of delivery of the Bonds to the
Underwriter.
“Costs of Issuance” means all items of expense directly or indirectly payable by or
reimbursable to the District relating to the authorization, issuance, sale and delivery of the
Bonds, including but not limited to: printing expenses; rating agency fees; filing and recording
fees; initial fees, expenses and charges of the Trustee, and the Trustee’s counsel, including the
Trustee’s first annual administrative fee; fees, charges and disbursements of attorneys, financial
advisors, accounting firms, consultants and other professionals; bond insurance and surety bond
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premiums, if any; fees and charges for preparation, execution and safekeeping of the Bonds; and
any other cost, charge or fee in connection with the original issuance of the Bonds.
“Costs of Issuance Fund” means the fund by that name established and held by the
Trustee under Section 3.03.
“Defeasance Obligations” means the following:
(a) Cash;
(b) Federal Securities;
(c) evidences of ownership of proportionate interests in future interest and
principal payments on Federal Securities held by a bank or trust company as custodian,
under which the owner of the investment is the real party in interest and has the right to
proceed directly and individually against the obligor and the underlying Federal
Securities are not available to any person claiming through the custodian or to whom the
custodian may be obligated;
(d) pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and
Moody’s, respectively; or
(e) securities eligible for “AAA” defeasance under then existing criteria of
S&P or any combination thereof.
“Depository” means (a) initially, DTC, and (b) any other Securities Depositories acting as
Depository under Section 2.05.
“Depository System Participant” means any participant in the Depository’s book-entry
system.
“District” means the Otay Water District.
“DTC” means The Depository Trust Company, and its successors and assigns.
“Event of Default” means any of the events specified in Section 7.01.
“Environmental Regulations” means any federal, state or local law, statute, code,
ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants,
Hazardous Substances or chemical waste, materials or substances.
“Excess Investment Earnings” means an amount required to be rebated to the United
States of America under Section 148(f) of the Tax Code due to investment of gross proceeds of
the Bonds at a yield in excess of the yield on the Bonds.
“Federal Securities” means: (a) any non-callable direct general obligations of the United
States of America (including obligations issued or held in book entry form on the books of the
Department of the Treasury of the United States of America), for which the full faith and credit
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of the United States of America are pledged; and (b) obligations of any agency, department or
instrumentality of the United States of America, the timely payment of principal and interest on
which are fully, unconditionally and directly or indirectly secured or guaranteed by the full faith
and credit of the United States of America.
“Fiscal Year” means any twelve-month period extending from July 1 in one calendar year
to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month
period selected and designated by the Authority as its official fiscal year period.
“Fitch” means Fitch Ratings and its successors and assigns, except that if such
corporation is dissolved or liquidated or no longer performs the functions of a securities rating
agency, then the term “Fitch” shall be deemed to refer to any other nationally recognized
securities rating agency selected by the Authority or the District.
“Governmental Agency” means the State of California, and the United States of America,
acting through any of its agencies, to the extent that the State of California or such agency has
loaned money to the District for the Wastewater Operations.
“Governmental Loan” means any loan made by a Governmental Agency to the District
that is secured by a pledge of Net Revenues and incurred by the District to finance improvements
to the Wastewater Operations pursuant to Section 5.9 of the Installment Sale Agreement.
“Gross Revenues” means all gross charges received for, and all other gross income and
receipts derived by the District from, the ownership and operation of the Wastewater Operations
or otherwise arising from the Wastewater Operations, including but not limited to:
(a) all amounts levied by the District as a fee for connecting to the
Wastewater Operations, as such fee is established for time to time under the applicable
laws of the State of California,
(b) all income, rents, rates, fees, capital improvement fees, charges and other
moneys derived from the services and facilities furnished or supplied through the
facilities of the Wastewater Operations,
(c) the earnings on and income derived from the investment of such income,
rents, rates, fees, charges or other moneys to the extent that the use of such earnings and
income is limited by or under applicable law to the Wastewater Operations,
(d) the proceeds derived by the District directly or indirectly from the sale,
lease or other disposition of a part of the Wastewater Operations as permitted hereunder,
and
(e) amounts transferred into the Wastewater Revenue Fund from a Rate
Stabilization Fund.
However, the term “Gross Revenues” does not include (i) customers’ deposits or any
other deposits subject to refund until such deposits have become the property of the District,
(ii) the proceeds of any ad valorem property taxes levied to pay any general obligation bond
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indebtedness of the District with respect to the Wastewater Operations, (iii) special assessments
or special taxes levied upon real property within any improvement district for the purpose of
paying special assessment bonds or special tax obligations of the District, and (iv) amounts
transferred from the Wastewater Revenue Fund into the Rate Stabilization Fund during a Fiscal
Year, but only to the extent that any amounts transferred from the Wastewater Revenue Fund
into the Rate Stabilization Fund were included in Gross Revenues for that Fiscal Year.
“Hazardous Substances” means (a) any oil, flammable substance, explosives, radioactive
materials, hazardous wastes or substances, toxic wastes or substances or any other wastes,
materials or pollutants which (i) pose a hazard to the Project or to persons on or about the Project
or (ii) cause the Project to be in violation of any Environmental Regulation; (b) asbestos in any
form which is or could become friable, urea formaldehyde foam insulation, transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon
gas; (c) any chemical, material or substance defined as or included in the definition of “waste,”
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous
waste,” “restricted hazardous waste,” or “toxic substances” or words of similar import under any
Environmental Regulation including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), 42 USC §§ 9601 et seq.; the Resource
Conservation and Recovery Act (“RCRA”), 42 USC §§ 6901 et seq.; the Hazardous Materials
Transportation Act, 49 USC §§ 1801 et seq.; the Federal Water Pollution Control Act, 33 USC
§§ 1251 et seq.; the California Hazardous Waste Control Law (“HWCL”), Cal. Health & Safety
Code §§ 25100 et seq.; the Hazardous Substance Account Act (“HSAA”), Cal. Health & Safety
Code §§ 25300 et seq.; the Underground Storage of Hazardous Substances Act, Cal. Health &
Safety Code §§ 25280 et seq.; the Porter-Cologne Water Quality Control Act (the “Porter-
Cologne Act”), Cal. Water Code §§ 13000 et seq., the Safe Drinking Water and Toxic
Enforcement Act of 1986 (Proposition 65); and Title 22 of the California Code of Regulations,
Division 4, Chapter 30; (d) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority or agency or may or could pose a
hazard to the health and safety of the occupants of the Project or the owners and/or occupants of
property adjacent to or surrounding the Project, or any other person coming upon the Project or
adjacent property; or (e) any other chemical, materials or substance which may or could pose a
hazard to the environment.
“Indenture” means this Indenture of Trust, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture under the
provisions hereof.
“Independent Accountant” means any certified public accountant or firm of certified
public accountants appointed and paid by the District, and who, or each of whom (a) is in fact
independent and not under domination of the District; (b) does not have any substantial interest,
direct or indirect, in the District; and (c) is not connected with the District as an officer or
employee of the District but who may be regularly retained to make annual or other audits of the
books of or reports to the District.
“Installment Payment Date” means, with respect to any Interest Payment Date, the __th
Business Day immediately preceding that Interest Payment Date.
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“Installment Payments” means all payments required to be paid by the District on any
date under Section 4.4 of the Installment Sale Agreement, including any amounts payable upon
delinquent installments and including any prepayment thereof under Section 7.2 of the
Installment Sale Agreement, but does not include Additional Payments.
“Installment Sale Agreement” means the Installment Sale Agreement dated as of
___________, 2019, between the District and the Authority, together with any duly authorized
and executed amendments thereto.
“Interest Account” means the account by that name established and held by the Trustee in
the Bond Fund under Section 5.02.
“Interest Payment Dates” means each March 1st and September 1st, commencing March
1st, 2020, so long as any Bonds remain unpaid.
“Maximum Annual Debt Service” means, as of the date of any calculation and with
respect to the Installment Payments or any Parity Obligations, as the case may be, the maximum
sum obtained for the current or any future Fiscal Year during the Term of the Installment Sale
Agreement by totaling the following amounts for such Fiscal Year:
(a) the aggregate amount of the Installment Payments coming due and
payable in such Fiscal Year pursuant hereto, except to the extent payable from any
security deposit pursuant to Section 7.1 of the Installment Sale Agreement;
(b) the principal amount of all outstanding Parity Obligations, if any, coming
due and payable by their terms in such Fiscal Year;
(c) the amount of interest which would be due during such Fiscal Year on the
aggregate principal amount of all outstanding Parity Obligations, if any, which would be
outstanding in such Fiscal Year if such Parity Obligations are retired as scheduled; and
(d) loan payments to be made to a Governmental Agency under a
Governmental Loan, if any, coming due and payable by its terms in such Fiscal Year.
“Moody’s” means Moody’s Investors Service, a corporation duly organized and existing
under and by virtue of the laws of the State of Delaware, and its successors and assigns, except
that if such corporation is dissolved or liquidated or no longer performs the functions of a
securities rating agency, then the term “Moody’s” shall be deemed to refer to any other
nationally recognized securities rating agency selected by the District.
“Net Revenues” means, for any period, an amount equal to all of the Gross Revenues
received during such period minus the amount required to pay all Operation and Maintenance
Costs becoming payable during such period.
“Nominee” means (a) initially, Cede & Co. as nominee of DTC, and (b) any other
nominee of the Depository designated under Section 2.05(a).
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“Office” means the corporate trust office of the Trustee in Los Angeles, California, or
such other or additional offices as the Trustee may designate in writing to the District from time
to time as the corporate trust office for purposes of the Indenture; except that with respect to
presentation of Bonds for payment or for registration of transfer and exchange such term means
the office or agency of the Trustee at which, at any particular time, its corporate trust agency
business is conducted, initially in Los Angeles, California.
“Operation and Maintenance Costs” means the reasonable and necessary costs and
expenses paid by the District for maintaining and operating the Wastewater Operations,
including but not limited to
(a) costs of utilities, including the costs of electricity and other forms of
energy supplied to the Wastewater Operations,
(b) the reasonable expenses of management and repair and other costs and
expenses necessary to maintain and preserve the Wastewater Operations in good repair
and working order, and
(c) the reasonable administrative costs of the District attributable to the
operation and maintenance of the Wastewater Operations;
but in all cases excluding
(i) debt service payable on obligations incurred by the District with respect to
the Wastewater Operations, including but not limited to the Installment Payments and
any Parity Obligations,
(ii) depreciation, replacement and obsolescence charges or reserves therefor,
(iii) capital expenditures (other than as set forth in paragraph (b) above), and
(iv) amortization of intangibles or other bookkeeping entries of a similar
nature.
“Outstanding,” when used as of any particular time with reference to Bonds, means,
subject to the last paragraph of Section 10.02 of this Indenture, all Bonds theretofore, or
thereupon being, authenticated and delivered by the Trustee under this Indenture except:
(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee
for cancellation;
(b) Bonds with respect to which all liability of the Authority and District has
been discharged in accordance with Section 10.02, including Bonds (or portions thereof)
described in Section 11.09; and
(c) Bonds for the transfer or exchange of or in lieu of or in substitution for
which other Bonds have been authenticated and delivered by the Trustee under this
Indenture.
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“Overdue Rate” means the highest rate of interest on any of the Outstanding Bonds.
“Owner,” whenever used herein with respect to a Bond, means the person in whose name
the ownership of such Bond is registered on the Registration Books.
“Parity Obligations” means the following:
(a) any bonds, notes, leases, installment sale agreements or other obligations
of the District payable from and secured by a pledge of and lien upon any of the Net
Revenues on a parity with the Installment Payments, entered into or issued under and in
accordance with Section 5.8 of the Installment Sale Agreement, and
(b) any Governmental Loan that is treated as a Parity Obligation under
Section 5.9 of the Installment Sale Agreement.
“Parity Obligations Documents” means, collectively, the indenture of trust, trust
agreement, installment sale agreement, or other document authorizing the issuance of any Parity
Obligations or any securities which evidence Parity Obligations.
“Permitted Investments” means any of the following which at the time of investment are
determined by the District to be legal investments under the laws of the State of California for
the moneys proposed to be invested therein (provided that the Trustee shall be entitled to rely
upon any investment directions from the District as conclusive certification to the Trustee that
the investments described therein are so authorized under the laws of the State of California):
(a) Federal Securities;
(b) obligations of any of the following federal agencies which obligations
represent full faith and credit of the United States of America, including: Export-Import
Bank, Farmers Home Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government National Mortgage
Association, U.S. Department of Housing & Urban Development, and Federal Housing
Administration;
(c) bonds, notes or other evidences of indebtedness rated AAA by S&P and
Aaa by Moody’s issued by the Fannie Mae or the Federal Home Loan Mortgage
Corporation with remaining maturities not exceeding three years;
(d) U.S. dollar denominated deposit accounts (including those with the
Trustee or with any affiliate of the Trustee), unsecured certificates of deposit, including
those placed by a third party pursuant to an agreement between the Trustee and the
Authority, demand deposits, including interest bearing money market accounts, trust
deposits, trust accounts, time deposits, overnight bank deposits, interest-bearing deposits,
federal funds and banker’s acceptances with domestic commercial banks which have a
rating on their short term certificates of deposit on the date of purchase of A-1 or A-1+ by
S&P and P-1 by Moody’s, and maturing no more than 360 days after the date of
purchase;
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(e) commercial paper which is rated at the time of purchase in the single
highest classification, A-1+ by S&P and P-1 by Moody’s and which matures not more
than 270 days after the date of purchase;
(f) investments in a money market mutual fund rated, at the time of purchase,
AAAm or AAAm-G or better by S&P, which shall exclude funds with a floating net asset
value and may include funds for which the Trustee or its affiliates provide investment
advisory or other management services for a fee, including serving as administrator,
shareholder servicing agent, and/or custodian or sub-custodian, notwithstanding that
(i) the Trustee or an affiliate of the Trustee receives fees from funds for services
rendered, (ii) the Trustee collects fees for services rendered pursuant to this Indenture,
which fees are separate from the fees received from such funds, and (iii) services
performed for such funds and pursuant to this Indenture may at times duplicate those
provided to such funds by the Trustee or an affiliate of the Trustee;
(g) Repurchase and reverse repurchase agreements collateralized with Federal
Securities, including those of the Trustee or any of its affiliates;
(h) any pre-refunded bonds or other obligations of any state of the United
States of America or of any agency, instrumentality or local governmental unit of any
such state which are not callable at the option of the obligor prior to maturity or as to
which irrevocable instructions have been given by the obligor to call on the date specified
in the notice; and (i) which are rated, at the time of purchase, based on the refunding
escrow, in the highest rating category of S&P and Moody’s or (ii)(A) which are fully
secured as to principal and interest and redemption premium (if any) by a fund consisting
only of cash or Federal Securities, which fund may be applied only to the payment of
such principal of and interest and redemption premium (if any) in such bonds or other
obligations on the maturity date or dates thereof or the specified redemption date or dates
under such irrevocable instructions, as appropriate, and (B) which fund is sufficient, as
verified by an Independent Accountant, to pay principal of and interest and redemption
premium (if any) on the bonds or other obligations described in this paragraph on the
maturity date or dates thereof or on the redemption date or dates specified in the
irrevocable instructions referred to above, as appropriate;
(i) investment agreements, with notice to each rating agency then rating the
Bonds;
(j) the Local Agency Investment Fund established under Section 16429.1 of
the Government Code of the State of California, provided, however, that with respect to
amounts held by the Trustee hereunder, to the extent the Trustee is authorized to register
such investment in its name; and
(k) any other investment permitted under Section 53601 of the California
Government Code.
“Principal Account” means the account by that name established and held by the Trustee
in the Bond Fund under Section 5.02.
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“Proceeds Account” shall have the meaning assigned to such term in Section 3.02.
“Project” means the facilities, improvements and other property described more fully in
Appendix B attached to the Installment Sale Agreement, as that Appendix may be amended from
time to time in accordance with the Installment Sale Agreement.
“Project Costs” means, with respect to the Project, all costs of the acquisition,
construction and installation thereof which are paid from moneys on deposit in the Project Fund,
including but not limited to:
(a) all costs required to be paid to any person under the terms of any
agreement for or relating to the acquisition, construction and installation of the Project;
(b) obligations incurred for labor and materials in connection with the
acquisition, construction and installation of the Project;
(c) the cost of performance or other bonds and any and all types of insurance
that may be necessary or appropriate to have in effect in connection with the acquisition,
construction and installation of the Project;
(d) all costs of engineering and architectural services, including the actual out-
of-pocket costs for test borings, surveys, estimates, plans and specifications and
preliminary investigations therefor, development fees, sales commissions, and for
supervising construction, as well as for the performance of all other duties required by or
consequent to the proper acquisition, construction and installation of the Project;
(e) any sums required to reimburse the District for advances made for any of
the above items or for any other costs incurred and for work done which are properly
chargeable to the acquisition, construction and installation of the Project;
(f) all financing costs incurred in connection with the acquisition,
construction and installation of the Project; and
(g) the interest components of the Installment Payments allocable to the
Project that come due during the period of acquisition, construction and installation of the
Project.
“Project Fund” means the fund by that name established and held by the District under
Section 3.04.
“Record Date” means, with respect to any Interest Payment Date, the 15th calendar day
of the month preceding such Interest Payment Date, whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established and held by the Trustee
under Section 5.06.
“Registration Books” means the records maintained by the Trustee under Section 2.06 for
the registration and transfer of ownership of the Bonds.
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“Revenues” means:
(a) all amounts received by the Authority or the Trustee pursuant or with
respect to the Installment Sale Agreement, including, without limiting the generality of
the foregoing, all of the Installment Payments (including both timely and delinquent
payments, any late charges, and whether paid from any source, but excluding any
Additional Payments), prepayments, insurance proceeds, condemnation proceeds, and
(b) all interest, profits or other income derived from the investment of
amounts in any fund or account established pursuant to this Indenture.
“S&P” means Standard & Poor’s, a division of the McGraw Hill Companies, of New
York, New York, its successors and assigns, except that if such corporation is dissolved or
liquidated or no longer performs the functions of a securities rating agency, then the term “S&P”
shall be deemed to refer to any other nationally recognized securities rating agency selected by
the District.
“Securities Depositories” means The Depository Trust Company: and, in accordance with
then current guidelines of the Securities and Exchange Commission, such other addresses or such
other securities depositories as the District designates in written notice filed with the Trustee.
“Supplemental Indenture” means any indenture hereafter duly authorized and entered into
between the Authority and the Trustee, supplementing, modifying or amending this Indenture;
but only if and to the extent that such Supplemental Indenture is specifically authorized
hereunder.
“Tax Agreement” means the Tax Regulatory Agreement by and among the Authority, the
Trustee and the District together with the exhibits thereto, dated as of ___________, 2019, as the
same may be amended or supplemented in accordance with its terms.
“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or
(except as otherwise referenced herein) as it may be amended to apply to obligations issued on
the Closing Date, together with applicable proposed, temporary and final regulations
promulgated, and applicable official public guidance published, under said Tax Code.
“Term” means, when used with respect to the Installment Sale Agreement, the time
during which the Installment Sale Agreement is in effect, as provided in Section 4.2 thereof.
[“Term Bonds” means the Bonds maturing on _______________.]
“Trustee” means MUFG Union Bank, N.A., a national banking association organized and
existing under the laws of the United States of America, or its successor or successors, as Trustee
hereunder as provided in Article VIII.
“Underwriter” means Hilltop Securities Inc., the Underwriter of the Bonds at the
negotiated sale thereof.
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“Wastewater Operations” means the wastewater operations of the District, including but
not limited to all facilities, properties and improvements at any time owned or operated by the
District for the collection of wastewater from residents served thereby, and any necessary lands,
rights, entitlements and other property useful in connection therewith, together with all
extensions thereof and improvements thereto hereafter acquired, constructed or installed by the
District.
“Wastewater Revenue Fund” means the fund or funds established and held by the District
with respect to the Wastewater Operations for the receipt and deposit of Gross Revenues.
Currently, the District’s Sewer General Fund constitutes the Wastewater Revenue Fund.
“Written Certificate,” “Written Request” and “Written Requisition” of the Authority or
the District mean, respectively, a written certificate, request or requisition signed in the name of
the Authority or the District by its Authorized Representative. Any such instrument and
supporting opinions or representations, if any, may, but need not, be combined in a single
instrument with any other instrument, opinion or representation, and the two or more so
combined shall be read and construed as a single instrument.
Section 1.02. Authorization. Each of the parties hereby represents and warrants that it
has full legal authority and is duly empowered to enter into this Indenture, and has taken all
actions necessary to authorize the execution hereof by the officers and persons signing it.
Section 1.03. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,” “hereof,”
thereby,” “hereunder” and other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or subdivision hereof.
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds. The Authority has reviewed all proceedings
heretofore taken and has found, as a result of such review, and hereby finds and determines that
all things, conditions and acts required by law to exist, happen or be performed precedent to and
in connection with the issuance of the Bonds do exist, have happened and have been performed
in due time, form and manner as required by law, and the Authority is now duly empowered,
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under each and every requirement of law, to issue the Bonds in the manner and form provided in
this Indenture.
The Authority hereby authorizes the issuance of the Bonds in the aggregate principal
amount of $[Principal Amount] under the Bond Law for the purposes of providing funds to
enable the District to acquire and construct the Project. The Bonds are authorized and issued
under, and are subject to the terms of, this Indenture and the Bond Law. The Bonds are
designated the “Otay Water District Financing Authority 2019 Wastewater Revenue Bonds.”
[Remainder of Page Intentionally Left Blank]
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3394469.7 043520 RSIND
Section 2.02. Terms of the Bonds.
Payment Provisions. The Bonds shall be issued in fully registered form without coupons
in denominations of $5,000 or any integral multiple thereof. The Bonds shall mature on
_________ in each of the years and in the amounts, and bear interest (calculated on the basis of a
360-day year of twelve 30-day months) at the rates, as follows:
Maturity Date
(September 1st)
Principal
Amount
Interest
Rate
- $- -%
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
Interest on the Bonds is payable from the Interest Payment Date next preceding the date
of authentication thereof unless:
(a) a Bond is authenticated on or before an Interest Payment Date and after
the close of business on the preceding Record Date, in which event it will bear interest
from such Interest Payment Date,
(b) a Bond is authenticated on or before the first Record Date, in which event
interest thereon will be payable from the Closing Date, or
(c) interest on any Bond is in default as of the data of authentication thereof,
in which event interest thereon will be payable from the date to which interest has been
paid in full, payable on each Interest Payment Date.
Interest is payable on each Interest Payment Date to the persons in whose names the
ownership of the Bonds is registered on the Registration Books at the close of business on the
immediately preceding Record Date, except as provided below. Interest on any Bond which is
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not punctually paid or duly provided for on any Interest Payment Date is payable to the person in
whose name the ownership of such Bond is registered on the Registration Books at the close of
business on a special record date for the payment of such defaulted interest to be fixed by the
Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to
such special record date.
The Trustee will pay interest on the Bonds by check mailed by first class mail, postage
prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses
shown on the Registration Books as of the close of business on the preceding Record Date. At
the written request of the Owner of Bonds in an aggregate principal amount of at least
$1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee
will pay interest on such Bonds on each succeeding Interest Payment Date by wire transfer in
immediately available funds to such account of a financial institution within the United States of
America as specified in such written request, which written request will remain in effect until
rescinded in writing by the Owner. The Trustee will pay principal of the Bonds in lawful money
of the United States of America by check upon presentation and surrender thereof at the Office
of the Trustee.
Section 2.03. Form and Execution of Bonds. The Bonds, the form of Trustee’s
certificate of authentication, and the form of assignment to appear thereon, are set forth in
Appendix A attached hereto and by this reference incorporated herein, with necessary or
appropriate variations, omissions and insertions, as permitted or required by this Indenture.
An Authorized Representative of the Authority shall execute, and the Secretary of the
Authority shall attest, each Bond. Either or both of such signatures may be made manually or
may be affixed by facsimile thereof. If any officer whose signature appears on any Bond ceases
to be such officer before the Closing Date, such signature will nevertheless be as effective as if
the officer had remained in office until the Closing Date any Bond may be signed and attested on
behalf of the Authority by such persons as at the actual date of the execution of such Bond are
the proper officers of the Authority, duly authorized to execute debt instruments on behalf of the
Authority, although on the date of such Bond any such person was not an officer of the
Authority.
Only those Bonds bearing a certificate of authentication in the form set forth in
Appendix A, manually executed and dated by the Trustee, are valid or obligatory for any purpose
or entitled to the benefits of this Indenture, and such certificate of the Trustee is conclusive
evidence that such Bonds have been duly authenticated and delivered hereunder and are entitled
to the benefits of this Indenture.
Section 2.04. Transfer and Exchange of Bonds.
(a) Transfer. Any Bond may, in accordance with its terms, be transferred, upon the
Registration Books, by the person in whose name it is registered, in person or by a duly
authorized attorney of such person, upon surrender of such Bond to the Trustee at its Office for
cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to
the Trustee, duly executed. The Trustee shall collect any tax or other governmental charge on the
transfer of any Bonds under this Section. Whenever any Bond or Bonds is surrendered for
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transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the
transferee a new Bond or Bonds of like series, interest rate, maturity and aggregate principal
amount. The District shall pay the cost of printing Bonds and any services rendered or expenses
incurred by the Trustee in connection with any transfer of Bonds.
(b) Exchange. The Bonds may be exchanged at the Office of the Trustee for a like
aggregate principal amount of Bonds of other authorized denominations and of the same series,
interest rate and maturity. The Trustee shall collect any tax or other governmental charge on the
exchange of any Bonds under this subsection (b). The District shall pay the cost of printing
Bonds and any services rendered or expenses incurred by the Trustee in connection with any
exchange of Bonds.
(c) Limitations. The Trustee may refuse to transfer or exchange, under the provisions
of this Section, any Bonds selected by the Trustee for redemption under Article IV, or any Bonds
during the period established by the Trustee for the selection of Bonds for redemption.
Section 2.05. Book-Entry System.
(a) Original Delivery. The Bonds will be initially delivered in the form of a separate
single fully registered bond (which may be typewritten) for each maturity of the Bonds. Upon
initial delivery, the Trustee shall register the ownership of each Bond on the Registration Books
in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the
Outstanding Bonds shall be registered in the name of the Nominee on the Registration Books.
With respect to Bonds the ownership of which is registered in the name of the Nominee,
neither the Authority, the District nor the Trustee has any responsibility or obligation to any
Depository System Participant or to any person on behalf of which the Nominee holds an interest
in the Bonds. Without limiting the generality of the immediately preceding sentence, the
Authority, the District and the Trustee have no responsibility or obligation with respect to (i) the
accuracy of the records of the Depository, the Nominee or any Depository System Participant
with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System
Participant or any other person, other than a Bond Owner as shown in the Registration Books, of
any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by
the Depository of the beneficial interests in the Bonds to be redeemed if the District elects to
redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other
person, other than a Bond Owner as shown in the Registration Books, of any amount with
respect to principal, premium, if any, or interest on the Bonds or (v) any consent given or other
action taken by the Depository as Owner of the Bonds.
The Authority, the District and the Trustee may treat and consider the person in whose
name each Bond is registered as the absolute owner of such Bond for the purpose of payment of
principal of and premium, if any, and interest on such Bond, for the purpose of giving notices of
redemption and other matters with respect to such Bond, for the purpose of registering transfers
of ownership of such Bond, and for all other purposes whatsoever.
The Trustee shall pay the principal of and the interest and premium, if any, on the Bonds
only to the respective Owners or their respective attorneys duly authorized in writing, and all
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such payments shall be valid and effective to fully satisfy and discharge all obligations with
respect to payment of principal of and interest and premium, if any, on the Bonds to the extent of
the sum or sums so paid.
No person other than a Bond Owner shall receive a Bond evidencing the obligation of the
Authority to make payments of principal, interest and premium, if any, under this Indenture.
Upon delivery by the Depository to the District of written notice to the effect that the
Depository has determined to substitute a new Nominee in its place, and subject to the provisions
herein with respect to Record Dates, such new nominee shall become the Nominee hereunder for
all purposes: and upon receipt of such a notice the District shall promptly deliver a copy of the
same to the Trustee.
(b) Representation Letter. In order to qualify the Bonds for the Depository’s
book-entry system, the Authority shall execute and deliver to such Depository a letter
representing such matters as shall be necessary to so qualify the Bonds. The execution and
delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any
other way impose upon the Authority or the Trustee any obligation whatsoever with respect to
persons having interests in the Bonds other than the Bond Owners.
In addition to the execution and delivery of such letter by the Authority, the Authority
and the Trustee may take any other actions, not inconsistent with this Indenture, to qualify the
Bonds for the Depository’s book-entry program.
(c) Transfers Outside Book-Entry System. If either (i) the Depository determines not
to continue to act as Depository for the Bonds, or (ii) the District determines to terminate the
Depository as such, then the District shall thereupon discontinue the book-entry system with
such Depository. In such event, the Depository shall cooperate with the District and the Trustee
in the issuance of replacement Bonds by providing the Trustee with a list showing the interests of
the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in
the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be
issued.
The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions
of this subsection (c).
If, prior to the termination of the Depository acting as such, the District fails to identify
another Securities Depository to replace the Depository, then the Bonds shall no longer be
required to be registered in the Registration Books in the name of the Nominee, but shall be
registered in whatever name or names the Owners transferring or exchanging Bonds shall
designate, in accordance with the provisions hereof.
If the District determines that it is in the best interests of the beneficial owners of the
Bonds that they be able to obtain certificated Bonds, the District may notify the Depository
System Participants of the availability of such certificated Bonds through the Depository. In such
event, the Trustee will authenticate, transfer and exchange Bonds as required by the Depository
and others in appropriate amounts; and whenever the Depository requests, the Trustee and the
District shall cooperate with the Depository in taking appropriate action (i) to make available one
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or more separate certificates evidencing the Bonds to any Depository System Participant having
Bonds credited to its account with the Depository, or (ii) to arrange for another Securities
Depository to maintain custody of a single certificate evidencing such Bonds, all at the District’s
expense.
(d) Payments to the Nominee. Notwithstanding any other provision of this Indenture
to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with
respect to principal of and interest and premium, if any, on such Bond and all notices with
respect to such Bond shall be made and given, respectively, as provided in the letter described in
subsection (b) of this Section or as otherwise instructed by the Depository.
Section 2.06. Registration Books. The Trustee will keep or cause to be kept, at the
Office of the Trustee, sufficient records for the registration and transfer of ownership of the
Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection
during regular business hours by the District; and, upon presentation for such purpose, the
Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause
to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore
provided.
Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is mutilated,
the Authority, at the expense of the Owner of such Bond, shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the
Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. The Trustee
shall cancel every mutilated Bond surrendered to it and deliver such mutilated Bond to, or upon
the order of, the District.
If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be
submitted to the Trustee and, if such evidence is satisfactory and if indemnity satisfactory to the
Trustee is given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the
Bond so lost, destroyed or stolen.
The Trustee may require payment of a sum not exceeding the actual cost of preparing
each new Bond issued under this Section and of the expenses which may be incurred by the
Trustee in connection therewith.
Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be
lost, destroyed or stolen will constitute an original additional contractual obligation on the part of
the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time
enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this
Indenture with all other Bonds issued under this Indenture.
Notwithstanding any other provision of this Section 2.07, in lieu of delivering a new
Bond for which principal has become due for a Bond which has been mutilated, lost, destroyed
or stolen, the Trustee may make payment of such Bond in accordance with its terms upon receipt
of indemnity satisfactory to the Trustee.
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Section 2.08. CUSIP Numbers. The District in issuing the Bonds may use “CUSIP”
numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices
of redemption as a convenience to Owners; provided that the Trustee shall have no liability for
any defect in the “CUSIP” numbers as they appear on any Bond, notice or elsewhere, and,
provided further that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Bonds or as contained in any notice of a
redemption and that reliance may be placed only on the other identification numbers printed on
the Bonds, and any such redemption shall not be affected by any defect in or omission of such
numbers. The District will promptly notify the Trustee in writing of any change in the "CUSIP"
numbers.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the Bonds. At any time after the execution of this Indenture,
the Authority may execute and the Trustee shall, upon the Written Request of the District,
authenticate and deliver the Bonds to the Underwriter.
Section 3.02. Application of Proceeds of Sale of the Bonds. Upon the receipt of
payment for the Bonds on the Closing Date, the Trustee shall receive the amount of $________
calculated as follows:
• $[Par Amount] (constituting the par amount of the Bonds),
• [less an aggregate original issue discount / plus an aggregate original issue
premium] in the amount of $________, and
• less an underwriter’s discount in the amount of $_________.
which the Trustee shall deposit into a temporary account called the Proceeds Fund which the
Trustee shall establish, maintain and hold in trust, and shall apply as follows (whereupon said
temporary account shall be closed):
(a) The Trustee shall deposit $_________ into the Costs of Issuance Fund.
(b) The Trustee shall wire $_________ as directed by the District for deposit
into the Project Fund to be established by the District.
The Trustee may establish and maintain a temporary account or fund to facilitate and
record such deposits and transfers.
Section 3.03. Establishment and Application of Costs of Issuance Fund. The
Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of
Issuance Fund” into which the Trustee shall deposit a portion of the proceeds of sale of the
Bonds under Section 3.02(a). The Trustee shall disburse amounts in the Costs of Issuance Fund
from time to time to pay the Costs of Issuance upon submission of a Written Requisition of the
District stating the person to whom payment is to be made, the amount to be paid, the purpose
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for which the obligation was incurred and that such payment is a proper charge against said fund.
The Trustee may conclusively rely on the representations and certifications set forth in such
Written Requisitions and shall be fully protected in relying thereon.
On ____________, or upon the earlier Written Request of the District, the Trustee shall
transfer all amounts remaining in the Costs of Issuance Fund to the Interest Account, and shall
thereupon close the Costs of Issuance Fund.
Section 3.04. Project Fund. The District shall establish and maintain a separate fund
to be known as the “Project Fund” into which the District shall deposit a portion of the proceeds
of sale of the Bonds transferred to the District by the Trustee pursuant to Section 3.02(b). Except
as otherwise provided herein, moneys in the Project Fund will be used solely for the payment of
the Project Costs. The District shall determine if amounts charged against the Project Fund are
proper charges against such fund, and the District shall maintain a record of disbursed amounts
from the Project Fund, including the person to whom payment was made, the amount paid, and
the purpose for which the obligation was incurred.
Upon the completion of the Project, the District shall transfer to the Trustee for deposit in
the Interest Account held by the Trustee all amounts remaining on deposit in the Project Fund,
and the District shall thereupon close the Project Fund.
Section 3.05. Validity of Bonds. The recital contained in the Bonds that the same are
issued under the Constitution and laws of the State of California shall be conclusive evidence of
their validity and of compliance with the provisions of law in their issuance.
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Terms of Redemption.
(a) Optional Redemption from any Source of Available Funds. The Bonds maturing
on or before _________ are not subject to optional redemption prior to their respective stated
maturity dates.
The Bonds maturing on or after ________________, are subject to redemption in whole,
or in part at the Written Request of the District among maturities on such basis as the District
may designate and by lot within a maturity, at the option of the District, on any date on or after
_____________, from any available source of funds, at a redemption price equal to the principal
amount of the Bonds to be redeemed, plus accrued interest to the date of redemption, without
premium.
The District must give the Trustee written notice of its intention to redeem Bonds under
this subsection (a), and the manner of selecting such Bonds for redemption from among the
maturities thereof, in sufficient time to enable the Trustee to give notice of such redemption in
accordance with Section 4.03.
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(b) [Mandatory Redemption in the Event of Conveyance of Wastewater Operations to
San Diego County. The Bonds are subject to mandatory redemption prior to their respective
stated maturity dates in the event the District’s Wastewater Operations are conveyed to San
Diego County, from any available source of funds, at a redemption price equal to the principal
amount of the Bonds to be redeemed, plus accrued interest to the date of redemption, without
premium.]
(c) [Mandatory Sinking Fund Redemption. The Term Bonds are also subject to
redemption, by lot, on ________ in each of the years as set forth in the following tables, from
deposits made for such purpose pursuant to Section 5.02(b), at a redemption price equal to the
principal amount thereof to be redeemed together with accrued interest thereon to the redemption
date, without premium, or in lieu thereof may be purchased pursuant to the succeeding paragraph
of this subsection (b), in the aggregate respective principal amounts and on the respective dates
as set forth in the following table; provided, however, that if some but not all of the Term Bonds
have been redeemed pursuant to subsection (a) above, the total amount of all future payments
pursuant to this subsection (b) with respect to such Term Bonds shall be reduced by the
aggregate principal amount of such Term Bonds so redeemed, to be allocated among such
payments in integral multiples of $5,000 as determined by the District (written notice of which
determination shall be given by the District to the Trustee).]
[Term Bond Maturing ____________]
[Sinking Fund
Redemption Date]
(____________)
[Principal
Amount To Be
Redeemed]
- $-
- (Maturity) -
[Term Bond Maturing ____________]
[Sinking Fund
Redemption Date]
(_________)
[Principal
Amount To Be
Redeemed]
- $-
- -
- (Maturity) -
Section 4.02. Selection of Bonds for Redemption. Whenever provision is made in this
Indenture for the redemption of less than all of the Bonds of a single maturity of the same issue,
the District shall select the Bonds of that maturity to be redeemed by lot in any manner which the
District in its sole discretion deems appropriate. For purposes of such selection, the District shall
treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject
to redemption as if such portion were a separate Bond.
Section 4.03. Notice of Redemption. The Trustee shall mail notice of redemption of
the Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any
redemption date, to the respective Owners of any Bonds designated for redemption at their
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addresses appearing on the Registration Books, and the Securities Depositories. The Trustee
shall electronically file a copy of each notice of redemption with the Municipal Securities
Rulemaking Board through its Electronic Municipal Market Access (EMMA) system, or such
other services providing information with respect to called bonds in accordance with then-current
guidelines of the Securities and Exchange Commission, or any other such services the District
may designate in writing to the Trustee.
Each notice of redemption shall state:
(i) the date of the notice,
(ii) the redemption date,
(iii) the place or places of redemption,
(iv) whether less than all of the Bonds (or all Bonds of a single maturity) are to
be redeemed,
(v) the CUSIP numbers and (in the event that not all Bonds within a maturity
are called for redemption) Bond numbers of the Bonds to be redeemed and the maturity
or maturities of the Bonds to be redeemed, and
(vi) in the case of Bonds to be redeemed in part only, the respective portions of
the principal amount thereof to be redeemed.
Each such notice shall also state that on the redemption date there will become due and
payable on each of said Bonds the redemption price thereof, and that from and after such
redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then
surrendered. Such redemption notices may state that no representation is made as to the accuracy
or correctness of the CUSIP numbers printed therein or on the Bonds.
Each notice relating to a redemption pursuant to Section 4.01(a) may be conditional, and
shall further state that such redemption may be rescinded by the District on or prior to the date
set for redemption.
Neither the failure to receive any notice nor any defect therein shall affect the sufficiency
of the proceedings for such redemption or the cessation of accrual of interest from and after the
redemption date. Notice of redemption of Bonds shall be given by the Trustee, at the expense of
the District, for and on behalf of the District.
Section 4.04. Rescission of Redemption. The District shall have the right to rescind
any redemption pursuant to Section 4.01(a) by written notice to the Trustee on or prior to the
date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any
reason funds are not available on the date fixed for redemption for the payment in full of the
Bonds then called for redemption, and such cancellation shall not constitute an Event of Default
hereunder. The Trustee shall mail notice of rescission of redemption in the same manner notice
of redemption was originally provided.
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Section 4.05. Execution of New Bonds Upon Partial Redemption of Bonds. Upon
surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall
authenticate and deliver to the Owner thereof, at the expense of the District, a new Bond or
Bonds of authorized denominations equal in aggregate principal amount to the unredeemed
portion of the Bonds surrendered.
Section 4.06. Effect of Redemption. Notice of redemption having been duly given as
aforesaid, and moneys for payment of the redemption price of, together with interest accrued to
the date fixed for redemption on, including any applicable premium, the Bonds (or portions
thereof) so called for redemption being held by the Trustee, on the redemption date designated in
such notice, the Bonds (or portions thereof) so called for redemption shall become due and
payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or
portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the
Owners of said Bonds shall have no rights in respect thereof except to receive payment of the
redemption price thereof.
All Bonds redeemed under the provisions of this Article shall be canceled by the Trustee
upon surrender thereof and destroyed in accordance with the retention policy of the Trustee then
in effect.
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Security for the Bonds; Bond Fund.
(a) Pledge of Revenues and Other Amounts. Subject only to the provisions of this
Indenture permitting the application thereof for the purposes and on the terms and conditions set
forth herein, all of the Revenues and all amounts held in any fund or account established under
this Indenture are hereby pledged to secure the payment of the principal of and interest and
premium (if any) on the Bonds in accordance with their terms and the provisions of this
Indenture.
This pledge constitutes a lien on and security interest in the Revenues and such amounts
and shall attach, be perfected and be valid and binding from and after the Closing Date, without
the need for any physical delivery thereof or further act.
(b) Assignment to Trustee. The Authority hereby irrevocably transfers, assigns and
sets over to the Trustee, without recourse to the Authority, all of its rights in the Installment Sale
Agreement (excepting only the Authority’s rights under Sections 4.7, 5.2 and 6.4 thereof and the
Authority’s rights to give approvals and consents thereunder), including but not limited to all of
the Authority’s rights to receive and collect all of the Installment Payments, and the Trustee
hereby accepts such assignment.
The Trustee is entitled to collect and receive all of the Installment Payments, and any
Installment Payments collected or received by the Authority shall be deemed to be held, and to
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have been collected or received, by the Authority as the agent of the Trustee and shall forthwith
be paid by the Authority to the Trustee.
The Trustee is also entitled to, subject to the provisions of Article VIII, take all steps,
actions and proceedings which the Trustee determines to be reasonably necessary in its judgment
to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all
of the obligations of the District under the Installment Sale Agreement.
(c) Deposit of Revenues in Bond Fund. All Revenues shall be promptly deposited by
the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the
Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee
and required hereunder or under the Installment Sale Agreement to be deposited in the
Redemption Fund shall be promptly deposited in such fund or account.
All Revenues deposited with the Trustee shall be held, disbursed, allocated and applied
by the Trustee only as provided in this Indenture.
Any surplus remaining in the Bond Fund, after payment in full of (i) the principal of and
interest on the Bonds or provision therefore under Article X and (ii) any applicable fees and
expenses of the Trustee shall be withdrawn by the Trustee and remitted to the District.
Section 5.02. Allocation of Revenues. On or before each Interest Payment Date, the
Trustee shall transfer from the Bond Fund and deposit into the following respective accounts
(each of which the Trustee shall establish and maintain within the Bond Fund), the following
amounts in the following order of priority:
(a) Deposit to Interest Account. The Trustee shall deposit into the Interest Account
an amount required to cause the aggregate amount on deposit in the Interest Account to be at
least equal to the amount of interest becoming due and payable on such Interest Payment Date on
all Bonds then Outstanding.
(b) Deposit to Principal Account. The Trustee shall deposit into the Principal
Account an amount required to cause the aggregate amount on deposit in the Principal Account
to equal the principal amount of the Bonds coming due and payable on each _________,
including the aggregate principal amount of the Term Bonds (if any) which are subject to
mandatory sinking fund redemption on such _________ under Section 4.01(b).
Section 5.03. Application of Interest Account. All amounts in the Interest Account
shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the
Bonds as it comes due and payable (including accrued interest on any Bonds purchased or
redeemed prior to maturity).
Section 5.04. Application of Principal Account. All amounts in the Principal
Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the
Bonds on their respective maturity dates, including the aggregate principal amount of the Term
Bonds (if any) which are subject to mandatory sinking fund redemption on such _________
under Section 4.01(b).
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Section 5.05. Application of Redemption Fund. The Trustee shall establish (when
needed) and maintain the Redemption Fund, into which the Trustee shall deposit a portion of the
Revenues received representing optional prepayments of the Installment Payments, in
accordance with a Written Request of the District.
Amounts on deposit in the Redemption Fund shall be used and withdrawn by the Trustee
solely for the purpose of paying the principal and premium (if any) of the Bonds to be redeemed
under Section 4.01[(a)]; provided, however, that at any time prior to the selection of Bonds for
redemption, the Trustee may apply such amounts to the purchase of Bonds at public or private
sale, when and at such prices (including brokerage and other charges, but excluding accrued
interest, which is payable from the Interest Account) as may be directed under a Written Request
of the District, except that the purchase price (exclusive of accrued interest) may not exceed the
redemption price then applicable to the Bonds.
The Trustee shall be entitled to conclusively rely on any Written Request of the District
received under this Section 5.05, and shall be fully protected in relying thereon.
Section 5.06. Investments. All moneys in any of the funds or accounts established
with the Trustee under this Indenture shall be invested by the Trustee solely in Permitted
Investments. Such investments shall be directed by the District under a Written Request of the
District filed with the Trustee at least 2 Business Days in advance of the making of such
investments. In the absence of any such directions from the District, the Trustee shall hold any
such moneys uninvested. Amounts in the Project Fund held by the District shall be invested by
the District in Permitted Investments.
Permitted Investments purchased as an investment of moneys in any fund shall be
deemed to be part of such fund or account. To the extent Permitted Investments are registrable,
such Permitted Investments must be registered in the name of the Trustee.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the Bond Fund.
For purposes of acquiring any investments hereunder, the Trustee may commingle funds
held by it hereunder. The Trustee or any of its affiliates may act as principal or agent in the
acquisition or disposition of any investment and may impose its customary charges therefor. The
Trustee may rely conclusively on the written investment direction of the District as to the
suitability and legality of the directed investments.
The Trustee shall incur no liability for losses arising from any investments made under
this Section 5.06.
The Trustee may make any investments hereunder through its own bond or investment
department or trust investment department, or those of its parent or any affiliate. The Trustee or
any of its affiliates may act as sponsor, advisor or manager in connection with any investments
made by the Trustee hereunder. The Trustee is hereby authorized, in making or disposing of any
investment permitted by this Section, to deal with itself (in its individual capacity) or with any
one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for
any third person or is dealing as a principal for its own account.
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The Authority and the District acknowledge that to the extent regulations of the
Comptroller of the Currency or other applicable regulatory entity grant the District the right to
receive brokerage confirmations of security transactions as they occur at no additional cost, the
District specifically waives receipt of such confirmations to the extent permitted by law. The
District further understands that trade confirmations for securities transactions effected by the
Trustee will be available upon request and at no additional cost and other trade confirmations
may be obtained from the applicable broker. The Trustee will furnish the District periodic cash
transaction statements which shall include detail for all investment transactions made by the
Trustee hereunder. Upon the District’s election, such statements will be delivered via the
Trustee’s online service and upon electing such service, paper statements will be provided only
upon request.
The moneys on deposit in the funds and accounts established under this Indenture shall
not be deemed “surplus” under Section 53601 of the Government Code.
Section 5.07. Valuation and Disposition of Investments.
(a) Except as otherwise provided in subsection (b) of this Section, the District
covenants that all investments of amounts deposited in any fund or account created by or under
this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of
Section 148 of the Tax Code) shall be acquired, disposed of and valued at the Fair Market Value
thereof as such term is defined in subsection (d) below. The Trustee shall have no duty in
connection with the determination of Fair Market Value other than to follow the investment
directions of the District in any Written Request of the District.
(b) Investments in funds or accounts (or portions thereof) that are subject to a yield
restriction under applicable provisions of the Tax Code shall be valued at cost thereof,
(consisting of present value thereof within the meaning of Section 148 of the Tax Code):
provided that the District shall inform the Trustee which funds are subject to a yield restriction
and the Trustee shall have no duty in regards to ensuring that such funds meet such yield
restriction.
(c) Except as provided in the preceding subsection (b), for the purpose of determining
the amount in any fund or account established hereunder, the value of Permitted Investments
credited to such fund shall be valued by the Trustee at least annually on or before __________.
The Trustee may sell or present for redemption, any Permitted Investment so purchased by the
Trustee whenever it shall be necessary in order to provide moneys to meet any required payment,
transfer, withdrawal or disbursement from the fund to which such Permitted Investment is
credited, and the Trustee shall not be liable or responsible for any loss, tax, fee or other charge
resulting from any such Permitted Investment, reinvestment or liquidation of investment.
(d) For purposes of this Section 5.08, the term “Fair Market Value” means the price
at which a willing buyer would purchase the investment from a willing seller in a bona fide,
arm’s length transaction (determined as of the date the contract to purchase or sell the investment
becomes binding) if the investment is traded on an established securities market (within the
meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means
the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the
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investment is a certificate of deposit that is acquired in accordance with applicable regulations
under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal
or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed
investment contract, a forward supply contract or other investment agreement) that is acquired in
accordance with applicable regulations under the Tax Code, or (iii) the investment is a United
States Treasury Security – State and Local Government Series which is acquired in accordance
with applicable regulations of the United States Bureau of Public Debt.
(e) To the extent of any valuations made by the Trustee hereunder, the Trustee may
utilize and rely upon generally recognized or computerized securities pricing services that may
be available to it, including those available through its regular accounting system.
ARTICLE VI
COVENANTS OF THE AUTHORITY
Section 6.01. Punctual Payment. The Authority shall punctually pay or cause to be
paid the principal of and interest and premium (if any) on all the Bonds in strict conformity with
the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof,
but only out of the Revenues and other amounts pledged for such payment as provided in this
Indenture.
Section 6.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement,
and in case the maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any
default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then Outstanding and of all claims for interest thereon which
have not been so extended.
Nothing in this Section 6.02 limits the right of the District to cause the Authority to issue
Bonds for the purpose of refunding any Outstanding Bonds, and such issuance does not
constitute an extension of maturity of the Bonds.
Section 6.03. Against Encumbrances. The Authority shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets
pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the
pledge and assignment created by this Indenture.
Subject to this limitation, the Authority expressly reserves the right to enter into one or
more other indentures for any of its corporate purposes, and reserves the right to issue other
obligations for such purposes.
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized under law to issue the Bonds and to enter into this Indenture and to
pledge and assign the Revenues and other amounts purported to be pledged and assigned,
respectively, under this Indenture in the manner and to the extent provided in this Indenture.
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The Bonds and the provisions of this Indenture are and will be the legal, valid and
binding special obligations of the Authority in accordance with their terms, and the Authority
and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent
permitted by law, defend, preserve and protect said pledge and assignment of Revenues and
other assets and all the rights of the Bond Owners under this Indenture against all claims and
demands of all persons whomsoever.
Section 6.05. Accounting Records. The Trustee shall at all times keep, or cause to be
kept, proper books of record and account, prepared in accordance with corporate trust industry
standards, in which complete and accurate entries shall be made of all transactions made by it
relating to the proceeds of Bonds and all funds and accounts established by the Trustee under this
Indenture. The Trustee shall make such books of record and account available for inspection by
the Authority and the District during business hours, upon reasonable notice, and under
reasonable circumstances.
Section 6.06. Limitation on Additional Obligations. The Authority covenants that no
additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of
the Revenues in whole or in part.
Section 6.07. Tax Covenants.
(a) Private Business Use Limitation. The Authority shall assure that the proceeds of
the Bonds are not used in a manner that would cause the Bonds to satisfy the private business
tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the
Tax Code.
(b) Federal Guarantee Prohibition. The Authority may not take any action or permit
or suffer any action to be taken if the result of the same would be to cause the Bonds to be
“federally guaranteed” within the meaning of Section 149(b) of the Tax Code.
(c) No Arbitrage. The Authority may not take, or permit or suffer to be taken by the
Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other
obligations which, if such action had been reasonably expected to have been taken, or had been
deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be
“arbitrage bonds” within the meaning of Section 148(a) of the Tax Code.
(d) Maintenance of Tax Exemption. The Authority shall take all actions necessary to
assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds
to the same extent as such interest is permitted to be excluded from gross income under the Tax
Code as in effect on the Closing Date.
(e) Rebate of Excess Investment Earnings to United States. The Authority shall
calculate or cause to be calculated all amounts of Excess Investment Earnings with respect to the
Bonds which are required to be rebated to the United States of America under Section 148(f) of
the Tax Code, at the times and in the manner required under the Tax Code.
The Authority shall pay when due an amount equal to Excess Investment Earnings to the
United States of America in such amounts, at such times and in such manner as may be required
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under the Tax Code, such payments to be made from any source of legally available funds of the
Authority.
The Authority shall keep or cause to be kept, and retain or cause to be retained for a
period of six years following the retirement of the Bonds, records of the determinations made
under this subsection (e).
The Trustee may rely conclusively upon the Authority’s determinations, calculations and
certifications required by this Section. The Trustee shall have no responsibility to independently
make any calculation or determination or to review the Authority’s calculations hereunder.
Section 6.08. Enforcement of Installment Sale Agreement. The Trustee shall collect
all amounts (to the extent any such amounts are available for collection) due from the District
under the Installment Sale Agreement.
Subject to the provisions of Article VIII, the Trustee may enforce, and take all steps,
actions and proceedings which the Trustee determines to be reasonably necessary for the
enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of
all of the obligations of the District under the Installment Sale Agreement.
Section 6.09. Waiver of Laws. The Authority shall not at any time insist upon or
plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or
extension law now or at any time hereafter in force that may affect the covenants and agreements
contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws
is hereby expressly waived by the Authority to the extent permitted by law.
Section 6.10. Further Assurances. The Authority will make, execute and deliver any
and all such further indentures, instruments and assurances as may be reasonably necessary or
proper to carry out the intention or to facilitate the performance of this Indenture and for the
better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided
in this Indenture.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default. The following events constitute Events of Default
hereunder:
(a) Failure to pay any installment of the principal of any Bonds when due,
whether at maturity as therein expressed, by proceedings for redemption, by acceleration,
or otherwise.
(b) Failure to pay any installment of interest on the Bonds when due.
(c) Failure by the Authority to observe and perform any of the other
covenants, agreements or conditions on its part contained in this Indenture or in the
Bonds, if such failure has continued for a period of 60 days after written notice thereof,
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specifying such failure and requiring the same to be remedied, has been given to the
Authority by the Trustee provided, however, if in the reasonable opinion of the Authority
the failure stated in the notice can be corrected, but not within such 60-day period, such
failure shall not constitute an Event of Default if the Authority institutes corrective action
within such 60-day period and thereafter diligently and in good faith cures the failure in a
reasonable period of time, not to exceed 180 days of the date of the written notice of such
failure.
(d) The commencement by the Authority of a voluntary case under Title 11 of
the United States Code or any substitute or successor statute.
(e) The occurrence and continuation of an Event of Default under and as
defined in the Installment Sale Agreement.
Section 7.02. Acceleration; Other Remedies. If any Event of Default occurs, then,
and in each and every such case during the continuance of such Event of Default, the Trustee
may, and shall, at the written direction of the Owners of a majority in aggregate principal amount
of the Bonds at the time Outstanding shall, in each case, upon receipt of indemnification
satisfactory to Trustee against the costs, expenses and liabilities to be incurred in connection with
such action, upon notice in writing to the Authority, declare the principal of all of the Bonds then
Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any
such declaration the same shall become and shall be immediately due and payable, anything in
this Indenture or in the Bonds contained to the contrary notwithstanding.
The foregoing provision, however, is subject to the condition that if, at any time after the
principal of the Bonds has been so declared due and payable, the Authority shall pay to or shall
deposit with the Trustee a sum sufficient to pay all principal of the Bonds maturing prior to such
declaration and all matured installments of interest (if any) upon all the Bonds, and any and all
other defaults actually known to the Trustee (other than in the payment of principal of and
interest on the Bonds due and payable solely by reason of such declaration) are made good or
cured to the satisfaction of the Trustee, or provision deemed by the Trustee to be adequate is
made therefor, then, and in every such case, the Trustee, on behalf of the Owners of all of the
Bonds, shall rescind and annul such declaration and its consequences: but no such rescission and
annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any
right or power consequent thereon; provided, however, that no such rescission and annulment
shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any
right or power consequent thereon.
In addition to declaring the principal of all of the Bonds, and the interest accrued thereon,
to be immediately due and payable as set forth above, the Trustee shall have the right to pursue
any other remedy provided by law or in equity or otherwise after an Event of Default has
occurred.
Section 7.03. Application of Revenues and Other Funds After Default. If an Event
of Default occurs and is continuing, all Revenues and any other funds then held or thereafter
received by the Trustee under any of the provisions of this Indenture shall be applied by the
Trustee in the following order of priority:
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(a) To the payment of fees, charges and expenses of the Trustee (including
reasonable fees and disbursements of its legal counsel including outside counsel and the
allocated costs of internal attorneys and those of its agents and advisors) incurred in and
about the performance of its powers and duties under this Indenture; and
(b) To the payment of the principal of and interest then due on the Bonds
(upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of
the payment if only partially paid, or surrender thereof if fully paid) in accordance with
the provisions of this Indenture, as follows:
First: To the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installments, and, if the
amount available is not sufficient to pay in full any installment or installments
maturing on the same date, then to the payment thereof ratably, according to the
amounts due thereon, to the persons entitled thereto, without any discrimination
or preference; and
Second: To the payment to the persons entitled thereto of the unpaid
principal of any Bonds which have become due, whether at maturity or by
acceleration or redemption, with interest on the overdue principal at the rate borne
by the respective Bonds (to the extent permitted by law), and, if the amount
available is not sufficient to pay in full all the Bonds, together with such interest,
then to the payment thereof ratably, according to the amounts of principal due on
such date to the persons entitled thereto, without any discrimination or preference.
Section 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably
appointed (and the successive respective Owners of the Bonds, by taking and holding the same,
shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful
attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on
their behalf such rights and remedies as may be available to such Owners under the provisions of
the Bonds, this Indenture and applicable provisions of any law. All rights of action under this
Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the
possession of any of the Bonds or the production thereof in any proceeding relating thereto, and
any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the
Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions
of this Indenture. Nothing herein shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement,
adjustment, or composition affecting the Bonds or the rights of any Owner thereof, or to
authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding
without the approval of the Owners so affected.
Section 7.05. Limitation on Bond Owners’ Right to Sue. Notwithstanding any other
provision hereof, no Owner of any Bonds has the right to institute any suit, action or proceeding
at law or in equity, for the protection or enforcement of any right or remedy under this Indenture,
the Installment Sale Agreement or any other applicable law with respect to such Bonds, unless
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(a) such Owner has given to the Trustee written notice of the occurrence of an
Event of Default;
(b) the Owners of a majority in aggregate principal amount of the Bonds then
Outstanding have requested the Trustee in writing to exercise the powers hereinbefore
granted or to institute such suit, action or proceeding in its own name;
(c) such Owner or Owners have tendered to the Trustee satisfactory indemnity
against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee has failed to comply with such request for a period of 60 days
after such written request has been received by, and said tender of indemnity has been
made to, the Trustee; and
(e) no direction inconsistent with such written request has been given to the
Trustee during such 60-day period by the Owners of a majority in aggregate principal
amount of the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any
remedy hereunder or under law; it being understood and intended that no one or more Owners of
Bonds shall have any right in any manner whatever by his or their action to affect, disturb or
prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce
any right under the Bonds (it being understood that the Trustee does not have an affirmative duty
to ascertain whether or not such actions or forbearances are unduly prejudicial to such Owners),
this Indenture, the Installment Sale Agreement or other applicable law with respect to the Bonds,
except in the manner herein provided, and that all proceedings at law or in equity to enforce any
such right shall be instituted, had and maintained in the manner herein provided and for the
benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this
Indenture.
Section 7.06. Absolute Obligation of Authority. Nothing in this Indenture or in the
Bonds affects or impairs the obligation of the Authority, which is absolute and unconditional, to
pay the principal of and interest and premium (if any) on the Bonds to the respective Owners of
the Bonds at their respective dates of maturity, or upon acceleration or call for redemption, as
herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect
or impair the right of such Owners, which is also absolute and unconditional, to enforce such
payment by virtue of the contract embodied in the Bonds.
Section 7.07. Termination of Proceedings. In case any proceedings taken by the
Trustee or by any one or more Bond Owners on account of any Event of Default have been
discontinued or abandoned for any reason or have been determined adversely to the Trustee or
the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners,
subject to any determination in such proceedings, shall be restored to their former positions and
rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the
Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had
been taken.
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Section 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved
to the Trustee, or to the Owners of the Bonds is intended to be exclusive of any other remedy or
remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative
and in addition to any other remedy given hereunder or now or hereafter existing at law or in
equity or otherwise.
Section 7.09. No Waiver of Default. No delay or omission of the Trustee or any
Owner of the Bonds to exercise any right or power arising upon the occurrence of any default or
Event of Default shall impair any such right or power or shall be construed to be a waiver of any
such default or Event of Default or an acquiescence therein; and every power and remedy given
by this Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to
time and as often as may be deemed expedient by the Trustee or the Bond Owners.
ARTICLE VIII
THE TRUSTEE
Section 8.01. Appointment of Trustee. MUFG Union Bank, N.A. is hereby appointed
Trustee by the Authority and the District for the purpose of receiving all moneys required to be
deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this
Indenture. The Authority and the District will maintain a Trustee which is qualified under the
provisions of the foregoing provisions of this Article VIII, so long as any Bonds are Outstanding.
Section 8.02. Acceptance of Trusts; Removal and Resignation of Trustee. The
Trustee hereby accepts the express trusts imposed upon it by this Indenture, and agrees to
perform said trusts, but only upon and subject to the following express terms and conditions:
(a) The Trustee shall, prior to an Event of Default, and after the curing or
waiver of all Events of Default which may have occurred, perform such duties and only
such duties as are expressly and specifically set forth in this Indenture and no implied
duties or covenants shall be read into this Indenture against the Trustee. After the
occurrence and during the continuance of an Event of Default, the Trustee shall use the
same degree of care and skill that a prudent person would use or exercise in the
circumstances in the conduct of such prudent person’s own affairs.
(b) The District may remove the Trustee at any time, unless an Event of
Default has occurred and is then continuing, and shall remove the Trustee (a) if at any
time requested to do so by the Owners of a majority in aggregate principal amount of the
Bonds then Outstanding (or their attorneys duly authorized in writing) or (b) if at any
time the Trustee ceases to be eligible in accordance with this Section 8.02, or becomes
incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or
its property is appointed, or any public officer takes control or charge of the Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or liquidation.
(c) The Trustee may at any time resign by giving written notice of such
resignation to the Authority and the District, and by giving the Bond Owners notice of
such resignation by mail at the addresses shown on the Registration Books.
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(d) Any removal or resignation of the Trustee and appointment of a successor
Trustee shall become effective upon acceptance of appointment by the successor Trustee.
If no successor Trustee has been appointed and accepted appointment within 45 days of
giving notice of removal or notice of resignation as aforesaid, the District, upon its own
direction or the direction of the retiring Trustee may, or the retiring Trustee may, at the
expense of the District, petition any court of competent jurisdiction for the appointment
of a successor Trustee, and such court may thereupon, after such notice (if any) as it may
deem proper, appoint such successor Trustee. Any successor Trustee appointed under
this Indenture, must signify its acceptance of such appointment by executing and
delivering to the District and to its predecessor Trustee a written acceptance thereof, and
after payment by the District of all unpaid fees and expenses of the predecessor Trustee,
and thereupon such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the moneys, estates, properties, rights, powers, trusts, duties and
obligations of such predecessor Trustee, with like effect as if originally named Trustee
herein. At the Written Request of the District or the request of the successor Trustee,
such predecessor Trustee shall pay over, transfer, assign and deliver to the successor
Trustee any money or other property subject to the trusts and conditions herein set forth.
Upon request of the successor Trustee, the District shall execute and deliver any and all
instruments as may be reasonably required for more fully and certainly vesting in and
confirming to such successor Trustee all such moneys, estates, properties, rights, powers,
trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as
provided in this subsection, the District shall promptly mail or cause the successor trustee
to mail a notice of the succession of such Trustee to the trusts hereunder to the Bond
Owners at the addresses shown on the Registration Books. If the District fails to mail
such notice within 15 days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the District.
(e) Any Trustee appointed under this Indenture shall be a corporation or
association organized and doing business under the laws of any state or the United States
of America or the District of Columbia, shall be authorized under such laws to exercise
corporate trust powers, shall have (or, in the case of a corporation or association that is a
member of a bank holding company system, the related bank holding company has) a
combined capital and surplus of at least $50,000,000, and shall be subject to supervision
or examination by a federal or state agency, so long as any Bonds are Outstanding. If
such corporation or association publishes a report of condition at least annually under law
or to the requirements of any supervising or examining agency above referred to, then for
the purpose of this subsection (e), the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If the Trustee at any time ceases to be
eligible in accordance with the provisions of this subsection (e), the Trustee shall resign
immediately in the manner and with the effect specified in this Section.
Section 8.03. Merger or Consolidation. Any bank, national banking association,
federal savings association, or trust company into which the Trustee may be merged or converted
or with which it may be consolidated or any bank, national banking association, federal savings
association, or trust company resulting from any merger, conversion or consolidation to which it
shall be a party or any bank, national banking association, federal savings association, or trust
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company to which the Trustee may sell or transfer all or substantially all of its corporate trust
business, provided such bank, national banking association, federal savings association, or trust
company shall be eligible under subsection (e) of Section 8.02 shall be the successor to such
Trustee, without the execution or filing of any paper or any further act, anything herein to the
contrary notwithstanding.
Section 8.04. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as
statements of the Authority or the District as appropriate, and the Trustee shall not assume
responsibility for the correctness of the same, or make any representations as to the validity or
sufficiency of this Indenture, the Bonds or the Installment Sale Agreement, nor shall the Trustee
incur any responsibility in respect thereof, other than as expressly stated herein in connection
with the respective duties or obligations of Trustee herein or in the Bonds assigned to or imposed
upon it. The Trustee shall, however, be responsible for its representations contained in its
certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the
performance of its duties hereunder, except for its own negligence. The Trustee may become the
Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent
permitted by law, may act as depository for and permit any of its officers or directors to act as a
member of, or in any other capacity with respect to, any committee formed to protect the rights
of Bond Owners, whether or not such committee shall represent the Owners of a majority in
principal amount of the Bonds then Outstanding.
(b) The Trustee is not liable for any error of judgment made by a responsible officer,
unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts.
(c) The Trustee is not liable with respect to any action taken or omitted to be taken by
it in accordance with the direction of the Owners of a majority in aggregate principal amount of
the Bonds at the time Outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee under this Indenture or assigned to it hereunder.
(d) The Trustee is not liable for any action taken by it and believed by it to be
authorized or within rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder, or any other event which, with the passage of time, the giving of notice, or both,
would constitute an Event of Default hereunder unless and until a corporate trust officer receives
written notice thereof at its Office from the District, the Authority or the Owners of at least 25%
in aggregate principal amount of the Outstanding Bonds. Except as otherwise expressly provided
herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance
by the Authority or the District of any of the terms, conditions, covenants or agreements herein,
under the Installment Sale Agreement or the Bonds or of any of the documents executed in
connection with the Bonds, or as to the existence of a default or an Event of Default or an event
which would, with the giving of notice, the passage of time, or both, constitute an Event of
Default. The Trustee is not responsible for the validity, effectiveness or priority of any collateral
given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be
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required to ascertain or inquire as to the performance or observance by the District or the
Authority of the terms, conditions, covenants or agreements set forth in the Installment Sale
Agreement, other than the covenants of the District to make Installment Payments to the Trustee
when due and to file with the Trustee when due, such reports and certifications as the District is
required to file with the Trustee thereunder.
(f) No provision of this Indenture requires the Trustee to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers.
(g) The Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or through agents, receivers or attorneys and the Trustee shall not
be responsible for any willful misconduct or negligence on the part of any agent, receiver or
attorney appointed with due care by it hereunder.
(h) The Trustee has no obligation to exercise any of the rights or powers vested in it
by this Indenture at the request or direction of the Bond Owners under this Indenture, unless the
such Owners have offered to the Trustee security or indemnity satisfactory to it against any and
all of the costs, claims, expenses and liabilities (including but not limited to fees and expenses of
its attorneys) which might be incurred by it in compliance with such request or direction. No
permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to
impose a duty. to exercise such power, right or remedy.
(i) Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to the Trustee is subject
to the provisions of Section 8.02(a), this Section 8.04 and Section 8.05, and shall be applicable to
the assignment of any rights to the Trustee hereunder.
(j) The Trustee is not accountable to anyone for the subsequent use or application of
any moneys which are released or withdrawn in accordance with the provisions hereof.
(k) The Trustee makes no representation or warranty, expressed or implied as to the
title, value, design, compliance with specifications or legal requirements, quality, durability,
operation, condition, merchantability or fitness for any particular purpose for the use
contemplated by the Authority or the District of the Project. In no event shall the Trustee be
liable for incidental, indirect, special, punitive or consequential damages in connection with or
arising from the Installment Sale Agreement or this Indenture for the existence, furnishing or use
of the Project.
(l) The Trustee has no responsibility with respect to any information, statement, or
recital in any official statement, offering memorandum or any other disclosure material prepared
or distributed with respect to the Bonds.
(m) The Trustee shall not be considered in breach of or in default in its obligations
hereunder or progress in respect thereto in the event of delay in the performance of such
obligations due to unforeseeable causes beyond its control and without its fault or negligence,
including, but not limited to acts of God or of the public enemy or terrorists, acts of a
government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes,
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freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general
sabotage or rationing of labor, equipment, facilities, sources or energy, material or supplies in the
open market, litigation or arbitration involving a party or others relating to zoning or other
governmental action or inaction pertaining to the project, malicious mischief, condemnation, and
unusually severe weather or delays of suppliers or subcontractors due to such causes or any
similar event and/or occurrences beyond the control of the Trustee.
(n) The Trustee shall have the right to accept and act upon instructions, including
funds transfer instructions (“Instructions”) given pursuant to this Indenture and delivered using
Electronic Means (“Electronic Means” shall mean the following communications methods:
S.W.I.F.T., e-mail, facsimile transmission, secure electronic transmission containing applicable
authorization codes, passwords and/or authentication keys issued by the Trustee, or another
method or system specified by the Trustee as available for use in connection with its services
hereunder); provided, however, that the District and the Authority shall provide to the Trustee an
incumbency certificate listing officers with the authority to provide such Instructions
(“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which
incumbency certificate shall be amended by the District or the Authority whenever a person is to
be added or deleted from the listing. If the District or the Authority elects to give the Trustee
Instructions using Electronic Means and the Trustee in its reasonable judgment elects to act upon
such Instructions, the Trustee’s understanding of such Instructions shall be deemed
controlling. The District and the Authority understand and agree that the Trustee cannot
determine the identity of the actual sender of such Instructions and that the Trustee shall
conclusively presume that directions that purport to have been sent by an Authorized Officer
listed on the incumbency certificate provided to the Trustee have been sent by such Authorized
Officer. The District and the Authority shall be responsible for ensuring that only Authorized
Officers transmit such Instructions to the Trustee and that the District or the Authority and all
Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable
user and authorization codes, passwords and/or authentication keys upon receipt by the District
or the Authority. The Trustee shall not be liable for any losses, costs, claims or expenses arising
directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions
notwithstanding such directions conflict or are inconsistent with a subsequent written
instruction. The District and the Authority agree: (i) to assume all risks arising out of the use of
Electronic Means to submit Instructions to the Trustee, including without limitation the risk of
the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third
parties; (ii) that it is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Trustee and that there may be more secure methods of
transmitting Instructions than the method(s) selected by the District or the Authority; (iii) that the
security procedures (if any) to be followed in connection with its transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its particular needs and
circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or
unauthorized use of the security procedures.
Section 8.05. Right to Rely on Documents. The Trustee shall be protected and shall
incur no liability in acting or refraining from acting in reliance upon any notice, resolution,
request, consent, order, certificate, report, opinion, bonds, requisition, facsimile transmission,
electronic mail or other paper or document believed by them to be genuine and to have been
signed or presented by the proper party or parties. The Trustee is under no duty to make any
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investigation or inquiry as to any statements contained or matter referred to in any paper or
document but may accept and conclusively rely upon the same as conclusive evidence of the
truth and accuracy of any such statement or matter and shall be fully protected in relying thereon.
The Trustee may consult with counsel of its selection, who may be counsel of or to the District,
with regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
The Trustee may treat the Owners of the Bonds appearing in the Registration Books as
the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any
notice to the contrary.
Whenever in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking
or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established by a Written
Certificate, Written Request or Written Requisition of the Authority or the District, and such
Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee
for any action taken or suffered under the provisions of this Indenture in reliance upon such
Written Certificate, Written Request or Written Requisition, and the Trustee shall be fully
protected in relying thereon, but the Trustee may, in lieu thereof, accept other evidence of such
matter or may require such additional evidence as to it may deem reasonable.
Section 8.06. Preservation and Inspection of Documents. All documents received by
the Trustee under the provisions of this Indenture shall be retained in its respective possession
and in accordance with its retention policy then in effect and shall, upon reasonable notice to
Trustee, be subject to the inspection of the Authority, the District, and any Bond Owner, and
their agents and representatives duly authorized in writing, during business hours and under
reasonable conditions as agreed to by the Trustee.
Section 8.07. Compensation and Indemnification. The District shall pay to the
Trustee from time to time, on demand, the compensation for all services rendered under this
Indenture and also all expenses, advances (including any interest on advances), charges, legal
(including outside counsel of its selection and the allocated costs of internal attorneys) and
consulting fees and other disbursements as previously agreed upon in writing, incurred in and
about the performance of its powers and duties under this Indenture.
The District and the Authority shall indemnify the Trustee, its officers, directors,
employees and agents against any cost, claim, suit, damage, fine, penalty, loss, liability or
expense whatsoever (including but not limited to fees and expenses of its attorneys) incurred
without negligence or willful misconduct on its part, arising out of or in connection with the
acceptance or administration of this trust and this Indenture, including costs and expenses of
defending itself against any claim or liability in connection with the exercise or performance of
any of its powers hereunder or under the Installment Sale Agreement. As security for the
performance of the obligations of the District and the Authority under this Section 8.07, the
Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or
collected by the Trustee as such. The rights of the Trustee and the obligations of the District and
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the Authority under this Section 8.07 shall survive the resignation or removal of the Trustee or
the discharge of the Bonds and this Indenture and the Installment Sale Agreement. When the
Trustee incurs expenses or renders services after the occurrence of an Event of Default, such
expenses and the compensation for such services are intended to constitute expenses of
administration under any federal or state bankruptcy, insolvency, arrangement, moratorium,
reorganization or other debtor relief law.
ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
Section 9.01. Amendments Permitted.
(a) Amendments With Bond Owner Consent. This Indenture and the rights and
obligations of the Authority, the District and the Owners of the Bonds and of the Trustee may be
modified or amended from time to time and at any time by Supplemental Indenture, which the
Authority and the Trustee may enter into when the written consents of the Owners of a majority
in aggregate principal amount of all Bonds then Outstanding are filed with the Trustee.
No such modification or amendment may:
(i) extend the fixed maturity of any Bonds, or reduce the amount of principal
thereof or extend the time of payment, or change the method of computing the rate of
interest thereon, or extend the time of payment of interest thereon, without the consent of
the Owner of each Bond so affected, or
(ii) reduce the aforesaid percentage of Bonds the consent of the Owners of
which is required to effect any such modification or amendment, or permit the creation of
any lien on the Revenues and other assets pledged under this Indenture prior to or on a
parity with the lien created by this Indenture except as permitted herein, or deprive the
Owners of the Bonds of the lien created by this Indenture on such Revenues and other
assets (except as expressly provided in this Indenture), without the consent of the Owners
of all of the Bonds then Outstanding.
It is not necessary for the consent of the Bond Owners to approve the particular form of
any Supplemental Indenture, but it is sufficient if such consent approves the substance thereof.
(b) Amendments Without Owner Consent. The Indenture and the rights and
obligations of the Authority, the District, the Trustee and the Owners of the Bonds may also be
modified or amended from time to time and at any time by a Supplemental Indenture, which the
Authority and the Trustee may enter into without the consent of any Bond Owners if the Trustee
has been furnished an opinion of counsel that the provisions of such Supplemental Indenture
shall not materially adversely affect the interests of the Owners of the Bonds, including, without
limitation, for any one or more of the following purposes:
(i) to add to the covenants and agreements of the Authority or the District
contained in this Indenture, other covenants and agreements thereafter to be observed, to
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pledge or assign additional security for the Bonds (or any portion thereof), or to surrender
any right or power herein reserved to or conferred upon the Authority or the District;
(ii) to cure any ambiguity, inconsistency or omission, or to cure or correct any
defective provision, contained in this Indenture, or in regard to matters or questions
arising under this Indenture, as the District deems necessary or desirable, provided that
such modification or amendment does not materially adversely affect the interests of the
Bond Owners, in the opinion of Bond Counsel filed with the Trustee;
(iii) to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any
similar federal statute hereafter in effect, and to add such other terms, conditions and
provisions as may be permitted by said act or similar federal statute;
(iv) to modify, amend or supplement this Indenture in such manner as to
assure that the interest on the Bonds remains excluded from gross income under the Tax
Code; or
(v) to modify any of the provisions of this Indenture in any other respect,
provided that such modifications shall not have a material adverse effect on the interests
of the Owners of the Bonds, in the opinion of Bond Counsel filed with the Trustee.
(c) Limitation. The Trustee is not obligated to enter into any Supplemental Indenture
authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the
Trustee’s own rights, duties or immunities under this Indenture or otherwise.
(d) Bond Counsel Opinion Requirement. Prior to the Trustee entering into any
Supplemental Indenture hereunder, the District shall deliver to the Trustee an opinion of Bond
Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance
with the requirements of this Indenture, the Supplemental Indenture is the legal, valid and
binding obligation of the District and that the adoption of such Supplemental Indenture will not,
in and of itself, adversely affect the exclusion from gross income for purposes of federal income
taxes of interest on the Bonds.
(e) Notice of Amendments. The District shall deliver or cause to be delivered a draft
of any Supplemental Indenture to each rating agency which then maintains a rating on the Bonds,
at least 10 days prior to the effective date of such Supplemental Indenture under this Section
9.01.
Section 9.02. Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture under this Article IX, this Indenture shall be deemed to be modified and
amended in accordance therewith, and the respective rights, duties and obligations under this
Indenture of the Authority, the District the Trustee, and all Owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced hereunder subject in all respects to such
modification and amendment, and all the terms and conditions of any such Supplemental
Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
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Section 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered
after the execution of any Supplemental Indenture under this Article may, and if the District so
determines shall, bear a notation by endorsement or otherwise in form approved by the District
as to any modification or amendment provided for in such Supplemental Indenture, and, in that
case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and
presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices
as the Trustee may select and designate for that purpose, a suitable notation shall be made on
such Bonds.
If the Supplemental Indenture so provides, new Bonds so modified as to conform, in the
opinion of the District, to any modification or amendment contained in such Supplemental
Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and
upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of
the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for
cancellation of such Bonds, in equal aggregate principal amount of the same maturity.
Section 9.04. Amendment of Particular Bonds. The provisions of this Article IX do
not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by
such Owner.
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture. Any or all of the Outstanding Bonds may be
paid by the District in any of the following ways, provided that the District also pays or causes to
be paid any other sums payable hereunder by the District:
(a) by paying or causing to be paid the principal of and interest and premium
(if any) on such Bonds, as and when the same become due and payable,
(b) by depositing with the Trustee, in trust, at or before maturity, money or
securities in the necessary amount (as provided in Section 10.03) to pay or redeem such
Bonds, or
(c) by delivering to the Trustee, for cancellation by it, such Bonds.
If the District pays all outstanding Bonds as provided above and also pays or causes to be
paid all other sums payable hereunder by the District, then and in that case, at the election of the
District (evidenced by a Written Certificate of the District, filed with the Trustee, signifying the
intention of the District to discharge all such indebtedness and this Indenture), and
notwithstanding that any of such Bonds have not been surrendered for payment, this indenture
and the pledge of Revenues and other assets made under this Indenture with respect to such
Bonds and all covenants, agreements and other obligations of the District under this Indenture
with respect to such Bonds shall cease, terminate, become void and be completely discharged
and satisfied, subject to Section 10.02.
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In such event, upon the Written Request of the District, the Trustee shall execute and
deliver to the District all such instruments as may be necessary or desirable to evidence such
discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the
District all moneys or securities or other property held by it under this Indenture which are not
required for the payment or redemption of any of such Bonds not theretofore surrendered for
such payment or redemption.
The Trustee is entitled to conclusively rely on any such Written Certificate or Written
Request and, in each case, is fully protected in relying thereon.
Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in
trust, at or before maturity, of money or securities in the necessary amount (as provided in
Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity
or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to
maturity, notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee is made for the giving of such notice, then all liability of the Authority
and the District in respect of such Bonds shall cease, terminate and be completely discharged,
and the Owners thereof shall thereafter be entitled only to payment out of such money or
securities deposited with the Trustee as aforesaid for their payment, subject, however, to the
provisions of Section 10.04.
The Authority or the District may at any time surrender to the Trustee, for cancellation by
Trustee, any Bonds previously issued and delivered, which the Authority or the District may
have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation,
shall be deemed to be paid and retired.
Section 10.03. Deposit of Money or Securities with Trustee. Whenever in this
Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee
money or securities in the necessary amount to pay or redeem any Bonds, the money or
securities so to be deposited or held may include money or securities held by the Trustee in the
funds and accounts established under this Indenture and shall be:
(a) lawful money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in
the case of Bonds which are to be redeemed prior to maturity and in respect of which
notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice, the amount
to be deposited or held shall be the principal amount of such Bonds, premium, if any, and
all unpaid interest thereon to the redemption date; or
(b) non-callable Defeasance Obligations, the principal of and interest on
which when due will, in the written opinion of an Independent Accountant filed with the
District, the Authority and the Trustee, provide money sufficient to pay the principal of
and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal,
interest and premium become due, provided that in the case of Bonds which are to be
redeemed prior to the maturity thereof, notice of such redemption shall have been given
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as provided in Article IV or provision satisfactory to the Trustee has been made for the
giving of such notice;
provided, in each case, that (i) the Trustee has been irrevocably instructed (by the terms of this
Indenture or by Written Request of the District) to apply such money to the payment of such
principal, interest and premium (if any) with respect to such Bonds, and (ii) the District has
delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been
discharged in accordance with this Indenture (which opinion may rely upon and assume the
accuracy of the Independent Accountant’s opinion referred to above).
The Trustee shall be entitled to conclusively rely on such Written Request or opinion and
shall be fully protected, in each case, in relying thereon.
Section 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture,
any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any
Bonds and remaining unclaimed for two years after the principal of all of the Bonds has become
due and payable (whether at maturity or upon call for redemption or by acceleration as provided
in this Indenture), if such moneys were so held at such date, or two years after the date of deposit
of such moneys if deposited after said date when all of the Bonds became due and payable, shall
be repaid to the District free from the trusts created by this Indenture, and all liability of the
Trustee with respect to such moneys shall thereupon cease; provided, however, that before the
repayment of such moneys to the District as aforesaid, the Trustee shall (at the cost of the
District) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown
on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee
with respect to the Bonds so payable and not presented and with respect to the provisions relating
to the repayment to the District of the moneys held for the payment thereof.
In the absence of any such written request, the Trustee shall from time to time deliver
such unclaimed funds to or as directed by pertinent escheat authority, as identified by the
Trustee, pursuant to and in accordance with applicable unclaimed property laws, rules or
regulations, any such delivery shall be in accordance with the customary practices and
procedures of the Trustee and the escheat authority. All moneys held by the Trustee and subject
to this Section shall be held uninvested and without liability for interest thereon.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues. Notwithstanding anything
in this Indenture or in the Bonds contained, the Authority is not required to advance any moneys
derived from any source other than the Revenues and other assets pledged under this Indenture
for any of the purposes in this Indenture mentioned, whether for the payment of the principal of
or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority
may, but is not required to, advance for any of the purposes hereof any funds of the Authority
which may be made available to it for such purposes.
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Section 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this
Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any
person other than the Authority, the Trustee, the District and the Owners of the Bonds, any legal
or equitable right, remedy or claim under or in respect of this Indenture or any covenant,
condition or provision therein or herein contained; and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the
Trustee, the District and the Owners of the Bonds.
Section 11.03. Funds and Accounts. Any fund or account required by this Indenture to
be established and maintained by the Trustee may be established and maintained in the
accounting records of the Trustee, either as a fund or an account, and may, for the purposes of
such records, any audits thereof and any reports or statements with respect thereto, be treated
either as a fund or as an account; but all such records with respect to all such funds and accounts
shall at all times be maintained in accordance with corporate trust industry standards to the
extent practicable, and with due regard for the requirements of Section 6.05 and for the
protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may
establish such funds and accounts as it deems necessary or appropriate to perform its obligations
under this Indenture.
Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this
Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the person entitled to receive such notice and in any such case the giving or
receipt of such notice shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. Whenever in this Indenture any notice is required to be given by mail,
such requirement may be satisfied by the deposit of such notice in the United States mail,
postage prepaid, by first class mail.
Section 11.05. Destruction of Bonds. Whenever in this Indenture provision is made for
the cancellation by the Trustee, and the delivery to the District or the Authority, of any Bonds,
the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds as may be
allowed by law in accordance with its customary procedures, and shall deliver a certificate of
such destruction to the District.
Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions shall be deemed severable from
the remaining provisions contained in this Indenture and such invalidity, illegality or
unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be
construed as if such invalid or illegal or unenforceable provision had never been contained
herein. The Authority hereby declares that it would have entered into this Indenture and each and
every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of
the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs,
sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable.
Section 11.07. Notices. All notices or communications to be given under this Indenture
shall be given by first class mail, e-mail, facsimile transmission, overnight mail or personal
delivery to the party entitled thereto at its address set forth below, or at such address as the party
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may provide to the other party in writing from time to time. Notice shall be effective either
(a) upon transmission by facsimile transmission or other form of telecommunication (including
e-mail) (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of
personal delivery to any person or overnight mail, upon actual receipt; provided, however, that
notice to the Trustee shall be deemed given only upon receipt by it. The Authority, the District or
the Trustee may, by written notice to the other parties, from time to time modify the address or
number to which communications are to be given hereunder.
If to the Authority: Otay Water District Financing Authority
[ADDRESS]
Attn: ___________________
E-Mail: [_______]
If to the District: Otay Water District
2554 Sweetwater Springs Blvd.
Spring Valley, CA 91978-2004
Attn: ___________________
E-Mail: [_______]
If to the Trustee: MUFG Union Bank, N.A.
Attention: Corporate Trust Department
445 South Figueroa Street, Suite 401
Los Angeles, California 90071
Fax: 213-972-5694
Email: LACT@unionbank.com
Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Bond Owners
may be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Bond Owners in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable by delivery,
shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the
Trustee, the District and the Authority if made in the manner provided in this Section 11.08.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the certificate of any notary public or other officer of
any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying
that the person signing such request, consent or other instrument acknowledged to him the
execution thereof, or by an affidavit of a witness of such execution duly sworn to before such
notary public or other officer.
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The ownership of Bonds shall be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any Bond shall bind
every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor
or in lieu thereof, in respect of anything done or suffered to be done by the Trustee, the District
or the Authority in accordance therewith or reliance thereon.
Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction, consent
or waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or
held by or for the account of the Authority or the District, or by any other obligor on the Bonds,
or by any person directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Authority or the District or any other obligor on the Bonds, shall be
disregarded and deemed not to be Outstanding for the purpose of any such determination unless
all the Bonds are so owned or held, in which case all such Bonds shall be deemed Outstanding.
Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the
pledgee’s right to vote such Bonds and that the pledgee is not a person directly or indirectly
controlling or controlled by, or under direct or indirect common control with, the Authority or
the District or any other obligor on the Bonds. In case of a dispute as to such right, the Trustee
shall be entitled to rely upon the advice of counsel in any decision by Trustee and shall be fully
protected in relying thereon.
Upon request, the Authority and the District shall specify to the Trustee those Bonds
disqualified under this Section 11.09.
Section 11.10. Money Held for Particular Bonds. The money held by the Trustee for
the payment of the interest, premium, if any, or principal due on any date with respect to
particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and
after such date and pending such payment, be set aside on its books and held in trust by it for the
Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 but
without any liability for interest thereon.
Section 11.11. Waiver of Personal Liability. No member, officer, agent or employee
of the Authority shall be individually or personally liable for the payment of the principal of or
interest or premium (if any) on the Bonds or be subject to any personal liability or accountability
by reason of the issuance thereof; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law or by this
Indenture,
Section 11.12. Successor Is Deemed Included in All References to
Predecessor. Whenever in this Indenture either the Authority, the District or the Trustee is
named or referred to, such reference shall be deemed to include the successors or assigns thereof,
and all the covenants and agreements in this Indenture contained by or on behalf of the
Authority, the District or the Trustee shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not.
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Section 11.13. Execution in Several Counterparts. This Indenture may be executed in
any number of counterparts and each of such counterparts shall for all purposes be deemed to be
an original; and all such counterparts, or as many of them as the Authority and the Trustee shall
preserve undestroyed, shall together constitute but one and the same instrument. The exchange of
copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute
effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu
of the original Indenture and signature pages for all purposes.
Section 11.14. Payment on Non-Business Day. In the event any payment is required to
be made hereunder on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and with the same effect as if made on such preceding
non-Business Day.
Section 11.15. Governing Law. This Indenture shall be governed by and construed in
accordance with the laws of the State of California.
Section 11.16. U.S.A. Patriot Act. The parties hereto acknowledge that in accordance
with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order
to help fight the funding of terrorism and money laundering, is required to obtain, verify, and
record information that identifies each person or legal entity that establishes a relationship or
opens an account with the Trustee. The parties to this Indenture agree that they will provide the
Trustee with such information as it may request in order for the Trustee to satisfy the
requirements of the U.S.A. Patriot Act.
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IN WITNESS WHEREOF, the Otay Water District Financing Authority has caused this
Indenture to be signed in its name by its authorized signatory and attested to by its other
authorized signatory, and MUFG Union Bank, N.A., in token of its acceptance of the trusts
created hereunder, has caused this Indenture to be signed in its corporate name by its officer
thereunto duly authorized, all as of the day and year first above written.
OTAY WATER DISTRICT FINANCING
AUTHORITY
By___________________________________
Name:
Title:
ATTEST:
By___________________________________
Name:
Title:
MUFG UNION BANK, N.A.
as Trustee
By______________________________________
Authorized Officer
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Acknowledged and agreed:
OTAY WATER DISTRICT
By____________________________________________
_______________, District Manager
[Signature page to Indenture]
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APPENDIX A
BOND FORM
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO. R-__________ ***$____________***
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
INTEREST RATE:
MATURITY
DATE:
ORIGINAL ISSUE
DATE: CUSIP:
_______% ______ 1, ____ _________, 2019
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: ***_______________________________________________***
The OTAY WATER DISTRICT FINANCING AUTHORITY, a joint exercise of powers
authority duly organized and existing under the laws of the State of California (the “Authority”),
for value received, hereby promises to pay to the Registered Owner specified above or registered
assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of
prior redemption hereinafter provided for), the Principal Amount specified above, in lawful
money of the United States of America, and to pay interest thereon in like lawful money from the
Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this
Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the
close of business on the __th day of the month preceding such interest payment date, in which
event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on
or before ___________, 201_, in which event it shall bear interest from the Original Issue Date
specified above; provided, however, that if at the time of authentication of this Bond, interest is
in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which
interest has previously been paid or made available for payment on this Bond, at the Interest Rate
per annum specified above, payable semiannually on ______ 1 and ______ 1 in each year,
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commencing _________ 1, 201_ (the “Interest Payment Dates”), calculated on the basis of a
360-day year composed of twelve 30-day months.
Principal hereof and premium, if any, upon early redemption hereof are payable upon
presentation and surrender hereof at the designated corporate trust office of MUFG Union Bank,
N.A. (the “Trust Office”), as trustee (the “Trustee”). Interest hereon is payable by check mailed
to the Registered Owner hereof at the Registered Owner’s address as it appears on the
registration books of the Trustee as of the close of business on the fifteenth day of the month
preceding each Interest Payment Date (a “Record Date”), or, upon written request filed with the
Trustee as of such Record Date by a registered owner of at least $1,000,000 in aggregate
principal amount of Bonds, by wire transfer in immediately available funds to an account in the
United States designated by such registered owner in such written request.
This Bond is one of a duly authorized issue of bonds of the Authority designated as the
“Otay Water District Financing Authority 2019 Wastewater Revenue Bonds” (the “Bonds”), in
an aggregate principal amount of $__________, all of like tenor and date (except for such
variation, if any, as may be required to designate varying numbers, maturities, interest rates or
redemption provisions) and all issued pursuant to the provisions of Articles 4 of Chapter 5,
Division 7, Title 1 of the California Government Code, commencing with Section 6584 of said
Code, and under an Indenture of Trust dated as of _________, 2019 (the “Indenture”), between
the Authority and the Trustee, and a resolution of the Authority adopted on __________,
authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of
which are on file at the office of the Authority) and all supplements thereto for a description of
the terms on which the Bonds are issued, the provisions with regard to the nature and extent of
the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and
immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the
provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and
agrees.
The Bonds have been issued by the Authority to finance certain improvements to the
District’s facilities and property for the collection of wastewater within its service area (the
“Wastewater Operations”). This Bond and the interest and premium, if any, hereon are special
obligations of the Authority, payable from the Revenues, and secured by a charge and lien on the
Revenues as defined in the Indenture, consisting principally of Installment Payments made by
the District under an Installment Sale Agreement dated as of _________, 2019, between the
Authority and the District (the “Installment Sale Agreement”). As and to the extent set forth in
the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the
terms hereof and the provisions of the Indenture, to the payment of the principal of and interest
and premium (if any) on the Bonds.
The rights and obligations of the Authority and the owners of the Bonds may be modified
or amended at any time in the manner, to the extent and upon the terms provided in the
Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds,
or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of
payment, or change the method of computing the rate of interest thereon, or extend the time of
payment of interest thereon, without the consent of the owner of each Bond so affected.
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The Bonds are subject to redemption prior to maturity as provided under the Indenture.
As provided in the Indenture, notice of redemption will be mailed by the Trustee by first class
mail not less than 30 nor more than 60 days prior to the redemption date to the respective owners
of any Bonds designated for redemption at their addresses appearing on the registration books of
the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall
affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest
thereon from and after the date fixed for redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Indenture, interest shall cease to accrue hereon from and after the date fixed for
redemption. Optional redemption may be conditional and rescinded by the District pursuant to
the Indenture
This Bond is transferable by the Registered Owner hereof, in person or by his attorney
duly authorized in writing, at the Trust Office, but only in the manner, subject to the limitations
and upon payment of the charges provided in the Indenture, and upon surrender and cancellation
of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized
denomination or denominations, for the same aggregate principal amount and of the same
maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the
Trust Office for Bonds of the same tenor, aggregate principal amount, interest rate and maturity,
of other authorized denominations.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute
owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any
notice to the contrary.
It is hereby certified by the Authority that all of the things, conditions and acts required to
exist, to have happened or to have been performed precedent to and in the issuance of this Bond
do exist, have happened or have been performed in due and regular time, form and manner as
required by the Indenture and the laws of the State of California and that the amount of this
Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed
by the Indenture or any laws of the State of California, and is not in excess of the amount of
Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication hereon endorsed shall have been
manually signed by the Trustee.
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IN WITNESS WHEREOF, the Otay Water District Financing Authority has caused this
Bond to be executed in its name and on its behalf with the facsimile signature of its
authorized signatory and attested to by the facsimile signature of its other authorized signatory,
all as of the Original Issue Date specified above.
OTAY WATER DISTRICT FINANCING
AUTHORITY
By___________________________________
Name:
Title:
Attest:
By___________________________________
Name:
Title:
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CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.
Dated: ____________
____________, as Trustee
By___________________________________
Authorized Signatory
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ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
________________________________________ whose address and social security or other tax
identifying number is ___________________________, the within-mentioned Bond and hereby
irrevocably constitute(s) and appoint(s) ___________________________________________
attorney, to transfer the same on the registration books of the Trustee with full power of
substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an eligible
guarantor institution meeting the requirements of
membership or participation in the Security Transfer
Agent Medallion Program (“STAMP”) or such other
“signature guarantee program” as may be determined in
substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within Bond in every particular without alteration
or enlargement or any change whatsoever.
Hawkins Delafield & Wood LLP
10/15/2019
3394471.5 043520 AGMT
INSTALLMENT SALE AGREEMENT
Dated as of __________, 2019
By and between
OTAY WATER DISTRICT FINANCING AUTHORITY,
as Seller
and
OTAY WATER DISTRICT,
as Purchaser
Relating to the
$[Par Amount]
Otay Water District Financing Authority
2019 Wastewater Revenue Bonds
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
Section 1.1. Definitions................................................................................................................1
Section 1.2. Interpretation ............................................................................................................2
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the District .....................................2
Section 2.2. Representations, Covenants and Warranties of Authority .......................................3
ARTICLE III
ISSUANCE OF BONDS
Section 3.1. The Bonds ................................................................................................................4
Section 3.2. Deposit and Application of Funds ...........................................................................4
Section 3.3. Acquisition of the Project ........................................................................................4
Section 3.4. Appointment of District as Agent ............................................................................4
ARTICLE IV
SALE OF PROJECT;
INSTALLMENT PAYMENTS
Section 4.1. Sale of Project ..........................................................................................................5
Section 4.2. Term .........................................................................................................................5
Section 4.3. Title ..........................................................................................................................5
Section 4.4. Installment Payments ...............................................................................................5
Section 4.5. Pledge and Application of Net Revenues ................................................................6
Section 4.6. Special Obligation of the District; Obligations Absolute ........................................7
Section 4.7. Additional Payments ................................................................................................8
Section 4.8. Rate Stabilization Fund ............................................................................................8
TABLE OF CONTENTS
(continued)
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ARTICLE V
COVENANTS OF THE DISTRICT
Section 5.1. Disclaimer of Warranties., Maintenance, Utilities and Taxes .................................9
Section 5.2. Release and Indemnification Covenants ................................................................10
Section 5.3. Sale or Eminent Domain of Wastewater Operations .............................................10
Section 5.4. Insurance ................................................................................................................11
Section 5.5. Records and Accounts............................................................................................11
Section 5.6. Rates and Charges ..................................................................................................11
Section 5.7. Superior and Subordinate Obligations ...................................................................12
Section 5.8. Issuance of Parity Obligations ...............................................................................12
Section 5.9. Governmental Loans ..............................................................................................13
Section 5.10. Operation of Wastewater Operations in Efficient and Economical Manner .........13
Section 5.11. Assignment and Amendment .................................................................................13
Section 5.12. Continuing Disclosure ...........................................................................................14
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1. Events of Default Defined .....................................................................................14
Section 6.2. Remedies on Default ..............................................................................................15
Section 6.3. No Remedy Exclusive............................................................................................16
Section 6.4. Agreement to Pay Attorneys’ Fees and Expenses .................................................16
Section 6.5. No Additional Waiver Implied by One Waiver .....................................................16
Section 6.6. Trustee and Bond Owners to Exercise Rights .......................................................16
ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 7.1. Security Deposit .....................................................................................................17
Section 7.2. Optional Prepayment Relating to the Bonds ..........................................................17
Section 7.3. Credit for Amounts on Deposit ..............................................................................18
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Further Assurances.................................................................................................18
Section 8.2. Notices ...................................................................................................................18
Section 8.3. Governing Law ......................................................................................................19
Section 8.4. Binding Effect ........................................................................................................19
Section 8.5. Severability of Invalid Provisions ..........................................................................19
Section 8.6. Article and Section Headings and References .......................................................20
Section 8.7. Payment on Non-Business Days ............................................................................20
TABLE OF CONTENTS
(continued)
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Section 8.8. Execution of Counterparts .....................................................................................20
Section 8.9. Waiver of Personal Liability ..................................................................................20
Section 8.10. Trustee as Third Party Beneficiary ........................................................................20
Section 8.11. Authority Provisions ..............................................................................................20
APPENDIX A Schedule of Installment Payments
APPENDIX B Description of Project
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INSTALLMENT SALE AGREEMENT
This INSTALLMENT SALE AGREEMENT (this “Agreement”), dated as of
____________, 2019, is between the OTAY WATER DISTRICT FINANCING
AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws
of the State of California (the “Authority”), as seller, and the OTAY WATER DISTRICT, a
sanitation district duly organized and existing under the laws of the State of California (the
“District”), as purchaser.
WHEREAS CLAUSES:
1. The District presently operates facilities and property for the collection of
wastewater within its service area (the “Wastewater Operations”).
2. The Authority has been formed for the purpose, among others, of issuing its
revenue bonds to finance the acquisition, construction and improvement of certain public capital
improvements in and for the benefit of the District.
3. The Authority and the District desire to raise funds necessary to finance certain
improvements to the Wastewater Operations.
4. In order to obtain funds for this purpose, the Authority has authorized the issuance
of its Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”),
in the aggregate principal amount of $[Principal Amount] under an Indenture of Trust, dated as
of _____________, 2019, by and between the Authority and MUFG Union Bank, N.A., as
trustee (the “Indenture”), and under Article 4 of Chapter 5, Division 7, Title 1 of the Government
Code of the State of California, commencing with Section 6584 (the “Bond Law”).
5. The Bonds will be payable from Installment Payments made under this
Agreement.
AGREEMENT:
In consideration of the foregoing and the material covenants hereinafter contained, the
District and the Authority formally covenant, agree and bind themselves as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
Section 1.1. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms in this Agreement have the respective meanings
given them in Article I of the Indenture.
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Section 1.2. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular include
the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of reference, do not constitute a part hereof and do not affect the meaning,
construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words “herein,”
“hereof,” “hereby,” “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or subdivision hereof.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the District. The District
represents, covenants and warrants to the Authority and the Trustee as follows:
(a) Due Organization and Existence. The District is a water, recycled water,
and sewer service provider duly organized and validly existing under the laws of the State
of California, has full legal right, power and authority under said laws to enter into this
Agreement and to carry out and consummate all transactions contemplated hereby and
thereby, and by proper action the Board of Directors of the District has duly authorized
the execution and delivery of this Agreement.
(b) Due Execution. The officers of the District executing this Agreement are
fully authorized to execute the same.
(c) Valid, Binding and Enforceable Obligations. This Agreement has been
duly authorized, executed and delivered by the District and constitutes the legal, valid
and binding agreement of the District enforceable against the District in accordance with
its terms; except as the enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or
hereafter enacted and except as such enforceability may be subject to the exercise of
judicial discretion in accordance with principles of equity.
(d) No Conflicts. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and the fulfillment of or
compliance with the terms and conditions hereof, do not and will not conflict with or
constitute a violation or breach of or default (with due notice or the passage of time or
both) under any applicable law or administrative rule or regulation, or any applicable
court or administrative decree or order, or any indenture, mortgage, deed of trust, lease,
contract or other agreement or instrument to which the District is a party or by which it or
its properties are otherwise subject or bound, or result in the creation or imposition of any
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prohibited lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of the District, which conflict, violation, breach, default, lien, charge or
encumbrance would have consequences that would materially adversely affect the
consummation of the transactions contemplated by this Agreement or the financial
condition, assets, properties or operations of the District, including but not limited to the
performance of the District’s obligations under this Agreement.
(e) Consents and Approvals. No consent or approval of any trustee or holder
of any indebtedness of the District or of the voters of the District, and no consent,
permission, authorization, order or license of, or filing or registration with, any
governmental authority is necessary in connection with the execution and delivery of the
Indenture, or the consummation of any transaction herein contemplated, except as have
been obtained or made and as are in full force and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or other governmental
authority pending or, to the knowledge of the District after reasonable investigation,
threatened against or affecting the District or the assets, properties or operations of the
District which, if determined adversely to the District or its interests, would have a
material and adverse effect upon the consummation of the transactions contemplated by
or the validity of the Indenture, or upon the financial condition, assets, properties or
operations of the District, and the District is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state, municipal or
other governmental authority, which default might have consequences that would
materially adversely affect the consummation of the transactions contemplated by the
Indenture, or the financial conditions, assets, properties or operations of the District,
including but not limited to the payment and performance of the District’s obligations
under the Indenture.
(g) Encumbrances. There are no easements, encumbrances or interests with
respect to the Wastewater Operations or the Project that prohibit or materially impair the
execution, delivery and performance of this Installment Sale Agreement or the
acquisition or use of the Project or the use of the Wastewater Operations.
(h) Senior Indebtedness. The District has not issued or incurred any
obligations which are currently outstanding having any priority in payment out of the
Gross Revenues or the Net Revenues over the payment of the Installment Payments as
provided herein.
Section 2.2. Representations, Covenants and Warranties of Authority. The Authority
represents, covenants and warrants to the District and the Trustee as follows:
(a) Due Organization and Existence. The Authority is a joint exercise of
powers authority organized and existing under the laws of the State of California, and has
power to enter into this Agreement and the Indenture and to perform the duties and
obligations imposed on it hereunder and under the Indenture. The Board of Directors of
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the Authority has duly authorized the execution and delivery of this Agreement and the
Indenture.
(b) Due Execution. The representatives of the Authority executing this
Agreement and the Indenture are fully authorized to execute the same.
(c) Valid, Binding and Enforceable Obligations. This Agreement and the
Indenture have been duly authorized, executed and delivered by the Authority and
constitute the legal, valid and binding agreements of the Authority with the Authority,
enforceable against the Authority in accordance with their respective terms; except as the
enforceability thereof may be subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors’ rights heretofore or hereafter
enacted and except as such enforceability may be subject to the exercise of judicial
discretion in accordance with principles of equity.
ARTICLE III
ISSUANCE OF BONDS
Section 3.1. The Bonds. The Authority shall cause the Bonds to be issued under the
Indenture in the aggregate principal amount of $[Principal Amount]. The Trustee shall deposit
the proceeds of sale of the Bonds received by it on the Closing Date in accordance with the
Indenture. The District hereby agrees to comply with the Indenture and approves the Indenture,
the assignment thereunder to the Trustee of certain rights of the Authority, and the issuance of
the Bonds.
Section 3.2. Deposit and Application of Funds. The proceeds received by the Trustee
from the sale of the Bonds to the Underwriter shall be deposited in the respective funds and
accounts, and in the respective amounts, as set forth in Section 3.02 of the Indenture.
Section 3.3. Acquisition of the Project. The Authority hereby agrees with due
diligence to supervise and provide for, or cause to be supervised and provided for, the acquisition
of the Project in accordance with all documents relating thereto and approved by the District
under all applicable requirements of law. The failure of the Authority to complete the Project by
that date does not constitute an Event of Default hereunder or a grounds for termination hereof,
nor does any such failure result in the diminution, abatement or extinguishment of the
obligations of the District hereunder to pay the Installment Payments when due hereunder.
Section 3.4. Appointment of District as Agent. The Authority hereby appoints the
District as its agent to carry out all phases of the acquisition of the Project under and in
accordance with the provisions hereof. The District hereby accepts such appointment and
assumes all rights, liabilities, duties and responsibilities of the Authority regarding the
acquisition of the Project. As agent of the Authority hereunder, the District shall enter into,
administer and enforce all purchase orders or other contracts relating to the Project. Payment of
Project Costs shall be made by the District from amounts held by the District in the Project Fund
in accordance with this Agreement and the Indenture.
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ARTICLE IV
SALE OF PROJECT;
INSTALLMENT PAYMENTS
Section 4.1. Sale of Project. The Authority hereby sells, bargains and conveys the
Project to the District, and the District hereby purchases the Project from the Authority, upon the
terms and conditions set forth in this Agreement. The Authority and the District are entering into
this Agreement in order to finance the facilities and improvements included in the Project.
Section 4.2. Term. The Term of this Agreement commences on the Closing Date, and
ends on ____________, or such later or earlier date on which the Bonds cease to be Outstanding
under and within the meaning of the Indenture.
Section 4.3. Title. Title to the Project shall be deemed conveyed by the Authority to
and vested in the District on the Closing Date. The Authority and the District will execute,
deliver and cause to be recorded any and all documents reasonably required by the District to
consummate the transfer of title to the Project to the District. Such title shall be held by the
District in trust pending the satisfaction of the payment obligations under this Agreement.
Section 4.4. Installment Payments.
(a) Obligation to Pay. The District hereby agrees to pay to the Authority, as the
purchase price of the Project hereunder, the aggregate principal amount of $[Principal Amount]
together with interest (calculated on the basis of a 360-day year of twelve 30-day months) on the
unpaid principal balance thereof, payable in semiannual installment payments in the respective
amounts and on the respective Installment Payment Dates specified in Appendix A hereto.
The District shall deposit the Installment Payment coming due and payable on any
Interest Payment Date with the Trustee, as assignee of the Authority under the Indenture, on the
related Installment Payment Date (as set forth in Appendix A hereto) in an amount which,
together with amounts then held by the Trustee in the Bond Fund, is equal to the full amount of
such Installment Payment. The Installment Payments are secured by and payable solely from the
sources specified in Section 4.5.
(b) Effect of Prepayment. If the District prepays all remaining Installment Payments
in full under Section 7.2, or under the relevant provisions of any Supplemental Agreement, the
District’s obligations under this Agreement shall thereupon cease and terminate, including but
not limited to the District’s obligation to pay Installment Payments therefor under this
Section 4.4; provided, however, that the District’s obligations to compensate and indemnify the
Trustee under Sections 4.7 and 5.2 will survive such prepayment. If the District prepays the
Installment Payments in part but not in whole under Section 7.2, or under the relevant provisions
of any Supplemental Agreement, the principal component of each succeeding Installment
Payment will be reduced as provided in such Sections or in such Supplemental Agreement, and
the interest component of each remaining Installment Payment will be reduced by the aggregate
corresponding amount of interest which would otherwise be payable with respect to the Bonds
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thereby redeemed under the applicable provisions of the Indenture and the District shall provide
the Trustee with a revised schedule of Installment Payments.
(c) Rate on Overdue Payments. If the District fails to make any of the payments
required in this Section 4.4 and Section 4.7, the payment in default will continue as an obligation
of the District until fully paid, and the District agrees to pay the same with interest thereon, from
the date of default to the date of payment, at the Overdue Rate.
(d) Assignment. The District understands and agrees that certain rights of the
Authority, including but not limited to the right of the Authority to receive payment of the
Installment Payments, have been assigned by the Authority to the Trustee in trust under the
Indenture, for the benefit of the Owners of the Bonds, and the District hereby consents to such
assignment. The Authority hereby directs the District, and the District hereby agrees, to pay to
the Trustee at its Trust Office, all payments payable by the District under this Section 4.4 and all
amounts payable by the District under Article VII.
Section 4.5. Pledge and Application of Net Revenues.
(a) Pledge of Net Revenues. The District hereby grants a first priority lien and
security interest in the Net Revenues in order to secure payment of the Installment Payments to
the Trustee (as assignee of the Authority under the Indenture). All of the Net Revenues and all
moneys on deposit in any of the funds and accounts established and held by the Trustee under
the Indenture are hereby irrevocably pledged, charged and assigned to the punctual payment of
the Installment Payments. Such pledge, charge and assignment constitute a lien and security
interest on the Net Revenues and such other moneys for the payment of the Installment Payments
in accordance with the terms hereof, on a parity with the pledge and lien which secures any
Parity Obligations.
(b) Deposit of Gross Revenues into Wastewater Revenue Fund; Transfers to Make
Payments. The District hereby establishes the Wastewater Revenue Fund, which the District will
hold and maintain for the purposes and uses set forth herein. The District shall deposit all of the
Gross Revenues in the Wastewater Revenue Fund immediately upon receipt. The District shall
apply amounts in the Wastewater Revenue Fund as set forth in this Agreement and any Parity
Obligations Documents. Amounts on deposit in the Wastewater Revenue Fund shall be applied
by the District to pay when due the following amounts in the following order of priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and
interest on any Parity Obligations;
(iii) any other payments required to comply with the provisions of this
Agreement (including Additional Payments) and any Parity Obligations
Documents; and
(iv) any other purposes authorized under subsection (d) of this
Section 4.5.
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(c) No Preference or Priority. Payment of the Installment Payments and the principal
of and interest on any Parity Obligations shall be made without preference or priority among the
Installment Payments and such Parity Obligations. If the amount of Net Revenues on deposit in
the Wastewater Revenue Fund is any time insufficient to enable the District to pay when due the
Installment Payments and the principal of and interest on any Parity Obligations, such payments
shall be made on a pro rata basis.
(d) Other Uses of Gross Revenues Permitted. The District shall manage, conserve
and apply the Gross Revenues on deposit in the Wastewater Revenue Fund in such a manner that
all deposits required to be made under the preceding subsection (b) will be made at the times and
in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default has
occurred and is continuing, the District may use and apply moneys in the Wastewater Revenue
Fund for (i) the payment of any subordinate obligations or any unsecured obligations, (ii) the
acquisition and construction of improvements to the Wastewater Operations, (iii) the prepayment
of any other obligations of the District relating to the Wastewater Operations, or (iv) any other
lawful purposes of the District.
Section 4.6. Special Obligation of the District; Obligations Absolute. The District’s
obligation to pay the Installment Payments and any other amounts coming due and payable
hereunder is a special obligation of the District limited solely to the Net Revenues. Under no
circumstances is the District required to advance moneys derived from any source of income
other than the Net Revenues and other sources specifically identified herein for the payment of
the Installment Payments and such other amounts. No other funds or property of the District are
liable for the payment of the Installment Payments and any other amounts coming due and
payable hereunder.
The obligations of the District to pay the Installment Payments from the Net Revenues
and to perform and observe the other agreements contained herein are absolute and unconditional
and are not subject to any defense or any right of set-off, counterclaim or recoupment arising out
of any breach by the Authority or the Trustee of any obligation to the District or otherwise with
respect to the Wastewater Operations, whether hereunder or otherwise, or out of indebtedness or
liability at any time owing to the District by the Authority or the Trustee. Until all of the
Installment Payments, all of the Additional Payments and all other amounts coming due and
payable hereunder are fully paid or prepaid, the District
(a) will not suspend or discontinue payment of any Installment Payments,
Additional Payments or such other amounts,
(b) will perform and observe all other agreements contained in this
Agreement, and
(c) will not terminate this Agreement for any cause, including, without
limiting the generality of the foregoing, the occurrence of any acts or circumstances that
may constitute failure of consideration, eviction or constructive eviction, destruction of or
damage to the Wastewater Operations, sale of the Wastewater Operations, the taking by
eminent domain of title to or temporary use of any component of the Wastewater
Operations, commercial frustration of purpose, any change in the tax or other laws of the
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United States of America or the State of California or any political subdivision of either
thereof, or any failure of the Authority or the Trustee to perform and observe any
agreement, whether express or implied, or any duty, liability or obligation arising out of
or connected with the Indenture or this Agreement.
The foregoing provisions of this Section 4.6 do not release the Authority from the
performance of any of the agreements on its part contained herein or in the Indenture, and if the
Authority fails to perform any such agreements, the District may institute such action against the
Authority as the District deems necessary to compel performance, so long as such action does
not abrogate the obligations of the District contained in the preceding paragraph. The District
may, however, at its cost and expense and in its name or in the name of the Authority, prosecute
or defend any action or proceeding or take any other action involving third persons which the
District deems reasonably necessary in order to secure or protect the District’s rights hereunder,
and in such event the Authority shall cooperate fully with the District and shall take such action
necessary to effect the substitution of the District for the Authority in such action or proceeding
if the District may request.
Section 4.7. Additional Payments. In addition to the Installment Payments, the District
shall pay when due the following amounts to the following parties:
(a) to the Authority, all costs and expenses incurred by the Authority to
comply with the provisions of this Agreement and the Indenture;
(b) to the Trustee upon request therefor, all of its fees, costs and expenses
payable as a result of the performance of and compliance with its duties hereunder or
under the Indenture or any related documents;
(c) to the Trustee, all amounts required to indemnify the Authority and the
Trustee under Section 5.2 hereof and Section 8.07 of the Indenture;
(d) all costs and expenses of auditors, engineers and accountants for
professional services relating to the Wastewater Operations or the Bonds; and
(e) to the Authority, the payments due under Section 8.12(a).
The Additional Payments shall be payable from, but shall not be secured by a pledge or
lien upon, the Net Revenues. The rights of the Trustee and the Authority under this Section 4.7,
and the obligations of the District under this Section 4.7, shall survive the termination of this
Agreement, and with regard to the Trustee, the resignation or removal of the Trustee.
Section 4.8. Rate Stabilization Fund.
The District has the right at any time to establish a fund to be held by it and administered
in accordance with this section, to be known as the “Rate Stabilization Fund,” for the purpose of
stabilizing the rates and charges imposed by the District with respect to the Wastewater
Operations.
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From time to time the District may deposit amounts in the Rate Stabilization Fund from
any source of legally available funds, including but not limited to Net Revenues which are
released from the pledge and lien which secures the Bonds and any Parity Obligations, as the
District may determine.
The District may, but is not required to, withdraw from any amounts on deposit in a Rate
Stabilization Fund and deposit such amounts in the Wastewater Revenue Fund in any Fiscal Year
for the purpose of paying Annual Debt Service coming due and payable in such Fiscal Year.
Amounts so transferred from a Rate Stabilization Fund to the Wastewater Revenue Fund will
constitute Gross Revenues for such Fiscal Year (except as otherwise provided in the Indenture),
and will be applied for the purposes of the Wastewater Revenue Fund.
Amounts on deposit in a Rate Stabilization Fund will not be pledged to or otherwise
secure the Bonds or any Parity Debt. All interest or other earnings on deposits in a Rate
Stabilization Fund will be withdrawn therefrom at least annually and accounted for as Gross
Revenues in the Wastewater Revenue Fund. The District has the right at any time to withdraw
any or all amounts on deposit in a Rate Stabilization Fund and apply such amounts for any
lawful purposes of the District.
The District does not currently maintain funds in a Rate Stabilization Fund.
ARTICLE V
COVENANTS OF THE DISTRICT
Section 5.1. Disclaimer of Warranties., Maintenance, Utilities and Taxes.
(a) The District makes no warranty or representation, either express or implied, as to
the value, design, condition, merchantability or fitness for any particular purpose or fitness for
the use contemplated by the District of the Project or any component thereof, or any other
representation or warranty with respect to the Project or any component thereof. In no event is
the Authority liable for incidental, indirect, special or consequential damages, in connection with
or arising out of this Agreement or the Indenture for the existence, furnishing, functioning or use
of the Project.
(b) Throughout the Term of this Agreement, all improvement, repair and maintenance
of the Wastewater Operations shall be the responsibility of the District, and the District shall pay
for or otherwise, arrange for the payment of all utility services supplied to the Wastewater
Operations, which may include, without limitation, janitor service, security, power, gas,
telephone, light, heating, water and all other utility services, and shall pay for or otherwise
arrange for the payment of the cost of the repair and replacement of the Wastewater Operations
resulting from ordinary wear and tear.
The District shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Authority or the District affecting the Wastewater Operations or the
respective interests or estates therein; provided, however, that with respect to special assessments
or other governmental charges that may lawfully be paid in installments over a period of years,
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the District shall be obligated to pay only such installments as are required to be paid during the
Term of this Agreement as and when the same become due.
Section 5.2. Release and Indemnification Covenants. The District agrees to indemnify
the Trustee and its respective officers, directors, employees, agents, successors and assigns,
against all costs, claims, losses, liabilities, penalties, fines and damages, including legal fees and
expenses, arising out of
(a) the use, maintenance, condition or management of, or from any work or
thing done on or about the Wastewater Operations by the District,
(b) any breach or default on the part of the District in the performance of any
of its obligations under this Agreement or the Indenture,
(c) any act or omission of the District or of any of its agents, contractors,
servants, employees or licensees with respect to the Wastewater Operations,
(d) any act or omission of any lessee of the District with respect to the
Wastewater Operations, and
(e) the acceptance or administration of the Indenture and the trusts thereunder,
including the costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers hereunder or under
the Indenture.
No indemnification is made under this Section 5.2 or elsewhere in this Agreement for
willful misconduct under this Agreement by the Authority, or the Trustee, or their respective
officers, agents, employees, successors or assigns. The provisions of this Section 5.2 shall
survive the expiration of the Term of this Agreement and the earlier removal or resignation of the
Trustee.
Section 5.3. Sale or Eminent Domain of Wastewater Operations. Except as provided
herein, the District covenants that the Wastewater Operations shall not be encumbered, sold,
leased, pledged, have any charge placed thereon, or otherwise be disposed of, as a whole or
substantially as a whole, if such encumbrance, sale, lease, pledge, charge or other disposition
would materially impair the ability of the District to pay the Installment Payments or the
principal of or interest on any Parity Obligations, or would materially adversely affect its ability
to comply with the terms of this Agreement or any Parity Obligations Documents.
The District may not enter into any agreement which impairs the operation of the
Wastewater Operations or any part of it necessary to secure adequate Net Revenues to pay the
Installment Payments or any Parity Obligations, or which otherwise would impair the rights of
the Bond Owners or the Trustee with respect to the Net Revenues.
If any substantial part of the Wastewater Operations is sold, the payment therefor shall be
used for the acquisition or construction of improvements to the Wastewater Operations [or the
redemption of all outstanding Bonds and Parity Obligations pursuant to Article 4 of the
Indenture].
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[Notwithstanding anything to the contrary provided herein, the District shall be permitted
to convey its Wastewater Operations to San Diego County so long as the Bonds are redeemed in
full pursuant to Article 4 of the Indenture on or prior to such conveyance.]
Any amounts received as awards as a result of the taking of all or any part of the
Wastewater Operations by the lawful exercise of eminent domain, if and to the extent that such
right can be exercised against such property of the District, shall be used for the acquisition or
construction of improvements to the Wastewater Operations.
Section 5.4. Insurance. The District shall at all times maintain with responsible
insurers all such insurance on the Wastewater Operations as is customarily maintained with
respect to works and properties of like character against accident to, loss of or damage to the
Wastewater Operations.
The District shall apply any amounts collected from insurance against accident to or
destruction of any portion of the Wastewater Operations to repair or rebuild such damaged or
destroyed portion of the Wastewater Operations.
The District shall also maintain, with responsible insurers, worker’s compensation
insurance and insurance against public liability and property damage to the extent reasonably
necessary to protect the District, the Authority, the Trustee and the Owners of the Bonds.
Any policy of insurance required under this Section 5.4 may be maintained as part of or
in conjunction with any other insurance coverage carried by the District, and may be maintained
in whole or in part in the form of self-insurance by the District or in the form of the participation
by the District in a joint powers agency or other program providing pooled insurance.
Section 5.5. Records and Accounts. The District shall keep proper books of record and
accounts of the Wastewater Operations in which complete and correct entries shall be made of
all transactions relating to the Wastewater Operations. Said books shall, upon prior request, be
subject to the reasonable inspection of the Owners of not less than 10% of the Outstanding
Bonds, or their representatives authorized in writing, upon not less than 2 Business Days’ prior
notice to the District.
The District shall cause the books and accounts of the Wastewater Operations to be
audited annually by an Independent Accountant not more than 9 months after the close of each
Fiscal Year, and shall make a copy of such report available for inspection by the Bond Owners at
the office of the District. Such report may be part of a combined financial audit or report
covering all or part of the District’s finances. The Trustee shall not be deemed to have notice of
any information contained therein or default or Event of Default which may be disclosed therein
in any manner.
Section 5.6. Rates and Charges.
(a) Covenant Regarding Gross Revenues. The District shall fix, prescribe, revise and
collect rates, fees and charges for the services and facilities furnished by the Wastewater
Operations during each Fiscal Year, which are at least sufficient, after making allowances for
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contingencies and error in the estimates, to yield Gross Revenues sufficient to pay the following
amounts in the following order of priority:
(i) All Operation and Maintenance Costs estimated by the District to
become due and payable in such Fiscal Year.
(ii) All Installment Payments and all payments of principal of and
interest on any Parity Obligations as they become due and payable during such
Fiscal Year, without preference or priority, except to the extent such Installment
Payments or the principal of and interest on such Parity Obligations are payable
from the proceeds of the Bonds or such Parity Obligations, as applicable, or from
any source of legally available funds of the District (other than the Gross
Revenues of the Wastewater Operations) that have been deposited with the
Trustee for such purpose before the beginning of that Fiscal Year.
(iii) All payments required to meet any other obligations of the District
which are charges, liens, encumbrances upon, or which are otherwise payable
from, the Gross Revenues or the Net Revenues during such Fiscal Year, except to
the extent other sources of funds are reserved or encumbered therefore.
(b) Covenant Regarding Net Revenues. In addition, the District shall fix, prescribe,
revise and collect rates, fees and charges for the services and facilities furnished by the
Wastewater Operations during each Fiscal Year that are sufficient, after making allowances for
contingencies and errors in estimates, to yield Net Revenues that are at least equal to [115]% of
the amount described in the preceding clauses (a)(ii) and (iii) for such Fiscal Year.
Section 5.7. Superior and Subordinate Obligations. The District may not issue or incur
any additional bonds or other obligations during the Term of this Agreement having any priority
in payment of principal or interest out of the Gross Revenues or the Net Revenues over the
Installment Payments.
Nothing herein is intended or shall be construed to limit or affect the ability of the
District to issue, enter into or incur
(a) Parity Obligations under Section 5.8, or
(b) obligations that are either unsecured or that are secured by an interest in
the Net Revenues which is junior and subordinate to the pledge of and lien upon the Net
Revenues established hereunder.
Section 5.8. Issuance of Parity Obligations. Except for obligations incurred to prepay
or discharge the Installment Payments or any Parity Obligations, the District may not issue or
incur any Parity Obligations during the Term hereof unless all of the following conditions are
satisfied:
(a) No Event of Default has occurred and is continuing.
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(b) The amount of Net Revenues, excluding connection fees and transfers
from the Rate Stabilization Fund, as shown by the books of the District for the most
recent completed Fiscal Year for which audited financial statements of the District are
available or for any more recent consecutive 12-month period selected by the District, or
shown in the audited financial statements of the District, plus at the option of the District
any Additional Revenues, are at least equal to [115]% of the amount of Maximum
Annual Debt Service coming due and payable in the current or any future Fiscal Year
with respect to the Bonds and all Parity Obligations then outstanding (including the
Parity Obligations then proposed to be issued).
If the Parity Obligations are being issued solely to refund outstanding Parity Obligations,
and the resulting Annual Debt Service for each Fiscal Year is less than the Annual Debt Service
for each Fiscal Year prior to the issuance of the refunding Parity Obligations, the District need
not comply with the provisions of paragraphs (a) and (b) above. The Parity Obligations may be,
but are not required to be, in the form of Supplemental Agreements, and may, but are not
required to, secure the payment of debt service on Bonds.
Section 5.9. Governmental Loans.
(a) The District may borrow money from a Governmental Agency and incur a
Governmental Loan to finance improvements to the Wastewater Operations. A Governmental
Loan may be treated as a Parity Obligation for purposes of this Agreement, so long as the
District complies with Sections 5.8(a) and (b) of this Agreement before incurring the
Governmental Loan.
(b) (i) the District shall not make a payment on any Governmental Loan (except as
expressly permitted in subsection (c) below) to the extent it would have the effect of causing the
District to fail to make a timely payment on the Bonds.
(c) If Net Revenues are ever insufficient to pay the full amount of Installment
Payments and other Parity Obligations then Outstanding and such Governmental Loan, the
District shall make payments on the Installment Payments and other Parity Obligations and such
Governmental Loan on a pro rata basis.
Section 5.10. Operation of Wastewater Operations in Efficient and Economical Manner.
The District covenants and agrees to operate the Wastewater Operations in an efficient and
economical manner and to operate, maintain and preserve the Wastewater Operations in good
repair and working order.
Section 5.11. Assignment and Amendment. The Authority and the District may at any
time amend or modify any of the provisions of this Agreement, but only: (a) with the prior
written consent of the Owners of a majority in aggregate principal amount of the Outstanding
Bonds, or (b) without the consent of the Trustee or any of the Bond Owners, but only if such
amendment or modification is for any one or more of the following purposes:
(i) to add to the covenants and agreements of the District contained in
this Agreement, other covenants and agreements thereafter to be observed, or to
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limit or surrender any rights or power herein reserved to or conferred upon the
District;
(ii) to make such provisions for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective provision contained
herein, to conform to the original intention of the District and the Authority;
(iii) to modify, amend or supplement this Agreement in such manner as
to assure that the interest on the Bonds remains excluded from gross income
under the Tax Code (provided that this provision shall not apply to bonds the
interest on which is intended to be included in gross income for purposes of
federal income taxation);
(iv) in any other respect whatsoever as the Authority and the District
deem necessary or desirable, if in the opinion of Bond Counsel such
modifications or amendments do not materially adversely affect the interests of
the Owners of the Bonds; and
(v) to provide for the issuance of Parity Obligations pursuant to
Section 5.8 hereof.
No such modification or amendment may (a) extend or have the effect of extending any
Installment Payment Date or reducing any Installment Payment or any premium payable upon
the prepayment thereof, without the express consent of the Owners of the affected Bonds, or
(b) modify any of the rights or obligations of the Trustee without its written assent thereto.
Section 5.12. Continuing Disclosure. The District hereby covenants and agrees to
comply with and carry out all of the provisions of the continuing disclosure agreement (the
“Continuing Disclosure Agreement”) as originally executed as of the date of issuance and
delivery of the Bonds, and as it may be amended from time to time in accordance with its terms.
Notwithstanding any other provision of this Agreement, failure by the District to comply
with the Continuing Disclosure Agreement shall not constitute a default hereunder or under the
Indenture of Trust; provided, however, that any Participating Underwriter or any Owner or
beneficial owner of the Bonds may take such action as may be necessary and appropriate to
compel performance by the District of its obligations under this Section 5.12, including seeking
mandamus or specific performance by court order. All capitalized terms used but not defined in
this Section 5.12 shall have the meanings given in the Continuing Disclosure Agreement.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1. Events of Default Defined. The following events constitute Events of
Default hereunder:
(a) Failure by the District to pay any Installment Payment when due and
payable hereunder.
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(b) Failure by the District to pay any Additional Payment when due and
payable hereunder, and the continuation of such failure for a period of 30 days.
(c) Failure by the District to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in the
preceding clauses (a) or (b), for a period of 60 days after written notice specifying such
failure and requesting that it be remedied has been given to the District by the Authority
or the Trustee; provided, however, that if the District notifies the Authority and the
Trustee that in its reasonable opinion the failure stated in the notice can be corrected, but
not within such 60-day period, such failure will not constitute an event of default
hereunder if the District commences to cure such failure within such 60 day period and
thereafter diligently and in good faith cures the failure in a reasonable period of time not
to exceed 180 days of the date of such written notice of failure.
(d) The filing by the District of a voluntary petition in bankruptcy, or failure
by the District promptly to lift any execution, garnishment or attachment, or adjudication
of the District as a bankrupt, or assignment by the District for the benefit of creditors, or
the entry by the District into an agreement of composition with creditors, or the approval
by a court of competent jurisdiction of a petition applicable to the District in any
proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended,
or under any similar acts which may hereafter be enacted.
(e) The occurrence of any event defined to be an event of default under any
Parity Obligations Documents.
Section 6.2. Remedies on Default. If an Event of Default occurs and is continuing, the
Trustee as assignee of the Authority and subject to its rights and protections under the Indenture
has the right, at its option and without any further demand or notice, to take any one or more of
the following actions:
(a) Declare all principal components of the unpaid Installment Payments,
together with accrued interest thereon at the Overdue Rate from the immediately
preceding Interest Payment Date on which payment was made, to be immediately due
and payable, whereupon the same shall immediately become due and payable.
Notwithstanding the foregoing provisions of this subsection (a), the
Trustee shall rescind and annul such declaration and its consequences if, before
any judgment or decree for the payment of the moneys due has been obtained or
entered, if (i) the District deposits with the Trustee a sum sufficient to pay all
principal components of the Installment Payments coming due prior to such
declaration and all matured interest components (if any) of the Installment
Payments, with interest on such overdue principal and interest components
calculated at the Overdue Rate, and (ii) the District pays the reasonable expenses
of the Trustee (including any fees and expenses of its attorneys), and (iii) any and
all other defaults actually known to the Trustee (other than in the payment of the
principal and interest components of the Installment Payments due and payable
solely by reason of such declaration) have been made good. No such rescission
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and annulment will extend to or shall affect any subsequent default, or impair or
exhaust any right or power consequent thereon.
(b) Take whatever action at law or in equity may appear necessary or
desirable to collect the Installment Payments then due or thereafter to become due during
the Term of this Agreement, or enforce performance and observance of any obligation,
agreement or covenant of the District under this Agreement.
(c) As a matter of right, in connection with the filing of a suit or other
commencement of judicial proceedings to enforce the rights of the Trustee and the Bond
Owners hereunder, cause the appointment of a receiver or receivers of the Gross
Revenues and other amounts pledged hereunder, with such powers as the court making
such appointment may confer.
Section 6.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to
the Authority is intended to be exclusive. Every such remedy is cumulative and in addition to
every other remedy given under this Agreement or now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon any default impairs any such
right or power or operates as a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle the Authority to
exercise any remedy reserved to it in this Article VI, it is not necessary to give any notice, other
than such notice as may be required in this Article VI or by law.
Section 6.4. Agreement to Pay Attorneys’ Fees and Expenses. If either party to this
Agreement defaults under any of the provisions hereof and the nondefaulting party, the Trustee
or the Owner of any Bonds employs attorneys or incurs other expenses for the collection of
moneys or the enforcement or performance or observance of any obligation or agreement on the
part of the defaulting party herein contained, the defaulting party agrees that it wilt on demand
therefor pay to the nondefaulting party, the Trustee or such Owner, as the case may be, the
reasonable fees and expenses of such attorneys and such other expenses so incurred. The
provisions of this Section 6.4 survive the expiration of the Term of this Agreement and the
resignation or removal of the Trustee.
Section 6.5. No Additional Waiver Implied by One Waiver. If any agreement
contained in this Agreement is breached by either party and thereafter waived by the other party,
such waiver is limited to the particular breach so waived and does not waive any other breach
hereunder.
Section 6.6. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as
are given to the Authority under this Article VI have been assigned by the Authority to the
Trustee under the Indenture, to which assignment the District hereby consents. Such rights and
remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the
Indenture.
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ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 7.1. Security Deposit. Notwithstanding any other provision hereof, the District
may on any date secure the payment of Installment Payments, in whole or in part, by irrevocably
depositing with the Trustee an amount of cash which, together with other available amounts, is
either:
(a) sufficient to pay all such Installment Payments, including the principal and
interest components thereof, when due under Section 4.4(a), or
(b) invested in whole or in part in non-callable Federal Securities in such
amount as will, in the opinion of an Independent Accountant (which opinion is addressed
and delivered to the Trustee), together with interest to accrue thereon and together with
any cash which is so deposited, be fully sufficient to pay all such Installment Payments
when due under Section 4.4(a) or when due on any optional prepayment date under
Section 7.2, as the District instructs at the time of said deposit.
If the District makes a security deposit under this Section for the payment of all
remaining Installment Payments, all obligations of the District hereunder, and the pledge of Net
Revenues and all other security provided by this Agreement for said obligations, will thereupon
cease and terminate, excepting only the obligation of the District to make, or cause to be made,
all Installment Payments from the security deposit. The security deposit will be deemed to be and
will constitute a special fund for the payment of the Installment Payments in accordance with the
provisions hereof.
Section 7.2. Optional Prepayment Relating to the Bonds. The District may exercise its
option to prepay the principal components of the Installment Payments relating to the Bonds in
whole or in part on any date on or after October 1, 2025.
The District may exercise such option by payment of a prepayment price equal to the sum
of:
(a) the aggregate principal components of the Installment Payments relating to the
Bonds to be prepaid,
(b) the interest component of the Installment Payment relating to the Bonds required
to be paid on or accrued to such date, and
(c) the premium (if any) then required to be paid upon the corresponding redemption
of the Bonds under Section 4.01(a) of the Indenture.
The Trustee shall deposit the prepayment price in the Redemption Fund to be applied to
the redemption of Bonds under Section 4.01(a) of the Indenture. If the District prepays the
Installment Payments in part but not in whole, the principal components will be prepaid among
such maturities and in such integral multiples of $5,000 as the District designates in written
notice to the Trustee.
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Section 7.3. Credit for Amounts on Deposit. If the District prepays the Installment
Payments in full under this Article VII, such that the Indenture is discharged by its terms as a
result of the prepayment, and upon payment in full of all Additional Payments and other amounts
then due and payable hereunder, all available amounts then on deposit in the funds and accounts
established under the Indenture shall be credited towards the amounts then required to be so
prepaid.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Further Assurances. The District agrees that it will execute and deliver
and file any and all such further agreements, instruments, financing statements or other
assurances as may be reasonably necessary or requested by the Authority or the Trustee to carry
out the intention or to facilitate the performance of this Agreement, including, without limitation,
to perfect and continue the security interests herein intended to be created.
Section 8.2. Notices. Any notice, request, complaint, demand or other communication
under this Agreement must be given by first class mail, e-mail, facsimile transmission, overnight
mail or personal delivery to the party entitled thereto at its address set forth below, or by
telecopier or other form of telecommunication, at its number set forth below. Notice is effective
either (a) upon transmission by fax or other form of telecommunication (including e-mail), (b)
upon actual receipt after deposit in the United States of America mail, postage prepaid, or (c) in
the case of personal delivery to any person or overnight mail, upon actual receipt; provided,
however that notice to the Trustee shall be deemed given only upon receipt by it. The Authority,
the District and the Trustee may, by written notice to the other parties, from time to time modify
the address or number to which communications are to be given hereunder.
If to the Authority: Otay Water District Financing Authority
[ADDRESS]
Attn:_________________
E-mail: [________]
If to the District: Otay Water District
2554 Sweetwater Springs Blvd.
Spring Valley, CA 91978-2004
Attn:________________
E-mail: [________]
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If to the Trustee: MUFG Union Bank, N.A.
Attention: Corporate Trust Department
445 South Figueroa Street, Suite 401
Los Angeles, California 90071
Fax: 213-972-5694
Email: LACT@unionbank.com
If the District or the Authority elects to give the Trustee Instructions using Electronic Means and
the Trustee in its reasonable judgment elects to act upon such Instructions, the Trustee’s
understanding of such Instructions shall be deemed controlling. The District and the Authority
understands and agrees that the Trustee cannot determine the identity of the actual sender of such
Instructions and that the Trustee shall conclusively presume that directions that purport to have
been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee
have been sent by such Authorized Officer. The District and the Authority shall be responsible
for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the
District or the Authority and all Authorized Officers are solely responsible to safeguard the use
and confidentiality of applicable user and authorization codes, passwords and/or authentication
keys upon receipt by the District or the Authority. The Trustee shall not be liable for any losses,
costs, claims or expenses arising directly or indirectly from the Trustee’s reliance upon and
compliance with such Instructions notwithstanding such directions conflict or are inconsistent
with a subsequent written instruction. The District and the Authority agrees: (i) to assume all
risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including
without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of
interception and misuse by third parties; (ii) that it is fully informed of the protections and risks
associated with the various methods of transmitting Instructions to the Trustee and that there may
be more secure methods of transmitting Instructions than the method(s) selected by the District
or the Authority; (iii) that the security procedures (if any) to be followed in connection with its
transmission of Instructions provide to it a commercially reasonable degree of protection in light
of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon
learning of any compromise or unauthorized use of the security procedures.
Section 8.3. Governing Law. This Agreement will be construed in accordance with
and governed by the laws of the State of California.
Section 8.4. Binding Effect. This Agreement inures to the benefit of and is binding
upon the Authority and the District and their respective successors and assigns, subject, however,
to the limitations contained herein.
Section 8.5. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Agreement are for any reason held to be invalid, illegal or unenforceable in any
respect, then such provision or provisions will be deemed severable from the remaining
provisions contained in this Agreement and such invalidity, illegality or unenforceability will not
affect any other provision of this Agreement, and this Agreement shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein. The Authority and
the District each hereby declares that it would have entered into this Agreement and each and
every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any
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one or more Sections, paragraphs, sentences, clauses or phrases of this Agreement may be held
illegal, invalid or unenforceable.
Section 8.6. Article and Section Headings and References. The headings or titles of
the several Articles and Sections hereof, and any table of contents appended to copies hereof, are
solely for convenience of reference and do not affect the meaning, construction or effect of this
Agreement. All references herein to “Articles,” “Sections” and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words “herein,”
“hereof,” “hereby,” “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or subdivision hereof; and words of the
masculine gender mean and include words of the feminine and neuter genders.
Section 8.7. Payment on Non-Business Days. Whenever any payment is required to be
made hereunder on a day which is not a Business Day, such payment shall be made on the
immediate preceding Business Day.
Section 8.8. Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which will for all purposes be deemed to be an original and all
of which together constitute but one and the same instrument.
Section 8.9. Waiver of Personal Liability. No member of the Board of Directors,
officer, agent or employee of the District has any individual or personal liability for the payment
of Installment Payments or Additional Payments or be subject to any personal liability or
accountability by reason of this Agreement; but nothing herein contained relieves any such
member of the Board of Supervisors, officer, agent or employee from the performance of any
official duty provided by law or by this Agreement.
Section 8.10. Trustee as Third Party Beneficiary. The Trustee is hereby made a third
party beneficiary hereof and is entitled to the benefits of this Agreement with the same force and
effect as if the Trustee were a party hereto.
Section 8.11. Authority Provisions.
(a) Additional Payments. In addition to the Installment Payments, the District
shall also pay to the Authority, the following:
(i) The reasonable fees and expenses of such accountants, consultants,
attorneys and other experts as may be engaged by the Authority to prepare
audits, financial statements, reports, opinions or provide such other services
required under this Agreement or the Indenture; and
(ii) The reasonable fees and expenses of the Authority or any agent or
attorney selected by the Authority to act on its behalf in connection with
this Agreement, the Bonds or the Indenture, including, without limitation,
any and all reasonable expenses incurred in connection with the
authorization, issuance, sale and delivery of any such Bonds or in
connection with any litigation, investigation, inquiry or other proceeding
which may at any time be instituted involving this Agreement, the Bonds or
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the Indenture or any of the other documents contemplated thereby, or in
connection with the reasonable supervision or inspection of the District, its
properties, assets or operations or otherwise in connection with the
administration of this Agreement, the Bonds or the Indenture.
Such Additional Payments shall be billed to the District by the Authority from
time to time, together with a statement certifying that the amount billed has been incurred or paid
by the Authority for one or more of the above items. After such a demand, amounts so billed
shall be paid by the District within thirty (30) days after receipt of the bill by the District.
(b) Non-Liability of Authority.
The Authority shall not be obligated to pay the principal (or redemption price) of
or interest on the Bonds, except from Revenues and other moneys and assets received by the
Trustee pursuant to this Agreement. Neither the faith and credit nor the taxing power of the State
or any political subdivision thereof, nor the faith and credit of the Authority is pledged to the
payment of the principal (or redemption price) of or interest on the Bonds. The Authority shall
not be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind
on any conceivable theory, under or by reason of or in connection with this Agreement, the
Bonds or the Indenture, except only to the extent amounts are received for the payment thereof
from the District under this Agreement.
The District hereby acknowledges that the Authority’s sole source of moneys to
repay the Bonds (whether by maturity, redemption, acceleration or otherwise) will be provided
by the payments made by the District to the Trustee pursuant to this Agreement, together with
amounts on deposit in and investment income on certain funds and accounts held by the Trustee
under the Indenture, and hereby agrees that if the payments to be made hereunder shall ever
prove insufficient to pay all principal (or redemption price) of and interest on the Bonds as the
same shall become due (whether by maturity, redemption, acceleration or otherwise), then upon
notice from the Trustee, the District shall pay such amounts as are required from time to time to
prevent any deficiency or default in the payment of such principal (or redemption price) or
interest, including, but not limited to, any deficiency caused by acts, omissions, nonfeasance or
malfeasance on the part of the Trustee, the District, the Authority or any third party, subject to
any right of reimbursement from the Trustee, the Authority or any such third party, as the case
may be, therefor.
(c) Annual Reporting Covenant. No later than January 31 of each calendar
year (commencing January 31, 2020), the District, on behalf of the Authority, agrees to provide
to the California Debt and Investment Advisory Commission, by any method approved by the
California Debt and Investment Advisory Commission, with a copy to the Authority, the annual
report information required by Section 8855(k)(1) of the California Government Code. This
covenant shall remain in effect until the later of the date (i) the Bonds are no longer Outstanding
or (ii) the proceeds of the Bonds have been fully spent.
(d) Expenses. The District covenants and agrees to pay and indemnify the
Authority against all reasonable fees, costs and charges, including reasonable fees and expenses
of attorneys, accountants, consultants and other experts, incurred in good faith (and with respect
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to the Trustee, without negligence) and arising out of or in connection with this Agreement, the
Bonds or the Indenture. These obligations and those in Section 5.2 Release and Indemnification
Covenants shall remain valid and in effect notwithstanding repayment of the loan hereunder or
the Bonds or termination of this Agreement or the Indenture.
(e) Indemnification. To the fullest extent permitted by law, the District agrees
to indemnify, hold harmless and defend the Authority, and each of its respective officers,
governing members, directors, officials, employees, attorneys and agents (collectively, the
“Indemnified Parties”), against any and all losses, damages, claims, actions, liabilities, costs and
expenses of any conceivable nature, kind or character (including, without limitation, reasonable
attorneys’ fees, litigation and court costs, amounts paid in settlement and amounts paid to
discharge judgments) to which the Indemnified Parties, or any of them, may become subject
under any statutory law (including federal or state securities laws) or at common law or
otherwise, arising out of or based upon or in any way relating to:
(i) the Bonds, the Indenture, this Agreement or the Tax Agreement or
the execution or amendment hereof or thereof or in connection with
transactions contemplated hereby or thereby, including the issuance, sale or
resale of the Bonds;
(ii) any act or omission of the District or any of its agents, contractors,
servants, employees, tenants or licensees in connection with the Project or
the Wastewater Operations, the operation of the Project or the Wastewater
Operations, or the condition, environmental or otherwise, occupancy, use,
possession, conduct or management of work done in or about, or from the
planning, design, acquisition, installation or construction of, the Project or
the Wastewater Operations or any part thereof;
(iii) any lien or charge upon payments by the District to the Authority
and the Trustee hereunder, or any taxes (including, without limitation, all
ad valorem taxes and sales taxes), assessments, impositions and other
charges imposed on the Authority in respect of any portion of the Project or
the Wastewater Operations;
(iv) any violation of any Environmental Regulations with respect to, or
the release of any Hazardous Substances from, the Project or the
Wastewater Operations or any part thereof;
(v) the defeasance and/or redemption, in whole or in part, of the
Bonds;
(vi) any untrue statement or misleading statement or alleged untrue
statement or alleged misleading statement of a material fact contained in
any offering or disclosure document or disclosure or continuing disclosure
document for the Bonds or any of the documents relating to the Bonds, or
any omission or alleged omission from any offering or disclosure document
or disclosure or continuing disclosure document for the Bonds of any
23
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material fact necessary to be stated therein in order to make the statements
made therein, in the light of the circumstances under which they were
made, not misleading;
(vii) any declaration of taxability of interest on the Bonds, or allegations
that interest on the Bonds is taxable or any regulatory audit or inquiry
regarding whether interest on the Bonds is taxable;
(viii) the Trustee’s acceptance or administration of the trust of the
Indenture, or the exercise or performance of any of its powers or duties
thereunder or under any of the documents relating to the Bonds to which it
is a party;
except in the case of the foregoing indemnification of the Authority or any
of its officers, members, directors, officials, employees, attorneys and
agents, to the extent such damages are caused by the willful misconduct of
such Indemnified Party. In the event that any action or proceeding is
brought against any Indemnified Party with respect to which indemnity
may be sought hereunder, the District, upon written notice from the
Indemnified Party, shall assume the investigation and defense thereof,
including the employment of counsel selected by the Indemnified Party,
and shall assume the payment of all expenses related thereto, with full
power to litigate, compromise or settle the same in its sole discretion;
provided that the Indemnified Party shall have the right to review and
approve or disapprove any such compromise or settlement. Each
Indemnified Party shall have the right to employ separate counsel in any
such action or proceeding and participate in the investigation and defense
thereof, and the District shall pay the reasonable fees and expenses of such
separate counsel; provided, however, that such Indemnified Party may only
employ separate counsel at the expense of the District if in the judgment of
such Indemnified Party a conflict of interest exists by reason of common
representation or if all parties commonly represented do not agree as to the
action (or inaction) of counsel.
The rights of any persons to indemnity hereunder and rights to payment of fees
and reimbursement of expenses pursuant to Section 5.2 and Section 4.7 shall survive the final
payment or defeasance of the Bonds and in the case of the Trustee any resignation or removal.
The provisions of this Section 8.12 shall survive the termination of this Agreement.
(f) Waiver of Personal Liability. No member, officer, agent or employee of
the Authority shall be individually or personally liable for the payment of any principal (or
redemption price) of or interest on the Bonds or any sum hereunder or under the Indenture or be
subject to any personal liability or accountability by reason of the execution and delivery of this
Agreement; but nothing herein contained shall relieve any such member, director, officer, agent
or employee from the performance of any official duty provided by law or by this Agreement.
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[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Authority and the District have caused this Agreement to be
executed in their respective names by their duly authorized signatories, all as of the date first
above written.
OTAY WATER DISTRICT FINANCING
AUTHORITY
By:
Name:
Title:
OTAY WATER DISTRICT
By:
Name:
Title:
[Signature page to Installment Sale Agreement]
A-1
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APPENDIX A
SCHEDULE OF INSTALLMENT PAYMENTS
Payment Date(1) Principal Interest Total Debt Service Fiscal Year Debt Service
(1) Installment Payment Dates are the first Business Day immediately preceding each Interest Payment Date shown
in the table.
- 2 -
3394471.5 043520 AGMT
Payment Date(1) Principal Interest Total Debt Service Fiscal Year Debt Service
Total $ $ $ $
B-1
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APPENDIX B
DESCRIPTION OF PROJECT
The Bonds are being issued primarily to finance capital improvements to the District
Wastewater Operations consisting primarily of [description of project]. The Bonds may also be
used to finance any other capital project of benefit to the Wastewater Operations.
DRAFT PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 15, 2019
NEW ISSUE- BOOK-ENTRY ONLY NOT RATED
(See “CONCLUDING INFORMATION - No Rating on the Bonds; Secondary Market” herein)
In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel, under existing statutes and court decisions and assuming continuing
compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for federal income tax
purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not
treated as a preference item in calculating the alternative minimum tax under the Code. In addition, in the opinion of Bond Counsel,
under existing statutes, interest on the Bonds is exempt from State of California personal income taxes. See “TAX MATTERS” herein.
$3,200,000*
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
Dated: Date of Delivery Due: September 1, as shown on the inside front cover page.
The cover page contains certain information for general reference only. It is not a summary of the issue. Potential investors
are advised to read the entire Official Statement to obtain information essential to the making of an informed investment
decision. See “RISK FACTORS” herein for a discussion of special risk factors that should be considered in evaluating the
investment quality of the Bonds.
The Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”) are payable from revenues pledged under
the Indenture (defined below) consisting of Installment Payments (defined herein) to be made by the Otay Water District (the “District”)
to the Otay Water District Financing Authority (the “Authority”) pursuant to an Installment Sale Agreement, as described herein and
from investment earnings on funds held under the Indenture (the “Revenues”). The Bonds will be issued pursuant to an Indenture of
Trust, dated as of November 1, 2019 (the “Indenture”), by and between the Authority and MUFG Union Bank, N.A., as trustee (the
“Trustee”). The Bonds are being issued to provide funds to pay for certain capital improvements to the District’s wastewater system
(the “Wastewater System”). See “THE FINANCING PLAN” herein. The District is required under the Installment Sale Agreement to
make the Installment Payments in each fiscal year from Net Revenues of the Wastewater System in an amount sufficient to pay the
annual principal and interest due on the Bonds, as described herein. See “SOURCES OF PAYMENT FOR THE BONDS” and “RISK
FACTORS” herein.
Interest on the Bonds is payable on March 1, 2020, and semiannually thereafter on September 1 and March 1 of each year until maturity.
The Bonds are subject to optional and sinking account redemption prior to maturity (see “THE BONDS - General Provisions” and “THE
BONDS - Redemption” herein).
The Bonds are special, limited obligations of the Authority and are not secured by a legal or equitable pledge of, or charge or
lien upon, any property of the Authority or any of its income or receipts, except the Revenues (consisting principally of
Installment Payments received from the District). Neither the full faith and credit of the Authority nor its members (including
the District) is pledged for the payment of the Bonds and no tax or other source of funds other than the Revenues is pledged to
pay the Bonds. The Bonds do not constitute a debt, liability or obligation of the Authority or any member of the Authority
(including the District) in violation of any constitutional or statutory debt limitation or for which any such entity is obligated
to levy or pledge any form of taxation or for which any such entity has levied or pledged any form of taxation. The Authority
has no taxing power. The obligation of the District to pay Installment Payments under the Installment Sale Agreement is
secured solely by the Net Revenues of the Wastewater System. The full faith and credit of the District is not pledged for the
payment of the Installment Payments and no tax or other source of funds other than the Net Revenues is pledged to pay the
Installment Payments. The Installment Payments do not constitute a debt, liability or obligation of the District in violation of
any constitutional or statutory debt limitation.
The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Hawkins Delafield & Wood LLP, San
Francisco, California, as Bond Counsel. Certain legal matters will be passed on for the District and the Authority by Artiano Shinoff,
San Diego, California, as General Counsel to the District and the Authority, and by Hawkins Delafield & Wood LLP, San Francisco,
California, as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by its counsel, Nixon Peabody LLP, Los
Angeles, California. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The
Depository Trust Company on or about ___________, 2019 (see “THE BONDS - General Provisions” herein).
The date of the Official Statement is __________, 2019.
__________________________
* Preliminary, subject to change.Th
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$3,200,000*
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
MATURITY SCHEDULE
(Base CUSIP®† _____)
Maturity Date Principal Interest Reoffering Reoffering
September 1 Amount Rate Yield Price CUSIP®†
__________________________ * Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP
Global Services, managed by S&P Capital IQ on behalf of the American Bankers Association. CUSIP numbers
have been assigned by an independent company not affiliated with the Authority, the District, the Municipal Advisor
or the Underwriter and are included solely for the convenience of the holders of the Bonds. None of the Authority,
the District, the Municipal Advisor or the Underwriter is responsible for the selection or use of these CUSIP
numbers, and no representation is made as to their correctness on the Bonds or as indicated above. The CUSIP
number for a specific maturity is subject to being changed after the execution and delivery of the Bonds as a result
of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a
result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is
applicable to all or a portion of certain maturities of the Bonds.
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended
(“Rule 15c2-12”), this Preliminary Official Statement constitutes an “official statement” of the District with respect
to the Bonds that has been deemed “final” by the District as of its date except for the omission of no more than the
information permitted by Rule 15c2-12.
Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official
Statement is not to be construed as a contract with the purchasers of the Bonds.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion
contained in this Official Statement are subject to change without notice. Neither the delivery of this Official
Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no
change in the affairs of the District or any other parties described in this Official Statement.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the District, any
press release and any oral statement made with the approval of an authorized officer of the District or any other entity
described or referenced herein, the words or phrases “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject
to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-
looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the
forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be
differences between forecasts and actual results, and those differences may be material.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the District to give any
information or to make any representations in connection with the offer or sale of the Bonds other than those contained
herein and if given or made, such other information or representation must not be relied upon as having been authorized
by the District or the Municipal Advisor. This Official Statement does not constitute an offer to sell or the solicitation
of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for
such person to make such an offer, solicitation or sale.
Preparation of This Official Statement. The information contained in this Official Statement has been obtained from
sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The
information and expressions of opinions herein are subject to change without notice and neither the delivery of this
Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection
with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose, unless authorized in writing by the District. All summaries of the Bonds, the Indenture or other documents,
are made subject to the provisions of such documents and do not purport to be complete statements of any or all of
such provisions. Reference is hereby made to such documents on file with the District Secretary for further
information. See “INTRODUCTION - Summaries Not Definitive.”
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has
reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors
under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does
not guarantee the accuracy or completeness of such information.
Bonds are Exempt From Securities Laws Registration. The issuance, sale and delivery of the Bonds has not been
registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in
reliance upon exemptions for the execution, sale and delivery of municipal securities provided under Section 3(a)(2)
of the Securities Act of 1933 and Section 3(a)(l2) of the Securities Exchange Act of 1934.
Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which
stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the
Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover
page hereof and said public offering prices may be changed from time to time by the Underwriter.
District Website. The District maintains a website. The information on such website is not part of this Official
Statement and is not intended to be relied on by investors with respect to the Bonds unless specifically set forth or
incorporated herein.
OTAY WATER DISTRICT
SAN DIEGO COUNTY, CALIFORNIA
BOARD OF DIRECTORS
Mitch Thompson, President - Division 2
Mark Robak, Vice President - Division 5
Hector Gastelum, Treasurer Division 4
Gary D. Croucher, Division 3
Tim Smith, Division 1
______________________________________________
MANAGEMENT TEAM
Mark Watton, General Manager
Adolfo Segura, Chief, Administrative Services
Rod Posada, PE, PLS, CCM, Chief, Engineering
Joseph R. Beachem, CPA, MBA, MPA, Chief Financial Officer
Pedro Porras, PE, Chief, Water Operations
Dan Martin, PE, Assistant Chief, Engineering
Kevin Koeppen, CPA Assistant Chief, Finance
Jose Martinez, Assistant Chief, Water Operations
________________________________________
PROFESSIONAL SERVICES
Bond Counsel and Disclosure Counsel
Hawkins Delafield & Wood LLP
San Francisco, California
General Counsel to the District and the Authority
Artiano Shinoff
San Diego, California
Municipal Advisor
Harrell & Company Advisors, LLC
Orange, California
Trustee
MUFG Union Bank, N.A.
Los Angeles, California
TABLE OF CONTENTS
INTRODUCTION ...................................................... 1
The District ................................................................ 1
The Authority ............................................................. 1
The Wastewater System ............................................. 2
Sources of Payment for the Bonds ............................. 2
No Reserve Fund ....................................................... 3
Offering of the Bonds ................................................ 3
Summaries Not Definitive ......................................... 3
THE BONDS ............................................................... 4
General Provisions ..................................................... 4
Redemption.. .............................................................. 4
Scheduled Debt Service ............................................. 6
THE FINANCING PLAN .......................................... 8
The Project ................................................................. 8
Estimated Sources and Uses of Funds ....................... 8
SOURCES OF PAYMENT FOR THE BONDS ....... 9
Revenues; Pledge of Revenues .................................. 9
Installment Payments ................................................. 9
Net Revenues ............................................................. 9
Application of District Revenues ............................. 11
No Reserve Fund for the Bonds ............................... 12
Event of Default and Acceleration of Maturities ..... 12
Rate Covenant .......................................................... 13
Rate Stabilization Fund ............................................ 13
Parity Obligations .................................................... 14
Proceeds of Insurance, Sale or Condemnation
Awards .................................................................. 15
OTAY WATER DISTRICT ...................................... 17
THE WASTEWATER SYSTEM ............................. 17
Wastewater System Description .............................. 17
San Diego Metropolitan Sewerage System .............. 18
Wastewater System Regulatory Issues ..................... 19
Customer Base ......................................................... 21
Sewer Charges ......................................................... 22
Billing Practices and Collection............................... 25
No Outstanding Parity Debt ..................................... 25
Capital Improvement Program ................................. 25
Employees and Benefits........................................... 26
District Reserves and Investment Policy ................. 26
Historical Operating Results .................................... 27
Projected Debt Service Coverage ............................ 32
CONSTITUTIONAL LIMITATIONS ON
TAXES AND APPROPRIATIONS ...................... 34
Article XIIIB Gann Limit ........................................ 34
Proposition 218 ........................................................ 34
Future Initiatives ...................................................... 36
RISK FACTORS ....................................................... 37
Net Revenues; Rate Covenant.................................. 37
Risks Related to Facilities and Operations ............... 37
Risk of Fines and Litigation ..................................... 39
Proposition 218 ........................................................ 39
Limitations on Remedies Available to Bond
Owners .................................................................. 39
Future Parity Obligations ......................................... 39
Cybersecurity ........................................................... 40
Bankruptcy ............................................................... 40
Loss of Tax Exemption ............................................ 41
IRS Audit of Tax-Exempt Bond Issues .................... 42
Secondary Market Risk ............................................ 42
TAX MATTERS ........................................................ 42
LEGAL MATTERS .................................................. 44
Enforceability of Remedies ...................................... 44
Approval of Legal Proceedings ................................ 44
Litigation .................................................................. 45
CONCLUDING INFORMATION .......................... 45
No Rating on the Bonds; Secondary Market ............ 45
Underwriting ............................................................ 45
The Municipal Advisor ............................................ 46
Continuing Disclosure ............................................. 46
Audited Financial Statements .................................. 46
References ................................................................ 46
Execution ................................................................. 47
APPENDIX A - SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS
APPENDIX B - DISTRICT AUDITED FINANCIAL
STATEMENTS
APPENDIX C - ECONOMIC PROFILE FOR THE
COUNTY OF SAN DIEGO
APPENDIX D - FORM OF CONTINUING
DISCLOSURE AGREEMENT
APPENDIX E - FORM OF BOND COUNSEL
OPINION
APPENDIX F - THE BOOK-ENTRY SYSTEM
OTAY WATER DISTRICT
LOCATION MAP
1
OFFICIAL STATEMENT
$3,200,000*
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
This Official Statement which includes the cover page, the inside front cover page and appendices (the
“Official Statement”) is provided to furnish certain information concerning the sale of the Otay Water
District Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”), in the aggregate principal
amount of $3,200,000*.
INTRODUCTION
This Introduction contains only a brief description of this issue and does not purport to be complete. The
Introduction is subject in all respects to more complete information in the entire Official Statement and the
offering of the Bonds to potential investors is made only by means of the entire Official Statement and the
documents summarized herein. Potential investors must read the entire Official Statement to obtain
information essential to the making of an informed investment decision (see “RISK FACTORS” herein). For
definitions of certain capitalized terms used herein and not otherwise defined, and the terms relating to the
Bonds, see the summary included in “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS”
herein.
The District
The Otay Water District (the “District”) was established in 1956. The District is a municipal water district
organized and existing under and in accordance with Division 20 of the Water Code of the State of
California, commencing with Section 71000, as amended (the “Law”). The District’s boundaries currently
encompass an area of approximately 125 square miles in San Diego County, lying immediately east of the
San Diego metropolitan area and running from the City of El Cajon south to the Mexican border, abutting
the cities of El Cajon and La Mesa and encompassing most of the City of Chula Vista and a small portion
of the City of San Diego. The District currently serves a population of approximately 223,000 and expects
the service area to experience moderate growth in the next ten years (see “OTAY WATER DISTRICT” and
“APPENDIX C - ECONOMIC PROFILE FOR THE COUNTY OF SAN DIEGO” herein). Approximately 15,300
of the District’s customers are served by the District’s wastewater system (see “THE WASTEWATER
SYSTEM” herein).
The District is administered by a Board of Directors consisting of five members who are elected to four-
year alternating terms by the voters residing within the District’s boundaries. The District is divided into
five divisions, with each Director representing a specific division within which he or she must reside. The
positions of General Manager and General Counsel are filled by appointments of the Board. The District
employs 137 full-time equivalent employees.
The Authority
The Otay Water District Financing Authority (the “Authority”) is a joint exercise of powers authority
organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1
through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of
the State of California (the “Joint Powers Act”). The District and the California Municipal Finance
Authority, a joint exercise of powers authority, formed the Authority by the execution of a joint exercise
__________________________
* Preliminary, subject to change.
2
of powers agreement on March 3, 2010. The Authority functions as an independent entity and was formed
to assist the District in the financing of public capital improvements. Pursuant to the Joint Powers Act, the
Authority is authorized to issue revenue bonds to provide funds to finance and refinance public capital
improvements of the District, with such revenue bonds to be repaid from the installment payments for such
improvements, such as the installment payments described herein.
The Authority is governed by a five-member Board which consists of all members of the District’s Board
of Directors. The Board President serves as the Chairman of the Authority. The General Manager acts as
the Executive Director, the District Secretary acts as the Secretary, and the Chief Financial Officer acts as
the Treasurer/Auditor of the Authority.
The Wastewater System
The District provides sewer service to approximately 15,300 customers through 4,729 accounts located in
the northern section of the District. The District operates and maintains the sewage collection system
serving Rancho San Diego, Singing Hills, and portions of Mount Helix, all within the Upper Sweetwater
River Basin. This basin is also known as the Jamacha Basin. Residential customers comprise 97.3% of the
customer base.
Wastewater collection within the Jamacha Basin is provided by two agencies, the District and the County
of San Diego (the “County”). Customers in the basin, not served by either agency, dispose of their sewage
through septic tanks. After the sewage has been collected, it is sent to the District’s Ralph W. Chapman
Water Reclamation Facility treatment plant where the District produces recycled water. The by-product of
the treatment process is discharged through the County’s transmission system into the City of San Diego
Metropolitan Wastewater system (the “Metro System”).
The District is a member of Metro Wastewater Joint Powers Authority (the “Metro JPA”) and shares in the
use of the City of San Diego’s regional wastewater facilities. A significant amount of the sewer operation
costs is for sewer service charges from the Metro JPA. Additionally, the District also pays its share of the
County’s operation and maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall
to transport sewage to the Metro System. See “THE WASTEWATER SYSTEM - San Diego Metropolitan
Sewerage System” herein.
Sources of Payment for the Bonds
The Bonds. The Bonds are being issued pursuant to the Joint Powers Act and an Indenture of Trust, dated
as of November 1, 2019 (the “Indenture”), by and between the Authority and MUFG Union Bank, N.A.,
Los Angeles, California, as trustee (the “Trustee”). The Bonds are being issued to provide funding for the
Project, as defined herein. The proceeds of the Bonds deposited in the Project Fund will be used by the
District for the acquisition, construction and installation of the Project. A portion of the proceeds will also
be used to pay costs of issuance.
The Bonds are secured by the “Revenues,” consisting of Installment Payments (defined herein) to be made
by the District to the Authority pursuant to an Installment Sale Agreement, dated as of November 1, 2019
(the “Installment Sale Agreement”) by and between the Authority and the District and from investment
earnings on funds held under the Indenture. The District is obligated to make installment payments to the
Authority under the Installment Sale Agreement (the “Installment Payments”) from Net Revenues (defined
herein), and the Authority is, in turn, required under the Indenture to use the Installment Payments to pay
interest on and principal of the Bonds.
The Installment Payments are scheduled to be sufficient to pay, when due, the annual principal and interest
on the Bonds. Pursuant to the Indenture, the Authority will assign to the Trustee, for the benefit of the
Owners of the Bonds, all of its rights, title and interest under the Installment Sale Agreement except for its
3
right to be indemnified by the District. For a summary of the Indenture and the Installment Sale Agreement
see “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” herein.
The Installment Payments. The Installment Sale Agreement is being executed and delivered to finance
the construction of the Project. See “THE FINANCING PLAN” and “THE WASTEWATER SYSTEM.” The
Installment Payments are secured by a charge and lien on Net Revenues of the Wastewater System. See
“SOURCES OF PAYMENT FOR THE BONDS” herein.
The Bonds are limited obligations of the Authority and are payable solely from and secured solely by
the Revenues and all moneys on deposit in any of the funds and accounts established and held by the
Trustee under the Indenture. The District’s obligation to make the Installment Payments is a limited
obligation of the District payable solely from Net Revenues of the Wastewater System, and neither
the full faith and credit nor the taxing power of the District, the State of California or any of its
political subdivisions is pledged for the payment of the Bonds. Neither the Bonds nor the obligation
of the District to make Installment Payments constitutes an indebtedness of the Authority, the
District, the State of California or any political subdivision thereof in contravention of any
constitutional or statutory debt limitation or restriction.
No Reserve Fund
The Authority will not establish or fund a reserve fund for the Bonds.
Offering of the Bonds
Authority for Issuance and Delivery. The Bonds are to be issued pursuant to the Joint Powers Act, the
Indenture and Resolution No. ___ of the Authority adopted on ____, 2019.
Offering and Delivery of the Bonds. The Bonds are offered, when, as and if issued, subject to the approval
as to their legality by Bond Counsel. It is anticipated that the Bonds, in book-entry form, will be available
for delivery on or about ______, 2019 through the facilities of The Depository Trust Company.
Summaries Not Definitive
The summaries and references contained herein with respect to the Indenture, the Bonds and other statutes
or documents do not purport to be comprehensive or definitive and are qualified by reference to each such
document or statute, and references to the Bonds are qualified in their entirety by reference to the form
thereof included in the Indenture. Copies of these documents may be obtained after delivery of the Bonds
from the District at 2554 Sweetwater Springs Blvd., Spring Valley, California 91978.
4
THE BONDS
General Provisions
Bond Terms. The Bonds will be dated their date of delivery and issued in fully registered form without
coupons in denominations of $5,000 or any integral multiple of $5,000. The Bonds will mature in the
amounts and on the dates, and bear interest at the annual rates, set forth on the inside front cover page of
this Official Statement.
The Bonds will be issued as fully registered bonds in book-entry only form, registered in the name of Cede
& Co. as nominee of DTC, and will be available to ultimate purchasers in the denomination of $5,000 or
any integral multiple of $5,000, under the book-entry system maintained by DTC. While the Bonds are
subject to the book-entry system, the principal and interest with respect to a Bond will be paid by the Trustee
to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent
disbursement to Beneficial Owners of the Bonds. Purchasers of the Bonds will not receive certificates
representing their interests therein, which will be held at DTC.
See “APPENDIX F - THE BOOK-ENTRY SYSTEM” for further information regarding DTC and the book-
entry system.
Payments of Principal and Interest. Principal of the Bonds will be payable in accordance with the
maturity schedule shown on the inside front cover page of this Official Statement, subject to any optional
or mandatory sinking fund redemptions prior to maturity (see “Redemption” below). Interest on the Bonds
will be payable on March 1 and September 1 in each year, commencing on March 1, 2020 (each an “Interest
Payment Date”). Interest will be calculated on the basis of a 360-day year of twelve 30-day months.
While the Bonds are subject to the book-entry system, the principal and interest with respect to the Bonds
will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the Bonds. See
“APPENDIX F - THE BOOK-ENTRY SYSTEM.”
Redemption*
Optional Redemption From any Source of Available Funds. The Bonds maturing on or before
September 1, 2029 are not subject to optional redemption prior to their respective stated maturity dates.
The Bonds maturing on or after September 1, 2030, are subject to redemption in whole, or in part at the
Written Request of the District, among maturities on such basis as the District may designate and by lot
within a maturity, at the option of the District, on any date on or after September 1, 2029, from any available
source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, plus
accrued interest to the date of redemption, without premium.
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, ___ (the “Term Bond”)
are also subject to redemption, by lot, on September 1 in each of the years as set forth in the following table,
from deposits made for such purpose under the Indenture, at a redemption price equal to the principal
amount thereof to be redeemed together with accrued interest thereon to the redemption date, without
premium, or in lieu thereof may be purchased in the aggregate respective principal amounts and on the
respective dates as set forth in the following table; provided, however, that if some but not all of the Term
Bonds have been redeemed through optional redemption as described above, the total amount of all future
sinking fund payments with respect to such Term Bonds will be reduced by the aggregate principal amount
of such Term Bonds so redeemed, to be allocated among such payments in integral multiples of $5,000 as
determined by the District.
________________________________________
* Preliminary, subject to change.
5
Term Bond Maturing September 1, 20__
Sinking Fund
Redemption Date
(September 1)
Principal
Amount To Be
Redeemed
(Maturity)
Special Mandatory Redemption From Sale Proceeds. [ ].
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of
less than all the Bonds of a single maturity, the District will select the Bonds of that maturity to be redeemed
by lot in any manner that the District in its sole discretion deems appropriate. For purposes of such
selection, the District will treat each Bond as consisting of separate $5,000 portions and each such portion
will be subject to redemption as if such portion were a separate bond.
Notice of Redemption. The Trustee will mail notice of redemption of the Bonds by first class mail, postage
prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of
any Bonds designated for redemption at their addresses appearing on the Registration Books and to one or
more Securities Depositories, and will be filed electronically with the Municipal Securities Rulemaking
Board or such other services providing information with respect to called bonds in accordance with then-
current guidelines of the Securities and Exchange Commission.
Neither the failure to receive any redemption notice nor any defect therein will affect the sufficiency of the
proceedings for redemption of the Bonds or the cessation of accrual of interest from and after the
redemption date.
Rescission of Redemption Notice. The District has the right to rescind any optional redemption by written
notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption will be cancelled
and annulled if for any reason funds are not available on the date fixed for redemption for the payment in
full of the Bonds then called for redemption, and such cancellation will not constitute an Event of Default
under the Indenture. The Trustee will mail notice of rescission of redemption in the same manner notice of
redemption was originally provided.
Effect of Redemption. If notice of redemption has been duly given as provided in the Indenture, and
moneys for payment of the redemption price of, together with interest accrued to the date fixed for
redemption on, including any applicable premium, the Bonds (or portions thereof) so called for redemption
are held by the Trustee, on the redemption date designated in the redemption notice, then the Bonds (or
portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for
redemption will cease to accrue, those Bonds (or portions thereof) will cease to be entitled to any benefit
or security under the Indenture, and the Owners of those Bonds will have no rights in respect thereof except
to receive payment of the redemption price thereof.
6
Scheduled Debt Service
The following presents the annual debt service on the Bonds, assuming no optional redemption prior to
maturity.
Bond Year
Ending
September 1 Principal Interest Total
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
Total
7
Annual Installment Payments related to the Bonds are set forth in the following table. The payments are
calculated on an accrual basis for each July 1 to June 30 period, consistent with the debt service calculations
that will be made for the District’s Comprehensive Annual Financial Report.
Fiscal
Year Ending Installment
June 30 Payments
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Total
8
THE FINANCING PLAN
The Project
The District will use the proceeds of the Bonds for the Campo Road Sewer replacement project (the
“Project”). The Project will replace 1.41 miles of 10-inch-diameter sewer main with a new 15-inch-
diameter sewer main pipeline along State Route 94 (“SR 94”) in Rancho San Diego. The sewer pipeline is
installed in easements that cross the properties of Rancho San Diego Village and the Rancho San Diego
Town Centre, and in the SR 94 public right of way between Avocado Boulevard and Jamacha Road.
The Project is part of an ongoing series of projects to rehabilitate and upgrade the sewer system in the
communities served by the District. The new pipeline will replace a 10-inch sewer main that can no longer
provide adequate capacity for sewer flows in the area. The new 15-inch-diameter pipeline will reduce the
potential for sewer overflows, and its new alignment will allow the District to construct and maintain the
pipeline without disturbing sensitive environmental areas.
The total Project cost is approximately $10.5 million, of which approximately $3 million will be funded
with proceeds of the Bonds. The Project is underway and is anticipated to be completed during November
2019.
Estimated Sources and Uses of Funds
Under the provisions of the Indenture, the Trustee will receive the proceeds from the sale of the Bonds and
other funds and will apply them as follows:
Sources:
Principal Amount of Bonds
Net Original Issue Premium (Discount)
Available Sources
Uses:
Project Fund
Underwriter’s Discount
Costs of Issuance Fund (1)
Total Uses
____________________________________
(1) Expenses include fees of Bond Counsel, the Municipal Advisor, Disclosure Counsel, the Trustee, costs of printing
the Official Statement, and other costs of delivery of the Bonds.
9
SOURCES OF PAYMENT FOR THE BONDS
Revenues; Pledge of Revenues
Pledge of Revenues and Other Amounts. Subject only to the provisions of the Indenture permitting the
application thereof for the purposes and on the terms and conditions set forth therein, all of the Revenues
and all amounts held in any fund or account established under the Indenture are pledged to secure the
payment of the principal of and interest and premium (if any) on the Bonds and in accordance with their
terms and the provisions of the Indenture. This pledge constitutes a lien on and security interest in the
Revenues and such amounts held under the Indenture, and will attach, be perfected and be valid and binding
from and after the Closing Date, without the need for any physical delivery thereof or further act.
“Revenues” means:
(a) all amounts received by the Authority or the Trustee pursuant or with respect to the Installment Sale
Agreement, including, without limiting the generality of the foregoing, all of the Installment
Payments (including both timely and delinquent payments, any late charges, and whether paid from
any source, but excluding any Additional Payments), prepayments, insurance proceeds,
condemnation proceeds, and
(b) all interest, profits or other income derived from the investment of amounts in any fund or account
established pursuant to the Indenture.
Assignment to Trustee. Under the Indenture, the Authority will irrevocably transfer, assign and set over
to the Trustee, without recourse to the Authority, all of its rights in the Installment Sale Agreement
(excepting only the Authority’s rights to Additional Payments, release and indemnification by the District,
and the payment of attorneys’ fees and expenses under the Installment Sale Agreement), including but not
limited to all of the Authority’s rights to receive and collect all of the Installment Payments. The Trustee is
entitled to collect and receive all of the Installment Payments, and any Installment Payments collected or
received by the Authority will be deemed to be held, and to have been collected or received, by the Authority
as the agent of the Trustee and will immediately be paid by the Authority to the Trustee. The Trustee is also
entitled to and must, subject to the provisions of the Indenture, take all steps, actions and proceedings which
the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the
Authority or separately, all of the rights of the Authority and all of the obligations of the District under the
Installment Sale Agreement.
Installment Payments
The Installment Payments are payable from and secured by Net Revenues all as set forth in the Installment
Sale Agreement and in the manner described herein. The Installment Payments are calculated to be
sufficient to pay, when due, the scheduled payment of principal and interest on by the Bonds.
The District’s obligation to pay the Installment Payments is a limited obligation of the District
payable solely from Net Revenues of the Wastewater System, and neither the full faith and credit nor
the taxing power of the District, the State of California or any if its political subdivisions is pledged
for the payment of the Installment Payments.
Net Revenues
Definitions. The following definitions are from the Installment Sale Agreement and the Indenture and
capitalized terms used below have the meanings set forth in the Indenture. See “APPENDIX A - SUMMARY
OF PRINCIPAL LEGAL DOCUMENTS.”
10
“Net Revenues” means, for any period, an amount equal to all of the Gross Revenues of the District received
during such period minus the amount required to pay all Operation and Maintenance Costs of the District
becoming payable during such period.
“Gross Revenues” means all gross charges received for, and all other gross income and receipts derived by
the District from, the ownership and operation of the Wastewater Operations (as defined below) or
otherwise arising from the Wastewater Operations, including but not limited to:
(a) all amounts levied by the District as a fee for connecting to the Wastewater Operations, as such fee
is established from time to time under the applicable laws of the State of California,
(b) all income, rents, rates, fees, capital improvement fees, charges and other moneys derived from the
services and facilities furnished or supplied through the facilities of the Wastewater Operations,
(c) the earnings on and income derived from the investment of such income, rents, rates, fees, charges
or other moneys to the extent that the use of such earnings and income is limited by or under
applicable law to the Wastewater Operations,
(d) the proceeds derived by the District directly or indirectly from the sale, lease or other disposition of
a part of the Wastewater Operations as permitted hereunder, and
(e) amounts transferred into the Wastewater Revenue Fund from a Rate Stabilization Fund, if any.
The term “Gross Revenues” does not include (i) customers’ deposits or any other deposits subject to refund
until such deposits have become the property of the District, (ii) the proceeds of any ad valorem property
taxes levied to pay any general obligation bond indebtedness of the District with respect to the Wastewater
Operations, (iii) special assessments or special taxes levied upon real property within any improvement
district for the purpose of paying special assessment bonds or special tax obligations of the District, and
(iv) amounts transferred from the Wastewater Revenue Fund into the Rate Stabilization Fund during a fiscal
year, but only to the extent that any amounts transferred from the Wastewater Revenue Fund into the Rate
Stabilization Fund were included in Gross Revenues for that fiscal year.
“Wastewater Operations” means the wastewater system of the District, including but not limited to all
facilities, properties and improvements at any time owned or operated by the District for the collection and
conveyance of wastewater from residents served thereby, and any necessary lands, rights, entitlements and
other property useful in connection therewith, together with all extensions thereof and improvements
thereto hereafter acquired, constructed or installed by the District.
“Operation and Maintenance Costs” means the reasonable and necessary costs and expenses paid by the
District for maintaining and operating the Wastewater Operations, including but not limited to:
(a) costs of utilities, including the costs of electricity and other forms of energy supplied to the
Wastewater Operations,
(b) the reasonable expenses of management and repair and other costs and expenses necessary to
maintain and preserve the Wastewater Operations in good repair and working order, and
(c) the reasonable administrative costs of the District attributable to the operation and maintenance of
the Wastewater Operations, including insurance and other costs described in the Installment Sale
Agreement.
“Operation and Maintenance Costs” do not include:
11
(i) debt service payable on obligations incurred by the District with respect to the Wastewater
Operations, including but not limited to the Installment Payments and any Parity Obligations,
(ii) depreciation, replacement and obsolescence charges or reserves therefor, and
(iii) capital expenditures (other than as set forth in paragraph (b) above), including amounts charged by
the Metro System for the Pure Water capital costs (see “THE WASTEWATER SYSTEM – San Diego
Metropolitan Sewerage System – Point Loma Wastewater Treatment Plant and the Pure Water Project”),
and
(iv) amortization of intangibles or other bookkeeping entries of a similar nature.
Application of District Revenues
Under the Installment Sale Agreement, the District will irrevocably pledge, charge and assign all the Net
Revenues of the District and all moneys on deposit in any of the funds and accounts established and held
by the Trustee under the Indenture to the punctual payment of the Installment Payments. This pledge,
charge and assignment constitutes a lien on the Net Revenues and such other moneys for the payment of
the Installment Payments in accordance with the terms of the Installment Sale Agreement, on parity with
the pledge and lien that secures any “Parity Obligations” (as defined under the heading entitled “Parity
Obligations” below).
Under the Installment Sale Agreement, the District is required to deposit all of the Gross Revenues in the
Wastewater Revenue Fund (which has been established and is held and maintained by the District)
immediately upon receipt.
The District will apply amounts in the Wastewater Revenue Fund in accordance with the Installment Sale
Agreement and any Parity Obligations Documents (for all purposes in this Official Statement, as such are
defined in the Indenture), and will apply amounts on deposit in the Wastewater Revenue Fund to pay when
due the following amounts in the following order of priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and interest on Parity Obligations;
(iii) any other payments required to comply with the provisions of the Installment Sale Agreement and
any Parity Obligations Documents; and
(iv) any other purposes authorized under the Installment Sale Agreement.
No Preference or Priority. Under the Installment Sale Agreement, payment of the Installment Payments
and the principal of and interest on Parity Obligations will be made without preference or priority among
the Installment Payments and such Parity Obligations. If the amount of Net Revenues on deposit in the
Wastewater Revenue Fund is any time insufficient to enable the District to pay when due the Installment
Payments and the principal of and interest on Parity Obligations, such payments will be made on a pro rata
basis.
Other Uses of Gross Revenues Permitted. Under the Installment Sale Agreement the District will
manage, conserve and apply the Gross Revenues on deposit in the Wastewater Revenue Fund in such a
manner that all deposits required to be made as described above will be made at the times and in the amounts
so required. Subject to the foregoing sentence, so long as no Event of Default has occurred and is
continuing, the District may use and apply moneys in the Wastewater Revenue Fund for (i) the payment of
any subordinate obligations or any unsecured obligations, (ii) the acquisition and construction of
12
improvements to the Wastewater Operations, (iii) the prepayment of any other obligations of the District
relating to the Wastewater Operations, or (iv) any other lawful purposes of the District.
Events of Default; Remedies on Default. For a description of events of default and remedies on default
contained in the Installment Sale Agreement, see “Events of Default and Acceleration of Maturities” below
and “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Events of Default” and “- Remedies
on Default.”
Allocation of Revenues by Trustee
Transfers from the Bond Fund. Under the Indenture, on or before each Interest Payment Date, the Trustee
will transfer from the Bond Fund and deposit into the following respective accounts the following amounts
in the following order of priority:
(a) Deposit to Interest Account. The Trustee will deposit in the Interest Account an amount required to
cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of
interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding.
(b) Deposit to Principal Account. The Trustee will deposit in the Principal Account an amount required
to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of
the Bonds coming due and payable on each September 1, including the aggregate principal amount
of the Term Bonds (if any) that are subject to mandatory sinking fund redemption on that
September 1.
Application of Interest Account. All amounts in the Interest Account will be used and withdrawn by the
Trustee solely for the purpose of paying interest on the Bonds as it comes due and payable (including
accrued interest on any Bonds purchased or redeemed prior to maturity).
Application of Principal Account. All amounts in the Principal Account will be used and withdrawn by
the Trustee solely to pay the principal amount of the Bonds on their respective maturity dates, and the
principal amount of the Term Bonds (if any) that are subject to mandatory sinking fund redemption on such
September 1.
No Reserve Fund for the Bonds
There is no reserve fund established for the Bonds.
Events of Default and Acceleration of Maturities
The Installment Payments are not secured by, and the Owners of Bonds have no security interest in or
mortgage on the property of the Wastewater System, or of the District. Default by the District will not
result in loss of any property to the District. Should the District default, the Trustee may declare the entire
principal amount of the Installment Payments and the accrued interest thereon, to be due and payable
immediately, whereupon the same shall become due and payable, and take whatever action at law or in
equity may appear necessary or desirable to enforce performance and observance of any obligation,
agreement or covenant of the District under the Installment Sale Agreement. A default under the Installment
Sale Agreement is also an Event of Default under the Indenture which may result in an acceleration of
Bonds. See “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Events of Default” and “-
Remedies on Default” and “RISK FACTORS - Limitations on Remedies Available to Bond Owners.”
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Rate Covenant
Covenant Regarding Net Revenues. Under the Installment Sale Agreement, the District is required to fix,
prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the
Wastewater Operations during each Fiscal Year that are sufficient, after making allowances for
contingencies and errors in estimates, to yield Net Revenues that are at least equal to 115% of the amount
described in the clauses (ii) and (iii) under “- Covenant Regarding Gross Revenues” below for such Fiscal
Year.
Covenant Regarding Gross Revenues. Under the Installment Sale Agreement, the District is required to
fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the
Wastewater Operations during each Fiscal Year, which are at least sufficient, after making allowances for
contingencies and error in the estimates, to yield Gross Revenues sufficient to pay the following amounts
in the following order of priority:
(i) All Operation and Maintenance Costs estimated by the District to become due and payable in such
Fiscal Year.
(ii) All Installment Payments and all payments of principal of and interest on any Parity Obligations as
they become due and payable during such Fiscal Year, without preference or priority, except to the
extent such Installment Payments or the principal of and interest on such Parity Obligations are
payable from the proceeds of the Bonds or such Parity Obligations, as applicable, or from any source
of legally available funds of the District (other than the Gross Revenues of the Wastewater
Operations) that have been deposited with the Trustee for such purpose before the beginning of that
Fiscal Year.
(iii) All payments required to meet any other obligations of the District which are charges, liens,
encumbrances upon, or which are otherwise payable from, the Gross Revenues or the Net Revenues
during such Fiscal Year, except to the extent other sources of funds are reserved or encumbered
therefore.
Rate Stabilization Fund
The District has the right at any time to establish a fund to be held by it and administered in accordance
with the Indenture, to be known as the “Rate Stabilization Fund,” for the purpose of stabilizing the rates
and charges imposed by the District. From time to time the District may deposit amounts in the Rate
Stabilization Fund from any source of legally available funds, including but not limited to Net Revenues
that are released from the pledge and lien that secures the Bonds and any Parity Obligations, as the District
may determine.
The District may, but is not required to, withdraw from any amounts on deposit in a Rate Stabilization Fund
and deposit such amounts in the Wastewater Revenue Fund in any Fiscal Year for the purpose of paying
Annual Debt Service coming due and payable in such Fiscal Year. Amounts so transferred from a Rate
Stabilization Fund to the Wastewater Revenue Fund will constitute Gross Revenues for such Fiscal Year
(except as otherwise provided in the Indenture), and will be applied for the purposes of the Wastewater
Revenue Fund. Amounts on deposit in a Rate Stabilization Fund will not be pledged to or otherwise secure
the Bonds or any Parity Debt. All interest or other earnings on deposits in a Rate Stabilization Fund will
be withdrawn therefrom at least annually and accounted for as Gross Revenues in the Wastewater Revenue
Fund. The District has the right at any time to withdraw any or all amounts on deposit in a Rate Stabilization
Fund and apply such amounts for any lawful purposes of the District. The District does not currently
maintain any funds in a Rate Stabilization Fund.
14
Parity Obligations
Under the Installment Sale Agreement, the District may not issue or incur any additional bonds or other
obligations during the Term of the Installment Sale Agreement having any priority in payment of principal
or interest out of the Gross Revenues or the Net Revenues over the Installment Payments.
Under the Installment Sale Agreement, the District may issue, enter into or incur Parity Obligations, in
accordance with the conditions described below, or obligations that are either unsecured or which are
secured by an interest in the Net Revenues that is junior and subordinate to the pledge of and lien upon the
Net Revenues established under the Installment Sale Agreement.
Conditions for Issuance of Parity Obligations. Under the Installment Sale Agreement, except for
obligations incurred to prepay or discharge the Installment Payments or any Parity Obligations, the District
may not issue or incur any Parity Obligations during the Term of the Installment Sale Agreement unless all
the following conditions are satisfied:
(a) No Event of Default has occurred and is continuing.
(b) The amount of Net Revenues, excluding connection fees and transfers from the Rate Stabilization
Fund, as shown by the books of the District for the most recent completed Fiscal Year for which
audited financial statements of the District are available or for any more recent consecutive 12-month
period selected by the District, or shown in the audited financial statements of the District, plus at the
option of the District any Additional Revenues, are at least equal to 115% of the amount of Maximum
Annual Debt Service coming due and payable in the current or any future Bond Year with respect to
the Bonds and all Parity Debt then outstanding (including the Parity Debt then proposed to be issued).
If the Parity Obligations are being issued solely to refund outstanding Parity Obligations, and the resulting
Annual Debt Service for each Bond Year is less than the Annual Debt Service for each Bond Year prior to
the issuance of the refunding Parity Obligations, the District need not comply with the provisions described
in paragraphs (a) and (b) above.
The Parity Obligations may be, but are not required to be, in the form of Supplemental Agreements, and
may, but are not required to, secure the payment of debt service on Bonds.
“Parity Obligations” means (i) any bonds, notes, leases, installment sale agreements or other obligations
of the District payable from and secured by a pledge of and lien upon any of the Net Revenues on a parity
with the Installment Payments, entered into or issued under and in accordance with the Installment Sale
Agreement, and (ii) any other Governmental Loan that is treated as a Parity Obligation under the Installment
Sale Agreement.
“Additional Revenues” means (i) an allowance for Net Revenues from any additions or improvements to
or extensions of the Wastewater Operations to be made with the proceeds of such Parity Obligations and
also for Net Revenues from any such additions, improvements or extensions which have been made from
moneys from any source but in any case which, during all or any part of the latest Fiscal Year or for any
more recent consecutive 12-month period selected by the District, were not in service, all in an amount
equal to the estimated additional average annual Net Revenues to be derived from such additions,
improvements and extensions for the first 36-month period in which each addition, improvement or
extension is respectively to be in operation, or (ii) an allowance for Net Revenues arising from any increase
in the charges made for service from the Wastewater Operations which has been adopted prior to the
incurring of such Parity Obligations but which, during all or any part of the latest Fiscal Year or for any
more recent consecutive 12-month period selected by the District, was not in effect, in an amount equal to
the total amount by which the Net Revenues would have been increased if such increase in charges had
been in effect during the whole of such Fiscal Year or 12-month period.
15
Conditions for Entering Into Governmental Loans.
(a) The District may borrow money from a Governmental Agency and incur a Governmental Loan to
finance improvements to the Wastewater Operations. A Governmental Loan may be treated as a
Parity Obligation for purposes of the Installment Sale Agreement, so long as the District complies
with subsections (a) and (b) under the conditions for issuance of Parity Obligations described above
before incurring the Governmental Loan.
(b) the District may not make a payment on any Governmental Loan (except as expressly described in
subsection (c) below) to the extent it would have the effect of causing the District to fail to make a
timely payment on the Bonds.
(c) If Net Revenues are ever insufficient to pay the full amount of Installment Payments and other Parity
Obligations then Outstanding and such Governmental Loan, the District will make payments on the
Installment Payments and other Parity Obligations and such Governmental Loan on a pro rata basis.
“Governmental Agency.” The term “Governmental Loan” is defined in the Indenture as any loan made
by a “Governmental Agency” (defined as the State, and the United States of America, acting through any
of its agencies, to the extent that the State or such agency has loaned money to the District for the
Wastewater Operations) to the District which is secured by a pledge of Net Revenues and incurred by the
District to finance improvements to the Wastewater Operations pursuant to the Installment Sale Agreement.
Proceeds of Insurance, Sale or Condemnation Awards
Insurance. Under the Installment Sale Agreement, the District must at all times maintain with responsible
insurers all such insurance on the Wastewater Operations as is customarily maintained with respect to works
and properties of like character against accident to, loss of or damage to the Wastewater Operations. The
District will apply any amounts collected from insurance against accident to or destruction of any portion
of the Wastewater Operations to repair or rebuild such damaged or destroyed portion of the Wastewater
Operations.
The District must also maintain, with responsible insurers, worker’s compensation insurance and insurance
against public liability and property damage to the extent reasonably necessary to protect the District, the
Authority, the Trustee and the Owners of the Bonds.
Any policy of insurance required under this provision may be maintained as part of or in conjunction with
any other insurance coverage carried by the District, and may be maintained in whole or in part in the form
of self-insurance by the District or in the form of the participation by the District in a joint powers agency
or other program providing pooled insurance.
Sale of the Wastewater Operations. Except as described below, the District will covenant in the
Installment Sale Agreement that the Wastewater Operations will not be encumbered, sold, leased, pledged,
have any charge placed thereon, or otherwise be disposed of, as a whole or substantially as a whole, if such
encumbrance, sale, lease, pledge, charge or other disposition would materially impair the ability of the
District to pay the Installment Payments or the principal of or interest on any Parity Obligations, or would
materially adversely affect its ability to comply with the terms of the Installment Sale Agreement or any
Parity Obligations Documents.
The District may not enter into any agreement that impairs the operation of the Wastewater Operations or
any part of it necessary to secure adequate Net Revenues to pay the Installment Payments or any Parity
Obligations, or which otherwise would impair the rights of the Bond Owners or the Trustee with respect to
the Net Revenues.
16
If any substantial part of the Wastewater Operations is sold, the payment therefor must be used for the
acquisition or construction of improvements to the Wastewater Operations [ or the redemption of all
Outstanding Bonds and Parity Obligations.]
Condemnation Awards. Any amounts received as awards as a result of the taking of all or any part of the
Wastewater Operations by the lawful exercise of eminent domain, if and to the extent that such right can be
exercised against such property of the District, must be used for the acquisition or construction of
improvements to the Wastewater Operations.
SEWER SERVICE AREA AND FACILITIES
INSERT MAP
17
OTAY WATER DISTRICT
The District was formed in January 1956 pursuant to Section 71000 et seq., of the California Water Code,
and joined the San Diego County Water Authority (which is a member of the Metropolitan Water District
of Southern California) in September 1956 to acquire the right to purchase and distribute imported water
throughout its service area. The San Diego County Water Authority is an agency responsible for the
wholesale supply of water to its 24 public agency members in San Diego County.
The District’s boundaries currently encompass an area of approximately 125 square miles and is generally
located within the south central portion of San Diego County. The District serves a wide spectrum of
communities, including southern El Cajon, La Mesa, Rancho San Diego, Jamul, Spring Valley, Bonita,
eastern Chula Vista, and a small portion of the City of San Diego on Otay Mesa. The southern boundary
of the District is the international border with Mexico.
The District is governed by a five-member Board of Directors (the “Board”) elected from separate
geographical areas within the District. The Board selects a Board President from among its members and
appoints a General Manager and General Counsel to serve the District.
Revenues from the District’s water system are not pledged to the payment of the Bonds or the Installment
Payments.
THE WASTEWATER SYSTEM
The following information concerning the Wastewater System was obtained from District officials except
where otherwise indicated. The audited financial statements of the District for the Fiscal Year ended
June 30, 2019 are attached hereto as “APPENDIX B” and should be read in their entirety.
Wastewater System Description
The District owns and operates the Wastewater System, a wastewater collection system providing public
sewer service to approximately 4,729 customer accounts within the Jamacha drainage basin located in the
northern section of the District. The County also provides wastewater service in a portion of the Jamacha
Basin. Wastewater flows from each agency’s customers are conveyed in joint collection and pumping
systems.
The District’s wastewater facilities consist of approximately 88 miles of sewer mains, four sewage lift
stations, and one main sewage pump station. The District also owns and operates the Ralph W. Chapman
Water Reclamation Facility (“Ralph W. Chapman Water Reclamation Facility”) within the Jamacha Basin,
which is operated as a skimming facility.
Currently, the District collects approximately 1.15 million gallons per day (“mgd”) of wastewater. Of this
amount, approximately 0.2 mgd is conveyed to the City of San Diego Metropolitan Sewerage System (the
“Metro System”) for treatment at the Point Loma Wastewater Treatment Plant (“Point Loma Wastewater
Treatment Plant”) and released into the ocean via an outfall. The remaining 0.95 mgd is processed as
recycled water at the Ralph W. Chapman Water Reclamation Facility. The costs of primary and secondary
treatment of wastewater is an operating expense of the Wastewater System. The costs of tertiary treatment
of the wastewater, which then allows it to be conveyed to the District’s recycled water customers, is charged
directly to the District’s water system.
The District has entered into a joint use agreement with the County’s Spring Valley Sanitation District to
pay its share of the County’s operation and maintenance cost of the Rancho San Diego Outfall and the
Spring Valley Outfall to transport sewage to the Metro System. The Metro System processes the District’s
sewage that is beyond the capability of the Ralph R. Chapman Water Recycling Facility and all of the sludge
created by the Ralph W. Chapman Water Reclamation Facility. All payments by the District to the City of
18
San Diego with respect to the Metro System are treated as Operation and Maintenance Costs of the
Wastewater System.
San Diego Metropolitan Sewerage System
The Metro System is a regional sewage treatment and disposal system that serves the City of San Diego
and various other public agencies, including cities situated within common drainage areas. The Metro
System treats and disposes of the wastewater generated by the City of San Diego and certain amounts from
12 other cities and districts. The City of San Diego, as operator of the Metro System, is the holder of two
National Pollutant Discharge Elimination System (“NPDES”) permits, one for the discharge of sewage at
the Point Loma Wastewater Treatment Plant (“Point Loma Discharge Permit”), and the other for the
discharge of sewage at the South Bay Water Reclamation Plant.
The Metropolitan Wastewater Joint Powers Authority (“Metro JPA”) is a coalition of municipalities and
special districts in the southern and central portions of San Diego County that share in the use of the Metro
System facilities. The District is one of 12 “Participating Agencies” in the Metro JPA The other Metro JPA
member agencies are the cities of Chula Vista, Coronado, Del Mar, El Cajon, Imperial Beach, La Mesa,
National City, Poway, the County of San Diego Sanitation District, the Lemon Grove Sanitation District,
and Padre Dam Municipal Water District.
The District is a party to the Regional Wastewater Disposal Agreement dated of May 18, 1998 as amended,
between the City of San Diego and the Participating Agencies including the District (the “Regional
Wastewater Disposal Agreement”). The Regional Wastewater Disposal Agreement is proposed to be
amended and restated by an Amended and Restated Regional Wastewater Disposal Agreement (the
“Amended and Restated Regional Wastewater Disposal Agreement”) that is currently under consideration
and has been executed by all but 2 Participating Agencies.
Regional Wastewater Disposal Agreement. Under the terms of the Regional Wastewater Disposal
Agreement, the District shares in the cost of the Metro System. It is the District’s practice to pass through
any increase in treatment costs to its customers (see “THE WASTEWATER SYSTEM - Sewer Charges”).
Pursuant to the Regional Wastewater Disposal Agreement, the Participating Agencies are required to pay
their respective share of planning, design and construction of the Metro System facilities and costs relating
to the operation and maintenance of the Metro System by the City of San Diego. The amount to be paid by
the Participating Agencies is calculated based on a Sewer System Charge and, if additional capacity is
needed, a New Contract Capacity Charge. The current Regional Wastewater Disposal Agreement expires
on December 31, 2050.
The “Sewer System Charge” is a charge that is calculated annually, billed quarterly and based on flow and
strength coming into the Metro System. The “New Contract Capacity Charge” is an amount to be paid by
any Participating Agency for the right to discharge any new or additional capacity into the Metro System
beyond its existing allotted capacity.
The Amended and Restated Regional Wastewater Disposal Agreement, as proposed, terminates on
December 31, 2065, subject to extension by agreement of the parties; the parties agree in the Amended and
Restated Regional Wastewater Disposal Agreement to begin discussing an extension no later than
December 31, 2055. The Participating Agencies’ right to obtain wastewater treatment services from the
Metro System will survive termination of the Amended and Restated Regional Wastewater Disposal
Agreement; in that case, the Participating Agencies are obligated to pay their proportional share of costs
based on their respective flow and strength. However, the City of San Diego may abandon the Metro
System on December 31, 2065 with 10 years’ prior notice to the Participating Agencies.
For information about regulatory requirements applicable to the Metro System and the Metro System capital
improvement program, the District refers potential investors to an Official Statement prepared by the Public
19
Facilities Financing Authority of the City of San Diego in connection with the issuance of Senior Sewer
Revenue Refunding Bonds, Series 2016A relating to the Metro System dated March 2, 2016 (the “Metro
Official Statement”). Although the District believes the City of San Diego is the best source of information
about the Metro System, and, therefore, encourages potential investors to review the Metro Official
Statement, the District can provide no assurances as to the accuracy, completeness or timeliness of the
Metro Official Statement. The Metro Official Statement and its continuing disclosure reports are available
on EMMA.
The City of San Diego is required to develop and implement an industrial pretreatment program pursuant
to its NPDES permits. Among other things, this obligates the District to adopt and diligently enforce an
ordinance that establishes an industrial pretreatment program that incorporates discharge limits that are at
least as stringent as those established by the City of San Diego and any categorical pretreatment standards
promulgated by the Environmental Protection Agency (“EPA”).
Point Loma Wastewater Treatment Plant and the Pure Water Project. Opened in 1963, the Point Loma
Wastewater Treatment Plant treats approximately 175 million gallons of wastewater per day (it is rated for
240 million gallons per day). In November 1995, the City of San Diego received a modified permit (also
called a “waiver”) from Secondary Treatment requirements of the Clean Water Act. This modified permit
was renewed in September 2002, in June 2010 and October_, 2017. The permit is required by the EPA to
be renewed every 5 years and expires September 30, 2022.
The recent renewal process included the “Pure Water Project,” a water recycling program that would divert
millions of gallons of wastewater per day to a water purification facility, providing 83 million gallons of
water every day, with an initial facility producing 30 million gallons per day anticipated to be completed
first and the second phase to be completed by 2035. The Pure Project would use proven water purification
technology to clean recycled water to produce safe, high-quality drinking water. While completion of the
Pure Water Project avoids costly upgrades to the Point Loma Wastewater Treatment Plant, cost estimates
for the Pure Water Project range from $1.8 billion to $3 billion (in 2016 dollars), of which approximately
$1.8 billion will be a cost borne by the Metro System with the balance of $1.2 billion paid for from the City
of San Diego’s Water Reserve Fund..
Under the existing Regional Wastewater Disposal Agreement, the Participating Agencies’ share of the Pure
Water capital costs is based on flow and strength coming into the Metro System. The capital costs are not
limited. Under the proposed Amended and Restated Regional Wastewater Disposal Agreement, the
Participating Agencies’ share of the Pure Water capital costs would be based on a fixed percentage of
capacity ownership. The capital costs are limited to $1.8 billion. The District’s financial liability associated
with the proposed improvements under the Amended and Restated Regional Wastewater Disposal
Agreement is approximately 0.5% of the total cost, or $9 million. This percentage is higher than the
District’s existing share of capital charges based the current formula for flow and strength, but it does
provide a limit on total capital costs.
The District cannot provide any assurance if, or when, the Amended and Restated Regional Wastewater
Disposal Agreement will be executed by all the Participating Agencies, what the ultimate cost of the Pure
Water Project will be and when and if it will be completed, or if additional capital improvements to the
Point Loma Wastewater Treatment Plant will be required in the interim and charged to the Participating
Agencies, including the District.
Wastewater System Regulatory Issues
Regulatory requirements applicable to the Wastewater System are contained in or imposed by regulation
pursuant to the Federal Water Pollution Control Act, as amended, and the State of California Porter Cologne
Water Quality Control Act of 1969, as amended. Both Federal and State regulations are administered
through the Regional Water Board. The District is not aware of any environmental or regulatory issues that
would adversely impact its ability to provide sewer service.
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The waste discharge requirements applicable to the Wastewater System are a product of (i) the waste
discharge requirements relating to the Ralph W. Chapman Water Reclamation Facility, and (ii) the waste
discharge requirements applicable to the Metro System (see “San Diego Metropolitan Sewerage System”
above).
The District’s recycled water operations are subject to regulation under Section 402 of the federal Clean
Water Act, implementing regulations adopted by the EPA, the California Water Code and regulations
promulgated by the California Department of Health Services. Specifically, the District must comply with
requirements relating to discharge from the Ralph W. Chapman Water Reclamation Facility established by
the Regional Water Board, San Diego Region, most recently by Order No. R9-2007-0038 dated May 7,
2007.
21
Customer Base
The customer base of the District consists primarily of residential properties. The District is primarily built
out and no significant new connections are anticipated.
TABLE NO. 1
CURRENT AND HISTORICAL SERVICE CONNECTIONS
Fiscal Years 2009-10 through 2018-19
Fiscal Year Ended
June 30
Number
of Connections
2010 4,646
2011 4,655
2012 4,655
2013 4,655
2014 4,657
2015 4,679
2016 4,677
2017 4,683
2018 4,714
2019 4,729 __________________________
Source: Otay Water District.
Table No. 2 shows the 10 largest water users for Fiscal Year 2018-19.
TABLE NO. 2
TEN LARGEST CUSTOMERS BY REVENUES
Year ended June 30, 2019
Customer
Usage
in CCF (1)
% of
Sewer System
Consumption
Wastewater
Revenues
% of Total
Wastewaters
Revenues
Country Hills Apartments 34,611 4.66% $ 152,539 5.24%
Cuyamaca College 25,865 3.49% 89,825 3.08%
HCA Woodbridge LLC 13,523 1.82% 64,128 2.20%
Avocado Village HOA 13,635 1.84% 36,373 1.25%
Dual Diagnosis Treatment Center 4,279 0.58% 21,234 0.73%
Sycuan Resort 5,110 0.69% 19,559 0.67%
Grossmont School District 5,296 0.71% 18,145 0.62%
Burton Schenker 3,108 0.42% 13,384 0.46%
Smart & Final 1,456 0.20% 10,837 0.37%
Western Golf Properties 3,478 0.47% 9,954 0.34%
Total top 10 110,362 14.87% 435,979 14.96%
Other sewer customers 631,667 85.13% 2,477,808 85.04%
Total sewer revenues 742,029 100.00% $2,913,787 100.00% ____________________________________
(1) Hundred cubic feet. Approximately based on 2nd half winter average used in the Fiscal Year 2018-19 Budget.
Source: Otay Water District.
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Sewer Charges
The District held a public hearing on October 3, 2018 and approved a five-year schedule of rates through
2023, which included authorization to raise rates by up to 10 percent per year during the five year period
for all costs related to labor, benefits, materials, maintenance, administrative expenses and other operational
costs of providing sewer service. This includes amounts required to meet bond covenants and to maintain
adequate reserves and rate stabilization. Authorization was also approved to pass through all rates, fees and
charges for power and from the District’s treatment and disposal providers including, but not limited to San
Diego Gas and Electric, the County of San Diego and the City of San Diego during the five year period.
Residential and Multi-Residential customers are billed based on their winter average consumption from the
previous year. The “Winter Average” is defined as units of water billed from January through April of the
previous year divided by four. This average is then reduced by 15% as an acknowledgement that not all
water purchased goes through the sewer system.
Commercial customers are billed based on the customer’s average annual consumption, meter size and
strength factor. The average is also reduced by 15%.
TABLE NO. 3
SEWER VARIABLE AND FIXED CHARGES
As of January 1, 2019 and January 1, 2020
Usage Fee
Residential Per Unit:
2019 $2.67
2020 2.93
Non-Residential Per Unit:
Category 2019 2020
Low strength $2.67 $2.93
Medium strength 3.31 3.64
High strength 4.56 5.01
Fixed Rates
Meter
Size
2019
Residential
2019 Non-
Residential
2020
Residential
2020 Non-
Residential
3/4” $14.91 $ 14.91 $16.38 $ 16.38
1” 14.91 37.27 16.38 40.94
1 1/2” N/A 74.55 N/A 81.88
2” N/A 119.27 N/A 131.00
3” N/A 223.64 N/A 245.64
4” N/A 372.73 N/A 409.40
6” N/A 745.45 N/A 818.79
8” N/A 1,192.73 N/A 1,310.08
10” N/A 1,714.54 N/A 1,883.23
____________________________________
Source: Otay Water District.
23
As charges are billed based on the prior Winter Average water use, there was a sewer rate decrease of 7%
as of January 1, 2019 due to increased water usage during the prior year. The adopted rate increase effective
January 1, 2020 is 8.9%, in part because the Winter Average in 2019 was lower than the prior year and in
part due to increased expenses.
The Board of Directors is expected to continue to take action each year through 2023 to set rates in
accordance with the October 3, 2018 rate action. However, there can be no assurance that rates will be
increased as contemplated herein. All rate increases are subject to the procedural and substantive provisions
of Proposition 218. See “CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS -
Proposition 218” herein.
Based on its internal rate model updated in June 2019 and the need to fund the CIP, the District anticipates
that it will need to increase its rates by approximately 7.1% in each of the next four years.
The District is conducting a cost of service study (the “Study”). One of the goals of the Study is modifying
the Winter Average component of the sewer rate calculation to include 3 prior years’ water usage instead of
a single year to take into account an average usage between high and low rain years. The District expects
to implement the new rate calculation in January 2021, however, there can be no assurance that rates will
be modified as contemplated.
As previously noted, the District has projected that future rate increases will be necessary to implement the
current six-year CIP. Additionally, the rates, charges and fees may be increased each year to pass-through
additional actual cost increases imposed by the City of San Diego and the County of San Diego if such
increases are greater than already factored in to the District’s rates.
24
The average residential customer uses 8.6 units of water per month. One unit of water is equal to 100 cubic
feet of water (one cubic foot of water equals 7.48 gallons). Table No. 4 compares average sewer water rates
charged by the District with surrounding cities and other water agencies in San Diego County.
TABLE NO. 4
COMPARISON OF
AVERAGE RESIDENTIAL SEWER RATES
Based on Rates to be Effective as of January 1, 2020
City/Water Agency Average Rates (1)
Leucadia $ 28.64
Carlsbad (2) 28.92
Otay Water District 37.80
San Diego County 38.58
National City 38.68
Vallecitos 40.47
City of San Diego(2) 48.13
Chula Vista 48.20
Corondao 48.75
Escondido 49.61
La Mesa 50.88
Lemon Grove 51.59
Poway(2) 51.90
Imperial Beach 52.74
El Cajon 52.84
Buena 55.25
Vista 56.17
Solana Beach 56.86
Valley Center – MG (2) 58.71
Ramona 67.12
Padre Dam 69.92
Oceanside 69.96
Rainbow 71.05
Fallbrook 71.09
Olivenhain 71.76
Encinitas 72.91
Rancho Santa Fe 79.17
Del Mar 109.49
____________________________________
(1) Based on 8.6 units of water used and ¾” residential meter size.
(2) At the time of the survey September 2019, the member agency’s Fiscal Year 2019-20 rate was
unavailable. The estimated increase is based on the other agency’s average Fiscal Year 2019-
20 known rate increases.
Source: Otay Water District.
25
Billing Practices and Collection
The District bills for sewer service monthly. Monthly amounts are fixed for each customer and are re-
calculated once each year, typically in January. For Fiscal Year 2018-19, the District’s collection rate was
99.96%.
Operating Reserves
The District has a number of policies concerning reserves for operations and capital expenditures. The
District’s minimum operating reserve requirement for the Wastewater System is 90 days’ of operating
expenses. In recent years, the District built up reserves for capital expenditures and has recently completed
a number of large capital projects.
No Outstanding Parity Debt
The Installment Payments will be secured by Net Revenues of the Wastewater System. The District has no
outstanding obligations that constitute Parity Obligations on the date of issuance of the Bonds.
Capital Improvement Program
The District reviews and updates its six-year Capital Improvement Program (the “CIP”) annually.
The table below summarizes the current six-year CIP for the Wastewater updated as part of the 2019-20
budget.
Fiscal Year Ending June 30
2020 2021 2022 2023 2024 2025 Total
$2,188,000 $792,000 $1,452,000 $1,008,000 $1,564,000 $1,388,000 $8,392,000
_______________________________
Source: Otay Water District.
The District has identified the timing and method of funding the capital improvements over the next six
years. The above improvement categories are designed to be funded with operational net cashflow,
proceeds of the Bonds, reserves or a combination of these sources, and currently, the District expects to
fund $3,000,000 of these improvements with future Bond proceeds. The District expects that additional
debt financing for the Wastewater System will occur during 2021. In order to implement the CIP, the
District anticipates that it will need to increase its rates as described herein (see “Sewer Charges” herein).
However, there is no guarantee that the District will implement such rate increases at the amount and at the
time anticipated in its planning documents. See “CONSTITUTIONAL LIMITATIONS ON TAXES AND
APPROPRIATIONS - Proposition 218.”
Pure Water Project. The District expects that it will capitalize any charges from the Metro System relating
to the Pure Water Project (see “San Diego Metropolitan Sewerage System – Point Loma Wastewater
Treatment Plant and the Pure Water Project”). The table below summarizes the expected capital charges
for the Pure Water System included in the District’s six-year Capital Improvement Program.
Fiscal Year Ending June 30
2020 2021 2022 2023 2024 2025 Total
$132,000 $182,000 $232,000 $283,000 $334,000 $383,000 $1,546,000
26
Employees and Benefits
The District has 138 full-time positions budgeted for Fiscal Year 2019-20. Five percent of total salaries and
benefits are allocated to the Wastewater System. The OWD Employee Association represents 100 of these
full-time employees as a collective bargaining unit. The District has not experienced any strikes and
continues to have positive labor relations, which includes a negotiated multi-year Collective Bargaining
Agreement. This agreement, the Memorandum of Understanding (“MOU”), with amendments, is in effect
from July 1, 2019 to June 30, 2024.
The District provides retirement benefits and other post-employment benefits for its employees. See Notes
(7) and (8) in the District’s Fiscal Year 2018-19 audited financial statements, attached hereto as “APPENDIX
B.” During Fiscal Year 2018-19, the District prepaid $31.8 million of its unfunded actuarial pension
liability, which is not yet reflected in the most current available actuarial valuation of the District’s pension
liability as of June 30, 2018. In addition, the District is expected to reach 100% funded status for its other post-
employment benefits as of June 30, 2020.
District Reserves and Investment Policy
As of June 30, 2019, the District had approximately $73.8 million in cash and investments (combined
Wastewater System and water operations). The Wastewater System’s share of this amount at June 30, 2019
is $2.76 million. The District’s reserves are not pledged to and do not secure the District’s obligation to
pay the Installment Payments.
In accordance with State of California law, the District Board of Directors has approved an investment
policy (the “Investment Policy”) which complies with Sections 53601 through 53630 of the Government
Code of the State of California providing legal authorization for the investment or deposit of funds of local
agencies. All investments of the District conform to the restrictions of those laws. The District’s
investments by category and their respective market value and book value as of June 30, 2019 are set forth
in Table No. 5 below. For additional information relating to the District’s investments, see “APPENDIX B
- DISTRICT AUDITED FINANCIAL STATEMENTS,” Note 2.
TABLE NO. 5
SUMMARY OF INVESTMENTS
As of June 30, 2019
Investments Market Value Book Value % of Portfolio
Federal Agency Issues – Callable $31,670,612 $31,735,000 42.97%
Local Agency Investment Fund (LAIF) 41,855,272 41,783,747 56.57
San Diego County Pool 281,000 281,036 0.38
Money Market Funds 59,595 59,595 0.08
$73,866,479 $73,859,378 100.00%
____________________________________
Source: Otay Water District.
The Investment Policy may be changed at any time at the discretion of the District (subject to the State law
provisions relating to authorized investments) and as the California Government Code is amended. Any
exception to the Investment Policy must, however, be formally approved by the Board of Directors of the
District. There can be no assurance the State law or the Investment Policy will not be amended in the future
to allow for investments which are currently not permitted under such State law or the Investment Policy,
or that the objectives of the District with respect to investments will not change.
27
Historical Operating Results
The following table summarizes the Statement of Net Position for the Wastewater System for the last five
fiscal years ended June 30, 2019. The audited financial statements of the District for the Fiscal Year ended
June 30, 2019 are attached hereto as “APPENDIX B” and should be read in their entirety.
The District accounts for moneys received and expenses paid in accordance with generally accepted
accounting principles applicable to governmental agencies such as the District (“GAAP”). In certain cases,
GAAP requires or permits moneys collected in one Fiscal Year to be recognized as revenue in a subsequent
Fiscal Year and requires or permits expenses paid or incurred in one Fiscal Year to be recognized as
expenses in a subsequent Fiscal Year. See “APPENDIX B.” Except as otherwise expressly noted herein, all
financial information derived from the District’s audited financial statements reflects the application of
GAAP.
The Governmental Accounting Standards Board (“GASB”) has issued various statements relating to the
reporting of pension and other post-retirement benefit liabilities and expense, and most recently, new
accounting and financial reporting requirements for OPEB plans. The required reporting of net pension
liability was incorporated into the District’s financial statements for the Fiscal Year ending June 30, 2015
and the required reporting of net OPEB liability in accordance with GASB Statement No. 75 was
incorporated into the District’s financial statements for the Fiscal Year ending June 30, 2018.
Prior to the start of a fiscal year, agencies (including the District) provide the Metro System with their
estimate of wastewater flow and strength they expect to discharge to the Metro System. The City of San
Diego also provides an estimate of their projected costs to be spent that fiscal year, including operational
and maintenance work on the Metro System. This provides the agencies with an estimated budget to use
for the fiscal year. After the fiscal year is over, the actual flows and strengths that were sent to the Metro
System and the actual expenses incurred by the City of San Diego are “trued-up” to determine the final
invoicing amount for that fiscal year. This generally occurs two years after the end of the operating year.
In prior years, this has been reflected in “Miscellaneous Revenues” when the true-up results in a refund,
and in “Operating Expenses” when the true-up results in additional payment.
28
TABLE NO. 6
OTAY WATER DISTRICT
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
STATEMENT OF NET POSITION
For the Fiscal Years Ended June 30
2015
2016
2017
2018
2019 ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,008,510 $ 1,380,004 $ 2,912,754 $ 1,248,515 $ 697,835
Investments 8,487,168 9,536,464 5,353,358 3,830,588 2,062,618
Board Designated Investments 44,054 87,915 115,396 125,620 -
Accounts Receivable, Net - 179,781 176,447 172,016 210,500
Prepaid Expenses and Other Current Assets 34,839 34,300 34,300 34,300 34,300
Total Current Assets $10,574,571 $11,218,464 $ 8,592,255 $ 5,411,039 $ 3,005,253
NON-CURRENT ASSETS:
Net OPEB Asset $ - $ 418,506 $ 467,099 $ - $ -
Capital Assets:
Land 28,200 28,200 332,136 332,136 332,136
Construction in Progress 1,754,365 2,168,017 4,722,179 4,977,615 9,269,253
Capital Assets, Net of Accumulated Depreciation 16,001,693 15,738,718 16,381,109 19,682,084 19,851,768
Total Capital Assets, Net of Depreciation 17,784,258 17,934,935 21,435,424 24,991,835 29,453,157
Total Non-current Assets $17,784,258 $18,353,441 $21,902,523 $24,991,835 $29,453,157
TOTAL ASSETS $28,358,829 $29,571,905 $30,494,778 $30,402,874 $32,458,410
DEFERRED OUTFLOWS OF
RESOURCES
Deferred Actuarial Pension Costs 164,477 277,530 450,476 425,632 2,065,311
Deferred Actuarial OPEB Costs - - - 103,494 103,904
TOTAL DEFERRED OUTFLOWS OF
RESOURCES
$ 164,477
$ 277,530
$ 450,476
$ 529,126
$ 2,169,215
Continued on next page.
29
TABLE NO. 6
OTAY WATER DISTRICT
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
STATEMENT OF NET POSITION
For the Fiscal Years Ended June 30
Continued from previous page.
2015 2016 2017 2018 2019
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable $ 228,017 $ 191,334 $ 82,906 $ 900,460 $ 179,189
Other Accrued Liabilities 179,155 210,558 255,709 439,426 643,495
Total Current Liabilities $ 407,172 $ 401,892 $ 338,615 $ 1,339,886 $ 822,684
NON-CURRENT LIABILITIES:
Long-term Debt:
Net Pension Liability 1,781,274 1,828,127 2,068,124 2,285,634 2,221,070
Net OPEB Liability - - - 221,393 151,308
Total Non-current Liabilities $ 1,781,274 $ 1,828,127 $ 2,068,124 $ 2,507,027 $ 2,372,378
TOTAL LIABILITIES $ 2,188,446 $ 2,230,019 $ 2,406,739 $ 3,846,913 $ 3,195,062
DEFERRED INFLOWS OF RESOURCES
Deferred Actuarial Pension Costs $ 228,525 $ 251,927 $ 163,823 $ 19,935 $ 31,888
Deferred Actuarial OPEB Costs - - - 25,354 25,642
TOTAL DEFERRED INFLOWS OF
RESOURCES
$ 228,525
$ 251,927
$ 163,823
$ 45,289
$ 57,530
NET POSITION
Net Investment in Capital Assets $17,784,258 $17,934,935 $21,435,424 $24,991,835 $29,453,157
Unrestricted 8,322,077 9,432,554 6,939,268 2,047,963 1,921,876
TOTAL NET POSITION $26,106,335 $27,367,489 $28,374,692 $27,039,798 $31,375,033
____________________________________
(1) For the Fiscal Year ended June 30, 2015, the District Implemented GASB 68 relating to reporting of pension and
other retirement obligations.
(2) For the Fiscal Year ended June 30, 2018, the District Implemented GASB 75 relating to reporting of OPEB
obligations.
Source: Otay Water District.
30
TABLE NO. 7
OTAY WATER DISTRICT
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
For the Fiscal Years Ended June 30
2015 2016 2017 2018 2019
OPERATING REVENUES
Wastewater Revenue $ 3,044,158 $ 3,175,300 $ 2,983,495 $ 2,865,520 $ 2,961,157
Connection and Other Fees 6,746 3,764 1,052 3,973 12,393
Total Operating Revenues 3,050,904 3,179,064 2,984,547 2,869,493 2,973,550
OPERATING EXPENSES
Wastewater 1,824,259 2,021,513 1,921,745 2,498,521 2,784,579
Depreciation 1,050,506 1,017,180 1,062,249 1,006,731 833,920
Total Operating Expenses 2,874,765 3,038,693 2,983,994 3,505,252 3,618,499
Operating Income (Loss) 176,139 140,371 553 (635,759) (644,949)
NON-OPERATING REVENUES
(EXPENSES)
Investment Earnings 73,700 94,168 50,070 67,388 104,362
Taxes and Assessments 437 3 16,316 789
Availability Charges 44,553 72,469 90,968 51,401 51,818
Gain (Loss) on Sale of Capital Assets - - - (181,859)
Miscellaneous Revenues (1) - 856,306 783,963 - 392,624
Miscellaneous Expenses (11,675) - (15,091) (6,624) (4,515)
Total Non-operating Revenues (Expenses) 107,015 1,022,946 926,226 (68,905) 544,289
Income (Loss) Before Capital Contributions 283,154 1,163,317 926,779 (704,664) (100,660)
Capital Contributions 687,614 97,837 80,424 37,109 4,435,895
Change in Net Position 970,768 1,261,154 1,007,203 (667,555) 4,335,235
Total Net Position, Beginning, As Previously
Reported
26,995,562
26,106,335
27,367,489
28,374,692
27,039,798
Prior Period Adjustment(2) (1,859,995) - - (667,339) -
Total Net Position, Beginning, As Restated 25,135,567 26,106,335 27,367,489 27,707,353 27,039,798
Total Net Position, Ending $26,106,335 $27,367,489 $28,374,692 $27,039,798 $31,375,033
____________________________________
(1) Miscellaneous Revenue may include refunds of overcharges from the City of San Diego Metro Operations from
previous billing years. These refunds are the result of the City performing a “true-up” of actual costs shared by
the Otay Water District which is completed 2 years after the billing year.
(2) The prior period adjustment in Fiscal Year 2014-15 relates to the implementation of GASB No. 68 and in Fiscal
Year 2017-18 relates to the implementation of GASB No. 75, both concerning post-employment benefits.
31
Table No. 8 sets forth historical Net Revenues for the Fiscal Years 2014-15 through 2018-19, as such Net
Revenues would have been calculated in accordance with the Installment Sale Agreement.
Such calculations, which are derived from definitions of Gross Revenues, Operation and Maintenance
Costs, Net Revenues set forth in Appendix A, are intended to reflect the District’s ability to comply with
the rate covenant contained in the Installment Sale Agreement and described under the caption “SOURCES
OF PAYMENT FOR THE BONDS” and for no other purpose. Such calculations may reflect non-recurring or
extraordinary accounting transactions permitted under the Installment Sale Agreement and GAAP. The
District makes no representations as to any such calculations, and such calculations should not be construed
as a representation by the District as to past or future compliance with any bond covenants, the availability
of particular revenues for the payment of Installment Payments or for any other purpose.
TABLE NO. 8
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
HISTORICAL NET REVENUES (in ‘000’s)
For the Fiscal Year Ended June 30
2015 2016 2017 2018 2019
Revenues:
Wastewater Revenue $3,044 $3,175 $2,983 $2,866 $2,961
Connection Fees 7 4 1 4 12
Availability 45 72 91 51 52
Capacity Fees/Annexation Fees 25 49 34 14 11
Betterment Fees 32 57 50 28 28
Investment and Other Earnings (1) 74 950 834 67 497
Total Revenue $3,227 $4,307 $3,993 $3,030 $3,561
Operation and Maintenance Costs:
Sewer Charge (Metro & County) $1,209 $1,031 $ 871 $1,134 $1,058
Utilities 167 154 123 174 144
Payroll 326 615 701 815 1,151
Administrative 48 47 42 84 219
Materials and Maintenance 74 175 185 292 213
Total Operation and Maintenance Costs $1,824 $2,022 $1,922 $2,499 $2,785
Net Revenues $1,403 $2,285 $2,071 $ 531 $ 776
____________________________________
(1) Investments and Other Earnings Schedule, includes Metro refunds that pertain to City of San Diego “True-Up”
cost calculations from previous years.
Source: Otay Water District.
32
Projected Debt Service Coverage
The projections of Revenues and the corresponding Net Revenues shown in Table No. 9 are based on the
assumptions shown below. The District believes the assumptions used for the projections are reasonable
based on its own data and on projections from outside sources regarding expected growth in the District;
however, some assumptions may not materialize and unanticipated events and circumstances may occur
(see “RISK FACTORS”). To the extent that the assumptions are not actually realized the coverage levels
shown in Table No. 9 will likely be reduced and, if substantial reductions in Net Revenues were to result,
the District’s ability to timely pay the Installment Payments, which, in turn, pay debt service on the Bonds,
may be adversely affected.
(a) Sewer rates are projected to increase 7.1% annually based on the District’s most recently updated
projections. These projected rates reflect the District’s estimate of potential rate increases that
would be passed through to the District’s customers as a result of increased costs from the Metro
System.
(b) Availability and Other Fees are projected to remain stable over the next 5 years with availability
charges of $52,000 derived from property tax assessments as a fixed charge per parcel representing
the majority of these revenues.
(c) Investment and Other Earnings are projected to increase as the District’s cash and investment
position increases.
(d) Sewer Costs are projected to increase 5.0% annually as a result of increases in the Metro System
operating costs charged to the District. County operating charges charged to the District are
projected to decrease in 2021 as a result of the County completing a major maintenance project and
remain level through 2024.
(e) Operating costs shown in Fiscal Year 2020 are based on current year budget estimates. Costs for
subsequent fiscal years include the annual average inflationary factors shown below.
Utilities 3.5%
Material and Maintenance 4.0%
Administrative Costs 3.0%
Salaries 3.0%
Benefits 5.0%
Workers Compensation Insurance 5.0%
33
TABLE NO. 9
PROJECTED NET REVENUES (in ‘000’s) AND DEBT SERVICE COVERAGE
For the Fiscal Year ended June 30 (1)
2020 2021 2022 2023 2024
Revenues:
Wastewater Revenue $2,918 $2,964 $3,288 $3,549 $3,799
Availability and Other Fees 81 81 81 81 81
Investment and Other Earnings (1) 56 58 81 101 99
Total Revenue $3,055 $3,103 $3,450 $3,731 $3,979
Operation and Maintenance Costs:
Metro Sewer Charge (2) $ 601 $ 631 $ 663 $ 696 $ 731
County Sewer Charge 251 185 185 185 185
Total Sewer Charge 852 816 848 881 916
Utilities 154 162 169 175 182
Payroll 1,167 1,202 1,237 1,277 1,320
Administrative 282 290 299 308 317
Materials and Maintenance 340 353 368 382 398
Total Operation and Maintenance Costs $2,795 $2,823 $2,921 $3,023 $3,133
Net Revenues 260 280 529 708 846
Installment Payments (3) $ 49 $ 86 $ 162 $ 162 $ 162
Parity Obligations (4) - - 45 175 175
Total Debt Service $ 49 $ 86 $ 207 $ 337 $ 337
Coverage Ratio 326% 256% 210% 251%
____________________________________
(1) Investments and Other Earnings Schedule, includes Metro refunds that pertain to City of San Diego “True-Up”
cost calculations from previous years.
(2) Excluding capital charges for Pure Water Project which the District expects to capitalize.
(3) Calculated on an accrual basis for each July 1 to June 30 period.
(4) The District anticipates issuing Parity Obligations to fund $3 million of additional capital improvements, see
“Capital Improvement Program” above.
Source: Otay Water District.
The projected Revenues, Taxes and Operation and Maintenance Costs shown above are subject to several
variables as described on the previous pages. The District provides no assurance that the projected Net
Revenues or Coverage Ratios will be achieved (see “RISK FACTORS” herein).
34
CONSTITUTIONAL LIMITATIONS ON TAXES AND
APPROPRIATIONS
Article XIIIB Gann Limit
Article XIIIB of the California State Constitution limits the annual appropriations of the State and of any
city, county, school district, authority or other political subdivision of the State to the level of appropriations
of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living
and population. The “base year” for establishing such appropriation limit is the 1978-79 fiscal year and the
limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the
appropriations limit of an entity may also be made if (i) the financial responsibility for a service is
transferred to another public entity or to a private entity, (ii) the financial source for the provision of services
is transferred from taxes to other revenues, or (iii) the voters of the entity approve a change in the limit for
a period of time not to exceed four years.
Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other
entity of local government, exclusive of certain State subventions and refunds of taxes. “Proceeds of taxes”
include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i)
regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of
providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a
requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess
would have to be returned by revising tax rates or fee schedules over the subsequent two years.
Certain expenditures are excluded from the appropriations limit including payments of indebtedness
existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the
voters and payments required to comply with court or federal mandates which without discretion require
an expenditure for additional services or which unavoidably make the providing of existing services more
costly.
The District is of the opinion that its charges with respect to Wastewater Service do not exceed the costs
that it reasonably bears in providing Wastewater Service and are not subject to the limits of Article XIIIB.
Proposition 218
General. On November 5, 1996, California voters approved Proposition 218, the so-called “Right to Vote
on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which affect the
ability of local governments to levy and collect both existing and future taxes, assessments, and property-
related fees and charges. Proposition 218, which generally became effective on November 6, 1996,
changed, among other things, the procedure for the imposition of any new or increased property-related
“fee” or “charge,” which is defined as “any levy other than an ad valorem tax, a special tax or an assessment,
imposed by a local government upon a parcel or upon a person as an incident of property ownership,
including user fees or charges for a property related service” (and referred to in this section as a “property
related fee or charge”).
On November 2, 2010, California voters approved Proposition 26, the so-called “Supermajority Vote to
Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit
the ability of the State Legislature and local government to circumvent existing restrictions on increasing
taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC
of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to
impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Proposition
26’s amendments to Article XIIIC broadly define “tax,” but specifically exclude, among other things:
35
A charge imposed for a specific benefit conferred or privilege granted directly to the payor that
is not provided to those not charged, and which does not exceed the reasonable costs to the local
government of conferring the benefit or granting the privilege.
A charge imposed for a specific government service or product provided directly to the payor that
is not provided to those not charged, and which does not exceed the reasonable costs to the local
government of providing the service or product.
A charge imposed as a condition of property development.
Assessments and property-related fees imposed in accordance with the provisions of Article
XIIID.
Property-Related Fees and Charges. Under Article XIIID, before a municipality may impose or increase
any property-related fee or charge, the entity must give written notice to the record owner of each parcel of
land affected by that fee or charge. The municipality must then hold a hearing upon the proposed imposition
or increase at least 45 days after the written notice is mailed, and, if a majority of the property owners of
the identified parcels present written protests against the proposal, the municipality may not impose or
increase the property-related fee or charge.
Further, under Article XIIID, revenues derived from a property-related fee or charge may not exceed the
funds required to provide the “property-related service” and the entity may not use such fee or charge for
any purpose other than that for which it imposed the fee or charge. The amount of a property-related fee
or charge may not exceed the proportional cost of the service attributable to the parcel, and no property-
related fee or charge may be imposed for a service unless that service is actually used by, or is immediately
available to, the owner of the property in question.
Initiative Power. In addition, Article XIIIC states that “the initiative power shall not be prohibited or
otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The power
of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments
and neither the Legislature nor any local government charter shall impose a signature requirement higher
than that applicable to Statewide statutory initiatives.”
Judicial Interpretation of Articles XIIIC and XIIID. After Proposition 218 was enacted in 1996, appellate
court cases and an Attorney General’s opinion initially indicated that fees and charges levied for water and
wastewater would not be considered property-related fees and charges, and thus not subject to the
requirements of Article XIIID regarding notice, hearing and protests in connection with any increase in the
fees and charges being imposed. However, three cases have held that certain types of water and wastewater
charges could be subject to the requirements of Article XIIID under certain circumstances.
In Richmond v. Shasta Community Services District (2004) 32 Cal.4th 409, the California Supreme Court
addressed the applicability of the notice, hearing and protest provisions of Article XIIID to certain charges
related to Wastewater Service. In Richmond, the Court held that capacity charges are not subject to
Proposition 218. The Court also indicated in dictum that a fee for ongoing Wastewater Service through an
existing connection could, under certain circumstances, constitute a property-related fee and charge, with
the result that a local government imposing such a fee and charge must comply with the notice, hearing and
protest requirements of Article XIIID.
In Howard Jarvis Taxpayers Association v. City of Fresno (2005) 127 Cal.App.4th 914, the California Court
of Appeal, Fifth District, concluded that water, sewer and trash fees are property-related fees subject to
Proposition 218, and a municipality must comply with Article XIIID before imposing or increasing such
fees. The California Supreme Court denied the City of Fresno’s petition for review of the Court of Appeal’s
decision on June 15, 2005.
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In July 2006, the California Supreme Court, in Bighorn-Desert View Water Agency v. Verjil (2006) 39
Cal.4th 205, addressed the validity of a local voter initiative measure that would have (a) reduced a water
agency’s rates for water consumption (and other water charges), and (b) required the water agency to obtain
voter approval before increasing any existing water rate, fee, or charge, or imposing any new water rate,
fee, or charge. The court adopted the position indicated by its statement in Richmond that a public water
agency’s charges for ongoing water delivery are “fees and charges” within the meaning of Article XIIID,
and went on to hold that charges for ongoing water delivery are also “fees” within the meaning of Article
XIIIC’s mandate that the initiative power of the electorate cannot be prohibited or limited in matters of
reducing or repealing any local tax, assessment, fee or charge. Therefore, the court held, Article XIIIC
authorizes local voters to adopt an initiative measure that would reduce or repeal a public agency’s water
rates and other water delivery charges. (However, the court ultimately ruled in favor of the water agency
and held that the entire initiative measure was invalid on the grounds that the second part of the initiative
measure, which would have subjected future water rate increases to prior voter approval, was not supported
by Article XIIIC and was therefore invalid.)
The court in Bighorn specifically noted that it was not holding that the initiative power is free of all
limitations; the court stated that it was not determining whether the electorate’s initiative power is subject
to the statutory provision requiring that Wastewater Service charges be set at a level that will pay for
operating expenses, provide for repairs and depreciation of works, provide a reasonable surplus for
improvements, extensions, and enlargements, pay the interest on any bonded debt, and provide a sinking or
other fund for the payment of the principal of such debt as it may become due.
On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano
Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the “SJC Case”)
upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of
furnishing service at a given level of usage. The opinion was specific to the facts of the case, including a
finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water
at various tier levels. District management believes that this case will not have any material impact on the
District’s ability to make the Installment Payments or to meet its rate covenant.
Conclusion. It is not possible to predict how the courts will further interpret Article XIIIC and Article
XIIID in future judicial decisions and what, if any, further implementing legislation will be enacted.
Under the Bighorn case, local voters could adopt an initiative measure that reduces or repeals water rates
and charges, though it is not clear whether (and California courts have not decided whether) any such
reduction or repeal by initiative would be enforceable in a situation in which such rates and charges are
pledged to the repayment of bonds or other indebtedness, as is the case with respect to the Bonds.
The District believes that its rates with respect to the Wastewater Service comply with the requirements of
Proposition 218 and expect that future fees and charges will comply with Proposition 218’s procedural and
substantive requirements to the extent applicable thereto. The requirements of, or a voter initiative pursuant
to, Proposition 218 could impact the ability of the District to set or raise service charges.
There can be no assurance that the courts will not further interpret, or the voters will not amend, Article
XIIIC and Article XIIID to limit the ability of local agencies to impose, levy, charge and collect increased
fees and charges for water, or to call into question previously adopted water rate increases.
Future Initiatives
Articles XIIIB, XIIIC and XIIID were adopted as measures that qualified for the ballot pursuant to
California’s initiative process. From time to time other initiatives could be proposed and adopted affecting
the revenues of the District.
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RISK FACTORS
This section describes certain special considerations and risk factors affecting the payment of and security
for the Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with
the purchase of any Bonds and the order does not necessarily reflect the relative importance of the various
risks. Potential investors in the Bonds are advised to consider these special factors along with all other
information in this Official Statement in evaluating the Bonds. There can be no assurance that other
considerations will not materialize in the future, and if additional considerations materialize to a sufficient
degree, they could delay or prevent payment of principal of and interest on the Bonds.
Net Revenues; Rate Covenant
Net Revenues are dependent upon the demand for wastewater services, which can be affected by population
factors, more stringent wastewater standards, wastewater regulations, water conservation, water shortages,
problems with the District’s wastewater collection and other factors. There can be no assurance that
wastewater service demand will be consistent with the levels contemplated in this Official Statement. A
decrease in demand could require an increase in rates or charges in order to comply with the rate covenant
contained in the Installment Sale Agreement.
The District’s ability to meet its rate covenant is dependent upon its capacity to increase rates to a level
sufficient to meet debt service on the Bonds and other Parity Obligations.
Risks Related to Facilities and Operations
The operation of the District’s facilities and physical condition of the District’s facilities are subject to a
number of risk factors that could adversely affect the reliability of sewer service or increase the operating
expenses of the District. Prolonged damage to the District’s facilities could interrupt the ability of the
District to realize Revenues sufficient to pay principal of and interest on the Bonds, require substantial
increases in rates or charges in order to comply with the rate covenant in the Installment Sale Agreement
(which could drive down demand for wastewater and related services), or require the District to increase
expenditures for repairs significantly enough to adversely impact the District’s ability to pay the principal
of or interest on the Bonds.
These factors could include, among others, the following:
Operation and Maintenance Expenses. There can be no assurance that operation and maintenance
expenses of the District related to the wastewater system will be consistent with the levels contemplated in
this Official Statement.
Seismic Hazards and Natural Disasters. The District is located in a seismically active region. From time
to time, the service area of the District may be subject to other natural disasters, including without limitation
wildfires, flooding and landslides, or man-made disasters that could interrupt operation of the wastewater
system, or adversely affect economic activity in the District’s service area.
There can be no assurance that the occurrence of any natural calamity would not cause substantial damage
to the District’s facilities, including exacerbated infiltration and/or inflow of ground and other waters into
the wastewater system, or that the District would have insurance or other resources available to make repairs
in order to generate sufficient Net Revenues to pay debt service on the Bonds when due. The casualty and
liability insurance maintained by the District may not cover damages and losses to the District’s facilities
due to earthquake, fire or flood.
The Wastewater System and its facilities are generally located adjacent to an area designated by California
Department of Forestry and Fire Protection as a Very High Fire Hazard Severity Zone (“FHSZ”). While
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FHSZ zones do not predict when or where a wildfire will occur, they do identify areas where wildfire
hazards could be more severe and therefore are of greater concern.
Climate Change. As noted, the sewer charges are based on water usage by customers, and therefore,
factors affecting water usage will necessarily affect revenues of the Wastewater System.
The issue of climate change has become an important factor in water resources planning in the State, and it
is being considered during planning for water supplies and systems. Many studies cite evidence that
increasing concentrations of greenhouse gases have caused and will continue to cause a rise in temperatures
around the world, which will result in a wide range of changes in climate patterns. Moreover, they cite
evidence that a warming trend occurred during the latter part of the 20th century and will likely continue
through the 21st century. These changes could have a direct effect on water resources in the State, and
numerous studies on climate and water in the State have been conducted to determine the potential impacts.
Based on these studies, global warming could result in the following types of water resources impacts in
the State, including impacts on water supplies and systems:
Sea level rise and an increase in saltwater intrusion into groundwater,
Changes in the timing, intensity, and variability of precipitation, and an increased amount of
precipitation falling as rain instead of as snow,
Reductions in the average annual snowpack due to a rise in the snowline and a shallower snowpack
in the low- and medium-elevation zones, and a shift in snowmelt runoff to earlier in the year,
Long-term changes in watershed vegetation and increased incidence of wildfires that could affect
water quality,
Increased water temperatures with accompanying adverse effects on some fisheries,
Increases in evaporation and concomitant increased irrigation need, and
Changes in urban and agricultural water demand.
Other than the general trends listed above, there is no specific information on exactly how global warming
will quantitatively affect water supplies with respect to the District or customer water conservation.
However, there can be no assurance that climate change will not affect the District’s water sources or
customer demand.
Aging Facilities. While the District has an ongoing series of projects to rehabilitate and upgrade the
Wastewater System some of these facilities are aging and still in need of repair or replacement. Long-lived
facilities result in decreased reliability due to unplanned outages and place a greater maintenance burden
on District Operations.
Private Sewer Laterals. Private sewer laterals are not owned or operated by the District; however, faulty
private sewer laterals can increase inflow and infiltration into the District’s facilities. Excessive inflow and
infiltration into the facilities due to faulty sewer laterals may cause damage to the District’s facilities.
Statutory and Regulatory Compliance. The operation of the District is subject to a variety of federal and
State statutory and regulatory requirements. Any failure by the District to comply with applicable laws and
regulations could result in significant fines and penalties. See “- Risk of Fines and Litigation” below.
Further, compliance with these laws and regulations may result in significant increases in the capital and
operating costs of the District.
Casualty Losses. The Installment Sale Agreement obligates the District to obtain and keep in force various
forms of insurance or self-insurance, subject to deductibles, for repair or replacement of a portion of the
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District’s facilities in the event of damage or destruction to such portion of the District’s facilities. No
assurance can be given as to the adequacy of any such self-insurance or any additional insurance to fund
necessary repair or replacement of any other portion of the District’s facilities.
Risk of Fines and Litigation
There is no certainty that the District can eliminate all future sanitary sewer overflows that reach waters of
the United States. Sanitary sewer overflows could result in administrative civil penalties or the request for
civil penalties by third parties brought under the citizen suit provisions of the Clean Water Act. Any such
actions could impose additional payment obligations on the District. Any fines or civil penalties would
likely be classified by the District as Operation and Maintenance Costs and, therefore, payable prior to debt
service on the Bonds.
Proposition 218
On November 5, 1996, California voters approved Proposition 218-Voter Approval for Local Government
Taxes-Limitation on Fees, Assessments, and Charges-Initiative Constitutional Amendment. Proposition
218 added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and
other limitations on the imposition of new or increased taxes, assessments and property-related fees and
charges. The ability of the District to comply with its covenants under the Installment Sale Agreement and
generate Net Revenues sufficient to pay the Installment Payments may be adversely affected by actions and
events outside of the control of the District or taken (or not taken) by voters, property owners, taxpayers or
payers of assessments, fees and charges. See “CONSTITUTIONAL LIMITATIONS ON TAXES AND
APPROPRIATIONS - Proposition 218” for a discussion of specific issues and risks raised by Proposition
218. The District’s current projections assume future rate increases which will be subject to the Proposition
218 notice process, will be needed during the time that the Bonds are Outstanding.
Limitations on Remedies Available to Bond Owners
Any remedies available to the owners of the Bonds upon the occurrence of an event of default under the
Installment Sale Agreement or the Indenture are in many respects dependent upon judicial actions, which
are often subject to discretion and delay and could prove both expensive and time consuming to obtain.
In addition to the limitations on Bondholder remedies contained in the Installment Sale Agreement and the
Indenture, the rights and obligations under the Bonds, the Installment Sale Agreement and the Indenture
may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights
generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under
State law of certain remedies; the exercise by the United States of America of the powers delegated to it by
the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the
police power inherent in the sovereignty of the State of California and its governmental bodies in the interest
of serving a significant and legitimate public purpose.
Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could
subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or
otherwise, and consequently may entail risks of delay, limitation or modification of their rights.
Future Parity Obligations
As described in “SOURCES OF PAYMENT FOR THE BONDS - Parity Obligations” herein, the Installment
Sale Agreement permits the District to issue Parity Obligations, under which its obligations would be
payable on a parity with the payment of the Installment Payments.
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The coverage tests described in “SOURCES OF PAYMENT FOR THE BONDS - Parity Obligations” involve,
to some extent, projections of Net Revenues. If Parity Obligations are issued, the debt service coverage for
the Bonds could be diluted below what it otherwise would be. Moreover, there is no assurance that the
assumptions that form the basis of such projections, if any, will be actually realized subsequent to the date
of such projections. If such assumptions are not realized, the amount of future Net Revenues may be less
than projected, and the actual amount of Net Revenues may be insufficient to provide for the payment of
the Bonds and any future Parity Obligations.
Cybersecurity
As a recipient and provider of personal, private and sensitive information, the District faces multiple cyber
threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other
sensitive digital networks and systems.
Despite security measures, information technology and infrastructure may be vulnerable to attacks by
hackers or breached due to employee error, malfeasance or other disruptions. Increasingly, government
entities are being targeted by cyber-attacks seeking to obtain confidential data or disrupt critical services.
A rapidly changing cyber risk landscape may introduce new vulnerabilities which hackers may exploit in
attempts to effect breaches or service disruptions. Any such breach could compromise networks and the
information stored there could be disrupted, accessed, publicly disclosed, lost or stolen. Any such
disruption, access, disclosure or other loss of information could result in legal claims or proceedings,
liability under laws that protect the privacy of personal information, regulatory penalties, operations and
the services provided which could ultimately adversely affect Net Revenues.
No assurances can be given that the security and operational control measures of the District will be
successful in guarding against any and each cyber threat or breach. Although the District maintains
insurance coverage for cyber security losses should a successful breach ever occur, the cost of any such
disruption or remedying damage caused by future attacks could be substantial and in excess of such
insurance coverage.
The District is also reliant on other entities and service providers in connection with the administration of
the Bonds, including without limitation the County tax collector for the levy and collection of sewer
charges, the Fiscal Agent, and the dissemination agent. No assurance can be given that the District, and
these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond
owners.
Bankruptcy
While an involuntary bankruptcy petition cannot be filed against the District or the Authority, each of the
District and the Authority is authorized to file for bankruptcy under certain circumstances. Should the
District or the Authority file for bankruptcy, there could be adverse effects on the holders of the Bonds.
To the extent that the Net Revenues are “special revenues” under the Bankruptcy Code and the Bonds are
covered by the provisions of the Bankruptcy Code relating to pledges of special revenues, then Net
Revenues collected after the date of the bankruptcy filing should secure the District’s obligations under the
Installment Sale Agreement. If any or all of the Net Revenues are determined not to be special revenues or
if it is determined that the Bonds are not covered by the relevant provisions of the Bankruptcy Code, then
any such amounts collected after the commencement of the bankruptcy case will likely not secure the
District’s obligations under the Installment Sale Agreement. The holders of the Bonds may not be able to
assert a claim against any property of the District other than the Net Revenues, and if any or all of the Net
Revenues no longer secure the Installment Sale Agreement, then there may be limited, if any, funds from
which the holders of the Bonds are entitled to be paid.
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The Bankruptcy Code provides that “special revenues” can be applied to necessary operating expenses of
the project or system, before they are applied to other obligations. This rule applies regardless of the
provisions of the transaction documents. It is not clear precisely which expenses would constitute necessary
operating expenses and any definition in the transaction documents may not be applicable.
If the District or the Authority is in bankruptcy, the parties (including the Trustee and the holders of the
Bonds) may be prohibited from taking any action to collect any amount from the bankrupt party or to
enforce any obligation of the bankrupt party, unless the permission of the bankruptcy court is obtained.
These restrictions may also prevent the Trustee from making payments to the holders of the Bonds from
funds in the Trustee’s possession. If the Authority is in bankruptcy, it may be able to require that all amounts
due under the Installment Sale Agreement (including Net Revenues) be paid directly to it, notwithstanding
the provisions of the transaction documents that require such payments be made directly to the Trustee.
The rate covenant (see “SOURCES OF PAYMENT FOR THE BONDS - Rate Covenant”) may not be
enforceable in bankruptcy by the Trustee or the holders of the Bonds.
The District is permitted to commingle Net Revenues with its own funds for certain periods of time before
turning over the Net Revenues to the Trustee. If the District goes into bankruptcy, the District may not be
required to turn over to the Trustee any Net Revenues that are in its possession at the time of the bankruptcy
filing and have been commingled with other moneys. If the District has possession of Net Revenues
(whether collected before or after commencement of the bankruptcy) and if the District does not voluntarily
turn over such Net Revenues to the Trustee, it is not entirely clear what procedures the Trustee and the
holders of the Bonds would have to follow to attempt to obtain possession of such Net Revenues, how much
time it would take for such procedures to be completed, or whether such procedures would ultimately be
successful.
If the District or the Authority is in bankruptcy it may be able to repudiate the Installment Sale Agreement.
If the Installment Sale Agreement is repudiated, the District will no longer be obligated to make any
payments under it.
If the District or the Authority is in bankruptcy it may be able, without the consent and over the objection
of the Trustee and the holders of the Bonds, to alter the priority, interest rate, principal amount, payment
terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other
terms or provisions of the Installment Sale Agreement, the Indenture, and the Bonds, as long as the
bankruptcy court determines that the alterations are fair and equitable.
There may be delays in payments on the Bonds while the court considers any of these issues. There may
be other possible effects of a bankruptcy of the District or the Authority that could result in delays or
reductions in payments on the Bonds, or result in losses to the holders of the Bonds. Regardless of any
specific adverse determinations in a District or Authority bankruptcy proceeding, the fact of a District or
Authority bankruptcy proceeding could have an adverse effect on the liquidity and value of the Bonds.
Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the
Bonds, the Authority will covenant in the Indenture and the District will covenant in the Installment Sale
Agreement to comply with each applicable requirement of Section 103 and Sections 141 through 150 of
the Internal Revenue Code. The interest on the Bonds could become includable in gross income for
purposes of federal income taxation retroactive to the date of execution and delivery of the Bonds, as a
result of acts or omissions of the Authority or the District in violation of this or other covenants in the
Indenture or the Installment Sale Agreement. Should such an event of taxability occur, the Bonds are not
subject to prepayment or any increase in interest rates and will remain outstanding until maturity. See “-
Limitations on Remedies Available to Bond Owners” and “TAX MATTERS” herein.
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IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues,
including both random and targeted audits. It is possible that the Bonds will be selected for audit by the
Internal Revenue Service. It is also possible that the market value of the Bonds might be adversely affected
as a result of such an audit of the Bonds (or by an audit of similar bonds).
Secondary Market Risk
There can be no assurance that there will be a secondary market for purchase or sale of the Bonds, and from
time to time there may be no market for them, depending upon prevailing market conditions, the financial
condition or market position of firms who may make the secondary market and the financial condition of
the District. Secondary market prices for the Bonds could be more or less than the original issue price
depending on market factors.
TAX MATTERS
Opinion of Bond Counsel. In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel, under
existing statutes and court decisions and assuming continuing compliance with certain tax covenants
described herein, (i) interest on the Bonds is excluded from gross income for federal income tax purposes
pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest
on the Bonds is not treated as a preference item in calculating the alternative minimum tax under the Code.
In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and
statements of reasonable expectations made by the Authority and the District in connection with the Bonds,
and Bond Counsel has assumed compliance by the Authority and the District with certain ongoing
covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the
Bonds from gross income under Section 103 of the Code.
In addition, in the opinion of Bond Counsel, under existing statutes, interest on the Bonds is exempt from
personal income taxes imposed by the State of California.
Bond Counsel expresses no opinion as to any other federal, state or local tax consequences arising with
respect to the Bonds, or the ownership or disposition thereof, except as stated above. Bond Counsel renders
its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to
update, revise or supplement its opinion to reflect any action thereafter taken or not taken, any fact or
circumstance that may thereafter come to its attention, any change in law or interpretation thereof that may
thereafter occur, or for any other reason. Bond Counsel expresses no opinion as to the consequence of any
of the events described in the preceding sentence or the likelihood of their occurrence. In addition, Bond
Counsel expresses no opinion on the effect of any action taken or not taken in reliance upon an opinion of
other counsel regarding federal, state or local tax matters, including, without limitation, exclusion from
gross income for federal income tax purposes of interest on the Bonds.
Certain Ongoing Federal Tax Requirements and Covenants. The Code establishes certain ongoing
requirements that must be met subsequent to the issuance and delivery of the Bonds in order that interest
on the Bonds be and remain excluded from gross income under Section 103 of the Code. These
requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds
of the Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate
requirement that certain excess earnings on gross proceeds be rebated to the federal government.
Noncompliance with such requirements may cause interest on the Bonds to become included in gross
income for federal income tax purposes retroactive to their issue date, irrespective of the date on which
such noncompliance occurs or is discovered. The Authority and the District have covenanted to comply
with certain applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross
income under Section 103 of the Code.
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Certain Collateral Federal Tax Consequences. The following is a brief discussion of certain collateral
federal income tax matters with respect to the Bonds. It does not purport to address all aspects of federal
taxation that may be relevant to a particular owner of a Bond. Prospective investors, particularly those who
may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax
consequences of owning and disposing of the Bonds.
Prospective owners of the Bonds should be aware that the ownership of such obligations may result in
collateral federal income tax consequences to various categories of persons, such as corporations (including
S corporations and foreign corporations), financial institutions, property and casualty and life insurance
companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise
eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness
to purchase or carry obligations the interest on which is excluded from gross income for federal income tax
purposes. Interest on the Bonds may be taken into account in determining the tax liability of foreign
corporations subject to the branch profits tax imposed by Section 884 of the Code.
Original Issue Discount. “Original issue discount” (“OID”) is the excess of the sum of all amounts payable
at the stated maturity of a Bond (excluding certain “qualified stated interest” that is unconditionally payable
at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a
maturity (a bond with the same maturity date, interest rate, and credit terms) means the first price at which
at least 10 percent of such maturity was sold to the public, i.e., a purchaser who is not, directly or indirectly,
a signatory to a written contract to participate in the initial sale of the Bonds. In general, the issue price for
each maturity of Bonds is expected to be the initial public offering price set forth on the cover page of the
Official Statement. Bond Counsel further is of the opinion that, for any Bonds having OID (a “Discount
Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section
1288 of the Code is excludable from gross income for federal income tax purposes to the same extent as
other interest on the Bonds.
In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method,
based on periodic compounding of interest over prescribed accrual periods using a compounding rate
determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond
is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition
of such Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income
received or deemed to have been received for purposes of determining various other tax consequences of
owning a Discount Bond even though there will not be a corresponding cash payment.
Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original
issue discount for federal income tax purposes, including various special rules relating thereto, and the state
and local tax consequences of acquiring, holding, and disposing of Discount Bonds.
Bond Premium. In general, if an owner acquires a bond for a purchase price (excluding accrued interest)
or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the bond after
the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least
annually at prescribed rates), that premium constitutes “bond premium” on that bond (a “Premium Bond”).
In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium
over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the
Premium Bond determined based on constant yield principles (in certain cases involving a Premium Bond
callable prior to its stated maturity date, the amortization period and yield may be required to be determined
on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium
Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest
accrual period under the owner’s regular method of accounting against the bond premium allocable to that
period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period
exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss.
Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of
the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s
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original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding
the treatment of bond premium for federal income tax purposes, including various special rules relating
thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization
of bond premium on, sale, exchange, or other disposition of Premium Bonds.
Information Reporting and Backup Withholding. Information reporting requirements apply to interest
paid on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the
interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification
Number and Certification,” or if the recipient is one of a limited class of exempt recipients. A recipient not
otherwise exempt from information reporting who fails to satisfy the information reporting requirements
will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a
tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a
“payor” generally refers to the person or entity from whom a recipient receives its payments of interest or
who collects such payments on behalf of the recipient.
If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with
the establishment of such account, as generally can be expected, no backup withholding should occur. In
any event, backup withholding does not affect the excludability of the interest on the Bonds from gross
income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be
allowed as a refund or a credit against the owner’s federal income tax once the required information is
furnished to the Internal Revenue Service.
Miscellaneous. Tax legislation, administrative actions taken by tax authorities, or court decisions, whether
at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal
or state law or otherwise prevent beneficial owners of the Bonds from realizing the full current benefit of
the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed
in the future, or enacted) and such decisions could affect the market price or marketability of the Bonds.
Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters.
A copy of the proposed form of opinion of Bond Counsel for the Bonds is attached in “APPENDIX E.”
LEGAL MATTERS
Enforceability of Remedies
The remedies available to the Trustee and the Owners of the Bonds upon an event of default under the
Indenture, the Installment Sale Agreement or any other document described herein are in many respects
dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under
existing law and judicial decisions, the remedies provided for under such documents may not be readily
available or may be limited. The various legal opinions to be delivered concurrently with the delivery of
the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Indenture
and the Installment Sale Agreement are subject to limitations imposed by bankruptcy, reorganization,
insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and
proceedings generally.
Approval of Legal Proceedings
The legality and enforceability of the Indenture and the Installment Sale Agreement and certain other legal
matters are subject to the approval of Hawkins Delafield & Wood LLP, San Francisco, California, acting as
Bond Counsel. See “APPENDIX E” for the proposed form of Bond Counsel’s Opinion.
The District has no knowledge of any fact or other information which would indicate that the Indenture and
the Installment Sale Agreement are not so enforceable against the Authority or the District except to the
45
extent such enforcement is limited by principles of equity and by state and federal laws relating to
bankruptcy, reorganization, moratorium or creditors’ rights generally.
Certain legal matters will be passed on for the District and the Authority by Artiano Shinoff, San Diego,
California, General Counsel to the District and the Authority, and by Hawkins Delafield & Wood LLP, San
Francisco, California, as Disclosure Counsel to the District. A portion of the fees payable to Bond Counsel
and Disclosure Counsel are contingent upon the sale and delivery of the Bonds.
Litigation
At any given time, including the present, there are certain claims, disputes and litigation actions that arise
in the normal course of the District’s activities. Such matters could, if determined adversely to the District,
affect the Wastewater Operations and in some cases the Net Revenues. The Authority and the District will
furnish a certificate dated as of the date of delivery of the Bonds that there is not now known to be pending
or threatened any litigation restraining or enjoining the execution or delivery of the Indenture or the
Installment Sale Agreement, or the sale or delivery of the Bonds or in any manner questioning the
proceedings and authority under which the Indenture or the Installment Sale Agreement are to be executed
or delivered or the Bonds are to be delivered or affecting the validity thereof or, in the case of the District,
which if decided adversely to the District would have a material adverse effect on the District’s financial
condition and its ability to pay the Installment Payments.
CONCLUDING INFORMATION
No Rating on the Bonds; Secondary Market
The Authority has not made, and does not contemplate making, any application for a rating on the Bonds.
No such rating should be assumed based upon any other Authority or District rating that may be
obtained. Prospective purchasers of the Bonds are required to make independent determinations as to the
credit quality of the Bonds and their appropriateness as an investment.
Should a Bondholder elect to sell a Bond prior to maturity, no representations or assurances can be made
that a market will have been established or maintained for the purchase and sale of the Bonds. The
Underwriter assumes no obligation to establish or maintain a market for the purchase and sale of the Bonds
and is not obligated to repurchase any of the Bonds at the request of the holder thereof.
Underwriting
The Bonds were sold to Hilltop Securities Inc. (the “Underwriter”). The Underwriter is offering the Bonds
at the initial offering prices set forth on the inside front cover page hereof. The initial offering prices may
be changed from time to time and concessions from the offering prices may be allowed to dealers, banks
and others. The Underwriter will purchase the Bonds at a price equal to $______________, which amount
represents the principal amount of the Bonds, plus a net original issue premium of $_______________ and
less an Underwriter’s discount of $_____. The Underwriter will pay certain of its expenses relating to the
offering from the Underwriter’s discount.
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The Municipal Advisor
The material contained in this Official Statement was prepared by the Authority and the District with the
assistance of the Municipal Advisor, who advised the Authority and the District as to the financial structure
and certain other financial matters relating to the Bonds. The information set forth herein received from
sources other than the Authority or the District is believed to be reliable, but such information is not
guaranteed by the Authority, the District or the Municipal Advisor as to accuracy or completeness, nor has
it been independently verified. Fees paid to the Municipal Advisor are contingent upon the sale and delivery
of the Bonds.
Continuing Disclosure
The District will covenant to provide certain annual financial information by not later than March 31 in
each year (the “Annual Reports”) and notices of the occurrence of certain listed events in accordance with
Rule 15c2-12 of the Securities Exchange Act of 1934 as amended (the “Rule”). Harrell & Company
Advisors, LLC will act as Dissemination Agent. The specific nature of the information to be contained in
the Annual Reports or the notices of listed events and certain other terms of the continuing disclosure
obligation are found in the form of the District’s Continuing Disclosure Agreement attached in “APPENDIX
D - FORM OF CONTINUING DISCLOSURE AGREEMENT.”
Within the last five years, the District believes it has not failed to comply in all material respects with any
prior undertakings with regard to the Rule.
Audited Financial Statements
The District’s audited financial statements for Fiscal Year 2018-19 included in this Official Statement have
been audited by Teaman, Ramirez & Smith, Inc. (the “Auditor”), independent auditors. Attention is called
to the scope limitation described in the Auditor’s report accompanying the financial statements. The
Auditor has not been requested to consent to the inclusion of its report in this Official Statement. The
Auditor has not undertaken to update the audited financial statements for Fiscal Year 2018-19 or its report,
and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated _______,
2019. See “APPENDIX B - DISTRICT AUDITED FINANCIAL STATEMENTS” herein.
References
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated,
are intended as such and not as representations of fact. This Official Statement is not to be construed as a
contract or agreement between the District and the purchasers or Owners of any of the Bonds.
47
Execution
The execution of this Official Statement has been duly authorized by the District and the Authority.
OTAY WATER DISTRICT
By: ______________________________
Chief Financial Officer
OTAY WATER DISTRICT FINANCING AUTHORITY
By: ______________________________
Executive Director
A-1
APPENDIX A
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
[to be provided by Bond Counsel]
B-1
APPENDIX B
DISTRICT AUDITED FINANCIAL STATEMENTS
C-1
APPENDIX C
ECONOMIC PROFILE FOR THE COUNTY OF SAN DIEGO
Introduction
The County of San Diego (the “County”) is the southernmost major metropolitan area in the State of
California. The County covers 4,255 square miles, extending 70 miles along the Pacific Coast from the
Mexican border to Orange County, and inland 75 miles to Imperial County. Riverside and Orange Counties
form the northern boundary. The County is approximately the size of the State of Connecticut.
The County possesses a diverse economic base consisting of a significant manufacturing presence in the
fields of electronics and shipbuilding, a large tourist industry attracted by the favorable climate of the
region, and a considerable defense-related presence.
The County is also growing as a major center for culture and education. A number of recognized art
organizations, including the San Diego Opera, the Old Globe Theater productions, the La Jolla Chamber
Orchestra, as well as museums and art galleries, are located in the County. Higher education is provided
through five two-year colleges and six four-year colleges and universities.
The San Diego Convention Center contains 361,000 square feet of exhibit space and over 100,000 square
feet of meeting/banquet rooms. The Convention Center can accommodate events for 30,000-40,000 people.
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Population
The following table shows the January 1 State of California Department of Finance estimates of total
population in the County of San Diego and the State of California for each year since 2010, and the increase
from the previous year.
TABLE NO. C-1
COUNTY OF SAN DIEGO AND STATE OF CALIFORNIA
POPULATION
COUNTY OF SAN DIEGO STATE OF CALIFORNIA
January 1 Percentage Percentage
Year Population Change Population Change
2010 3,091,579 37,223,900 1.0%
2011 3,125,264 1.1% 37,594,781 1.0%
2012 3,161,750 1.2% 37,971,427 0.9%
2013 3,201,417 1.3% 38,321,459 0.8%
2014 3,235,142 1.1% 38,622,301 0.9%
2015 3,267,992 1.0% 38,952,462 0.7%
2016 3,287,279 0.6% 39,214,803 0.7%
2017 3,309,626 0.7% 39,504,609 0.6%
2018 3,333,128 0.7% 39,740,508 0.5%
2019 3,351,786 0.6% 39,927,315
% Increase Between
2010 - 2019 8.4% 7.3%
_______________________________________
Source: State of California, Department of Finance, “E-4 Population Estimates for Cities, Counties, and the State,
2001-2010, with 2000 & 2010 Census Counts” Sacramento, California, November 2012 and “E-4
Population Estimates for Cities, Counties and the State, 2011-2019, with 2010 Census Benchmark”
Sacramento, California, May 2019.
C-3
Per Capita Personal Income
Per capita personal income information for San Diego County, the State of California and the United States
are summarized in the following table.
TABLE NO. C-2
PER CAPITA PERSONAL INCOME (1)
SAN DIEGO COUNTY, STATE OF CALIFORNIA AND UNITED STATES
2013 – 2017
Year San Diego County State of California United States
2013 $49,460 $49,173 $44,826
2014 52,166 52,237 47,025
2015 54,742 55,679 48,940
2016 56,116 57,497 49,831
2017 57,913 59,796 51,640
____________________________________
(1) For San Diego County, State of California and United States, per capita personal income was computed using
Census Bureau midyear population estimates. Estimates for 2010-2017 reflect county population estimates
available as of March 2018.
Note: All dollar estimates are in current dollars (not adjusted for inflation).
Last updated: March 6, 2019.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
C-4
The District is located in the San Diego-Carlsbad Metropolitan Statistical Area (MSA). The August 2019
unemployment rate in the San Diego-Carlsbad MSA was 3.4%. The State of California August 2019
unemployment rate (unadjusted) was 4.2%.
TABLE NO. C-3
SAN DIEGO-CARLSBAD MSA
WAGE AND SALARY WORKERS BY INDUSTRY (1)
(in $ thousands)
Industry 2015 2016 2017 2018 2019
Government 226.9 234.3 233.7 234.9 243.3
Other Services 54.3 55.2 55.7 55.9 57.0
Leisure and Hospitality 189.1 197.5 202.1 206.6 208.1
Educational and Health Services 191.6 196.5 203.0 211.5 215.8
Professional and Business Services 231.6 236.3 240.5 250.8 257.4
Financial Activities 72.0 73.8 75.2 76.4 75.3
Information 24.0 24.0 24.1 24.0 23.8
Transportation, Warehousing and Utilities 28.8 30.2 32.1 33.6 34.1
Service Producing
Retail Trade 146.2 146.9 148.0 147.5 144.9
Wholesale Trade 44.0 43.5 43.9 43.9 43.1
Manufacturing
Nondurable Goods 26.7 27.5 28.2 28.7 28.7
Durable Goods 81.2 81.1 82.3 84.7 88.7
Goods Producing
Construction 72.7 78.3 80.8 86.4 92.1
Mining and Logging 0.3 0.3 0.3 0.4 0.4
Total Nonfarm 1,389.4 1,425.4 1,449.9 1,485.3 1,512.7
Farm 9.3 9.2 8.9 9.9 9.1
Total (all industries) 1,398.7 1,434.6 1,458.8 1,495.2 1,521.8
____________________________________
(1) Annually, as of August.
Note: The unemployment rate is calculated using unrounded data. Data may not add due to rounding.
Source: State of California Employment Development Department, Labor Market Information Division, “Industry
Employment & Labor Force - by month March 2018 Benchmark.”
C-5
Major Employers
The major employers operating within the County as of June 30, 2018 are shown in Table No. C-4.
TABLE NO. C-4
COUNTY OF SAN DIEGO
MAJOR EMPLOYERS
Employer Number of Employees Percent of Total Employment
University of California, San Diego 34,448 2.26%
Naval Base San Diego 34,185 2.24%
Sharp Healthcare 18,364 1.20%
County of San Diego 17,413 1.14%
Scripps Health 14,941 0.98%
San Diego Unified School District 13,815 0.91%
Qualcomm Inc. 11,800 0.77%
City of San Diego 11,462 0.75%
Kaiser Permanente San Diego Medical Center 9,606 0.63%
UC San Diego Health 8,932 0.59%
174,966 11.47%
____________________________________
Source: County of San Diego Comprehensive Annual Financial Report.
Transportation
Interstate 5 parallels the coast of San Diego County, starting at the border with Mexico and traveling to the
Los Angeles area and points north. Interstate 15 runs inland through the County, leading to Riverside-San
Bernardino, Las Vegas and Salt Lake City. Interstate 8 runs eastward providing access to the southern
United States.
San Diego’s International Airport (Lindbergh Field) is located approximately one mile west of downtown
San Diego at the edge of the San Diego Bay. The facilities are owned and maintained by the San Diego
Unified Port District and are leased to commercial airlines and other tenants. The airport is the third most
active commercial airport in California, served by most major airlines. In addition to San Diego
International Airport, there are two naval air stations and seven general aviation airports located in the
County.
San Diego is the terminus of the Santa Fe Railway’s main line from Los Angeles. Amtrak passenger service
is available at San Diego with stops at Del Mar and Oceanside in the north county. San Diego’s harbor is
one of the world’s largest natural harbors. The harbor, a busy commercial port, also serves cruise ships.
The Port of San Diego is administered by the San Diego Unified Port District, which includes the cities of
San Diego, National City, Chula Vista, Imperial Beach and Coronado.
D-1
APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement, dated November 1, 2019 (the “Disclosure Agreement”) is
executed and delivered by the Otay Water District (the “District”) and Harrell & Company Advisors, LLC
(the “Dissemination Agent”) in connection with the issuance of $___________ Otay Water District
Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”) by the Otay Water District Financing
Authority (the “Authority”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of
November 1, 2019 (the “Indenture”), by and between MUFG Union Bank, N.A., as trustee (the “Trustee”)
and the Authority. The District covenants as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds
and in order to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply
to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
“Annual Report” shall mean the Annual Report provided by the District pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Agreement.
“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding
Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any
Bonds for federal income tax purposes.
“Disclosure Representative” shall mean the General Manager of the District and the Chief Financial
Officer of the District, or their designee, or such other officer or employee as the District shall
designate in writing from time to time.
“Dissemination Agent” shall mean Harrell & Company Advisors, LLC, or any successor
Dissemination Agent designated in writing by the District and which has filed with the District a
written acceptance of such designation.
“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB.
“Holder” shall mean the registered owner of any Bond.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
“MSRB” shall mean the Municipal Securities Rulemaking Board.
“Official Statement” shall mean the Official Statement relating to the Bonds, dated __________,
2019.
“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply
with the Rule in connection with the offering of the Bonds.
“Repository” shall mean the EMMA system of the MSRB or any other entity designated under the
Rule as the repository for filings made pursuant to the Rule.
D-2
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
“State” shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The District shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than March 31 of each year, commencing March 31, 2020,
provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this
Disclosure Agreement. The Annual Report shall be provided to the Repository in an electronic format as
prescribed by the Repository and shall be accompanied by identifying information as prescribed by the
Repository. The Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross-reference other information as provided in Section 4 of this
Disclosure Agreement; provided that the audited financial statements of the District may be submitted
separately from the balance of the Annual Report and later than the date required above for the filing of the
Annual Report if they are not available by that date. If the District’s fiscal year changes, it shall give notice
of such change in the same manner as for a Listed Event under Section 5(c).
(b) Not later than five (5) business days prior to the date specified in subsection (a) for
providing the Annual Report to the Repository, the District shall provide the Annual Report to the
Dissemination Agent (if other than the District). If the District is unable to provide to the Repository an
Annual Report by the date required in subsection (a), the Dissemination Agent shall send a notice to the
Repository that the Annual Report has not been delivered by the District.
(c) The Dissemination Agent shall:
(i) confirm the electronic filing requirements of the Repository for the Annual
Reports; and
(ii) if the Dissemination Agent is other than the District, file a report with the District
certifying that the Annual Report has been provided pursuant to this Disclosure
Agreement, stating the date it was provided to the Repository.
(d) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made
in accordance with the MSRB’s EMMA system, or in another manner approved under the Rule.
SECTION 4. Content of Annual Reports. The District’s Annual Report due by March 31, 2020
shall consist of the Official Statement and the District’s audited financial statements for the fiscal year
ended June 30, 2019. Thereafter, the Annual Reports shall contain or include by reference the following:
(a) The District’s audited financial statements for the previous fiscal year, prepared in
accordance with generally accepted auditing standards for special districts in the State of California. If the
District’s audited financial statements are not available by the time the Annual Report is required to be filed
pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar
to the financial statements contained in the final Official Statement, and the audited financial statements
shall be filed in the same manner as the Annual Report when they become available.
(b) To the extent not contained in the audited financial statements filed pursuant to the
preceding subsection (a) by the date required by Section 4 hereof, updates of Table Nos. 1, 2, 3, 6, 7 and 9
under the caption “THE WASTEWATER SYSTEM.”
(c) Amounts, if any, held in the Rate Stabilization Fund as of June 30 of the preceding fiscal
year, together with amounts, if any, deposited to or transferred from the Rate Stabilization Fund in the
preceding fiscal year.
D-3
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the District or related public entities, which have been
submitted to the Repository or the Securities and Exchange Commission. If the document included by
reference is a final official statement, it must be available from the MSRB. The District shall clearly identify
each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The District shall give, or cause to be given, notice of the occurrence of any of the following
Listed Events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults, if material.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform.
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-
TEB) or other material notices or determinations with respect to the tax status of
the security, or other material events affecting the tax status of the security.
(7) Modifications to rights of security holders, if material.
(8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if
material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the District or other
obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the District
or an obligated person, or the sale of all or substantially all of the assets of the
District or an obligated person (other than in the ordinary course of business), the
entry into a definitive agreement to undertake such an action, or the termination of
a definitive agreement relating to any such actions, other than pursuant to its terms,
if material.
(14) Appointment of a successor or additional trustee or the change of name of a trustee,
if material.
(15) Incurrence of a financial obligation of the District, if material, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a
financial obligation of the District, any of which affect security holders, if material.
D-4
(16) Default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a financial obligation of the District, any of which
reflect financial difficulties.
(b) The District shall, or shall cause the Dissemination Agent (if not the District) to, file a
notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely
manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the
foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under this
subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds
under the Indenture.
(c) The District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8)
(if the event is a bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain the qualifier “if
material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices,
determinations or other events affecting the tax status of the Bonds. The District shall cause a notice to be
filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines
the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the District obtains
knowledge of the occurrence of any of these Listed Events, the District will as soon as possible determine
if such event would be material under applicable federal securities law. If such event is determined to be
material, the District will cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above
is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or
similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other
proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction
over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by
leaving the existing governing body and officials or officers in possession but subject to the supervision
and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization,
arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the District.
(e) The term financial obligation means a (1) debt obligation; (2) derivative instrument entered
into in connection with, or pledged as security or a source of payment for, an existing or planned debt
obligation; or (3) guarantee of (e)(1) or (e)(2). The term financial obligation shall not include municipal
securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
SECTION 6. Termination of Reporting Obligation. The District’s obligations under this
Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all
of the Bonds.
SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or
report prepared by the District pursuant to this Disclosure Agreement. The Dissemination Agent may resign
by providing thirty days written notice to the District. The Dissemination Agent shall not be responsible
for the content of any report or notice prepared by the District and shall have no duty to review any
information provided to it by the District. The Dissemination Agent shall have no duty to prepare any
information report nor shall the Dissemination Agent be responsible for filing any report not provided to it
by the District in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the District may amend this Disclosure Agreement, and any provision of this Disclosure
Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such
D-5
amendment or waiver is permitted by the Rule; provided, the Dissemination Agent shall have first
consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of
any amendment or waiver of a provision of this Disclosure Agreement, the District shall describe such
amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason
for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles,
on the presentation) of financial information or operating data being presented by the District. In addition,
if the amendment relates to the accounting principles to be followed in preparing financial statements, (i)
notice of such change shall be given in the same manner as for a Listed Event under Section 5(d), and (ii)
the Annual Report for the year in which the change is made shall present a comparison (in narrative form
and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the
new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the District from disseminating any other information, using the means of dissemination set forth
in this Disclosure Agreement or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice
of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Agreement, the District shall have no obligation under this Disclosure Agreement to update such
information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the District to comply with any provision of
this Disclosure Agreement, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
District to comply with its obligations under this Disclosure Agreement. A default under this Disclosure
Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this
Disclosure Agreement in the event of any failure of the District or the Dissemination Agent to comply with
this Disclosure Agreement shall be an action to compel performance.
No Bondholder or Beneficial Owner may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the District satisfactory written evidence of such
Holder’s or Beneficial Owner’s status as such, and a written notice of and request to cure such failure, and
the District shall have refused to comply therewith within a reasonable time.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District
agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers,
directors, employees and agents, harmless against any loss, expense and liabilities which it may incur
arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and
expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due
to the Dissemination Agent’s, its officers’, directors’, employees’ and agents’ negligence or willful
misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided
hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees
and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In
performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary
capacity for the District, the Holders, or any other party. The obligations of the District under this Section
shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
D-6
SECTION 12. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
District: Otay Water District
2554 Sweetwater Springs Boulevard
Spring Valley, CA 91978
Attention: General Manager
Dissemination Agent: Harrell & Company Advisors, LLC
333 City Boulevard West, Suite 1215
Orange, CA 92868
Attn: Suzanne Harrell
SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from
time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on
the date hereof, and such signature binds the District to the undertaking herein provided.
OTAY WATER DISTRICT
By:
Chief Financial Officer
HARRELL & COMPANY ADVISORS, LLC, as
Dissemination Agent
By:
Authorized Officer
E-1
APPENDIX E
FORM OF BOND COUNSEL OPINION
F-1
APPENDIX F
THE BOOK-ENTRY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record
keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other
payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial
ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants
and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no
representations can be made concerning these matters and neither the DTC Participants nor the Beneficial
Owners should rely on the foregoing information with respect to such matters, but should instead confirm
the same with DTC or the DTC Participants, as the case may be.
Neither the issuer of the Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent
appointed with respect to the Bonds (the “Agent”) take any responsibility for the information contained in
this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to
the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b)
certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or
(c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the
Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants
will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with
the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing
with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository
for the Bonds (the “Securities”). The Securities will be issued as fully-registered securities registered in
the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of
the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If,
however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued
with respect to each $500 million of principal amount, and an additional certificate will be issued with
respect to any remaining principal amount of such issue.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a “banking organization” within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the
New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC.
DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry transfers and pledges
between Direct Participants’ accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of
The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National
Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is
also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of
F-2
AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com. The information contained on
such Internet site is not incorporated herein by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of
each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and
Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC
are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration
in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the
identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to
augment the transmission to them of notices of significant events with respect to the Securities, such as
redemptions, tenders, defaults, and proposed amendments to the Security documents. For example,
Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their
benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the registrar and request that copies of notices
be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue
are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to
whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
8. Redemption proceeds and distributions on the Securities will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to
credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from
Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in bearer form or registered in
“street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject
F-3
to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption
proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested
by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Securities at
any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor securities depository). In that event, Security certificates will be printed and delivered to
DTC.
11. The information in this section concerning DTC and DTC’s book-entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy
thereof.
4844-9354-5385.1
$_________
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
BOND PURCHASE AGREEMENT
_________, 2019
Otay Water District Financing Authority
2554 Sweetwater Springs Boulevard
Spring Valley, California 91978
Otay Water District
2554 Sweetwater Springs Boulevard
Spring Valley, California 91978
Ladies and Gentlemen:
Hilltop Securities Inc. (the “Underwriter”) hereby offers to enter into this Bond Purchase
Agreement (the “Purchase Agreement”) with you, the Otay Water District Financing Authority (the
“Authority”) and the Otay Water District (the “District”), for the purchase by the Underwriter and the
delivery by the Authority of the above-referenced Bonds (the “Bonds”). The proceeds of the Bonds
will be used to: (i) to finance certain improvements to the District’s Wastewater System; and (ii) to
pay costs incurred in connection with the issuance of the Bonds. This offer is subject to your
acceptance prior to 11:59 p.m., California time, on the date hereof and if not so accepted will be subject
to withdrawal by the Underwriter upon written notice delivered to the Authority and the District at any
time prior to the acceptance thereof by the Authority and the District. Upon such acceptance, this
Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding
upon you and the Underwriter. All terms not defined herein shall have the meanings set forth in the
Indenture or the Installment Sale Agreement (each defined below).
The Authority and the District acknowledge and agree that: (i) the purchase and sale of the
Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction among the
District, the Authority and the Underwriter in which the Underwriter is acting solely as a principal and
not as an agent of the Authority or the District and the Underwriter is not acting as a municipal advisor,
financial advisor or fiduciary to the Authority or the District; (ii) the Underwriter has not assumed any
advisory or fiduciary responsibility to the Authority or the District with respect to the transaction
contemplated by this Purchase Agreement and the discussions, undertakings or procedures leading
thereto (irrespective of whether the Underwriter, or any affiliate of the Underwriter has provided other
services or is currently providing other services to the Authority or the District on other matters); (iii)
the only obligations the Underwriter has to the Authority and the District with respect to the transaction
contemplated by this Purchase Agreement are expressly set forth in this Purchase Agreement; and (iv)
the Authority and the District have consulted their own financial and/or municipal, legal, accounting,
tax and other advisors, as applicable, to the extent the Authority and the District have deemed
appropriate. The Authority acknowledges that it has previously provided the Underwriter with an
4844-9354-5385.1
2
acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal
Securities Rulemaking Board (the “MSRB”).
1. Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriter hereby agrees to purchase from the Authority for offering to the public, and the
Authority hereby agrees to sell and deliver to the Underwriter, all (but not less than all) of the
$_________ aggregate principal amount of the Bonds to be dated the Closing Date, at a price of
$_________, being the principal amount of the Bonds, plus original issue premium of $________, less
an Underwriter’s discount of $_________.
The Bonds shall mature in the amounts and on the dates, and bear interest at the rates, set forth
in Exhibit A hereto. The Bonds shall be as described in and shall be secured under and pursuant to an
Indenture of Trust, dated as of November 1, 2019 (the “Indenture”), between the Authority and
MUFG Union Bank, N.A., as trustee (the “Trustee”), substantially in the form previously submitted
to the Underwriter with only such changes therein as shall be mutually agreed upon by the Authority,
the District, the Trustee and the Underwriter.
The obligation of the Authority to pay the principal of and interest on the Bonds is a special
obligation of the Authority, payable solely from Revenues (as defined in the Indenture), and certain
other amounts held under the Indenture. Revenues consist primarily of Installment Payments made by
the District to the Authority pursuant to the Installment Sale Agreement (as defined below). The
principal of and interest on the Bonds are not required to be paid from any other funds of the Authority,
including any proceeds of any taxes, and does not constitute a debt or pledge of the faith and credit of
the Authority or the State of California (the “State”) or any political subdivision thereof in
contravention of any constitutional or statutory debt limitation or restriction.
The Authority and the District hereby ratify the use by the Underwriter of the Preliminary
Official Statement, dated ________, 2019 relating to the Bonds (together with the cover page and all
appendices thereto, and any supplements thereof, the “Preliminary Official Statement”), and
authorizes the Underwriter to use and distribute the Preliminary Official Statement, the Official
Statement (as defined below), the Indenture, the Installment Sale Agreement, dated as of November 1,
2019, between the Authority and the District (the “Installment Sale Agreement”), the Continuing
Disclosure Agreement as required by Securities and Exchange Commission Rule 15c2-12, as amended
(“Rule 15c2-12”), and substantially in the form attached as an appendix to the Official Statement,
dated April 17, 2019 (the “Continuing Disclosure Agreement”), executed by the District and the
dissemination agent named therein and this Purchase Agreement, and all information contained therein,
and all other documents, certificates and statements furnished by the Authority and the District to the
Underwriter in connection with the offer and sale of the Bonds by the Underwriter. The Authority and
the District have heretofore “deemed final” the Preliminary Official Statement within the meaning of
Rule 15c2-12.
The District will undertake pursuant to the Continuing Disclosure Agreement to provide certain
annual financial and operating information and notices of the occurrence of certain events. A
description of this undertaking is set forth in the Preliminary Official Statement and will also be set
forth in the final Official Statement. This undertaking will be entered into in order to assist the
Underwriter in complying with the Rule 15c2-12.
2. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or
yields) set forth on the inside cover page of the Official Statement of the Authority pertaining to the
4844-9354-5385.1
3
Bonds, dated _________, 2019 (together with all appendices thereto, and with such changes therein
and supplements thereto and as are consented to in writing by the Underwriter, and with the Preliminary
Official Statement, are herein called the “Official Statement”). Subsequent to the initial public
offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields)
as it deems necessary in connection with the marketing of the Bonds subject to Section 5 hereof. The
Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices.
“Public Offering” shall include an offering to a representative number of institutional investors or
registered investment companies, regardless of the number of such investors to which the Bonds are
sold. The Underwriter agrees that prior to the time the final Official Statement relating to the Bonds
is available, the Underwriter will send to any potential purchaser of the Bonds, upon the request of
such potential purchaser, a copy of the most recent Preliminary Official Statement. Such Preliminary
Official Statement shall be sent by first class mail or electronic distribution (or other equally prompt
means) not later than the first business day following the date upon which each such request is received.
3. The Authority shall also deliver a sufficient number of copies of the Official Statement
to enable the Underwriter to distribute a single copy of the Official Statement to any potential customer
of the Underwriter requesting an Official Statement during the time period beginning when the Official
Statement becomes available and ending on the End Date (defined below). The Authority shall deliver
these copies to the Underwriter no later than the earlier of (i) seven (7) business days after the execution
of this Purchase Agreement or (ii) one (1) business day prior to the Closing Date in order to permit the
Underwriter to comply with Rule 15c2-12, and the applicable rules of the MSRB, with respect to
distribution of the Official Statement. The Authority and the District shall prepare the Official
Statement, including any amendments thereto, in word-searchable PDF format as described in the
MSRB’s Rule G-32 and shall provide the electronic copy of the word-searchable PDF format of the
Official Statement to the Underwriter no later than one (1) business day prior to the Closing Date to
enable the Underwriter to comply with MSRB Rule G-32. The Underwriter shall inform the District in
writing of the End Date, and covenants to file the Official Statement with the MSRB on a timely basis.
The Official Statement, as of its date, as of the Closing Date (as defined herein) and as of the
date of any update, amendment or supplement thereto as required hereby subsequent to the Closing,
up to and including the date which is twenty-five (25) days following the end (the “End Date”) of the
Underwriting Period (as hereinafter defined), will be correct and complete in all material respects and
will not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading.
If, after the date of this Purchase Agreement and until the earlier of (i) ninety (90) days after
the end of the “underwriting period” (as defined in Rule 15c2-12) (the “Underwriting Period”), or
(ii) twenty-five (25) days following the end of the Underwriting Period if the Official Statement is
available to any person from the MSRB as contemplated by Rule 15c2-12(b)(4), any event shall occur
or circumstance shall exist of which the Authority or the District have knowledge that would cause the
Official Statement to contain any untrue statement of a material fact or to omit to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading, the Authority or the District, as the case may be, shall notify the Underwriter
(and for the purpose of this Section provide the Underwriter with such information as it may from time
to time reasonably request), and, if in the opinion of the District, the Authority or the Underwriter such
event or circumstance requires the preparation and publication of a supplement or amendment to the
Official Statement, the Authority and the District will, at their expense, supplement or amend the
Official Statement in a form and manner jointly approved by the District, the Authority and the
4844-9354-5385.1
4
Underwriter and furnish to the Underwriter a reasonable number of copies of such supplement or
amendment provided that the Underwriter agrees that it will promptly notify the Authority and the
District of the end of the Underwriting Period.
4. At 8:30 a.m., Pacific Time, on ________, 2019, or at such other time or date as shall
be agreed upon by the Underwriter, Authority and the District (such time and date being herein referred
to as the “Closing Date”), the Authority will deliver to the Underwriter, at a location or locations to
be designated by the Underwriter, the Bonds in book-entry form (all Bonds having had the CUSIP
numbers assigned to them thereon), duly executed by an authorized officer of the Trustee as provided
in the Indenture, and the other documents herein mentioned; and the Underwriter will accept such
delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Purchase Agreement
in immediately available funds (such delivery and payment being herein referred to as the “Closing”).
Upon initial issuance, the ownership of such Bonds shall be registered in the registration books
kept by the Trustee in the name of Cede & Co., as the nominee of The Depository Trust Company.
It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to
provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal
by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase
Agreement.
5. (a) The Underwriter agrees to assist the Authority in establishing the issue price of
the Bonds and shall execute and deliver to the Authority at Closing an “issue price” or similar
certificate, together with the supporting pricing wires or equivalent communications, substantially in
the form attached hereto as Exhibit C, with such modifications as may be appropriate or necessary, in
the reasonable judgment of the Underwriter, the Authority and Bond Counsel, to accurately reflect, as
applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All
actions to be taken by the Authority under this section to establish the issue price of the Bonds may be
taken on behalf of the Authority by the Authority’s municipal advisor identified herein and any notice
or report to be provided to the Authority may be provided to the Authority’s municipal advisor.].
(b) [Except as otherwise set forth in Schedule I attached hereto,] the Authority will treat
the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the
issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the
Underwriter shall report to the Authority the price or prices at which it has sold to the public each
maturity of Bonds. [If at that time the 10% test has not been satisfied as to any maturity of the Bonds,
the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Bonds
of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date
has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has
been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation
after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the
Authority or bond counsel.] For purposes of this Section, if Bonds mature on the same date but have
different interest rates, each separate CUSIP number within that maturity will be treated as a separate
maturity of the Bonds.
(c) [The Underwriter confirms that it has offered the Bonds to the public on or before the
date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the
corresponding yield or yields, set forth in Schedule I attached hereto, except as otherwise set forth
therein. Schedule I also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of
4844-9354-5385.1
5
the Bonds for which the 10% test has not been satisfied and for which the Authority and the
Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the
Authority to treat the initial offering price to the public of each such maturity as of the sale date as the
issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price
rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold
Bonds of that maturity to any person at a price that is higher than the initial offering price to the public
during the period starting on the sale date and ending on the earlier of the following:
(1) the close of the fifth (5th) business day after the sale date; or
(2) the date on which the Underwriter has sold at least 10% of that maturity of the
Bonds to the public at a price that is no higher than the initial offering price to the
public.
The Underwriter will advise the Authority promptly after the close of the fifth (5th) business
day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price
that is no higher than the initial offering price to the public.]
(d) The Underwriter confirms that:
(i) any selling group agreement and any third-party distribution agreement relating to the
initial sale of the Bonds to the public, together with the related pricing wires, contains or will
contain language obligating each dealer who is a member of the selling group and each broker-
dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each
maturity allocated to it, whether or not the Closing Date has occurred, until either all
Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter
that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the
reporting obligation after the Closing Date may be at reasonable periodic intervals or
otherwise upon request of the Underwriter, and (ii) to comply with the hold-the-
offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge,
are made to a purchaser who is a related party to an underwriter participating in the
initial sale of the Bonds to the public (each such term being used as defined below),
and
(C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the
Underwriter shall assume that each order submitted by the dealer or broker-dealer is a
sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public,
together with the related pricing wires, contains or will contain language obligating each dealer
that is a party to a third-party distribution agreement to be employed in connection with the
initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-
party distribution agreement to (A) report the prices at which it sells to the public the unsold
Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until
either all Bonds of that maturity allocated to it have been sold or it is notified by the
4844-9354-5385.1
6
Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity,
provided that, the reporting obligation after the Closing Date may be at reasonable periodic
intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the
hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or
the dealer and as set forth in the related pricing wires.
(e) The Authority acknowledges that, in making the representations set forth in this
section, the Underwriter will rely on (i) in the event a selling group has been created in connection
with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the
selling group to comply with the requirements for establishing issue price of the Bonds, including, but
not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds,
as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-
party distribution agreement was employed in connection with the initial sale of the Bonds to the
public, the agreement of each broker-dealer that is a party to such agreement to comply with the
requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to
comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party
distribution agreement and the related pricing wires. The Authority further acknowledges that the
Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of
any broker-dealer that is a party to a third-party distribution agreement, to comply with its
corresponding agreement to comply with the requirements for establishing issue price of the Bonds,
including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if
applicable to the Bonds.
(f) The Underwriter acknowledges that sales of any Bonds to any person that is a related
party to an underwriter participating in the initial sale of the Bonds to the public (each such term being
used as defined below) shall not constitute sales to the public for purposes of this section. Further, for
purposes of this section:
(i) “public” means any person other than an underwriter or a related party,
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract
with the Authority (or with the lead underwriter to form an underwriting
syndicate) to participate in the initial sale of the Bonds to the public and (B)
any person that agrees pursuant to a written contract directly or indirectly with
a person described in clause (A) to participate in the initial sale of the Bonds to
the public (including a member of a selling group or a party to a third-party
distribution agreement participating in the initial sale of the Bonds to the
public),
(iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the
underwriter and the purchaser are subject, directly or indirectly, to (A) more
than 50% common ownership of the voting power or the total value of their
stock, if both entities are corporations (including direct ownership by one
corporation of another), (B) more than 50% common ownership of their capital
interests or profits interests, if both entities are partnerships (including direct
ownership by one partnership of another), or (C) more than 50% common
ownership of the value of the outstanding stock of the corporation or the capital
interests or profit interests of the partnership, as applicable, if one entity is a
4844-9354-5385.1
7
corporation and the other entity is a partnership (including direct ownership of
the applicable stock or interests by one entity of the other), and
(iv) “sale date” means the date of execution of this Purchase Agreement by all
parties.
6. The Underwriter represents to and agrees with the Authority and the District that, as of
the date hereof and as of the Closing Date:
(i) The Underwriter is duly authorized to execute this Purchase Agreement and to
take any action under this Purchase Agreement required to be taken by it;
(ii) The Underwriter is in compliance with MSRB Rule G-37 with respect to the
Authority and the District, and is not prohibited thereby from acting as the underwriter with
respect to securities of the Authority and the District; and
(iii) The Underwriter has, and has had, no financial advisory relationship, as that
term is defined in California Government Code Section 53590 (c) or MSRB Rule G-32, with
the District with respect to the Bonds, and no investment firm controlling, controlled by or
under common control with such Underwriter have or has had any such financial advisory
relationship.
7. The Authority represents, warrants and covenants to the Underwriter that:
(a) The Authority is a joint exercise of powers authority duly organized and validly
existing pursuant to the laws of the State of California and has all necessary power and authority to
enter into and perform its duties under the Indenture, the Installment Sale Agreement and this Purchase
Agreement (collectively, the “Authority Documents”) and, when executed and delivered by the
respective parties thereto, the Authority Documents will constitute the legal, valid and binding
obligations of the Authority in accordance with their respective terms.
(b) Neither the execution and delivery of the Authority Documents, or the approval
and execution of the Official Statement, and compliance with the provisions on the Authority’s part
contained therein, nor the consummation of any other of the transactions herein and therein
contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach
of or default under nor contravenes any law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is
a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in
the security interest or encumbrance of any nature whatsoever upon any of the properties or assets of
the Authority under the terms of any such law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the
Authority Documents.
(c) Except as may be required under blue sky or other securities laws of any state,
there is no consent, approval, authorization or other order of, or filing with, or certification by, any
regulatory authority having jurisdiction over the Authority required for the execution and delivery of
the Bonds or the consummation by the Authority of the other transactions contemplated by the Official
Statement and this Purchase Agreement.
4844-9354-5385.1
8
(d) To the best of the knowledge of the Authority, there is, and on the Closing there
will be, no action, suit, proceeding or investigation at law or in equity before or by any court or
governmental agency or body pending or threatened against the Authority to restrain or enjoin the
delivery of any of the Bonds, or the payments to be made pursuant to the Indenture, or in any way
contesting or affecting the validity of the Authority Documents or of the Authority to enter into the
Authority Documents or contesting the powers of the Authority to perform its obligations under any
of the foregoing or in any way contesting the powers of the Authority in connection with any action
contemplated by this Purchase Agreement, or in any way questioning or challenging the tax status of
the Bonds.
(e) As of the date thereof and at all times subsequent thereto up to and including
the End Date, the information relating to the Authority contained in the Official Statement will be
complete and will not contain any untrue or misleading statement of a material fact or omit to state any
material fact (unless an event occurs of the nature described in Section 7(j) below) necessary to make
the statements therein, in the light of the circumstances under which they were made, not misleading.
As of its date, the information relating to the Authority and the Bonds contained in the Official
Statement is true and correct in all material respects and such information does not contain any untrue
or misleading statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
(f) The Authority agrees to cooperate with the Underwriter in endeavoring to
qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of
the United States as the Underwriter may request; provided, however, that the Authority will not be
required to execute a special or general consent to service of process in any jurisdiction in which it is
not now so subject or to qualify to do business as a foreign agency in any jurisdiction where it is not
so qualified.
(g) By official action of the Authority prior to or concurrently with the execution
hereof, the Authority has duly approved the distribution of the Official Statement, and has duly
authorized and approved the execution and delivery of, and the performance by the Authority of the
obligations on its part contained in the Authority Documents and the consummation by it of all other
transactions contemplated by the Official Statement and this Purchase Agreement.
(h) The Authority is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable judgment or
decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which
the Authority is a party or is otherwise subject, and no event has occurred and is continuing which,
with the passage of time or the giving of notice, or both, would constitute a default or an event of
default under any such instrument.
(i) The Authority is not in default, nor has been in default at any time, as to the
payment of principal or interest with respect to an obligation issued by the Authority or successor of
the Authority or with respect to an obligation guaranteed by the Authority as guarantor or successor of
a guarantor.
(j) If between the date of this Purchase Agreement and the End Date an event
occurs, of which the Authority has knowledge, which might or would cause the information relating
to the Authority or the Authority’s functions, duties and responsibilities contained in the Official
Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to
4844-9354-5385.1
9
omit to state a material fact required to be stated therein or necessary to make such information therein,
in the light of the circumstances under which it was presented, not misleading, the Authority will notify
the Underwriter, and if, in the opinion of the Underwriter or the Authority, such event requires the
preparation and publication of a supplement or amendment to the Official Statement, the Authority
will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official
Statement in a form and in a manner approved by the Underwriter or the Authority, provided all
expenses thereby incurred will be paid for by the Authority.
(k) If the information relating to the Authority, its functions, duties and
responsibilities contained in the Official Statement is amended or supplemented pursuant to the
immediately preceding subsection, at the time of each supplement or amendment thereto and (unless
subsequently again supplemented or amended pursuant to such subsection) at all times subsequent
thereto up to and including the date of the Closing, the portions of the Official Statement so
supplemented or amended (including any financial and statistical data contained therein) will not
contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make such information therein, in the light of the circumstances under which it
was presented, not misleading.
(l) No consent, approval, authorization or other action by a governmental or
regulatory authority that has not been obtained is or will be required of the Authority for the delivery
and sale of the Bonds or the consummation of the other transactions contemplated by this Purchase
Agreement and the Official Statement, except as may be required under the state securities or blue sky
laws in connection with the sale of the Bonds by the Underwriter.
(m) The Authority will deliver all opinions, Bonds, letters and other instruments
and documents reasonably required by the Underwriter and this Purchase Agreement.
(n) Any certificate of the Authority delivered to the Underwriter shall be deemed
a representation and warranty by the Authority to the Underwriter as to the statements made therein.
(o) Other than as described in the Official Statement, as of the time of acceptance
hereof and as of the Closing the Authority does not and will not have outstanding any indebtedness
which is secured by a lien on the Installment Payments superior to or on a parity with the lien of the
Bonds thereon.
(p) Between the date of this Purchase Agreement and the date of Closing, the
Authority will not, without the prior written consent of the Underwriter, and except as disclosed in the
Official Statement, offer or issue any bonds, notes or other obligations for borrowed money, or incur
any material liabilities, direct or contingent, payable from the Net Revenues.
(q) The Authority is not presently and as a result of the execution of the Authority
Documents and the sale of the Bonds will not be in violation of any debt limitation, appropriation
limitation or any other provision of the California Constitution or statutes or any additional debt or
similar provision of any bond, note, contract or other evidence of indebtedness to which the Authority
is a party or to which the Authority is bound.
(r) The Authority will not knowingly take or omit to take any action, which action
or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner
other than as provided in the Authority Documents, unless otherwise required by law.
4844-9354-5385.1
10
8. The District represents, warrants and covenants to the Underwriter that:
(a) The District is a municipal water district duly organized under the laws of the
State of California, and has all necessary power and authority to enter into and perform its duties under
the Installment Sale Agreement, the Continuing Disclosure Agreement, and this Purchase Agreement
(collectively, the “District Documents”) and, when executed and delivered by the respective parties
thereto, the District Documents will constitute the legal, valid and binding obligations of the District
in accordance with their respective terms.
(b) Neither the execution and delivery of the District Documents, or the approval
and execution of the Official Statement, and compliance with the provisions on the District’s part
contained therein, nor the consummation of any other of the transactions herein and therein
contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach
of or default under nor contravenes any law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the District is a
party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in
the security interest or encumbrance of any nature whatsoever upon any of the properties or assets of
the District under the terms of any such law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the
District Documents.
(c) Except as may be required under blue sky or other securities laws of any state,
there is no consent, approval, authorization or other order of, or filing with, or certification by, any
regulatory authority having jurisdiction over the District required for the execution and delivery of the
Bonds or the consummation by the District of the other transactions contemplated by the Official
Statement and this Purchase Agreement.
(d) To the best of the knowledge of the District, there is, and on the Closing there
will be, no action, suit, proceeding or investigation at law or in equity before or by any court or
governmental agency or body pending or threatened against the District to restrain or enjoin the
delivery of any of the Bonds, or the payments to be made pursuant to the Installment Sale Agreement
and Indenture, or in any way contesting or affecting the validity of the District Documents or of the
District to approve or enter into the District Documents, or in any way questioning or challenging the
tax status of the Bonds.
(e) As of the date thereof and at all times subsequent thereto up to and including
the End Date, the information relating to the District, the Bonds and the Wastewater System contained
in the Official Statement will be complete and will not contain any untrue or misleading statement of
a material fact or omit to state any material fact (unless an event occurs of the nature described in
Section 8(j) below) necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of its date and as of the date hereof, the information relating
to the District, the Bonds and the Wastewater System contained in the Official Statement is true and
correct in all material respects and such information does not contain any untrue or misleading
statement of a material fact or omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(f) The District agrees to cooperate with the Underwriter in endeavoring to qualify
the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United
States as the Underwriter may request; provided, however, that the District will not be required to
4844-9354-5385.1
11
execute a special or general consent to service of process in any jurisdiction in which it is not now so
subject or to qualify to do business as a foreign agency in any jurisdiction where it is not so qualified.
(g) By official action of the District prior to or concurrently with the execution
hereof, the District has duly approved the distribution of the Official Statement, and has duly authorized
and approved the execution and delivery of, and the performance by the District of the obligations on
its part contained in the District Documents and the consummation by it of all other transactions
contemplated by the Official Statement and this Purchase Agreement.
(h) The District is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable judgment or
decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which
the District is a party or is otherwise subject, and no event has occurred and is continuing which, with
the passage of time or the giving of notice, or both, would constitute a default or an event of default
under any such instrument.
(i) The District is not in default, nor has been in default at any time, as to the
payment of principal or interest with respect to an obligation issued by the District or successor of the
District or with respect to an obligation guaranteed by the District as guarantor or successor of a
guarantor.
(j) If between the date of this Purchase Agreement and the End Date an event
occurs, of which the District has knowledge, which might or would cause the information relating to
the District, the Wastewater System or the District’s functions, duties and responsibilities contained in
the Official Statement, as then supplemented or amended, to contain an untrue statement of a material
fact or to omit to state a material fact required to be stated therein or necessary to make such
information therein, in the light of the circumstances under which it was presented, not misleading, the
District will notify the Underwriter, and if, in the opinion of the Underwriter or the Authority, such
event requires the preparation and publication of a supplement or amendment to the Official Statement,
the District will cooperate with the Underwriter in the preparation of an amendment or supplement to
the Official Statement in a form and in a manner approved by the Underwriter or the Authority,
provided all expenses thereby incurred will be paid for by the District.
(k) If the information relating to the Wastewater System, the District, its functions,
duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to
the immediately preceding subsection, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such subsection) at all times
subsequent thereto up to and including the date of the Closing, the portions of the Official Statement
so supplemented or amended (including any financial and statistical data contained therein) will not
contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make such information therein, in the light of the circumstances under which it
was presented, not misleading.
(l) The District covenants that it will comply with all tax covenants relating to it
in the District Documents and the Tax Certificate of the District.
(m) The written information supplied by the District to the Underwriter with respect
to the financial information relating to the Wastewater System is true, correct and complete in all
material respects for the purposes for which it was supplied.
4844-9354-5385.1
12
(n) No consent, approval, authorization or other action by a governmental or
regulatory agency that has not been obtained is or will be required of the District for the delivery and
sale of the Bonds or the consummation of the other transactions contemplated by this Purchase
Agreement and the Official Statement, except for such licenses, certificates, approvals, variances or
permits which may be necessary for the construction or operation of the Wastewater System which the
District has applied for (or will apply for in the ordinary course of business) and expects to receive,
and except as may be required under the state securities or blue sky laws in connection with the sale of
the Bonds by the Underwriter.
(o) The District will not take or omit to take any action which action or omission
will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to
that provided in the Indenture and as described in the Official Statement, unless otherwise required by
law.
(p) The District will deliver all opinions, certificates, letters and other instruments
and documents reasonably required by the Underwriter and this Purchase Agreement.
(q) Any certificate of the District delivered to the Underwriter shall be deemed a
representation and warranty by the District to the Underwriter as to the statements made therein.
(r) Other than as described in the Official Statement, as of the time of acceptance
hereof and as of the Closing, the District does not and will not have outstanding any indebtedness
which is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Bonds
thereon.
(s) Between the date of this Purchase Agreement and the date of Closing, the
District will not, without the prior written consent of the Underwriter, and except as disclosed in the
Official Statement, offer or issue any bonds, notes or other obligations for borrowed money, or incur
any material liabilities, direct or contingent, payable from the Net Revenues.
(t) The District is not presently and as a result of the execution of the District
Documents and the sale of the Bonds will not be in violation of any debt limitation, appropriation
limitation or any other provision of the California Constitution or statutes or any additional debt or
similar provision of any bond, note, contract or other evidence of indebtedness to which the District is
a party or to which the District is bound.
(u) Based on a review of its previous undertakings, the District has not, in the last
five years, failed to comply in any material respect with its obligations under any continuing disclosure
undertaking entered into pursuant to Rule 15c2-12 except as disclosed in the Official Statement. The
District will undertake, pursuant to the Continuing Disclosure Agreement to provide annual reports
and notices of certain events in accordance with the requirements of Rule 15c2-12.
9. The Underwriter has entered into this Purchase Agreement in reliance upon the
representations, warranties and agreements of the Authority and the District contained herein, and the
opinions of Bond Counsel, Counsel to the Trustee, General Counsel to the District and Counsel to the
Authority required hereby. The Underwriter’s obligations under this Purchase Agreement are and shall
be subject to the following further conditions:
4844-9354-5385.1
13
(a) At the time of Closing, this Purchase Agreement, the Indenture, the Installment
Sale Agreement, and the Continuing Disclosure Agreement (collectively the “Legal Documents”), all
as described in the Official Statement, shall be in full force and effect as valid and binding agreements
between or among the various parties thereto, and the Legal Documents and the Official Statement
shall not have been amended, modified or supplemented except as may have been agreed to in writing
by the Underwriter, and there shall be in full force and effect such resolutions as, in the opinion of
Hawkins Delafield & Wood LLP (“Bond Counsel”), shall be necessary in connection with the
transactions contemplated hereby.
(b) At or prior to the Closing, the Underwriter shall receive the following
documents, in each case satisfactory in form and substance to them:
(1) The unqualified approving opinion of Bond Counsel, dated the date of
Closing, addressed to the Authority, the District and the Underwriter (or a reliance
letter to the Underwriter), in substantially the form attached as Appendix E to the
Official Statement.
(2) A supplemental opinion of Bond Counsel, dated as of the date of
Closing addressed to the Underwriter, in form and substance to the effect that:
(a) The statements and information contained in the Official
Statement under the captions “INTRODUCTION,” “THE BONDS,” “SOURCES OF
PAYMENT FOR THE BONDS,” “TAX MATTERS” and APPENDICES A and E to
the extent they purport to summarize information concerning the Bonds and certain
provisions of the Legal Documents and the opinion of such counsel, present a fair and
accurate summary of such information and such provisions;
(b) The Bonds are exempt from registration under the Securities
Act of 1933, as amended, and the Indenture is exempt from qualification as an
Indenture pursuant to the Indenture Act of 1939, as amended; and
(c) The Purchase Agreement has been duly authorized, executed
and delivered by the Authority and the District, and, assuming due authorization,
execution and delivery by the other parties thereto, constitutes legal, valid and binding
agreement of the Authority and the District enforceable against each in accordance
with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors’ rights generally and
equitable remedies if equitable remedies are sought, and except no opinion need be
expressed as to the enforceability of the indemnification, waiver, choice of law or
contributions provisions contained in the Purchase Agreement.
(3) The opinion of Hawkins Delafield & Wood LLP, Disclosure Counsel,
dated the date of Closing and addressed to the Authority, the District and the
Underwriter, in substantially the form attached hereto as Exhibit C.
(4) An opinion of Counsel to the Authority, dated the date of Closing in
form and substance satisfactory to the Underwriter and Bond Counsel, addressed to the
District and the Underwriter, to the effect that:
4844-9354-5385.1
14
(i) the Authority is a joint powers authority duly organized and
validly existing under the laws of the State of California;
(ii) the preparation and distribution of the Official Statement and
the Authority Documents have been duly approved by the Authority;
(iii) the resolutions of the Authority approving and authorizing the
execution and delivery of the Official Statement and the Authority Documents
have been duly adopted at meetings of the governing body of the Authority
which were called and held pursuant to law and with all public notice required
by law and at which a quorum was present and acting throughout and such
resolutions have not been amended or modified and are in full force and effect;
(iv) there is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body, pending or, to the best
knowledge of such counsel, threatened against or affecting the Authority,
which would adversely impact the Authority’s ability to complete the
transactions described in and contemplated by the Official Statement, to
restrain or enjoin the payments under, or in any way contesting or affecting the
validity of the Authority Documents, or the transactions described and defined
in the Official Statement wherein an unfavorable decision, ruling or finding
would adversely affect the validity and enforceability of the Authority
Documents;
(v) the execution and delivery of the Authority Documents and the
approval of the Official Statement, and compliance with the provisions thereof
and hereof, under the circumstances contemplated thereby, do not and will not
in any material respect conflict with or constitute on the part of the Authority a
breach of or default under any agreement or other instrument to which the
Authority is a party or by which it is bound or any existing law, regulation,
court order or consent decree to which the Authority is subject;
(vi) the Authority Documents and the Official Statement have been
duly authorized, executed and delivered by the Authority, and, assuming due
authorization, execution and delivery by the other parties thereto, the Authority
Documents constitute legal, valid and binding agreements of the Authority
enforceable in accordance with their respective terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors’ rights generally and by the application
of equitable principles if sought and by the limitations on legal remedies
imposed on actions against public agencies in the State of California;
(vii) no authorization, approval, consent, or other order of the State
of California or any other governmental authority or agency within the State of
California is required for the valid authorization, execution and delivery of the
Authority Documents and the approval of the Official Statement; and
(viii) nothing has come to their attention which would lead them to
believe that the information relating to the Authority contained in the Official
4844-9354-5385.1
15
Statement contains an untrue statement or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(5) An opinion of General Counsel to the District, dated the date of Closing
in form and substance satisfactory to the Underwriter and Bond Counsel, addressed to
the Authority and the Underwriter, to the effect that:
(i) the District is a municipal water district created in accordance
with the laws of the State of California;
(ii) the preparation and distribution of the Official Statement and
the District Documents have been duly approved by the District;
(iii) the resolutions of the District approving and authorizing the
execution and delivery of the Official Statement and the District Documents
have been duly adopted at meetings of the governing body of the District which
were called and held pursuant to law and with all public notice required by law
and at which a quorum was present and acting throughout and such resolutions
have not been amended or modified and are in full force and effect;
(iv) there is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body, pending or, to the best
knowledge of such counsel, threatened against or affecting the District, which
would adversely impact the District’s ability to complete the transactions
described in and contemplated by the Official Statement, to restrain or enjoin
the payments under, or in any way contesting or affecting the validity of the
District Documents, or the transactions described and defined in the Official
Statement wherein an unfavorable decision, ruling or finding would adversely
affect the validity and enforceability of the District Documents;
(v) the execution and delivery of the District Documents and the
approval of the Official Statement, and compliance with the provisions thereof
and hereof, under the circumstances contemplated thereby, do not and will not
in any material respect conflict with or constitute on the part of the District a
breach of or default under any agreement or other instrument to which the
District is a party or by which it is bound or any existing law, regulation, court
order or consent decree to which the District is subject;
(vi) the District Documents and the Official Statement have been
duly authorized, executed and delivered by the District, and, assuming due
authorization, execution and delivery by the other parties thereto, the District
Documents constitute legal, valid and binding agreements of the District
enforceable in accordance with their respective terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors’ rights generally and by the application
of equitable principles if sought and by the limitations on legal remedies
imposed on actions against public agencies in the State of California;
4844-9354-5385.1
16
(vii) no authorization, approval, consent, or other order of the State
of California or any other governmental authority or agency within the State of
California is required for the valid authorization, execution and delivery of the
District Documents and the approval of the Official Statement;
(viii) the District’s charges and fees with respect to the Wastewater
System were duly approved and adopted by the District, and are valid and
enforceable at the current levels levied by the District; and
(ix) nothing has come to the General Counsel’s attention which
would lead such attorney to believe that the information relating to the District
or the Wastewater System contained in the Official Statement contains an
untrue statement or omits to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(6) The opinion of counsel to the Trustee, dated the date of Closing in form
and substance satisfactory to the Underwriter and Bond Counsel, and addressed to the
Authority, the District and the Underwriter, to the effect that:
(i) the Trustee is a national banking association duly organized
and validly existing under the laws of the United States;
(ii) the Trustee has duly authorized the execution and delivery of
the Indenture;
(iii) the Indenture has been duly entered into and delivered by the
Trustee and assuming due, valid and binding authorization, execution and
delivery by the other parties thereto, constitutes the legal, valid and binding
obligation of the Trustee enforceable against the Trustee in accordance with its
terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors’ rights generally, or by general principles of equity;
(iv) the Trustee has duly authenticated and delivered the Bonds in
its capacity as trustee under the Indenture;
(v) acceptance by the Trustee of the duties and obligations under
the Indenture and compliance with provisions thereof will not conflict with or
constitute a breach of or default under any law or administrative regulation to
which the Trustee is subject; and
(vi) all approvals, consents and orders of any governmental
authority or agency having jurisdiction in the matter which would constitute a
condition precedent to the performance by the Trustee of its duties and
obligations under the Indenture have been obtained and are in full force and
effect.
4844-9354-5385.1
17
(7) An opinion, dated the date of the Closing and addressed to the
Underwriter, of Nixon Peabody LLP, counsel to the Underwriter (“Underwriter’s
Counsel”), in such form as may be acceptable to the Underwriter.
(8) A certificate, dated the date of Closing, signed by a duly authorized
official of the Authority satisfactory in form and substance to the Underwriter and Bond
Counsel, (a) confirming as of such date the representations and warranties of the
Authority contained in this Purchase Agreement; (b) certifying that the Authority has
complied with all agreements, covenants and conditions to be complied with by the
Authority at or prior to the Closing under the Authority Documents; and (c) certifying
that to the best of such official’s knowledge, no event affecting the Authority has
occurred since the date of the Official Statement which either makes untrue or incorrect
in any material respect as of the Closing the statements or information contained in the
Official Statement or is not reflected in the Official Statement but should be reflected
therein in order to make the statements and information therein not misleading in any
material respect.
(9) A certificate or certificates, dated the date of Closing, signed by a duly
authorized official of the District satisfactory in form and substance to the Underwriter
and Bond Counsel, (a) confirming as of such date the representations and warranties
of the District contained in this Purchase Agreement; (b) certifying that the District has
complied with all agreements, covenants and conditions to be complied with by the
District at or prior to the Closing under the District Documents; and (c) certifying that
to the best of such official’s knowledge, no event affecting the District has occurred
since the date of the Official Statement which either makes untrue or incorrect in any
material respect as of the Closing the statements or information contained in the
Official Statement or is not reflected in the Official Statement but should be reflected
therein in order to make the statements and information therein not misleading in any
material respect.
(10) A certificate, dated the date of the Preliminary Official Statement,
signed by a duly authorized official of the Authority deeming the Preliminary Official
Statement “final” for purposes of Rule 15c2-12.
(11) A certificate, dated the date of the Preliminary Official Statement,
signed by a duly authorized official of the District deeming the Preliminary Official
Statement “final” for purposes of Rule 15c2-12.
(12) An executed or certified copy of each of the Legal Documents.
(13) A certificate dated as of the date of Closing of a duly authorized officer
of the District to the effect that each included resolution is a true, correct and complete
copy of the one duly adopted by the Board of Directors of the District and that none
have been amended, modified or rescinded since adoption (except as reflected in said
transcript or as may have been agreed to in writing by the Underwriter) and is in full
force and effect as of the date of Closing.
(14) A certificate dated as of the date of Closing of a duly authorized officer
of the Authority to the effect that each included resolution is a true, correct and
4844-9354-5385.1
18
complete copy of the one duly adopted by the Board of Directors of the Authority and
that none have been amended, modified or rescinded since adoption (except as reflected
in said transcript or as may have been agreed to in writing by the Underwriter) and is
in full force and effect as of the date of Closing.
(15) An executed copy of the Official Statement.
(16) A certified copy of the general resolution of the Trustee authorizing the
execution and delivery of certain documents by certain officers of the Trustee, which
resolution authorizes the execution and delivery of documents such as the Bonds and
the Indenture.
(17) A Certificate of the District with respect to the Wastewater System
evidencing that the insurance required by the Installment Sale Agreement has been
procured and is in full force and effect.
(18) Tax certifications by the Authority and the District in form and
substance acceptable to Bond Counsel.
(19) A Certificate of the Trustee, dated the Closing Date to the effect that:
(i) the Trustee is duly organized and existing as a national banking
association in good standing under the laws of the United States, having the
full power and authority to accept and perform its duties under the Indenture;
(ii) subject to the provisions of the Indenture, the Trustee will apply
the proceeds from the Bonds to the purposes specified in the Indenture;
(iii) the Trustee has duly authorized and executed the Indenture; and
(iv) the Trustee has duly authenticated and delivered the Bonds in
its capacity as trustee under the Indenture.
(20) Evidence that a federal tax information form 8038-G has been prepared
for filing with respect to the Bonds.
(21) A copy of the Notice of Final Sale required to be delivered to the
California Debt and Investment Advisory Commission pursuant to Section 8855 of the
California Government Code.
(22) Such additional legal opinions, certificates, proceedings, instruments
and other documents as Bond Counsel, the Underwriter and Underwriter’s Counsel
may reasonably request to evidence compliance with legal requirements, the truth and
accuracy, as of the time of Closing, of the representations contained herein and in the
Official Statement and the due performance or satisfaction by the Trustee and the
Authority at or prior to such time of all agreements then to be performed and all
conditions then to be satisfied.
(c) All matters relating to this Purchase Agreement, the Bonds and the sale thereof,
the Legal Documents and the consummation of the transactions contemplated by this Purchase
4844-9354-5385.1
19
Agreement shall have been approved by the Underwriter, such approval not to be unreasonably
withheld.
If the conditions to the Underwriter’s obligations contained in this Purchase Agreement are not
satisfied or if the Underwriter’s obligations shall be terminated for any reason permitted by this
Purchase Agreement, this Purchase Agreement shall terminate and none of the Underwriter, the
District nor the Authority shall have any further obligation hereunder.
10. The Underwriter shall have the right to terminate this Purchase Agreement, without
liability therefore, by written notification to the Authority and the District if at any time at or prior to
the Closing:
(i) Any event shall occur which causes any statement contained in
the Official Statement to be materially misleading or results in a failure of the
Official Statement to state a material fact necessary to make the statements in
the Official Statement, in the light of the circumstances under which they were
made, not misleading; or
(ii) Legislation shall be enacted by or introduced in the Congress
of the United States or recommended to the Congress for passage by the
President of the United States, or the Treasury Department of the United States
or the Internal Revenue Service or favorably reported for passage to either
House of the Congress by any committee of such House to which such
legislation has been referred for consideration, a decision by a court of the
United States or of the State or the United States Tax Court shall be rendered,
or an order, ruling, regulation (final, temporary or proposed), press release,
statement or other form of notice by or on behalf of the Treasury Department
of the United States, the Internal Revenue Service or other governmental
agency shall be made or proposed, the effect of any or all of which would be
to alter, directly or indirectly, federal income taxation upon interest received
on obligations of the general character of the Bonds, or the interest on the
Bonds as described in the Official Statement, or other action or events shall
have transpired which may have the purpose or effect, directly or indirectly, of
changing the federal income tax consequences of any of the transactions
contemplated herein; or
(iii) Legislation introduced in or enacted (or resolution passed) by
the Congress or an order, decree, or injunction issued by any court of competent
jurisdiction, or an order, ruling, regulation (final, temporary, or proposed),
press release or other form of notice issued or made by or on behalf of the
Securities and Exchange Commission, or any other governmental agency
having jurisdiction of the subject matter, to the effect that obligations of the
general character of the Bonds are not exempt from registration under or other
requirements of the Securities Act of 1933, as amended, or that the Indenture
is not exempt from qualification under or other requirements of the Trust
Indenture Act of 1939, as amended, or that the issuance, offering, or sale of
obligations of the general character of the Bonds, as contemplated hereby or by
the Official Statement or otherwise, is or would be in violation of the federal
securities law as amended and then in effect; or
4844-9354-5385.1
20
(iv) A general suspension of trading in securities on the New York
Stock Exchange or any other national securities exchange, the establishment of
minimum or maximum prices on any such national securities exchange, the
establishment of material restrictions (not in force as of the date hereof) upon
trading securities generally by any governmental authority or any national
securities exchange, or any material increase of restrictions now in force
(including, with respect to the extension of credit by, or the charge to the net
capital requirements of, the Underwriter); or
(v) A general banking moratorium shall have been established by
federal, New York or California authorities; or
(vi) Establishment of any new restrictions in securities materially
affecting the free market for securities of the same nature as the Bonds
(including the imposition of any limitations on interest rates); or
(vii) The occurrence of an adverse event in the affairs of the
Authority or the District which, in the reasonable opinion of the Underwriter,
materially impairs the investment quality of the Bonds; or
(viii) Any amendment to the federal or California Constitution or
action by any federal or California court, legislative body, regulatory body or
other authority materially adversely affecting the Authority or the District, its
property, income or securities (or interest thereon), or the ability of the District
to execute the Installment Sale Agreement or the Authority to issue the Bonds
and pledge the Revenues as contemplated by the Indenture and the Official
Statement; or
(ix) There shall have occurred any (1) new material outbreak of
hostilities (including, without limitation, an act of terrorism) or (2) new
material other national or international calamity or crisis, or any material
adverse change in the financial, political or economic conditions affecting the
United States, including, but not limited to, an escalation of hostilities that
existed prior to the date hereto; or
(x) There shall have occurred any materially adverse change in the
affairs or financial position, results of operations or condition, financial or
otherwise, of the Authority or the District, other than changes in the ordinary
course of business or activity or in the normal operation of the Authority or the
District, except as described in the Official Statement; or
(xi) Any event occurring, or information becoming known which,
in the reasonable judgment of the Underwriter, makes untrue in any material
respect any statement or information contained in the Preliminary Official
Statement or the Official Statement, or results in the Preliminary Official
Statement or the Official Statement containing any untrue statement of a
material fact or omitting to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or
4844-9354-5385.1
21
(xii) An event described in Section 7(j) or 8(j) hereof shall have
occurred which, in the reasonable professional judgment of the Underwriter,
requires the preparation and publication of a supplement or amendment to the
Official Statement; or
(xiii) Any rating of other obligations of the Authority or the District
by a national rating agency shall have been withdrawn or downgraded or placed
on negative outlook or negative watch.
11. Performance by the Authority and the District of their respective obligations under this
Purchase Agreement is conditioned upon (i) performance by the Underwriter of its obligations
hereunder, and (ii) receipt by the Underwriter of all opinions and certificates to be delivered at Closing
by persons and entities other than the Authority or the District.
12. After the Closing and until the End Date if any event relating to or affecting the
Authority or the District shall occur as a result of which it is necessary, in the opinion of the
Underwriter or the Authority, to amend or supplement the Official Statement in order to make the
Official Statement not misleading in the light of the circumstances existing at the time it is delivered
to an initial purchaser of the Bonds, the Authority will forthwith prepare and furnish to the Underwriter
a reasonable number of copies of an amendment of or supplement to the Official Statement (in form
and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement
so that it will not contain an untrue statement of a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time the Official Statement is
delivered to an initial purchaser of the Bonds, not misleading. The costs of preparing any necessary
amendment or supplement to the Official Statement to be utilized until the End Date shall be borne by
the Authority and any costs incurred thereafter incident to amending or supplementing the Official
Statement shall be borne by the Underwriter. For the purposes of this Section, the Authority will
furnish such information with respect to itself as the Underwriter may from time to time request.
13. (a) The Underwriter shall be under no obligation to pay, and the District or
Authority shall pay or cause to be paid out of the proceeds of the Bonds, all expenses incident to the
performance of the Authority’s and District’s obligations hereunder, including but not limited to: the
cost of photocopying and delivering the Bonds to the Underwriter; the cost of preparing, printing
(and/or word processing and reproducing), distributing and delivering the District Documents and the
Authority Documents, and the cost of printing, distributing and delivering the Preliminary Official
Statement and the Official Statement in such reasonable quantities as requested by the Underwriter;
the premiums with respect to the Policy and the Surety; and the fees and disbursements of Bond
Counsel, Disclosure Counsel, the Municipal Advisor, any accountants, municipal advisors or other
engineers or experts or consultants the Authority or the District have retained in connection with the
Bonds and expenses (included in the expense component of the Underwriter’s spread) incurred on
behalf of the Authority or District officers or employees which are incidental to implementing this
Purchase Agreement, including, but not limited to, meals, transportation, and lodging of those officers
or employees.
(b) Whether or not the Bonds are delivered to the Underwriter as set forth herein,
neither the Authority nor the District shall be under any obligation to pay, and the Authority and the
District shall not pay, any expenses incurred by the Underwriter in connection with its public offering
and distribution of the Bonds (except those specifically enumerated in subsection (a) of this section),
including any advertising expenses and the fees of the California Debt and Investment Advisory
4844-9354-5385.1
22
Commission, the cost of preparation of any “blue sky” or legal investment memoranda, and the fees
and disbursements of Underwriter’s Counsel.
The Authority and the District acknowledge that the Underwriter will pay from the
underwriter’s expense allocation of the underwriting discount certain fees, including the applicable per
bond assessment charged by the California Debt and Investment Advisory Commission.
14. Any notice or other communication to be given to the Underwriter may be given by
delivering the same to Hilltop Securities Inc. 2533 South Coast Hwy., Suite 250, Cardiff, California
92007; Attention: Robin Thomas. Any notice or other communication to be given to the Authority or
the District may be given by delivering the same to addresses initially provided herein, Attention:
Executive Director with respect to the Authority and Attention: General Manager with respect to the
District. The approval of the Underwriter when required hereunder or the determination of satisfaction
as to any document referred to herein shall be in writing signed by the Underwriter and delivered to
you.
15. This Purchase Agreement is made solely for the benefit of the Authority, the District
and the Underwriter (including the successors or assigns thereof) and no other person shall acquire or
have any right hereunder or by virtue hereof.
16. This Purchase Agreement may be executed by the parties hereto in separate
counterparts, each of which such counterparts shall together constitute but one and the same
instrument.
17. The representations and warranties of the Authority and the District set forth in or made
pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or
otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and
regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results
of such investigations) concerning such representations and warranties of the Authority and the District
and regardless of delivery of and payment for the Bonds.
18. The primary role of the Underwriter, as underwriter, is to purchase the Bonds for resale
to investors in an arms-length commercial transaction among the District, the Authority and the
Underwriter. The Underwriter, as underwriter, has financial and other interests that differ from those
of the Authority and the District.
19. This Purchase Agreement shall become effective and binding upon the respective
parties hereto upon the execution of the acceptance hereof by the Authority, the District and the
Underwriter, and shall be valid and enforceable as of the time of such acceptance.
20. This Purchase Agreement shall be governed by the laws of the State of California. This
Purchase Agreement shall not be assigned by either party hereto.
21. This Purchase Agreement supersedes and replaces all prior negotiations, agreements
and understandings between the parties hereto in relation to the sale of Bonds by the Authority and the
District and represents the entire agreement of the parties as to the subject matter herein.
4844-9354-5385.1
23
4844-9354-5385.1
S-1
Signature Page of Bond Purchase Agreement relating to
Otway Water District Financing Authority
2019 Wastewater Revenue Bonds
22. Any provision of this Purchase Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Purchase Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.
HILLTOP SECURITIES INC.
By:
Authorized Signatory
The foregoing is hereby agreed to and accepted as of the date first above written:
OTAY WATER DISTRICT FINANCING AUTHORITY
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
OTAY WATER DISTRICT
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
.
4844-9354-5385.1
Exhibit A
EXHIBIT A
$________
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-
Price Rule
4844-9354-5385.1
EXHIBIT B
$________
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, Hilltop Securities Inc. (the “Underwriter”), hereby certifies as set forth below with
respect to the sale and issuance of the above-captioned obligations (the “Bonds”) of the Otay Water
District Financing Authority (the “Issuer”).
1. Sale of the General Rule Maturities. As of the date of this certificate, for each
Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold
to the Public is the respective price listed in Schedule A.
[2. Initial Offering Price of the Hold-the-Offering-Price Maturities.
(a) The Underwriter has offered the Hold-the-Offering-Price Maturities to the Public for
purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on
or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is
attached to this certificate as Schedule B.
(b) As set forth in the Bond Purchase Agreement dated ________ __, 2019, among the
Underwriter, the Otwater Water District and the Issuer, the Underwriter agreed in writing on or prior
to the Sale Date that, (i) for each Maturity of the Hold-the-Offering-Price Maturities, they would
neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the
Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-
offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer
who is a member of the selling group, and any retail distribution agreement shall contain the agreement
of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-
offering-price rule. Pursuant to such agreement, no Underwriter (as defined below in this certificate)
offered or sold any Maturity of the Hold-the-Offering-Price Maturities at a price that is higher than the
respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.]
3. Defined Terms.
[(a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A
hereto as the “General Rule Maturities.”]
[(b) Hold-the-Offering-Price Maturities means those Maturities of the Bonds listed in
Schedule A hereto as the “Hold-the-Offering-Price Maturities.”]
[(c) Holding Period means, with respect to a Hold-the-Offering-Price Maturity, the period
starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the
Sale Date, or (ii) the date on which the Underwriters sold at least 10% of such Hold-the-Offering-Price
Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-
Offering-Price Maturity.]
4844-9354-5385.1
(d) Maturity means Bonds with the same credit and payment terms. Bonds with different
maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as
separate maturities.
(e) Public means any person (including an individual, trust, estate, partnership,
association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who
have greater than 50 percent common ownership, directly or indirectly.
(f) Sale Date means the first day on which there is a binding contract in writing for the
sale of a Maturity of the Bonds. The Sale Date of the Bonds is [date of execution of Purchase Contract].
(g) Underwriter means (i) any person that agrees pursuant to a written contract with the
Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale
of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or
indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the
Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement
participating in the initial sale of the Bonds to the Public).
The representations set forth in this certificate are limited to factual matters only. Nothing in
this certificate represents the undersigned’s interpretation of any laws, including specifically Sections
103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
thereunder. The undersigned understands that the foregoing information will be relied upon by the
Issuer with respect to certain of the representations set forth in the Tax Certificate with respect to the
Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by
Hawkins Delafield & Wood LLP in connection with rendering its opinion that the interest on the Bonds
is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue
Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to
time relating to the Bonds.
IN WITNESS WHEREOF, the undersigned has executed this certificate on this __ day of __________,
2019.
HILLTOP SECURITIES INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
4844-9354-5385.1
EXHIBIT C
FORM OF DISCLOSURE COUNSEL OPINION LETTER
Otay Water district Financing Authority
Spring Valley, California
Otay Water District
Spring Valley, California
Hilltop Securities Inc.
Cardiff, California
Re: $________ Otay Water District Financing Authority 2019 Wastewater Revenue
Bonds
Ladies and Gentlemen:
We have acted as Disclosure Counsel to the Otway Water District (the “District”) and the Otay
Water District Financing Authority (the “Authority”) in connection with the issuance by the Authority
of its 2019 Wastewater Revenue Bonds (the “Bonds”). The Bonds are authorized under Article 4
(commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the
State of California. The Bonds are being issued pursuant to the provisions of an Indenture of Trust,
dated as of November 1, 2019 (the “Indenture”), by and between the Authority and MUFG Union
Bank, N.A., as trustee (the “Trustee”). The terms and provisions of the Bonds are contained in the
Indenture and are further described in the Official Statement relating to the Bonds, dated ________,
2019 (the “Official Statement”). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Official Statement or the Indenture, as applicable.
In rendering this opinion, we have reviewed the Indenture and such records, documents,
certificates and opinions, and made such other investigations of law and fact as we have deemed
necessary or appropriate. This opinion is limited to matters governed by the federal securities law of
the United States of America, and we assume no responsibility with respect to the applicability or effect
of the laws of any other jurisdiction.
In our capacity as Disclosure Counsel, we have rendered certain assistance to the District and
the Authority in connection with the preparation of the Preliminary Official Statement, dated
_________, 2019 (the “Preliminary Official Statement”), and the Official Statement. Rendering such
assistance involved discussions and inquiries concerning certain matters, review of certain documents
and proceedings, and participation in meetings and telephone conferences with representatives of the
District and the Authority, counsel to the District and the Authority, the Municipal Advisor, the
Underwriter and counsel to the Underwriter, during which meetings and telephone conferences the
contents of the Preliminary Official Statement, the Official Statement and related matters were
discussed. On the basis of the information made available to us in the course of the foregoing (but
without having undertaken to determine or verify independently, or assuming any responsibility for,
the accuracy, completeness or fairness of any of the statements contained in the Preliminary Official
Statement or the Official Statement), no facts have come to the attention of the personnel in our firm
4844-9354-5385.1
directly involved in rendering legal advice and assistance in connection with the preparation of the
Preliminary Official Statement or Official Statement which cause us to believe that: (a) the Preliminary
Official Statement as of its date or as of ________, 2019 (excluding therefrom financial, engineering
and statistical data; CUSIP numbers, forecasts, projections, estimates, assumptions and expressions of
opinions; statements relating to The Depository Trust Company, Cede & Co. and the operation of the
book-entry system; and the information in Appendices B, C, and F to the Official Statement, as to all
of which we express no view, and except for such information as is permitted to be excluded from the
Preliminary Official Statement pursuant to Rule 15c2-12 of the Securities Exchange Act of 1934, as
amended, including but not limited to information as to pricing, yields, interest rates, maturities,
amortization, redemption provisions, debt service requirements, underwriter’s discount and CUSIP
numbers) contained or contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading; or (b) the Official Statement as of its date and as of the date hereof
(excluding therefrom financial, engineering and statistical data; CUSIP numbers, forecasts,
projections, estimates, assumptions and expressions of opinions; statements relating to The Depository
Trust Company, Cede & Co. and the operation of the book-entry system; and the information in
Appendices B, C, and F to the Official Statement, as to all of which we express no view) contained or
contains any untrue statement of a material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading. In rendering such advice we conducted no independent diligence on the Electronic
Municipal Market Access website and express no view regarding the District’s or the Authority’s
compliance with any obligation to provide notice of the events described in part (b)(5)(i)(C) of Rule
15c2-12 or to file annual reports described in part (b)(5)(i)(A) of Rule 15c2-12.
During the period from the date of the Official Statement to the date of this opinion, except for
our review of the certificates and opinions regarding the Preliminary Official Statement and the Official
Statement delivered on the date hereof, we have not undertaken any procedures or taken any actions
which were intended or likely to elicit information concerning the accuracy, completeness or fairness
of any of the statements contained in the Preliminary Official Statement or the Official Statement.
We are furnishing this opinion to the District and the Authority, solely for their benefit. This
opinion is rendered in connection with the transaction described herein, and may not be relied upon by
the District or the Authority for any other purpose. This opinion shall not extend to, and may not be
used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other
entity without our prior written consent. The delivery of this opinion shall not create any attorney-
client relationship between our firm and the addressees hereof, other than the District and the Authority.
Our engagement with respect to this matter terminates upon the delivery of this opinion to the District
and the Authority at the time of the issuance of the Bonds, and we have no obligation to update this
opinion.
Respectfully submitted,
STAFF REPORT
TYPE MEETING: Regular Board Meeting of the
Otay Water District Financing
Authority
MEETING DATE: November 6, 2019
SUBMITTED BY: Eid Fakhouri, Finance Manager W.O./G.F. NO:DIV. NO.All
APPROVED BY: Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Otay Water District Financing Authority Adoption of
Resolution No. 2019-01 Authorizing the Issuance Not To Exceed
$3,500,000 of its 2019 Wastewater Revenue Bonds, Authorizing
the Authority’s Executive Director and the Authority’s
Treasurer/Auditor to Approve the Execution of Certain
Documents and Authorizing Certain Acts in Connection
Therewith
GENERAL MANAGER’S RECOMMENDATION:
That the Board of Directors of the Otay Water District Financing
Authority (“Authority Board”) adopt Resolution No. 2019-01
authorizing the issuance not to exceed $3,500,000 of its 2019
Wastewater Revenue Bonds, Authorizing the Authority’s Executive
Director and the Authority’s Treasurer/Auditor to approve the
execution of certain documents and authorizing certain acts in
connection therewith.
COMMITTEE ACTION:
None.
PURPOSE:
To obtain Authority Board authorization to issue up to $3,500,000 of
Otay Water District Financing Authority 2019 Wastewater Revenue Bonds
to fund $3.0 million of the District’s six-year Wastewater System CIP
Program and authorize the Authority’s President, Executive Director,
Secretary, and Treasurer/Auditor to execute and deliver related
AGENDA ITEM 10a
documents and take other related actions necessary for the issuance
of the 2019 Wastewater Revenue Bonds.
ANALYSIS:
The Otay Water District Financing Authority (“Authority”) was formed
in 2010 to assist the District with financing capital improvements.
Staff is recommending that the Authority issue Wastewater Revenue
Bonds and secure the bonds with Installment Payments payable by the
District to the Authority from Net Revenues of the Wastewater System.
The bonds will be used to fund $3.0 million in Capital Improvement
Program (CIP) expenditures of the wastewater system, which will
result in the District maintaining targeted reserve levels in
accordance with the District’s Reserve Policy. Staff estimates that
the actual amount of the bonds will be $3,165,000 to fund $3.0
million of CIP projects, approximately $105,000 of debt issuance
costs, and $60,000 of anticipated original issue discount. Staff
will not issue more debt than is needed for these purposes.
On April 4, 2018, the Board adopted Reimbursement Resolution No.4344
allowing for reimbursement of certain expenditures from the proceeds
of tax-exempt wastewater debt. The Board adopted the FY 2020 budget
in anticipation that the financing would occur in FY 2020, as the
proposed wastewater bonds would be necessary to maintain wastewater
reserves at targeted levels. On August 7, 2019, staff obtained
approval from the Board to proceed to issue wastewater bonds to fund
the recommended amount of $3.0 million, with an anticipated 2nd issue
of bonds to fund a further $3.0 million in two years. This staff
report describes the final actions necessary to issue the first
series of bonds.
The bond proceeds will be used to reimburse the District for $3.0
million of the total cost of the Campo Road Sewer replacement project
(S2024).
For this bond issue, the District engaged:
• Harrell & Company Advisors to serve as Municipal Advisor,
• Hilltop Securities to serve as the Underwriter,
• Hawkins, Delafield & Wood LLP to serve as Bond and Disclosure
Counsel.
As part of this process, Suzanne Harrell of Harrell & Company and
Robin Thomas of Hilltop Securities reviewed three debt options and
analyzed the costs and benefits of each option. A summary of these
options, including staff’s recommendation, and cost/benefit of each
option is below:
Option 1 – Non-Rated Public Offering
Staff and the District’s Financial Advisor are recommending the
District proceed with a non-rated public offering. Under this option
the average annual debt service is $161,000. The recommendation is
being made because this option provides the District with the most
flexibility for the wastewater operation. Wastewater currently has
no debt, but is projecting the need to issue additional debt in two
years. The flexible terms established in this proposed issuance will
establish the baseline for additional bond issues in the near future.
The rate covenant for the non-rated issue will be lower than might be
required to achieve a rating for the bonds. This is important,
particularly with the wastewater system, because it will make it
easier to smooth out rate increases in the event of significant cost
increases. This is a real concern as much of the wastewater costs
are not within the District’s direct control. This flexibility is
also desirable as the customer base is relatively small and creates a
dynamic where larger rate increases are more of a possibility.
Due to the flat yield curve and a compressed spread between rated and
non-rated utility bonds, there is very little difference in yields
between a non-rated bond and a rated bond. The difference is
considered worth paying for the added flexibility in rate setting
going forward. One of the Board’s mandates has always been rate
smoothing, and this would give the Board a tool to achieve that.
Option 2 – Rated Public Offering
Under this option, the net average annual debt service would be
approximately $159,000. While this option is a slightly lower cost
option, it provides less flexibility in rate setting than the non-
rated option. As noted, having less flexibility may adversely impact
future wastewater rates. This option also requires the funding of a
reserve fund to secure debt payments, which would be used to offset
the final bond payment in 30 years if not needed.
Option 3 – Private Sale
As staff noted in its August 2019 presentation to the Board, there
was only one lender offering a 30-year term on a private placement.
This option results in an annual average debt service of $162,000.
This option was not recommended as it is the most costly, carries a
risk in that specific terms of a private sale are unknown until
negotiated with the lender, and there is a lack of competition to get
the most beneficial terms with only one lender offering a 30-year
term.
Based on the recommended debt issuance and the anticipated second
issuance of bonds in FY 2022, the table below shows the projected
annual debt service coverage for the following four years:
Fiscal
Year
2021 2022 2023 2024
DSC 3.26 2.56 2.10 2.51
The District may also establish a Rate Stabilization Fund for the
wastewater bonds. This is another tool that the Board can utilize to
offset rate spikes generated by unanticipated costs or revenue
reductions from decreased water usage.
A tentative timeline of events related to the debt issuance is below.
Finance Committee Approval
of Financing Documents
October 23, 2019
Board Approval of Financing
Documents
November 6, 2019
Bond Pricing/Set Interest
Rate
November 14, 2019
Closing Document Signing December 2, 2019
Closing December 5, 2019
Documents to be Approved
The Bonds will be issued by the Authority and secured by Installment
Payments payable by the District to the Authority from Net Revenues of
the wastewater system. The following financing documents are approved
in form by the resolution:
• Indenture of Trust, by and between the Authority and the Trustee;
• Installment Purchase Agreement, by and between the Authority and
the District;
• Preliminary Official Statement, including a Continuing Disclosure
Agreement; and
• Bond Purchase Agreement between the Authority, the District and
the Underwriter.
The Authority Executive Director and Authority Treasurer/Auditor
are authorized by the resolution to execute a Bond Purchase Agreement
for the sale of the Bonds within the following parameters: (1) the
par amount of the Bonds cannot exceed $3,500,000, (2) the true
interest cost must be less than 3.5% and (3) the underwriters’
discount cannot exceed 0.75% of the par amount of the Bonds.
The draft documents are included with this report for review by the
Board. The preliminary official statement was prepared by staff and
the Municipal Advisor, with input from the District’s bond counsel
and disclosure counsel. The Board’s review of the description of the
Wastewater System, the Metro System and the Risk Factors contained in
the preliminary official statement is requested prior to printing on
or about November 7, 2019.
Financial Analysis
The $3.0 million debt funding of the CIP will ensure the District
maintains its reserves at targeted levels. The cost of the
principal, plus interest payments will be $4.8 million over the
thirty-year period, which equates to an average annual debt service
of $161,000. In FY 2020, there will be one interest-only payment of
$20,000, and in FY 2021, there will be 2 interest-only payments
totaling $86,000, to give the District an opportunity to smooth rate
increases in preparation for the full annual debt service together
with the projected debt service of the planned 2nd issue in 2 years.
The following table provides the anticipated size of the bond issue,
including funding of the costs of issuance.
Cost of Issuance $ 105,000
Project Fund (Net Proceeds) 3,000,000
Total Bond Proceeds 3,105,000
Original Issue Discount 60,000
Par Amount of Bonds Issued $3,165,000
Costs of issuance include bond counsel fees, municipal advisor fees,
disclosure counsel fees, underwriting costs, and trustee fees. All
upfront costs associated with the Bonds will be paid out of Bond
proceeds.
The estimated par amount will be subject to prevailing market
conditions at the time of sale. Therefore, a par amount of $3,165,000
is being estimated but the actual issue size may be higher if the
Bonds are priced with a higher original issue discount or with an
original issue premium based on investor preference at the time of
sale.
Conclusion
That the Board of Directors of the Otay Water District Financing
Authority adopt Resolution No. 2019-01 authorizing the issuance not
to exceed $$3,500,000 of its 2019 Wastewater Revenue Bonds, approving
the execution of certain documents and authorizing certain acts in
connection therewith.
The District Board has separately been presented with a resolution
approving documents and its actions relating to the Bonds.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
All bond costs will be paid by the bond proceeds. Estimated annual
debt service has been incorporated into the District’s budget rate
model so this debt issuance does not put any added rate pressure
other than what has already been incorporated into the rate
projections.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning and debt planning.
LEGAL IMPACT:
None.
Attachments:
A) Authority Resolution No. 2019-01
B) Indenture of Trust
C) Installment Sale Agreement
D) Preliminary Official Statement
E) Bond Purchase Agreement
ATTACHMENT A
SUBJECT/PROJECT:
Otay Water District Financing Authority Adoption of
Resolution No. 2019-01 Authorizing the Issuance Not To
Exceed $3,500,000 of its 2019 Wastewater Revenue Bonds,
Authorizing the Authority’s Executive Director and the
Authority’s Treasurer/Auditor to Approve the Execution of
Certain Documents and Authorizing Certain Acts in
Connection Therewith
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were
made:
• Staff is recommending that the Board adopt Resolution No.
2019-01 authorizing the issuance not-to-exceed $3,500,000
of its 2019 Wastewater Revenue Bonds and authorizing the
the execution of certain documents and acts in connection
therewith.
• Staff reviewed information in the staff report.
• Currently, the Wastewater System does not have outstanding
debt. With this issuance, the District will have an
estimated debt coverage covenant of 115%, and a target
ratio of 150%. Based on the recommended debt issuance and
the projected rate increases, the District will be in
compliance with the debt coverage covenant.
• The estimated timing for the closing of the bond issuance
is currently December 5th, 2019.
• Staff introduced the District’s Municipal Advisor, Ms.
Suzanne Harrell of Harrell & Company Advisors. Ms. Harrell
indicated in August 2019, the Board had directed staff to
pursue $6 million of financing for the sewer CIP with $3
million issued today and another $3 million to be issued in
two (2) years allowing the District time to smooth its
sewer rates.
• Ms. Harrell and Ms. Robin Thomas of Hilltop Securities, who
serves as the District’s Underwriter for this issuance,
identified three (3) possible debt options. Ms. Harrell
reviewed the three possible debt options and their
cost/benefit (please reference page 3 of the staff report).
• Staff is proposing Option 1, a non-rated public offering,
which would allow the District to meet emergency costs with
flexibility on rates as it allows the District to maintain
a lower debt coverage ratio (115% versus 120%).
• Staff noted that the District is also performing a Cost of
Service Study on sewer services and will be proposing a
change in how bills are calculated to make sewer revenues
more stable and not as subject to changes in annual
rainfall.
• In response to an inquiry from the Committee, it was
indicated that the interest rate on the bond would be
approximately 3.20% for a rated bond and 3.30% for a non-
rated bond, which would be about $2,000 per year in debt
service.
• It was indicated that the draft documents for the issuance
are included with the staff report and it is requested that
the board review the Official Statement, particularly the
description of the wastewater system and the risks.
• It was noted that a redemption provision has been included
in the bond documents to allow the District the option to
redeem the bonds should its sewer system be
sold/consolidated with another provider. The District has
no expectation that its sewer system will be
sold/consolidated, the provision just provides the District
the option/ability to redeem the bonds within the first
ten-years of issuance as the bonds are not subject to
redemption during that period. There would be a redemption
premium and, thus, the provision would not have a price
impact on the bonds.
• In response to an inquiry from the Board, it was indicated
that the District is not designating this issuance as a
Bank Qualified, Section 265 Bond, because the target buyers
of this bond will not be banks as the issuance will be a
non-rated issuance. It was indicated in response to
another inquiry from the Committee that a Bank Qualified
Bond would be similar to a private placement bond. Ms.
Harrell estimated that, thus, the rate for a Bank Qualified
Bond issuance with a 15-year term would be approximately
2.7% for a AA rated organization. It was noted that the
District’s sewer financials would likely earn a rating of
BBB+.
•At the Committee’s request, staff reviewed the criteria for
selecting Hilltop Securities to serve as the District’s
Underwriter. Staff indicated that they reviewed the firm’s
presence in the municipal bond market segment, the
qualifications of the individual team members, and, because
this is a small issuance, the firm’s ability to sell the
bonds in the retail market. Additionally, Hilltop
Securities has a wide breadth in terms of tier 1 and 2 bond
buyers; and provided the best pricing overall.
•Staff also reviewed the selection process for Hawkins
Delafield & Wood LLP (HDW) to serve as Bond and Disclosure
Counsel. It was indicated that staff issued an RFP and
received five responses. The proposals were reviewed for
public sector expertise (wastewater in particular), beadth
of the team, expertise in tax laws, the number of years the
firm has been performing the services, location of their
offices to assure they could attend the District’s
meetings, and references. They met all the qualifications
and were the lowest qualified bidder. HDW has offices
nationwide, with three offices in California (Los Angeles,
San Francisco and Sacramento). Ms. Christina Togle of HDW,
Bond Counsel, was in attendance of the meeting.
•It was indicated in response to another inquiry from the
Committee that the bonds would likely be sold in the retail
market to California individuals in the first 15 years of
the issuance, and the remainder would go to separately
managed accounts because the size of the issuance is very
small.
Upon completion of the discussion, the committee supported
staffs recommendation an presentation to the full board as an
action item.
Hawkins Delafield & Wood LLP
10/17/2019
3394762.8 043520 RSIND
RESOLUTION NO. 2019-01
RESOLUTION OF THE BOARD OF DIRECTORS OF OTAY WATER DISTRICT
FINANCING AUTHORITY APPROVING, AUTHORIZING AND DIRECTING
EXECUTION OF CERTAIN FINANCING DOCUMENTS AND DIRECTING CERTAIN
RELATED ACTIONS IN CONNECTION WITH FINANCING CERTAIN
IMPROVEMENTS TO THE OTAY WATER DISTRICT’S WASTEWATER SYSTEM
WHEREAS, the California Municipal Finance Authority and Otay Water District (the
"District") have entered into a Joint Exercise of Powers Agreement establishing the Otay Water
District Financing Authority (the "Authority") for the purpose, among others, of issuing its
revenue bonds to finance and refinance the acquisition, construction and improvement of certain
public capital improvements;
WHEREAS, for the purpose of raising funds necessary to finance certain public, capital
improvements to District facilities, the Authority proposes to authorize the issuance of its
revenue bonds under the provisions of Article 4 (commencing with Section 6584) of Chapter 5
of Division 7 of Title 1 of the Government Code of the State of California (the "Act"), to be
designated as the Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the
"Bonds");
WHEREAS, the proceeds of the Bonds will be used to (i) finance certain public, capital
improvements to the District’s wastewater system; and (ii) pay the costs of issuing the Bonds;
WHEREAS, pursuant to an Installment Sale Agreement by and between the District and
the Authority (the "Installment Sale Agreement"), the District will make installment payments to
the Authority as the purchase price for certain improvements to the District's facilities, and the
Authority will use the installment payments made by the District to the Authority pursuant to the
Installment Sale Agreement to pay debt service on the Bonds;
WHEREAS, the Authority desires to prepare and make available to potential investors
an official statement (the “Official Statement”) relating to the Bonds containing information to
be used in connection with the sale of Bonds;
WHEREAS, there has been prepared a form of a Bond Purchase Agreement for the sale
and purchase of the Bonds by and among Hilltop Securities Inc. (the “Underwriter”), the District
and the Authority (the “Bond Purchase Agreement”);
WHEREAS, this Board of Directors ("Board") of the Authority hereby finds that the
debt policy of the District, as amended from time to time, shall be applicable to the Authority;
WHEREAS, this Board has duly considered these transactions and wishes at this time to
approve these transactions and make certain findings regarding significant public benefits to the
Authority's members with respect to these transactions;
ATTACHMNENT A
2
3394762.8 043520 RSIND
WHEREAS, pursuant to Section 5852.1 of the Government code of the State of
California, the Authority has received certain representations and good faith estimates from its
municipal advisor, Harrell & Company Advisors, LLC (the “Municipal Advisor”), and the
Authority has disclosed such good faith estimates as set forth on Exhibit A attached hereto;
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Otay
Water District Financing Authority, as follows:
Section 1. Findings and Determinations. Pursuant to the Act, the Board
hereby finds and determines that the issuance of the Bonds and the transactions related thereto
will result in significant public benefits to its members within the contemplation of Section 6586
of the Act.
Section 2. Issuance of Bonds; Approval of Indenture. The Board hereby
authorizes the issuance of the Bonds pursuant to an Indenture of Trust (the "Indenture") by and
between the Authority and the Trustee (hereinafter defined). The Board hereby approves the
Indenture in the form on file with the Secretary, together with such additions thereto and changes
therein as the President of the Board, Vice President of the Board, Authority Executive Director
or Authority Treasurer/Auditor (each, a “Designated Officer”), may deem necessary, desirable or
appropriate upon consultation with bond counsel, the execution of which by the Authority shall
be conclusive evidence of the approval of any such additions and changes. The Designated
Officers, each acting alone or in combination, are hereby authorized and directed to execute, and
the Secretary of the Board is hereby authorized and directed to attest, the final form of the
Indenture for and in the name and on behalf of the Authority. The Board hereby authorizes the
performance by the Authority of its obligations under the Indenture.
Section 3. Maximum Bond Parameters. The Board hereby approves the
issuance of the Bonds; provided that the principal amount of Bonds may not exceed $3,500,000
the true interest cost of the Bonds may not exceed 3.5% per annum, and the final maturity of the
Bonds may not exceed September 1, 2049.
Section 4. Approval of Installment Sale Agreement. The Board hereby
approves the form of the Installment Sale Agreement by and between the Authority and the
District on file with the Secretary, together with such additions thereto and changes therein as the
Designated Officers deem necessary, desirable or appropriate upon consultation with bond
counsel to the Authority, the execution of which by the Authority shall be conclusive evidence of
the approval of any such additions and changes. The Designated Officers, each acting alone, are
hereby authorized and directed to execute, and the Secretary is hereby authorized and directed to
attest, the final form of the Installment Sale Agreement for and in the name of and on behalf of
the Authority. The Authority hereby authorizes the performance by the Authority of its
obligations under the Installment Sale Agreement.
Section 5. Approval of Negotiated Bond Sale; Bond Purchase Agreement.
The Board hereby approves the negotiated sale of the Bonds to the Underwriter in the form of
the Bond Purchase Agreement by and among the Underwriter, District and Authority on file with
the Secretary, together with such additions thereto and changes therein as the Designated
Officers deem necessary, desirable or appropriate upon consultation with bond counsel to the
3
3394762.8 043520 RSIND
Authority, the execution of which by the Authority shall be conclusive evidence of the approval
of any such additions and changes. The Designated Officers, each acting alone, are hereby
authorized and directed to execute, and the Secretary is hereby authorized and directed to attest,
the final form of the Bond Purchase Agreement for and in the name of and on behalf of the
Authority; provided that the principal amount of the Bonds shall not exceed $3,500,000 and the
underwriter's discount (exclusive of any original issue discount) may not exceed 0.75%. The
Authority hereby authorizes the performance by the Authority of its obligations under the Bond
Purchase Agreement.
Section 6. Official Statement. The Board hereby approves the form of
Official Statement relating to the Bonds (the "Official Statement") on file with the Secretary,
together with such changes or additions thereto as the Designated Officers deem necessary,
desirable or appropriate upon consultation with bond counsel to the Authority, and authorizes the
Designated Officers, each acting alone, to deem a preliminary form of the Official Statement
final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended,
except for omissions permitted therein. The Board hereby approves the distribution of the
preliminary form of Official Statement by the Underwriter to potential Bond investors. The
Designated Officers, each acting alone, are hereby authorized to execute the final form of the
Official Statement with such changes or additions as the Designated Officers deem necessary,
desirable or appropriate upon consultation with bond counsel to the Authority, and the execution
of the final Official Statement by the Authority shall be conclusive evidence of the approval of
any such additions and changes. The Board hereby authorizes the distribution of the final
Official Statement.
Section 7. Selection of Trustee. The Board hereby authorizes and directs the
Designated Officers to appoint MUFG Union Bank, N.A. as trustee (the "Trustee") for the
Bonds, and authorizes the Designated Officers to negotiate the fees for trustee services in the
name of and on behalf of the Authority.
Section 8. Official Actions. The Designated Officers, the Secretary and any
and all other officers of the Authority are hereby authorized and directed, for and in the name of
and on behalf of the Authority, to do any and all things and take any and all actions, including
execution and delivery of any and all documents, assignments, certificates, requisitions,
agreements, notices, consents, instruments of conveyance, warrants and documents, which they,
or any of them, may deem necessary or advisable in order to consummate the lawful issuance
and sale of the Bonds and the consummation of the transactions as described herein, including
without limitation, a continuing disclosure agreement and such documents, assignments,
certificates and agreements as may be required by the Indenture, the Installment Sale Agreement,
the Bond Purchase Agreement, and any and all other documents and agreement approved
hereunder.
Section 9. Effective Date. This Resolution shall take effect from and after the
date of its passage and adoption.
4
3394762.8 043520 RSIND
PASSED, APPROVED AND ADOPTED by the Board of Directors of Otay
Water District Financing Authority at a special board meeting held the 6th day of November
2019, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
______________________________
President of the Board
ATTEST:
______________________________
Secretary of the Board
5
3394762.8 043520 RSIND
EXHIBIT A
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
GOOD FAITH ESTIMATES
Pursuant to Section 5852.1 of the Government Code of the State of California, the following
information was obtained from Harrell & Company Advisors, LLC, as the municipal advisor of the bonds
defined above (the “Bonds”), for consideration prior to the authorization in the foregoing Resolution of
the proposed Bonds:
1. True Interest Cost of the Bonds. Assuming an aggregate principal amount of the Bonds
in the amount of $3,165,000 is sold to effectuate the financing and based on market interest rates
prevailing at the time of preparation of this information, a good faith estimate of the true interest cost of
the Bonds, which means the rate necessary to discount the amounts payable on the respective principal
and interest payment dates to the purchase price received for the Bonds, is 3.08%.
2. Finance Charge of the Bonds. Assuming such a principal amount of the proposed Bonds
is sold and based on market interest rates prevailing at the time of preparation of this information, a good
faith estimate of the Finance Charge of the Bonds, which means the sum of all fees and charges paid to
third parties (or costs associated with the issuance of the Bonds), from proceeds of the Bonds, is
$105,000.
3. Amount of Proceeds to be received. Assuming such aggregate principal amount of the
proposed Bonds required to effectuate the financing is sold and based on market interest rates prevailing
at the time of preparation of this information, a good faith estimate of the amount of proceeds expected to
be received by the District for sale of the Bonds less the Finance Charge of the Bonds described in 2
above and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $3,000,000.
4. Total Payment Amount. Assuming such aggregate principal amount of the proposed
Bonds are sold and based on market interest rates prevailing at the time of preparation of this information,
a good faith estimate of the total payment amount, which means the sum total of all payments the issuer
will make to pay debt service on the Bonds calculated to the final maturity of the Bonds, is $4,782,000
and the annual cost to administer the Bonds not paid with the proceeds of the Bonds, calculated to the
final maturity of the Bonds, is $125,000.
Attention is directed to the fact that the foregoing information constitutes good faith estimates
only. The actual interest cost, finance charges, amount of proceeds and total payment amount may vary
from the estimates above due to variations from these estimates in the timing of Bond sales, the amount of
Bonds sold, the amortization of the Bonds sold and market interest rates at the time of each sale. The date
or dates of sale and the amount of Bonds sold will be determined by the District based on need for funds
and other factors. The actual interest rates at which the Bonds will be sold will depend on the bond market
at the time of sale. The actual amortization of the Bonds will also depend, in part, on market interest rates
at the time of each sale. Market interest rates are affected by economic and other factors beyond the
District’s control.
Hawkins Delafield & Wood LLP
Draft of 10/15/2019
3394469.7 043520 RSIND
INDENTURE OF TRUST
Dated as of __________, 2019
By and between
OTAY WATER DISTRICT FINANCING AUTHORITY
and
MUFG UNION BANK, N.A.,
as Trustee
Relating to the
$[Par Amount]
Otay Water District Financing Authority
2019 Wastewater Revenue Bonds
(i)
3394469.7 043520 RSIND
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01. Definitions..........................................................................................................2
Section 1.02. Authorization ...................................................................................................13
Section 1.03. Interpretation ....................................................................................................13
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds ....................................................................................13
Section 2.02. Terms of the Bonds ..........................................................................................15
Section 2.03. Form and Execution of Bonds .........................................................................16
Section 2.04. Transfer and Exchange of Bonds .....................................................................16
Section 2.05. Book-Entry System ..........................................................................................17
Section 2.06. Registration Books ...........................................................................................19
Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen ....................................................19
Section 2.07. CUSIP Numbers...............................................................................................19
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the Bonds ......................................................................................20
Section 3.02. Application of Proceeds of Sale of the Bonds .................................................20
Section 3.03. Establishment and Application of Costs of Issuance Fund ..............................20
Section 3.04. Project Fund .....................................................................................................21
Section 3.05. Validity of Bonds .............................................................................................21
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Terms of Redemption ......................................................................................21
Section 4.02. Selection of Bonds for Redemption .................................................................22
Section 4.03. Notice of Redemption ......................................................................................22
Section 4.04. Rescission of Redemption................................................................................23
Section 4.05. Execution of New Bonds Upon Partial Redemption of Bonds ........................24
Section 4.06. Effect of Redemption .......................................................................................24
TABLE OF CONTENTS
(continued)
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3394469.7 043520 RSIND
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Security for the Bonds; Bond Fund .................................................................24
Section 5.02. Allocation of Revenues ....................................................................................25
Section 5.03. Application of Interest Account .......................................................................25
Section 5.04. Application of Principal Account ....................................................................25
Section 5.06. Application of Redemption Fund.....................................................................26
Section 5.07. Investments ......................................................................................................26
Section 5.08. Valuation and Disposition of Investments .......................................................27
ARTICLE VI
COVENANTS OF THE AUTHORITY
Section 6.01. Punctual Payment.............................................................................................28
Section 6.02. Extension of Payment of Bonds .......................................................................28
Section 6.03. Against Encumbrances.....................................................................................28
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment ...............................28
Section 6.05. Accounting Records .........................................................................................29
Section 6.06. Limitation on Additional Obligations ..............................................................29
Section 6.07. Tax Covenants .................................................................................................29
Section 6.08. Enforcement of Installment Sale Agreement ...................................................30
Section 6.09. Waiver of Laws ................................................................................................30
Section 6.10. Further Assurances...........................................................................................30
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default .............................................................................................30
Section 7.02. Acceleration; Other Remedies .........................................................................31
Section 7.03. Application of Revenues and Other Funds After Default ................................31
Section 7.04. Trustee to Represent Bond Owners .................................................................32
Section 7.05. Limitation on Bond Owners’ Right to Sue ......................................................32
Section 7.06. Absolute Obligation of Authority ....................................................................33
Section 7.07. Termination of Proceedings .............................................................................33
Section 7.08. Remedies Not Exclusive ..................................................................................34
Section 7.09. No Waiver of Default.......................................................................................34
TABLE OF CONTENTS
(continued)
Page
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3394469.7 043520 RSIND
ARTICLE VIII
THE TRUSTEE
Section 8.01. Appointment of Trustee ...................................................................................34
Section 8.02. Acceptance of Trusts; Removal and Resignation of Trustee ...........................34
Section 8.03. Merger or Consolidation ..................................................................................35
Section 8.04. Liability of Trustee ..........................................................................................36
Section 8.05. Right to Rely on Documents ............................................................................38
Section 8.06. Preservation and Inspection of Documents......................................................39
Section 8.07. Compensation and Indemnification .................................................................39
ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
Section 9.01. Amendments Permitted ....................................................................................40
Section 9.02. Effect of Supplemental Indenture ....................................................................41
Section 9.03. Endorsement of Bonds; Preparation of New Bonds ........................................42
Section 9.04. Amendment of Particular Bonds ......................................................................42
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture .....................................................................................42
Section 10.02. Discharge of Liability on Bonds ......................................................................43
Section 10.03. Deposit of Money or Securities with Trustee ..................................................43
Section 10.04. Unclaimed Funds .............................................................................................44
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues .....................................................44
Section 11.02. Limitation of Rights to Parties and Bond Owners ...........................................45
Section 11.03. Funds and Accounts .........................................................................................45
Section 11.04. Waiver of Notice; Requirement of Mailed Notice ...........................................45
Section 11.05. Destruction of Bonds .......................................................................................45
Section 11.06. Severability of Invalid Provisions ....................................................................45
Section 11.07. Notices .............................................................................................................45
Section 11.08. Evidence of Rights of Bond Owners ...............................................................46
Section 11.09. Disqualified Bonds...........................................................................................47
Section 11.10. Money Held for Particular Bonds ....................................................................47
Section 11.11. Waiver of Personal Liability ............................................................................47
Section 11.12. Successor Is Deemed Included in All References to Predecessor ...................47
TABLE OF CONTENTS
(continued)
Page
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3394469.7 043520 RSIND
Section 11.13. Execution in Several Counterparts...................................................................48
Section 11.14. Payment on Non-Business Day .......................................................................48
Section 11.15. Governing Law ................................................................................................48
Section 11.16 U.S.A. Patriot Act ............................................................................................47
3394469.7 043520 RSIND
INDENTURE OF TRUST
This INDENTURE OF TRUST (this “Indenture”), dated for convenience as of
________________, 2019, is by and between the OTAY WATER DISTRICT FINANCING
AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the
State of California (the “Authority”), and MUFG UNION BANK, N.A., a national banking
association organized and existing under the laws of the United States of America, with a
corporate trust office in Los Angeles, California, being qualified to accept and administer the
trusts hereby created (the “Trustee”).
WHEREAS CLAUSES:
1. Otay Water District (the “District”) presently operates facilities and property for
collection of wastewater within its service area (the “Wastewater Operations”).
2. The Authority has been formed for the purpose, among others, of issuing its
revenue bonds to finance the acquisition, construction and improvement of certain public capital
improvements in and for the benefit of the District.
3. The Authority and the District desire to raise funds necessary to finance certain
improvements to the Wastewater Operations.
4. In order to obtain funds for these purposes, the Authority has authorized the
issuance of its Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the
“Bonds”), in the aggregate principal amount of $[Principal Amount], under this Indenture and
under Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of
California, commencing with Section 6584 (the “Bond Law”).
5. The Bonds will be payable from Installment Payments made under an Installment
Sale Agreement dated as of ______________, 2019 (the “Installment Sale Agreement”) by and
between the Authority, as seller, and the District, as purchaser.
6. In order to provide for the authentication and delivery of the Bonds, to establish
and declare the terms and conditions upon which the Bonds are to be issued and to secure the
payment of the principal thereof, premium (if any) and interest thereon, the Authority has
authorized the execution and delivery of this Indenture.
7. The Authority has found and determines, and hereby affirms, that all acts and
proceedings required by law necessary to make the Bonds, when executed by the Authority,
authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special
obligations of the Authority, and to constitute this Indenture a valid and binding agreement for
the uses and purposes herein set forth in accordance with its terms, have been done and taken,
and the execution and delivery of this Indenture have been in all respects duly authorized.
- 2 -
3394469.7 043520 RSIND
AGREEMENT:
In order to secure the payment of the principal of and the interest and redemption
premium (if any) on all the Outstanding Bonds under this Indenture according to their tenor, and
to secure the performance and observance of all the covenants and conditions therein and herein
set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be
issued and received, and in consideration of the premises and of the mutual covenants herein
contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other
valuable considerations, the receipt of which is hereby acknowledged, the Authority and the
Trustee do hereby covenant and agree with one another, for the benefit of the respective Owners
from time to time of the Bonds, as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms set forth in this Indenture shall have the meanings
assigned to them in this Section 1.01.
“Additional Payments” means the amounts payable by the District under Section 4.7 of
the Installment Sale Agreement.
“Additional Revenues” means, with respect to the issuance of any Parity Obligations, any
or all of the following amounts:
(a) An allowance for Net Revenues from any additions or improvements to or
extensions of the Wastewater Operations to be made with the proceeds of such Parity
Obligations and also for Net Revenues from any such additions, improvements or
extensions which have been made from moneys from any source but in any case which,
during all or any part of the latest Fiscal Year or for any more recent consecutive 12-
month period selected by the District, were not in service, all in an amount equal to the
estimated additional average annual Net Revenues to be derived from such additions,
improvements and extensions for the first 36-month period in which each addition
improvement or extension is respectively to be in operation.
(b) An allowance for Net Revenues arising from any increase in the charges
made for service from the Wastewater Operations which has been adopted prior to the
incurring of such Parity Obligations but which, during all or any part of the latest Fiscal
Year or for any more recent consecutive 12-month period selected by the District, was
not in effect, in an amount equal to the total amount by which the Net Revenues would
have been increased if such increase in charges had been in effect during the whole of
such Fiscal Year or 12-month period.
“Annual Debt Service” means, as of the date of any calculation and with respect to the
Installment Payments or any Parity Obligations, as the case may be, the sum obtained for the
current or any future Fiscal Year during the Term of the Installment Sale Agreement by totaling
the following amounts for such Fiscal Year:
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(a) the aggregate amount of the Installment Payments coming due and
payable in such Fiscal Year pursuant hereto, except to the extent payable from any
security deposit pursuant to Section 7.1 of the Installment Sale Agreement; and
(b) the principal amount of all outstanding Parity Obligations, if any, coming
due and payable by their terms in such Fiscal Year.
“Authority” means the Otay Water District Financing Authority, a joint exercise of
powers authority duly organized and existing under the laws of the State of California.
“Authorized Representative” means:
(a) with respect to the Authority, its the President of the Board, Vice President
of the Board, Authority Executive Director or Authority Treasurer/Auditor, each acting
alone or in combination; and
(b) with respect to the District, its President of the Board, Vice President of
the Board, District General Manager or District Chief Financial Officer, each acting alone
or in combination.
“Bond Counsel” means (a) Hawkins Delafield & Wood LLP, or (b) any other attorney or
firm of attorneys appointed by or acceptable to the District of nationally recognized experience
in the issuance of obligations-the interest on which is excludable from gross income for federal
income tax purposes under the Tax Code.
“Bond Fund” means the fund by that name established and held by the Trustee under
Section 5.01.
“Bond Law” means the provisions of Article 4 of Chapter 5, Division 7, Title 41 of the
Government Code of the State of California, commencing with Section 6584, as in effect on the
Closing Date or as thereafter amended in accordance with its terms.
“Bonds” means the Otay Water District Financing Authority 2019 Wastewater Revenue
Bonds, in the original principal amount of $[Principal Amount].
“Business Day” means any day (i) other than a Saturday or a Sunday or (ii) any other
day on which commercial banks located in the city in which the Office of the Trustee is located
are authorized or required by law to close.
“Closing Date” means ______________, 2019, the date of delivery of the Bonds to the
Underwriter.
“Costs of Issuance” means all items of expense directly or indirectly payable by or
reimbursable to the District relating to the authorization, issuance, sale and delivery of the
Bonds, including but not limited to: printing expenses; rating agency fees; filing and recording
fees; initial fees, expenses and charges of the Trustee, and the Trustee’s counsel, including the
Trustee’s first annual administrative fee; fees, charges and disbursements of attorneys, financial
advisors, accounting firms, consultants and other professionals; bond insurance and surety bond
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premiums, if any; fees and charges for preparation, execution and safekeeping of the Bonds; and
any other cost, charge or fee in connection with the original issuance of the Bonds.
“Costs of Issuance Fund” means the fund by that name established and held by the
Trustee under Section 3.03.
“Defeasance Obligations” means the following:
(a) Cash;
(b) Federal Securities;
(c) evidences of ownership of proportionate interests in future interest and
principal payments on Federal Securities held by a bank or trust company as custodian,
under which the owner of the investment is the real party in interest and has the right to
proceed directly and individually against the obligor and the underlying Federal
Securities are not available to any person claiming through the custodian or to whom the
custodian may be obligated;
(d) pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and
Moody’s, respectively; or
(e) securities eligible for “AAA” defeasance under then existing criteria of
S&P or any combination thereof.
“Depository” means (a) initially, DTC, and (b) any other Securities Depositories acting as
Depository under Section 2.05.
“Depository System Participant” means any participant in the Depository’s book-entry
system.
“District” means the Otay Water District.
“DTC” means The Depository Trust Company, and its successors and assigns.
“Event of Default” means any of the events specified in Section 7.01.
“Environmental Regulations” means any federal, state or local law, statute, code,
ordinance, regulation, requirement or rule relating to dangerous, toxic or hazardous pollutants,
Hazardous Substances or chemical waste, materials or substances.
“Excess Investment Earnings” means an amount required to be rebated to the United
States of America under Section 148(f) of the Tax Code due to investment of gross proceeds of
the Bonds at a yield in excess of the yield on the Bonds.
“Federal Securities” means: (a) any non-callable direct general obligations of the United
States of America (including obligations issued or held in book entry form on the books of the
Department of the Treasury of the United States of America), for which the full faith and credit
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of the United States of America are pledged; and (b) obligations of any agency, department or
instrumentality of the United States of America, the timely payment of principal and interest on
which are fully, unconditionally and directly or indirectly secured or guaranteed by the full faith
and credit of the United States of America.
“Fiscal Year” means any twelve-month period extending from July 1 in one calendar year
to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month
period selected and designated by the Authority as its official fiscal year period.
“Fitch” means Fitch Ratings and its successors and assigns, except that if such
corporation is dissolved or liquidated or no longer performs the functions of a securities rating
agency, then the term “Fitch” shall be deemed to refer to any other nationally recognized
securities rating agency selected by the Authority or the District.
“Governmental Agency” means the State of California, and the United States of America,
acting through any of its agencies, to the extent that the State of California or such agency has
loaned money to the District for the Wastewater Operations.
“Governmental Loan” means any loan made by a Governmental Agency to the District
that is secured by a pledge of Net Revenues and incurred by the District to finance improvements
to the Wastewater Operations pursuant to Section 5.9 of the Installment Sale Agreement.
“Gross Revenues” means all gross charges received for, and all other gross income and
receipts derived by the District from, the ownership and operation of the Wastewater Operations
or otherwise arising from the Wastewater Operations, including but not limited to:
(a) all amounts levied by the District as a fee for connecting to the
Wastewater Operations, as such fee is established for time to time under the applicable
laws of the State of California,
(b) all income, rents, rates, fees, capital improvement fees, charges and other
moneys derived from the services and facilities furnished or supplied through the
facilities of the Wastewater Operations,
(c) the earnings on and income derived from the investment of such income,
rents, rates, fees, charges or other moneys to the extent that the use of such earnings and
income is limited by or under applicable law to the Wastewater Operations,
(d) the proceeds derived by the District directly or indirectly from the sale,
lease or other disposition of a part of the Wastewater Operations as permitted hereunder,
and
(e) amounts transferred into the Wastewater Revenue Fund from a Rate
Stabilization Fund.
However, the term “Gross Revenues” does not include (i) customers’ deposits or any
other deposits subject to refund until such deposits have become the property of the District,
(ii) the proceeds of any ad valorem property taxes levied to pay any general obligation bond
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indebtedness of the District with respect to the Wastewater Operations, (iii) special assessments
or special taxes levied upon real property within any improvement district for the purpose of
paying special assessment bonds or special tax obligations of the District, and (iv) amounts
transferred from the Wastewater Revenue Fund into the Rate Stabilization Fund during a Fiscal
Year, but only to the extent that any amounts transferred from the Wastewater Revenue Fund
into the Rate Stabilization Fund were included in Gross Revenues for that Fiscal Year.
“Hazardous Substances” means (a) any oil, flammable substance, explosives, radioactive
materials, hazardous wastes or substances, toxic wastes or substances or any other wastes,
materials or pollutants which (i) pose a hazard to the Project or to persons on or about the Project
or (ii) cause the Project to be in violation of any Environmental Regulation; (b) asbestos in any
form which is or could become friable, urea formaldehyde foam insulation, transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, or radon
gas; (c) any chemical, material or substance defined as or included in the definition of “waste,”
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous
waste,” “restricted hazardous waste,” or “toxic substances” or words of similar import under any
Environmental Regulation including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), 42 USC §§ 9601 et seq.; the Resource
Conservation and Recovery Act (“RCRA”), 42 USC §§ 6901 et seq.; the Hazardous Materials
Transportation Act, 49 USC §§ 1801 et seq.; the Federal Water Pollution Control Act, 33 USC
§§ 1251 et seq.; the California Hazardous Waste Control Law (“HWCL”), Cal. Health & Safety
Code §§ 25100 et seq.; the Hazardous Substance Account Act (“HSAA”), Cal. Health & Safety
Code §§ 25300 et seq.; the Underground Storage of Hazardous Substances Act, Cal. Health &
Safety Code §§ 25280 et seq.; the Porter-Cologne Water Quality Control Act (the “Porter-
Cologne Act”), Cal. Water Code §§ 13000 et seq., the Safe Drinking Water and Toxic
Enforcement Act of 1986 (Proposition 65); and Title 22 of the California Code of Regulations,
Division 4, Chapter 30; (d) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority or agency or may or could pose a
hazard to the health and safety of the occupants of the Project or the owners and/or occupants of
property adjacent to or surrounding the Project, or any other person coming upon the Project or
adjacent property; or (e) any other chemical, materials or substance which may or could pose a
hazard to the environment.
“Indenture” means this Indenture of Trust, as originally executed or as it may from time
to time be supplemented, modified or amended by any Supplemental Indenture under the
provisions hereof.
“Independent Accountant” means any certified public accountant or firm of certified
public accountants appointed and paid by the District, and who, or each of whom (a) is in fact
independent and not under domination of the District; (b) does not have any substantial interest,
direct or indirect, in the District; and (c) is not connected with the District as an officer or
employee of the District but who may be regularly retained to make annual or other audits of the
books of or reports to the District.
“Installment Payment Date” means, with respect to any Interest Payment Date, the __th
Business Day immediately preceding that Interest Payment Date.
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“Installment Payments” means all payments required to be paid by the District on any
date under Section 4.4 of the Installment Sale Agreement, including any amounts payable upon
delinquent installments and including any prepayment thereof under Section 7.2 of the
Installment Sale Agreement, but does not include Additional Payments.
“Installment Sale Agreement” means the Installment Sale Agreement dated as of
___________, 2019, between the District and the Authority, together with any duly authorized
and executed amendments thereto.
“Interest Account” means the account by that name established and held by the Trustee in
the Bond Fund under Section 5.02.
“Interest Payment Dates” means each March 1st and September 1st, commencing March
1st, 2020, so long as any Bonds remain unpaid.
“Maximum Annual Debt Service” means, as of the date of any calculation and with
respect to the Installment Payments or any Parity Obligations, as the case may be, the maximum
sum obtained for the current or any future Fiscal Year during the Term of the Installment Sale
Agreement by totaling the following amounts for such Fiscal Year:
(a) the aggregate amount of the Installment Payments coming due and
payable in such Fiscal Year pursuant hereto, except to the extent payable from any
security deposit pursuant to Section 7.1 of the Installment Sale Agreement;
(b) the principal amount of all outstanding Parity Obligations, if any, coming
due and payable by their terms in such Fiscal Year;
(c) the amount of interest which would be due during such Fiscal Year on the
aggregate principal amount of all outstanding Parity Obligations, if any, which would be
outstanding in such Fiscal Year if such Parity Obligations are retired as scheduled; and
(d) loan payments to be made to a Governmental Agency under a
Governmental Loan, if any, coming due and payable by its terms in such Fiscal Year.
“Moody’s” means Moody’s Investors Service, a corporation duly organized and existing
under and by virtue of the laws of the State of Delaware, and its successors and assigns, except
that if such corporation is dissolved or liquidated or no longer performs the functions of a
securities rating agency, then the term “Moody’s” shall be deemed to refer to any other
nationally recognized securities rating agency selected by the District.
“Net Revenues” means, for any period, an amount equal to all of the Gross Revenues
received during such period minus the amount required to pay all Operation and Maintenance
Costs becoming payable during such period.
“Nominee” means (a) initially, Cede & Co. as nominee of DTC, and (b) any other
nominee of the Depository designated under Section 2.05(a).
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“Office” means the corporate trust office of the Trustee in Los Angeles, California, or
such other or additional offices as the Trustee may designate in writing to the District from time
to time as the corporate trust office for purposes of the Indenture; except that with respect to
presentation of Bonds for payment or for registration of transfer and exchange such term means
the office or agency of the Trustee at which, at any particular time, its corporate trust agency
business is conducted, initially in Los Angeles, California.
“Operation and Maintenance Costs” means the reasonable and necessary costs and
expenses paid by the District for maintaining and operating the Wastewater Operations,
including but not limited to
(a) costs of utilities, including the costs of electricity and other forms of
energy supplied to the Wastewater Operations,
(b) the reasonable expenses of management and repair and other costs and
expenses necessary to maintain and preserve the Wastewater Operations in good repair
and working order, and
(c) the reasonable administrative costs of the District attributable to the
operation and maintenance of the Wastewater Operations;
but in all cases excluding
(i) debt service payable on obligations incurred by the District with respect to
the Wastewater Operations, including but not limited to the Installment Payments and
any Parity Obligations,
(ii) depreciation, replacement and obsolescence charges or reserves therefor,
(iii) capital expenditures (other than as set forth in paragraph (b) above), and
(iv) amortization of intangibles or other bookkeeping entries of a similar
nature.
“Outstanding,” when used as of any particular time with reference to Bonds, means,
subject to the last paragraph of Section 10.02 of this Indenture, all Bonds theretofore, or
thereupon being, authenticated and delivered by the Trustee under this Indenture except:
(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee
for cancellation;
(b) Bonds with respect to which all liability of the Authority and District has
been discharged in accordance with Section 10.02, including Bonds (or portions thereof)
described in Section 11.09; and
(c) Bonds for the transfer or exchange of or in lieu of or in substitution for
which other Bonds have been authenticated and delivered by the Trustee under this
Indenture.
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“Overdue Rate” means the highest rate of interest on any of the Outstanding Bonds.
“Owner,” whenever used herein with respect to a Bond, means the person in whose name
the ownership of such Bond is registered on the Registration Books.
“Parity Obligations” means the following:
(a) any bonds, notes, leases, installment sale agreements or other obligations
of the District payable from and secured by a pledge of and lien upon any of the Net
Revenues on a parity with the Installment Payments, entered into or issued under and in
accordance with Section 5.8 of the Installment Sale Agreement, and
(b) any Governmental Loan that is treated as a Parity Obligation under
Section 5.9 of the Installment Sale Agreement.
“Parity Obligations Documents” means, collectively, the indenture of trust, trust
agreement, installment sale agreement, or other document authorizing the issuance of any Parity
Obligations or any securities which evidence Parity Obligations.
“Permitted Investments” means any of the following which at the time of investment are
determined by the District to be legal investments under the laws of the State of California for
the moneys proposed to be invested therein (provided that the Trustee shall be entitled to rely
upon any investment directions from the District as conclusive certification to the Trustee that
the investments described therein are so authorized under the laws of the State of California):
(a) Federal Securities;
(b) obligations of any of the following federal agencies which obligations
represent full faith and credit of the United States of America, including: Export-Import
Bank, Farmers Home Administration, General Services Administration, U.S. Maritime
Administration, Small Business Administration, Government National Mortgage
Association, U.S. Department of Housing & Urban Development, and Federal Housing
Administration;
(c) bonds, notes or other evidences of indebtedness rated AAA by S&P and
Aaa by Moody’s issued by the Fannie Mae or the Federal Home Loan Mortgage
Corporation with remaining maturities not exceeding three years;
(d) U.S. dollar denominated deposit accounts (including those with the
Trustee or with any affiliate of the Trustee), unsecured certificates of deposit, including
those placed by a third party pursuant to an agreement between the Trustee and the
Authority, demand deposits, including interest bearing money market accounts, trust
deposits, trust accounts, time deposits, overnight bank deposits, interest-bearing deposits,
federal funds and banker’s acceptances with domestic commercial banks which have a
rating on their short term certificates of deposit on the date of purchase of A-1 or A-1+ by
S&P and P-1 by Moody’s, and maturing no more than 360 days after the date of
purchase;
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(e) commercial paper which is rated at the time of purchase in the single
highest classification, A-1+ by S&P and P-1 by Moody’s and which matures not more
than 270 days after the date of purchase;
(f) investments in a money market mutual fund rated, at the time of purchase,
AAAm or AAAm-G or better by S&P, which shall exclude funds with a floating net asset
value and may include funds for which the Trustee or its affiliates provide investment
advisory or other management services for a fee, including serving as administrator,
shareholder servicing agent, and/or custodian or sub-custodian, notwithstanding that
(i) the Trustee or an affiliate of the Trustee receives fees from funds for services
rendered, (ii) the Trustee collects fees for services rendered pursuant to this Indenture,
which fees are separate from the fees received from such funds, and (iii) services
performed for such funds and pursuant to this Indenture may at times duplicate those
provided to such funds by the Trustee or an affiliate of the Trustee;
(g) Repurchase and reverse repurchase agreements collateralized with Federal
Securities, including those of the Trustee or any of its affiliates;
(h) any pre-refunded bonds or other obligations of any state of the United
States of America or of any agency, instrumentality or local governmental unit of any
such state which are not callable at the option of the obligor prior to maturity or as to
which irrevocable instructions have been given by the obligor to call on the date specified
in the notice; and (i) which are rated, at the time of purchase, based on the refunding
escrow, in the highest rating category of S&P and Moody’s or (ii)(A) which are fully
secured as to principal and interest and redemption premium (if any) by a fund consisting
only of cash or Federal Securities, which fund may be applied only to the payment of
such principal of and interest and redemption premium (if any) in such bonds or other
obligations on the maturity date or dates thereof or the specified redemption date or dates
under such irrevocable instructions, as appropriate, and (B) which fund is sufficient, as
verified by an Independent Accountant, to pay principal of and interest and redemption
premium (if any) on the bonds or other obligations described in this paragraph on the
maturity date or dates thereof or on the redemption date or dates specified in the
irrevocable instructions referred to above, as appropriate;
(i) investment agreements, with notice to each rating agency then rating the
Bonds;
(j) the Local Agency Investment Fund established under Section 16429.1 of
the Government Code of the State of California, provided, however, that with respect to
amounts held by the Trustee hereunder, to the extent the Trustee is authorized to register
such investment in its name; and
(k) any other investment permitted under Section 53601 of the California
Government Code.
“Principal Account” means the account by that name established and held by the Trustee
in the Bond Fund under Section 5.02.
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“Proceeds Account” shall have the meaning assigned to such term in Section 3.02.
“Project” means the facilities, improvements and other property described more fully in
Appendix B attached to the Installment Sale Agreement, as that Appendix may be amended from
time to time in accordance with the Installment Sale Agreement.
“Project Costs” means, with respect to the Project, all costs of the acquisition,
construction and installation thereof which are paid from moneys on deposit in the Project Fund,
including but not limited to:
(a) all costs required to be paid to any person under the terms of any
agreement for or relating to the acquisition, construction and installation of the Project;
(b) obligations incurred for labor and materials in connection with the
acquisition, construction and installation of the Project;
(c) the cost of performance or other bonds and any and all types of insurance
that may be necessary or appropriate to have in effect in connection with the acquisition,
construction and installation of the Project;
(d) all costs of engineering and architectural services, including the actual out-
of-pocket costs for test borings, surveys, estimates, plans and specifications and
preliminary investigations therefor, development fees, sales commissions, and for
supervising construction, as well as for the performance of all other duties required by or
consequent to the proper acquisition, construction and installation of the Project;
(e) any sums required to reimburse the District for advances made for any of
the above items or for any other costs incurred and for work done which are properly
chargeable to the acquisition, construction and installation of the Project;
(f) all financing costs incurred in connection with the acquisition,
construction and installation of the Project; and
(g) the interest components of the Installment Payments allocable to the
Project that come due during the period of acquisition, construction and installation of the
Project.
“Project Fund” means the fund by that name established and held by the District under
Section 3.04.
“Record Date” means, with respect to any Interest Payment Date, the 15th calendar day
of the month preceding such Interest Payment Date, whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established and held by the Trustee
under Section 5.06.
“Registration Books” means the records maintained by the Trustee under Section 2.06 for
the registration and transfer of ownership of the Bonds.
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“Revenues” means:
(a) all amounts received by the Authority or the Trustee pursuant or with
respect to the Installment Sale Agreement, including, without limiting the generality of
the foregoing, all of the Installment Payments (including both timely and delinquent
payments, any late charges, and whether paid from any source, but excluding any
Additional Payments), prepayments, insurance proceeds, condemnation proceeds, and
(b) all interest, profits or other income derived from the investment of
amounts in any fund or account established pursuant to this Indenture.
“S&P” means Standard & Poor’s, a division of the McGraw Hill Companies, of New
York, New York, its successors and assigns, except that if such corporation is dissolved or
liquidated or no longer performs the functions of a securities rating agency, then the term “S&P”
shall be deemed to refer to any other nationally recognized securities rating agency selected by
the District.
“Securities Depositories” means The Depository Trust Company: and, in accordance with
then current guidelines of the Securities and Exchange Commission, such other addresses or such
other securities depositories as the District designates in written notice filed with the Trustee.
“Supplemental Indenture” means any indenture hereafter duly authorized and entered into
between the Authority and the Trustee, supplementing, modifying or amending this Indenture;
but only if and to the extent that such Supplemental Indenture is specifically authorized
hereunder.
“Tax Agreement” means the Tax Regulatory Agreement by and among the Authority, the
Trustee and the District together with the exhibits thereto, dated as of ___________, 2019, as the
same may be amended or supplemented in accordance with its terms.
“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or
(except as otherwise referenced herein) as it may be amended to apply to obligations issued on
the Closing Date, together with applicable proposed, temporary and final regulations
promulgated, and applicable official public guidance published, under said Tax Code.
“Term” means, when used with respect to the Installment Sale Agreement, the time
during which the Installment Sale Agreement is in effect, as provided in Section 4.2 thereof.
[“Term Bonds” means the Bonds maturing on _______________.]
“Trustee” means MUFG Union Bank, N.A., a national banking association organized and
existing under the laws of the United States of America, or its successor or successors, as Trustee
hereunder as provided in Article VIII.
“Underwriter” means Hilltop Securities Inc., the Underwriter of the Bonds at the
negotiated sale thereof.
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“Wastewater Operations” means the wastewater operations of the District, including but
not limited to all facilities, properties and improvements at any time owned or operated by the
District for the collection of wastewater from residents served thereby, and any necessary lands,
rights, entitlements and other property useful in connection therewith, together with all
extensions thereof and improvements thereto hereafter acquired, constructed or installed by the
District.
“Wastewater Revenue Fund” means the fund or funds established and held by the District
with respect to the Wastewater Operations for the receipt and deposit of Gross Revenues.
Currently, the District’s Sewer General Fund constitutes the Wastewater Revenue Fund.
“Written Certificate,” “Written Request” and “Written Requisition” of the Authority or
the District mean, respectively, a written certificate, request or requisition signed in the name of
the Authority or the District by its Authorized Representative. Any such instrument and
supporting opinions or representations, if any, may, but need not, be combined in a single
instrument with any other instrument, opinion or representation, and the two or more so
combined shall be read and construed as a single instrument.
Section 1.02. Authorization. Each of the parties hereby represents and warrants that it
has full legal authority and is duly empowered to enter into this Indenture, and has taken all
actions necessary to authorize the execution hereof by the officers and persons signing it.
Section 1.03. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular shall
include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to include the neuter, masculine or feminine gender, as
appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of reference, do not constitute a part hereof and shall not affect the meaning,
construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Indenture; the words “herein,” “hereof,”
thereby,” “hereunder” and other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or subdivision hereof.
ARTICLE II
THE BONDS
Section 2.01. Authorization of Bonds. The Authority has reviewed all proceedings
heretofore taken and has found, as a result of such review, and hereby finds and determines that
all things, conditions and acts required by law to exist, happen or be performed precedent to and
in connection with the issuance of the Bonds do exist, have happened and have been performed
in due time, form and manner as required by law, and the Authority is now duly empowered,
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under each and every requirement of law, to issue the Bonds in the manner and form provided in
this Indenture.
The Authority hereby authorizes the issuance of the Bonds in the aggregate principal
amount of $[Principal Amount] under the Bond Law for the purposes of providing funds to
enable the District to acquire and construct the Project. The Bonds are authorized and issued
under, and are subject to the terms of, this Indenture and the Bond Law. The Bonds are
designated the “Otay Water District Financing Authority 2019 Wastewater Revenue Bonds.”
[Remainder of Page Intentionally Left Blank]
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3394469.7 043520 RSIND
Section 2.02. Terms of the Bonds.
Payment Provisions. The Bonds shall be issued in fully registered form without coupons
in denominations of $5,000 or any integral multiple thereof. The Bonds shall mature on
_________ in each of the years and in the amounts, and bear interest (calculated on the basis of a
360-day year of twelve 30-day months) at the rates, as follows:
Maturity Date
(September 1st)
Principal
Amount
Interest
Rate
- $- -%
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
Interest on the Bonds is payable from the Interest Payment Date next preceding the date
of authentication thereof unless:
(a) a Bond is authenticated on or before an Interest Payment Date and after
the close of business on the preceding Record Date, in which event it will bear interest
from such Interest Payment Date,
(b) a Bond is authenticated on or before the first Record Date, in which event
interest thereon will be payable from the Closing Date, or
(c) interest on any Bond is in default as of the data of authentication thereof,
in which event interest thereon will be payable from the date to which interest has been
paid in full, payable on each Interest Payment Date.
Interest is payable on each Interest Payment Date to the persons in whose names the
ownership of the Bonds is registered on the Registration Books at the close of business on the
immediately preceding Record Date, except as provided below. Interest on any Bond which is
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not punctually paid or duly provided for on any Interest Payment Date is payable to the person in
whose name the ownership of such Bond is registered on the Registration Books at the close of
business on a special record date for the payment of such defaulted interest to be fixed by the
Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to
such special record date.
The Trustee will pay interest on the Bonds by check mailed by first class mail, postage
prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses
shown on the Registration Books as of the close of business on the preceding Record Date. At
the written request of the Owner of Bonds in an aggregate principal amount of at least
$1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee
will pay interest on such Bonds on each succeeding Interest Payment Date by wire transfer in
immediately available funds to such account of a financial institution within the United States of
America as specified in such written request, which written request will remain in effect until
rescinded in writing by the Owner. The Trustee will pay principal of the Bonds in lawful money
of the United States of America by check upon presentation and surrender thereof at the Office
of the Trustee.
Section 2.03. Form and Execution of Bonds. The Bonds, the form of Trustee’s
certificate of authentication, and the form of assignment to appear thereon, are set forth in
Appendix A attached hereto and by this reference incorporated herein, with necessary or
appropriate variations, omissions and insertions, as permitted or required by this Indenture.
An Authorized Representative of the Authority shall execute, and the Secretary of the
Authority shall attest, each Bond. Either or both of such signatures may be made manually or
may be affixed by facsimile thereof. If any officer whose signature appears on any Bond ceases
to be such officer before the Closing Date, such signature will nevertheless be as effective as if
the officer had remained in office until the Closing Date any Bond may be signed and attested on
behalf of the Authority by such persons as at the actual date of the execution of such Bond are
the proper officers of the Authority, duly authorized to execute debt instruments on behalf of the
Authority, although on the date of such Bond any such person was not an officer of the
Authority.
Only those Bonds bearing a certificate of authentication in the form set forth in
Appendix A, manually executed and dated by the Trustee, are valid or obligatory for any purpose
or entitled to the benefits of this Indenture, and such certificate of the Trustee is conclusive
evidence that such Bonds have been duly authenticated and delivered hereunder and are entitled
to the benefits of this Indenture.
Section 2.04. Transfer and Exchange of Bonds.
(a) Transfer. Any Bond may, in accordance with its terms, be transferred, upon the
Registration Books, by the person in whose name it is registered, in person or by a duly
authorized attorney of such person, upon surrender of such Bond to the Trustee at its Office for
cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to
the Trustee, duly executed. The Trustee shall collect any tax or other governmental charge on the
transfer of any Bonds under this Section. Whenever any Bond or Bonds is surrendered for
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transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the
transferee a new Bond or Bonds of like series, interest rate, maturity and aggregate principal
amount. The District shall pay the cost of printing Bonds and any services rendered or expenses
incurred by the Trustee in connection with any transfer of Bonds.
(b) Exchange. The Bonds may be exchanged at the Office of the Trustee for a like
aggregate principal amount of Bonds of other authorized denominations and of the same series,
interest rate and maturity. The Trustee shall collect any tax or other governmental charge on the
exchange of any Bonds under this subsection (b). The District shall pay the cost of printing
Bonds and any services rendered or expenses incurred by the Trustee in connection with any
exchange of Bonds.
(c) Limitations. The Trustee may refuse to transfer or exchange, under the provisions
of this Section, any Bonds selected by the Trustee for redemption under Article IV, or any Bonds
during the period established by the Trustee for the selection of Bonds for redemption.
Section 2.05. Book-Entry System.
(a) Original Delivery. The Bonds will be initially delivered in the form of a separate
single fully registered bond (which may be typewritten) for each maturity of the Bonds. Upon
initial delivery, the Trustee shall register the ownership of each Bond on the Registration Books
in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the
Outstanding Bonds shall be registered in the name of the Nominee on the Registration Books.
With respect to Bonds the ownership of which is registered in the name of the Nominee,
neither the Authority, the District nor the Trustee has any responsibility or obligation to any
Depository System Participant or to any person on behalf of which the Nominee holds an interest
in the Bonds. Without limiting the generality of the immediately preceding sentence, the
Authority, the District and the Trustee have no responsibility or obligation with respect to (i) the
accuracy of the records of the Depository, the Nominee or any Depository System Participant
with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System
Participant or any other person, other than a Bond Owner as shown in the Registration Books, of
any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by
the Depository of the beneficial interests in the Bonds to be redeemed if the District elects to
redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other
person, other than a Bond Owner as shown in the Registration Books, of any amount with
respect to principal, premium, if any, or interest on the Bonds or (v) any consent given or other
action taken by the Depository as Owner of the Bonds.
The Authority, the District and the Trustee may treat and consider the person in whose
name each Bond is registered as the absolute owner of such Bond for the purpose of payment of
principal of and premium, if any, and interest on such Bond, for the purpose of giving notices of
redemption and other matters with respect to such Bond, for the purpose of registering transfers
of ownership of such Bond, and for all other purposes whatsoever.
The Trustee shall pay the principal of and the interest and premium, if any, on the Bonds
only to the respective Owners or their respective attorneys duly authorized in writing, and all
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such payments shall be valid and effective to fully satisfy and discharge all obligations with
respect to payment of principal of and interest and premium, if any, on the Bonds to the extent of
the sum or sums so paid.
No person other than a Bond Owner shall receive a Bond evidencing the obligation of the
Authority to make payments of principal, interest and premium, if any, under this Indenture.
Upon delivery by the Depository to the District of written notice to the effect that the
Depository has determined to substitute a new Nominee in its place, and subject to the provisions
herein with respect to Record Dates, such new nominee shall become the Nominee hereunder for
all purposes: and upon receipt of such a notice the District shall promptly deliver a copy of the
same to the Trustee.
(b) Representation Letter. In order to qualify the Bonds for the Depository’s
book-entry system, the Authority shall execute and deliver to such Depository a letter
representing such matters as shall be necessary to so qualify the Bonds. The execution and
delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any
other way impose upon the Authority or the Trustee any obligation whatsoever with respect to
persons having interests in the Bonds other than the Bond Owners.
In addition to the execution and delivery of such letter by the Authority, the Authority
and the Trustee may take any other actions, not inconsistent with this Indenture, to qualify the
Bonds for the Depository’s book-entry program.
(c) Transfers Outside Book-Entry System. If either (i) the Depository determines not
to continue to act as Depository for the Bonds, or (ii) the District determines to terminate the
Depository as such, then the District shall thereupon discontinue the book-entry system with
such Depository. In such event, the Depository shall cooperate with the District and the Trustee
in the issuance of replacement Bonds by providing the Trustee with a list showing the interests of
the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in
the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be
issued.
The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions
of this subsection (c).
If, prior to the termination of the Depository acting as such, the District fails to identify
another Securities Depository to replace the Depository, then the Bonds shall no longer be
required to be registered in the Registration Books in the name of the Nominee, but shall be
registered in whatever name or names the Owners transferring or exchanging Bonds shall
designate, in accordance with the provisions hereof.
If the District determines that it is in the best interests of the beneficial owners of the
Bonds that they be able to obtain certificated Bonds, the District may notify the Depository
System Participants of the availability of such certificated Bonds through the Depository. In such
event, the Trustee will authenticate, transfer and exchange Bonds as required by the Depository
and others in appropriate amounts; and whenever the Depository requests, the Trustee and the
District shall cooperate with the Depository in taking appropriate action (i) to make available one
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or more separate certificates evidencing the Bonds to any Depository System Participant having
Bonds credited to its account with the Depository, or (ii) to arrange for another Securities
Depository to maintain custody of a single certificate evidencing such Bonds, all at the District’s
expense.
(d) Payments to the Nominee. Notwithstanding any other provision of this Indenture
to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with
respect to principal of and interest and premium, if any, on such Bond and all notices with
respect to such Bond shall be made and given, respectively, as provided in the letter described in
subsection (b) of this Section or as otherwise instructed by the Depository.
Section 2.06. Registration Books. The Trustee will keep or cause to be kept, at the
Office of the Trustee, sufficient records for the registration and transfer of ownership of the
Bonds, which shall upon reasonable notice as agreed to by the Trustee, be open to inspection
during regular business hours by the District; and, upon presentation for such purpose, the
Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause
to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore
provided.
Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is mutilated,
the Authority, at the expense of the Owner of such Bond, shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the
Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. The Trustee
shall cancel every mutilated Bond surrendered to it and deliver such mutilated Bond to, or upon
the order of, the District.
If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be
submitted to the Trustee and, if such evidence is satisfactory and if indemnity satisfactory to the
Trustee is given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall
thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the
Bond so lost, destroyed or stolen.
The Trustee may require payment of a sum not exceeding the actual cost of preparing
each new Bond issued under this Section and of the expenses which may be incurred by the
Trustee in connection therewith.
Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be
lost, destroyed or stolen will constitute an original additional contractual obligation on the part of
the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time
enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this
Indenture with all other Bonds issued under this Indenture.
Notwithstanding any other provision of this Section 2.07, in lieu of delivering a new
Bond for which principal has become due for a Bond which has been mutilated, lost, destroyed
or stolen, the Trustee may make payment of such Bond in accordance with its terms upon receipt
of indemnity satisfactory to the Trustee.
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Section 2.08. CUSIP Numbers. The District in issuing the Bonds may use “CUSIP”
numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices
of redemption as a convenience to Owners; provided that the Trustee shall have no liability for
any defect in the “CUSIP” numbers as they appear on any Bond, notice or elsewhere, and,
provided further that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Bonds or as contained in any notice of a
redemption and that reliance may be placed only on the other identification numbers printed on
the Bonds, and any such redemption shall not be affected by any defect in or omission of such
numbers. The District will promptly notify the Trustee in writing of any change in the "CUSIP"
numbers.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Issuance of the Bonds. At any time after the execution of this Indenture,
the Authority may execute and the Trustee shall, upon the Written Request of the District,
authenticate and deliver the Bonds to the Underwriter.
Section 3.02. Application of Proceeds of Sale of the Bonds. Upon the receipt of
payment for the Bonds on the Closing Date, the Trustee shall receive the amount of $________
calculated as follows:
• $[Par Amount] (constituting the par amount of the Bonds),
• [less an aggregate original issue discount / plus an aggregate original issue
premium] in the amount of $________, and
• less an underwriter’s discount in the amount of $_________.
which the Trustee shall deposit into a temporary account called the Proceeds Fund which the
Trustee shall establish, maintain and hold in trust, and shall apply as follows (whereupon said
temporary account shall be closed):
(a) The Trustee shall deposit $_________ into the Costs of Issuance Fund.
(b) The Trustee shall wire $_________ as directed by the District for deposit
into the Project Fund to be established by the District.
The Trustee may establish and maintain a temporary account or fund to facilitate and
record such deposits and transfers.
Section 3.03. Establishment and Application of Costs of Issuance Fund. The
Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of
Issuance Fund” into which the Trustee shall deposit a portion of the proceeds of sale of the
Bonds under Section 3.02(a). The Trustee shall disburse amounts in the Costs of Issuance Fund
from time to time to pay the Costs of Issuance upon submission of a Written Requisition of the
District stating the person to whom payment is to be made, the amount to be paid, the purpose
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for which the obligation was incurred and that such payment is a proper charge against said fund.
The Trustee may conclusively rely on the representations and certifications set forth in such
Written Requisitions and shall be fully protected in relying thereon.
On ____________, or upon the earlier Written Request of the District, the Trustee shall
transfer all amounts remaining in the Costs of Issuance Fund to the Interest Account, and shall
thereupon close the Costs of Issuance Fund.
Section 3.04. Project Fund. The District shall establish and maintain a separate fund
to be known as the “Project Fund” into which the District shall deposit a portion of the proceeds
of sale of the Bonds transferred to the District by the Trustee pursuant to Section 3.02(b). Except
as otherwise provided herein, moneys in the Project Fund will be used solely for the payment of
the Project Costs. The District shall determine if amounts charged against the Project Fund are
proper charges against such fund, and the District shall maintain a record of disbursed amounts
from the Project Fund, including the person to whom payment was made, the amount paid, and
the purpose for which the obligation was incurred.
Upon the completion of the Project, the District shall transfer to the Trustee for deposit in
the Interest Account held by the Trustee all amounts remaining on deposit in the Project Fund,
and the District shall thereupon close the Project Fund.
Section 3.05. Validity of Bonds. The recital contained in the Bonds that the same are
issued under the Constitution and laws of the State of California shall be conclusive evidence of
their validity and of compliance with the provisions of law in their issuance.
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Terms of Redemption.
(a) Optional Redemption from any Source of Available Funds. The Bonds maturing
on or before _________ are not subject to optional redemption prior to their respective stated
maturity dates.
The Bonds maturing on or after ________________, are subject to redemption in whole,
or in part at the Written Request of the District among maturities on such basis as the District
may designate and by lot within a maturity, at the option of the District, on any date on or after
_____________, from any available source of funds, at a redemption price equal to the principal
amount of the Bonds to be redeemed, plus accrued interest to the date of redemption, without
premium.
The District must give the Trustee written notice of its intention to redeem Bonds under
this subsection (a), and the manner of selecting such Bonds for redemption from among the
maturities thereof, in sufficient time to enable the Trustee to give notice of such redemption in
accordance with Section 4.03.
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(b) [Mandatory Redemption in the Event of Conveyance of Wastewater Operations to
San Diego County. The Bonds are subject to mandatory redemption prior to their respective
stated maturity dates in the event the District’s Wastewater Operations are conveyed to San
Diego County, from any available source of funds, at a redemption price equal to the principal
amount of the Bonds to be redeemed, plus accrued interest to the date of redemption, without
premium.]
(c) [Mandatory Sinking Fund Redemption. The Term Bonds are also subject to
redemption, by lot, on ________ in each of the years as set forth in the following tables, from
deposits made for such purpose pursuant to Section 5.02(b), at a redemption price equal to the
principal amount thereof to be redeemed together with accrued interest thereon to the redemption
date, without premium, or in lieu thereof may be purchased pursuant to the succeeding paragraph
of this subsection (b), in the aggregate respective principal amounts and on the respective dates
as set forth in the following table; provided, however, that if some but not all of the Term Bonds
have been redeemed pursuant to subsection (a) above, the total amount of all future payments
pursuant to this subsection (b) with respect to such Term Bonds shall be reduced by the
aggregate principal amount of such Term Bonds so redeemed, to be allocated among such
payments in integral multiples of $5,000 as determined by the District (written notice of which
determination shall be given by the District to the Trustee).]
[Term Bond Maturing ____________]
[Sinking Fund
Redemption Date]
(____________)
[Principal
Amount To Be
Redeemed]
- $-
- (Maturity) -
[Term Bond Maturing ____________]
[Sinking Fund
Redemption Date]
(_________)
[Principal
Amount To Be
Redeemed]
- $-
- -
- (Maturity) -
Section 4.02. Selection of Bonds for Redemption. Whenever provision is made in this
Indenture for the redemption of less than all of the Bonds of a single maturity of the same issue,
the District shall select the Bonds of that maturity to be redeemed by lot in any manner which the
District in its sole discretion deems appropriate. For purposes of such selection, the District shall
treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject
to redemption as if such portion were a separate Bond.
Section 4.03. Notice of Redemption. The Trustee shall mail notice of redemption of
the Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any
redemption date, to the respective Owners of any Bonds designated for redemption at their
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addresses appearing on the Registration Books, and the Securities Depositories. The Trustee
shall electronically file a copy of each notice of redemption with the Municipal Securities
Rulemaking Board through its Electronic Municipal Market Access (EMMA) system, or such
other services providing information with respect to called bonds in accordance with then-current
guidelines of the Securities and Exchange Commission, or any other such services the District
may designate in writing to the Trustee.
Each notice of redemption shall state:
(i) the date of the notice,
(ii) the redemption date,
(iii) the place or places of redemption,
(iv) whether less than all of the Bonds (or all Bonds of a single maturity) are to
be redeemed,
(v) the CUSIP numbers and (in the event that not all Bonds within a maturity
are called for redemption) Bond numbers of the Bonds to be redeemed and the maturity
or maturities of the Bonds to be redeemed, and
(vi) in the case of Bonds to be redeemed in part only, the respective portions of
the principal amount thereof to be redeemed.
Each such notice shall also state that on the redemption date there will become due and
payable on each of said Bonds the redemption price thereof, and that from and after such
redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then
surrendered. Such redemption notices may state that no representation is made as to the accuracy
or correctness of the CUSIP numbers printed therein or on the Bonds.
Each notice relating to a redemption pursuant to Section 4.01(a) may be conditional, and
shall further state that such redemption may be rescinded by the District on or prior to the date
set for redemption.
Neither the failure to receive any notice nor any defect therein shall affect the sufficiency
of the proceedings for such redemption or the cessation of accrual of interest from and after the
redemption date. Notice of redemption of Bonds shall be given by the Trustee, at the expense of
the District, for and on behalf of the District.
Section 4.04. Rescission of Redemption. The District shall have the right to rescind
any redemption pursuant to Section 4.01(a) by written notice to the Trustee on or prior to the
date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any
reason funds are not available on the date fixed for redemption for the payment in full of the
Bonds then called for redemption, and such cancellation shall not constitute an Event of Default
hereunder. The Trustee shall mail notice of rescission of redemption in the same manner notice
of redemption was originally provided.
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Section 4.05. Execution of New Bonds Upon Partial Redemption of Bonds. Upon
surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall
authenticate and deliver to the Owner thereof, at the expense of the District, a new Bond or
Bonds of authorized denominations equal in aggregate principal amount to the unredeemed
portion of the Bonds surrendered.
Section 4.06. Effect of Redemption. Notice of redemption having been duly given as
aforesaid, and moneys for payment of the redemption price of, together with interest accrued to
the date fixed for redemption on, including any applicable premium, the Bonds (or portions
thereof) so called for redemption being held by the Trustee, on the redemption date designated in
such notice, the Bonds (or portions thereof) so called for redemption shall become due and
payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or
portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the
Owners of said Bonds shall have no rights in respect thereof except to receive payment of the
redemption price thereof.
All Bonds redeemed under the provisions of this Article shall be canceled by the Trustee
upon surrender thereof and destroyed in accordance with the retention policy of the Trustee then
in effect.
ARTICLE V
REVENUES; FUNDS AND ACCOUNTS;
PAYMENT OF PRINCIPAL AND INTEREST
Section 5.01. Security for the Bonds; Bond Fund.
(a) Pledge of Revenues and Other Amounts. Subject only to the provisions of this
Indenture permitting the application thereof for the purposes and on the terms and conditions set
forth herein, all of the Revenues and all amounts held in any fund or account established under
this Indenture are hereby pledged to secure the payment of the principal of and interest and
premium (if any) on the Bonds in accordance with their terms and the provisions of this
Indenture.
This pledge constitutes a lien on and security interest in the Revenues and such amounts
and shall attach, be perfected and be valid and binding from and after the Closing Date, without
the need for any physical delivery thereof or further act.
(b) Assignment to Trustee. The Authority hereby irrevocably transfers, assigns and
sets over to the Trustee, without recourse to the Authority, all of its rights in the Installment Sale
Agreement (excepting only the Authority’s rights under Sections 4.7, 5.2 and 6.4 thereof and the
Authority’s rights to give approvals and consents thereunder), including but not limited to all of
the Authority’s rights to receive and collect all of the Installment Payments, and the Trustee
hereby accepts such assignment.
The Trustee is entitled to collect and receive all of the Installment Payments, and any
Installment Payments collected or received by the Authority shall be deemed to be held, and to
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have been collected or received, by the Authority as the agent of the Trustee and shall forthwith
be paid by the Authority to the Trustee.
The Trustee is also entitled to, subject to the provisions of Article VIII, take all steps,
actions and proceedings which the Trustee determines to be reasonably necessary in its judgment
to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all
of the obligations of the District under the Installment Sale Agreement.
(c) Deposit of Revenues in Bond Fund. All Revenues shall be promptly deposited by
the Trustee upon receipt thereof in a special fund designated as the “Bond Fund” which the
Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee
and required hereunder or under the Installment Sale Agreement to be deposited in the
Redemption Fund shall be promptly deposited in such fund or account.
All Revenues deposited with the Trustee shall be held, disbursed, allocated and applied
by the Trustee only as provided in this Indenture.
Any surplus remaining in the Bond Fund, after payment in full of (i) the principal of and
interest on the Bonds or provision therefore under Article X and (ii) any applicable fees and
expenses of the Trustee shall be withdrawn by the Trustee and remitted to the District.
Section 5.02. Allocation of Revenues. On or before each Interest Payment Date, the
Trustee shall transfer from the Bond Fund and deposit into the following respective accounts
(each of which the Trustee shall establish and maintain within the Bond Fund), the following
amounts in the following order of priority:
(a) Deposit to Interest Account. The Trustee shall deposit into the Interest Account
an amount required to cause the aggregate amount on deposit in the Interest Account to be at
least equal to the amount of interest becoming due and payable on such Interest Payment Date on
all Bonds then Outstanding.
(b) Deposit to Principal Account. The Trustee shall deposit into the Principal
Account an amount required to cause the aggregate amount on deposit in the Principal Account
to equal the principal amount of the Bonds coming due and payable on each _________,
including the aggregate principal amount of the Term Bonds (if any) which are subject to
mandatory sinking fund redemption on such _________ under Section 4.01(b).
Section 5.03. Application of Interest Account. All amounts in the Interest Account
shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the
Bonds as it comes due and payable (including accrued interest on any Bonds purchased or
redeemed prior to maturity).
Section 5.04. Application of Principal Account. All amounts in the Principal
Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the
Bonds on their respective maturity dates, including the aggregate principal amount of the Term
Bonds (if any) which are subject to mandatory sinking fund redemption on such _________
under Section 4.01(b).
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Section 5.05. Application of Redemption Fund. The Trustee shall establish (when
needed) and maintain the Redemption Fund, into which the Trustee shall deposit a portion of the
Revenues received representing optional prepayments of the Installment Payments, in
accordance with a Written Request of the District.
Amounts on deposit in the Redemption Fund shall be used and withdrawn by the Trustee
solely for the purpose of paying the principal and premium (if any) of the Bonds to be redeemed
under Section 4.01[(a)]; provided, however, that at any time prior to the selection of Bonds for
redemption, the Trustee may apply such amounts to the purchase of Bonds at public or private
sale, when and at such prices (including brokerage and other charges, but excluding accrued
interest, which is payable from the Interest Account) as may be directed under a Written Request
of the District, except that the purchase price (exclusive of accrued interest) may not exceed the
redemption price then applicable to the Bonds.
The Trustee shall be entitled to conclusively rely on any Written Request of the District
received under this Section 5.05, and shall be fully protected in relying thereon.
Section 5.06. Investments. All moneys in any of the funds or accounts established
with the Trustee under this Indenture shall be invested by the Trustee solely in Permitted
Investments. Such investments shall be directed by the District under a Written Request of the
District filed with the Trustee at least 2 Business Days in advance of the making of such
investments. In the absence of any such directions from the District, the Trustee shall hold any
such moneys uninvested. Amounts in the Project Fund held by the District shall be invested by
the District in Permitted Investments.
Permitted Investments purchased as an investment of moneys in any fund shall be
deemed to be part of such fund or account. To the extent Permitted Investments are registrable,
such Permitted Investments must be registered in the name of the Trustee.
All interest or gain derived from the investment of amounts in any of the funds or
accounts established hereunder shall be deposited in the Bond Fund.
For purposes of acquiring any investments hereunder, the Trustee may commingle funds
held by it hereunder. The Trustee or any of its affiliates may act as principal or agent in the
acquisition or disposition of any investment and may impose its customary charges therefor. The
Trustee may rely conclusively on the written investment direction of the District as to the
suitability and legality of the directed investments.
The Trustee shall incur no liability for losses arising from any investments made under
this Section 5.06.
The Trustee may make any investments hereunder through its own bond or investment
department or trust investment department, or those of its parent or any affiliate. The Trustee or
any of its affiliates may act as sponsor, advisor or manager in connection with any investments
made by the Trustee hereunder. The Trustee is hereby authorized, in making or disposing of any
investment permitted by this Section, to deal with itself (in its individual capacity) or with any
one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for
any third person or is dealing as a principal for its own account.
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The Authority and the District acknowledge that to the extent regulations of the
Comptroller of the Currency or other applicable regulatory entity grant the District the right to
receive brokerage confirmations of security transactions as they occur at no additional cost, the
District specifically waives receipt of such confirmations to the extent permitted by law. The
District further understands that trade confirmations for securities transactions effected by the
Trustee will be available upon request and at no additional cost and other trade confirmations
may be obtained from the applicable broker. The Trustee will furnish the District periodic cash
transaction statements which shall include detail for all investment transactions made by the
Trustee hereunder. Upon the District’s election, such statements will be delivered via the
Trustee’s online service and upon electing such service, paper statements will be provided only
upon request.
The moneys on deposit in the funds and accounts established under this Indenture shall
not be deemed “surplus” under Section 53601 of the Government Code.
Section 5.07. Valuation and Disposition of Investments.
(a) Except as otherwise provided in subsection (b) of this Section, the District
covenants that all investments of amounts deposited in any fund or account created by or under
this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of
Section 148 of the Tax Code) shall be acquired, disposed of and valued at the Fair Market Value
thereof as such term is defined in subsection (d) below. The Trustee shall have no duty in
connection with the determination of Fair Market Value other than to follow the investment
directions of the District in any Written Request of the District.
(b) Investments in funds or accounts (or portions thereof) that are subject to a yield
restriction under applicable provisions of the Tax Code shall be valued at cost thereof,
(consisting of present value thereof within the meaning of Section 148 of the Tax Code):
provided that the District shall inform the Trustee which funds are subject to a yield restriction
and the Trustee shall have no duty in regards to ensuring that such funds meet such yield
restriction.
(c) Except as provided in the preceding subsection (b), for the purpose of determining
the amount in any fund or account established hereunder, the value of Permitted Investments
credited to such fund shall be valued by the Trustee at least annually on or before __________.
The Trustee may sell or present for redemption, any Permitted Investment so purchased by the
Trustee whenever it shall be necessary in order to provide moneys to meet any required payment,
transfer, withdrawal or disbursement from the fund to which such Permitted Investment is
credited, and the Trustee shall not be liable or responsible for any loss, tax, fee or other charge
resulting from any such Permitted Investment, reinvestment or liquidation of investment.
(d) For purposes of this Section 5.08, the term “Fair Market Value” means the price
at which a willing buyer would purchase the investment from a willing seller in a bona fide,
arm’s length transaction (determined as of the date the contract to purchase or sell the investment
becomes binding) if the investment is traded on an established securities market (within the
meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means
the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the
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investment is a certificate of deposit that is acquired in accordance with applicable regulations
under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal
or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed
investment contract, a forward supply contract or other investment agreement) that is acquired in
accordance with applicable regulations under the Tax Code, or (iii) the investment is a United
States Treasury Security – State and Local Government Series which is acquired in accordance
with applicable regulations of the United States Bureau of Public Debt.
(e) To the extent of any valuations made by the Trustee hereunder, the Trustee may
utilize and rely upon generally recognized or computerized securities pricing services that may
be available to it, including those available through its regular accounting system.
ARTICLE VI
COVENANTS OF THE AUTHORITY
Section 6.01. Punctual Payment. The Authority shall punctually pay or cause to be
paid the principal of and interest and premium (if any) on all the Bonds in strict conformity with
the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof,
but only out of the Revenues and other amounts pledged for such payment as provided in this
Indenture.
Section 6.02. Extension of Payment of Bonds. The Authority shall not directly or
indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of
payment of any claims for interest by the purchase of such Bonds or by any other arrangement,
and in case the maturity of any of the Bonds or the time of payment of any such claims for
interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any
default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of
the principal of all of the Bonds then Outstanding and of all claims for interest thereon which
have not been so extended.
Nothing in this Section 6.02 limits the right of the District to cause the Authority to issue
Bonds for the purpose of refunding any Outstanding Bonds, and such issuance does not
constitute an extension of maturity of the Bonds.
Section 6.03. Against Encumbrances. The Authority shall not create, or permit the
creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets
pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the
pledge and assignment created by this Indenture.
Subject to this limitation, the Authority expressly reserves the right to enter into one or
more other indentures for any of its corporate purposes, and reserves the right to issue other
obligations for such purposes.
Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The
Authority is duly authorized under law to issue the Bonds and to enter into this Indenture and to
pledge and assign the Revenues and other amounts purported to be pledged and assigned,
respectively, under this Indenture in the manner and to the extent provided in this Indenture.
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The Bonds and the provisions of this Indenture are and will be the legal, valid and
binding special obligations of the Authority in accordance with their terms, and the Authority
and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent
permitted by law, defend, preserve and protect said pledge and assignment of Revenues and
other assets and all the rights of the Bond Owners under this Indenture against all claims and
demands of all persons whomsoever.
Section 6.05. Accounting Records. The Trustee shall at all times keep, or cause to be
kept, proper books of record and account, prepared in accordance with corporate trust industry
standards, in which complete and accurate entries shall be made of all transactions made by it
relating to the proceeds of Bonds and all funds and accounts established by the Trustee under this
Indenture. The Trustee shall make such books of record and account available for inspection by
the Authority and the District during business hours, upon reasonable notice, and under
reasonable circumstances.
Section 6.06. Limitation on Additional Obligations. The Authority covenants that no
additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of
the Revenues in whole or in part.
Section 6.07. Tax Covenants.
(a) Private Business Use Limitation. The Authority shall assure that the proceeds of
the Bonds are not used in a manner that would cause the Bonds to satisfy the private business
tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the
Tax Code.
(b) Federal Guarantee Prohibition. The Authority may not take any action or permit
or suffer any action to be taken if the result of the same would be to cause the Bonds to be
“federally guaranteed” within the meaning of Section 149(b) of the Tax Code.
(c) No Arbitrage. The Authority may not take, or permit or suffer to be taken by the
Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other
obligations which, if such action had been reasonably expected to have been taken, or had been
deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be
“arbitrage bonds” within the meaning of Section 148(a) of the Tax Code.
(d) Maintenance of Tax Exemption. The Authority shall take all actions necessary to
assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds
to the same extent as such interest is permitted to be excluded from gross income under the Tax
Code as in effect on the Closing Date.
(e) Rebate of Excess Investment Earnings to United States. The Authority shall
calculate or cause to be calculated all amounts of Excess Investment Earnings with respect to the
Bonds which are required to be rebated to the United States of America under Section 148(f) of
the Tax Code, at the times and in the manner required under the Tax Code.
The Authority shall pay when due an amount equal to Excess Investment Earnings to the
United States of America in such amounts, at such times and in such manner as may be required
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under the Tax Code, such payments to be made from any source of legally available funds of the
Authority.
The Authority shall keep or cause to be kept, and retain or cause to be retained for a
period of six years following the retirement of the Bonds, records of the determinations made
under this subsection (e).
The Trustee may rely conclusively upon the Authority’s determinations, calculations and
certifications required by this Section. The Trustee shall have no responsibility to independently
make any calculation or determination or to review the Authority’s calculations hereunder.
Section 6.08. Enforcement of Installment Sale Agreement. The Trustee shall collect
all amounts (to the extent any such amounts are available for collection) due from the District
under the Installment Sale Agreement.
Subject to the provisions of Article VIII, the Trustee may enforce, and take all steps,
actions and proceedings which the Trustee determines to be reasonably necessary for the
enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of
all of the obligations of the District under the Installment Sale Agreement.
Section 6.09. Waiver of Laws. The Authority shall not at any time insist upon or
plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or
extension law now or at any time hereafter in force that may affect the covenants and agreements
contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws
is hereby expressly waived by the Authority to the extent permitted by law.
Section 6.10. Further Assurances. The Authority will make, execute and deliver any
and all such further indentures, instruments and assurances as may be reasonably necessary or
proper to carry out the intention or to facilitate the performance of this Indenture and for the
better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided
in this Indenture.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default. The following events constitute Events of Default
hereunder:
(a) Failure to pay any installment of the principal of any Bonds when due,
whether at maturity as therein expressed, by proceedings for redemption, by acceleration,
or otherwise.
(b) Failure to pay any installment of interest on the Bonds when due.
(c) Failure by the Authority to observe and perform any of the other
covenants, agreements or conditions on its part contained in this Indenture or in the
Bonds, if such failure has continued for a period of 60 days after written notice thereof,
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specifying such failure and requiring the same to be remedied, has been given to the
Authority by the Trustee provided, however, if in the reasonable opinion of the Authority
the failure stated in the notice can be corrected, but not within such 60-day period, such
failure shall not constitute an Event of Default if the Authority institutes corrective action
within such 60-day period and thereafter diligently and in good faith cures the failure in a
reasonable period of time, not to exceed 180 days of the date of the written notice of such
failure.
(d) The commencement by the Authority of a voluntary case under Title 11 of
the United States Code or any substitute or successor statute.
(e) The occurrence and continuation of an Event of Default under and as
defined in the Installment Sale Agreement.
Section 7.02. Acceleration; Other Remedies. If any Event of Default occurs, then,
and in each and every such case during the continuance of such Event of Default, the Trustee
may, and shall, at the written direction of the Owners of a majority in aggregate principal amount
of the Bonds at the time Outstanding shall, in each case, upon receipt of indemnification
satisfactory to Trustee against the costs, expenses and liabilities to be incurred in connection with
such action, upon notice in writing to the Authority, declare the principal of all of the Bonds then
Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any
such declaration the same shall become and shall be immediately due and payable, anything in
this Indenture or in the Bonds contained to the contrary notwithstanding.
The foregoing provision, however, is subject to the condition that if, at any time after the
principal of the Bonds has been so declared due and payable, the Authority shall pay to or shall
deposit with the Trustee a sum sufficient to pay all principal of the Bonds maturing prior to such
declaration and all matured installments of interest (if any) upon all the Bonds, and any and all
other defaults actually known to the Trustee (other than in the payment of principal of and
interest on the Bonds due and payable solely by reason of such declaration) are made good or
cured to the satisfaction of the Trustee, or provision deemed by the Trustee to be adequate is
made therefor, then, and in every such case, the Trustee, on behalf of the Owners of all of the
Bonds, shall rescind and annul such declaration and its consequences: but no such rescission and
annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any
right or power consequent thereon; provided, however, that no such rescission and annulment
shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any
right or power consequent thereon.
In addition to declaring the principal of all of the Bonds, and the interest accrued thereon,
to be immediately due and payable as set forth above, the Trustee shall have the right to pursue
any other remedy provided by law or in equity or otherwise after an Event of Default has
occurred.
Section 7.03. Application of Revenues and Other Funds After Default. If an Event
of Default occurs and is continuing, all Revenues and any other funds then held or thereafter
received by the Trustee under any of the provisions of this Indenture shall be applied by the
Trustee in the following order of priority:
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(a) To the payment of fees, charges and expenses of the Trustee (including
reasonable fees and disbursements of its legal counsel including outside counsel and the
allocated costs of internal attorneys and those of its agents and advisors) incurred in and
about the performance of its powers and duties under this Indenture; and
(b) To the payment of the principal of and interest then due on the Bonds
(upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of
the payment if only partially paid, or surrender thereof if fully paid) in accordance with
the provisions of this Indenture, as follows:
First: To the payment to the persons entitled thereto of all installments of
interest then due in the order of the maturity of such installments, and, if the
amount available is not sufficient to pay in full any installment or installments
maturing on the same date, then to the payment thereof ratably, according to the
amounts due thereon, to the persons entitled thereto, without any discrimination
or preference; and
Second: To the payment to the persons entitled thereto of the unpaid
principal of any Bonds which have become due, whether at maturity or by
acceleration or redemption, with interest on the overdue principal at the rate borne
by the respective Bonds (to the extent permitted by law), and, if the amount
available is not sufficient to pay in full all the Bonds, together with such interest,
then to the payment thereof ratably, according to the amounts of principal due on
such date to the persons entitled thereto, without any discrimination or preference.
Section 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably
appointed (and the successive respective Owners of the Bonds, by taking and holding the same,
shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful
attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on
their behalf such rights and remedies as may be available to such Owners under the provisions of
the Bonds, this Indenture and applicable provisions of any law. All rights of action under this
Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the
possession of any of the Bonds or the production thereof in any proceeding relating thereto, and
any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the
Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions
of this Indenture. Nothing herein shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement,
adjustment, or composition affecting the Bonds or the rights of any Owner thereof, or to
authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding
without the approval of the Owners so affected.
Section 7.05. Limitation on Bond Owners’ Right to Sue. Notwithstanding any other
provision hereof, no Owner of any Bonds has the right to institute any suit, action or proceeding
at law or in equity, for the protection or enforcement of any right or remedy under this Indenture,
the Installment Sale Agreement or any other applicable law with respect to such Bonds, unless
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(a) such Owner has given to the Trustee written notice of the occurrence of an
Event of Default;
(b) the Owners of a majority in aggregate principal amount of the Bonds then
Outstanding have requested the Trustee in writing to exercise the powers hereinbefore
granted or to institute such suit, action or proceeding in its own name;
(c) such Owner or Owners have tendered to the Trustee satisfactory indemnity
against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee has failed to comply with such request for a period of 60 days
after such written request has been received by, and said tender of indemnity has been
made to, the Trustee; and
(e) no direction inconsistent with such written request has been given to the
Trustee during such 60-day period by the Owners of a majority in aggregate principal
amount of the Bonds then Outstanding.
Such notification, request, tender of indemnity and refusal or omission are hereby
declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any
remedy hereunder or under law; it being understood and intended that no one or more Owners of
Bonds shall have any right in any manner whatever by his or their action to affect, disturb or
prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce
any right under the Bonds (it being understood that the Trustee does not have an affirmative duty
to ascertain whether or not such actions or forbearances are unduly prejudicial to such Owners),
this Indenture, the Installment Sale Agreement or other applicable law with respect to the Bonds,
except in the manner herein provided, and that all proceedings at law or in equity to enforce any
such right shall be instituted, had and maintained in the manner herein provided and for the
benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this
Indenture.
Section 7.06. Absolute Obligation of Authority. Nothing in this Indenture or in the
Bonds affects or impairs the obligation of the Authority, which is absolute and unconditional, to
pay the principal of and interest and premium (if any) on the Bonds to the respective Owners of
the Bonds at their respective dates of maturity, or upon acceleration or call for redemption, as
herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect
or impair the right of such Owners, which is also absolute and unconditional, to enforce such
payment by virtue of the contract embodied in the Bonds.
Section 7.07. Termination of Proceedings. In case any proceedings taken by the
Trustee or by any one or more Bond Owners on account of any Event of Default have been
discontinued or abandoned for any reason or have been determined adversely to the Trustee or
the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners,
subject to any determination in such proceedings, shall be restored to their former positions and
rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the
Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had
been taken.
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Section 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved
to the Trustee, or to the Owners of the Bonds is intended to be exclusive of any other remedy or
remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative
and in addition to any other remedy given hereunder or now or hereafter existing at law or in
equity or otherwise.
Section 7.09. No Waiver of Default. No delay or omission of the Trustee or any
Owner of the Bonds to exercise any right or power arising upon the occurrence of any default or
Event of Default shall impair any such right or power or shall be construed to be a waiver of any
such default or Event of Default or an acquiescence therein; and every power and remedy given
by this Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to
time and as often as may be deemed expedient by the Trustee or the Bond Owners.
ARTICLE VIII
THE TRUSTEE
Section 8.01. Appointment of Trustee. MUFG Union Bank, N.A. is hereby appointed
Trustee by the Authority and the District for the purpose of receiving all moneys required to be
deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this
Indenture. The Authority and the District will maintain a Trustee which is qualified under the
provisions of the foregoing provisions of this Article VIII, so long as any Bonds are Outstanding.
Section 8.02. Acceptance of Trusts; Removal and Resignation of Trustee. The
Trustee hereby accepts the express trusts imposed upon it by this Indenture, and agrees to
perform said trusts, but only upon and subject to the following express terms and conditions:
(a) The Trustee shall, prior to an Event of Default, and after the curing or
waiver of all Events of Default which may have occurred, perform such duties and only
such duties as are expressly and specifically set forth in this Indenture and no implied
duties or covenants shall be read into this Indenture against the Trustee. After the
occurrence and during the continuance of an Event of Default, the Trustee shall use the
same degree of care and skill that a prudent person would use or exercise in the
circumstances in the conduct of such prudent person’s own affairs.
(b) The District may remove the Trustee at any time, unless an Event of
Default has occurred and is then continuing, and shall remove the Trustee (a) if at any
time requested to do so by the Owners of a majority in aggregate principal amount of the
Bonds then Outstanding (or their attorneys duly authorized in writing) or (b) if at any
time the Trustee ceases to be eligible in accordance with this Section 8.02, or becomes
incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or
its property is appointed, or any public officer takes control or charge of the Trustee or of
its property or affairs for the purpose of rehabilitation, conservation or liquidation.
(c) The Trustee may at any time resign by giving written notice of such
resignation to the Authority and the District, and by giving the Bond Owners notice of
such resignation by mail at the addresses shown on the Registration Books.
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(d) Any removal or resignation of the Trustee and appointment of a successor
Trustee shall become effective upon acceptance of appointment by the successor Trustee.
If no successor Trustee has been appointed and accepted appointment within 45 days of
giving notice of removal or notice of resignation as aforesaid, the District, upon its own
direction or the direction of the retiring Trustee may, or the retiring Trustee may, at the
expense of the District, petition any court of competent jurisdiction for the appointment
of a successor Trustee, and such court may thereupon, after such notice (if any) as it may
deem proper, appoint such successor Trustee. Any successor Trustee appointed under
this Indenture, must signify its acceptance of such appointment by executing and
delivering to the District and to its predecessor Trustee a written acceptance thereof, and
after payment by the District of all unpaid fees and expenses of the predecessor Trustee,
and thereupon such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the moneys, estates, properties, rights, powers, trusts, duties and
obligations of such predecessor Trustee, with like effect as if originally named Trustee
herein. At the Written Request of the District or the request of the successor Trustee,
such predecessor Trustee shall pay over, transfer, assign and deliver to the successor
Trustee any money or other property subject to the trusts and conditions herein set forth.
Upon request of the successor Trustee, the District shall execute and deliver any and all
instruments as may be reasonably required for more fully and certainly vesting in and
confirming to such successor Trustee all such moneys, estates, properties, rights, powers,
trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as
provided in this subsection, the District shall promptly mail or cause the successor trustee
to mail a notice of the succession of such Trustee to the trusts hereunder to the Bond
Owners at the addresses shown on the Registration Books. If the District fails to mail
such notice within 15 days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the District.
(e) Any Trustee appointed under this Indenture shall be a corporation or
association organized and doing business under the laws of any state or the United States
of America or the District of Columbia, shall be authorized under such laws to exercise
corporate trust powers, shall have (or, in the case of a corporation or association that is a
member of a bank holding company system, the related bank holding company has) a
combined capital and surplus of at least $50,000,000, and shall be subject to supervision
or examination by a federal or state agency, so long as any Bonds are Outstanding. If
such corporation or association publishes a report of condition at least annually under law
or to the requirements of any supervising or examining agency above referred to, then for
the purpose of this subsection (e), the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If the Trustee at any time ceases to be
eligible in accordance with the provisions of this subsection (e), the Trustee shall resign
immediately in the manner and with the effect specified in this Section.
Section 8.03. Merger or Consolidation. Any bank, national banking association,
federal savings association, or trust company into which the Trustee may be merged or converted
or with which it may be consolidated or any bank, national banking association, federal savings
association, or trust company resulting from any merger, conversion or consolidation to which it
shall be a party or any bank, national banking association, federal savings association, or trust
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company to which the Trustee may sell or transfer all or substantially all of its corporate trust
business, provided such bank, national banking association, federal savings association, or trust
company shall be eligible under subsection (e) of Section 8.02 shall be the successor to such
Trustee, without the execution or filing of any paper or any further act, anything herein to the
contrary notwithstanding.
Section 8.04. Liability of Trustee.
(a) The recitals of facts herein and in the Bonds contained shall be taken as
statements of the Authority or the District as appropriate, and the Trustee shall not assume
responsibility for the correctness of the same, or make any representations as to the validity or
sufficiency of this Indenture, the Bonds or the Installment Sale Agreement, nor shall the Trustee
incur any responsibility in respect thereof, other than as expressly stated herein in connection
with the respective duties or obligations of Trustee herein or in the Bonds assigned to or imposed
upon it. The Trustee shall, however, be responsible for its representations contained in its
certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the
performance of its duties hereunder, except for its own negligence. The Trustee may become the
Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent
permitted by law, may act as depository for and permit any of its officers or directors to act as a
member of, or in any other capacity with respect to, any committee formed to protect the rights
of Bond Owners, whether or not such committee shall represent the Owners of a majority in
principal amount of the Bonds then Outstanding.
(b) The Trustee is not liable for any error of judgment made by a responsible officer,
unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts.
(c) The Trustee is not liable with respect to any action taken or omitted to be taken by
it in accordance with the direction of the Owners of a majority in aggregate principal amount of
the Bonds at the time Outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee under this Indenture or assigned to it hereunder.
(d) The Trustee is not liable for any action taken by it and believed by it to be
authorized or within rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be deemed to have knowledge of any Event of Default
hereunder, or any other event which, with the passage of time, the giving of notice, or both,
would constitute an Event of Default hereunder unless and until a corporate trust officer receives
written notice thereof at its Office from the District, the Authority or the Owners of at least 25%
in aggregate principal amount of the Outstanding Bonds. Except as otherwise expressly provided
herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance
by the Authority or the District of any of the terms, conditions, covenants or agreements herein,
under the Installment Sale Agreement or the Bonds or of any of the documents executed in
connection with the Bonds, or as to the existence of a default or an Event of Default or an event
which would, with the giving of notice, the passage of time, or both, constitute an Event of
Default. The Trustee is not responsible for the validity, effectiveness or priority of any collateral
given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be
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required to ascertain or inquire as to the performance or observance by the District or the
Authority of the terms, conditions, covenants or agreements set forth in the Installment Sale
Agreement, other than the covenants of the District to make Installment Payments to the Trustee
when due and to file with the Trustee when due, such reports and certifications as the District is
required to file with the Trustee thereunder.
(f) No provision of this Indenture requires the Trustee to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers.
(g) The Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or through agents, receivers or attorneys and the Trustee shall not
be responsible for any willful misconduct or negligence on the part of any agent, receiver or
attorney appointed with due care by it hereunder.
(h) The Trustee has no obligation to exercise any of the rights or powers vested in it
by this Indenture at the request or direction of the Bond Owners under this Indenture, unless the
such Owners have offered to the Trustee security or indemnity satisfactory to it against any and
all of the costs, claims, expenses and liabilities (including but not limited to fees and expenses of
its attorneys) which might be incurred by it in compliance with such request or direction. No
permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to
impose a duty. to exercise such power, right or remedy.
(i) Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to the Trustee is subject
to the provisions of Section 8.02(a), this Section 8.04 and Section 8.05, and shall be applicable to
the assignment of any rights to the Trustee hereunder.
(j) The Trustee is not accountable to anyone for the subsequent use or application of
any moneys which are released or withdrawn in accordance with the provisions hereof.
(k) The Trustee makes no representation or warranty, expressed or implied as to the
title, value, design, compliance with specifications or legal requirements, quality, durability,
operation, condition, merchantability or fitness for any particular purpose for the use
contemplated by the Authority or the District of the Project. In no event shall the Trustee be
liable for incidental, indirect, special, punitive or consequential damages in connection with or
arising from the Installment Sale Agreement or this Indenture for the existence, furnishing or use
of the Project.
(l) The Trustee has no responsibility with respect to any information, statement, or
recital in any official statement, offering memorandum or any other disclosure material prepared
or distributed with respect to the Bonds.
(m) The Trustee shall not be considered in breach of or in default in its obligations
hereunder or progress in respect thereto in the event of delay in the performance of such
obligations due to unforeseeable causes beyond its control and without its fault or negligence,
including, but not limited to acts of God or of the public enemy or terrorists, acts of a
government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes,
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freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general
sabotage or rationing of labor, equipment, facilities, sources or energy, material or supplies in the
open market, litigation or arbitration involving a party or others relating to zoning or other
governmental action or inaction pertaining to the project, malicious mischief, condemnation, and
unusually severe weather or delays of suppliers or subcontractors due to such causes or any
similar event and/or occurrences beyond the control of the Trustee.
(n) The Trustee shall have the right to accept and act upon instructions, including
funds transfer instructions (“Instructions”) given pursuant to this Indenture and delivered using
Electronic Means (“Electronic Means” shall mean the following communications methods:
S.W.I.F.T., e-mail, facsimile transmission, secure electronic transmission containing applicable
authorization codes, passwords and/or authentication keys issued by the Trustee, or another
method or system specified by the Trustee as available for use in connection with its services
hereunder); provided, however, that the District and the Authority shall provide to the Trustee an
incumbency certificate listing officers with the authority to provide such Instructions
(“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which
incumbency certificate shall be amended by the District or the Authority whenever a person is to
be added or deleted from the listing. If the District or the Authority elects to give the Trustee
Instructions using Electronic Means and the Trustee in its reasonable judgment elects to act upon
such Instructions, the Trustee’s understanding of such Instructions shall be deemed
controlling. The District and the Authority understand and agree that the Trustee cannot
determine the identity of the actual sender of such Instructions and that the Trustee shall
conclusively presume that directions that purport to have been sent by an Authorized Officer
listed on the incumbency certificate provided to the Trustee have been sent by such Authorized
Officer. The District and the Authority shall be responsible for ensuring that only Authorized
Officers transmit such Instructions to the Trustee and that the District or the Authority and all
Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable
user and authorization codes, passwords and/or authentication keys upon receipt by the District
or the Authority. The Trustee shall not be liable for any losses, costs, claims or expenses arising
directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions
notwithstanding such directions conflict or are inconsistent with a subsequent written
instruction. The District and the Authority agree: (i) to assume all risks arising out of the use of
Electronic Means to submit Instructions to the Trustee, including without limitation the risk of
the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third
parties; (ii) that it is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Trustee and that there may be more secure methods of
transmitting Instructions than the method(s) selected by the District or the Authority; (iii) that the
security procedures (if any) to be followed in connection with its transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its particular needs and
circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or
unauthorized use of the security procedures.
Section 8.05. Right to Rely on Documents. The Trustee shall be protected and shall
incur no liability in acting or refraining from acting in reliance upon any notice, resolution,
request, consent, order, certificate, report, opinion, bonds, requisition, facsimile transmission,
electronic mail or other paper or document believed by them to be genuine and to have been
signed or presented by the proper party or parties. The Trustee is under no duty to make any
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investigation or inquiry as to any statements contained or matter referred to in any paper or
document but may accept and conclusively rely upon the same as conclusive evidence of the
truth and accuracy of any such statement or matter and shall be fully protected in relying thereon.
The Trustee may consult with counsel of its selection, who may be counsel of or to the District,
with regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
The Trustee may treat the Owners of the Bonds appearing in the Registration Books as
the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any
notice to the contrary.
Whenever in the administration of the trusts imposed upon it by this Indenture the
Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking
or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established by a Written
Certificate, Written Request or Written Requisition of the Authority or the District, and such
Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee
for any action taken or suffered under the provisions of this Indenture in reliance upon such
Written Certificate, Written Request or Written Requisition, and the Trustee shall be fully
protected in relying thereon, but the Trustee may, in lieu thereof, accept other evidence of such
matter or may require such additional evidence as to it may deem reasonable.
Section 8.06. Preservation and Inspection of Documents. All documents received by
the Trustee under the provisions of this Indenture shall be retained in its respective possession
and in accordance with its retention policy then in effect and shall, upon reasonable notice to
Trustee, be subject to the inspection of the Authority, the District, and any Bond Owner, and
their agents and representatives duly authorized in writing, during business hours and under
reasonable conditions as agreed to by the Trustee.
Section 8.07. Compensation and Indemnification. The District shall pay to the
Trustee from time to time, on demand, the compensation for all services rendered under this
Indenture and also all expenses, advances (including any interest on advances), charges, legal
(including outside counsel of its selection and the allocated costs of internal attorneys) and
consulting fees and other disbursements as previously agreed upon in writing, incurred in and
about the performance of its powers and duties under this Indenture.
The District and the Authority shall indemnify the Trustee, its officers, directors,
employees and agents against any cost, claim, suit, damage, fine, penalty, loss, liability or
expense whatsoever (including but not limited to fees and expenses of its attorneys) incurred
without negligence or willful misconduct on its part, arising out of or in connection with the
acceptance or administration of this trust and this Indenture, including costs and expenses of
defending itself against any claim or liability in connection with the exercise or performance of
any of its powers hereunder or under the Installment Sale Agreement. As security for the
performance of the obligations of the District and the Authority under this Section 8.07, the
Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or
collected by the Trustee as such. The rights of the Trustee and the obligations of the District and
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the Authority under this Section 8.07 shall survive the resignation or removal of the Trustee or
the discharge of the Bonds and this Indenture and the Installment Sale Agreement. When the
Trustee incurs expenses or renders services after the occurrence of an Event of Default, such
expenses and the compensation for such services are intended to constitute expenses of
administration under any federal or state bankruptcy, insolvency, arrangement, moratorium,
reorganization or other debtor relief law.
ARTICLE IX
MODIFICATION OR AMENDMENT HEREOF
Section 9.01. Amendments Permitted.
(a) Amendments With Bond Owner Consent. This Indenture and the rights and
obligations of the Authority, the District and the Owners of the Bonds and of the Trustee may be
modified or amended from time to time and at any time by Supplemental Indenture, which the
Authority and the Trustee may enter into when the written consents of the Owners of a majority
in aggregate principal amount of all Bonds then Outstanding are filed with the Trustee.
No such modification or amendment may:
(i) extend the fixed maturity of any Bonds, or reduce the amount of principal
thereof or extend the time of payment, or change the method of computing the rate of
interest thereon, or extend the time of payment of interest thereon, without the consent of
the Owner of each Bond so affected, or
(ii) reduce the aforesaid percentage of Bonds the consent of the Owners of
which is required to effect any such modification or amendment, or permit the creation of
any lien on the Revenues and other assets pledged under this Indenture prior to or on a
parity with the lien created by this Indenture except as permitted herein, or deprive the
Owners of the Bonds of the lien created by this Indenture on such Revenues and other
assets (except as expressly provided in this Indenture), without the consent of the Owners
of all of the Bonds then Outstanding.
It is not necessary for the consent of the Bond Owners to approve the particular form of
any Supplemental Indenture, but it is sufficient if such consent approves the substance thereof.
(b) Amendments Without Owner Consent. The Indenture and the rights and
obligations of the Authority, the District, the Trustee and the Owners of the Bonds may also be
modified or amended from time to time and at any time by a Supplemental Indenture, which the
Authority and the Trustee may enter into without the consent of any Bond Owners if the Trustee
has been furnished an opinion of counsel that the provisions of such Supplemental Indenture
shall not materially adversely affect the interests of the Owners of the Bonds, including, without
limitation, for any one or more of the following purposes:
(i) to add to the covenants and agreements of the Authority or the District
contained in this Indenture, other covenants and agreements thereafter to be observed, to
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pledge or assign additional security for the Bonds (or any portion thereof), or to surrender
any right or power herein reserved to or conferred upon the Authority or the District;
(ii) to cure any ambiguity, inconsistency or omission, or to cure or correct any
defective provision, contained in this Indenture, or in regard to matters or questions
arising under this Indenture, as the District deems necessary or desirable, provided that
such modification or amendment does not materially adversely affect the interests of the
Bond Owners, in the opinion of Bond Counsel filed with the Trustee;
(iii) to modify, amend or supplement this Indenture in such manner as to
permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any
similar federal statute hereafter in effect, and to add such other terms, conditions and
provisions as may be permitted by said act or similar federal statute;
(iv) to modify, amend or supplement this Indenture in such manner as to
assure that the interest on the Bonds remains excluded from gross income under the Tax
Code; or
(v) to modify any of the provisions of this Indenture in any other respect,
provided that such modifications shall not have a material adverse effect on the interests
of the Owners of the Bonds, in the opinion of Bond Counsel filed with the Trustee.
(c) Limitation. The Trustee is not obligated to enter into any Supplemental Indenture
authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the
Trustee’s own rights, duties or immunities under this Indenture or otherwise.
(d) Bond Counsel Opinion Requirement. Prior to the Trustee entering into any
Supplemental Indenture hereunder, the District shall deliver to the Trustee an opinion of Bond
Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance
with the requirements of this Indenture, the Supplemental Indenture is the legal, valid and
binding obligation of the District and that the adoption of such Supplemental Indenture will not,
in and of itself, adversely affect the exclusion from gross income for purposes of federal income
taxes of interest on the Bonds.
(e) Notice of Amendments. The District shall deliver or cause to be delivered a draft
of any Supplemental Indenture to each rating agency which then maintains a rating on the Bonds,
at least 10 days prior to the effective date of such Supplemental Indenture under this Section
9.01.
Section 9.02. Effect of Supplemental Indenture. Upon the execution of any
Supplemental Indenture under this Article IX, this Indenture shall be deemed to be modified and
amended in accordance therewith, and the respective rights, duties and obligations under this
Indenture of the Authority, the District the Trustee, and all Owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced hereunder subject in all respects to such
modification and amendment, and all the terms and conditions of any such Supplemental
Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
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Section 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered
after the execution of any Supplemental Indenture under this Article may, and if the District so
determines shall, bear a notation by endorsement or otherwise in form approved by the District
as to any modification or amendment provided for in such Supplemental Indenture, and, in that
case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and
presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices
as the Trustee may select and designate for that purpose, a suitable notation shall be made on
such Bonds.
If the Supplemental Indenture so provides, new Bonds so modified as to conform, in the
opinion of the District, to any modification or amendment contained in such Supplemental
Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and
upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of
the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for
cancellation of such Bonds, in equal aggregate principal amount of the same maturity.
Section 9.04. Amendment of Particular Bonds. The provisions of this Article IX do
not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by
such Owner.
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture. Any or all of the Outstanding Bonds may be
paid by the District in any of the following ways, provided that the District also pays or causes to
be paid any other sums payable hereunder by the District:
(a) by paying or causing to be paid the principal of and interest and premium
(if any) on such Bonds, as and when the same become due and payable,
(b) by depositing with the Trustee, in trust, at or before maturity, money or
securities in the necessary amount (as provided in Section 10.03) to pay or redeem such
Bonds, or
(c) by delivering to the Trustee, for cancellation by it, such Bonds.
If the District pays all outstanding Bonds as provided above and also pays or causes to be
paid all other sums payable hereunder by the District, then and in that case, at the election of the
District (evidenced by a Written Certificate of the District, filed with the Trustee, signifying the
intention of the District to discharge all such indebtedness and this Indenture), and
notwithstanding that any of such Bonds have not been surrendered for payment, this indenture
and the pledge of Revenues and other assets made under this Indenture with respect to such
Bonds and all covenants, agreements and other obligations of the District under this Indenture
with respect to such Bonds shall cease, terminate, become void and be completely discharged
and satisfied, subject to Section 10.02.
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In such event, upon the Written Request of the District, the Trustee shall execute and
deliver to the District all such instruments as may be necessary or desirable to evidence such
discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the
District all moneys or securities or other property held by it under this Indenture which are not
required for the payment or redemption of any of such Bonds not theretofore surrendered for
such payment or redemption.
The Trustee is entitled to conclusively rely on any such Written Certificate or Written
Request and, in each case, is fully protected in relying thereon.
Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in
trust, at or before maturity, of money or securities in the necessary amount (as provided in
Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity
or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to
maturity, notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee is made for the giving of such notice, then all liability of the Authority
and the District in respect of such Bonds shall cease, terminate and be completely discharged,
and the Owners thereof shall thereafter be entitled only to payment out of such money or
securities deposited with the Trustee as aforesaid for their payment, subject, however, to the
provisions of Section 10.04.
The Authority or the District may at any time surrender to the Trustee, for cancellation by
Trustee, any Bonds previously issued and delivered, which the Authority or the District may
have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation,
shall be deemed to be paid and retired.
Section 10.03. Deposit of Money or Securities with Trustee. Whenever in this
Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee
money or securities in the necessary amount to pay or redeem any Bonds, the money or
securities so to be deposited or held may include money or securities held by the Trustee in the
funds and accounts established under this Indenture and shall be:
(a) lawful money of the United States of America in an amount equal to the
principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in
the case of Bonds which are to be redeemed prior to maturity and in respect of which
notice of such redemption shall have been given as provided in Article IV or provision
satisfactory to the Trustee shall have been made for the giving of such notice, the amount
to be deposited or held shall be the principal amount of such Bonds, premium, if any, and
all unpaid interest thereon to the redemption date; or
(b) non-callable Defeasance Obligations, the principal of and interest on
which when due will, in the written opinion of an Independent Accountant filed with the
District, the Authority and the Trustee, provide money sufficient to pay the principal of
and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal,
interest and premium become due, provided that in the case of Bonds which are to be
redeemed prior to the maturity thereof, notice of such redemption shall have been given
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as provided in Article IV or provision satisfactory to the Trustee has been made for the
giving of such notice;
provided, in each case, that (i) the Trustee has been irrevocably instructed (by the terms of this
Indenture or by Written Request of the District) to apply such money to the payment of such
principal, interest and premium (if any) with respect to such Bonds, and (ii) the District has
delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been
discharged in accordance with this Indenture (which opinion may rely upon and assume the
accuracy of the Independent Accountant’s opinion referred to above).
The Trustee shall be entitled to conclusively rely on such Written Request or opinion and
shall be fully protected, in each case, in relying thereon.
Section 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture,
any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any
Bonds and remaining unclaimed for two years after the principal of all of the Bonds has become
due and payable (whether at maturity or upon call for redemption or by acceleration as provided
in this Indenture), if such moneys were so held at such date, or two years after the date of deposit
of such moneys if deposited after said date when all of the Bonds became due and payable, shall
be repaid to the District free from the trusts created by this Indenture, and all liability of the
Trustee with respect to such moneys shall thereupon cease; provided, however, that before the
repayment of such moneys to the District as aforesaid, the Trustee shall (at the cost of the
District) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown
on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee
with respect to the Bonds so payable and not presented and with respect to the provisions relating
to the repayment to the District of the moneys held for the payment thereof.
In the absence of any such written request, the Trustee shall from time to time deliver
such unclaimed funds to or as directed by pertinent escheat authority, as identified by the
Trustee, pursuant to and in accordance with applicable unclaimed property laws, rules or
regulations, any such delivery shall be in accordance with the customary practices and
procedures of the Trustee and the escheat authority. All moneys held by the Trustee and subject
to this Section shall be held uninvested and without liability for interest thereon.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues. Notwithstanding anything
in this Indenture or in the Bonds contained, the Authority is not required to advance any moneys
derived from any source other than the Revenues and other assets pledged under this Indenture
for any of the purposes in this Indenture mentioned, whether for the payment of the principal of
or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority
may, but is not required to, advance for any of the purposes hereof any funds of the Authority
which may be made available to it for such purposes.
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Section 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this
Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any
person other than the Authority, the Trustee, the District and the Owners of the Bonds, any legal
or equitable right, remedy or claim under or in respect of this Indenture or any covenant,
condition or provision therein or herein contained; and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the
Trustee, the District and the Owners of the Bonds.
Section 11.03. Funds and Accounts. Any fund or account required by this Indenture to
be established and maintained by the Trustee may be established and maintained in the
accounting records of the Trustee, either as a fund or an account, and may, for the purposes of
such records, any audits thereof and any reports or statements with respect thereto, be treated
either as a fund or as an account; but all such records with respect to all such funds and accounts
shall at all times be maintained in accordance with corporate trust industry standards to the
extent practicable, and with due regard for the requirements of Section 6.05 and for the
protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may
establish such funds and accounts as it deems necessary or appropriate to perform its obligations
under this Indenture.
Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this
Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be
waived in writing by the person entitled to receive such notice and in any such case the giving or
receipt of such notice shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. Whenever in this Indenture any notice is required to be given by mail,
such requirement may be satisfied by the deposit of such notice in the United States mail,
postage prepaid, by first class mail.
Section 11.05. Destruction of Bonds. Whenever in this Indenture provision is made for
the cancellation by the Trustee, and the delivery to the District or the Authority, of any Bonds,
the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds as may be
allowed by law in accordance with its customary procedures, and shall deliver a certificate of
such destruction to the District.
Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or
unenforceable in any respect, then such provision or provisions shall be deemed severable from
the remaining provisions contained in this Indenture and such invalidity, illegality or
unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be
construed as if such invalid or illegal or unenforceable provision had never been contained
herein. The Authority hereby declares that it would have entered into this Indenture and each and
every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of
the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs,
sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable.
Section 11.07. Notices. All notices or communications to be given under this Indenture
shall be given by first class mail, e-mail, facsimile transmission, overnight mail or personal
delivery to the party entitled thereto at its address set forth below, or at such address as the party
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may provide to the other party in writing from time to time. Notice shall be effective either
(a) upon transmission by facsimile transmission or other form of telecommunication (including
e-mail) (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of
personal delivery to any person or overnight mail, upon actual receipt; provided, however, that
notice to the Trustee shall be deemed given only upon receipt by it. The Authority, the District or
the Trustee may, by written notice to the other parties, from time to time modify the address or
number to which communications are to be given hereunder.
If to the Authority: Otay Water District Financing Authority
[ADDRESS]
Attn: ___________________
E-Mail: [_______]
If to the District: Otay Water District
2554 Sweetwater Springs Blvd.
Spring Valley, CA 91978-2004
Attn: ___________________
E-Mail: [_______]
If to the Trustee: MUFG Union Bank, N.A.
Attention: Corporate Trust Department
445 South Figueroa Street, Suite 401
Los Angeles, California 90071
Fax: 213-972-5694
Email: LACT@unionbank.com
Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other
instrument required or permitted by this Indenture to be signed and executed by Bond Owners
may be in any number of concurrent instruments of substantially similar tenor and shall be
signed or executed by such Bond Owners in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the holding by any person of Bonds transferable by delivery,
shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the
Trustee, the District and the Authority if made in the manner provided in this Section 11.08.
The fact and date of the execution by any person of any such request, consent or other
instrument or writing may be proved by the certificate of any notary public or other officer of
any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying
that the person signing such request, consent or other instrument acknowledged to him the
execution thereof, or by an affidavit of a witness of such execution duly sworn to before such
notary public or other officer.
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The ownership of Bonds shall be proved by the Registration Books.
Any request, consent, or other instrument or writing of the Owner of any Bond shall bind
every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor
or in lieu thereof, in respect of anything done or suffered to be done by the Trustee, the District
or the Authority in accordance therewith or reliance thereon.
Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite
aggregate principal amount of Bonds have concurred in any demand, request, direction, consent
or waiver under this Indenture, Bonds which are actually known by the Trustee to be owned or
held by or for the account of the Authority or the District, or by any other obligor on the Bonds,
or by any person directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Authority or the District or any other obligor on the Bonds, shall be
disregarded and deemed not to be Outstanding for the purpose of any such determination unless
all the Bonds are so owned or held, in which case all such Bonds shall be deemed Outstanding.
Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the
purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the
pledgee’s right to vote such Bonds and that the pledgee is not a person directly or indirectly
controlling or controlled by, or under direct or indirect common control with, the Authority or
the District or any other obligor on the Bonds. In case of a dispute as to such right, the Trustee
shall be entitled to rely upon the advice of counsel in any decision by Trustee and shall be fully
protected in relying thereon.
Upon request, the Authority and the District shall specify to the Trustee those Bonds
disqualified under this Section 11.09.
Section 11.10. Money Held for Particular Bonds. The money held by the Trustee for
the payment of the interest, premium, if any, or principal due on any date with respect to
particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and
after such date and pending such payment, be set aside on its books and held in trust by it for the
Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 but
without any liability for interest thereon.
Section 11.11. Waiver of Personal Liability. No member, officer, agent or employee
of the Authority shall be individually or personally liable for the payment of the principal of or
interest or premium (if any) on the Bonds or be subject to any personal liability or accountability
by reason of the issuance thereof; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by law or by this
Indenture,
Section 11.12. Successor Is Deemed Included in All References to
Predecessor. Whenever in this Indenture either the Authority, the District or the Trustee is
named or referred to, such reference shall be deemed to include the successors or assigns thereof,
and all the covenants and agreements in this Indenture contained by or on behalf of the
Authority, the District or the Trustee shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not.
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Section 11.13. Execution in Several Counterparts. This Indenture may be executed in
any number of counterparts and each of such counterparts shall for all purposes be deemed to be
an original; and all such counterparts, or as many of them as the Authority and the Trustee shall
preserve undestroyed, shall together constitute but one and the same instrument. The exchange of
copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute
effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu
of the original Indenture and signature pages for all purposes.
Section 11.14. Payment on Non-Business Day. In the event any payment is required to
be made hereunder on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and with the same effect as if made on such preceding
non-Business Day.
Section 11.15. Governing Law. This Indenture shall be governed by and construed in
accordance with the laws of the State of California.
Section 11.16. U.S.A. Patriot Act. The parties hereto acknowledge that in accordance
with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order
to help fight the funding of terrorism and money laundering, is required to obtain, verify, and
record information that identifies each person or legal entity that establishes a relationship or
opens an account with the Trustee. The parties to this Indenture agree that they will provide the
Trustee with such information as it may request in order for the Trustee to satisfy the
requirements of the U.S.A. Patriot Act.
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IN WITNESS WHEREOF, the Otay Water District Financing Authority has caused this
Indenture to be signed in its name by its authorized signatory and attested to by its other
authorized signatory, and MUFG Union Bank, N.A., in token of its acceptance of the trusts
created hereunder, has caused this Indenture to be signed in its corporate name by its officer
thereunto duly authorized, all as of the day and year first above written.
OTAY WATER DISTRICT FINANCING
AUTHORITY
By___________________________________
Name:
Title:
ATTEST:
By___________________________________
Name:
Title:
MUFG UNION BANK, N.A.
as Trustee
By______________________________________
Authorized Officer
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Acknowledged and agreed:
OTAY WATER DISTRICT
By____________________________________________
_______________, District Manager
[Signature page to Indenture]
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APPENDIX A
BOND FORM
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO. R-__________ ***$____________***
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
INTEREST RATE:
MATURITY
DATE:
ORIGINAL ISSUE
DATE: CUSIP:
_______% ______ 1, ____ _________, 2019
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: ***_______________________________________________***
The OTAY WATER DISTRICT FINANCING AUTHORITY, a joint exercise of powers
authority duly organized and existing under the laws of the State of California (the “Authority”),
for value received, hereby promises to pay to the Registered Owner specified above or registered
assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of
prior redemption hereinafter provided for), the Principal Amount specified above, in lawful
money of the United States of America, and to pay interest thereon in like lawful money from the
Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this
Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the
close of business on the __th day of the month preceding such interest payment date, in which
event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on
or before ___________, 201_, in which event it shall bear interest from the Original Issue Date
specified above; provided, however, that if at the time of authentication of this Bond, interest is
in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which
interest has previously been paid or made available for payment on this Bond, at the Interest Rate
per annum specified above, payable semiannually on ______ 1 and ______ 1 in each year,
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commencing _________ 1, 201_ (the “Interest Payment Dates”), calculated on the basis of a
360-day year composed of twelve 30-day months.
Principal hereof and premium, if any, upon early redemption hereof are payable upon
presentation and surrender hereof at the designated corporate trust office of MUFG Union Bank,
N.A. (the “Trust Office”), as trustee (the “Trustee”). Interest hereon is payable by check mailed
to the Registered Owner hereof at the Registered Owner’s address as it appears on the
registration books of the Trustee as of the close of business on the fifteenth day of the month
preceding each Interest Payment Date (a “Record Date”), or, upon written request filed with the
Trustee as of such Record Date by a registered owner of at least $1,000,000 in aggregate
principal amount of Bonds, by wire transfer in immediately available funds to an account in the
United States designated by such registered owner in such written request.
This Bond is one of a duly authorized issue of bonds of the Authority designated as the
“Otay Water District Financing Authority 2019 Wastewater Revenue Bonds” (the “Bonds”), in
an aggregate principal amount of $__________, all of like tenor and date (except for such
variation, if any, as may be required to designate varying numbers, maturities, interest rates or
redemption provisions) and all issued pursuant to the provisions of Articles 4 of Chapter 5,
Division 7, Title 1 of the California Government Code, commencing with Section 6584 of said
Code, and under an Indenture of Trust dated as of _________, 2019 (the “Indenture”), between
the Authority and the Trustee, and a resolution of the Authority adopted on __________,
authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of
which are on file at the office of the Authority) and all supplements thereto for a description of
the terms on which the Bonds are issued, the provisions with regard to the nature and extent of
the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and
immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the
provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and
agrees.
The Bonds have been issued by the Authority to finance certain improvements to the
District’s facilities and property for the collection of wastewater within its service area (the
“Wastewater Operations”). This Bond and the interest and premium, if any, hereon are special
obligations of the Authority, payable from the Revenues, and secured by a charge and lien on the
Revenues as defined in the Indenture, consisting principally of Installment Payments made by
the District under an Installment Sale Agreement dated as of _________, 2019, between the
Authority and the District (the “Installment Sale Agreement”). As and to the extent set forth in
the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the
terms hereof and the provisions of the Indenture, to the payment of the principal of and interest
and premium (if any) on the Bonds.
The rights and obligations of the Authority and the owners of the Bonds may be modified
or amended at any time in the manner, to the extent and upon the terms provided in the
Indenture, but no such modification or amendment shall extend the fixed maturity of any Bonds,
or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of
payment, or change the method of computing the rate of interest thereon, or extend the time of
payment of interest thereon, without the consent of the owner of each Bond so affected.
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The Bonds are subject to redemption prior to maturity as provided under the Indenture.
As provided in the Indenture, notice of redemption will be mailed by the Trustee by first class
mail not less than 30 nor more than 60 days prior to the redemption date to the respective owners
of any Bonds designated for redemption at their addresses appearing on the registration books of
the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall
affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest
thereon from and after the date fixed for redemption.
If this Bond is called for redemption and payment is duly provided therefor as specified
in the Indenture, interest shall cease to accrue hereon from and after the date fixed for
redemption. Optional redemption may be conditional and rescinded by the District pursuant to
the Indenture
This Bond is transferable by the Registered Owner hereof, in person or by his attorney
duly authorized in writing, at the Trust Office, but only in the manner, subject to the limitations
and upon payment of the charges provided in the Indenture, and upon surrender and cancellation
of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized
denomination or denominations, for the same aggregate principal amount and of the same
maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the
Trust Office for Bonds of the same tenor, aggregate principal amount, interest rate and maturity,
of other authorized denominations.
The Authority and the Trustee may treat the Registered Owner hereof as the absolute
owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any
notice to the contrary.
It is hereby certified by the Authority that all of the things, conditions and acts required to
exist, to have happened or to have been performed precedent to and in the issuance of this Bond
do exist, have happened or have been performed in due and regular time, form and manner as
required by the Indenture and the laws of the State of California and that the amount of this
Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed
by the Indenture or any laws of the State of California, and is not in excess of the amount of
Bonds permitted to be issued under the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication hereon endorsed shall have been
manually signed by the Trustee.
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IN WITNESS WHEREOF, the Otay Water District Financing Authority has caused this
Bond to be executed in its name and on its behalf with the facsimile signature of its
authorized signatory and attested to by the facsimile signature of its other authorized signatory,
all as of the Original Issue Date specified above.
OTAY WATER DISTRICT FINANCING
AUTHORITY
By___________________________________
Name:
Title:
Attest:
By___________________________________
Name:
Title:
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CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture.
Dated: ____________
____________, as Trustee
By___________________________________
Authorized Signatory
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ASSIGNMENT
For value received the undersigned hereby sells, assigns and transfers unto
________________________________________ whose address and social security or other tax
identifying number is ___________________________, the within-mentioned Bond and hereby
irrevocably constitute(s) and appoint(s) ___________________________________________
attorney, to transfer the same on the registration books of the Trustee with full power of
substitution in the premises.
Dated:
Signature Guaranteed:
Note: Signature(s) must be guaranteed by an eligible
guarantor institution meeting the requirements of
membership or participation in the Security Transfer
Agent Medallion Program (“STAMP”) or such other
“signature guarantee program” as may be determined in
substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
Note: The signature(s) on this Assignment must
correspond with the name(s) as written on the face of
the within Bond in every particular without alteration
or enlargement or any change whatsoever.
Hawkins Delafield & Wood LLP
10/15/2019
3394471.5 043520 AGMT
INSTALLMENT SALE AGREEMENT
Dated as of __________, 2019
By and between
OTAY WATER DISTRICT FINANCING AUTHORITY,
as Seller
and
OTAY WATER DISTRICT,
as Purchaser
Relating to the
$[Par Amount]
Otay Water District Financing Authority
2019 Wastewater Revenue Bonds
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
Section 1.1. Definitions................................................................................................................1
Section 1.2. Interpretation ............................................................................................................2
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the District .....................................2
Section 2.2. Representations, Covenants and Warranties of Authority .......................................3
ARTICLE III
ISSUANCE OF BONDS
Section 3.1. The Bonds ................................................................................................................4
Section 3.2. Deposit and Application of Funds ...........................................................................4
Section 3.3. Acquisition of the Project ........................................................................................4
Section 3.4. Appointment of District as Agent ............................................................................4
ARTICLE IV
SALE OF PROJECT;
INSTALLMENT PAYMENTS
Section 4.1. Sale of Project ..........................................................................................................5
Section 4.2. Term .........................................................................................................................5
Section 4.3. Title ..........................................................................................................................5
Section 4.4. Installment Payments ...............................................................................................5
Section 4.5. Pledge and Application of Net Revenues ................................................................6
Section 4.6. Special Obligation of the District; Obligations Absolute ........................................7
Section 4.7. Additional Payments ................................................................................................8
Section 4.8. Rate Stabilization Fund ............................................................................................8
TABLE OF CONTENTS
(continued)
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ARTICLE V
COVENANTS OF THE DISTRICT
Section 5.1. Disclaimer of Warranties., Maintenance, Utilities and Taxes .................................9
Section 5.2. Release and Indemnification Covenants ................................................................10
Section 5.3. Sale or Eminent Domain of Wastewater Operations .............................................10
Section 5.4. Insurance ................................................................................................................11
Section 5.5. Records and Accounts............................................................................................11
Section 5.6. Rates and Charges ..................................................................................................11
Section 5.7. Superior and Subordinate Obligations ...................................................................12
Section 5.8. Issuance of Parity Obligations ...............................................................................12
Section 5.9. Governmental Loans ..............................................................................................13
Section 5.10. Operation of Wastewater Operations in Efficient and Economical Manner .........13
Section 5.11. Assignment and Amendment .................................................................................13
Section 5.12. Continuing Disclosure ...........................................................................................14
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1. Events of Default Defined .....................................................................................14
Section 6.2. Remedies on Default ..............................................................................................15
Section 6.3. No Remedy Exclusive............................................................................................16
Section 6.4. Agreement to Pay Attorneys’ Fees and Expenses .................................................16
Section 6.5. No Additional Waiver Implied by One Waiver .....................................................16
Section 6.6. Trustee and Bond Owners to Exercise Rights .......................................................16
ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 7.1. Security Deposit .....................................................................................................17
Section 7.2. Optional Prepayment Relating to the Bonds ..........................................................17
Section 7.3. Credit for Amounts on Deposit ..............................................................................18
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Further Assurances.................................................................................................18
Section 8.2. Notices ...................................................................................................................18
Section 8.3. Governing Law ......................................................................................................19
Section 8.4. Binding Effect ........................................................................................................19
Section 8.5. Severability of Invalid Provisions ..........................................................................19
Section 8.6. Article and Section Headings and References .......................................................20
Section 8.7. Payment on Non-Business Days ............................................................................20
TABLE OF CONTENTS
(continued)
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Section 8.8. Execution of Counterparts .....................................................................................20
Section 8.9. Waiver of Personal Liability ..................................................................................20
Section 8.10. Trustee as Third Party Beneficiary ........................................................................20
Section 8.11. Authority Provisions ..............................................................................................20
APPENDIX A Schedule of Installment Payments
APPENDIX B Description of Project
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INSTALLMENT SALE AGREEMENT
This INSTALLMENT SALE AGREEMENT (this “Agreement”), dated as of
____________, 2019, is between the OTAY WATER DISTRICT FINANCING
AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws
of the State of California (the “Authority”), as seller, and the OTAY WATER DISTRICT, a
sanitation district duly organized and existing under the laws of the State of California (the
“District”), as purchaser.
WHEREAS CLAUSES:
1. The District presently operates facilities and property for the collection of
wastewater within its service area (the “Wastewater Operations”).
2. The Authority has been formed for the purpose, among others, of issuing its
revenue bonds to finance the acquisition, construction and improvement of certain public capital
improvements in and for the benefit of the District.
3. The Authority and the District desire to raise funds necessary to finance certain
improvements to the Wastewater Operations.
4. In order to obtain funds for this purpose, the Authority has authorized the issuance
of its Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”),
in the aggregate principal amount of $[Principal Amount] under an Indenture of Trust, dated as
of _____________, 2019, by and between the Authority and MUFG Union Bank, N.A., as
trustee (the “Indenture”), and under Article 4 of Chapter 5, Division 7, Title 1 of the Government
Code of the State of California, commencing with Section 6584 (the “Bond Law”).
5. The Bonds will be payable from Installment Payments made under this
Agreement.
AGREEMENT:
In consideration of the foregoing and the material covenants hereinafter contained, the
District and the Authority formally covenant, agree and bind themselves as follows:
ARTICLE I
DEFINITIONS; RULES OF INTERPRETATION
Section 1.1. Definitions. Unless the context clearly otherwise requires or unless
otherwise defined herein, the capitalized terms in this Agreement have the respective meanings
given them in Article I of the Indenture.
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Section 1.2. Interpretation.
(a) Unless the context otherwise indicates, words expressed in the singular include
the plural and vice versa and the use of the neuter, masculine, or feminine gender is for
convenience only and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof are solely
for convenience of reference, do not constitute a part hereof and do not affect the meaning,
construction or effect hereof.
(c) All references herein to “Articles,” “Sections” and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words “herein,”
“hereof,” “hereby,” “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or subdivision hereof.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of the District. The District
represents, covenants and warrants to the Authority and the Trustee as follows:
(a) Due Organization and Existence. The District is a water, recycled water,
and sewer service provider duly organized and validly existing under the laws of the State
of California, has full legal right, power and authority under said laws to enter into this
Agreement and to carry out and consummate all transactions contemplated hereby and
thereby, and by proper action the Board of Directors of the District has duly authorized
the execution and delivery of this Agreement.
(b) Due Execution. The officers of the District executing this Agreement are
fully authorized to execute the same.
(c) Valid, Binding and Enforceable Obligations. This Agreement has been
duly authorized, executed and delivered by the District and constitutes the legal, valid
and binding agreement of the District enforceable against the District in accordance with
its terms; except as the enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or
hereafter enacted and except as such enforceability may be subject to the exercise of
judicial discretion in accordance with principles of equity.
(d) No Conflicts. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and the fulfillment of or
compliance with the terms and conditions hereof, do not and will not conflict with or
constitute a violation or breach of or default (with due notice or the passage of time or
both) under any applicable law or administrative rule or regulation, or any applicable
court or administrative decree or order, or any indenture, mortgage, deed of trust, lease,
contract or other agreement or instrument to which the District is a party or by which it or
its properties are otherwise subject or bound, or result in the creation or imposition of any
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prohibited lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of the District, which conflict, violation, breach, default, lien, charge or
encumbrance would have consequences that would materially adversely affect the
consummation of the transactions contemplated by this Agreement or the financial
condition, assets, properties or operations of the District, including but not limited to the
performance of the District’s obligations under this Agreement.
(e) Consents and Approvals. No consent or approval of any trustee or holder
of any indebtedness of the District or of the voters of the District, and no consent,
permission, authorization, order or license of, or filing or registration with, any
governmental authority is necessary in connection with the execution and delivery of the
Indenture, or the consummation of any transaction herein contemplated, except as have
been obtained or made and as are in full force and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court or federal, state, municipal or other governmental
authority pending or, to the knowledge of the District after reasonable investigation,
threatened against or affecting the District or the assets, properties or operations of the
District which, if determined adversely to the District or its interests, would have a
material and adverse effect upon the consummation of the transactions contemplated by
or the validity of the Indenture, or upon the financial condition, assets, properties or
operations of the District, and the District is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state, municipal or
other governmental authority, which default might have consequences that would
materially adversely affect the consummation of the transactions contemplated by the
Indenture, or the financial conditions, assets, properties or operations of the District,
including but not limited to the payment and performance of the District’s obligations
under the Indenture.
(g) Encumbrances. There are no easements, encumbrances or interests with
respect to the Wastewater Operations or the Project that prohibit or materially impair the
execution, delivery and performance of this Installment Sale Agreement or the
acquisition or use of the Project or the use of the Wastewater Operations.
(h) Senior Indebtedness. The District has not issued or incurred any
obligations which are currently outstanding having any priority in payment out of the
Gross Revenues or the Net Revenues over the payment of the Installment Payments as
provided herein.
Section 2.2. Representations, Covenants and Warranties of Authority. The Authority
represents, covenants and warrants to the District and the Trustee as follows:
(a) Due Organization and Existence. The Authority is a joint exercise of
powers authority organized and existing under the laws of the State of California, and has
power to enter into this Agreement and the Indenture and to perform the duties and
obligations imposed on it hereunder and under the Indenture. The Board of Directors of
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the Authority has duly authorized the execution and delivery of this Agreement and the
Indenture.
(b) Due Execution. The representatives of the Authority executing this
Agreement and the Indenture are fully authorized to execute the same.
(c) Valid, Binding and Enforceable Obligations. This Agreement and the
Indenture have been duly authorized, executed and delivered by the Authority and
constitute the legal, valid and binding agreements of the Authority with the Authority,
enforceable against the Authority in accordance with their respective terms; except as the
enforceability thereof may be subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors’ rights heretofore or hereafter
enacted and except as such enforceability may be subject to the exercise of judicial
discretion in accordance with principles of equity.
ARTICLE III
ISSUANCE OF BONDS
Section 3.1. The Bonds. The Authority shall cause the Bonds to be issued under the
Indenture in the aggregate principal amount of $[Principal Amount]. The Trustee shall deposit
the proceeds of sale of the Bonds received by it on the Closing Date in accordance with the
Indenture. The District hereby agrees to comply with the Indenture and approves the Indenture,
the assignment thereunder to the Trustee of certain rights of the Authority, and the issuance of
the Bonds.
Section 3.2. Deposit and Application of Funds. The proceeds received by the Trustee
from the sale of the Bonds to the Underwriter shall be deposited in the respective funds and
accounts, and in the respective amounts, as set forth in Section 3.02 of the Indenture.
Section 3.3. Acquisition of the Project. The Authority hereby agrees with due
diligence to supervise and provide for, or cause to be supervised and provided for, the acquisition
of the Project in accordance with all documents relating thereto and approved by the District
under all applicable requirements of law. The failure of the Authority to complete the Project by
that date does not constitute an Event of Default hereunder or a grounds for termination hereof,
nor does any such failure result in the diminution, abatement or extinguishment of the
obligations of the District hereunder to pay the Installment Payments when due hereunder.
Section 3.4. Appointment of District as Agent. The Authority hereby appoints the
District as its agent to carry out all phases of the acquisition of the Project under and in
accordance with the provisions hereof. The District hereby accepts such appointment and
assumes all rights, liabilities, duties and responsibilities of the Authority regarding the
acquisition of the Project. As agent of the Authority hereunder, the District shall enter into,
administer and enforce all purchase orders or other contracts relating to the Project. Payment of
Project Costs shall be made by the District from amounts held by the District in the Project Fund
in accordance with this Agreement and the Indenture.
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ARTICLE IV
SALE OF PROJECT;
INSTALLMENT PAYMENTS
Section 4.1. Sale of Project. The Authority hereby sells, bargains and conveys the
Project to the District, and the District hereby purchases the Project from the Authority, upon the
terms and conditions set forth in this Agreement. The Authority and the District are entering into
this Agreement in order to finance the facilities and improvements included in the Project.
Section 4.2. Term. The Term of this Agreement commences on the Closing Date, and
ends on ____________, or such later or earlier date on which the Bonds cease to be Outstanding
under and within the meaning of the Indenture.
Section 4.3. Title. Title to the Project shall be deemed conveyed by the Authority to
and vested in the District on the Closing Date. The Authority and the District will execute,
deliver and cause to be recorded any and all documents reasonably required by the District to
consummate the transfer of title to the Project to the District. Such title shall be held by the
District in trust pending the satisfaction of the payment obligations under this Agreement.
Section 4.4. Installment Payments.
(a) Obligation to Pay. The District hereby agrees to pay to the Authority, as the
purchase price of the Project hereunder, the aggregate principal amount of $[Principal Amount]
together with interest (calculated on the basis of a 360-day year of twelve 30-day months) on the
unpaid principal balance thereof, payable in semiannual installment payments in the respective
amounts and on the respective Installment Payment Dates specified in Appendix A hereto.
The District shall deposit the Installment Payment coming due and payable on any
Interest Payment Date with the Trustee, as assignee of the Authority under the Indenture, on the
related Installment Payment Date (as set forth in Appendix A hereto) in an amount which,
together with amounts then held by the Trustee in the Bond Fund, is equal to the full amount of
such Installment Payment. The Installment Payments are secured by and payable solely from the
sources specified in Section 4.5.
(b) Effect of Prepayment. If the District prepays all remaining Installment Payments
in full under Section 7.2, or under the relevant provisions of any Supplemental Agreement, the
District’s obligations under this Agreement shall thereupon cease and terminate, including but
not limited to the District’s obligation to pay Installment Payments therefor under this
Section 4.4; provided, however, that the District’s obligations to compensate and indemnify the
Trustee under Sections 4.7 and 5.2 will survive such prepayment. If the District prepays the
Installment Payments in part but not in whole under Section 7.2, or under the relevant provisions
of any Supplemental Agreement, the principal component of each succeeding Installment
Payment will be reduced as provided in such Sections or in such Supplemental Agreement, and
the interest component of each remaining Installment Payment will be reduced by the aggregate
corresponding amount of interest which would otherwise be payable with respect to the Bonds
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thereby redeemed under the applicable provisions of the Indenture and the District shall provide
the Trustee with a revised schedule of Installment Payments.
(c) Rate on Overdue Payments. If the District fails to make any of the payments
required in this Section 4.4 and Section 4.7, the payment in default will continue as an obligation
of the District until fully paid, and the District agrees to pay the same with interest thereon, from
the date of default to the date of payment, at the Overdue Rate.
(d) Assignment. The District understands and agrees that certain rights of the
Authority, including but not limited to the right of the Authority to receive payment of the
Installment Payments, have been assigned by the Authority to the Trustee in trust under the
Indenture, for the benefit of the Owners of the Bonds, and the District hereby consents to such
assignment. The Authority hereby directs the District, and the District hereby agrees, to pay to
the Trustee at its Trust Office, all payments payable by the District under this Section 4.4 and all
amounts payable by the District under Article VII.
Section 4.5. Pledge and Application of Net Revenues.
(a) Pledge of Net Revenues. The District hereby grants a first priority lien and
security interest in the Net Revenues in order to secure payment of the Installment Payments to
the Trustee (as assignee of the Authority under the Indenture). All of the Net Revenues and all
moneys on deposit in any of the funds and accounts established and held by the Trustee under
the Indenture are hereby irrevocably pledged, charged and assigned to the punctual payment of
the Installment Payments. Such pledge, charge and assignment constitute a lien and security
interest on the Net Revenues and such other moneys for the payment of the Installment Payments
in accordance with the terms hereof, on a parity with the pledge and lien which secures any
Parity Obligations.
(b) Deposit of Gross Revenues into Wastewater Revenue Fund; Transfers to Make
Payments. The District hereby establishes the Wastewater Revenue Fund, which the District will
hold and maintain for the purposes and uses set forth herein. The District shall deposit all of the
Gross Revenues in the Wastewater Revenue Fund immediately upon receipt. The District shall
apply amounts in the Wastewater Revenue Fund as set forth in this Agreement and any Parity
Obligations Documents. Amounts on deposit in the Wastewater Revenue Fund shall be applied
by the District to pay when due the following amounts in the following order of priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and
interest on any Parity Obligations;
(iii) any other payments required to comply with the provisions of this
Agreement (including Additional Payments) and any Parity Obligations
Documents; and
(iv) any other purposes authorized under subsection (d) of this
Section 4.5.
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(c) No Preference or Priority. Payment of the Installment Payments and the principal
of and interest on any Parity Obligations shall be made without preference or priority among the
Installment Payments and such Parity Obligations. If the amount of Net Revenues on deposit in
the Wastewater Revenue Fund is any time insufficient to enable the District to pay when due the
Installment Payments and the principal of and interest on any Parity Obligations, such payments
shall be made on a pro rata basis.
(d) Other Uses of Gross Revenues Permitted. The District shall manage, conserve
and apply the Gross Revenues on deposit in the Wastewater Revenue Fund in such a manner that
all deposits required to be made under the preceding subsection (b) will be made at the times and
in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default has
occurred and is continuing, the District may use and apply moneys in the Wastewater Revenue
Fund for (i) the payment of any subordinate obligations or any unsecured obligations, (ii) the
acquisition and construction of improvements to the Wastewater Operations, (iii) the prepayment
of any other obligations of the District relating to the Wastewater Operations, or (iv) any other
lawful purposes of the District.
Section 4.6. Special Obligation of the District; Obligations Absolute. The District’s
obligation to pay the Installment Payments and any other amounts coming due and payable
hereunder is a special obligation of the District limited solely to the Net Revenues. Under no
circumstances is the District required to advance moneys derived from any source of income
other than the Net Revenues and other sources specifically identified herein for the payment of
the Installment Payments and such other amounts. No other funds or property of the District are
liable for the payment of the Installment Payments and any other amounts coming due and
payable hereunder.
The obligations of the District to pay the Installment Payments from the Net Revenues
and to perform and observe the other agreements contained herein are absolute and unconditional
and are not subject to any defense or any right of set-off, counterclaim or recoupment arising out
of any breach by the Authority or the Trustee of any obligation to the District or otherwise with
respect to the Wastewater Operations, whether hereunder or otherwise, or out of indebtedness or
liability at any time owing to the District by the Authority or the Trustee. Until all of the
Installment Payments, all of the Additional Payments and all other amounts coming due and
payable hereunder are fully paid or prepaid, the District
(a) will not suspend or discontinue payment of any Installment Payments,
Additional Payments or such other amounts,
(b) will perform and observe all other agreements contained in this
Agreement, and
(c) will not terminate this Agreement for any cause, including, without
limiting the generality of the foregoing, the occurrence of any acts or circumstances that
may constitute failure of consideration, eviction or constructive eviction, destruction of or
damage to the Wastewater Operations, sale of the Wastewater Operations, the taking by
eminent domain of title to or temporary use of any component of the Wastewater
Operations, commercial frustration of purpose, any change in the tax or other laws of the
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United States of America or the State of California or any political subdivision of either
thereof, or any failure of the Authority or the Trustee to perform and observe any
agreement, whether express or implied, or any duty, liability or obligation arising out of
or connected with the Indenture or this Agreement.
The foregoing provisions of this Section 4.6 do not release the Authority from the
performance of any of the agreements on its part contained herein or in the Indenture, and if the
Authority fails to perform any such agreements, the District may institute such action against the
Authority as the District deems necessary to compel performance, so long as such action does
not abrogate the obligations of the District contained in the preceding paragraph. The District
may, however, at its cost and expense and in its name or in the name of the Authority, prosecute
or defend any action or proceeding or take any other action involving third persons which the
District deems reasonably necessary in order to secure or protect the District’s rights hereunder,
and in such event the Authority shall cooperate fully with the District and shall take such action
necessary to effect the substitution of the District for the Authority in such action or proceeding
if the District may request.
Section 4.7. Additional Payments. In addition to the Installment Payments, the District
shall pay when due the following amounts to the following parties:
(a) to the Authority, all costs and expenses incurred by the Authority to
comply with the provisions of this Agreement and the Indenture;
(b) to the Trustee upon request therefor, all of its fees, costs and expenses
payable as a result of the performance of and compliance with its duties hereunder or
under the Indenture or any related documents;
(c) to the Trustee, all amounts required to indemnify the Authority and the
Trustee under Section 5.2 hereof and Section 8.07 of the Indenture;
(d) all costs and expenses of auditors, engineers and accountants for
professional services relating to the Wastewater Operations or the Bonds; and
(e) to the Authority, the payments due under Section 8.12(a).
The Additional Payments shall be payable from, but shall not be secured by a pledge or
lien upon, the Net Revenues. The rights of the Trustee and the Authority under this Section 4.7,
and the obligations of the District under this Section 4.7, shall survive the termination of this
Agreement, and with regard to the Trustee, the resignation or removal of the Trustee.
Section 4.8. Rate Stabilization Fund.
The District has the right at any time to establish a fund to be held by it and administered
in accordance with this section, to be known as the “Rate Stabilization Fund,” for the purpose of
stabilizing the rates and charges imposed by the District with respect to the Wastewater
Operations.
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From time to time the District may deposit amounts in the Rate Stabilization Fund from
any source of legally available funds, including but not limited to Net Revenues which are
released from the pledge and lien which secures the Bonds and any Parity Obligations, as the
District may determine.
The District may, but is not required to, withdraw from any amounts on deposit in a Rate
Stabilization Fund and deposit such amounts in the Wastewater Revenue Fund in any Fiscal Year
for the purpose of paying Annual Debt Service coming due and payable in such Fiscal Year.
Amounts so transferred from a Rate Stabilization Fund to the Wastewater Revenue Fund will
constitute Gross Revenues for such Fiscal Year (except as otherwise provided in the Indenture),
and will be applied for the purposes of the Wastewater Revenue Fund.
Amounts on deposit in a Rate Stabilization Fund will not be pledged to or otherwise
secure the Bonds or any Parity Debt. All interest or other earnings on deposits in a Rate
Stabilization Fund will be withdrawn therefrom at least annually and accounted for as Gross
Revenues in the Wastewater Revenue Fund. The District has the right at any time to withdraw
any or all amounts on deposit in a Rate Stabilization Fund and apply such amounts for any
lawful purposes of the District.
The District does not currently maintain funds in a Rate Stabilization Fund.
ARTICLE V
COVENANTS OF THE DISTRICT
Section 5.1. Disclaimer of Warranties., Maintenance, Utilities and Taxes.
(a) The District makes no warranty or representation, either express or implied, as to
the value, design, condition, merchantability or fitness for any particular purpose or fitness for
the use contemplated by the District of the Project or any component thereof, or any other
representation or warranty with respect to the Project or any component thereof. In no event is
the Authority liable for incidental, indirect, special or consequential damages, in connection with
or arising out of this Agreement or the Indenture for the existence, furnishing, functioning or use
of the Project.
(b) Throughout the Term of this Agreement, all improvement, repair and maintenance
of the Wastewater Operations shall be the responsibility of the District, and the District shall pay
for or otherwise, arrange for the payment of all utility services supplied to the Wastewater
Operations, which may include, without limitation, janitor service, security, power, gas,
telephone, light, heating, water and all other utility services, and shall pay for or otherwise
arrange for the payment of the cost of the repair and replacement of the Wastewater Operations
resulting from ordinary wear and tear.
The District shall also pay or cause to be paid all taxes and assessments of any type or
nature, if any, charged to the Authority or the District affecting the Wastewater Operations or the
respective interests or estates therein; provided, however, that with respect to special assessments
or other governmental charges that may lawfully be paid in installments over a period of years,
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the District shall be obligated to pay only such installments as are required to be paid during the
Term of this Agreement as and when the same become due.
Section 5.2. Release and Indemnification Covenants. The District agrees to indemnify
the Trustee and its respective officers, directors, employees, agents, successors and assigns,
against all costs, claims, losses, liabilities, penalties, fines and damages, including legal fees and
expenses, arising out of
(a) the use, maintenance, condition or management of, or from any work or
thing done on or about the Wastewater Operations by the District,
(b) any breach or default on the part of the District in the performance of any
of its obligations under this Agreement or the Indenture,
(c) any act or omission of the District or of any of its agents, contractors,
servants, employees or licensees with respect to the Wastewater Operations,
(d) any act or omission of any lessee of the District with respect to the
Wastewater Operations, and
(e) the acceptance or administration of the Indenture and the trusts thereunder,
including the costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers hereunder or under
the Indenture.
No indemnification is made under this Section 5.2 or elsewhere in this Agreement for
willful misconduct under this Agreement by the Authority, or the Trustee, or their respective
officers, agents, employees, successors or assigns. The provisions of this Section 5.2 shall
survive the expiration of the Term of this Agreement and the earlier removal or resignation of the
Trustee.
Section 5.3. Sale or Eminent Domain of Wastewater Operations. Except as provided
herein, the District covenants that the Wastewater Operations shall not be encumbered, sold,
leased, pledged, have any charge placed thereon, or otherwise be disposed of, as a whole or
substantially as a whole, if such encumbrance, sale, lease, pledge, charge or other disposition
would materially impair the ability of the District to pay the Installment Payments or the
principal of or interest on any Parity Obligations, or would materially adversely affect its ability
to comply with the terms of this Agreement or any Parity Obligations Documents.
The District may not enter into any agreement which impairs the operation of the
Wastewater Operations or any part of it necessary to secure adequate Net Revenues to pay the
Installment Payments or any Parity Obligations, or which otherwise would impair the rights of
the Bond Owners or the Trustee with respect to the Net Revenues.
If any substantial part of the Wastewater Operations is sold, the payment therefor shall be
used for the acquisition or construction of improvements to the Wastewater Operations [or the
redemption of all outstanding Bonds and Parity Obligations pursuant to Article 4 of the
Indenture].
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[Notwithstanding anything to the contrary provided herein, the District shall be permitted
to convey its Wastewater Operations to San Diego County so long as the Bonds are redeemed in
full pursuant to Article 4 of the Indenture on or prior to such conveyance.]
Any amounts received as awards as a result of the taking of all or any part of the
Wastewater Operations by the lawful exercise of eminent domain, if and to the extent that such
right can be exercised against such property of the District, shall be used for the acquisition or
construction of improvements to the Wastewater Operations.
Section 5.4. Insurance. The District shall at all times maintain with responsible
insurers all such insurance on the Wastewater Operations as is customarily maintained with
respect to works and properties of like character against accident to, loss of or damage to the
Wastewater Operations.
The District shall apply any amounts collected from insurance against accident to or
destruction of any portion of the Wastewater Operations to repair or rebuild such damaged or
destroyed portion of the Wastewater Operations.
The District shall also maintain, with responsible insurers, worker’s compensation
insurance and insurance against public liability and property damage to the extent reasonably
necessary to protect the District, the Authority, the Trustee and the Owners of the Bonds.
Any policy of insurance required under this Section 5.4 may be maintained as part of or
in conjunction with any other insurance coverage carried by the District, and may be maintained
in whole or in part in the form of self-insurance by the District or in the form of the participation
by the District in a joint powers agency or other program providing pooled insurance.
Section 5.5. Records and Accounts. The District shall keep proper books of record and
accounts of the Wastewater Operations in which complete and correct entries shall be made of
all transactions relating to the Wastewater Operations. Said books shall, upon prior request, be
subject to the reasonable inspection of the Owners of not less than 10% of the Outstanding
Bonds, or their representatives authorized in writing, upon not less than 2 Business Days’ prior
notice to the District.
The District shall cause the books and accounts of the Wastewater Operations to be
audited annually by an Independent Accountant not more than 9 months after the close of each
Fiscal Year, and shall make a copy of such report available for inspection by the Bond Owners at
the office of the District. Such report may be part of a combined financial audit or report
covering all or part of the District’s finances. The Trustee shall not be deemed to have notice of
any information contained therein or default or Event of Default which may be disclosed therein
in any manner.
Section 5.6. Rates and Charges.
(a) Covenant Regarding Gross Revenues. The District shall fix, prescribe, revise and
collect rates, fees and charges for the services and facilities furnished by the Wastewater
Operations during each Fiscal Year, which are at least sufficient, after making allowances for
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contingencies and error in the estimates, to yield Gross Revenues sufficient to pay the following
amounts in the following order of priority:
(i) All Operation and Maintenance Costs estimated by the District to
become due and payable in such Fiscal Year.
(ii) All Installment Payments and all payments of principal of and
interest on any Parity Obligations as they become due and payable during such
Fiscal Year, without preference or priority, except to the extent such Installment
Payments or the principal of and interest on such Parity Obligations are payable
from the proceeds of the Bonds or such Parity Obligations, as applicable, or from
any source of legally available funds of the District (other than the Gross
Revenues of the Wastewater Operations) that have been deposited with the
Trustee for such purpose before the beginning of that Fiscal Year.
(iii) All payments required to meet any other obligations of the District
which are charges, liens, encumbrances upon, or which are otherwise payable
from, the Gross Revenues or the Net Revenues during such Fiscal Year, except to
the extent other sources of funds are reserved or encumbered therefore.
(b) Covenant Regarding Net Revenues. In addition, the District shall fix, prescribe,
revise and collect rates, fees and charges for the services and facilities furnished by the
Wastewater Operations during each Fiscal Year that are sufficient, after making allowances for
contingencies and errors in estimates, to yield Net Revenues that are at least equal to [115]% of
the amount described in the preceding clauses (a)(ii) and (iii) for such Fiscal Year.
Section 5.7. Superior and Subordinate Obligations. The District may not issue or incur
any additional bonds or other obligations during the Term of this Agreement having any priority
in payment of principal or interest out of the Gross Revenues or the Net Revenues over the
Installment Payments.
Nothing herein is intended or shall be construed to limit or affect the ability of the
District to issue, enter into or incur
(a) Parity Obligations under Section 5.8, or
(b) obligations that are either unsecured or that are secured by an interest in
the Net Revenues which is junior and subordinate to the pledge of and lien upon the Net
Revenues established hereunder.
Section 5.8. Issuance of Parity Obligations. Except for obligations incurred to prepay
or discharge the Installment Payments or any Parity Obligations, the District may not issue or
incur any Parity Obligations during the Term hereof unless all of the following conditions are
satisfied:
(a) No Event of Default has occurred and is continuing.
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(b) The amount of Net Revenues, excluding connection fees and transfers
from the Rate Stabilization Fund, as shown by the books of the District for the most
recent completed Fiscal Year for which audited financial statements of the District are
available or for any more recent consecutive 12-month period selected by the District, or
shown in the audited financial statements of the District, plus at the option of the District
any Additional Revenues, are at least equal to [115]% of the amount of Maximum
Annual Debt Service coming due and payable in the current or any future Fiscal Year
with respect to the Bonds and all Parity Obligations then outstanding (including the
Parity Obligations then proposed to be issued).
If the Parity Obligations are being issued solely to refund outstanding Parity Obligations,
and the resulting Annual Debt Service for each Fiscal Year is less than the Annual Debt Service
for each Fiscal Year prior to the issuance of the refunding Parity Obligations, the District need
not comply with the provisions of paragraphs (a) and (b) above. The Parity Obligations may be,
but are not required to be, in the form of Supplemental Agreements, and may, but are not
required to, secure the payment of debt service on Bonds.
Section 5.9. Governmental Loans.
(a) The District may borrow money from a Governmental Agency and incur a
Governmental Loan to finance improvements to the Wastewater Operations. A Governmental
Loan may be treated as a Parity Obligation for purposes of this Agreement, so long as the
District complies with Sections 5.8(a) and (b) of this Agreement before incurring the
Governmental Loan.
(b) (i) the District shall not make a payment on any Governmental Loan (except as
expressly permitted in subsection (c) below) to the extent it would have the effect of causing the
District to fail to make a timely payment on the Bonds.
(c) If Net Revenues are ever insufficient to pay the full amount of Installment
Payments and other Parity Obligations then Outstanding and such Governmental Loan, the
District shall make payments on the Installment Payments and other Parity Obligations and such
Governmental Loan on a pro rata basis.
Section 5.10. Operation of Wastewater Operations in Efficient and Economical Manner.
The District covenants and agrees to operate the Wastewater Operations in an efficient and
economical manner and to operate, maintain and preserve the Wastewater Operations in good
repair and working order.
Section 5.11. Assignment and Amendment. The Authority and the District may at any
time amend or modify any of the provisions of this Agreement, but only: (a) with the prior
written consent of the Owners of a majority in aggregate principal amount of the Outstanding
Bonds, or (b) without the consent of the Trustee or any of the Bond Owners, but only if such
amendment or modification is for any one or more of the following purposes:
(i) to add to the covenants and agreements of the District contained in
this Agreement, other covenants and agreements thereafter to be observed, or to
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limit or surrender any rights or power herein reserved to or conferred upon the
District;
(ii) to make such provisions for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective provision contained
herein, to conform to the original intention of the District and the Authority;
(iii) to modify, amend or supplement this Agreement in such manner as
to assure that the interest on the Bonds remains excluded from gross income
under the Tax Code (provided that this provision shall not apply to bonds the
interest on which is intended to be included in gross income for purposes of
federal income taxation);
(iv) in any other respect whatsoever as the Authority and the District
deem necessary or desirable, if in the opinion of Bond Counsel such
modifications or amendments do not materially adversely affect the interests of
the Owners of the Bonds; and
(v) to provide for the issuance of Parity Obligations pursuant to
Section 5.8 hereof.
No such modification or amendment may (a) extend or have the effect of extending any
Installment Payment Date or reducing any Installment Payment or any premium payable upon
the prepayment thereof, without the express consent of the Owners of the affected Bonds, or
(b) modify any of the rights or obligations of the Trustee without its written assent thereto.
Section 5.12. Continuing Disclosure. The District hereby covenants and agrees to
comply with and carry out all of the provisions of the continuing disclosure agreement (the
“Continuing Disclosure Agreement”) as originally executed as of the date of issuance and
delivery of the Bonds, and as it may be amended from time to time in accordance with its terms.
Notwithstanding any other provision of this Agreement, failure by the District to comply
with the Continuing Disclosure Agreement shall not constitute a default hereunder or under the
Indenture of Trust; provided, however, that any Participating Underwriter or any Owner or
beneficial owner of the Bonds may take such action as may be necessary and appropriate to
compel performance by the District of its obligations under this Section 5.12, including seeking
mandamus or specific performance by court order. All capitalized terms used but not defined in
this Section 5.12 shall have the meanings given in the Continuing Disclosure Agreement.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1. Events of Default Defined. The following events constitute Events of
Default hereunder:
(a) Failure by the District to pay any Installment Payment when due and
payable hereunder.
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(b) Failure by the District to pay any Additional Payment when due and
payable hereunder, and the continuation of such failure for a period of 30 days.
(c) Failure by the District to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in the
preceding clauses (a) or (b), for a period of 60 days after written notice specifying such
failure and requesting that it be remedied has been given to the District by the Authority
or the Trustee; provided, however, that if the District notifies the Authority and the
Trustee that in its reasonable opinion the failure stated in the notice can be corrected, but
not within such 60-day period, such failure will not constitute an event of default
hereunder if the District commences to cure such failure within such 60 day period and
thereafter diligently and in good faith cures the failure in a reasonable period of time not
to exceed 180 days of the date of such written notice of failure.
(d) The filing by the District of a voluntary petition in bankruptcy, or failure
by the District promptly to lift any execution, garnishment or attachment, or adjudication
of the District as a bankrupt, or assignment by the District for the benefit of creditors, or
the entry by the District into an agreement of composition with creditors, or the approval
by a court of competent jurisdiction of a petition applicable to the District in any
proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended,
or under any similar acts which may hereafter be enacted.
(e) The occurrence of any event defined to be an event of default under any
Parity Obligations Documents.
Section 6.2. Remedies on Default. If an Event of Default occurs and is continuing, the
Trustee as assignee of the Authority and subject to its rights and protections under the Indenture
has the right, at its option and without any further demand or notice, to take any one or more of
the following actions:
(a) Declare all principal components of the unpaid Installment Payments,
together with accrued interest thereon at the Overdue Rate from the immediately
preceding Interest Payment Date on which payment was made, to be immediately due
and payable, whereupon the same shall immediately become due and payable.
Notwithstanding the foregoing provisions of this subsection (a), the
Trustee shall rescind and annul such declaration and its consequences if, before
any judgment or decree for the payment of the moneys due has been obtained or
entered, if (i) the District deposits with the Trustee a sum sufficient to pay all
principal components of the Installment Payments coming due prior to such
declaration and all matured interest components (if any) of the Installment
Payments, with interest on such overdue principal and interest components
calculated at the Overdue Rate, and (ii) the District pays the reasonable expenses
of the Trustee (including any fees and expenses of its attorneys), and (iii) any and
all other defaults actually known to the Trustee (other than in the payment of the
principal and interest components of the Installment Payments due and payable
solely by reason of such declaration) have been made good. No such rescission
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and annulment will extend to or shall affect any subsequent default, or impair or
exhaust any right or power consequent thereon.
(b) Take whatever action at law or in equity may appear necessary or
desirable to collect the Installment Payments then due or thereafter to become due during
the Term of this Agreement, or enforce performance and observance of any obligation,
agreement or covenant of the District under this Agreement.
(c) As a matter of right, in connection with the filing of a suit or other
commencement of judicial proceedings to enforce the rights of the Trustee and the Bond
Owners hereunder, cause the appointment of a receiver or receivers of the Gross
Revenues and other amounts pledged hereunder, with such powers as the court making
such appointment may confer.
Section 6.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to
the Authority is intended to be exclusive. Every such remedy is cumulative and in addition to
every other remedy given under this Agreement or now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon any default impairs any such
right or power or operates as a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle the Authority to
exercise any remedy reserved to it in this Article VI, it is not necessary to give any notice, other
than such notice as may be required in this Article VI or by law.
Section 6.4. Agreement to Pay Attorneys’ Fees and Expenses. If either party to this
Agreement defaults under any of the provisions hereof and the nondefaulting party, the Trustee
or the Owner of any Bonds employs attorneys or incurs other expenses for the collection of
moneys or the enforcement or performance or observance of any obligation or agreement on the
part of the defaulting party herein contained, the defaulting party agrees that it wilt on demand
therefor pay to the nondefaulting party, the Trustee or such Owner, as the case may be, the
reasonable fees and expenses of such attorneys and such other expenses so incurred. The
provisions of this Section 6.4 survive the expiration of the Term of this Agreement and the
resignation or removal of the Trustee.
Section 6.5. No Additional Waiver Implied by One Waiver. If any agreement
contained in this Agreement is breached by either party and thereafter waived by the other party,
such waiver is limited to the particular breach so waived and does not waive any other breach
hereunder.
Section 6.6. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as
are given to the Authority under this Article VI have been assigned by the Authority to the
Trustee under the Indenture, to which assignment the District hereby consents. Such rights and
remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the
Indenture.
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ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
Section 7.1. Security Deposit. Notwithstanding any other provision hereof, the District
may on any date secure the payment of Installment Payments, in whole or in part, by irrevocably
depositing with the Trustee an amount of cash which, together with other available amounts, is
either:
(a) sufficient to pay all such Installment Payments, including the principal and
interest components thereof, when due under Section 4.4(a), or
(b) invested in whole or in part in non-callable Federal Securities in such
amount as will, in the opinion of an Independent Accountant (which opinion is addressed
and delivered to the Trustee), together with interest to accrue thereon and together with
any cash which is so deposited, be fully sufficient to pay all such Installment Payments
when due under Section 4.4(a) or when due on any optional prepayment date under
Section 7.2, as the District instructs at the time of said deposit.
If the District makes a security deposit under this Section for the payment of all
remaining Installment Payments, all obligations of the District hereunder, and the pledge of Net
Revenues and all other security provided by this Agreement for said obligations, will thereupon
cease and terminate, excepting only the obligation of the District to make, or cause to be made,
all Installment Payments from the security deposit. The security deposit will be deemed to be and
will constitute a special fund for the payment of the Installment Payments in accordance with the
provisions hereof.
Section 7.2. Optional Prepayment Relating to the Bonds. The District may exercise its
option to prepay the principal components of the Installment Payments relating to the Bonds in
whole or in part on any date on or after October 1, 2025.
The District may exercise such option by payment of a prepayment price equal to the sum
of:
(a) the aggregate principal components of the Installment Payments relating to the
Bonds to be prepaid,
(b) the interest component of the Installment Payment relating to the Bonds required
to be paid on or accrued to such date, and
(c) the premium (if any) then required to be paid upon the corresponding redemption
of the Bonds under Section 4.01(a) of the Indenture.
The Trustee shall deposit the prepayment price in the Redemption Fund to be applied to
the redemption of Bonds under Section 4.01(a) of the Indenture. If the District prepays the
Installment Payments in part but not in whole, the principal components will be prepaid among
such maturities and in such integral multiples of $5,000 as the District designates in written
notice to the Trustee.
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Section 7.3. Credit for Amounts on Deposit. If the District prepays the Installment
Payments in full under this Article VII, such that the Indenture is discharged by its terms as a
result of the prepayment, and upon payment in full of all Additional Payments and other amounts
then due and payable hereunder, all available amounts then on deposit in the funds and accounts
established under the Indenture shall be credited towards the amounts then required to be so
prepaid.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Further Assurances. The District agrees that it will execute and deliver
and file any and all such further agreements, instruments, financing statements or other
assurances as may be reasonably necessary or requested by the Authority or the Trustee to carry
out the intention or to facilitate the performance of this Agreement, including, without limitation,
to perfect and continue the security interests herein intended to be created.
Section 8.2. Notices. Any notice, request, complaint, demand or other communication
under this Agreement must be given by first class mail, e-mail, facsimile transmission, overnight
mail or personal delivery to the party entitled thereto at its address set forth below, or by
telecopier or other form of telecommunication, at its number set forth below. Notice is effective
either (a) upon transmission by fax or other form of telecommunication (including e-mail), (b)
upon actual receipt after deposit in the United States of America mail, postage prepaid, or (c) in
the case of personal delivery to any person or overnight mail, upon actual receipt; provided,
however that notice to the Trustee shall be deemed given only upon receipt by it. The Authority,
the District and the Trustee may, by written notice to the other parties, from time to time modify
the address or number to which communications are to be given hereunder.
If to the Authority: Otay Water District Financing Authority
[ADDRESS]
Attn:_________________
E-mail: [________]
If to the District: Otay Water District
2554 Sweetwater Springs Blvd.
Spring Valley, CA 91978-2004
Attn:________________
E-mail: [________]
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If to the Trustee: MUFG Union Bank, N.A.
Attention: Corporate Trust Department
445 South Figueroa Street, Suite 401
Los Angeles, California 90071
Fax: 213-972-5694
Email: LACT@unionbank.com
If the District or the Authority elects to give the Trustee Instructions using Electronic Means and
the Trustee in its reasonable judgment elects to act upon such Instructions, the Trustee’s
understanding of such Instructions shall be deemed controlling. The District and the Authority
understands and agrees that the Trustee cannot determine the identity of the actual sender of such
Instructions and that the Trustee shall conclusively presume that directions that purport to have
been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee
have been sent by such Authorized Officer. The District and the Authority shall be responsible
for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the
District or the Authority and all Authorized Officers are solely responsible to safeguard the use
and confidentiality of applicable user and authorization codes, passwords and/or authentication
keys upon receipt by the District or the Authority. The Trustee shall not be liable for any losses,
costs, claims or expenses arising directly or indirectly from the Trustee’s reliance upon and
compliance with such Instructions notwithstanding such directions conflict or are inconsistent
with a subsequent written instruction. The District and the Authority agrees: (i) to assume all
risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including
without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of
interception and misuse by third parties; (ii) that it is fully informed of the protections and risks
associated with the various methods of transmitting Instructions to the Trustee and that there may
be more secure methods of transmitting Instructions than the method(s) selected by the District
or the Authority; (iii) that the security procedures (if any) to be followed in connection with its
transmission of Instructions provide to it a commercially reasonable degree of protection in light
of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon
learning of any compromise or unauthorized use of the security procedures.
Section 8.3. Governing Law. This Agreement will be construed in accordance with
and governed by the laws of the State of California.
Section 8.4. Binding Effect. This Agreement inures to the benefit of and is binding
upon the Authority and the District and their respective successors and assigns, subject, however,
to the limitations contained herein.
Section 8.5. Severability of Invalid Provisions. If any one or more of the provisions
contained in this Agreement are for any reason held to be invalid, illegal or unenforceable in any
respect, then such provision or provisions will be deemed severable from the remaining
provisions contained in this Agreement and such invalidity, illegality or unenforceability will not
affect any other provision of this Agreement, and this Agreement shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein. The Authority and
the District each hereby declares that it would have entered into this Agreement and each and
every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any
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one or more Sections, paragraphs, sentences, clauses or phrases of this Agreement may be held
illegal, invalid or unenforceable.
Section 8.6. Article and Section Headings and References. The headings or titles of
the several Articles and Sections hereof, and any table of contents appended to copies hereof, are
solely for convenience of reference and do not affect the meaning, construction or effect of this
Agreement. All references herein to “Articles,” “Sections” and other subdivisions are to the
corresponding Articles, Sections or subdivisions of this Agreement; the words “herein,”
“hereof,” “hereby,” “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or subdivision hereof; and words of the
masculine gender mean and include words of the feminine and neuter genders.
Section 8.7. Payment on Non-Business Days. Whenever any payment is required to be
made hereunder on a day which is not a Business Day, such payment shall be made on the
immediate preceding Business Day.
Section 8.8. Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which will for all purposes be deemed to be an original and all
of which together constitute but one and the same instrument.
Section 8.9. Waiver of Personal Liability. No member of the Board of Directors,
officer, agent or employee of the District has any individual or personal liability for the payment
of Installment Payments or Additional Payments or be subject to any personal liability or
accountability by reason of this Agreement; but nothing herein contained relieves any such
member of the Board of Supervisors, officer, agent or employee from the performance of any
official duty provided by law or by this Agreement.
Section 8.10. Trustee as Third Party Beneficiary. The Trustee is hereby made a third
party beneficiary hereof and is entitled to the benefits of this Agreement with the same force and
effect as if the Trustee were a party hereto.
Section 8.11. Authority Provisions.
(a) Additional Payments. In addition to the Installment Payments, the District
shall also pay to the Authority, the following:
(i) The reasonable fees and expenses of such accountants, consultants,
attorneys and other experts as may be engaged by the Authority to prepare
audits, financial statements, reports, opinions or provide such other services
required under this Agreement or the Indenture; and
(ii) The reasonable fees and expenses of the Authority or any agent or
attorney selected by the Authority to act on its behalf in connection with
this Agreement, the Bonds or the Indenture, including, without limitation,
any and all reasonable expenses incurred in connection with the
authorization, issuance, sale and delivery of any such Bonds or in
connection with any litigation, investigation, inquiry or other proceeding
which may at any time be instituted involving this Agreement, the Bonds or
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the Indenture or any of the other documents contemplated thereby, or in
connection with the reasonable supervision or inspection of the District, its
properties, assets or operations or otherwise in connection with the
administration of this Agreement, the Bonds or the Indenture.
Such Additional Payments shall be billed to the District by the Authority from
time to time, together with a statement certifying that the amount billed has been incurred or paid
by the Authority for one or more of the above items. After such a demand, amounts so billed
shall be paid by the District within thirty (30) days after receipt of the bill by the District.
(b) Non-Liability of Authority.
The Authority shall not be obligated to pay the principal (or redemption price) of
or interest on the Bonds, except from Revenues and other moneys and assets received by the
Trustee pursuant to this Agreement. Neither the faith and credit nor the taxing power of the State
or any political subdivision thereof, nor the faith and credit of the Authority is pledged to the
payment of the principal (or redemption price) of or interest on the Bonds. The Authority shall
not be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind
on any conceivable theory, under or by reason of or in connection with this Agreement, the
Bonds or the Indenture, except only to the extent amounts are received for the payment thereof
from the District under this Agreement.
The District hereby acknowledges that the Authority’s sole source of moneys to
repay the Bonds (whether by maturity, redemption, acceleration or otherwise) will be provided
by the payments made by the District to the Trustee pursuant to this Agreement, together with
amounts on deposit in and investment income on certain funds and accounts held by the Trustee
under the Indenture, and hereby agrees that if the payments to be made hereunder shall ever
prove insufficient to pay all principal (or redemption price) of and interest on the Bonds as the
same shall become due (whether by maturity, redemption, acceleration or otherwise), then upon
notice from the Trustee, the District shall pay such amounts as are required from time to time to
prevent any deficiency or default in the payment of such principal (or redemption price) or
interest, including, but not limited to, any deficiency caused by acts, omissions, nonfeasance or
malfeasance on the part of the Trustee, the District, the Authority or any third party, subject to
any right of reimbursement from the Trustee, the Authority or any such third party, as the case
may be, therefor.
(c) Annual Reporting Covenant. No later than January 31 of each calendar
year (commencing January 31, 2020), the District, on behalf of the Authority, agrees to provide
to the California Debt and Investment Advisory Commission, by any method approved by the
California Debt and Investment Advisory Commission, with a copy to the Authority, the annual
report information required by Section 8855(k)(1) of the California Government Code. This
covenant shall remain in effect until the later of the date (i) the Bonds are no longer Outstanding
or (ii) the proceeds of the Bonds have been fully spent.
(d) Expenses. The District covenants and agrees to pay and indemnify the
Authority against all reasonable fees, costs and charges, including reasonable fees and expenses
of attorneys, accountants, consultants and other experts, incurred in good faith (and with respect
22
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to the Trustee, without negligence) and arising out of or in connection with this Agreement, the
Bonds or the Indenture. These obligations and those in Section 5.2 Release and Indemnification
Covenants shall remain valid and in effect notwithstanding repayment of the loan hereunder or
the Bonds or termination of this Agreement or the Indenture.
(e) Indemnification. To the fullest extent permitted by law, the District agrees
to indemnify, hold harmless and defend the Authority, and each of its respective officers,
governing members, directors, officials, employees, attorneys and agents (collectively, the
“Indemnified Parties”), against any and all losses, damages, claims, actions, liabilities, costs and
expenses of any conceivable nature, kind or character (including, without limitation, reasonable
attorneys’ fees, litigation and court costs, amounts paid in settlement and amounts paid to
discharge judgments) to which the Indemnified Parties, or any of them, may become subject
under any statutory law (including federal or state securities laws) or at common law or
otherwise, arising out of or based upon or in any way relating to:
(i) the Bonds, the Indenture, this Agreement or the Tax Agreement or
the execution or amendment hereof or thereof or in connection with
transactions contemplated hereby or thereby, including the issuance, sale or
resale of the Bonds;
(ii) any act or omission of the District or any of its agents, contractors,
servants, employees, tenants or licensees in connection with the Project or
the Wastewater Operations, the operation of the Project or the Wastewater
Operations, or the condition, environmental or otherwise, occupancy, use,
possession, conduct or management of work done in or about, or from the
planning, design, acquisition, installation or construction of, the Project or
the Wastewater Operations or any part thereof;
(iii) any lien or charge upon payments by the District to the Authority
and the Trustee hereunder, or any taxes (including, without limitation, all
ad valorem taxes and sales taxes), assessments, impositions and other
charges imposed on the Authority in respect of any portion of the Project or
the Wastewater Operations;
(iv) any violation of any Environmental Regulations with respect to, or
the release of any Hazardous Substances from, the Project or the
Wastewater Operations or any part thereof;
(v) the defeasance and/or redemption, in whole or in part, of the
Bonds;
(vi) any untrue statement or misleading statement or alleged untrue
statement or alleged misleading statement of a material fact contained in
any offering or disclosure document or disclosure or continuing disclosure
document for the Bonds or any of the documents relating to the Bonds, or
any omission or alleged omission from any offering or disclosure document
or disclosure or continuing disclosure document for the Bonds of any
23
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material fact necessary to be stated therein in order to make the statements
made therein, in the light of the circumstances under which they were
made, not misleading;
(vii) any declaration of taxability of interest on the Bonds, or allegations
that interest on the Bonds is taxable or any regulatory audit or inquiry
regarding whether interest on the Bonds is taxable;
(viii) the Trustee’s acceptance or administration of the trust of the
Indenture, or the exercise or performance of any of its powers or duties
thereunder or under any of the documents relating to the Bonds to which it
is a party;
except in the case of the foregoing indemnification of the Authority or any
of its officers, members, directors, officials, employees, attorneys and
agents, to the extent such damages are caused by the willful misconduct of
such Indemnified Party. In the event that any action or proceeding is
brought against any Indemnified Party with respect to which indemnity
may be sought hereunder, the District, upon written notice from the
Indemnified Party, shall assume the investigation and defense thereof,
including the employment of counsel selected by the Indemnified Party,
and shall assume the payment of all expenses related thereto, with full
power to litigate, compromise or settle the same in its sole discretion;
provided that the Indemnified Party shall have the right to review and
approve or disapprove any such compromise or settlement. Each
Indemnified Party shall have the right to employ separate counsel in any
such action or proceeding and participate in the investigation and defense
thereof, and the District shall pay the reasonable fees and expenses of such
separate counsel; provided, however, that such Indemnified Party may only
employ separate counsel at the expense of the District if in the judgment of
such Indemnified Party a conflict of interest exists by reason of common
representation or if all parties commonly represented do not agree as to the
action (or inaction) of counsel.
The rights of any persons to indemnity hereunder and rights to payment of fees
and reimbursement of expenses pursuant to Section 5.2 and Section 4.7 shall survive the final
payment or defeasance of the Bonds and in the case of the Trustee any resignation or removal.
The provisions of this Section 8.12 shall survive the termination of this Agreement.
(f) Waiver of Personal Liability. No member, officer, agent or employee of
the Authority shall be individually or personally liable for the payment of any principal (or
redemption price) of or interest on the Bonds or any sum hereunder or under the Indenture or be
subject to any personal liability or accountability by reason of the execution and delivery of this
Agreement; but nothing herein contained shall relieve any such member, director, officer, agent
or employee from the performance of any official duty provided by law or by this Agreement.
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[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Authority and the District have caused this Agreement to be
executed in their respective names by their duly authorized signatories, all as of the date first
above written.
OTAY WATER DISTRICT FINANCING
AUTHORITY
By:
Name:
Title:
OTAY WATER DISTRICT
By:
Name:
Title:
[Signature page to Installment Sale Agreement]
A-1
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APPENDIX A
SCHEDULE OF INSTALLMENT PAYMENTS
Payment Date(1) Principal Interest Total Debt Service Fiscal Year Debt Service
(1) Installment Payment Dates are the first Business Day immediately preceding each Interest Payment Date shown
in the table.
- 2 -
3394471.5 043520 AGMT
Payment Date(1) Principal Interest Total Debt Service Fiscal Year Debt Service
Total $ $ $ $
B-1
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APPENDIX B
DESCRIPTION OF PROJECT
The Bonds are being issued primarily to finance capital improvements to the District
Wastewater Operations consisting primarily of [description of project]. The Bonds may also be
used to finance any other capital project of benefit to the Wastewater Operations.
DRAFT PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 15, 2019
NEW ISSUE- BOOK-ENTRY ONLY NOT RATED
(See “CONCLUDING INFORMATION - No Rating on the Bonds; Secondary Market” herein)
In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel, under existing statutes and court decisions and assuming continuing
compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for federal income tax
purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not
treated as a preference item in calculating the alternative minimum tax under the Code. In addition, in the opinion of Bond Counsel,
under existing statutes, interest on the Bonds is exempt from State of California personal income taxes. See “TAX MATTERS” herein.
$3,200,000*
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
Dated: Date of Delivery Due: September 1, as shown on the inside front cover page.
The cover page contains certain information for general reference only. It is not a summary of the issue. Potential investors
are advised to read the entire Official Statement to obtain information essential to the making of an informed investment
decision. See “RISK FACTORS” herein for a discussion of special risk factors that should be considered in evaluating the
investment quality of the Bonds.
The Otay Water District Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”) are payable from revenues pledged under
the Indenture (defined below) consisting of Installment Payments (defined herein) to be made by the Otay Water District (the “District”)
to the Otay Water District Financing Authority (the “Authority”) pursuant to an Installment Sale Agreement, as described herein and
from investment earnings on funds held under the Indenture (the “Revenues”). The Bonds will be issued pursuant to an Indenture of
Trust, dated as of November 1, 2019 (the “Indenture”), by and between the Authority and MUFG Union Bank, N.A., as trustee (the
“Trustee”). The Bonds are being issued to provide funds to pay for certain capital improvements to the District’s wastewater system
(the “Wastewater System”). See “THE FINANCING PLAN” herein. The District is required under the Installment Sale Agreement to
make the Installment Payments in each fiscal year from Net Revenues of the Wastewater System in an amount sufficient to pay the
annual principal and interest due on the Bonds, as described herein. See “SOURCES OF PAYMENT FOR THE BONDS” and “RISK
FACTORS” herein.
Interest on the Bonds is payable on March 1, 2020, and semiannually thereafter on September 1 and March 1 of each year until maturity.
The Bonds are subject to optional and sinking account redemption prior to maturity (see “THE BONDS - General Provisions” and “THE
BONDS - Redemption” herein).
The Bonds are special, limited obligations of the Authority and are not secured by a legal or equitable pledge of, or charge or
lien upon, any property of the Authority or any of its income or receipts, except the Revenues (consisting principally of
Installment Payments received from the District). Neither the full faith and credit of the Authority nor its members (including
the District) is pledged for the payment of the Bonds and no tax or other source of funds other than the Revenues is pledged to
pay the Bonds. The Bonds do not constitute a debt, liability or obligation of the Authority or any member of the Authority
(including the District) in violation of any constitutional or statutory debt limitation or for which any such entity is obligated
to levy or pledge any form of taxation or for which any such entity has levied or pledged any form of taxation. The Authority
has no taxing power. The obligation of the District to pay Installment Payments under the Installment Sale Agreement is
secured solely by the Net Revenues of the Wastewater System. The full faith and credit of the District is not pledged for the
payment of the Installment Payments and no tax or other source of funds other than the Net Revenues is pledged to pay the
Installment Payments. The Installment Payments do not constitute a debt, liability or obligation of the District in violation of
any constitutional or statutory debt limitation.
The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Hawkins Delafield & Wood LLP, San
Francisco, California, as Bond Counsel. Certain legal matters will be passed on for the District and the Authority by Artiano Shinoff,
San Diego, California, as General Counsel to the District and the Authority, and by Hawkins Delafield & Wood LLP, San Francisco,
California, as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by its counsel, Nixon Peabody LLP, Los
Angeles, California. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The
Depository Trust Company on or about ___________, 2019 (see “THE BONDS - General Provisions” herein).
The date of the Official Statement is __________, 2019.
__________________________
* Preliminary, subject to change. Th
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$3,200,000*
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
MATURITY SCHEDULE
(Base CUSIP®† _____)
Maturity Date Principal Interest Reoffering Reoffering
September 1 Amount Rate Yield Price CUSIP®†
__________________________ * Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP
Global Services, managed by S&P Capital IQ on behalf of the American Bankers Association. CUSIP numbers
have been assigned by an independent company not affiliated with the Authority, the District, the Municipal Advisor
or the Underwriter and are included solely for the convenience of the holders of the Bonds. None of the Authority,
the District, the Municipal Advisor or the Underwriter is responsible for the selection or use of these CUSIP
numbers, and no representation is made as to their correctness on the Bonds or as indicated above. The CUSIP
number for a specific maturity is subject to being changed after the execution and delivery of the Bonds as a result
of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a
result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is
applicable to all or a portion of certain maturities of the Bonds.
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended
(“Rule 15c2-12”), this Preliminary Official Statement constitutes an “official statement” of the District with respect
to the Bonds that has been deemed “final” by the District as of its date except for the omission of no more than the
information permitted by Rule 15c2-12.
Use of Official Statement. This Official Statement is submitted in connection with the offer and sale of the Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official
Statement is not to be construed as a contract with the purchasers of the Bonds.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion
contained in this Official Statement are subject to change without notice. Neither the delivery of this Official
Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no
change in the affairs of the District or any other parties described in this Official Statement.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the District, any
press release and any oral statement made with the approval of an authorized officer of the District or any other entity
described or referenced herein, the words or phrases “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject
to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-
looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the
forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be
differences between forecasts and actual results, and those differences may be material.
Limit of Offering. No dealer, broker, salesperson or other person has been authorized by the District to give any
information or to make any representations in connection with the offer or sale of the Bonds other than those contained
herein and if given or made, such other information or representation must not be relied upon as having been authorized
by the District or the Municipal Advisor. This Official Statement does not constitute an offer to sell or the solicitation
of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for
such person to make such an offer, solicitation or sale.
Preparation of This Official Statement. The information contained in this Official Statement has been obtained from
sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The
information and expressions of opinions herein are subject to change without notice and neither the delivery of this
Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the District since the date hereof. This Official Statement is submitted in connection
with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose, unless authorized in writing by the District. All summaries of the Bonds, the Indenture or other documents,
are made subject to the provisions of such documents and do not purport to be complete statements of any or all of
such provisions. Reference is hereby made to such documents on file with the District Secretary for further
information. See “INTRODUCTION - Summaries Not Definitive.”
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has
reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors
under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does
not guarantee the accuracy or completeness of such information.
Bonds are Exempt From Securities Laws Registration. The issuance, sale and delivery of the Bonds has not been
registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in
reliance upon exemptions for the execution, sale and delivery of municipal securities provided under Section 3(a)(2)
of the Securities Act of 1933 and Section 3(a)(l2) of the Securities Exchange Act of 1934.
Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which
stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open
market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the
Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside front cover
page hereof and said public offering prices may be changed from time to time by the Underwriter.
District Website. The District maintains a website. The information on such website is not part of this Official
Statement and is not intended to be relied on by investors with respect to the Bonds unless specifically set forth or
incorporated herein.
OTAY WATER DISTRICT
SAN DIEGO COUNTY, CALIFORNIA
BOARD OF DIRECTORS
Mitch Thompson, President - Division 2
Mark Robak, Vice President - Division 5
Hector Gastelum, Treasurer Division 4
Gary D. Croucher, Division 3
Tim Smith, Division 1
______________________________________________
MANAGEMENT TEAM
Mark Watton, General Manager
Adolfo Segura, Chief, Administrative Services
Rod Posada, PE, PLS, CCM, Chief, Engineering
Joseph R. Beachem, CPA, MBA, MPA, Chief Financial Officer
Pedro Porras, PE, Chief, Water Operations
Dan Martin, PE, Assistant Chief, Engineering
Kevin Koeppen, CPA Assistant Chief, Finance
Jose Martinez, Assistant Chief, Water Operations
________________________________________
PROFESSIONAL SERVICES
Bond Counsel and Disclosure Counsel
Hawkins Delafield & Wood LLP
San Francisco, California
General Counsel to the District and the Authority
Artiano Shinoff
San Diego, California
Municipal Advisor
Harrell & Company Advisors, LLC
Orange, California
Trustee
MUFG Union Bank, N.A.
Los Angeles, California
TABLE OF CONTENTS
INTRODUCTION ...................................................... 1
The District ................................................................ 1
The Authority ............................................................. 1
The Wastewater System ............................................. 2
Sources of Payment for the Bonds ............................. 2
No Reserve Fund ....................................................... 3
Offering of the Bonds ................................................ 3
Summaries Not Definitive ......................................... 3
THE BONDS ............................................................... 4
General Provisions ..................................................... 4
Redemption.. .............................................................. 4
Scheduled Debt Service ............................................. 6
THE FINANCING PLAN .......................................... 8
The Project ................................................................. 8
Estimated Sources and Uses of Funds ....................... 8
SOURCES OF PAYMENT FOR THE BONDS ....... 9
Revenues; Pledge of Revenues .................................. 9
Installment Payments ................................................. 9
Net Revenues ............................................................. 9
Application of District Revenues ............................. 11
No Reserve Fund for the Bonds ............................... 12
Event of Default and Acceleration of Maturities ..... 12
Rate Covenant .......................................................... 13
Rate Stabilization Fund ............................................ 13
Parity Obligations .................................................... 14
Proceeds of Insurance, Sale or Condemnation
Awards .................................................................. 15
OTAY WATER DISTRICT ...................................... 17
THE WASTEWATER SYSTEM ............................. 17
Wastewater System Description .............................. 17
San Diego Metropolitan Sewerage System .............. 18
Wastewater System Regulatory Issues ..................... 19
Customer Base ......................................................... 21
Sewer Charges ......................................................... 22
Billing Practices and Collection............................... 25
No Outstanding Parity Debt ..................................... 25
Capital Improvement Program ................................. 25
Employees and Benefits........................................... 26
District Reserves and Investment Policy ................. 26
Historical Operating Results .................................... 27
Projected Debt Service Coverage ............................ 32
CONSTITUTIONAL LIMITATIONS ON
TAXES AND APPROPRIATIONS ...................... 34
Article XIIIB Gann Limit ........................................ 34
Proposition 218 ........................................................ 34
Future Initiatives ...................................................... 36
RISK FACTORS ....................................................... 37
Net Revenues; Rate Covenant.................................. 37
Risks Related to Facilities and Operations ............... 37
Risk of Fines and Litigation ..................................... 39
Proposition 218 ........................................................ 39
Limitations on Remedies Available to Bond
Owners .................................................................. 39
Future Parity Obligations ......................................... 39
Cybersecurity ........................................................... 40
Bankruptcy ............................................................... 40
Loss of Tax Exemption ............................................ 41
IRS Audit of Tax-Exempt Bond Issues .................... 42
Secondary Market Risk ............................................ 42
TAX MATTERS ........................................................ 42
LEGAL MATTERS .................................................. 44
Enforceability of Remedies ...................................... 44
Approval of Legal Proceedings ................................ 44
Litigation .................................................................. 45
CONCLUDING INFORMATION .......................... 45
No Rating on the Bonds; Secondary Market ............ 45
Underwriting ............................................................ 45
The Municipal Advisor ............................................ 46
Continuing Disclosure ............................................. 46
Audited Financial Statements .................................. 46
References ................................................................ 46
Execution ................................................................. 47
APPENDIX A - SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS
APPENDIX B - DISTRICT AUDITED FINANCIAL
STATEMENTS
APPENDIX C - ECONOMIC PROFILE FOR THE
COUNTY OF SAN DIEGO
APPENDIX D - FORM OF CONTINUING
DISCLOSURE AGREEMENT
APPENDIX E - FORM OF BOND COUNSEL
OPINION
APPENDIX F - THE BOOK-ENTRY SYSTEM
OTAY WATER DISTRICT
LOCATION MAP
1
OFFICIAL STATEMENT
$3,200,000*
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
This Official Statement which includes the cover page, the inside front cover page and appendices (the
“Official Statement”) is provided to furnish certain information concerning the sale of the Otay Water
District Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”), in the aggregate principal
amount of $3,200,000*.
INTRODUCTION
This Introduction contains only a brief description of this issue and does not purport to be complete. The
Introduction is subject in all respects to more complete information in the entire Official Statement and the
offering of the Bonds to potential investors is made only by means of the entire Official Statement and the
documents summarized herein. Potential investors must read the entire Official Statement to obtain
information essential to the making of an informed investment decision (see “RISK FACTORS” herein). For
definitions of certain capitalized terms used herein and not otherwise defined, and the terms relating to the
Bonds, see the summary included in “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS”
herein.
The District
The Otay Water District (the “District”) was established in 1956. The District is a municipal water district
organized and existing under and in accordance with Division 20 of the Water Code of the State of
California, commencing with Section 71000, as amended (the “Law”). The District’s boundaries currently
encompass an area of approximately 125 square miles in San Diego County, lying immediately east of the
San Diego metropolitan area and running from the City of El Cajon south to the Mexican border, abutting
the cities of El Cajon and La Mesa and encompassing most of the City of Chula Vista and a small portion
of the City of San Diego. The District currently serves a population of approximately 223,000 and expects
the service area to experience moderate growth in the next ten years (see “OTAY WATER DISTRICT” and
“APPENDIX C - ECONOMIC PROFILE FOR THE COUNTY OF SAN DIEGO” herein). Approximately 15,300
of the District’s customers are served by the District’s wastewater system (see “THE WASTEWATER
SYSTEM” herein).
The District is administered by a Board of Directors consisting of five members who are elected to four-
year alternating terms by the voters residing within the District’s boundaries. The District is divided into
five divisions, with each Director representing a specific division within which he or she must reside. The
positions of General Manager and General Counsel are filled by appointments of the Board. The District
employs 137 full-time equivalent employees.
The Authority
The Otay Water District Financing Authority (the “Authority”) is a joint exercise of powers authority
organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1
through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of
the State of California (the “Joint Powers Act”). The District and the California Municipal Finance
Authority, a joint exercise of powers authority, formed the Authority by the execution of a joint exercise
__________________________
* Preliminary, subject to change.
2
of powers agreement on March 3, 2010. The Authority functions as an independent entity and was formed
to assist the District in the financing of public capital improvements. Pursuant to the Joint Powers Act, the
Authority is authorized to issue revenue bonds to provide funds to finance and refinance public capital
improvements of the District, with such revenue bonds to be repaid from the installment payments for such
improvements, such as the installment payments described herein.
The Authority is governed by a five-member Board which consists of all members of the District’s Board
of Directors. The Board President serves as the Chairman of the Authority. The General Manager acts as
the Executive Director, the District Secretary acts as the Secretary, and the Chief Financial Officer acts as
the Treasurer/Auditor of the Authority.
The Wastewater System
The District provides sewer service to approximately 15,300 customers through 4,729 accounts located in
the northern section of the District. The District operates and maintains the sewage collection system
serving Rancho San Diego, Singing Hills, and portions of Mount Helix, all within the Upper Sweetwater
River Basin. This basin is also known as the Jamacha Basin. Residential customers comprise 97.3% of the
customer base.
Wastewater collection within the Jamacha Basin is provided by two agencies, the District and the County
of San Diego (the “County”). Customers in the basin, not served by either agency, dispose of their sewage
through septic tanks. After the sewage has been collected, it is sent to the District’s Ralph W. Chapman
Water Reclamation Facility treatment plant where the District produces recycled water. The by-product of
the treatment process is discharged through the County’s transmission system into the City of San Diego
Metropolitan Wastewater system (the “Metro System”).
The District is a member of Metro Wastewater Joint Powers Authority (the “Metro JPA”) and shares in the
use of the City of San Diego’s regional wastewater facilities. A significant amount of the sewer operation
costs is for sewer service charges from the Metro JPA. Additionally, the District also pays its share of the
County’s operation and maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall
to transport sewage to the Metro System. See “THE WASTEWATER SYSTEM - San Diego Metropolitan
Sewerage System” herein.
Sources of Payment for the Bonds
The Bonds. The Bonds are being issued pursuant to the Joint Powers Act and an Indenture of Trust, dated
as of November 1, 2019 (the “Indenture”), by and between the Authority and MUFG Union Bank, N.A.,
Los Angeles, California, as trustee (the “Trustee”). The Bonds are being issued to provide funding for the
Project, as defined herein. The proceeds of the Bonds deposited in the Project Fund will be used by the
District for the acquisition, construction and installation of the Project. A portion of the proceeds will also
be used to pay costs of issuance.
The Bonds are secured by the “Revenues,” consisting of Installment Payments (defined herein) to be made
by the District to the Authority pursuant to an Installment Sale Agreement, dated as of November 1, 2019
(the “Installment Sale Agreement”) by and between the Authority and the District and from investment
earnings on funds held under the Indenture. The District is obligated to make installment payments to the
Authority under the Installment Sale Agreement (the “Installment Payments”) from Net Revenues (defined
herein), and the Authority is, in turn, required under the Indenture to use the Installment Payments to pay
interest on and principal of the Bonds.
The Installment Payments are scheduled to be sufficient to pay, when due, the annual principal and interest
on the Bonds. Pursuant to the Indenture, the Authority will assign to the Trustee, for the benefit of the
Owners of the Bonds, all of its rights, title and interest under the Installment Sale Agreement except for its
3
right to be indemnified by the District. For a summary of the Indenture and the Installment Sale Agreement
see “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” herein.
The Installment Payments. The Installment Sale Agreement is being executed and delivered to finance
the construction of the Project. See “THE FINANCING PLAN” and “THE WASTEWATER SYSTEM.” The
Installment Payments are secured by a charge and lien on Net Revenues of the Wastewater System. See
“SOURCES OF PAYMENT FOR THE BONDS” herein.
The Bonds are limited obligations of the Authority and are payable solely from and secured solely by
the Revenues and all moneys on deposit in any of the funds and accounts established and held by the
Trustee under the Indenture. The District’s obligation to make the Installment Payments is a limited
obligation of the District payable solely from Net Revenues of the Wastewater System, and neither
the full faith and credit nor the taxing power of the District, the State of California or any of its
political subdivisions is pledged for the payment of the Bonds. Neither the Bonds nor the obligation
of the District to make Installment Payments constitutes an indebtedness of the Authority, the
District, the State of California or any political subdivision thereof in contravention of any
constitutional or statutory debt limitation or restriction.
No Reserve Fund
The Authority will not establish or fund a reserve fund for the Bonds.
Offering of the Bonds
Authority for Issuance and Delivery. The Bonds are to be issued pursuant to the Joint Powers Act, the
Indenture and Resolution No. ___ of the Authority adopted on ____, 2019.
Offering and Delivery of the Bonds. The Bonds are offered, when, as and if issued, subject to the approval
as to their legality by Bond Counsel. It is anticipated that the Bonds, in book-entry form, will be available
for delivery on or about ______, 2019 through the facilities of The Depository Trust Company.
Summaries Not Definitive
The summaries and references contained herein with respect to the Indenture, the Bonds and other statutes
or documents do not purport to be comprehensive or definitive and are qualified by reference to each such
document or statute, and references to the Bonds are qualified in their entirety by reference to the form
thereof included in the Indenture. Copies of these documents may be obtained after delivery of the Bonds
from the District at 2554 Sweetwater Springs Blvd., Spring Valley, California 91978.
4
THE BONDS
General Provisions
Bond Terms. The Bonds will be dated their date of delivery and issued in fully registered form without
coupons in denominations of $5,000 or any integral multiple of $5,000. The Bonds will mature in the
amounts and on the dates, and bear interest at the annual rates, set forth on the inside front cover page of
this Official Statement.
The Bonds will be issued as fully registered bonds in book-entry only form, registered in the name of Cede
& Co. as nominee of DTC, and will be available to ultimate purchasers in the denomination of $5,000 or
any integral multiple of $5,000, under the book-entry system maintained by DTC. While the Bonds are
subject to the book-entry system, the principal and interest with respect to a Bond will be paid by the Trustee
to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent
disbursement to Beneficial Owners of the Bonds. Purchasers of the Bonds will not receive certificates
representing their interests therein, which will be held at DTC.
See “APPENDIX F - THE BOOK-ENTRY SYSTEM” for further information regarding DTC and the book-
entry system.
Payments of Principal and Interest. Principal of the Bonds will be payable in accordance with the
maturity schedule shown on the inside front cover page of this Official Statement, subject to any optional
or mandatory sinking fund redemptions prior to maturity (see “Redemption” below). Interest on the Bonds
will be payable on March 1 and September 1 in each year, commencing on March 1, 2020 (each an “Interest
Payment Date”). Interest will be calculated on the basis of a 360-day year of twelve 30-day months.
While the Bonds are subject to the book-entry system, the principal and interest with respect to the Bonds
will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the Bonds. See
“APPENDIX F - THE BOOK-ENTRY SYSTEM.”
Redemption*
Optional Redemption From any Source of Available Funds. The Bonds maturing on or before
September 1, 2029 are not subject to optional redemption prior to their respective stated maturity dates.
The Bonds maturing on or after September 1, 2030, are subject to redemption in whole, or in part at the
Written Request of the District, among maturities on such basis as the District may designate and by lot
within a maturity, at the option of the District, on any date on or after September 1, 2029, from any available
source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, plus
accrued interest to the date of redemption, without premium.
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, ___ (the “Term Bond”)
are also subject to redemption, by lot, on September 1 in each of the years as set forth in the following table,
from deposits made for such purpose under the Indenture, at a redemption price equal to the principal
amount thereof to be redeemed together with accrued interest thereon to the redemption date, without
premium, or in lieu thereof may be purchased in the aggregate respective principal amounts and on the
respective dates as set forth in the following table; provided, however, that if some but not all of the Term
Bonds have been redeemed through optional redemption as described above, the total amount of all future
sinking fund payments with respect to such Term Bonds will be reduced by the aggregate principal amount
of such Term Bonds so redeemed, to be allocated among such payments in integral multiples of $5,000 as
determined by the District.
________________________________________
* Preliminary, subject to change.
5
Term Bond Maturing September 1, 20__
Sinking Fund
Redemption Date
(September 1)
Principal
Amount To Be
Redeemed
(Maturity)
Special Mandatory Redemption From Sale Proceeds. [ ].
Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of
less than all the Bonds of a single maturity, the District will select the Bonds of that maturity to be redeemed
by lot in any manner that the District in its sole discretion deems appropriate. For purposes of such
selection, the District will treat each Bond as consisting of separate $5,000 portions and each such portion
will be subject to redemption as if such portion were a separate bond.
Notice of Redemption. The Trustee will mail notice of redemption of the Bonds by first class mail, postage
prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of
any Bonds designated for redemption at their addresses appearing on the Registration Books and to one or
more Securities Depositories, and will be filed electronically with the Municipal Securities Rulemaking
Board or such other services providing information with respect to called bonds in accordance with then-
current guidelines of the Securities and Exchange Commission.
Neither the failure to receive any redemption notice nor any defect therein will affect the sufficiency of the
proceedings for redemption of the Bonds or the cessation of accrual of interest from and after the
redemption date.
Rescission of Redemption Notice. The District has the right to rescind any optional redemption by written
notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption will be cancelled
and annulled if for any reason funds are not available on the date fixed for redemption for the payment in
full of the Bonds then called for redemption, and such cancellation will not constitute an Event of Default
under the Indenture. The Trustee will mail notice of rescission of redemption in the same manner notice of
redemption was originally provided.
Effect of Redemption. If notice of redemption has been duly given as provided in the Indenture, and
moneys for payment of the redemption price of, together with interest accrued to the date fixed for
redemption on, including any applicable premium, the Bonds (or portions thereof) so called for redemption
are held by the Trustee, on the redemption date designated in the redemption notice, then the Bonds (or
portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for
redemption will cease to accrue, those Bonds (or portions thereof) will cease to be entitled to any benefit
or security under the Indenture, and the Owners of those Bonds will have no rights in respect thereof except
to receive payment of the redemption price thereof.
6
Scheduled Debt Service
The following presents the annual debt service on the Bonds, assuming no optional redemption prior to
maturity.
Bond Year
Ending
September 1 Principal Interest Total
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
Total
7
Annual Installment Payments related to the Bonds are set forth in the following table. The payments are
calculated on an accrual basis for each July 1 to June 30 period, consistent with the debt service calculations
that will be made for the District’s Comprehensive Annual Financial Report.
Fiscal
Year Ending Installment
June 30 Payments
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Total
8
THE FINANCING PLAN
The Project
The District will use the proceeds of the Bonds for the Campo Road Sewer replacement project (the
“Project”). The Project will replace 1.41 miles of 10-inch-diameter sewer main with a new 15-inch-
diameter sewer main pipeline along State Route 94 (“SR 94”) in Rancho San Diego. The sewer pipeline is
installed in easements that cross the properties of Rancho San Diego Village and the Rancho San Diego
Town Centre, and in the SR 94 public right of way between Avocado Boulevard and Jamacha Road.
The Project is part of an ongoing series of projects to rehabilitate and upgrade the sewer system in the
communities served by the District. The new pipeline will replace a 10-inch sewer main that can no longer
provide adequate capacity for sewer flows in the area. The new 15-inch-diameter pipeline will reduce the
potential for sewer overflows, and its new alignment will allow the District to construct and maintain the
pipeline without disturbing sensitive environmental areas.
The total Project cost is approximately $10.5 million, of which approximately $3 million will be funded
with proceeds of the Bonds. The Project is underway and is anticipated to be completed during November
2019.
Estimated Sources and Uses of Funds
Under the provisions of the Indenture, the Trustee will receive the proceeds from the sale of the Bonds and
other funds and will apply them as follows:
Sources:
Principal Amount of Bonds
Net Original Issue Premium (Discount)
Available Sources
Uses:
Project Fund
Underwriter’s Discount
Costs of Issuance Fund (1)
Total Uses
____________________________________
(1) Expenses include fees of Bond Counsel, the Municipal Advisor, Disclosure Counsel, the Trustee, costs of printing
the Official Statement, and other costs of delivery of the Bonds.
9
SOURCES OF PAYMENT FOR THE BONDS
Revenues; Pledge of Revenues
Pledge of Revenues and Other Amounts. Subject only to the provisions of the Indenture permitting the
application thereof for the purposes and on the terms and conditions set forth therein, all of the Revenues
and all amounts held in any fund or account established under the Indenture are pledged to secure the
payment of the principal of and interest and premium (if any) on the Bonds and in accordance with their
terms and the provisions of the Indenture. This pledge constitutes a lien on and security interest in the
Revenues and such amounts held under the Indenture, and will attach, be perfected and be valid and binding
from and after the Closing Date, without the need for any physical delivery thereof or further act.
“Revenues” means:
(a) all amounts received by the Authority or the Trustee pursuant or with respect to the Installment Sale
Agreement, including, without limiting the generality of the foregoing, all of the Installment
Payments (including both timely and delinquent payments, any late charges, and whether paid from
any source, but excluding any Additional Payments), prepayments, insurance proceeds,
condemnation proceeds, and
(b) all interest, profits or other income derived from the investment of amounts in any fund or account
established pursuant to the Indenture.
Assignment to Trustee. Under the Indenture, the Authority will irrevocably transfer, assign and set over
to the Trustee, without recourse to the Authority, all of its rights in the Installment Sale Agreement
(excepting only the Authority’s rights to Additional Payments, release and indemnification by the District,
and the payment of attorneys’ fees and expenses under the Installment Sale Agreement), including but not
limited to all of the Authority’s rights to receive and collect all of the Installment Payments. The Trustee is
entitled to collect and receive all of the Installment Payments, and any Installment Payments collected or
received by the Authority will be deemed to be held, and to have been collected or received, by the Authority
as the agent of the Trustee and will immediately be paid by the Authority to the Trustee. The Trustee is also
entitled to and must, subject to the provisions of the Indenture, take all steps, actions and proceedings which
the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the
Authority or separately, all of the rights of the Authority and all of the obligations of the District under the
Installment Sale Agreement.
Installment Payments
The Installment Payments are payable from and secured by Net Revenues all as set forth in the Installment
Sale Agreement and in the manner described herein. The Installment Payments are calculated to be
sufficient to pay, when due, the scheduled payment of principal and interest on by the Bonds.
The District’s obligation to pay the Installment Payments is a limited obligation of the District
payable solely from Net Revenues of the Wastewater System, and neither the full faith and credit nor
the taxing power of the District, the State of California or any if its political subdivisions is pledged
for the payment of the Installment Payments.
Net Revenues
Definitions. The following definitions are from the Installment Sale Agreement and the Indenture and
capitalized terms used below have the meanings set forth in the Indenture. See “APPENDIX A - SUMMARY
OF PRINCIPAL LEGAL DOCUMENTS.”
10
“Net Revenues” means, for any period, an amount equal to all of the Gross Revenues of the District received
during such period minus the amount required to pay all Operation and Maintenance Costs of the District
becoming payable during such period.
“Gross Revenues” means all gross charges received for, and all other gross income and receipts derived by
the District from, the ownership and operation of the Wastewater Operations (as defined below) or
otherwise arising from the Wastewater Operations, including but not limited to:
(a) all amounts levied by the District as a fee for connecting to the Wastewater Operations, as such fee
is established from time to time under the applicable laws of the State of California,
(b) all income, rents, rates, fees, capital improvement fees, charges and other moneys derived from the
services and facilities furnished or supplied through the facilities of the Wastewater Operations,
(c) the earnings on and income derived from the investment of such income, rents, rates, fees, charges
or other moneys to the extent that the use of such earnings and income is limited by or under
applicable law to the Wastewater Operations,
(d) the proceeds derived by the District directly or indirectly from the sale, lease or other disposition of
a part of the Wastewater Operations as permitted hereunder, and
(e) amounts transferred into the Wastewater Revenue Fund from a Rate Stabilization Fund, if any.
The term “Gross Revenues” does not include (i) customers’ deposits or any other deposits subject to refund
until such deposits have become the property of the District, (ii) the proceeds of any ad valorem property
taxes levied to pay any general obligation bond indebtedness of the District with respect to the Wastewater
Operations, (iii) special assessments or special taxes levied upon real property within any improvement
district for the purpose of paying special assessment bonds or special tax obligations of the District, and
(iv) amounts transferred from the Wastewater Revenue Fund into the Rate Stabilization Fund during a fiscal
year, but only to the extent that any amounts transferred from the Wastewater Revenue Fund into the Rate
Stabilization Fund were included in Gross Revenues for that fiscal year.
“Wastewater Operations” means the wastewater system of the District, including but not limited to all
facilities, properties and improvements at any time owned or operated by the District for the collection and
conveyance of wastewater from residents served thereby, and any necessary lands, rights, entitlements and
other property useful in connection therewith, together with all extensions thereof and improvements
thereto hereafter acquired, constructed or installed by the District.
“Operation and Maintenance Costs” means the reasonable and necessary costs and expenses paid by the
District for maintaining and operating the Wastewater Operations, including but not limited to:
(a) costs of utilities, including the costs of electricity and other forms of energy supplied to the
Wastewater Operations,
(b) the reasonable expenses of management and repair and other costs and expenses necessary to
maintain and preserve the Wastewater Operations in good repair and working order, and
(c) the reasonable administrative costs of the District attributable to the operation and maintenance of
the Wastewater Operations, including insurance and other costs described in the Installment Sale
Agreement.
“Operation and Maintenance Costs” do not include:
11
(i) debt service payable on obligations incurred by the District with respect to the Wastewater
Operations, including but not limited to the Installment Payments and any Parity Obligations,
(ii) depreciation, replacement and obsolescence charges or reserves therefor, and
(iii) capital expenditures (other than as set forth in paragraph (b) above), including amounts charged by
the Metro System for the Pure Water capital costs (see “THE WASTEWATER SYSTEM – San Diego
Metropolitan Sewerage System – Point Loma Wastewater Treatment Plant and the Pure Water Project”),
and
(iv) amortization of intangibles or other bookkeeping entries of a similar nature.
Application of District Revenues
Under the Installment Sale Agreement, the District will irrevocably pledge, charge and assign all the Net
Revenues of the District and all moneys on deposit in any of the funds and accounts established and held
by the Trustee under the Indenture to the punctual payment of the Installment Payments. This pledge,
charge and assignment constitutes a lien on the Net Revenues and such other moneys for the payment of
the Installment Payments in accordance with the terms of the Installment Sale Agreement, on parity with
the pledge and lien that secures any “Parity Obligations” (as defined under the heading entitled “Parity
Obligations” below).
Under the Installment Sale Agreement, the District is required to deposit all of the Gross Revenues in the
Wastewater Revenue Fund (which has been established and is held and maintained by the District)
immediately upon receipt.
The District will apply amounts in the Wastewater Revenue Fund in accordance with the Installment Sale
Agreement and any Parity Obligations Documents (for all purposes in this Official Statement, as such are
defined in the Indenture), and will apply amounts on deposit in the Wastewater Revenue Fund to pay when
due the following amounts in the following order of priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments and all payments of principal of and interest on Parity Obligations;
(iii) any other payments required to comply with the provisions of the Installment Sale Agreement and
any Parity Obligations Documents; and
(iv) any other purposes authorized under the Installment Sale Agreement.
No Preference or Priority. Under the Installment Sale Agreement, payment of the Installment Payments
and the principal of and interest on Parity Obligations will be made without preference or priority among
the Installment Payments and such Parity Obligations. If the amount of Net Revenues on deposit in the
Wastewater Revenue Fund is any time insufficient to enable the District to pay when due the Installment
Payments and the principal of and interest on Parity Obligations, such payments will be made on a pro rata
basis.
Other Uses of Gross Revenues Permitted. Under the Installment Sale Agreement the District will
manage, conserve and apply the Gross Revenues on deposit in the Wastewater Revenue Fund in such a
manner that all deposits required to be made as described above will be made at the times and in the amounts
so required. Subject to the foregoing sentence, so long as no Event of Default has occurred and is
continuing, the District may use and apply moneys in the Wastewater Revenue Fund for (i) the payment of
any subordinate obligations or any unsecured obligations, (ii) the acquisition and construction of
12
improvements to the Wastewater Operations, (iii) the prepayment of any other obligations of the District
relating to the Wastewater Operations, or (iv) any other lawful purposes of the District.
Events of Default; Remedies on Default. For a description of events of default and remedies on default
contained in the Installment Sale Agreement, see “Events of Default and Acceleration of Maturities” below
and “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Events of Default” and “- Remedies
on Default.”
Allocation of Revenues by Trustee
Transfers from the Bond Fund. Under the Indenture, on or before each Interest Payment Date, the Trustee
will transfer from the Bond Fund and deposit into the following respective accounts the following amounts
in the following order of priority:
(a) Deposit to Interest Account. The Trustee will deposit in the Interest Account an amount required to
cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of
interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding.
(b) Deposit to Principal Account. The Trustee will deposit in the Principal Account an amount required
to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of
the Bonds coming due and payable on each September 1, including the aggregate principal amount
of the Term Bonds (if any) that are subject to mandatory sinking fund redemption on that
September 1.
Application of Interest Account. All amounts in the Interest Account will be used and withdrawn by the
Trustee solely for the purpose of paying interest on the Bonds as it comes due and payable (including
accrued interest on any Bonds purchased or redeemed prior to maturity).
Application of Principal Account. All amounts in the Principal Account will be used and withdrawn by
the Trustee solely to pay the principal amount of the Bonds on their respective maturity dates, and the
principal amount of the Term Bonds (if any) that are subject to mandatory sinking fund redemption on such
September 1.
No Reserve Fund for the Bonds
There is no reserve fund established for the Bonds.
Events of Default and Acceleration of Maturities
The Installment Payments are not secured by, and the Owners of Bonds have no security interest in or
mortgage on the property of the Wastewater System, or of the District. Default by the District will not
result in loss of any property to the District. Should the District default, the Trustee may declare the entire
principal amount of the Installment Payments and the accrued interest thereon, to be due and payable
immediately, whereupon the same shall become due and payable, and take whatever action at law or in
equity may appear necessary or desirable to enforce performance and observance of any obligation,
agreement or covenant of the District under the Installment Sale Agreement. A default under the Installment
Sale Agreement is also an Event of Default under the Indenture which may result in an acceleration of
Bonds. See “APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - Events of Default” and “-
Remedies on Default” and “RISK FACTORS - Limitations on Remedies Available to Bond Owners.”
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Rate Covenant
Covenant Regarding Net Revenues. Under the Installment Sale Agreement, the District is required to fix,
prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the
Wastewater Operations during each Fiscal Year that are sufficient, after making allowances for
contingencies and errors in estimates, to yield Net Revenues that are at least equal to 115% of the amount
described in the clauses (ii) and (iii) under “- Covenant Regarding Gross Revenues” below for such Fiscal
Year.
Covenant Regarding Gross Revenues. Under the Installment Sale Agreement, the District is required to
fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the
Wastewater Operations during each Fiscal Year, which are at least sufficient, after making allowances for
contingencies and error in the estimates, to yield Gross Revenues sufficient to pay the following amounts
in the following order of priority:
(i) All Operation and Maintenance Costs estimated by the District to become due and payable in such
Fiscal Year.
(ii) All Installment Payments and all payments of principal of and interest on any Parity Obligations as
they become due and payable during such Fiscal Year, without preference or priority, except to the
extent such Installment Payments or the principal of and interest on such Parity Obligations are
payable from the proceeds of the Bonds or such Parity Obligations, as applicable, or from any source
of legally available funds of the District (other than the Gross Revenues of the Wastewater
Operations) that have been deposited with the Trustee for such purpose before the beginning of that
Fiscal Year.
(iii) All payments required to meet any other obligations of the District which are charges, liens,
encumbrances upon, or which are otherwise payable from, the Gross Revenues or the Net Revenues
during such Fiscal Year, except to the extent other sources of funds are reserved or encumbered
therefore.
Rate Stabilization Fund
The District has the right at any time to establish a fund to be held by it and administered in accordance
with the Indenture, to be known as the “Rate Stabilization Fund,” for the purpose of stabilizing the rates
and charges imposed by the District. From time to time the District may deposit amounts in the Rate
Stabilization Fund from any source of legally available funds, including but not limited to Net Revenues
that are released from the pledge and lien that secures the Bonds and any Parity Obligations, as the District
may determine.
The District may, but is not required to, withdraw from any amounts on deposit in a Rate Stabilization Fund
and deposit such amounts in the Wastewater Revenue Fund in any Fiscal Year for the purpose of paying
Annual Debt Service coming due and payable in such Fiscal Year. Amounts so transferred from a Rate
Stabilization Fund to the Wastewater Revenue Fund will constitute Gross Revenues for such Fiscal Year
(except as otherwise provided in the Indenture), and will be applied for the purposes of the Wastewater
Revenue Fund. Amounts on deposit in a Rate Stabilization Fund will not be pledged to or otherwise secure
the Bonds or any Parity Debt. All interest or other earnings on deposits in a Rate Stabilization Fund will
be withdrawn therefrom at least annually and accounted for as Gross Revenues in the Wastewater Revenue
Fund. The District has the right at any time to withdraw any or all amounts on deposit in a Rate Stabilization
Fund and apply such amounts for any lawful purposes of the District. The District does not currently
maintain any funds in a Rate Stabilization Fund.
14
Parity Obligations
Under the Installment Sale Agreement, the District may not issue or incur any additional bonds or other
obligations during the Term of the Installment Sale Agreement having any priority in payment of principal
or interest out of the Gross Revenues or the Net Revenues over the Installment Payments.
Under the Installment Sale Agreement, the District may issue, enter into or incur Parity Obligations, in
accordance with the conditions described below, or obligations that are either unsecured or which are
secured by an interest in the Net Revenues that is junior and subordinate to the pledge of and lien upon the
Net Revenues established under the Installment Sale Agreement.
Conditions for Issuance of Parity Obligations. Under the Installment Sale Agreement, except for
obligations incurred to prepay or discharge the Installment Payments or any Parity Obligations, the District
may not issue or incur any Parity Obligations during the Term of the Installment Sale Agreement unless all
the following conditions are satisfied:
(a) No Event of Default has occurred and is continuing.
(b) The amount of Net Revenues, excluding connection fees and transfers from the Rate Stabilization
Fund, as shown by the books of the District for the most recent completed Fiscal Year for which
audited financial statements of the District are available or for any more recent consecutive 12-month
period selected by the District, or shown in the audited financial statements of the District, plus at the
option of the District any Additional Revenues, are at least equal to 115% of the amount of Maximum
Annual Debt Service coming due and payable in the current or any future Bond Year with respect to
the Bonds and all Parity Debt then outstanding (including the Parity Debt then proposed to be issued).
If the Parity Obligations are being issued solely to refund outstanding Parity Obligations, and the resulting
Annual Debt Service for each Bond Year is less than the Annual Debt Service for each Bond Year prior to
the issuance of the refunding Parity Obligations, the District need not comply with the provisions described
in paragraphs (a) and (b) above.
The Parity Obligations may be, but are not required to be, in the form of Supplemental Agreements, and
may, but are not required to, secure the payment of debt service on Bonds.
“Parity Obligations” means (i) any bonds, notes, leases, installment sale agreements or other obligations
of the District payable from and secured by a pledge of and lien upon any of the Net Revenues on a parity
with the Installment Payments, entered into or issued under and in accordance with the Installment Sale
Agreement, and (ii) any other Governmental Loan that is treated as a Parity Obligation under the Installment
Sale Agreement.
“Additional Revenues” means (i) an allowance for Net Revenues from any additions or improvements to
or extensions of the Wastewater Operations to be made with the proceeds of such Parity Obligations and
also for Net Revenues from any such additions, improvements or extensions which have been made from
moneys from any source but in any case which, during all or any part of the latest Fiscal Year or for any
more recent consecutive 12-month period selected by the District, were not in service, all in an amount
equal to the estimated additional average annual Net Revenues to be derived from such additions,
improvements and extensions for the first 36-month period in which each addition, improvement or
extension is respectively to be in operation, or (ii) an allowance for Net Revenues arising from any increase
in the charges made for service from the Wastewater Operations which has been adopted prior to the
incurring of such Parity Obligations but which, during all or any part of the latest Fiscal Year or for any
more recent consecutive 12-month period selected by the District, was not in effect, in an amount equal to
the total amount by which the Net Revenues would have been increased if such increase in charges had
been in effect during the whole of such Fiscal Year or 12-month period.
15
Conditions for Entering Into Governmental Loans.
(a) The District may borrow money from a Governmental Agency and incur a Governmental Loan to
finance improvements to the Wastewater Operations. A Governmental Loan may be treated as a
Parity Obligation for purposes of the Installment Sale Agreement, so long as the District complies
with subsections (a) and (b) under the conditions for issuance of Parity Obligations described above
before incurring the Governmental Loan.
(b) the District may not make a payment on any Governmental Loan (except as expressly described in
subsection (c) below) to the extent it would have the effect of causing the District to fail to make a
timely payment on the Bonds.
(c) If Net Revenues are ever insufficient to pay the full amount of Installment Payments and other Parity
Obligations then Outstanding and such Governmental Loan, the District will make payments on the
Installment Payments and other Parity Obligations and such Governmental Loan on a pro rata basis.
“Governmental Agency.” The term “Governmental Loan” is defined in the Indenture as any loan made
by a “Governmental Agency” (defined as the State, and the United States of America, acting through any
of its agencies, to the extent that the State or such agency has loaned money to the District for the
Wastewater Operations) to the District which is secured by a pledge of Net Revenues and incurred by the
District to finance improvements to the Wastewater Operations pursuant to the Installment Sale Agreement.
Proceeds of Insurance, Sale or Condemnation Awards
Insurance. Under the Installment Sale Agreement, the District must at all times maintain with responsible
insurers all such insurance on the Wastewater Operations as is customarily maintained with respect to works
and properties of like character against accident to, loss of or damage to the Wastewater Operations. The
District will apply any amounts collected from insurance against accident to or destruction of any portion
of the Wastewater Operations to repair or rebuild such damaged or destroyed portion of the Wastewater
Operations.
The District must also maintain, with responsible insurers, worker’s compensation insurance and insurance
against public liability and property damage to the extent reasonably necessary to protect the District, the
Authority, the Trustee and the Owners of the Bonds.
Any policy of insurance required under this provision may be maintained as part of or in conjunction with
any other insurance coverage carried by the District, and may be maintained in whole or in part in the form
of self-insurance by the District or in the form of the participation by the District in a joint powers agency
or other program providing pooled insurance.
Sale of the Wastewater Operations. Except as described below, the District will covenant in the
Installment Sale Agreement that the Wastewater Operations will not be encumbered, sold, leased, pledged,
have any charge placed thereon, or otherwise be disposed of, as a whole or substantially as a whole, if such
encumbrance, sale, lease, pledge, charge or other disposition would materially impair the ability of the
District to pay the Installment Payments or the principal of or interest on any Parity Obligations, or would
materially adversely affect its ability to comply with the terms of the Installment Sale Agreement or any
Parity Obligations Documents.
The District may not enter into any agreement that impairs the operation of the Wastewater Operations or
any part of it necessary to secure adequate Net Revenues to pay the Installment Payments or any Parity
Obligations, or which otherwise would impair the rights of the Bond Owners or the Trustee with respect to
the Net Revenues.
16
If any substantial part of the Wastewater Operations is sold, the payment therefor must be used for the
acquisition or construction of improvements to the Wastewater Operations [ or the redemption of all
Outstanding Bonds and Parity Obligations.]
Condemnation Awards. Any amounts received as awards as a result of the taking of all or any part of the
Wastewater Operations by the lawful exercise of eminent domain, if and to the extent that such right can be
exercised against such property of the District, must be used for the acquisition or construction of
improvements to the Wastewater Operations.
SEWER SERVICE AREA AND FACILITIES
INSERT MAP
17
OTAY WATER DISTRICT
The District was formed in January 1956 pursuant to Section 71000 et seq., of the California Water Code,
and joined the San Diego County Water Authority (which is a member of the Metropolitan Water District
of Southern California) in September 1956 to acquire the right to purchase and distribute imported water
throughout its service area. The San Diego County Water Authority is an agency responsible for the
wholesale supply of water to its 24 public agency members in San Diego County.
The District’s boundaries currently encompass an area of approximately 125 square miles and is generally
located within the south central portion of San Diego County. The District serves a wide spectrum of
communities, including southern El Cajon, La Mesa, Rancho San Diego, Jamul, Spring Valley, Bonita,
eastern Chula Vista, and a small portion of the City of San Diego on Otay Mesa. The southern boundary
of the District is the international border with Mexico.
The District is governed by a five-member Board of Directors (the “Board”) elected from separate
geographical areas within the District. The Board selects a Board President from among its members and
appoints a General Manager and General Counsel to serve the District.
Revenues from the District’s water system are not pledged to the payment of the Bonds or the Installment
Payments.
THE WASTEWATER SYSTEM
The following information concerning the Wastewater System was obtained from District officials except
where otherwise indicated. The audited financial statements of the District for the Fiscal Year ended
June 30, 2019 are attached hereto as “APPENDIX B” and should be read in their entirety.
Wastewater System Description
The District owns and operates the Wastewater System, a wastewater collection system providing public
sewer service to approximately 4,729 customer accounts within the Jamacha drainage basin located in the
northern section of the District. The County also provides wastewater service in a portion of the Jamacha
Basin. Wastewater flows from each agency’s customers are conveyed in joint collection and pumping
systems.
The District’s wastewater facilities consist of approximately 88 miles of sewer mains, four sewage lift
stations, and one main sewage pump station. The District also owns and operates the Ralph W. Chapman
Water Reclamation Facility (“Ralph W. Chapman Water Reclamation Facility”) within the Jamacha Basin,
which is operated as a skimming facility.
Currently, the District collects approximately 1.15 million gallons per day (“mgd”) of wastewater. Of this
amount, approximately 0.2 mgd is conveyed to the City of San Diego Metropolitan Sewerage System (the
“Metro System”) for treatment at the Point Loma Wastewater Treatment Plant (“Point Loma Wastewater
Treatment Plant”) and released into the ocean via an outfall. The remaining 0.95 mgd is processed as
recycled water at the Ralph W. Chapman Water Reclamation Facility. The costs of primary and secondary
treatment of wastewater is an operating expense of the Wastewater System. The costs of tertiary treatment
of the wastewater, which then allows it to be conveyed to the District’s recycled water customers, is charged
directly to the District’s water system.
The District has entered into a joint use agreement with the County’s Spring Valley Sanitation District to
pay its share of the County’s operation and maintenance cost of the Rancho San Diego Outfall and the
Spring Valley Outfall to transport sewage to the Metro System. The Metro System processes the District’s
sewage that is beyond the capability of the Ralph R. Chapman Water Recycling Facility and all of the sludge
created by the Ralph W. Chapman Water Reclamation Facility. All payments by the District to the City of
18
San Diego with respect to the Metro System are treated as Operation and Maintenance Costs of the
Wastewater System.
San Diego Metropolitan Sewerage System
The Metro System is a regional sewage treatment and disposal system that serves the City of San Diego
and various other public agencies, including cities situated within common drainage areas. The Metro
System treats and disposes of the wastewater generated by the City of San Diego and certain amounts from
12 other cities and districts. The City of San Diego, as operator of the Metro System, is the holder of two
National Pollutant Discharge Elimination System (“NPDES”) permits, one for the discharge of sewage at
the Point Loma Wastewater Treatment Plant (“Point Loma Discharge Permit”), and the other for the
discharge of sewage at the South Bay Water Reclamation Plant.
The Metropolitan Wastewater Joint Powers Authority (“Metro JPA”) is a coalition of municipalities and
special districts in the southern and central portions of San Diego County that share in the use of the Metro
System facilities. The District is one of 12 “Participating Agencies” in the Metro JPA The other Metro JPA
member agencies are the cities of Chula Vista, Coronado, Del Mar, El Cajon, Imperial Beach, La Mesa,
National City, Poway, the County of San Diego Sanitation District, the Lemon Grove Sanitation District,
and Padre Dam Municipal Water District.
The District is a party to the Regional Wastewater Disposal Agreement dated of May 18, 1998 as amended,
between the City of San Diego and the Participating Agencies including the District (the “Regional
Wastewater Disposal Agreement”). The Regional Wastewater Disposal Agreement is proposed to be
amended and restated by an Amended and Restated Regional Wastewater Disposal Agreement (the
“Amended and Restated Regional Wastewater Disposal Agreement”) that is currently under consideration
and has been executed by all but 2 Participating Agencies.
Regional Wastewater Disposal Agreement. Under the terms of the Regional Wastewater Disposal
Agreement, the District shares in the cost of the Metro System. It is the District’s practice to pass through
any increase in treatment costs to its customers (see “THE WASTEWATER SYSTEM - Sewer Charges”).
Pursuant to the Regional Wastewater Disposal Agreement, the Participating Agencies are required to pay
their respective share of planning, design and construction of the Metro System facilities and costs relating
to the operation and maintenance of the Metro System by the City of San Diego. The amount to be paid by
the Participating Agencies is calculated based on a Sewer System Charge and, if additional capacity is
needed, a New Contract Capacity Charge. The current Regional Wastewater Disposal Agreement expires
on December 31, 2050.
The “Sewer System Charge” is a charge that is calculated annually, billed quarterly and based on flow and
strength coming into the Metro System. The “New Contract Capacity Charge” is an amount to be paid by
any Participating Agency for the right to discharge any new or additional capacity into the Metro System
beyond its existing allotted capacity.
The Amended and Restated Regional Wastewater Disposal Agreement, as proposed, terminates on
December 31, 2065, subject to extension by agreement of the parties; the parties agree in the Amended and
Restated Regional Wastewater Disposal Agreement to begin discussing an extension no later than
December 31, 2055. The Participating Agencies’ right to obtain wastewater treatment services from the
Metro System will survive termination of the Amended and Restated Regional Wastewater Disposal
Agreement; in that case, the Participating Agencies are obligated to pay their proportional share of costs
based on their respective flow and strength. However, the City of San Diego may abandon the Metro
System on December 31, 2065 with 10 years’ prior notice to the Participating Agencies.
For information about regulatory requirements applicable to the Metro System and the Metro System capital
improvement program, the District refers potential investors to an Official Statement prepared by the Public
19
Facilities Financing Authority of the City of San Diego in connection with the issuance of Senior Sewer
Revenue Refunding Bonds, Series 2016A relating to the Metro System dated March 2, 2016 (the “Metro
Official Statement”). Although the District believes the City of San Diego is the best source of information
about the Metro System, and, therefore, encourages potential investors to review the Metro Official
Statement, the District can provide no assurances as to the accuracy, completeness or timeliness of the
Metro Official Statement. The Metro Official Statement and its continuing disclosure reports are available
on EMMA.
The City of San Diego is required to develop and implement an industrial pretreatment program pursuant
to its NPDES permits. Among other things, this obligates the District to adopt and diligently enforce an
ordinance that establishes an industrial pretreatment program that incorporates discharge limits that are at
least as stringent as those established by the City of San Diego and any categorical pretreatment standards
promulgated by the Environmental Protection Agency (“EPA”).
Point Loma Wastewater Treatment Plant and the Pure Water Project. Opened in 1963, the Point Loma
Wastewater Treatment Plant treats approximately 175 million gallons of wastewater per day (it is rated for
240 million gallons per day). In November 1995, the City of San Diego received a modified permit (also
called a “waiver”) from Secondary Treatment requirements of the Clean Water Act. This modified permit
was renewed in September 2002, in June 2010 and October_, 2017. The permit is required by the EPA to
be renewed every 5 years and expires September 30, 2022.
The recent renewal process included the “Pure Water Project,” a water recycling program that would divert
millions of gallons of wastewater per day to a water purification facility, providing 83 million gallons of
water every day, with an initial facility producing 30 million gallons per day anticipated to be completed
first and the second phase to be completed by 2035. The Pure Project would use proven water purification
technology to clean recycled water to produce safe, high-quality drinking water. While completion of the
Pure Water Project avoids costly upgrades to the Point Loma Wastewater Treatment Plant, cost estimates
for the Pure Water Project range from $1.8 billion to $3 billion (in 2016 dollars), of which approximately
$1.8 billion will be a cost borne by the Metro System with the balance of $1.2 billion paid for from the City
of San Diego’s Water Reserve Fund..
Under the existing Regional Wastewater Disposal Agreement, the Participating Agencies’ share of the Pure
Water capital costs is based on flow and strength coming into the Metro System. The capital costs are not
limited. Under the proposed Amended and Restated Regional Wastewater Disposal Agreement, the
Participating Agencies’ share of the Pure Water capital costs would be based on a fixed percentage of
capacity ownership. The capital costs are limited to $1.8 billion. The District’s financial liability associated
with the proposed improvements under the Amended and Restated Regional Wastewater Disposal
Agreement is approximately 0.5% of the total cost, or $9 million. This percentage is higher than the
District’s existing share of capital charges based the current formula for flow and strength, but it does
provide a limit on total capital costs.
The District cannot provide any assurance if, or when, the Amended and Restated Regional Wastewater
Disposal Agreement will be executed by all the Participating Agencies, what the ultimate cost of the Pure
Water Project will be and when and if it will be completed, or if additional capital improvements to the
Point Loma Wastewater Treatment Plant will be required in the interim and charged to the Participating
Agencies, including the District.
Wastewater System Regulatory Issues
Regulatory requirements applicable to the Wastewater System are contained in or imposed by regulation
pursuant to the Federal Water Pollution Control Act, as amended, and the State of California Porter Cologne
Water Quality Control Act of 1969, as amended. Both Federal and State regulations are administered
through the Regional Water Board. The District is not aware of any environmental or regulatory issues that
would adversely impact its ability to provide sewer service.
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The waste discharge requirements applicable to the Wastewater System are a product of (i) the waste
discharge requirements relating to the Ralph W. Chapman Water Reclamation Facility, and (ii) the waste
discharge requirements applicable to the Metro System (see “San Diego Metropolitan Sewerage System”
above).
The District’s recycled water operations are subject to regulation under Section 402 of the federal Clean
Water Act, implementing regulations adopted by the EPA, the California Water Code and regulations
promulgated by the California Department of Health Services. Specifically, the District must comply with
requirements relating to discharge from the Ralph W. Chapman Water Reclamation Facility established by
the Regional Water Board, San Diego Region, most recently by Order No. R9-2007-0038 dated May 7,
2007.
21
Customer Base
The customer base of the District consists primarily of residential properties. The District is primarily built
out and no significant new connections are anticipated.
TABLE NO. 1
CURRENT AND HISTORICAL SERVICE CONNECTIONS
Fiscal Years 2009-10 through 2018-19
Fiscal Year Ended
June 30
Number
of Connections
2010 4,646
2011 4,655
2012 4,655
2013 4,655
2014 4,657
2015 4,679
2016 4,677
2017 4,683
2018 4,714
2019 4,729 __________________________
Source: Otay Water District.
Table No. 2 shows the 10 largest water users for Fiscal Year 2018-19.
TABLE NO. 2
TEN LARGEST CUSTOMERS BY REVENUES
Year ended June 30, 2019
Customer
Usage
in CCF (1)
% of
Sewer System
Consumption
Wastewater
Revenues
% of Total
Wastewaters
Revenues
Country Hills Apartments 34,611 4.66% $ 152,539 5.24%
Cuyamaca College 25,865 3.49% 89,825 3.08%
HCA Woodbridge LLC 13,523 1.82% 64,128 2.20%
Avocado Village HOA 13,635 1.84% 36,373 1.25%
Dual Diagnosis Treatment Center 4,279 0.58% 21,234 0.73%
Sycuan Resort 5,110 0.69% 19,559 0.67%
Grossmont School District 5,296 0.71% 18,145 0.62%
Burton Schenker 3,108 0.42% 13,384 0.46%
Smart & Final 1,456 0.20% 10,837 0.37%
Western Golf Properties 3,478 0.47% 9,954 0.34%
Total top 10 110,362 14.87% 435,979 14.96%
Other sewer customers 631,667 85.13% 2,477,808 85.04%
Total sewer revenues 742,029 100.00% $2,913,787 100.00% ____________________________________
(1) Hundred cubic feet. Approximately based on 2nd half winter average used in the Fiscal Year 2018-19 Budget.
Source: Otay Water District.
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Sewer Charges
The District held a public hearing on October 3, 2018 and approved a five-year schedule of rates through
2023, which included authorization to raise rates by up to 10 percent per year during the five year period
for all costs related to labor, benefits, materials, maintenance, administrative expenses and other operational
costs of providing sewer service. This includes amounts required to meet bond covenants and to maintain
adequate reserves and rate stabilization. Authorization was also approved to pass through all rates, fees and
charges for power and from the District’s treatment and disposal providers including, but not limited to San
Diego Gas and Electric, the County of San Diego and the City of San Diego during the five year period.
Residential and Multi-Residential customers are billed based on their winter average consumption from the
previous year. The “Winter Average” is defined as units of water billed from January through April of the
previous year divided by four. This average is then reduced by 15% as an acknowledgement that not all
water purchased goes through the sewer system.
Commercial customers are billed based on the customer’s average annual consumption, meter size and
strength factor. The average is also reduced by 15%.
TABLE NO. 3
SEWER VARIABLE AND FIXED CHARGES
As of January 1, 2019 and January 1, 2020
Usage Fee
Residential Per Unit:
2019 $2.67
2020 2.93
Non-Residential Per Unit:
Category 2019 2020
Low strength $2.67 $2.93
Medium strength 3.31 3.64
High strength 4.56 5.01
Fixed Rates
Meter
Size
2019
Residential
2019 Non-
Residential
2020
Residential
2020 Non-
Residential
3/4” $14.91 $ 14.91 $16.38 $ 16.38
1” 14.91 37.27 16.38 40.94
1 1/2” N/A 74.55 N/A 81.88
2” N/A 119.27 N/A 131.00
3” N/A 223.64 N/A 245.64
4” N/A 372.73 N/A 409.40
6” N/A 745.45 N/A 818.79
8” N/A 1,192.73 N/A 1,310.08
10” N/A 1,714.54 N/A 1,883.23
____________________________________
Source: Otay Water District.
23
As charges are billed based on the prior Winter Average water use, there was a sewer rate decrease of 7%
as of January 1, 2019 due to increased water usage during the prior year. The adopted rate increase effective
January 1, 2020 is 8.9%, in part because the Winter Average in 2019 was lower than the prior year and in
part due to increased expenses.
The Board of Directors is expected to continue to take action each year through 2023 to set rates in
accordance with the October 3, 2018 rate action. However, there can be no assurance that rates will be
increased as contemplated herein. All rate increases are subject to the procedural and substantive provisions
of Proposition 218. See “CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS -
Proposition 218” herein.
Based on its internal rate model updated in June 2019 and the need to fund the CIP, the District anticipates
that it will need to increase its rates by approximately 7.1% in each of the next four years.
The District is conducting a cost of service study (the “Study”). One of the goals of the Study is modifying
the Winter Average component of the sewer rate calculation to include 3 prior years’ water usage instead of
a single year to take into account an average usage between high and low rain years. The District expects
to implement the new rate calculation in January 2021, however, there can be no assurance that rates will
be modified as contemplated.
As previously noted, the District has projected that future rate increases will be necessary to implement the
current six-year CIP. Additionally, the rates, charges and fees may be increased each year to pass-through
additional actual cost increases imposed by the City of San Diego and the County of San Diego if such
increases are greater than already factored in to the District’s rates.
24
The average residential customer uses 8.6 units of water per month. One unit of water is equal to 100 cubic
feet of water (one cubic foot of water equals 7.48 gallons). Table No. 4 compares average sewer water rates
charged by the District with surrounding cities and other water agencies in San Diego County.
TABLE NO. 4
COMPARISON OF
AVERAGE RESIDENTIAL SEWER RATES
Based on Rates to be Effective as of January 1, 2020
City/Water Agency Average Rates (1)
Leucadia $ 28.64
Carlsbad (2) 28.92
Otay Water District 37.80
San Diego County 38.58
National City 38.68
Vallecitos 40.47
City of San Diego(2) 48.13
Chula Vista 48.20
Corondao 48.75
Escondido 49.61
La Mesa 50.88
Lemon Grove 51.59
Poway(2) 51.90
Imperial Beach 52.74
El Cajon 52.84
Buena 55.25
Vista 56.17
Solana Beach 56.86
Valley Center – MG (2) 58.71
Ramona 67.12
Padre Dam 69.92
Oceanside 69.96
Rainbow 71.05
Fallbrook 71.09
Olivenhain 71.76
Encinitas 72.91
Rancho Santa Fe 79.17
Del Mar 109.49
____________________________________
(1) Based on 8.6 units of water used and ¾” residential meter size.
(2) At the time of the survey September 2019, the member agency’s Fiscal Year 2019-20 rate was
unavailable. The estimated increase is based on the other agency’s average Fiscal Year 2019-
20 known rate increases.
Source: Otay Water District.
25
Billing Practices and Collection
The District bills for sewer service monthly. Monthly amounts are fixed for each customer and are re-
calculated once each year, typically in January. For Fiscal Year 2018-19, the District’s collection rate was
99.96%.
Operating Reserves
The District has a number of policies concerning reserves for operations and capital expenditures. The
District’s minimum operating reserve requirement for the Wastewater System is 90 days’ of operating
expenses. In recent years, the District built up reserves for capital expenditures and has recently completed
a number of large capital projects.
No Outstanding Parity Debt
The Installment Payments will be secured by Net Revenues of the Wastewater System. The District has no
outstanding obligations that constitute Parity Obligations on the date of issuance of the Bonds.
Capital Improvement Program
The District reviews and updates its six-year Capital Improvement Program (the “CIP”) annually.
The table below summarizes the current six-year CIP for the Wastewater updated as part of the 2019-20
budget.
Fiscal Year Ending June 30
2020 2021 2022 2023 2024 2025 Total
$2,188,000 $792,000 $1,452,000 $1,008,000 $1,564,000 $1,388,000 $8,392,000
_______________________________
Source: Otay Water District.
The District has identified the timing and method of funding the capital improvements over the next six
years. The above improvement categories are designed to be funded with operational net cashflow,
proceeds of the Bonds, reserves or a combination of these sources, and currently, the District expects to
fund $3,000,000 of these improvements with future Bond proceeds. The District expects that additional
debt financing for the Wastewater System will occur during 2021. In order to implement the CIP, the
District anticipates that it will need to increase its rates as described herein (see “Sewer Charges” herein).
However, there is no guarantee that the District will implement such rate increases at the amount and at the
time anticipated in its planning documents. See “CONSTITUTIONAL LIMITATIONS ON TAXES AND
APPROPRIATIONS - Proposition 218.”
Pure Water Project. The District expects that it will capitalize any charges from the Metro System relating
to the Pure Water Project (see “San Diego Metropolitan Sewerage System – Point Loma Wastewater
Treatment Plant and the Pure Water Project”). The table below summarizes the expected capital charges
for the Pure Water System included in the District’s six-year Capital Improvement Program.
Fiscal Year Ending June 30
2020 2021 2022 2023 2024 2025 Total
$132,000 $182,000 $232,000 $283,000 $334,000 $383,000 $1,546,000
26
Employees and Benefits
The District has 138 full-time positions budgeted for Fiscal Year 2019-20. Five percent of total salaries and
benefits are allocated to the Wastewater System. The OWD Employee Association represents 100 of these
full-time employees as a collective bargaining unit. The District has not experienced any strikes and
continues to have positive labor relations, which includes a negotiated multi-year Collective Bargaining
Agreement. This agreement, the Memorandum of Understanding (“MOU”), with amendments, is in effect
from July 1, 2019 to June 30, 2024.
The District provides retirement benefits and other post-employment benefits for its employees. See Notes
(7) and (8) in the District’s Fiscal Year 2018-19 audited financial statements, attached hereto as “APPENDIX
B.” During Fiscal Year 2018-19, the District prepaid $31.8 million of its unfunded actuarial pension
liability, which is not yet reflected in the most current available actuarial valuation of the District’s pension
liability as of June 30, 2018. In addition, the District is expected to reach 100% funded status for its other post-
employment benefits as of June 30, 2020.
District Reserves and Investment Policy
As of June 30, 2019, the District had approximately $73.8 million in cash and investments (combined
Wastewater System and water operations). The Wastewater System’s share of this amount at June 30, 2019
is $2.76 million. The District’s reserves are not pledged to and do not secure the District’s obligation to
pay the Installment Payments.
In accordance with State of California law, the District Board of Directors has approved an investment
policy (the “Investment Policy”) which complies with Sections 53601 through 53630 of the Government
Code of the State of California providing legal authorization for the investment or deposit of funds of local
agencies. All investments of the District conform to the restrictions of those laws. The District’s
investments by category and their respective market value and book value as of June 30, 2019 are set forth
in Table No. 5 below. For additional information relating to the District’s investments, see “APPENDIX B
- DISTRICT AUDITED FINANCIAL STATEMENTS,” Note 2.
TABLE NO. 5
SUMMARY OF INVESTMENTS
As of June 30, 2019
Investments Market Value Book Value % of Portfolio
Federal Agency Issues – Callable $31,670,612 $31,735,000 42.97%
Local Agency Investment Fund (LAIF) 41,855,272 41,783,747 56.57
San Diego County Pool 281,000 281,036 0.38
Money Market Funds 59,595 59,595 0.08
$73,866,479 $73,859,378 100.00%
____________________________________
Source: Otay Water District.
The Investment Policy may be changed at any time at the discretion of the District (subject to the State law
provisions relating to authorized investments) and as the California Government Code is amended. Any
exception to the Investment Policy must, however, be formally approved by the Board of Directors of the
District. There can be no assurance the State law or the Investment Policy will not be amended in the future
to allow for investments which are currently not permitted under such State law or the Investment Policy,
or that the objectives of the District with respect to investments will not change.
27
Historical Operating Results
The following table summarizes the Statement of Net Position for the Wastewater System for the last five
fiscal years ended June 30, 2019. The audited financial statements of the District for the Fiscal Year ended
June 30, 2019 are attached hereto as “APPENDIX B” and should be read in their entirety.
The District accounts for moneys received and expenses paid in accordance with generally accepted
accounting principles applicable to governmental agencies such as the District (“GAAP”). In certain cases,
GAAP requires or permits moneys collected in one Fiscal Year to be recognized as revenue in a subsequent
Fiscal Year and requires or permits expenses paid or incurred in one Fiscal Year to be recognized as
expenses in a subsequent Fiscal Year. See “APPENDIX B.” Except as otherwise expressly noted herein, all
financial information derived from the District’s audited financial statements reflects the application of
GAAP.
The Governmental Accounting Standards Board (“GASB”) has issued various statements relating to the
reporting of pension and other post-retirement benefit liabilities and expense, and most recently, new
accounting and financial reporting requirements for OPEB plans. The required reporting of net pension
liability was incorporated into the District’s financial statements for the Fiscal Year ending June 30, 2015
and the required reporting of net OPEB liability in accordance with GASB Statement No. 75 was
incorporated into the District’s financial statements for the Fiscal Year ending June 30, 2018.
Prior to the start of a fiscal year, agencies (including the District) provide the Metro System with their
estimate of wastewater flow and strength they expect to discharge to the Metro System. The City of San
Diego also provides an estimate of their projected costs to be spent that fiscal year, including operational
and maintenance work on the Metro System. This provides the agencies with an estimated budget to use
for the fiscal year. After the fiscal year is over, the actual flows and strengths that were sent to the Metro
System and the actual expenses incurred by the City of San Diego are “trued-up” to determine the final
invoicing amount for that fiscal year. This generally occurs two years after the end of the operating year.
In prior years, this has been reflected in “Miscellaneous Revenues” when the true-up results in a refund,
and in “Operating Expenses” when the true-up results in additional payment.
28
TABLE NO. 6
OTAY WATER DISTRICT
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
STATEMENT OF NET POSITION
For the Fiscal Years Ended June 30
2015
2016
2017
2018
2019 ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,008,510 $ 1,380,004 $ 2,912,754 $ 1,248,515 $ 697,835
Investments 8,487,168 9,536,464 5,353,358 3,830,588 2,062,618
Board Designated Investments 44,054 87,915 115,396 125,620 -
Accounts Receivable, Net - 179,781 176,447 172,016 210,500
Prepaid Expenses and Other Current Assets 34,839 34,300 34,300 34,300 34,300
Total Current Assets $10,574,571 $11,218,464 $ 8,592,255 $ 5,411,039 $ 3,005,253
NON-CURRENT ASSETS:
Net OPEB Asset $ - $ 418,506 $ 467,099 $ - $ -
Capital Assets:
Land 28,200 28,200 332,136 332,136 332,136
Construction in Progress 1,754,365 2,168,017 4,722,179 4,977,615 9,269,253
Capital Assets, Net of Accumulated Depreciation 16,001,693 15,738,718 16,381,109 19,682,084 19,851,768
Total Capital Assets, Net of Depreciation 17,784,258 17,934,935 21,435,424 24,991,835 29,453,157
Total Non-current Assets $17,784,258 $18,353,441 $21,902,523 $24,991,835 $29,453,157
TOTAL ASSETS $28,358,829 $29,571,905 $30,494,778 $30,402,874 $32,458,410
DEFERRED OUTFLOWS OF
RESOURCES
Deferred Actuarial Pension Costs 164,477 277,530 450,476 425,632 2,065,311
Deferred Actuarial OPEB Costs - - - 103,494 103,904
TOTAL DEFERRED OUTFLOWS OF
RESOURCES
$ 164,477
$ 277,530
$ 450,476
$ 529,126
$ 2,169,215
Continued on next page.
29
TABLE NO. 6
OTAY WATER DISTRICT
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
STATEMENT OF NET POSITION
For the Fiscal Years Ended June 30
Continued from previous page.
2015 2016 2017 2018 2019
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable $ 228,017 $ 191,334 $ 82,906 $ 900,460 $ 179,189
Other Accrued Liabilities 179,155 210,558 255,709 439,426 643,495
Total Current Liabilities $ 407,172 $ 401,892 $ 338,615 $ 1,339,886 $ 822,684
NON-CURRENT LIABILITIES:
Long-term Debt:
Net Pension Liability 1,781,274 1,828,127 2,068,124 2,285,634 2,221,070
Net OPEB Liability - - - 221,393 151,308
Total Non-current Liabilities $ 1,781,274 $ 1,828,127 $ 2,068,124 $ 2,507,027 $ 2,372,378
TOTAL LIABILITIES $ 2,188,446 $ 2,230,019 $ 2,406,739 $ 3,846,913 $ 3,195,062
DEFERRED INFLOWS OF RESOURCES
Deferred Actuarial Pension Costs $ 228,525 $ 251,927 $ 163,823 $ 19,935 $ 31,888
Deferred Actuarial OPEB Costs - - - 25,354 25,642
TOTAL DEFERRED INFLOWS OF
RESOURCES
$ 228,525
$ 251,927
$ 163,823
$ 45,289
$ 57,530
NET POSITION
Net Investment in Capital Assets $17,784,258 $17,934,935 $21,435,424 $24,991,835 $29,453,157
Unrestricted 8,322,077 9,432,554 6,939,268 2,047,963 1,921,876
TOTAL NET POSITION $26,106,335 $27,367,489 $28,374,692 $27,039,798 $31,375,033
____________________________________
(1) For the Fiscal Year ended June 30, 2015, the District Implemented GASB 68 relating to reporting of pension and
other retirement obligations.
(2) For the Fiscal Year ended June 30, 2018, the District Implemented GASB 75 relating to reporting of OPEB
obligations.
Source: Otay Water District.
30
TABLE NO. 7
OTAY WATER DISTRICT
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
For the Fiscal Years Ended June 30
2015 2016 2017 2018 2019
OPERATING REVENUES
Wastewater Revenue $ 3,044,158 $ 3,175,300 $ 2,983,495 $ 2,865,520 $ 2,961,157
Connection and Other Fees 6,746 3,764 1,052 3,973 12,393
Total Operating Revenues 3,050,904 3,179,064 2,984,547 2,869,493 2,973,550
OPERATING EXPENSES
Wastewater 1,824,259 2,021,513 1,921,745 2,498,521 2,784,579
Depreciation 1,050,506 1,017,180 1,062,249 1,006,731 833,920
Total Operating Expenses 2,874,765 3,038,693 2,983,994 3,505,252 3,618,499
Operating Income (Loss) 176,139 140,371 553 (635,759) (644,949)
NON-OPERATING REVENUES
(EXPENSES)
Investment Earnings 73,700 94,168 50,070 67,388 104,362
Taxes and Assessments 437 3 16,316 789
Availability Charges 44,553 72,469 90,968 51,401 51,818
Gain (Loss) on Sale of Capital Assets - - - (181,859)
Miscellaneous Revenues (1) - 856,306 783,963 - 392,624
Miscellaneous Expenses (11,675) - (15,091) (6,624) (4,515)
Total Non-operating Revenues (Expenses) 107,015 1,022,946 926,226 (68,905) 544,289
Income (Loss) Before Capital Contributions 283,154 1,163,317 926,779 (704,664) (100,660)
Capital Contributions 687,614 97,837 80,424 37,109 4,435,895
Change in Net Position 970,768 1,261,154 1,007,203 (667,555) 4,335,235
Total Net Position, Beginning, As Previously
Reported
26,995,562
26,106,335
27,367,489
28,374,692
27,039,798
Prior Period Adjustment(2) (1,859,995) - - (667,339) -
Total Net Position, Beginning, As Restated 25,135,567 26,106,335 27,367,489 27,707,353 27,039,798
Total Net Position, Ending $26,106,335 $27,367,489 $28,374,692 $27,039,798 $31,375,033
____________________________________
(1) Miscellaneous Revenue may include refunds of overcharges from the City of San Diego Metro Operations from
previous billing years. These refunds are the result of the City performing a “true-up” of actual costs shared by
the Otay Water District which is completed 2 years after the billing year.
(2) The prior period adjustment in Fiscal Year 2014-15 relates to the implementation of GASB No. 68 and in Fiscal
Year 2017-18 relates to the implementation of GASB No. 75, both concerning post-employment benefits.
31
Table No. 8 sets forth historical Net Revenues for the Fiscal Years 2014-15 through 2018-19, as such Net
Revenues would have been calculated in accordance with the Installment Sale Agreement.
Such calculations, which are derived from definitions of Gross Revenues, Operation and Maintenance
Costs, Net Revenues set forth in Appendix A, are intended to reflect the District’s ability to comply with
the rate covenant contained in the Installment Sale Agreement and described under the caption “SOURCES
OF PAYMENT FOR THE BONDS” and for no other purpose. Such calculations may reflect non-recurring or
extraordinary accounting transactions permitted under the Installment Sale Agreement and GAAP. The
District makes no representations as to any such calculations, and such calculations should not be construed
as a representation by the District as to past or future compliance with any bond covenants, the availability
of particular revenues for the payment of Installment Payments or for any other purpose.
TABLE NO. 8
SEGMENT INFORMATION FOR WASTEWATER SYSTEM
HISTORICAL NET REVENUES (in ‘000’s)
For the Fiscal Year Ended June 30
2015 2016 2017 2018 2019
Revenues:
Wastewater Revenue $3,044 $3,175 $2,983 $2,866 $2,961
Connection Fees 7 4 1 4 12
Availability 45 72 91 51 52
Capacity Fees/Annexation Fees 25 49 34 14 11
Betterment Fees 32 57 50 28 28
Investment and Other Earnings (1) 74 950 834 67 497
Total Revenue $3,227 $4,307 $3,993 $3,030 $3,561
Operation and Maintenance Costs:
Sewer Charge (Metro & County) $1,209 $1,031 $ 871 $1,134 $1,058
Utilities 167 154 123 174 144
Payroll 326 615 701 815 1,151
Administrative 48 47 42 84 219
Materials and Maintenance 74 175 185 292 213
Total Operation and Maintenance Costs $1,824 $2,022 $1,922 $2,499 $2,785
Net Revenues $1,403 $2,285 $2,071 $ 531 $ 776
____________________________________
(1) Investments and Other Earnings Schedule, includes Metro refunds that pertain to City of San Diego “True-Up”
cost calculations from previous years.
Source: Otay Water District.
32
Projected Debt Service Coverage
The projections of Revenues and the corresponding Net Revenues shown in Table No. 9 are based on the
assumptions shown below. The District believes the assumptions used for the projections are reasonable
based on its own data and on projections from outside sources regarding expected growth in the District;
however, some assumptions may not materialize and unanticipated events and circumstances may occur
(see “RISK FACTORS”). To the extent that the assumptions are not actually realized the coverage levels
shown in Table No. 9 will likely be reduced and, if substantial reductions in Net Revenues were to result,
the District’s ability to timely pay the Installment Payments, which, in turn, pay debt service on the Bonds,
may be adversely affected.
(a) Sewer rates are projected to increase 7.1% annually based on the District’s most recently updated
projections. These projected rates reflect the District’s estimate of potential rate increases that
would be passed through to the District’s customers as a result of increased costs from the Metro
System.
(b) Availability and Other Fees are projected to remain stable over the next 5 years with availability
charges of $52,000 derived from property tax assessments as a fixed charge per parcel representing
the majority of these revenues.
(c) Investment and Other Earnings are projected to increase as the District’s cash and investment
position increases.
(d) Sewer Costs are projected to increase 5.0% annually as a result of increases in the Metro System
operating costs charged to the District. County operating charges charged to the District are
projected to decrease in 2021 as a result of the County completing a major maintenance project and
remain level through 2024.
(e) Operating costs shown in Fiscal Year 2020 are based on current year budget estimates. Costs for
subsequent fiscal years include the annual average inflationary factors shown below.
Utilities 3.5%
Material and Maintenance 4.0%
Administrative Costs 3.0%
Salaries 3.0%
Benefits 5.0%
Workers Compensation Insurance 5.0%
33
TABLE NO. 9
PROJECTED NET REVENUES (in ‘000’s) AND DEBT SERVICE COVERAGE
For the Fiscal Year ended June 30 (1)
2020 2021 2022 2023 2024
Revenues:
Wastewater Revenue $2,918 $2,964 $3,288 $3,549 $3,799
Availability and Other Fees 81 81 81 81 81
Investment and Other Earnings (1) 56 58 81 101 99
Total Revenue $3,055 $3,103 $3,450 $3,731 $3,979
Operation and Maintenance Costs:
Metro Sewer Charge (2) $ 601 $ 631 $ 663 $ 696 $ 731
County Sewer Charge 251 185 185 185 185
Total Sewer Charge 852 816 848 881 916
Utilities 154 162 169 175 182
Payroll 1,167 1,202 1,237 1,277 1,320
Administrative 282 290 299 308 317
Materials and Maintenance 340 353 368 382 398
Total Operation and Maintenance Costs $2,795 $2,823 $2,921 $3,023 $3,133
Net Revenues 260 280 529 708 846
Installment Payments (3) $ 49 $ 86 $ 162 $ 162 $ 162
Parity Obligations (4) - - 45 175 175
Total Debt Service $ 49 $ 86 $ 207 $ 337 $ 337
Coverage Ratio 326% 256% 210% 251%
____________________________________
(1) Investments and Other Earnings Schedule, includes Metro refunds that pertain to City of San Diego “True-Up”
cost calculations from previous years.
(2) Excluding capital charges for Pure Water Project which the District expects to capitalize.
(3) Calculated on an accrual basis for each July 1 to June 30 period.
(4) The District anticipates issuing Parity Obligations to fund $3 million of additional capital improvements, see
“Capital Improvement Program” above.
Source: Otay Water District.
The projected Revenues, Taxes and Operation and Maintenance Costs shown above are subject to several
variables as described on the previous pages. The District provides no assurance that the projected Net
Revenues or Coverage Ratios will be achieved (see “RISK FACTORS” herein).
34
CONSTITUTIONAL LIMITATIONS ON TAXES AND
APPROPRIATIONS
Article XIIIB Gann Limit
Article XIIIB of the California State Constitution limits the annual appropriations of the State and of any
city, county, school district, authority or other political subdivision of the State to the level of appropriations
of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living
and population. The “base year” for establishing such appropriation limit is the 1978-79 fiscal year and the
limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the
appropriations limit of an entity may also be made if (i) the financial responsibility for a service is
transferred to another public entity or to a private entity, (ii) the financial source for the provision of services
is transferred from taxes to other revenues, or (iii) the voters of the entity approve a change in the limit for
a period of time not to exceed four years.
Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other
entity of local government, exclusive of certain State subventions and refunds of taxes. “Proceeds of taxes”
include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i)
regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of
providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a
requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess
would have to be returned by revising tax rates or fee schedules over the subsequent two years.
Certain expenditures are excluded from the appropriations limit including payments of indebtedness
existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the
voters and payments required to comply with court or federal mandates which without discretion require
an expenditure for additional services or which unavoidably make the providing of existing services more
costly.
The District is of the opinion that its charges with respect to Wastewater Service do not exceed the costs
that it reasonably bears in providing Wastewater Service and are not subject to the limits of Article XIIIB.
Proposition 218
General. On November 5, 1996, California voters approved Proposition 218, the so-called “Right to Vote
on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which affect the
ability of local governments to levy and collect both existing and future taxes, assessments, and property-
related fees and charges. Proposition 218, which generally became effective on November 6, 1996,
changed, among other things, the procedure for the imposition of any new or increased property-related
“fee” or “charge,” which is defined as “any levy other than an ad valorem tax, a special tax or an assessment,
imposed by a local government upon a parcel or upon a person as an incident of property ownership,
including user fees or charges for a property related service” (and referred to in this section as a “property
related fee or charge”).
On November 2, 2010, California voters approved Proposition 26, the so-called “Supermajority Vote to
Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit
the ability of the State Legislature and local government to circumvent existing restrictions on increasing
taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC
of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to
impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Proposition
26’s amendments to Article XIIIC broadly define “tax,” but specifically exclude, among other things:
35
A charge imposed for a specific benefit conferred or privilege granted directly to the payor that
is not provided to those not charged, and which does not exceed the reasonable costs to the local
government of conferring the benefit or granting the privilege.
A charge imposed for a specific government service or product provided directly to the payor that
is not provided to those not charged, and which does not exceed the reasonable costs to the local
government of providing the service or product.
A charge imposed as a condition of property development.
Assessments and property-related fees imposed in accordance with the provisions of Article
XIIID.
Property-Related Fees and Charges. Under Article XIIID, before a municipality may impose or increase
any property-related fee or charge, the entity must give written notice to the record owner of each parcel of
land affected by that fee or charge. The municipality must then hold a hearing upon the proposed imposition
or increase at least 45 days after the written notice is mailed, and, if a majority of the property owners of
the identified parcels present written protests against the proposal, the municipality may not impose or
increase the property-related fee or charge.
Further, under Article XIIID, revenues derived from a property-related fee or charge may not exceed the
funds required to provide the “property-related service” and the entity may not use such fee or charge for
any purpose other than that for which it imposed the fee or charge. The amount of a property-related fee
or charge may not exceed the proportional cost of the service attributable to the parcel, and no property-
related fee or charge may be imposed for a service unless that service is actually used by, or is immediately
available to, the owner of the property in question.
Initiative Power. In addition, Article XIIIC states that “the initiative power shall not be prohibited or
otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The power
of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments
and neither the Legislature nor any local government charter shall impose a signature requirement higher
than that applicable to Statewide statutory initiatives.”
Judicial Interpretation of Articles XIIIC and XIIID. After Proposition 218 was enacted in 1996, appellate
court cases and an Attorney General’s opinion initially indicated that fees and charges levied for water and
wastewater would not be considered property-related fees and charges, and thus not subject to the
requirements of Article XIIID regarding notice, hearing and protests in connection with any increase in the
fees and charges being imposed. However, three cases have held that certain types of water and wastewater
charges could be subject to the requirements of Article XIIID under certain circumstances.
In Richmond v. Shasta Community Services District (2004) 32 Cal.4th 409, the California Supreme Court
addressed the applicability of the notice, hearing and protest provisions of Article XIIID to certain charges
related to Wastewater Service. In Richmond, the Court held that capacity charges are not subject to
Proposition 218. The Court also indicated in dictum that a fee for ongoing Wastewater Service through an
existing connection could, under certain circumstances, constitute a property-related fee and charge, with
the result that a local government imposing such a fee and charge must comply with the notice, hearing and
protest requirements of Article XIIID.
In Howard Jarvis Taxpayers Association v. City of Fresno (2005) 127 Cal.App.4th 914, the California Court
of Appeal, Fifth District, concluded that water, sewer and trash fees are property-related fees subject to
Proposition 218, and a municipality must comply with Article XIIID before imposing or increasing such
fees. The California Supreme Court denied the City of Fresno’s petition for review of the Court of Appeal’s
decision on June 15, 2005.
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In July 2006, the California Supreme Court, in Bighorn-Desert View Water Agency v. Verjil (2006) 39
Cal.4th 205, addressed the validity of a local voter initiative measure that would have (a) reduced a water
agency’s rates for water consumption (and other water charges), and (b) required the water agency to obtain
voter approval before increasing any existing water rate, fee, or charge, or imposing any new water rate,
fee, or charge. The court adopted the position indicated by its statement in Richmond that a public water
agency’s charges for ongoing water delivery are “fees and charges” within the meaning of Article XIIID,
and went on to hold that charges for ongoing water delivery are also “fees” within the meaning of Article
XIIIC’s mandate that the initiative power of the electorate cannot be prohibited or limited in matters of
reducing or repealing any local tax, assessment, fee or charge. Therefore, the court held, Article XIIIC
authorizes local voters to adopt an initiative measure that would reduce or repeal a public agency’s water
rates and other water delivery charges. (However, the court ultimately ruled in favor of the water agency
and held that the entire initiative measure was invalid on the grounds that the second part of the initiative
measure, which would have subjected future water rate increases to prior voter approval, was not supported
by Article XIIIC and was therefore invalid.)
The court in Bighorn specifically noted that it was not holding that the initiative power is free of all
limitations; the court stated that it was not determining whether the electorate’s initiative power is subject
to the statutory provision requiring that Wastewater Service charges be set at a level that will pay for
operating expenses, provide for repairs and depreciation of works, provide a reasonable surplus for
improvements, extensions, and enlargements, pay the interest on any bonded debt, and provide a sinking or
other fund for the payment of the principal of such debt as it may become due.
On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano
Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the “SJC Case”)
upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of
furnishing service at a given level of usage. The opinion was specific to the facts of the case, including a
finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water
at various tier levels. District management believes that this case will not have any material impact on the
District’s ability to make the Installment Payments or to meet its rate covenant.
Conclusion. It is not possible to predict how the courts will further interpret Article XIIIC and Article
XIIID in future judicial decisions and what, if any, further implementing legislation will be enacted.
Under the Bighorn case, local voters could adopt an initiative measure that reduces or repeals water rates
and charges, though it is not clear whether (and California courts have not decided whether) any such
reduction or repeal by initiative would be enforceable in a situation in which such rates and charges are
pledged to the repayment of bonds or other indebtedness, as is the case with respect to the Bonds.
The District believes that its rates with respect to the Wastewater Service comply with the requirements of
Proposition 218 and expect that future fees and charges will comply with Proposition 218’s procedural and
substantive requirements to the extent applicable thereto. The requirements of, or a voter initiative pursuant
to, Proposition 218 could impact the ability of the District to set or raise service charges.
There can be no assurance that the courts will not further interpret, or the voters will not amend, Article
XIIIC and Article XIIID to limit the ability of local agencies to impose, levy, charge and collect increased
fees and charges for water, or to call into question previously adopted water rate increases.
Future Initiatives
Articles XIIIB, XIIIC and XIIID were adopted as measures that qualified for the ballot pursuant to
California’s initiative process. From time to time other initiatives could be proposed and adopted affecting
the revenues of the District.
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RISK FACTORS
This section describes certain special considerations and risk factors affecting the payment of and security
for the Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with
the purchase of any Bonds and the order does not necessarily reflect the relative importance of the various
risks. Potential investors in the Bonds are advised to consider these special factors along with all other
information in this Official Statement in evaluating the Bonds. There can be no assurance that other
considerations will not materialize in the future, and if additional considerations materialize to a sufficient
degree, they could delay or prevent payment of principal of and interest on the Bonds.
Net Revenues; Rate Covenant
Net Revenues are dependent upon the demand for wastewater services, which can be affected by population
factors, more stringent wastewater standards, wastewater regulations, water conservation, water shortages,
problems with the District’s wastewater collection and other factors. There can be no assurance that
wastewater service demand will be consistent with the levels contemplated in this Official Statement. A
decrease in demand could require an increase in rates or charges in order to comply with the rate covenant
contained in the Installment Sale Agreement.
The District’s ability to meet its rate covenant is dependent upon its capacity to increase rates to a level
sufficient to meet debt service on the Bonds and other Parity Obligations.
Risks Related to Facilities and Operations
The operation of the District’s facilities and physical condition of the District’s facilities are subject to a
number of risk factors that could adversely affect the reliability of sewer service or increase the operating
expenses of the District. Prolonged damage to the District’s facilities could interrupt the ability of the
District to realize Revenues sufficient to pay principal of and interest on the Bonds, require substantial
increases in rates or charges in order to comply with the rate covenant in the Installment Sale Agreement
(which could drive down demand for wastewater and related services), or require the District to increase
expenditures for repairs significantly enough to adversely impact the District’s ability to pay the principal
of or interest on the Bonds.
These factors could include, among others, the following:
Operation and Maintenance Expenses. There can be no assurance that operation and maintenance
expenses of the District related to the wastewater system will be consistent with the levels contemplated in
this Official Statement.
Seismic Hazards and Natural Disasters. The District is located in a seismically active region. From time
to time, the service area of the District may be subject to other natural disasters, including without limitation
wildfires, flooding and landslides, or man-made disasters that could interrupt operation of the wastewater
system, or adversely affect economic activity in the District’s service area.
There can be no assurance that the occurrence of any natural calamity would not cause substantial damage
to the District’s facilities, including exacerbated infiltration and/or inflow of ground and other waters into
the wastewater system, or that the District would have insurance or other resources available to make repairs
in order to generate sufficient Net Revenues to pay debt service on the Bonds when due. The casualty and
liability insurance maintained by the District may not cover damages and losses to the District’s facilities
due to earthquake, fire or flood.
The Wastewater System and its facilities are generally located adjacent to an area designated by California
Department of Forestry and Fire Protection as a Very High Fire Hazard Severity Zone (“FHSZ”). While
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FHSZ zones do not predict when or where a wildfire will occur, they do identify areas where wildfire
hazards could be more severe and therefore are of greater concern.
Climate Change. As noted, the sewer charges are based on water usage by customers, and therefore,
factors affecting water usage will necessarily affect revenues of the Wastewater System.
The issue of climate change has become an important factor in water resources planning in the State, and it
is being considered during planning for water supplies and systems. Many studies cite evidence that
increasing concentrations of greenhouse gases have caused and will continue to cause a rise in temperatures
around the world, which will result in a wide range of changes in climate patterns. Moreover, they cite
evidence that a warming trend occurred during the latter part of the 20th century and will likely continue
through the 21st century. These changes could have a direct effect on water resources in the State, and
numerous studies on climate and water in the State have been conducted to determine the potential impacts.
Based on these studies, global warming could result in the following types of water resources impacts in
the State, including impacts on water supplies and systems:
Sea level rise and an increase in saltwater intrusion into groundwater,
Changes in the timing, intensity, and variability of precipitation, and an increased amount of
precipitation falling as rain instead of as snow,
Reductions in the average annual snowpack due to a rise in the snowline and a shallower snowpack
in the low- and medium-elevation zones, and a shift in snowmelt runoff to earlier in the year,
Long-term changes in watershed vegetation and increased incidence of wildfires that could affect
water quality,
Increased water temperatures with accompanying adverse effects on some fisheries,
Increases in evaporation and concomitant increased irrigation need, and
Changes in urban and agricultural water demand.
Other than the general trends listed above, there is no specific information on exactly how global warming
will quantitatively affect water supplies with respect to the District or customer water conservation.
However, there can be no assurance that climate change will not affect the District’s water sources or
customer demand.
Aging Facilities. While the District has an ongoing series of projects to rehabilitate and upgrade the
Wastewater System some of these facilities are aging and still in need of repair or replacement. Long-lived
facilities result in decreased reliability due to unplanned outages and place a greater maintenance burden
on District Operations.
Private Sewer Laterals. Private sewer laterals are not owned or operated by the District; however, faulty
private sewer laterals can increase inflow and infiltration into the District’s facilities. Excessive inflow and
infiltration into the facilities due to faulty sewer laterals may cause damage to the District’s facilities.
Statutory and Regulatory Compliance. The operation of the District is subject to a variety of federal and
State statutory and regulatory requirements. Any failure by the District to comply with applicable laws and
regulations could result in significant fines and penalties. See “- Risk of Fines and Litigation” below.
Further, compliance with these laws and regulations may result in significant increases in the capital and
operating costs of the District.
Casualty Losses. The Installment Sale Agreement obligates the District to obtain and keep in force various
forms of insurance or self-insurance, subject to deductibles, for repair or replacement of a portion of the
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District’s facilities in the event of damage or destruction to such portion of the District’s facilities. No
assurance can be given as to the adequacy of any such self-insurance or any additional insurance to fund
necessary repair or replacement of any other portion of the District’s facilities.
Risk of Fines and Litigation
There is no certainty that the District can eliminate all future sanitary sewer overflows that reach waters of
the United States. Sanitary sewer overflows could result in administrative civil penalties or the request for
civil penalties by third parties brought under the citizen suit provisions of the Clean Water Act. Any such
actions could impose additional payment obligations on the District. Any fines or civil penalties would
likely be classified by the District as Operation and Maintenance Costs and, therefore, payable prior to debt
service on the Bonds.
Proposition 218
On November 5, 1996, California voters approved Proposition 218-Voter Approval for Local Government
Taxes-Limitation on Fees, Assessments, and Charges-Initiative Constitutional Amendment. Proposition
218 added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and
other limitations on the imposition of new or increased taxes, assessments and property-related fees and
charges. The ability of the District to comply with its covenants under the Installment Sale Agreement and
generate Net Revenues sufficient to pay the Installment Payments may be adversely affected by actions and
events outside of the control of the District or taken (or not taken) by voters, property owners, taxpayers or
payers of assessments, fees and charges. See “CONSTITUTIONAL LIMITATIONS ON TAXES AND
APPROPRIATIONS - Proposition 218” for a discussion of specific issues and risks raised by Proposition
218. The District’s current projections assume future rate increases which will be subject to the Proposition
218 notice process, will be needed during the time that the Bonds are Outstanding.
Limitations on Remedies Available to Bond Owners
Any remedies available to the owners of the Bonds upon the occurrence of an event of default under the
Installment Sale Agreement or the Indenture are in many respects dependent upon judicial actions, which
are often subject to discretion and delay and could prove both expensive and time consuming to obtain.
In addition to the limitations on Bondholder remedies contained in the Installment Sale Agreement and the
Indenture, the rights and obligations under the Bonds, the Installment Sale Agreement and the Indenture
may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights
generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under
State law of certain remedies; the exercise by the United States of America of the powers delegated to it by
the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the
police power inherent in the sovereignty of the State of California and its governmental bodies in the interest
of serving a significant and legitimate public purpose.
Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could
subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or
otherwise, and consequently may entail risks of delay, limitation or modification of their rights.
Future Parity Obligations
As described in “SOURCES OF PAYMENT FOR THE BONDS - Parity Obligations” herein, the Installment
Sale Agreement permits the District to issue Parity Obligations, under which its obligations would be
payable on a parity with the payment of the Installment Payments.
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The coverage tests described in “SOURCES OF PAYMENT FOR THE BONDS - Parity Obligations” involve,
to some extent, projections of Net Revenues. If Parity Obligations are issued, the debt service coverage for
the Bonds could be diluted below what it otherwise would be. Moreover, there is no assurance that the
assumptions that form the basis of such projections, if any, will be actually realized subsequent to the date
of such projections. If such assumptions are not realized, the amount of future Net Revenues may be less
than projected, and the actual amount of Net Revenues may be insufficient to provide for the payment of
the Bonds and any future Parity Obligations.
Cybersecurity
As a recipient and provider of personal, private and sensitive information, the District faces multiple cyber
threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other
sensitive digital networks and systems.
Despite security measures, information technology and infrastructure may be vulnerable to attacks by
hackers or breached due to employee error, malfeasance or other disruptions. Increasingly, government
entities are being targeted by cyber-attacks seeking to obtain confidential data or disrupt critical services.
A rapidly changing cyber risk landscape may introduce new vulnerabilities which hackers may exploit in
attempts to effect breaches or service disruptions. Any such breach could compromise networks and the
information stored there could be disrupted, accessed, publicly disclosed, lost or stolen. Any such
disruption, access, disclosure or other loss of information could result in legal claims or proceedings,
liability under laws that protect the privacy of personal information, regulatory penalties, operations and
the services provided which could ultimately adversely affect Net Revenues.
No assurances can be given that the security and operational control measures of the District will be
successful in guarding against any and each cyber threat or breach. Although the District maintains
insurance coverage for cyber security losses should a successful breach ever occur, the cost of any such
disruption or remedying damage caused by future attacks could be substantial and in excess of such
insurance coverage.
The District is also reliant on other entities and service providers in connection with the administration of
the Bonds, including without limitation the County tax collector for the levy and collection of sewer
charges, the Fiscal Agent, and the dissemination agent. No assurance can be given that the District, and
these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond
owners.
Bankruptcy
While an involuntary bankruptcy petition cannot be filed against the District or the Authority, each of the
District and the Authority is authorized to file for bankruptcy under certain circumstances. Should the
District or the Authority file for bankruptcy, there could be adverse effects on the holders of the Bonds.
To the extent that the Net Revenues are “special revenues” under the Bankruptcy Code and the Bonds are
covered by the provisions of the Bankruptcy Code relating to pledges of special revenues, then Net
Revenues collected after the date of the bankruptcy filing should secure the District’s obligations under the
Installment Sale Agreement. If any or all of the Net Revenues are determined not to be special revenues or
if it is determined that the Bonds are not covered by the relevant provisions of the Bankruptcy Code, then
any such amounts collected after the commencement of the bankruptcy case will likely not secure the
District’s obligations under the Installment Sale Agreement. The holders of the Bonds may not be able to
assert a claim against any property of the District other than the Net Revenues, and if any or all of the Net
Revenues no longer secure the Installment Sale Agreement, then there may be limited, if any, funds from
which the holders of the Bonds are entitled to be paid.
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The Bankruptcy Code provides that “special revenues” can be applied to necessary operating expenses of
the project or system, before they are applied to other obligations. This rule applies regardless of the
provisions of the transaction documents. It is not clear precisely which expenses would constitute necessary
operating expenses and any definition in the transaction documents may not be applicable.
If the District or the Authority is in bankruptcy, the parties (including the Trustee and the holders of the
Bonds) may be prohibited from taking any action to collect any amount from the bankrupt party or to
enforce any obligation of the bankrupt party, unless the permission of the bankruptcy court is obtained.
These restrictions may also prevent the Trustee from making payments to the holders of the Bonds from
funds in the Trustee’s possession. If the Authority is in bankruptcy, it may be able to require that all amounts
due under the Installment Sale Agreement (including Net Revenues) be paid directly to it, notwithstanding
the provisions of the transaction documents that require such payments be made directly to the Trustee.
The rate covenant (see “SOURCES OF PAYMENT FOR THE BONDS - Rate Covenant”) may not be
enforceable in bankruptcy by the Trustee or the holders of the Bonds.
The District is permitted to commingle Net Revenues with its own funds for certain periods of time before
turning over the Net Revenues to the Trustee. If the District goes into bankruptcy, the District may not be
required to turn over to the Trustee any Net Revenues that are in its possession at the time of the bankruptcy
filing and have been commingled with other moneys. If the District has possession of Net Revenues
(whether collected before or after commencement of the bankruptcy) and if the District does not voluntarily
turn over such Net Revenues to the Trustee, it is not entirely clear what procedures the Trustee and the
holders of the Bonds would have to follow to attempt to obtain possession of such Net Revenues, how much
time it would take for such procedures to be completed, or whether such procedures would ultimately be
successful.
If the District or the Authority is in bankruptcy it may be able to repudiate the Installment Sale Agreement.
If the Installment Sale Agreement is repudiated, the District will no longer be obligated to make any
payments under it.
If the District or the Authority is in bankruptcy it may be able, without the consent and over the objection
of the Trustee and the holders of the Bonds, to alter the priority, interest rate, principal amount, payment
terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other
terms or provisions of the Installment Sale Agreement, the Indenture, and the Bonds, as long as the
bankruptcy court determines that the alterations are fair and equitable.
There may be delays in payments on the Bonds while the court considers any of these issues. There may
be other possible effects of a bankruptcy of the District or the Authority that could result in delays or
reductions in payments on the Bonds, or result in losses to the holders of the Bonds. Regardless of any
specific adverse determinations in a District or Authority bankruptcy proceeding, the fact of a District or
Authority bankruptcy proceeding could have an adverse effect on the liquidity and value of the Bonds.
Loss of Tax Exemption
In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the
Bonds, the Authority will covenant in the Indenture and the District will covenant in the Installment Sale
Agreement to comply with each applicable requirement of Section 103 and Sections 141 through 150 of
the Internal Revenue Code. The interest on the Bonds could become includable in gross income for
purposes of federal income taxation retroactive to the date of execution and delivery of the Bonds, as a
result of acts or omissions of the Authority or the District in violation of this or other covenants in the
Indenture or the Installment Sale Agreement. Should such an event of taxability occur, the Bonds are not
subject to prepayment or any increase in interest rates and will remain outstanding until maturity. See “-
Limitations on Remedies Available to Bond Owners” and “TAX MATTERS” herein.
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IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues,
including both random and targeted audits. It is possible that the Bonds will be selected for audit by the
Internal Revenue Service. It is also possible that the market value of the Bonds might be adversely affected
as a result of such an audit of the Bonds (or by an audit of similar bonds).
Secondary Market Risk
There can be no assurance that there will be a secondary market for purchase or sale of the Bonds, and from
time to time there may be no market for them, depending upon prevailing market conditions, the financial
condition or market position of firms who may make the secondary market and the financial condition of
the District. Secondary market prices for the Bonds could be more or less than the original issue price
depending on market factors.
TAX MATTERS
Opinion of Bond Counsel. In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel, under
existing statutes and court decisions and assuming continuing compliance with certain tax covenants
described herein, (i) interest on the Bonds is excluded from gross income for federal income tax purposes
pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest
on the Bonds is not treated as a preference item in calculating the alternative minimum tax under the Code.
In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and
statements of reasonable expectations made by the Authority and the District in connection with the Bonds,
and Bond Counsel has assumed compliance by the Authority and the District with certain ongoing
covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the
Bonds from gross income under Section 103 of the Code.
In addition, in the opinion of Bond Counsel, under existing statutes, interest on the Bonds is exempt from
personal income taxes imposed by the State of California.
Bond Counsel expresses no opinion as to any other federal, state or local tax consequences arising with
respect to the Bonds, or the ownership or disposition thereof, except as stated above. Bond Counsel renders
its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to
update, revise or supplement its opinion to reflect any action thereafter taken or not taken, any fact or
circumstance that may thereafter come to its attention, any change in law or interpretation thereof that may
thereafter occur, or for any other reason. Bond Counsel expresses no opinion as to the consequence of any
of the events described in the preceding sentence or the likelihood of their occurrence. In addition, Bond
Counsel expresses no opinion on the effect of any action taken or not taken in reliance upon an opinion of
other counsel regarding federal, state or local tax matters, including, without limitation, exclusion from
gross income for federal income tax purposes of interest on the Bonds.
Certain Ongoing Federal Tax Requirements and Covenants. The Code establishes certain ongoing
requirements that must be met subsequent to the issuance and delivery of the Bonds in order that interest
on the Bonds be and remain excluded from gross income under Section 103 of the Code. These
requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds
of the Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate
requirement that certain excess earnings on gross proceeds be rebated to the federal government.
Noncompliance with such requirements may cause interest on the Bonds to become included in gross
income for federal income tax purposes retroactive to their issue date, irrespective of the date on which
such noncompliance occurs or is discovered. The Authority and the District have covenanted to comply
with certain applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross
income under Section 103 of the Code.
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Certain Collateral Federal Tax Consequences. The following is a brief discussion of certain collateral
federal income tax matters with respect to the Bonds. It does not purport to address all aspects of federal
taxation that may be relevant to a particular owner of a Bond. Prospective investors, particularly those who
may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax
consequences of owning and disposing of the Bonds.
Prospective owners of the Bonds should be aware that the ownership of such obligations may result in
collateral federal income tax consequences to various categories of persons, such as corporations (including
S corporations and foreign corporations), financial institutions, property and casualty and life insurance
companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise
eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness
to purchase or carry obligations the interest on which is excluded from gross income for federal income tax
purposes. Interest on the Bonds may be taken into account in determining the tax liability of foreign
corporations subject to the branch profits tax imposed by Section 884 of the Code.
Original Issue Discount. “Original issue discount” (“OID”) is the excess of the sum of all amounts payable
at the stated maturity of a Bond (excluding certain “qualified stated interest” that is unconditionally payable
at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a
maturity (a bond with the same maturity date, interest rate, and credit terms) means the first price at which
at least 10 percent of such maturity was sold to the public, i.e., a purchaser who is not, directly or indirectly,
a signatory to a written contract to participate in the initial sale of the Bonds. In general, the issue price for
each maturity of Bonds is expected to be the initial public offering price set forth on the cover page of the
Official Statement. Bond Counsel further is of the opinion that, for any Bonds having OID (a “Discount
Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section
1288 of the Code is excludable from gross income for federal income tax purposes to the same extent as
other interest on the Bonds.
In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method,
based on periodic compounding of interest over prescribed accrual periods using a compounding rate
determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond
is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition
of such Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income
received or deemed to have been received for purposes of determining various other tax consequences of
owning a Discount Bond even though there will not be a corresponding cash payment.
Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original
issue discount for federal income tax purposes, including various special rules relating thereto, and the state
and local tax consequences of acquiring, holding, and disposing of Discount Bonds.
Bond Premium. In general, if an owner acquires a bond for a purchase price (excluding accrued interest)
or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the bond after
the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least
annually at prescribed rates), that premium constitutes “bond premium” on that bond (a “Premium Bond”).
In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium
over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the
Premium Bond determined based on constant yield principles (in certain cases involving a Premium Bond
callable prior to its stated maturity date, the amortization period and yield may be required to be determined
on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium
Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest
accrual period under the owner’s regular method of accounting against the bond premium allocable to that
period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period
exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss.
Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of
the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s
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original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding
the treatment of bond premium for federal income tax purposes, including various special rules relating
thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization
of bond premium on, sale, exchange, or other disposition of Premium Bonds.
Information Reporting and Backup Withholding. Information reporting requirements apply to interest
paid on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the
interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification
Number and Certification,” or if the recipient is one of a limited class of exempt recipients. A recipient not
otherwise exempt from information reporting who fails to satisfy the information reporting requirements
will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a
tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a
“payor” generally refers to the person or entity from whom a recipient receives its payments of interest or
who collects such payments on behalf of the recipient.
If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with
the establishment of such account, as generally can be expected, no backup withholding should occur. In
any event, backup withholding does not affect the excludability of the interest on the Bonds from gross
income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be
allowed as a refund or a credit against the owner’s federal income tax once the required information is
furnished to the Internal Revenue Service.
Miscellaneous. Tax legislation, administrative actions taken by tax authorities, or court decisions, whether
at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal
or state law or otherwise prevent beneficial owners of the Bonds from realizing the full current benefit of
the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed
in the future, or enacted) and such decisions could affect the market price or marketability of the Bonds.
Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters.
A copy of the proposed form of opinion of Bond Counsel for the Bonds is attached in “APPENDIX E.”
LEGAL MATTERS
Enforceability of Remedies
The remedies available to the Trustee and the Owners of the Bonds upon an event of default under the
Indenture, the Installment Sale Agreement or any other document described herein are in many respects
dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under
existing law and judicial decisions, the remedies provided for under such documents may not be readily
available or may be limited. The various legal opinions to be delivered concurrently with the delivery of
the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Indenture
and the Installment Sale Agreement are subject to limitations imposed by bankruptcy, reorganization,
insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and
proceedings generally.
Approval of Legal Proceedings
The legality and enforceability of the Indenture and the Installment Sale Agreement and certain other legal
matters are subject to the approval of Hawkins Delafield & Wood LLP, San Francisco, California, acting as
Bond Counsel. See “APPENDIX E” for the proposed form of Bond Counsel’s Opinion.
The District has no knowledge of any fact or other information which would indicate that the Indenture and
the Installment Sale Agreement are not so enforceable against the Authority or the District except to the
45
extent such enforcement is limited by principles of equity and by state and federal laws relating to
bankruptcy, reorganization, moratorium or creditors’ rights generally.
Certain legal matters will be passed on for the District and the Authority by Artiano Shinoff, San Diego,
California, General Counsel to the District and the Authority, and by Hawkins Delafield & Wood LLP, San
Francisco, California, as Disclosure Counsel to the District. A portion of the fees payable to Bond Counsel
and Disclosure Counsel are contingent upon the sale and delivery of the Bonds.
Litigation
At any given time, including the present, there are certain claims, disputes and litigation actions that arise
in the normal course of the District’s activities. Such matters could, if determined adversely to the District,
affect the Wastewater Operations and in some cases the Net Revenues. The Authority and the District will
furnish a certificate dated as of the date of delivery of the Bonds that there is not now known to be pending
or threatened any litigation restraining or enjoining the execution or delivery of the Indenture or the
Installment Sale Agreement, or the sale or delivery of the Bonds or in any manner questioning the
proceedings and authority under which the Indenture or the Installment Sale Agreement are to be executed
or delivered or the Bonds are to be delivered or affecting the validity thereof or, in the case of the District,
which if decided adversely to the District would have a material adverse effect on the District’s financial
condition and its ability to pay the Installment Payments.
CONCLUDING INFORMATION
No Rating on the Bonds; Secondary Market
The Authority has not made, and does not contemplate making, any application for a rating on the Bonds.
No such rating should be assumed based upon any other Authority or District rating that may be
obtained. Prospective purchasers of the Bonds are required to make independent determinations as to the
credit quality of the Bonds and their appropriateness as an investment.
Should a Bondholder elect to sell a Bond prior to maturity, no representations or assurances can be made
that a market will have been established or maintained for the purchase and sale of the Bonds. The
Underwriter assumes no obligation to establish or maintain a market for the purchase and sale of the Bonds
and is not obligated to repurchase any of the Bonds at the request of the holder thereof.
Underwriting
The Bonds were sold to Hilltop Securities Inc. (the “Underwriter”). The Underwriter is offering the Bonds
at the initial offering prices set forth on the inside front cover page hereof. The initial offering prices may
be changed from time to time and concessions from the offering prices may be allowed to dealers, banks
and others. The Underwriter will purchase the Bonds at a price equal to $______________, which amount
represents the principal amount of the Bonds, plus a net original issue premium of $_______________ and
less an Underwriter’s discount of $_____. The Underwriter will pay certain of its expenses relating to the
offering from the Underwriter’s discount.
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The Municipal Advisor
The material contained in this Official Statement was prepared by the Authority and the District with the
assistance of the Municipal Advisor, who advised the Authority and the District as to the financial structure
and certain other financial matters relating to the Bonds. The information set forth herein received from
sources other than the Authority or the District is believed to be reliable, but such information is not
guaranteed by the Authority, the District or the Municipal Advisor as to accuracy or completeness, nor has
it been independently verified. Fees paid to the Municipal Advisor are contingent upon the sale and delivery
of the Bonds.
Continuing Disclosure
The District will covenant to provide certain annual financial information by not later than March 31 in
each year (the “Annual Reports”) and notices of the occurrence of certain listed events in accordance with
Rule 15c2-12 of the Securities Exchange Act of 1934 as amended (the “Rule”). Harrell & Company
Advisors, LLC will act as Dissemination Agent. The specific nature of the information to be contained in
the Annual Reports or the notices of listed events and certain other terms of the continuing disclosure
obligation are found in the form of the District’s Continuing Disclosure Agreement attached in “APPENDIX
D - FORM OF CONTINUING DISCLOSURE AGREEMENT.”
Within the last five years, the District believes it has not failed to comply in all material respects with any
prior undertakings with regard to the Rule.
Audited Financial Statements
The District’s audited financial statements for Fiscal Year 2018-19 included in this Official Statement have
been audited by Teaman, Ramirez & Smith, Inc. (the “Auditor”), independent auditors. Attention is called
to the scope limitation described in the Auditor’s report accompanying the financial statements. The
Auditor has not been requested to consent to the inclusion of its report in this Official Statement. The
Auditor has not undertaken to update the audited financial statements for Fiscal Year 2018-19 or its report,
and no opinion is expressed by the Auditor with respect to any event subsequent to its report dated _______,
2019. See “APPENDIX B - DISTRICT AUDITED FINANCIAL STATEMENTS” herein.
References
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated,
are intended as such and not as representations of fact. This Official Statement is not to be construed as a
contract or agreement between the District and the purchasers or Owners of any of the Bonds.
47
Execution
The execution of this Official Statement has been duly authorized by the District and the Authority.
OTAY WATER DISTRICT
By: ______________________________
Chief Financial Officer
OTAY WATER DISTRICT FINANCING AUTHORITY
By: ______________________________
Executive Director
A-1
APPENDIX A
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
[to be provided by Bond Counsel]
B-1
APPENDIX B
DISTRICT AUDITED FINANCIAL STATEMENTS
C-1
APPENDIX C
ECONOMIC PROFILE FOR THE COUNTY OF SAN DIEGO
Introduction
The County of San Diego (the “County”) is the southernmost major metropolitan area in the State of
California. The County covers 4,255 square miles, extending 70 miles along the Pacific Coast from the
Mexican border to Orange County, and inland 75 miles to Imperial County. Riverside and Orange Counties
form the northern boundary. The County is approximately the size of the State of Connecticut.
The County possesses a diverse economic base consisting of a significant manufacturing presence in the
fields of electronics and shipbuilding, a large tourist industry attracted by the favorable climate of the
region, and a considerable defense-related presence.
The County is also growing as a major center for culture and education. A number of recognized art
organizations, including the San Diego Opera, the Old Globe Theater productions, the La Jolla Chamber
Orchestra, as well as museums and art galleries, are located in the County. Higher education is provided
through five two-year colleges and six four-year colleges and universities.
The San Diego Convention Center contains 361,000 square feet of exhibit space and over 100,000 square
feet of meeting/banquet rooms. The Convention Center can accommodate events for 30,000-40,000 people.
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Population
The following table shows the January 1 State of California Department of Finance estimates of total
population in the County of San Diego and the State of California for each year since 2010, and the increase
from the previous year.
TABLE NO. C-1
COUNTY OF SAN DIEGO AND STATE OF CALIFORNIA
POPULATION
COUNTY OF SAN DIEGO STATE OF CALIFORNIA
January 1 Percentage Percentage
Year Population Change Population Change
2010 3,091,579 37,223,900 1.0%
2011 3,125,264 1.1% 37,594,781 1.0%
2012 3,161,750 1.2% 37,971,427 0.9%
2013 3,201,417 1.3% 38,321,459 0.8%
2014 3,235,142 1.1% 38,622,301 0.9%
2015 3,267,992 1.0% 38,952,462 0.7%
2016 3,287,279 0.6% 39,214,803 0.7%
2017 3,309,626 0.7% 39,504,609 0.6%
2018 3,333,128 0.7% 39,740,508 0.5%
2019 3,351,786 0.6% 39,927,315
% Increase Between
2010 - 2019 8.4% 7.3%
_______________________________________
Source: State of California, Department of Finance, “E-4 Population Estimates for Cities, Counties, and the State,
2001-2010, with 2000 & 2010 Census Counts” Sacramento, California, November 2012 and “E-4
Population Estimates for Cities, Counties and the State, 2011-2019, with 2010 Census Benchmark”
Sacramento, California, May 2019.
C-3
Per Capita Personal Income
Per capita personal income information for San Diego County, the State of California and the United States
are summarized in the following table.
TABLE NO. C-2
PER CAPITA PERSONAL INCOME (1)
SAN DIEGO COUNTY, STATE OF CALIFORNIA AND UNITED STATES
2013 – 2017
Year San Diego County State of California United States
2013 $49,460 $49,173 $44,826
2014 52,166 52,237 47,025
2015 54,742 55,679 48,940
2016 56,116 57,497 49,831
2017 57,913 59,796 51,640
____________________________________
(1) For San Diego County, State of California and United States, per capita personal income was computed using
Census Bureau midyear population estimates. Estimates for 2010-2017 reflect county population estimates
available as of March 2018.
Note: All dollar estimates are in current dollars (not adjusted for inflation).
Last updated: March 6, 2019.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
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The District is located in the San Diego-Carlsbad Metropolitan Statistical Area (MSA). The August 2019
unemployment rate in the San Diego-Carlsbad MSA was 3.4%. The State of California August 2019
unemployment rate (unadjusted) was 4.2%.
TABLE NO. C-3
SAN DIEGO-CARLSBAD MSA
WAGE AND SALARY WORKERS BY INDUSTRY (1)
(in $ thousands)
Industry 2015 2016 2017 2018 2019
Government 226.9 234.3 233.7 234.9 243.3
Other Services 54.3 55.2 55.7 55.9 57.0
Leisure and Hospitality 189.1 197.5 202.1 206.6 208.1
Educational and Health Services 191.6 196.5 203.0 211.5 215.8
Professional and Business Services 231.6 236.3 240.5 250.8 257.4
Financial Activities 72.0 73.8 75.2 76.4 75.3
Information 24.0 24.0 24.1 24.0 23.8
Transportation, Warehousing and Utilities 28.8 30.2 32.1 33.6 34.1
Service Producing
Retail Trade 146.2 146.9 148.0 147.5 144.9
Wholesale Trade 44.0 43.5 43.9 43.9 43.1
Manufacturing
Nondurable Goods 26.7 27.5 28.2 28.7 28.7
Durable Goods 81.2 81.1 82.3 84.7 88.7
Goods Producing
Construction 72.7 78.3 80.8 86.4 92.1
Mining and Logging 0.3 0.3 0.3 0.4 0.4
Total Nonfarm 1,389.4 1,425.4 1,449.9 1,485.3 1,512.7
Farm 9.3 9.2 8.9 9.9 9.1
Total (all industries) 1,398.7 1,434.6 1,458.8 1,495.2 1,521.8
____________________________________
(1) Annually, as of August.
Note: The unemployment rate is calculated using unrounded data. Data may not add due to rounding.
Source: State of California Employment Development Department, Labor Market Information Division, “Industry
Employment & Labor Force - by month March 2018 Benchmark.”
C-5
Major Employers
The major employers operating within the County as of June 30, 2018 are shown in Table No. C-4.
TABLE NO. C-4
COUNTY OF SAN DIEGO
MAJOR EMPLOYERS
Employer Number of Employees Percent of Total Employment
University of California, San Diego 34,448 2.26%
Naval Base San Diego 34,185 2.24%
Sharp Healthcare 18,364 1.20%
County of San Diego 17,413 1.14%
Scripps Health 14,941 0.98%
San Diego Unified School District 13,815 0.91%
Qualcomm Inc. 11,800 0.77%
City of San Diego 11,462 0.75%
Kaiser Permanente San Diego Medical Center 9,606 0.63%
UC San Diego Health 8,932 0.59%
174,966 11.47%
____________________________________
Source: County of San Diego Comprehensive Annual Financial Report.
Transportation
Interstate 5 parallels the coast of San Diego County, starting at the border with Mexico and traveling to the
Los Angeles area and points north. Interstate 15 runs inland through the County, leading to Riverside-San
Bernardino, Las Vegas and Salt Lake City. Interstate 8 runs eastward providing access to the southern
United States.
San Diego’s International Airport (Lindbergh Field) is located approximately one mile west of downtown
San Diego at the edge of the San Diego Bay. The facilities are owned and maintained by the San Diego
Unified Port District and are leased to commercial airlines and other tenants. The airport is the third most
active commercial airport in California, served by most major airlines. In addition to San Diego
International Airport, there are two naval air stations and seven general aviation airports located in the
County.
San Diego is the terminus of the Santa Fe Railway’s main line from Los Angeles. Amtrak passenger service
is available at San Diego with stops at Del Mar and Oceanside in the north county. San Diego’s harbor is
one of the world’s largest natural harbors. The harbor, a busy commercial port, also serves cruise ships.
The Port of San Diego is administered by the San Diego Unified Port District, which includes the cities of
San Diego, National City, Chula Vista, Imperial Beach and Coronado.
D-1
APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement, dated November 1, 2019 (the “Disclosure Agreement”) is
executed and delivered by the Otay Water District (the “District”) and Harrell & Company Advisors, LLC
(the “Dissemination Agent”) in connection with the issuance of $___________ Otay Water District
Financing Authority 2019 Wastewater Revenue Bonds (the “Bonds”) by the Otay Water District Financing
Authority (the “Authority”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of
November 1, 2019 (the “Indenture”), by and between MUFG Union Bank, N.A., as trustee (the “Trustee”)
and the Authority. The District covenants as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds
and in order to assist the Participating Underwriter in complying with the Rule.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply
to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
“Annual Report” shall mean the Annual Report provided by the District pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Agreement.
“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding
Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any
Bonds for federal income tax purposes.
“Disclosure Representative” shall mean the General Manager of the District and the Chief Financial
Officer of the District, or their designee, or such other officer or employee as the District shall
designate in writing from time to time.
“Dissemination Agent” shall mean Harrell & Company Advisors, LLC, or any successor
Dissemination Agent designated in writing by the District and which has filed with the District a
written acceptance of such designation.
“EMMA” shall mean the Electronic Municipal Market Access system of the MSRB.
“Holder” shall mean the registered owner of any Bond.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
“MSRB” shall mean the Municipal Securities Rulemaking Board.
“Official Statement” shall mean the Official Statement relating to the Bonds, dated __________,
2019.
“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply
with the Rule in connection with the offering of the Bonds.
“Repository” shall mean the EMMA system of the MSRB or any other entity designated under the
Rule as the repository for filings made pursuant to the Rule.
D-2
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
“State” shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The District shall, or, upon delivery of the Annual Report to the Dissemination Agent, shall
cause the Dissemination Agent to, not later than March 31 of each year, commencing March 31, 2020,
provide to the Repository an Annual Report which is consistent with the requirements of Section 4 of this
Disclosure Agreement. The Annual Report shall be provided to the Repository in an electronic format as
prescribed by the Repository and shall be accompanied by identifying information as prescribed by the
Repository. The Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross-reference other information as provided in Section 4 of this
Disclosure Agreement; provided that the audited financial statements of the District may be submitted
separately from the balance of the Annual Report and later than the date required above for the filing of the
Annual Report if they are not available by that date. If the District’s fiscal year changes, it shall give notice
of such change in the same manner as for a Listed Event under Section 5(c).
(b) Not later than five (5) business days prior to the date specified in subsection (a) for
providing the Annual Report to the Repository, the District shall provide the Annual Report to the
Dissemination Agent (if other than the District). If the District is unable to provide to the Repository an
Annual Report by the date required in subsection (a), the Dissemination Agent shall send a notice to the
Repository that the Annual Report has not been delivered by the District.
(c) The Dissemination Agent shall:
(i) confirm the electronic filing requirements of the Repository for the Annual
Reports; and
(ii) if the Dissemination Agent is other than the District, file a report with the District
certifying that the Annual Report has been provided pursuant to this Disclosure
Agreement, stating the date it was provided to the Repository.
(d) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made
in accordance with the MSRB’s EMMA system, or in another manner approved under the Rule.
SECTION 4. Content of Annual Reports. The District’s Annual Report due by March 31, 2020
shall consist of the Official Statement and the District’s audited financial statements for the fiscal year
ended June 30, 2019. Thereafter, the Annual Reports shall contain or include by reference the following:
(a) The District’s audited financial statements for the previous fiscal year, prepared in
accordance with generally accepted auditing standards for special districts in the State of California. If the
District’s audited financial statements are not available by the time the Annual Report is required to be filed
pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar
to the financial statements contained in the final Official Statement, and the audited financial statements
shall be filed in the same manner as the Annual Report when they become available.
(b) To the extent not contained in the audited financial statements filed pursuant to the
preceding subsection (a) by the date required by Section 4 hereof, updates of Table Nos. 1, 2, 3, 6, 7 and 9
under the caption “THE WASTEWATER SYSTEM.”
(c) Amounts, if any, held in the Rate Stabilization Fund as of June 30 of the preceding fiscal
year, together with amounts, if any, deposited to or transferred from the Rate Stabilization Fund in the
preceding fiscal year.
D-3
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the District or related public entities, which have been
submitted to the Repository or the Securities and Exchange Commission. If the document included by
reference is a final official statement, it must be available from the MSRB. The District shall clearly identify
each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The District shall give, or cause to be given, notice of the occurrence of any of the following
Listed Events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults, if material.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform.
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-
TEB) or other material notices or determinations with respect to the tax status of
the security, or other material events affecting the tax status of the security.
(7) Modifications to rights of security holders, if material.
(8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if
material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the District or other
obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the District
or an obligated person, or the sale of all or substantially all of the assets of the
District or an obligated person (other than in the ordinary course of business), the
entry into a definitive agreement to undertake such an action, or the termination of
a definitive agreement relating to any such actions, other than pursuant to its terms,
if material.
(14) Appointment of a successor or additional trustee or the change of name of a trustee,
if material.
(15) Incurrence of a financial obligation of the District, if material, or agreement to
covenants, events of default, remedies, priority rights, or other similar terms of a
financial obligation of the District, any of which affect security holders, if material.
D-4
(16) Default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a financial obligation of the District, any of which
reflect financial difficulties.
(b) The District shall, or shall cause the Dissemination Agent (if not the District) to, file a
notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely
manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the
foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under this
subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds
under the Indenture.
(c) The District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8)
(if the event is a bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain the qualifier “if
material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices,
determinations or other events affecting the tax status of the Bonds. The District shall cause a notice to be
filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines
the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the District obtains
knowledge of the occurrence of any of these Listed Events, the District will as soon as possible determine
if such event would be material under applicable federal securities law. If such event is determined to be
material, the District will cause a notice to be filed as set forth in paragraph (b) above.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above
is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or
similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other
proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction
over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by
leaving the existing governing body and officials or officers in possession but subject to the supervision
and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization,
arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over
substantially all of the assets or business of the District.
(e) The term financial obligation means a (1) debt obligation; (2) derivative instrument entered
into in connection with, or pledged as security or a source of payment for, an existing or planned debt
obligation; or (3) guarantee of (e)(1) or (e)(2). The term financial obligation shall not include municipal
securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
SECTION 6. Termination of Reporting Obligation. The District’s obligations under this
Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all
of the Bonds.
SECTION 7. Dissemination Agent. The District may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or
report prepared by the District pursuant to this Disclosure Agreement. The Dissemination Agent may resign
by providing thirty days written notice to the District. The Dissemination Agent shall not be responsible
for the content of any report or notice prepared by the District and shall have no duty to review any
information provided to it by the District. The Dissemination Agent shall have no duty to prepare any
information report nor shall the Dissemination Agent be responsible for filing any report not provided to it
by the District in a timely manner and in a form suitable for filing.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the District may amend this Disclosure Agreement, and any provision of this Disclosure
Agreement may be waived, provided that, in the opinion of nationally recognized bond counsel, such
D-5
amendment or waiver is permitted by the Rule; provided, the Dissemination Agent shall have first
consented to any amendment that modifies or increases its duties or obligations hereunder. In the event of
any amendment or waiver of a provision of this Disclosure Agreement, the District shall describe such
amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason
for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles,
on the presentation) of financial information or operating data being presented by the District. In addition,
if the amendment relates to the accounting principles to be followed in preparing financial statements, (i)
notice of such change shall be given in the same manner as for a Listed Event under Section 5(d), and (ii)
the Annual Report for the year in which the change is made shall present a comparison (in narrative form
and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the
new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the District from disseminating any other information, using the means of dissemination set forth
in this Disclosure Agreement or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice
of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Agreement, the District shall have no obligation under this Disclosure Agreement to update such
information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the District to comply with any provision of
this Disclosure Agreement, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
District to comply with its obligations under this Disclosure Agreement. A default under this Disclosure
Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this
Disclosure Agreement in the event of any failure of the District or the Dissemination Agent to comply with
this Disclosure Agreement shall be an action to compel performance.
No Bondholder or Beneficial Owner may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the District satisfactory written evidence of such
Holder’s or Beneficial Owner’s status as such, and a written notice of and request to cure such failure, and
the District shall have refused to comply therewith within a reasonable time.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District
agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers,
directors, employees and agents, harmless against any loss, expense and liabilities which it may incur
arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and
expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due
to the Dissemination Agent’s, its officers’, directors’, employees’ and agents’ negligence or willful
misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided
hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees
and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In
performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary
capacity for the District, the Holders, or any other party. The obligations of the District under this Section
shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
D-6
SECTION 12. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
District: Otay Water District
2554 Sweetwater Springs Boulevard
Spring Valley, CA 91978
Attention: General Manager
Dissemination Agent: Harrell & Company Advisors, LLC
333 City Boulevard West, Suite 1215
Orange, CA 92868
Attn: Suzanne Harrell
SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from
time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 14. Signature. This Disclosure Agreement has been executed by the undersigned on
the date hereof, and such signature binds the District to the undertaking herein provided.
OTAY WATER DISTRICT
By:
Chief Financial Officer
HARRELL & COMPANY ADVISORS, LLC, as
Dissemination Agent
By:
Authorized Officer
E-1
APPENDIX E
FORM OF BOND COUNSEL OPINION
F-1
APPENDIX F
THE BOOK-ENTRY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record
keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other
payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial
ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants
and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no
representations can be made concerning these matters and neither the DTC Participants nor the Beneficial
Owners should rely on the foregoing information with respect to such matters, but should instead confirm
the same with DTC or the DTC Participants, as the case may be.
Neither the issuer of the Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent
appointed with respect to the Bonds (the “Agent”) take any responsibility for the information contained in
this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to
the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b)
certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or
(c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the
Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants
will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with
the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing
with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository
for the Bonds (the “Securities”). The Securities will be issued as fully-registered securities registered in
the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of
the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If,
however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued
with respect to each $500 million of principal amount, and an additional certificate will be issued with
respect to any remaining principal amount of such issue.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a “banking organization” within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the
New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC.
DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry transfers and pledges
between Direct Participants’ accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of
The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National
Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is
also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of
F-2
AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www.dtcc.com. The information contained on
such Internet site is not incorporated herein by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of
each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and
Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC
are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration
in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the
identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to
augment the transmission to them of notices of significant events with respect to the Securities, such as
redemptions, tenders, defaults, and proposed amendments to the Security documents. For example,
Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their
benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the registrar and request that copies of notices
be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue
are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to
whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
8. Redemption proceeds and distributions on the Securities will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to
credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from
Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in bearer form or registered in
“street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject
F-3
to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption
proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested
by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Securities at
any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor securities depository). In that event, Security certificates will be printed and delivered to
DTC.
11. The information in this section concerning DTC and DTC’s book-entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy
thereof.
4844-9354-5385.1
$_________
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
BOND PURCHASE AGREEMENT
_________, 2019
Otay Water District Financing Authority
2554 Sweetwater Springs Boulevard
Spring Valley, California 91978
Otay Water District
2554 Sweetwater Springs Boulevard
Spring Valley, California 91978
Ladies and Gentlemen:
Hilltop Securities Inc. (the “Underwriter”) hereby offers to enter into this Bond Purchase
Agreement (the “Purchase Agreement”) with you, the Otay Water District Financing Authority (the
“Authority”) and the Otay Water District (the “District”), for the purchase by the Underwriter and the
delivery by the Authority of the above-referenced Bonds (the “Bonds”). The proceeds of the Bonds
will be used to: (i) to finance certain improvements to the District’s Wastewater System; and (ii) to
pay costs incurred in connection with the issuance of the Bonds. This offer is subject to your
acceptance prior to 11:59 p.m., California time, on the date hereof and if not so accepted will be subject
to withdrawal by the Underwriter upon written notice delivered to the Authority and the District at any
time prior to the acceptance thereof by the Authority and the District. Upon such acceptance, this
Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding
upon you and the Underwriter. All terms not defined herein shall have the meanings set forth in the
Indenture or the Installment Sale Agreement (each defined below).
The Authority and the District acknowledge and agree that: (i) the purchase and sale of the
Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction among the
District, the Authority and the Underwriter in which the Underwriter is acting solely as a principal and
not as an agent of the Authority or the District and the Underwriter is not acting as a municipal advisor,
financial advisor or fiduciary to the Authority or the District; (ii) the Underwriter has not assumed any
advisory or fiduciary responsibility to the Authority or the District with respect to the transaction
contemplated by this Purchase Agreement and the discussions, undertakings or procedures leading
thereto (irrespective of whether the Underwriter, or any affiliate of the Underwriter has provided other
services or is currently providing other services to the Authority or the District on other matters); (iii)
the only obligations the Underwriter has to the Authority and the District with respect to the transaction
contemplated by this Purchase Agreement are expressly set forth in this Purchase Agreement; and (iv)
the Authority and the District have consulted their own financial and/or municipal, legal, accounting,
tax and other advisors, as applicable, to the extent the Authority and the District have deemed
appropriate. The Authority acknowledges that it has previously provided the Underwriter with an
4844-9354-5385.1
2
acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal
Securities Rulemaking Board (the “MSRB”).
1. Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriter hereby agrees to purchase from the Authority for offering to the public, and the
Authority hereby agrees to sell and deliver to the Underwriter, all (but not less than all) of the
$_________ aggregate principal amount of the Bonds to be dated the Closing Date, at a price of
$_________, being the principal amount of the Bonds, plus original issue premium of $________, less
an Underwriter’s discount of $_________.
The Bonds shall mature in the amounts and on the dates, and bear interest at the rates, set forth
in Exhibit A hereto. The Bonds shall be as described in and shall be secured under and pursuant to an
Indenture of Trust, dated as of November 1, 2019 (the “Indenture”), between the Authority and
MUFG Union Bank, N.A., as trustee (the “Trustee”), substantially in the form previously submitted
to the Underwriter with only such changes therein as shall be mutually agreed upon by the Authority,
the District, the Trustee and the Underwriter.
The obligation of the Authority to pay the principal of and interest on the Bonds is a special
obligation of the Authority, payable solely from Revenues (as defined in the Indenture), and certain
other amounts held under the Indenture. Revenues consist primarily of Installment Payments made by
the District to the Authority pursuant to the Installment Sale Agreement (as defined below). The
principal of and interest on the Bonds are not required to be paid from any other funds of the Authority,
including any proceeds of any taxes, and does not constitute a debt or pledge of the faith and credit of
the Authority or the State of California (the “State”) or any political subdivision thereof in
contravention of any constitutional or statutory debt limitation or restriction.
The Authority and the District hereby ratify the use by the Underwriter of the Preliminary
Official Statement, dated ________, 2019 relating to the Bonds (together with the cover page and all
appendices thereto, and any supplements thereof, the “Preliminary Official Statement”), and
authorizes the Underwriter to use and distribute the Preliminary Official Statement, the Official
Statement (as defined below), the Indenture, the Installment Sale Agreement, dated as of November 1,
2019, between the Authority and the District (the “Installment Sale Agreement”), the Continuing
Disclosure Agreement as required by Securities and Exchange Commission Rule 15c2-12, as amended
(“Rule 15c2-12”), and substantially in the form attached as an appendix to the Official Statement,
dated April 17, 2019 (the “Continuing Disclosure Agreement”), executed by the District and the
dissemination agent named therein and this Purchase Agreement, and all information contained therein,
and all other documents, certificates and statements furnished by the Authority and the District to the
Underwriter in connection with the offer and sale of the Bonds by the Underwriter. The Authority and
the District have heretofore “deemed final” the Preliminary Official Statement within the meaning of
Rule 15c2-12.
The District will undertake pursuant to the Continuing Disclosure Agreement to provide certain
annual financial and operating information and notices of the occurrence of certain events. A
description of this undertaking is set forth in the Preliminary Official Statement and will also be set
forth in the final Official Statement. This undertaking will be entered into in order to assist the
Underwriter in complying with the Rule 15c2-12.
2. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or
yields) set forth on the inside cover page of the Official Statement of the Authority pertaining to the
4844-9354-5385.1
3
Bonds, dated _________, 2019 (together with all appendices thereto, and with such changes therein
and supplements thereto and as are consented to in writing by the Underwriter, and with the Preliminary
Official Statement, are herein called the “Official Statement”). Subsequent to the initial public
offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields)
as it deems necessary in connection with the marketing of the Bonds subject to Section 5 hereof. The
Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices.
“Public Offering” shall include an offering to a representative number of institutional investors or
registered investment companies, regardless of the number of such investors to which the Bonds are
sold. The Underwriter agrees that prior to the time the final Official Statement relating to the Bonds
is available, the Underwriter will send to any potential purchaser of the Bonds, upon the request of
such potential purchaser, a copy of the most recent Preliminary Official Statement. Such Preliminary
Official Statement shall be sent by first class mail or electronic distribution (or other equally prompt
means) not later than the first business day following the date upon which each such request is received.
3. The Authority shall also deliver a sufficient number of copies of the Official Statement
to enable the Underwriter to distribute a single copy of the Official Statement to any potential customer
of the Underwriter requesting an Official Statement during the time period beginning when the Official
Statement becomes available and ending on the End Date (defined below). The Authority shall deliver
these copies to the Underwriter no later than the earlier of (i) seven (7) business days after the execution
of this Purchase Agreement or (ii) one (1) business day prior to the Closing Date in order to permit the
Underwriter to comply with Rule 15c2-12, and the applicable rules of the MSRB, with respect to
distribution of the Official Statement. The Authority and the District shall prepare the Official
Statement, including any amendments thereto, in word-searchable PDF format as described in the
MSRB’s Rule G-32 and shall provide the electronic copy of the word-searchable PDF format of the
Official Statement to the Underwriter no later than one (1) business day prior to the Closing Date to
enable the Underwriter to comply with MSRB Rule G-32. The Underwriter shall inform the District in
writing of the End Date, and covenants to file the Official Statement with the MSRB on a timely basis.
The Official Statement, as of its date, as of the Closing Date (as defined herein) and as of the
date of any update, amendment or supplement thereto as required hereby subsequent to the Closing,
up to and including the date which is twenty-five (25) days following the end (the “End Date”) of the
Underwriting Period (as hereinafter defined), will be correct and complete in all material respects and
will not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading.
If, after the date of this Purchase Agreement and until the earlier of (i) ninety (90) days after
the end of the “underwriting period” (as defined in Rule 15c2-12) (the “Underwriting Period”), or
(ii) twenty-five (25) days following the end of the Underwriting Period if the Official Statement is
available to any person from the MSRB as contemplated by Rule 15c2-12(b)(4), any event shall occur
or circumstance shall exist of which the Authority or the District have knowledge that would cause the
Official Statement to contain any untrue statement of a material fact or to omit to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading, the Authority or the District, as the case may be, shall notify the Underwriter
(and for the purpose of this Section provide the Underwriter with such information as it may from time
to time reasonably request), and, if in the opinion of the District, the Authority or the Underwriter such
event or circumstance requires the preparation and publication of a supplement or amendment to the
Official Statement, the Authority and the District will, at their expense, supplement or amend the
Official Statement in a form and manner jointly approved by the District, the Authority and the
4844-9354-5385.1
4
Underwriter and furnish to the Underwriter a reasonable number of copies of such supplement or
amendment provided that the Underwriter agrees that it will promptly notify the Authority and the
District of the end of the Underwriting Period.
4. At 8:30 a.m., Pacific Time, on ________, 2019, or at such other time or date as shall
be agreed upon by the Underwriter, Authority and the District (such time and date being herein referred
to as the “Closing Date”), the Authority will deliver to the Underwriter, at a location or locations to
be designated by the Underwriter, the Bonds in book-entry form (all Bonds having had the CUSIP
numbers assigned to them thereon), duly executed by an authorized officer of the Trustee as provided
in the Indenture, and the other documents herein mentioned; and the Underwriter will accept such
delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Purchase Agreement
in immediately available funds (such delivery and payment being herein referred to as the “Closing”).
Upon initial issuance, the ownership of such Bonds shall be registered in the registration books
kept by the Trustee in the name of Cede & Co., as the nominee of The Depository Trust Company.
It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to
provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal
by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase
Agreement.
5. (a) The Underwriter agrees to assist the Authority in establishing the issue price of
the Bonds and shall execute and deliver to the Authority at Closing an “issue price” or similar
certificate, together with the supporting pricing wires or equivalent communications, substantially in
the form attached hereto as Exhibit C, with such modifications as may be appropriate or necessary, in
the reasonable judgment of the Underwriter, the Authority and Bond Counsel, to accurately reflect, as
applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All
actions to be taken by the Authority under this section to establish the issue price of the Bonds may be
taken on behalf of the Authority by the Authority’s municipal advisor identified herein and any notice
or report to be provided to the Authority may be provided to the Authority’s municipal advisor.].
(b) [Except as otherwise set forth in Schedule I attached hereto,] the Authority will treat
the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the
issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the
Underwriter shall report to the Authority the price or prices at which it has sold to the public each
maturity of Bonds. [If at that time the 10% test has not been satisfied as to any maturity of the Bonds,
the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold Bonds
of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date
has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has
been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation
after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the
Authority or bond counsel.] For purposes of this Section, if Bonds mature on the same date but have
different interest rates, each separate CUSIP number within that maturity will be treated as a separate
maturity of the Bonds.
(c) [The Underwriter confirms that it has offered the Bonds to the public on or before the
date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the
corresponding yield or yields, set forth in Schedule I attached hereto, except as otherwise set forth
therein. Schedule I also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of
4844-9354-5385.1
5
the Bonds for which the 10% test has not been satisfied and for which the Authority and the
Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the
Authority to treat the initial offering price to the public of each such maturity as of the sale date as the
issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price
rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold
Bonds of that maturity to any person at a price that is higher than the initial offering price to the public
during the period starting on the sale date and ending on the earlier of the following:
(1) the close of the fifth (5th) business day after the sale date; or
(2) the date on which the Underwriter has sold at least 10% of that maturity of the
Bonds to the public at a price that is no higher than the initial offering price to the
public.
The Underwriter will advise the Authority promptly after the close of the fifth (5th) business
day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price
that is no higher than the initial offering price to the public.]
(d) The Underwriter confirms that:
(i) any selling group agreement and any third-party distribution agreement relating to the
initial sale of the Bonds to the public, together with the related pricing wires, contains or will
contain language obligating each dealer who is a member of the selling group and each broker-
dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each
maturity allocated to it, whether or not the Closing Date has occurred, until either all
Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter
that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the
reporting obligation after the Closing Date may be at reasonable periodic intervals or
otherwise upon request of the Underwriter, and (ii) to comply with the hold-the-
offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge,
are made to a purchaser who is a related party to an underwriter participating in the
initial sale of the Bonds to the public (each such term being used as defined below),
and
(C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the
Underwriter shall assume that each order submitted by the dealer or broker-dealer is a
sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public,
together with the related pricing wires, contains or will contain language obligating each dealer
that is a party to a third-party distribution agreement to be employed in connection with the
initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-
party distribution agreement to (A) report the prices at which it sells to the public the unsold
Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until
either all Bonds of that maturity allocated to it have been sold or it is notified by the
4844-9354-5385.1
6
Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity,
provided that, the reporting obligation after the Closing Date may be at reasonable periodic
intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the
hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or
the dealer and as set forth in the related pricing wires.
(e) The Authority acknowledges that, in making the representations set forth in this
section, the Underwriter will rely on (i) in the event a selling group has been created in connection
with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the
selling group to comply with the requirements for establishing issue price of the Bonds, including, but
not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds,
as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-
party distribution agreement was employed in connection with the initial sale of the Bonds to the
public, the agreement of each broker-dealer that is a party to such agreement to comply with the
requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to
comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party
distribution agreement and the related pricing wires. The Authority further acknowledges that the
Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of
any broker-dealer that is a party to a third-party distribution agreement, to comply with its
corresponding agreement to comply with the requirements for establishing issue price of the Bonds,
including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if
applicable to the Bonds.
(f) The Underwriter acknowledges that sales of any Bonds to any person that is a related
party to an underwriter participating in the initial sale of the Bonds to the public (each such term being
used as defined below) shall not constitute sales to the public for purposes of this section. Further, for
purposes of this section:
(i) “public” means any person other than an underwriter or a related party,
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract
with the Authority (or with the lead underwriter to form an underwriting
syndicate) to participate in the initial sale of the Bonds to the public and (B)
any person that agrees pursuant to a written contract directly or indirectly with
a person described in clause (A) to participate in the initial sale of the Bonds to
the public (including a member of a selling group or a party to a third-party
distribution agreement participating in the initial sale of the Bonds to the
public),
(iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the
underwriter and the purchaser are subject, directly or indirectly, to (A) more
than 50% common ownership of the voting power or the total value of their
stock, if both entities are corporations (including direct ownership by one
corporation of another), (B) more than 50% common ownership of their capital
interests or profits interests, if both entities are partnerships (including direct
ownership by one partnership of another), or (C) more than 50% common
ownership of the value of the outstanding stock of the corporation or the capital
interests or profit interests of the partnership, as applicable, if one entity is a
4844-9354-5385.1
7
corporation and the other entity is a partnership (including direct ownership of
the applicable stock or interests by one entity of the other), and
(iv) “sale date” means the date of execution of this Purchase Agreement by all
parties.
6. The Underwriter represents to and agrees with the Authority and the District that, as of
the date hereof and as of the Closing Date:
(i) The Underwriter is duly authorized to execute this Purchase Agreement and to
take any action under this Purchase Agreement required to be taken by it;
(ii) The Underwriter is in compliance with MSRB Rule G-37 with respect to the
Authority and the District, and is not prohibited thereby from acting as the underwriter with
respect to securities of the Authority and the District; and
(iii) The Underwriter has, and has had, no financial advisory relationship, as that
term is defined in California Government Code Section 53590 (c) or MSRB Rule G-32, with
the District with respect to the Bonds, and no investment firm controlling, controlled by or
under common control with such Underwriter have or has had any such financial advisory
relationship.
7. The Authority represents, warrants and covenants to the Underwriter that:
(a) The Authority is a joint exercise of powers authority duly organized and validly
existing pursuant to the laws of the State of California and has all necessary power and authority to
enter into and perform its duties under the Indenture, the Installment Sale Agreement and this Purchase
Agreement (collectively, the “Authority Documents”) and, when executed and delivered by the
respective parties thereto, the Authority Documents will constitute the legal, valid and binding
obligations of the Authority in accordance with their respective terms.
(b) Neither the execution and delivery of the Authority Documents, or the approval
and execution of the Official Statement, and compliance with the provisions on the Authority’s part
contained therein, nor the consummation of any other of the transactions herein and therein
contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach
of or default under nor contravenes any law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is
a party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in
the security interest or encumbrance of any nature whatsoever upon any of the properties or assets of
the Authority under the terms of any such law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the
Authority Documents.
(c) Except as may be required under blue sky or other securities laws of any state,
there is no consent, approval, authorization or other order of, or filing with, or certification by, any
regulatory authority having jurisdiction over the Authority required for the execution and delivery of
the Bonds or the consummation by the Authority of the other transactions contemplated by the Official
Statement and this Purchase Agreement.
4844-9354-5385.1
8
(d) To the best of the knowledge of the Authority, there is, and on the Closing there
will be, no action, suit, proceeding or investigation at law or in equity before or by any court or
governmental agency or body pending or threatened against the Authority to restrain or enjoin the
delivery of any of the Bonds, or the payments to be made pursuant to the Indenture, or in any way
contesting or affecting the validity of the Authority Documents or of the Authority to enter into the
Authority Documents or contesting the powers of the Authority to perform its obligations under any
of the foregoing or in any way contesting the powers of the Authority in connection with any action
contemplated by this Purchase Agreement, or in any way questioning or challenging the tax status of
the Bonds.
(e) As of the date thereof and at all times subsequent thereto up to and including
the End Date, the information relating to the Authority contained in the Official Statement will be
complete and will not contain any untrue or misleading statement of a material fact or omit to state any
material fact (unless an event occurs of the nature described in Section 7(j) below) necessary to make
the statements therein, in the light of the circumstances under which they were made, not misleading.
As of its date, the information relating to the Authority and the Bonds contained in the Official
Statement is true and correct in all material respects and such information does not contain any untrue
or misleading statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
(f) The Authority agrees to cooperate with the Underwriter in endeavoring to
qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of
the United States as the Underwriter may request; provided, however, that the Authority will not be
required to execute a special or general consent to service of process in any jurisdiction in which it is
not now so subject or to qualify to do business as a foreign agency in any jurisdiction where it is not
so qualified.
(g) By official action of the Authority prior to or concurrently with the execution
hereof, the Authority has duly approved the distribution of the Official Statement, and has duly
authorized and approved the execution and delivery of, and the performance by the Authority of the
obligations on its part contained in the Authority Documents and the consummation by it of all other
transactions contemplated by the Official Statement and this Purchase Agreement.
(h) The Authority is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable judgment or
decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which
the Authority is a party or is otherwise subject, and no event has occurred and is continuing which,
with the passage of time or the giving of notice, or both, would constitute a default or an event of
default under any such instrument.
(i) The Authority is not in default, nor has been in default at any time, as to the
payment of principal or interest with respect to an obligation issued by the Authority or successor of
the Authority or with respect to an obligation guaranteed by the Authority as guarantor or successor of
a guarantor.
(j) If between the date of this Purchase Agreement and the End Date an event
occurs, of which the Authority has knowledge, which might or would cause the information relating
to the Authority or the Authority’s functions, duties and responsibilities contained in the Official
Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to
4844-9354-5385.1
9
omit to state a material fact required to be stated therein or necessary to make such information therein,
in the light of the circumstances under which it was presented, not misleading, the Authority will notify
the Underwriter, and if, in the opinion of the Underwriter or the Authority, such event requires the
preparation and publication of a supplement or amendment to the Official Statement, the Authority
will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official
Statement in a form and in a manner approved by the Underwriter or the Authority, provided all
expenses thereby incurred will be paid for by the Authority.
(k) If the information relating to the Authority, its functions, duties and
responsibilities contained in the Official Statement is amended or supplemented pursuant to the
immediately preceding subsection, at the time of each supplement or amendment thereto and (unless
subsequently again supplemented or amended pursuant to such subsection) at all times subsequent
thereto up to and including the date of the Closing, the portions of the Official Statement so
supplemented or amended (including any financial and statistical data contained therein) will not
contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make such information therein, in the light of the circumstances under which it
was presented, not misleading.
(l) No consent, approval, authorization or other action by a governmental or
regulatory authority that has not been obtained is or will be required of the Authority for the delivery
and sale of the Bonds or the consummation of the other transactions contemplated by this Purchase
Agreement and the Official Statement, except as may be required under the state securities or blue sky
laws in connection with the sale of the Bonds by the Underwriter.
(m) The Authority will deliver all opinions, Bonds, letters and other instruments
and documents reasonably required by the Underwriter and this Purchase Agreement.
(n) Any certificate of the Authority delivered to the Underwriter shall be deemed
a representation and warranty by the Authority to the Underwriter as to the statements made therein.
(o) Other than as described in the Official Statement, as of the time of acceptance
hereof and as of the Closing the Authority does not and will not have outstanding any indebtedness
which is secured by a lien on the Installment Payments superior to or on a parity with the lien of the
Bonds thereon.
(p) Between the date of this Purchase Agreement and the date of Closing, the
Authority will not, without the prior written consent of the Underwriter, and except as disclosed in the
Official Statement, offer or issue any bonds, notes or other obligations for borrowed money, or incur
any material liabilities, direct or contingent, payable from the Net Revenues.
(q) The Authority is not presently and as a result of the execution of the Authority
Documents and the sale of the Bonds will not be in violation of any debt limitation, appropriation
limitation or any other provision of the California Constitution or statutes or any additional debt or
similar provision of any bond, note, contract or other evidence of indebtedness to which the Authority
is a party or to which the Authority is bound.
(r) The Authority will not knowingly take or omit to take any action, which action
or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner
other than as provided in the Authority Documents, unless otherwise required by law.
4844-9354-5385.1
10
8. The District represents, warrants and covenants to the Underwriter that:
(a) The District is a municipal water district duly organized under the laws of the
State of California, and has all necessary power and authority to enter into and perform its duties under
the Installment Sale Agreement, the Continuing Disclosure Agreement, and this Purchase Agreement
(collectively, the “District Documents”) and, when executed and delivered by the respective parties
thereto, the District Documents will constitute the legal, valid and binding obligations of the District
in accordance with their respective terms.
(b) Neither the execution and delivery of the District Documents, or the approval
and execution of the Official Statement, and compliance with the provisions on the District’s part
contained therein, nor the consummation of any other of the transactions herein and therein
contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach
of or default under nor contravenes any law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the District is a
party or is otherwise subject, nor does any such execution, delivery, adoption or compliance result in
the security interest or encumbrance of any nature whatsoever upon any of the properties or assets of
the District under the terms of any such law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the
District Documents.
(c) Except as may be required under blue sky or other securities laws of any state,
there is no consent, approval, authorization or other order of, or filing with, or certification by, any
regulatory authority having jurisdiction over the District required for the execution and delivery of the
Bonds or the consummation by the District of the other transactions contemplated by the Official
Statement and this Purchase Agreement.
(d) To the best of the knowledge of the District, there is, and on the Closing there
will be, no action, suit, proceeding or investigation at law or in equity before or by any court or
governmental agency or body pending or threatened against the District to restrain or enjoin the
delivery of any of the Bonds, or the payments to be made pursuant to the Installment Sale Agreement
and Indenture, or in any way contesting or affecting the validity of the District Documents or of the
District to approve or enter into the District Documents, or in any way questioning or challenging the
tax status of the Bonds.
(e) As of the date thereof and at all times subsequent thereto up to and including
the End Date, the information relating to the District, the Bonds and the Wastewater System contained
in the Official Statement will be complete and will not contain any untrue or misleading statement of
a material fact or omit to state any material fact (unless an event occurs of the nature described in
Section 8(j) below) necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of its date and as of the date hereof, the information relating
to the District, the Bonds and the Wastewater System contained in the Official Statement is true and
correct in all material respects and such information does not contain any untrue or misleading
statement of a material fact or omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(f) The District agrees to cooperate with the Underwriter in endeavoring to qualify
the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United
States as the Underwriter may request; provided, however, that the District will not be required to
4844-9354-5385.1
11
execute a special or general consent to service of process in any jurisdiction in which it is not now so
subject or to qualify to do business as a foreign agency in any jurisdiction where it is not so qualified.
(g) By official action of the District prior to or concurrently with the execution
hereof, the District has duly approved the distribution of the Official Statement, and has duly authorized
and approved the execution and delivery of, and the performance by the District of the obligations on
its part contained in the District Documents and the consummation by it of all other transactions
contemplated by the Official Statement and this Purchase Agreement.
(h) The District is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable judgment or
decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which
the District is a party or is otherwise subject, and no event has occurred and is continuing which, with
the passage of time or the giving of notice, or both, would constitute a default or an event of default
under any such instrument.
(i) The District is not in default, nor has been in default at any time, as to the
payment of principal or interest with respect to an obligation issued by the District or successor of the
District or with respect to an obligation guaranteed by the District as guarantor or successor of a
guarantor.
(j) If between the date of this Purchase Agreement and the End Date an event
occurs, of which the District has knowledge, which might or would cause the information relating to
the District, the Wastewater System or the District’s functions, duties and responsibilities contained in
the Official Statement, as then supplemented or amended, to contain an untrue statement of a material
fact or to omit to state a material fact required to be stated therein or necessary to make such
information therein, in the light of the circumstances under which it was presented, not misleading, the
District will notify the Underwriter, and if, in the opinion of the Underwriter or the Authority, such
event requires the preparation and publication of a supplement or amendment to the Official Statement,
the District will cooperate with the Underwriter in the preparation of an amendment or supplement to
the Official Statement in a form and in a manner approved by the Underwriter or the Authority,
provided all expenses thereby incurred will be paid for by the District.
(k) If the information relating to the Wastewater System, the District, its functions,
duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to
the immediately preceding subsection, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such subsection) at all times
subsequent thereto up to and including the date of the Closing, the portions of the Official Statement
so supplemented or amended (including any financial and statistical data contained therein) will not
contain any untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make such information therein, in the light of the circumstances under which it
was presented, not misleading.
(l) The District covenants that it will comply with all tax covenants relating to it
in the District Documents and the Tax Certificate of the District.
(m) The written information supplied by the District to the Underwriter with respect
to the financial information relating to the Wastewater System is true, correct and complete in all
material respects for the purposes for which it was supplied.
4844-9354-5385.1
12
(n) No consent, approval, authorization or other action by a governmental or
regulatory agency that has not been obtained is or will be required of the District for the delivery and
sale of the Bonds or the consummation of the other transactions contemplated by this Purchase
Agreement and the Official Statement, except for such licenses, certificates, approvals, variances or
permits which may be necessary for the construction or operation of the Wastewater System which the
District has applied for (or will apply for in the ordinary course of business) and expects to receive,
and except as may be required under the state securities or blue sky laws in connection with the sale of
the Bonds by the Underwriter.
(o) The District will not take or omit to take any action which action or omission
will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to
that provided in the Indenture and as described in the Official Statement, unless otherwise required by
law.
(p) The District will deliver all opinions, certificates, letters and other instruments
and documents reasonably required by the Underwriter and this Purchase Agreement.
(q) Any certificate of the District delivered to the Underwriter shall be deemed a
representation and warranty by the District to the Underwriter as to the statements made therein.
(r) Other than as described in the Official Statement, as of the time of acceptance
hereof and as of the Closing, the District does not and will not have outstanding any indebtedness
which is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Bonds
thereon.
(s) Between the date of this Purchase Agreement and the date of Closing, the
District will not, without the prior written consent of the Underwriter, and except as disclosed in the
Official Statement, offer or issue any bonds, notes or other obligations for borrowed money, or incur
any material liabilities, direct or contingent, payable from the Net Revenues.
(t) The District is not presently and as a result of the execution of the District
Documents and the sale of the Bonds will not be in violation of any debt limitation, appropriation
limitation or any other provision of the California Constitution or statutes or any additional debt or
similar provision of any bond, note, contract or other evidence of indebtedness to which the District is
a party or to which the District is bound.
(u) Based on a review of its previous undertakings, the District has not, in the last
five years, failed to comply in any material respect with its obligations under any continuing disclosure
undertaking entered into pursuant to Rule 15c2-12 except as disclosed in the Official Statement. The
District will undertake, pursuant to the Continuing Disclosure Agreement to provide annual reports
and notices of certain events in accordance with the requirements of Rule 15c2-12.
9. The Underwriter has entered into this Purchase Agreement in reliance upon the
representations, warranties and agreements of the Authority and the District contained herein, and the
opinions of Bond Counsel, Counsel to the Trustee, General Counsel to the District and Counsel to the
Authority required hereby. The Underwriter’s obligations under this Purchase Agreement are and shall
be subject to the following further conditions:
4844-9354-5385.1
13
(a) At the time of Closing, this Purchase Agreement, the Indenture, the Installment
Sale Agreement, and the Continuing Disclosure Agreement (collectively the “Legal Documents”), all
as described in the Official Statement, shall be in full force and effect as valid and binding agreements
between or among the various parties thereto, and the Legal Documents and the Official Statement
shall not have been amended, modified or supplemented except as may have been agreed to in writing
by the Underwriter, and there shall be in full force and effect such resolutions as, in the opinion of
Hawkins Delafield & Wood LLP (“Bond Counsel”), shall be necessary in connection with the
transactions contemplated hereby.
(b) At or prior to the Closing, the Underwriter shall receive the following
documents, in each case satisfactory in form and substance to them:
(1) The unqualified approving opinion of Bond Counsel, dated the date of
Closing, addressed to the Authority, the District and the Underwriter (or a reliance
letter to the Underwriter), in substantially the form attached as Appendix E to the
Official Statement.
(2) A supplemental opinion of Bond Counsel, dated as of the date of
Closing addressed to the Underwriter, in form and substance to the effect that:
(a) The statements and information contained in the Official
Statement under the captions “INTRODUCTION,” “THE BONDS,” “SOURCES OF
PAYMENT FOR THE BONDS,” “TAX MATTERS” and APPENDICES A and E to
the extent they purport to summarize information concerning the Bonds and certain
provisions of the Legal Documents and the opinion of such counsel, present a fair and
accurate summary of such information and such provisions;
(b) The Bonds are exempt from registration under the Securities
Act of 1933, as amended, and the Indenture is exempt from qualification as an
Indenture pursuant to the Indenture Act of 1939, as amended; and
(c) The Purchase Agreement has been duly authorized, executed
and delivered by the Authority and the District, and, assuming due authorization,
execution and delivery by the other parties thereto, constitutes legal, valid and binding
agreement of the Authority and the District enforceable against each in accordance
with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors’ rights generally and
equitable remedies if equitable remedies are sought, and except no opinion need be
expressed as to the enforceability of the indemnification, waiver, choice of law or
contributions provisions contained in the Purchase Agreement.
(3) The opinion of Hawkins Delafield & Wood LLP, Disclosure Counsel,
dated the date of Closing and addressed to the Authority, the District and the
Underwriter, in substantially the form attached hereto as Exhibit C.
(4) An opinion of Counsel to the Authority, dated the date of Closing in
form and substance satisfactory to the Underwriter and Bond Counsel, addressed to the
District and the Underwriter, to the effect that:
4844-9354-5385.1
14
(i) the Authority is a joint powers authority duly organized and
validly existing under the laws of the State of California;
(ii) the preparation and distribution of the Official Statement and
the Authority Documents have been duly approved by the Authority;
(iii) the resolutions of the Authority approving and authorizing the
execution and delivery of the Official Statement and the Authority Documents
have been duly adopted at meetings of the governing body of the Authority
which were called and held pursuant to law and with all public notice required
by law and at which a quorum was present and acting throughout and such
resolutions have not been amended or modified and are in full force and effect;
(iv) there is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body, pending or, to the best
knowledge of such counsel, threatened against or affecting the Authority,
which would adversely impact the Authority’s ability to complete the
transactions described in and contemplated by the Official Statement, to
restrain or enjoin the payments under, or in any way contesting or affecting the
validity of the Authority Documents, or the transactions described and defined
in the Official Statement wherein an unfavorable decision, ruling or finding
would adversely affect the validity and enforceability of the Authority
Documents;
(v) the execution and delivery of the Authority Documents and the
approval of the Official Statement, and compliance with the provisions thereof
and hereof, under the circumstances contemplated thereby, do not and will not
in any material respect conflict with or constitute on the part of the Authority a
breach of or default under any agreement or other instrument to which the
Authority is a party or by which it is bound or any existing law, regulation,
court order or consent decree to which the Authority is subject;
(vi) the Authority Documents and the Official Statement have been
duly authorized, executed and delivered by the Authority, and, assuming due
authorization, execution and delivery by the other parties thereto, the Authority
Documents constitute legal, valid and binding agreements of the Authority
enforceable in accordance with their respective terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors’ rights generally and by the application
of equitable principles if sought and by the limitations on legal remedies
imposed on actions against public agencies in the State of California;
(vii) no authorization, approval, consent, or other order of the State
of California or any other governmental authority or agency within the State of
California is required for the valid authorization, execution and delivery of the
Authority Documents and the approval of the Official Statement; and
(viii) nothing has come to their attention which would lead them to
believe that the information relating to the Authority contained in the Official
4844-9354-5385.1
15
Statement contains an untrue statement or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(5) An opinion of General Counsel to the District, dated the date of Closing
in form and substance satisfactory to the Underwriter and Bond Counsel, addressed to
the Authority and the Underwriter, to the effect that:
(i) the District is a municipal water district created in accordance
with the laws of the State of California;
(ii) the preparation and distribution of the Official Statement and
the District Documents have been duly approved by the District;
(iii) the resolutions of the District approving and authorizing the
execution and delivery of the Official Statement and the District Documents
have been duly adopted at meetings of the governing body of the District which
were called and held pursuant to law and with all public notice required by law
and at which a quorum was present and acting throughout and such resolutions
have not been amended or modified and are in full force and effect;
(iv) there is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body, pending or, to the best
knowledge of such counsel, threatened against or affecting the District, which
would adversely impact the District’s ability to complete the transactions
described in and contemplated by the Official Statement, to restrain or enjoin
the payments under, or in any way contesting or affecting the validity of the
District Documents, or the transactions described and defined in the Official
Statement wherein an unfavorable decision, ruling or finding would adversely
affect the validity and enforceability of the District Documents;
(v) the execution and delivery of the District Documents and the
approval of the Official Statement, and compliance with the provisions thereof
and hereof, under the circumstances contemplated thereby, do not and will not
in any material respect conflict with or constitute on the part of the District a
breach of or default under any agreement or other instrument to which the
District is a party or by which it is bound or any existing law, regulation, court
order or consent decree to which the District is subject;
(vi) the District Documents and the Official Statement have been
duly authorized, executed and delivered by the District, and, assuming due
authorization, execution and delivery by the other parties thereto, the District
Documents constitute legal, valid and binding agreements of the District
enforceable in accordance with their respective terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors’ rights generally and by the application
of equitable principles if sought and by the limitations on legal remedies
imposed on actions against public agencies in the State of California;
4844-9354-5385.1
16
(vii) no authorization, approval, consent, or other order of the State
of California or any other governmental authority or agency within the State of
California is required for the valid authorization, execution and delivery of the
District Documents and the approval of the Official Statement;
(viii) the District’s charges and fees with respect to the Wastewater
System were duly approved and adopted by the District, and are valid and
enforceable at the current levels levied by the District; and
(ix) nothing has come to the General Counsel’s attention which
would lead such attorney to believe that the information relating to the District
or the Wastewater System contained in the Official Statement contains an
untrue statement or omits to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(6) The opinion of counsel to the Trustee, dated the date of Closing in form
and substance satisfactory to the Underwriter and Bond Counsel, and addressed to the
Authority, the District and the Underwriter, to the effect that:
(i) the Trustee is a national banking association duly organized
and validly existing under the laws of the United States;
(ii) the Trustee has duly authorized the execution and delivery of
the Indenture;
(iii) the Indenture has been duly entered into and delivered by the
Trustee and assuming due, valid and binding authorization, execution and
delivery by the other parties thereto, constitutes the legal, valid and binding
obligation of the Trustee enforceable against the Trustee in accordance with its
terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors’ rights generally, or by general principles of equity;
(iv) the Trustee has duly authenticated and delivered the Bonds in
its capacity as trustee under the Indenture;
(v) acceptance by the Trustee of the duties and obligations under
the Indenture and compliance with provisions thereof will not conflict with or
constitute a breach of or default under any law or administrative regulation to
which the Trustee is subject; and
(vi) all approvals, consents and orders of any governmental
authority or agency having jurisdiction in the matter which would constitute a
condition precedent to the performance by the Trustee of its duties and
obligations under the Indenture have been obtained and are in full force and
effect.
4844-9354-5385.1
17
(7) An opinion, dated the date of the Closing and addressed to the
Underwriter, of Nixon Peabody LLP, counsel to the Underwriter (“Underwriter’s
Counsel”), in such form as may be acceptable to the Underwriter.
(8) A certificate, dated the date of Closing, signed by a duly authorized
official of the Authority satisfactory in form and substance to the Underwriter and Bond
Counsel, (a) confirming as of such date the representations and warranties of the
Authority contained in this Purchase Agreement; (b) certifying that the Authority has
complied with all agreements, covenants and conditions to be complied with by the
Authority at or prior to the Closing under the Authority Documents; and (c) certifying
that to the best of such official’s knowledge, no event affecting the Authority has
occurred since the date of the Official Statement which either makes untrue or incorrect
in any material respect as of the Closing the statements or information contained in the
Official Statement or is not reflected in the Official Statement but should be reflected
therein in order to make the statements and information therein not misleading in any
material respect.
(9) A certificate or certificates, dated the date of Closing, signed by a duly
authorized official of the District satisfactory in form and substance to the Underwriter
and Bond Counsel, (a) confirming as of such date the representations and warranties
of the District contained in this Purchase Agreement; (b) certifying that the District has
complied with all agreements, covenants and conditions to be complied with by the
District at or prior to the Closing under the District Documents; and (c) certifying that
to the best of such official’s knowledge, no event affecting the District has occurred
since the date of the Official Statement which either makes untrue or incorrect in any
material respect as of the Closing the statements or information contained in the
Official Statement or is not reflected in the Official Statement but should be reflected
therein in order to make the statements and information therein not misleading in any
material respect.
(10) A certificate, dated the date of the Preliminary Official Statement,
signed by a duly authorized official of the Authority deeming the Preliminary Official
Statement “final” for purposes of Rule 15c2-12.
(11) A certificate, dated the date of the Preliminary Official Statement,
signed by a duly authorized official of the District deeming the Preliminary Official
Statement “final” for purposes of Rule 15c2-12.
(12) An executed or certified copy of each of the Legal Documents.
(13) A certificate dated as of the date of Closing of a duly authorized officer
of the District to the effect that each included resolution is a true, correct and complete
copy of the one duly adopted by the Board of Directors of the District and that none
have been amended, modified or rescinded since adoption (except as reflected in said
transcript or as may have been agreed to in writing by the Underwriter) and is in full
force and effect as of the date of Closing.
(14) A certificate dated as of the date of Closing of a duly authorized officer
of the Authority to the effect that each included resolution is a true, correct and
4844-9354-5385.1
18
complete copy of the one duly adopted by the Board of Directors of the Authority and
that none have been amended, modified or rescinded since adoption (except as reflected
in said transcript or as may have been agreed to in writing by the Underwriter) and is
in full force and effect as of the date of Closing.
(15) An executed copy of the Official Statement.
(16) A certified copy of the general resolution of the Trustee authorizing the
execution and delivery of certain documents by certain officers of the Trustee, which
resolution authorizes the execution and delivery of documents such as the Bonds and
the Indenture.
(17) A Certificate of the District with respect to the Wastewater System
evidencing that the insurance required by the Installment Sale Agreement has been
procured and is in full force and effect.
(18) Tax certifications by the Authority and the District in form and
substance acceptable to Bond Counsel.
(19) A Certificate of the Trustee, dated the Closing Date to the effect that:
(i) the Trustee is duly organized and existing as a national banking
association in good standing under the laws of the United States, having the
full power and authority to accept and perform its duties under the Indenture;
(ii) subject to the provisions of the Indenture, the Trustee will apply
the proceeds from the Bonds to the purposes specified in the Indenture;
(iii) the Trustee has duly authorized and executed the Indenture; and
(iv) the Trustee has duly authenticated and delivered the Bonds in
its capacity as trustee under the Indenture.
(20) Evidence that a federal tax information form 8038-G has been prepared
for filing with respect to the Bonds.
(21) A copy of the Notice of Final Sale required to be delivered to the
California Debt and Investment Advisory Commission pursuant to Section 8855 of the
California Government Code.
(22) Such additional legal opinions, certificates, proceedings, instruments
and other documents as Bond Counsel, the Underwriter and Underwriter’s Counsel
may reasonably request to evidence compliance with legal requirements, the truth and
accuracy, as of the time of Closing, of the representations contained herein and in the
Official Statement and the due performance or satisfaction by the Trustee and the
Authority at or prior to such time of all agreements then to be performed and all
conditions then to be satisfied.
(c) All matters relating to this Purchase Agreement, the Bonds and the sale thereof,
the Legal Documents and the consummation of the transactions contemplated by this Purchase
4844-9354-5385.1
19
Agreement shall have been approved by the Underwriter, such approval not to be unreasonably
withheld.
If the conditions to the Underwriter’s obligations contained in this Purchase Agreement are not
satisfied or if the Underwriter’s obligations shall be terminated for any reason permitted by this
Purchase Agreement, this Purchase Agreement shall terminate and none of the Underwriter, the
District nor the Authority shall have any further obligation hereunder.
10. The Underwriter shall have the right to terminate this Purchase Agreement, without
liability therefore, by written notification to the Authority and the District if at any time at or prior to
the Closing:
(i) Any event shall occur which causes any statement contained in
the Official Statement to be materially misleading or results in a failure of the
Official Statement to state a material fact necessary to make the statements in
the Official Statement, in the light of the circumstances under which they were
made, not misleading; or
(ii) Legislation shall be enacted by or introduced in the Congress
of the United States or recommended to the Congress for passage by the
President of the United States, or the Treasury Department of the United States
or the Internal Revenue Service or favorably reported for passage to either
House of the Congress by any committee of such House to which such
legislation has been referred for consideration, a decision by a court of the
United States or of the State or the United States Tax Court shall be rendered,
or an order, ruling, regulation (final, temporary or proposed), press release,
statement or other form of notice by or on behalf of the Treasury Department
of the United States, the Internal Revenue Service or other governmental
agency shall be made or proposed, the effect of any or all of which would be
to alter, directly or indirectly, federal income taxation upon interest received
on obligations of the general character of the Bonds, or the interest on the
Bonds as described in the Official Statement, or other action or events shall
have transpired which may have the purpose or effect, directly or indirectly, of
changing the federal income tax consequences of any of the transactions
contemplated herein; or
(iii) Legislation introduced in or enacted (or resolution passed) by
the Congress or an order, decree, or injunction issued by any court of competent
jurisdiction, or an order, ruling, regulation (final, temporary, or proposed),
press release or other form of notice issued or made by or on behalf of the
Securities and Exchange Commission, or any other governmental agency
having jurisdiction of the subject matter, to the effect that obligations of the
general character of the Bonds are not exempt from registration under or other
requirements of the Securities Act of 1933, as amended, or that the Indenture
is not exempt from qualification under or other requirements of the Trust
Indenture Act of 1939, as amended, or that the issuance, offering, or sale of
obligations of the general character of the Bonds, as contemplated hereby or by
the Official Statement or otherwise, is or would be in violation of the federal
securities law as amended and then in effect; or
4844-9354-5385.1
20
(iv) A general suspension of trading in securities on the New York
Stock Exchange or any other national securities exchange, the establishment of
minimum or maximum prices on any such national securities exchange, the
establishment of material restrictions (not in force as of the date hereof) upon
trading securities generally by any governmental authority or any national
securities exchange, or any material increase of restrictions now in force
(including, with respect to the extension of credit by, or the charge to the net
capital requirements of, the Underwriter); or
(v) A general banking moratorium shall have been established by
federal, New York or California authorities; or
(vi) Establishment of any new restrictions in securities materially
affecting the free market for securities of the same nature as the Bonds
(including the imposition of any limitations on interest rates); or
(vii) The occurrence of an adverse event in the affairs of the
Authority or the District which, in the reasonable opinion of the Underwriter,
materially impairs the investment quality of the Bonds; or
(viii) Any amendment to the federal or California Constitution or
action by any federal or California court, legislative body, regulatory body or
other authority materially adversely affecting the Authority or the District, its
property, income or securities (or interest thereon), or the ability of the District
to execute the Installment Sale Agreement or the Authority to issue the Bonds
and pledge the Revenues as contemplated by the Indenture and the Official
Statement; or
(ix) There shall have occurred any (1) new material outbreak of
hostilities (including, without limitation, an act of terrorism) or (2) new
material other national or international calamity or crisis, or any material
adverse change in the financial, political or economic conditions affecting the
United States, including, but not limited to, an escalation of hostilities that
existed prior to the date hereto; or
(x) There shall have occurred any materially adverse change in the
affairs or financial position, results of operations or condition, financial or
otherwise, of the Authority or the District, other than changes in the ordinary
course of business or activity or in the normal operation of the Authority or the
District, except as described in the Official Statement; or
(xi) Any event occurring, or information becoming known which,
in the reasonable judgment of the Underwriter, makes untrue in any material
respect any statement or information contained in the Preliminary Official
Statement or the Official Statement, or results in the Preliminary Official
Statement or the Official Statement containing any untrue statement of a
material fact or omitting to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or
4844-9354-5385.1
21
(xii) An event described in Section 7(j) or 8(j) hereof shall have
occurred which, in the reasonable professional judgment of the Underwriter,
requires the preparation and publication of a supplement or amendment to the
Official Statement; or
(xiii) Any rating of other obligations of the Authority or the District
by a national rating agency shall have been withdrawn or downgraded or placed
on negative outlook or negative watch.
11. Performance by the Authority and the District of their respective obligations under this
Purchase Agreement is conditioned upon (i) performance by the Underwriter of its obligations
hereunder, and (ii) receipt by the Underwriter of all opinions and certificates to be delivered at Closing
by persons and entities other than the Authority or the District.
12. After the Closing and until the End Date if any event relating to or affecting the
Authority or the District shall occur as a result of which it is necessary, in the opinion of the
Underwriter or the Authority, to amend or supplement the Official Statement in order to make the
Official Statement not misleading in the light of the circumstances existing at the time it is delivered
to an initial purchaser of the Bonds, the Authority will forthwith prepare and furnish to the Underwriter
a reasonable number of copies of an amendment of or supplement to the Official Statement (in form
and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement
so that it will not contain an untrue statement of a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time the Official Statement is
delivered to an initial purchaser of the Bonds, not misleading. The costs of preparing any necessary
amendment or supplement to the Official Statement to be utilized until the End Date shall be borne by
the Authority and any costs incurred thereafter incident to amending or supplementing the Official
Statement shall be borne by the Underwriter. For the purposes of this Section, the Authority will
furnish such information with respect to itself as the Underwriter may from time to time request.
13. (a) The Underwriter shall be under no obligation to pay, and the District or
Authority shall pay or cause to be paid out of the proceeds of the Bonds, all expenses incident to the
performance of the Authority’s and District’s obligations hereunder, including but not limited to: the
cost of photocopying and delivering the Bonds to the Underwriter; the cost of preparing, printing
(and/or word processing and reproducing), distributing and delivering the District Documents and the
Authority Documents, and the cost of printing, distributing and delivering the Preliminary Official
Statement and the Official Statement in such reasonable quantities as requested by the Underwriter;
the premiums with respect to the Policy and the Surety; and the fees and disbursements of Bond
Counsel, Disclosure Counsel, the Municipal Advisor, any accountants, municipal advisors or other
engineers or experts or consultants the Authority or the District have retained in connection with the
Bonds and expenses (included in the expense component of the Underwriter’s spread) incurred on
behalf of the Authority or District officers or employees which are incidental to implementing this
Purchase Agreement, including, but not limited to, meals, transportation, and lodging of those officers
or employees.
(b) Whether or not the Bonds are delivered to the Underwriter as set forth herein,
neither the Authority nor the District shall be under any obligation to pay, and the Authority and the
District shall not pay, any expenses incurred by the Underwriter in connection with its public offering
and distribution of the Bonds (except those specifically enumerated in subsection (a) of this section),
including any advertising expenses and the fees of the California Debt and Investment Advisory
4844-9354-5385.1
22
Commission, the cost of preparation of any “blue sky” or legal investment memoranda, and the fees
and disbursements of Underwriter’s Counsel.
The Authority and the District acknowledge that the Underwriter will pay from the
underwriter’s expense allocation of the underwriting discount certain fees, including the applicable per
bond assessment charged by the California Debt and Investment Advisory Commission.
14. Any notice or other communication to be given to the Underwriter may be given by
delivering the same to Hilltop Securities Inc. 2533 South Coast Hwy., Suite 250, Cardiff, California
92007; Attention: Robin Thomas. Any notice or other communication to be given to the Authority or
the District may be given by delivering the same to addresses initially provided herein, Attention:
Executive Director with respect to the Authority and Attention: General Manager with respect to the
District. The approval of the Underwriter when required hereunder or the determination of satisfaction
as to any document referred to herein shall be in writing signed by the Underwriter and delivered to
you.
15. This Purchase Agreement is made solely for the benefit of the Authority, the District
and the Underwriter (including the successors or assigns thereof) and no other person shall acquire or
have any right hereunder or by virtue hereof.
16. This Purchase Agreement may be executed by the parties hereto in separate
counterparts, each of which such counterparts shall together constitute but one and the same
instrument.
17. The representations and warranties of the Authority and the District set forth in or made
pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or
otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and
regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results
of such investigations) concerning such representations and warranties of the Authority and the District
and regardless of delivery of and payment for the Bonds.
18. The primary role of the Underwriter, as underwriter, is to purchase the Bonds for resale
to investors in an arms-length commercial transaction among the District, the Authority and the
Underwriter. The Underwriter, as underwriter, has financial and other interests that differ from those
of the Authority and the District.
19. This Purchase Agreement shall become effective and binding upon the respective
parties hereto upon the execution of the acceptance hereof by the Authority, the District and the
Underwriter, and shall be valid and enforceable as of the time of such acceptance.
20. This Purchase Agreement shall be governed by the laws of the State of California. This
Purchase Agreement shall not be assigned by either party hereto.
21. This Purchase Agreement supersedes and replaces all prior negotiations, agreements
and understandings between the parties hereto in relation to the sale of Bonds by the Authority and the
District and represents the entire agreement of the parties as to the subject matter herein.
4844-9354-5385.1
23
4844-9354-5385.1
S-1
Signature Page of Bond Purchase Agreement relating to
Otway Water District Financing Authority
2019 Wastewater Revenue Bonds
22. Any provision of this Purchase Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Purchase Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.
HILLTOP SECURITIES INC.
By:
Authorized Signatory
The foregoing is hereby agreed to and accepted as of the date first above written:
OTAY WATER DISTRICT FINANCING AUTHORITY
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
OTAY WATER DISTRICT
By:
Authorized Officer
Time of Execution: _____________ p.m. California time
.
4844-9354-5385.1
Exhibit A
EXHIBIT A
$________
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-The-
Offering-
Price Rule
4844-9354-5385.1
EXHIBIT B
$________
OTAY WATER DISTRICT FINANCING AUTHORITY
2019 WASTEWATER REVENUE BONDS
FORM OF ISSUE PRICE CERTIFICATE
The undersigned, Hilltop Securities Inc. (the “Underwriter”), hereby certifies as set forth below with
respect to the sale and issuance of the above-captioned obligations (the “Bonds”) of the Otay Water
District Financing Authority (the “Issuer”).
1. Sale of the General Rule Maturities. As of the date of this certificate, for each
Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold
to the Public is the respective price listed in Schedule A.
[2. Initial Offering Price of the Hold-the-Offering-Price Maturities.
(a) The Underwriter has offered the Hold-the-Offering-Price Maturities to the Public for
purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on
or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is
attached to this certificate as Schedule B.
(b) As set forth in the Bond Purchase Agreement dated ________ __, 2019, among the
Underwriter, the Otwater Water District and the Issuer, the Underwriter agreed in writing on or prior
to the Sale Date that, (i) for each Maturity of the Hold-the-Offering-Price Maturities, they would
neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the
Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-
offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer
who is a member of the selling group, and any retail distribution agreement shall contain the agreement
of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-
offering-price rule. Pursuant to such agreement, no Underwriter (as defined below in this certificate)
offered or sold any Maturity of the Hold-the-Offering-Price Maturities at a price that is higher than the
respective Initial Offering Price for that Maturity of the Bonds during the Holding Period.]
3. Defined Terms.
[(a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A
hereto as the “General Rule Maturities.”]
[(b) Hold-the-Offering-Price Maturities means those Maturities of the Bonds listed in
Schedule A hereto as the “Hold-the-Offering-Price Maturities.”]
[(c) Holding Period means, with respect to a Hold-the-Offering-Price Maturity, the period
starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the
Sale Date, or (ii) the date on which the Underwriters sold at least 10% of such Hold-the-Offering-Price
Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-
Offering-Price Maturity.]
4844-9354-5385.1
(d) Maturity means Bonds with the same credit and payment terms. Bonds with different
maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as
separate maturities.
(e) Public means any person (including an individual, trust, estate, partnership,
association, company, or corporation) other than an Underwriter or a related party to an Underwriter.
The term “related party” for purposes of this certificate generally means any two or more persons who
have greater than 50 percent common ownership, directly or indirectly.
(f) Sale Date means the first day on which there is a binding contract in writing for the
sale of a Maturity of the Bonds. The Sale Date of the Bonds is [date of execution of Purchase Contract].
(g) Underwriter means (i) any person that agrees pursuant to a written contract with the
Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale
of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or
indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the
Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement
participating in the initial sale of the Bonds to the Public).
The representations set forth in this certificate are limited to factual matters only. Nothing in
this certificate represents the undersigned’s interpretation of any laws, including specifically Sections
103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
thereunder. The undersigned understands that the foregoing information will be relied upon by the
Issuer with respect to certain of the representations set forth in the Tax Certificate with respect to the
Bonds and with respect to compliance with the federal income tax rules affecting the Bonds, and by
Hawkins Delafield & Wood LLP in connection with rendering its opinion that the interest on the Bonds
is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue
Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to
time relating to the Bonds.
IN WITNESS WHEREOF, the undersigned has executed this certificate on this __ day of __________,
2019.
HILLTOP SECURITIES INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
4844-9354-5385.1
EXHIBIT C
FORM OF DISCLOSURE COUNSEL OPINION LETTER
Otay Water district Financing Authority
Spring Valley, California
Otay Water District
Spring Valley, California
Hilltop Securities Inc.
Cardiff, California
Re: $________ Otay Water District Financing Authority 2019 Wastewater Revenue
Bonds
Ladies and Gentlemen:
We have acted as Disclosure Counsel to the Otway Water District (the “District”) and the Otay
Water District Financing Authority (the “Authority”) in connection with the issuance by the Authority
of its 2019 Wastewater Revenue Bonds (the “Bonds”). The Bonds are authorized under Article 4
(commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the
State of California. The Bonds are being issued pursuant to the provisions of an Indenture of Trust,
dated as of November 1, 2019 (the “Indenture”), by and between the Authority and MUFG Union
Bank, N.A., as trustee (the “Trustee”). The terms and provisions of the Bonds are contained in the
Indenture and are further described in the Official Statement relating to the Bonds, dated ________,
2019 (the “Official Statement”). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Official Statement or the Indenture, as applicable.
In rendering this opinion, we have reviewed the Indenture and such records, documents,
certificates and opinions, and made such other investigations of law and fact as we have deemed
necessary or appropriate. This opinion is limited to matters governed by the federal securities law of
the United States of America, and we assume no responsibility with respect to the applicability or effect
of the laws of any other jurisdiction.
In our capacity as Disclosure Counsel, we have rendered certain assistance to the District and
the Authority in connection with the preparation of the Preliminary Official Statement, dated
_________, 2019 (the “Preliminary Official Statement”), and the Official Statement. Rendering such
assistance involved discussions and inquiries concerning certain matters, review of certain documents
and proceedings, and participation in meetings and telephone conferences with representatives of the
District and the Authority, counsel to the District and the Authority, the Municipal Advisor, the
Underwriter and counsel to the Underwriter, during which meetings and telephone conferences the
contents of the Preliminary Official Statement, the Official Statement and related matters were
discussed. On the basis of the information made available to us in the course of the foregoing (but
without having undertaken to determine or verify independently, or assuming any responsibility for,
the accuracy, completeness or fairness of any of the statements contained in the Preliminary Official
Statement or the Official Statement), no facts have come to the attention of the personnel in our firm
4844-9354-5385.1
directly involved in rendering legal advice and assistance in connection with the preparation of the
Preliminary Official Statement or Official Statement which cause us to believe that: (a) the Preliminary
Official Statement as of its date or as of ________, 2019 (excluding therefrom financial, engineering
and statistical data; CUSIP numbers, forecasts, projections, estimates, assumptions and expressions of
opinions; statements relating to The Depository Trust Company, Cede & Co. and the operation of the
book-entry system; and the information in Appendices B, C, and F to the Official Statement, as to all
of which we express no view, and except for such information as is permitted to be excluded from the
Preliminary Official Statement pursuant to Rule 15c2-12 of the Securities Exchange Act of 1934, as
amended, including but not limited to information as to pricing, yields, interest rates, maturities,
amortization, redemption provisions, debt service requirements, underwriter’s discount and CUSIP
numbers) contained or contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading; or (b) the Official Statement as of its date and as of the date hereof
(excluding therefrom financial, engineering and statistical data; CUSIP numbers, forecasts,
projections, estimates, assumptions and expressions of opinions; statements relating to The Depository
Trust Company, Cede & Co. and the operation of the book-entry system; and the information in
Appendices B, C, and F to the Official Statement, as to all of which we express no view) contained or
contains any untrue statement of a material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading. In rendering such advice we conducted no independent diligence on the Electronic
Municipal Market Access website and express no view regarding the District’s or the Authority’s
compliance with any obligation to provide notice of the events described in part (b)(5)(i)(C) of Rule
15c2-12 or to file annual reports described in part (b)(5)(i)(A) of Rule 15c2-12.
During the period from the date of the Official Statement to the date of this opinion, except for
our review of the certificates and opinions regarding the Preliminary Official Statement and the Official
Statement delivered on the date hereof, we have not undertaken any procedures or taken any actions
which were intended or likely to elicit information concerning the accuracy, completeness or fairness
of any of the statements contained in the Preliminary Official Statement or the Official Statement.
We are furnishing this opinion to the District and the Authority, solely for their benefit. This
opinion is rendered in connection with the transaction described herein, and may not be relied upon by
the District or the Authority for any other purpose. This opinion shall not extend to, and may not be
used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other
entity without our prior written consent. The delivery of this opinion shall not create any attorney-
client relationship between our firm and the addressees hereof, other than the District and the Authority.
Our engagement with respect to this matter terminates upon the delivery of this opinion to the District
and the Authority at the time of the issuance of the Bonds, and we have no obligation to update this
opinion.
Respectfully submitted,
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Bob Kennedy
Engineering Manager
PROJECT: P1210-018000 DIV. NO. 5
APPROVED BY: Dan Martin, Assistant Chief of Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Approval of the September 24, 2019 Purchase Agreement for
$508,000.00 for the Campo Road and Hillside Drive Property in
Jamul
GENERAL MANAGER’S RECOMMENDATION:
That the Otay Water District (District) Board of Directors (Board)
approve the September 24, 2019 Purchase Agreement for $508,000.00 for
the Campo Road and Hillside Drive property in Jamul and authorize the
General Manager to enter into escrow to complete the sale of the
property.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To request the Board approve the September 24, 2019 Purchase
Agreement for $508,000.00 for the Campo Road and Hillside Drive
property in Jamul and authorize the General Manager to enter into
escrow to complete the sale of the property (see Exhibit A for
District property location).
AGENDA ITEM 13a
2
ANALYSIS:
As a regular course of business, the District periodically reviews
the need and use of real estate (property) it owns. This is done to
ensure that the District’s current and future property needs are
provided for, and that property that is no longer required is
disposed of in order to minimize costs and associated liabilities of
property ownership. The retention of real property that is surplus
to the District’s needs increases operating expense by increasing the
requirement to maintain and manage the property.
After an evaluation of District-owned properties, staff identified
the Campo Road and Hillside Drive property in Jamul as not required
for District use and on January 2, 2019 the Board adopted Resolution
No. 4355 declaring this surplus property and directed staff to
solicit offers for the surplus property.
On February 22, 2019, staff solicited offers for the lease or sale of
the surplus properties from Preferred Entities of the opportunity to
purchase or lease the properties for specified priority uses, as
required by Government Code § 54222 et seq.
On April 4, 2019, the District received an appraisal of the Campo
Road and Hillside Drive property in Jamul from Anderson and Brabant,
Inc. (see Exhibit B) that valued the property at $430,000. This
appraisal was performed to assist the District in determining the
market value of the subject property.
Staff did not receive any offers for the Campo Road and Hillside
Drive property in Jamul from any Preferred Entities, and on May 21,
2019, staff advertised for the service of a real estate broker
(Broker) with experience in dealing in commercial and residential
real estate. On August 14, 2019, the District signed a Sales Listing
Agreement with Pacific Coast Commercial (PCC) to provide Broker
services for the District (see Exhibit C). PCC prepared a broker’s
opinion and recommended a listing price of $525,000.00. PCC prepared
the property’s marketing program and listed the property on August
26, 2019 (see Exhibit D).
Prior to listing the property, the District received an offer dated
August 12, 2019, to purchase the Campo Road and Hillside Drive
property in Jamul for $430,000.00. On September 24, 2019, the
District submitted a counter offer to the buyer for $508,000.00,
which was accepted by the buyer the same day.
After consideration of the offer, the District conditionally accepted
the Purchase Agreement from Abudulaziz Hanna for $508,000.00 subject
3
to the terms of the Purchase Agreement and the approval by the Board
(see Exhibit E).
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
Acceptance of this offer will result in revenue of approximately
$508,000.00, less escrow and closing costs, to the District and the
proceeds from the sale of the properties will be credited to the
funds that provided for their purchase.
The Engineering Outside Services budget covered the cost of appraisal
services. Currently, Engineering’s expenses have not exceeded
anticipated expenses and it is expected that there will be sufficient
funds available to offset the expected costs.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To provide
exceptional water and wastewater service to its customers, and to
manage District resources in a transparent and fiscally responsive
manner” and the District’s Vision, “To be a model water agency by
providing stellar service, achieving measurable results, and
continuously improving operational practices.”
LEGAL IMPACT:
None.
BK/DM/RP:jf
P:\Public-s\Real Estate Services\4 Surplus Properties - Jan 2019\Staff Reports\Staff Report 11-6-19\BD
11-06-19 Approve PA for Jamul.docx
Attachments: Attachment A – Committee Action
Exhibit A – Jamul Property Location Map
Exhibit B – Jamul Property Appraisal
Exhibit C – Sales Listing Agreement
Exhibit D – Jamul Property Marketing Program
Exhibit E – Jamul Property Purchase Agreement
ATTACHMENT A
SUBJECT/PROJECT:
P1210-018000
Approval of the September 24, 2019 Purchase Agreement for
$508,000.00 for the Campo Road and Hillside Drive Property
in Jamul
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is requesting that the Board approve the September 24, 2019
Purchase Agreement for $508,000 for the Campo Road and Hillside
Drive property in Jamul.
• Staff reviewed information in the staff report.
• The Committee noted that the offer received prior to the District
listing the property was for $430,000 which matched the
appraiser’s estimated value. The Committee inquired if the buyer
had information about the appraisal. Staff indicated when the
District was searching for broker services, the appraised value
of the property was disclosed in the broker RFP.
• The Committee indicated that they agreed with the listing price
provided by Pacific Coast Commercial, the listing agency, and
supported the sale at $508,000.
• As the buyer indicates they would tender cash for the Campo Road
and Hillside Drive property, the Committee requested that staff
acquire proof of the buyer’s source of funds prior to the
November 6, 2019 board meeting. Staff has attached a letter from
the buyer’s bank confirming that he has sufficient funds in his
account to purchase the property.
Upon completion of the discussion, the committee supported staff’s
recommendation and presentation to the full board as an action item.
OTAY WATER DISTRICTOWD PARCEL 597-041-66-00LOCATION MAP
EXHIBIT A
November 2018F
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5961800100
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5970416600
5961803600
5970410100
5961800200
5970421800
5970420600 5970411800
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4
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5970421900
5970420300
5970420500
5970420400
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5970416500
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5 9 7 0 4 1 2 9 0 0
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5970412700
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5 9 7 0 4 2 0 2 0 0
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VICINITY MAP
PROJECT SITE
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Legend
OTAY WATER DISTRICT PROPERTY: 7.81 ACRES (approx)
SURPLUS PROPERTY: 7.81 ACRES (approx)
PARCEL LINES
0 340170
Feet
Anderson & Brabant, Inc.
APPRAISAL REPORT
7.81 ACRES OF LAND
APN 597-041-66
NEC CAMPO ROAD AND HILLSIDE DRIVE
JAMUL (SAN DIEGO CO.), CALIFORNIA
APPRAISED FOR
Otay Water District 2554 Sweetwater Springs Boulevard
Spring Valley, CA 91978-0004
DATE OF VALUATION
April 4, 2019
DATE OF REPORT
April 26, 2019
APPRAISED BY Anderson & Brabant, Inc.
353 W. 9th Avenue
Escondido, California 92025
File No. 19-027
EXHIBIT B
ANDERSON & BRABANT, INC.
REAL ESTATE APPRAISERS AND CONSULTANTS
353 W. NINTH AVENUE
ESCONDIDO, CALIFORNIA 92025-5032
TELEPHONE (760) 741-4146
April 26, 2019
Mr. Bob Kennedy, P.E.
Engineering Manager
Otay Water District 2554 Sweetwater Springs Road Spring Valley, California 91978
RE: Appraisal of Otay Water District Parcel
` Jamul Area, Unincorporated San Diego County
Dear Mr. Kennedy:
At your request and authorization, we have completed our appraisal of 7.81 acres of land located at
the northeast corner of Campo Road (Highway 94) and Hillside Drive in the central area of the
unincorporated community of Jamul. The property can be further identified as Assessor’s Parcel
597-041-66. The land is unimproved and consists of level to gently sloping terrain.
The parcel appraised is considered to be surplus property and the objective of this appraisal is to provide our client an estimate of market value for the property that will be used as the basis upon
which the owner can consider marketing options for the site. The opinion expressed herein is set
forth as of April 4, 2019, the date of our property inspection.
The following is recognized as an Appraisal Report under the Uniform Standards of Professional Appraisal Practice (USPAP). As such, our report is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(a) of USPAP. It has been prepared in
conformance with the Code of Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute.
Based upon our investigation and analysis of relevant market data, it is our opinion that the market value of the appraised property, as of the above mentioned date, is $430,000.
This estimate is subject to the General and Special Assumptions and Limiting Conditions, and
the Certification contained herein.
Thank you for this opportunity to be of service and if we can be of further assistance in this
matter, please let us know.
Respectfully submitted,
ANDERSON & BRABANT, INC.
Patricia Milich Cypher James Brabant, MAI
Certified General Real Estate Appraiser Certified General Real Estate Appraiser
BREA State Certification No. AG2249 BREA State Certification No. AG002100
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
TABLE OF CONTENTS
EXECUTIVE SUMMARY ...........................................................................................................1
ASSUMPTIONS AND LIMITING CONDITIONS ...................................................................3
APPRAISERS’ CERTIFICATION .............................................................................................5
INTRODUCTION
Identification of the Property .....................................................................................................7
Purpose of the Appraisal ............................................................................................................7
Intended Use and User ...............................................................................................................7
Property Rights Appraised .........................................................................................................7
Extraordinary Assumptions .......................................................................................................7
Hypothetical Conditions ............................................................................................................8
Effective Date of Value Opinion ...............................................................................................8
Date of Report ............................................................................................................................8
Scope of Work ...........................................................................................................................8
Recent History of the Subject Property .....................................................................................8 Prior Appraisal Services ............................................................................................................9
Location Map ...........................................................................................................................10
Location Description ................................................................................................................11
DESCRIPTION OF THE APPRAISED PROPERTY
Subject Property Photographs ..................................................................................................14
Aerial View of the Subject Property ........................................................................................17
Plat Map ...................................................................................................................................18
Land Description ......................................................................................................................19
Improvement Description ........................................................................................................21
Tax Data ...................................................................................................................................21
VALUATION
Definition of Highest and Best Use .........................................................................................22
Highest and Best Use ...............................................................................................................22
Valuation Methodology ...........................................................................................................23
Sales Comparison Approach ....................................................................................................23 Conclusion – Market Value of the Subject Property ...............................................................27
Estimated Exposure Time ........................................................................................................28
ADDENDA
Preliminary Title Report and Plotted Easements
Market Data Map and Comparable Sale Photos
Qualifications of the Appraiser
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc. 1
EXECUTIVE SUMMARY
Appraised Property: Northeast corner of Campo Road (Highway 94) and Hillside Drive, Jamul (Unincorporated area of San Diego County)
Assessor Parcel Nos.: 597-041-66-00
Owner of Record: Otay Water District
Land Description:
Size: Approximately 7.81 acres
Zone: County of San Diego – Split zoning - C32 (Convenience
Commercial), Commercial uses permitted include convenience
stores, eating and drinking establishments, food and beverage retail
sales as well as civic type uses such as child care centers and small
schools. RR, Rural Residential, Family Residential uses permitted with Group Residential, limited packing and processing, and other
uses allowed by Use Permit on minimum one acre parcels.
General Plan: County of San Diego – Jamul/Dulzura Subregional Plan –
Public/Semi-Public Facilities
Easements: A title report has been provided for review. The title report outlines various easements and a copy can be found in the
Addenda.
Flood Zone: Not in an identified flood zone
Seismic Hazard: None known
Topography: Ranges from level to gently sloping
Access: The site has frontage along Campo Road and Hillside Drive.
Utilities: No services are currently connected to the property. Electrical
power and telephone services are available in the area. Where
allowed, wastewater is handled by conventional septic tank and leach field systems, and gas availability is propane which is distributed by local vendors. Water service is provided by the
Otay Water District.
Improvements: There are no existing onsite improvements.
Interest Appraised: Fee estate
Highest and Best Use: Hold for future possible mixed use (commercial/residential) development that conforms to the current zoning or develop as a
single family homesite.
Date of Value: April 4, 2019
Date of Report: April 26, 2019
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EXECUTIVE SUMMARY
Continued
Exposure Time: Between six months and one year
Special Assumptions: Refer to page 3
Extraordinary Assumptions: None
Hypothetical Conditions: None
Market Value: $430,000
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
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ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal is subject to the following special assumptions and limiting conditions:
1. It is assumed that the existence of significant cultural or mineral resources, if any,
discovered within the subject parcel will not create any abnormal hardship nor measurably
impact market value in conjunction with our determination of highest and best use.
2. The opinions and conclusions included in this appraisal are based on information
available and/or discovered as of the date of the appraisal. The appraiser reserves the right to change those opinions and conclusions if additional information which is in any way pertinent,
such as items specific to the property or additional market data, becomes available and/or is
discovered subsequent to the appraisal date.
3. No engineering data has been provided to support the development potential of the
appraised property. We have made assumptions regarding this issue that if proven to be false, could affect our value conclusion.
4. We have assumed that the site is suitable for a traditional or alternative-type septic
system. This is considered to be an extraordinary assumption.
5. The site has split zoning and is currently zoned for commercial and residential use while
the General Plan designation is Public/Semi-Public Facilities. In estimating the value of the subject as a developable parcel of land, we have assumed that it would be possible to secure an
amendment to the General Plan that would conform to the current zoning. This is considered to
be an extraordinary assumption.
This appraisal is subject to the following general assumptions and limiting conditions:
1. It is assumed that information furnished to us by our client is substantially correct.
2. No responsibility is assumed for matters legal in character, nor do we render an opinion
as to title, which is assumed to be held in fee simple interest as of the date of valuation unless
otherwise specified.
3. It is assumed that the property is readily marketable, free of all liens and encumbrances except any specifically discussed herein, and under responsible ownership and management.
4. Possession of this report, or a copy thereof, does not carry with it the right of publication.
It may not be used for any purpose by any person other than the party or parties identified as
Intended Users, without the written consent of Anderson & Brabant. In any event, the report
may be used only with proper written qualification and only in its entirety.
5. Disclosure of the contents of this appraisal report is governed by the by-laws and regulations of the Appraisal Institute. Neither all nor any part of the contents of this report
(especially reference to the Appraisal Institute or the MAI designation) shall be disseminated to
the public through advertising media, public relations media, news media, sales media, or any
other public means of communication without prior written consent and approval of Anderson & Brabant.
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6. The submission of this report constitutes completion of the services authorized. It is
submitted on the condition that the client will provide Anderson & Brabant customary compensation relating to any subsequent required depositions, conferences, additional
preparation or testimony.
7. The valuation estimate is of surface rights only and the mineral rights, if any, have been
disregarded.
8. No warranty is made as to the seismic stability of the subject property.
9. It is assumed that all applicable zoning and land use regulations and restrictions have
been or will be complied with, unless a nonconformity has been stated, defined, and considered
in this appraisal report.
10. As part of the analysis, we have estimated reasonable exposure and marketing periods for
the appraised property at between six months and one year. The reported marketing period is based on the assumption that the property is marketed competently at a price that reflects market
value. It is possible that market conditions could change during the marketing period if offered
for sale today, and those changing conditions could affect both market value and marketing
period.
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APPRAISERS’ CERTIFICATION
I do hereby certify that, to the best of my knowledge and belief …
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions and are my personal, impartial, and unbiased professional
analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.
4. I have performed no services, as an appraiser or in any other capacity, regarding the
property that is the subject of this report within the three-year period immediately preceding
acceptance of this assignment.
5. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
6. My engagement in this assignment was not contingent upon developing or reporting
predetermined results.
7. My compensation for completing this assignment is not contingent upon the development
or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal.
8. My analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
9. I have made a personal inspection of the property that is the subject of this report.
10. No one has provided real property appraisal assistance to the persons signing this report.
11. The reported analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute.
12. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
_________________________________________ April 26, 2019
Patricia Milich Cypher Date Certified General Real Estate Appraiser
BREA State Appraiser No. AG002249
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APPRAISERS’ CERTIFICATION
I do hereby certify that, to the best of my knowledge and belief …
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions and are my personal, impartial, and unbiased professional
analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.
4. I have performed no services, as an appraiser or in any other capacity, regarding the
property that is the subject of this report within the three-year period immediately preceding
acceptance of this assignment.
5. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
6. My engagement in this assignment was not contingent upon developing or reporting
predetermined results.
7. My compensation for completing this assignment is not contingent upon the development
or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of this appraisal.
8. My analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
9. Patricia Milich Cypher made a personal inspection of the property that is the subject of this report. James Brabant did not personally inspect the property.
10. No one has provided real property appraisal assistance to the persons signing this report.
11. The reported analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute.
12. The use of this report is subject to the requirements of the Appraisal Institute relating to
review by its duly authorized representatives.
13. As of the date of this report, I have completed the continuing education program for
Designated Members of the Appraisal Institute.
________________________________________ April 26, 2019
James Brabant, MAI Date
Certified General Real Estate Appraiser
BREA State Appraiser No. AG002100
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
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INTRODUCTION
IDENTIFICATION OF THE PROPERTY
The irregular shaped property under appraisal involves 7.81 acres of undeveloped land located at the northeast corner of Campo Road and Hillside Drive in the unincorporated
community of Jamul.
Legal Description
The land can be legally described by reference to Assessor Parcel No. 597-041-66-00.
Ownership
According to public records, vesting in the subject property is as follows: Otay Water
District.
PURPOSE OF THE APPRAISAL
The purpose of this appraisal assignment is to estimate the market value of the property appraised, subject to certain assumptions and limiting conditions as set forth in this report. As used in this report, the term market value is defined as follows.
MARKET VALUE is the most probable price, as of a specified date, in cash, or
in terms equivalent to cash, or in other precisely revealed terms, for which the
specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither
is under undue duress.1
INTENDED USE & USER
The subject property is considered surplus land and the intended use of this report is to assist the client, Otay Water District, regarding the disposition of the property. The client is the only known user of this report. Any party other than the client who may receive this appraisal is
not an intended user, and we are not responsible for unauthorized use of this report.
PROPERTY RIGHTS APPRAISED
The reported estimate of market value reflects the fee property interest as set forth in a provided preliminary title report, subject to all easements of record.
EXTRAORDINARY ASSUMPTIONS
An extraordinary assumption is defined as an assumption, directly related to a specific
assignment, as of the effective date of the assignment results, which, if found to be false, could
alter the appraiser’s opinions or conclusions. The subject site is currently designated Public/Semi Public Use in the General Plan of San Diego County. In valuing the subject, we have assumed that
1 The Appraisal of Real Estate, 14th ed. (Chicago: Appraisal Institute, 2013), p. 58
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a General Plan amendment could be obtained that would conform to the existing zoning
designations. In addition, we have assumed that a septic system could be installed. This appraisal is subject to certain other special and general assumptions as outlined on pages 2 and 3 of this
report.
HYPOTHETICAL CONDITIONS
A hypothetical condition is defined as a condition, directly related to a specific
assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis. No hypothetical conditions were
considered in this analysis.
EFFECTIVE DATE OF VALUE OPINION
The value conclusion is set forth as of April 4, 2019.
DATE OF REPORT
The date of the report is April 26, 2019.
SCOPE OF WORK
In preparing this appraisal report, we have completed the following tasks.
Discussed the appraisal assignment with the client.
Set forth all assumptions and limiting conditions affecting the appraisal.
Inspected the subject property as well as the comparable data and took
photographs on April 4, 2019.
Researched County of San Diego public records for information regarding
existing zoning and general plan designations and associated constraints to
future development.
Estimated highest and best use of the appraised property as vacant land.
Researched the current market for listings and sales of properties to be used
in the valuation analysis.
Compared the chosen market data to the subject property for identified
elements of comparison, making adjustments judged supportable in the open market.
Arrived at a value conclusion considering the stated definition of value.
Prepared the appraisal report.
RECENT HISTORY OF THE SUBJECT PROPERTY
A review of the public records did not reveal the acquisition date by the current
ownership, but to the best of our knowledge, the property has not been marketed for sale or lease
during at least the last five years. Reportedly, the property was acquired by the Otay Water
District as part of a land swap and is considered to be surplus land.
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PRIOR APPRAISAL SERVICES
As noted in the Appraisers’ Certifications on pages 5 and 6 of this report, we have performed no services, as an appraiser or in any other capacity, regarding the property that is the
subject of this report within the three-year period immediately preceding acceptance of this
assignment.
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LOCATION DESCRIPTION Region
The subject property is located in an unincorporated area of San Diego County within the
community of Jamul. San Diego County is the second largest county in the State of California
based on population. As of January 1, 2018, the population was estimated by the California
Department of Finance Demographic Research Unit at 3,337,456 persons. This reflects an increase of about 0.8 percent from the January 1, 2017 total of 3,309,509.
The County includes the State's second most populous city and offers such geographic
features as mountainous regions of the Cleveland National Forest, the Anza Borrego Desert, the
International Border with Mexico, and over 50 miles of Pacific Ocean coastline. These features,
and the area's temperate year-round climate, are among the county's major attractions. Most of the county's population is located along the coastal region, inland valleys, and foothills, within
approximately 25 to 30 miles of the ocean. The mountains and deserts are only sparsely
developed and populated.
On a regional basis, San Diego County is served by three major freeways. These include
Interstate 5, a coastal route connecting San Diego with Baja California to the south and the states of California, Oregon, and Washington to the north; Interstate 8, a major east-west route
connecting San Diego with Arizona and other southwestern states to the east; and Interstate 15,
an inland route connecting San Diego with Riverside and San Bernardino Counties and other
points to the northeast. There are several important local freeways that provide access within the
region. These include Interstate 805 that runs inland from and parallel to Interstate 5; State Route 94, parallel to Interstate 8; State Route 163, connecting Interstate 15 with Downtown San
Diego; and State Route 78, the major east-west freeway in northern San Diego County.
San Diego International Airport (Lindbergh Field) is located about 70 miles to the west of
the subject and is close to Downtown San Diego. This airport is serviced by 18 commercial airlines and four scheduled air-freight services. There are an additional eight small public airports located throughout the county. There is little commercial air activity at these facilities.
Rail service is provided by San Diego and Arizona Eastern Railroad, Santa Fe Railroad, and
Amtrak. Industrial/commercial use of the rail lines for freight carriage has declined in San Diego
over the past 15+ years. However, the Amtrak line between San Diego and Los Angeles is popular with commuters. The San Diego Trolley (light rail transit system) has opened several commuter routes in the southern and eastern portions of San Diego County that have proven very
popular. Individual transit districts throughout the county provide local bus service.
The economy within the San Diego region has improved since experiencing a global
financial crisis, considered the worst of its kind since the Great Depression. The poor economic conditions became prominently visible in the past decade with the failure, merger or conservatorship of several large United States-based financial firms. The underlying causes
leading to the crisis had been reported in business journals with commentary about the financial
stability of leading United States and European investment banks, insurance firms and mortgage
banks consequent to the subprime mortgage crisis that commenced in 2007. The failures of large financial institutions in the United States and Europe led to dramatic declines in various stock
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indexes and significant reductions in the market-value of equities (stock) and commodities
worldwide. The crisis led to a liquidity problem and the de-leveraging of financial institutions, especially in the United States and Europe, which further accelerated the liquidity crisis. World
political leaders, national ministers of finance, and central bank directors coordinated efforts to
reduce economic fears. Along with the economic downturn came a marked increase in
unemployment.
However, times have changed and we are in the midst of an economic recovery. The stock market has reached record highs. Home values have been increasing, as have apartment
and home rental rates. Optimism as to a growing economy is further evidenced in notably
improved employment statistics. Based on statistical data from the California Employment
Development department, the unemployment rate in San Diego County in January 2019 was 3.8
percent. This is a slight decrease over the rate of 3.6 percent one year earlier. The San Diego County unemployment rate in January 2019 was below both the state level of 4.2 percent and the
national rate of 4.0 percent for the same reporting period.
The University of San Diego publishes an Index of Leading Economic Indicators for the
San Diego regional economy. The index had posted positive numbers from April 2003 up to
March 2006 when it peaked at 144.2. The Index declined nearly every month thereafter until March 2009 when it reached 100.7. Since March 2009 the index has increased every month until
March 2018 when it reached a recovery high of 152.9, but the index fell slightly to 152.7 in April
2018 and again to 152.3 in May 2018, the most recent figures available. From an economic
standpoint, the outlook for the future of San Diego County appears positive.
Community and Immediate Surroundings
The subject property is located in the unincorporated San Diego County community of
Jamul, approximately 20 miles east of downtown San Diego. It is located within the central
portion of Jamul. Jamul is closely linked to the community of Dulzura, which is about ten miles
further southeast on Highway 94/Campo Road. Jamacha, a rural unincorporated area, is located to the northwest of central Jamul, with the urban and suburban communities of Spring Valley and El Cajon further west. The rural communities of La Cresta, Crest and Harbison Canyon are
further north on the south side of Interstate 8. The community of Alpine and the Japatul Valley
area are northeast of the subject, beyond the Loveland Reservoir. The area is geographically
diverse including steep mountains, massive rock formations, rolling hills, open valleys and deep canyons.
The subject parcel is located in the northwestern portion of the Jamul/Dulzura Subregion
which covers an area of approximately 168 square miles located, south of Loveland Reservoir
and the Sweetwater River, adjacent to and north of the Mexican border, and east of the
community of Rancho San Diego. Barrett Lake and the Cleveland National Forest are located within the northeast portion of the Planning Area. U.S Highway 94 (Campo Road) traverses the region generally in an east-west direction. The population of the subregion as of the 2010
Census was 10,159 people. It is comprised of several small rural or semi-rural communities
including Jamul, Steel Canyon, Dulzura, and Barrett Junction. Jamul, the largest of these
communities, along with its surrounding hills and valleys, accommodate the majority of the population within the subregion at approximately 6,163 residents. Generally the area is still rural
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in character since it has no sewer system and imported water service only in certain areas of the
northwestern portion of the community.
More specifically, the subject parcel is situated at the northeast corner of Campo Road
and Hillside Drive, a short distance southeast of the central commercial area of the Jamul
community. There are scattered commercial uses along Campo Road in the vicinity of the
subject but the majority of the surrounding property is developed with custom residences on
larger parcels. There is a U-Haul dealer and feed store located just to the north of the subject. Uses further north are residential in nature. Uses to the south, south of Hillside Drive, are also
residential in nature with some vacant parcels. Further south, south of Melody Road on the west
side of Campo Road, is the Jamul Indian Casino. After over 15 years spent in the planning,
approval and construction stages, significant opposition by community leaders and members, as
well as a lawsuit between the tribe and Caltrans, the Hollywood Casino opened in October 2016. The casino was built as a collaborative effort between Penn National Gaming, who was the
developer, lender and manager of the $400 million project, and the Jamul Indian Village tribe.
According to an SEC filing in March 2018, the loan between Penn National Gaming and the
Jamul Indian Development Corporation was in default. In May, 2018, the Penn National
Gaming Corporation, who owns the Hollywood casino chain of 27 gambling properties, pulled out and turned management over to the Jamul Indian Village Tribe. The Jamul Casino is
considered to be relatively small and does not have the ability to offer similar amenities as other
casinos in the area.
Directly across the street from the subject, on the west side of Campo Road, is an old
restaurant building that had been occupied by a Mexican restaurant that is now closed, vacant land, and an automotive repair shop. There is an approximate 1.3 acre commercially zoned
parcel across from the subject situated between the restaurant and the automotive shop that has
been on the market for approximately two years. According to the agent, there is no “official”
asking price and they have not received any recent inquiries or offers. The agent indicated that the zoning does not allow for outside storage which has been cited as a major drawback by potential buyers. Further north is an older two-story office building and the Jamul post office is
just beyond. Although there are a few commercial uses in the immediate area, most of the
commercial development in the community is concentrated to the north of the subject in what is
considered to be the village center.
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SUBJECT PROPETY PHOTOGRAPHS
Looking in a general northeast direction across the subject from the intersection of
Campo Road and Hillside Drive.
Looking in a northerly direction across the subject from the southeastern corner of
the property.
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SUBJECT PROPETY PHOTOGRAPHS
Looking southeast across the subject from near the mid-point of the northerly
property line. The buildings shown in the right-hand side of the photo are located
on the adjacent property (APN 597-041-65).
Looking in an easterly direction across the northern portion of the subject.
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SUBJECT PROPETY PHOTOGRAPHS
Looking south along Campo Road from near the northwest corner of the property.
The subject is visible on the left.
Looking east along Hillside Drive. The subject is visible on the left.
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AERIAL VIEW OF SUBJECT PROPERTY
This exhibit shows the approximate boundaries of the appraised property.
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PLAT MAP
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DESCRIPTION OF THE SUBJECT PROPERTY
LAND DESCRIPTION
Legal: The property can be identified as APN 597-041-66-00. A complete legal
description can be found in the preliminary title report that is included in
the Addenda.
Size and Shape: The subject is an irregular shaped parcel consisting of approximately 7.81 acres, gross.
Zoning: County of San Diego – The subject has split zoning. That portion located
at the corner of Campo Road (Highway 94) and Hillside Drive is zoned
C32 (Convenience Commercial), Commercial uses permitted include
convenience stores, eating and drinking establishments, food and beverage retail sales as well as civic type uses such as child care centers and small
schools. The remaining portion of the site is zoned RR, Rural Residential,
Family Residential uses permitted with Group Residential, limited packing
and processing, and other uses allowed by Use Permit on minimum one
acre parcels.
General Plan: County of San Diego – Jamul/Dulzura Subregional Plan – Public/Semi-Public Facilities (entire site). The property is considered to be surplus
land by the Otay Water District. Because the site is no longer needed by
the agency, it is highly likely that a General Plan amendment could be
obtained that would allow development that would conform to the existing
Subregional Plan, which would be consistent with surrounding properties.
Flood Zone: According to Flood Insurance Rate Map No. 06073C1955G, dated May
16, 2012, (Panel Not Printed) the site is within Zone D, which applies to
areas of undetermined flood hazard.
C32 Zone
Rural Residential
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Easements/
Encumbrances: We have been provided with a preliminary title report prepared by First American Title Company dated January 10, 2019 (Order No. DIV-
5854431). The title report outlines easements for right-of-way for public
road purposes in favor of the County of San Diego, an easement for water
pipes and an easement for public utilities and incidental purposes in favor
of San Diego Gas and Electric. In addition, there is a non-exclusive 30 foot wide easement for right-of-way for access, ingress, egress road and
utility purposes that runs along a portion of the northerly property line.
This is a shared easement that currently provides access to the subject as
well as two parcels to the north. A map provided by the title company
plotting these easements can be found in the preliminary title report in the
Addenda. The existing easements are not considered to have a negative
impact on the value of the subject property. For purposes of this appraisal,
the assumption is made that no other easements or encumbrances exist that
negatively impact the value of the site in accordance with the estimated
highest and best use.
Access/Street
Improvements: The land has extensive frontage along both Campo Road (Highway 94)
and Hillside Drive. Both are paved, county maintained roads. The site
currently has vehicular access via an unpaved shared easement road off
Campo Road.
Soil Conditions: No soils report was provided. Soil conditions are assumed to be adequate
for the allowed uses.
Toxic Hazard: No site specific Phase I Environmental Assessment provided. The site is
assumed to be free of contamination.
Seismic Hazard: The subject is not in an Earthquake Fault Zone as designated by the California State Division of Mines and Geology. However, the property is
located in an area prone to seismic events, a condition that it shares with
other properties located in the general Southern California area.
Utilities: No services are currently connected to the property. Electrical power and telephone services are available in the area. Where allowed, wastewater is handled by conventional septic tank and leach field systems, and gas
availability is propane which is distributed by local vendors. Water
service is provided by the Otay Water District.
Existing Use: The land is unimproved structurally.
Topo/Drainage: The subject property is characterized by terrain that ranges from level to gently sloping, with a few areas of the site that have slopes that exceed 25
percent. The red shading in the exhibit below shows those areas of subject
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
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parcel that exceed a 25 percent slope. The other exhibit shows the overall
topography of the land.
Biological
Resources: There are no known biological resources that would impact development of the subject site. According to information obtained from the County of
San Diego GIS website, the vegetation consists primarily of disturbed
habitat.
IMPROVEMENT DESCRIPTION
There are no structural improvements on the subject property.
TAX DATA
The subject property is owned by a public agency at this time and is not assessed or
taxed. The site is within Tax Rate Area 79007 that is subject to a base tax rate of 1.20108
percent plus some fixed charged assessments for the year 2018/2019.
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VALUATION ANALYSIS
DEFINITION OF HIGHEST AND BEST USE
Highest and Best Use is an important concept in real estate valuation as it represents the
premise upon which value is based. As used in this report, Highest and Best Use is defined as
follows.
“The reasonably probable and legal use of vacant land or an improved
property, that is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use
must meet are legal permissibility, physical possibility, financial feasibility, and
maximum productivity.”2
Highest and best use analysis is used in the appraisal process to identify comparable
properties and, where applicable, to determine whether any existing improvements should be retained, renovated, or demolished. The conclusion of highest and best use is determined by
social, economic, governmental, and physical forces. The concept addresses the question of
legally allowable, physically possible, economically feasible, and maximally productive uses.
Potential alternative uses of the property must be considered in the highest and best use analysis.
Once the legally allowable and physically possible uses have been identified, the economic viability of the various uses must be determined. The use is financially feasible if it
provides a positive return to the land. The highest and best use is that use that provides the
highest overall return.
HIGHEST AND BEST USE
Legally Permissible: The legally allowable uses of the subject property are governed primarily by regulations set forth in the San Diego County Municipal Code and more specifically
the Jamul/Dulzura Community Plan dealing with land use issues. The appraised property
currently has split zoning. Based upon measurements taken from the Assessor’s plat, it appears
that approximately 2.2 acres are zoned for commercial use while the remainder of the site is zoned RR, which is a residential use with a minimum lot size of one acre. Currently, the subject site consists of a single legal parcel. The existing Community Plan designation is Semi-
Public/Public Facilities. Any future development of the subject site will require an amendment
to the Community Plan to bring it into conformity with the zoning. We have assumed that an
amendment to the General Plan could be secured.
Physically Possible: Any of the legally allowed uses would be physically possible on the land, subject to existing land use restrictions. The site has relatively gentle slopes and there does
not appear to be any significant constraints due to topography. Although the subject frontage
along Campo Road is zoned for commercial use, the development character of the immediate
surroundings would suggest residential use would be more likely. Utilities (power and water)
2 The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), p.93
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
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are available to the site; however, any development of the land will depend on the viability of a
suitable septic system.
Economically Feasible and Maximally Productive Uses: The issue of economic
feasibility focuses primarily on supply and demand characteristics of the local market for
commercial and residential land. A review of the local competitive market area reveals very few
sales of commercially zoned land. The current zoning allows a one acre minimum parcel size.
Existing market conditions can be described as relatively stable and our research of the current market indicates that recent transactions involving residentially zoned parcels of similar size
appear to the subject are being purchased primarily for development as a single homesite rather
than for subdivision purposes. The subject property consists of a single parcel with split zoning.
Without subdividing the property, there would be a limited market, at best, for buyers who would
want to develop the site with two separate uses (commercial and residential) without subdividing the property. No engineering data is available to support the potential lot yield from subdividing
the site, but it seems likely that at least three or four parcels could be achieved.
Conclusion: Despite being relatively close to major freeways and employment centers,
Jamul has continued to retain its rural character and there does not appear to be a strong demand
for commercially zoned sites in close proximity to the subject. Discussions with brokers and market participants revealed that residential properties in the Jamul area are not typically
purchased for the sole purpose of subdividing due to the cost associated with the process of
obtaining approvals. Although the subject site has split zoning it is still a single legal parcel. In
order to develop the site with two distinctly separate uses, it is likely that the property would first
be subdivided. There is a commercially zoned property across the street from the subject that has been on the market for over two years with no offers. Because currently there is no clear
evidence of a market for commercially zoned property in the vicinity to the subject, it is our
opinion that a likely purchaser of the subject would hold the property for future development
with a mixed use (commercial/residential) or develop the property as a single family homesite.
VALUATION METHODOLOGY
The three common valuation approaches in real estate include the Cost Approach,
Income Approach, and Sales Comparison Approach. In the valuation of the subject property, the
Sales Comparison Approach has been relied upon as the only applicable valuation technique.
Neither the Cost Approach nor the Income Approach was utilized because the land is unimproved open space, and this type of acreage is not purchased for income production.
SALES COMPARISON APPROACH
The Sales Comparison Approach is based on the premise that the market value of a
property is directly related to the prices of comparable, competitive properties. It is based on the
principal of substitution, wherein the value of a property tends to be set by the price that would be paid to acquire a substitute property of similar utility and desirability.
Market value is estimated by comparing the subject property to similar properties that
have sold recently or for which offers to purchase have been made. Listings are also considered
where appropriate. This approach is applicable when the market provides reliable data which
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can be verified from authoritative sources. The comparative analysis focuses on differences in
the legal, physical, locational, environmental and economic characteristics of the appraised property and comparable data, as well as the real property rights conveyed, the dates of sale, the
motivations of buyers and sellers, and the financing arrangements for each sale transaction, all of
which can account for variations in prices.
The subject property is located in an unincorporated community of Jamul. As a result of
our research we have discovered five items of data deemed useful for comparison purposes. Comparables 1 and 2 have commercial or mixed use potential while three of the comparables are
residentially zoned properties. All of the residentially zoned data have subdivision potential
based on the current zoning. This data is summarized in the following chart.
Discussion of the Data
The five items of data show an unadjusted range of indicators from a low of $49,314 per
acre for a 23.32 acre parcel to a high of $108,192 per acre for a 19.41 acre parcel, with an overall
average of $77,140 per acre. The data range in size from 3.61 acres to 23.32 acres. The terrain varies from partially level to moderate to steeply sloping hillsides.
Comparable No. 1 involves a larger, 19.41 acre parcel located to the northwest of the
subject in Jamul. It has a small amount of frontage along Campo Road and Lyons Valley Road,
with a significant amount of frontage on Jefferson Road, which runs along the easterly boundary
of the site. The site is zoned C36, which is a General Commercial classification, and the Community Plan designation is Rural Commercial. The property is rectangular in shape and sold in November 2018 at a price of $2,100,000 or approximately $108,192 per acre. The site is
not located within a FEMA identified Special Flood Zone, but there are identified wetlands on
the property. The topography is mostly level to gently sloping with only a small portion that
exceeds 25 percent slope. Based upon historic aerial imagery, the site was formerly used for
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agricultural purposes and there is no environmentally significant onsite vegetation. This parcel is
located close to existing commercial development in the central portion of Jamul. The site was purchased by a national developer (Hix Snedeker) who plans on constructing a Tractor Supply
and mini-storage facility on the site. Although the sale occurred in November 2018, the buyer
spent a significant amount of time completing due diligence prior to opening escrow. A
representative of the buyer indicated that they had been considering the property off and on for
approximately five years but did not enter escrow until 2017. During escrow, a Traffic Impact Study was completed and preliminary development plans were submitted to the County of San
Diego. Although the Assessor reports that the site has an area of 18.65 acres, the site size of the
site at 19.41 acres was confirmed by the buyer. Preliminary calculations indicate that the net
usable area will be around 11.5 acres with the remainder of the site designated as permanent
open space. This site is nearly rectangular in shape and is considered superior to the subject in terms of location and site utility but is inferior due to the considerable amount of open space that
will be required upon development. A downward adjustment was also required for the superior
development potential.
Comparable No. 2 is a 23.32 acre site located on the western fringe of Jamul, just east of
the community of Spring Valley. The sale occurred in November 2016 at a price of $1,150,000 or $49,314 per acre. The site is basically rectangular in shape and consists of two separate
Assessor’s Parcels with multiple zoning classifications. The property that fronts Campo Road is
zoned C40 (Rural Commercial), the central portion of the site is zoned RR (Rural Residential
with a one acre minimum), and the southern portion of the site is zoned A72 (General
Agriculture). The Community Plan designation is Semi-Rural Residential and Public Agency Lands. The site features gently to moderately sloping topography and the central portion of the
site is characterized with slopes that exceed 25 percent. Onsite vegetation is primarily Diegan
Coastal Sage Scrub with small portions designated as Oak and Eucalyptus Woodland and may
contain sensitive species. The northern-most portion of the site, along Campo Road is within a FEMA designated floodway. There was an older single family residence on the site at the time of sale served by a septic system. Electricity and water are also at the site. Currently, there is a
nursery being operated on a portion of the site. According to the broker, the site was purchased
by the buyer to hold for future development. Ultimately, the buyer is proposing a commercial
use (possibly a strip center) along the Campo Road frontage with a single family subdivision in the southern portion of the site. The upper elevations of the site will provide good area views. The sale is considered superior to the subject in terms of location and availability of utilities but
is significantly inferior due to the rugged topography and the presence of the floodway over a
portion of the site.
Comparable No. 3 is a single parcel with an area of approximately 3.61 acres. Although the location is shown on County records as Hillside Drive, the parcel is somewhat flag-shaped and access is off Campo Road. The site is zoned RR (Rural Residential) and the General Plan
designation is Semi-Rural Residential with a minimum of one dwelling unit per acre. The sale
occurred in April 2018 at a price of $200,000 or $55,402 per acre. A portion of the site consists
of Diegan Coastal Sage Scrub. The site is primarily level to gently sloping with only a small portion of the site characterized by slopes exceeding 25 percent. The property is considered to be suitable as a single homesite and is located a short distance south of the subject. Currently,
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there is a single family residence under construction on the site. The site offers better views
when compared to the subject but is inferior as to topography and overall site utility.
Comparable No. 4 is a 4.41 acre parcel located a short distance south of the subject. It is
located adjacent to Sale No. 3 and involves the same seller. It sold in April 2018 for $285,000 or
$64,626 per acre overall. It is a gently sloping site that fronts on Campo Road. The site is zoned
Rural Residential and the General Plan designation conforms to the zoning. The site is
considered to be suitable for development as a single homesite or it can be subdivided. There
was an older single family residence with a septic system and water meter at the time of sale.
According to the agent, the buyer intends on constructing a single family home on the site. This
comparable is considered superior in terms of parcel shape and the availability of utilities.
Comparable No. 5 involves a current listing of a 6.0 acre parcel located at the northeast
corner of Campo Road and Melody Road, to the south of the subject. The property has been off
and on the market since 2009. It was originally listed in 2009 at an asking price of $1,100,000,
with a reduction in the asking price to $749,000. The asking price was further reduced in 2010
to $595,000. It was taken off the market in 2011. The property was placed back on the market
in 2016 at an asking price of $995,000, but again, was taken off the market. The site went back
on the market in March of this year at an initial asking price of $749,000; however, according to
the listing agent, the price was recently reduced to $649,000 or $108,167 per acre. The site is
located a short distance from the Jamul Casino It is level to gently sloping and is zoned for one
acre lots. In addition, the site is being marketed as possibly supporting an institutional use or
suitable for a residential subdivision. The vegetation on the site is disturbed and it is likely that
there are no sensitive species on the property. Reportedly, the seller has relocated out of the state
and is in the process of attempting to liquidate his holdings. There has been some interest in the
site, but no offers to date. The listing agent feels that the asking price is on the high side. This
site is superior in terms of the view potential and site configuration (shape).
A summary of our adjustment analysis is found in the following table. Transactional
adjustments that were considered pertinent to this analysis include property rights conveyed,
conditions of sale, financing terms, and market conditions. No transactional adjustments were
required for any of the comparable data. Property adjustments include location, access/view, site
size/shape/topography, development potential/land use, improvements and utility availability.
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Comparable No. Subject 1 2 3 4 5
Price Per Sq. Ft. Land $108,192 $49,314 $55,402 $64,626 $108,167
Transactional Adjustments
Property Rights Conveyed Fee 0.00%0.00%0.00%0.00%0.00%
Financing Cash Equiv.0.00%0.00%0.00%0.00%0.00%
Conditions of Sale Arm's Length 0.00%0.00%0.00%0.00%0.00%
Market Conditions Stable 0.00%0.00%0.00%0.00%0.00%
Net Adjustment 0.00%0.00%0.00%0.00%0.00%
Adj. Price Per Acre $108,192 $49,314 $55,402 $64,626 $108,167
Property Adjustments
Location Average -25.00%-25.00%0.00%0.00%0.00%
Access/Visibility/View Avg-Gd/Good 0.00%0.00%-5.00%0.00%-5.00%
Size/Shape/Topo 7.81/Irreg/Sloping -10.00%30.00%10.00%-5.00%-5.00%
Dev Potential/Land Use Residential/Comml -10.00%0.00%0.00%0.00%0.00%
Improvements None 0.00%0.00%0.00%0.00%0.00%
Utility Availability Electric; water 0.00%-10.00%0.00%-10.00% 0.00%
Net Adjustment -45.00%-5.00%5.00%-15.00% -10.00%
Indicated Value Per Acre $59,505 $46,848 $58,172 $54,932 $97,350
Summary of Adjustment Analysis
CONCLUSION – MARKET VALUE OF THE SUBJECT PROPERTY
We have analyzed the data on a quantitative basis in an effort to bracket the appropriate
value indicator for the subject land. After the adjustment process, the indicated value per acre
ranged from $46,848 per acre to $97,350 per acre. The highest indicator, by far, was produced by Comparable No. 5. This is a current listing that has been on an off the market over the last several years and is considered to be a high indicator for the subject. The remaining four items
of data produced a much tighter range from $46,848 to $59,505 per acre, with an overall average
of $54,864 per acre. Sale 1 is a larger, commercially zoned parcel and is considered overall
superior to the subject. Sale 2 is a larger parcel that has split zoning (commercial/residential). It was considered most similar to the subject in terms of zoning and overall potential, but superior for location and utility availability. Sales 3 and 4 are smaller, residentially zoned parcels located
within close proximity to the subject. Although both of these properties are zoned for one acre
minimum parcel sizes, it was reported that they sold to owner-users who do not intend on
subdividing. Sale 2 was considered to be a good indicator for the subject due to the split zoning while Sales 3 and 4 are the most similar in terms of location.
After considering all available data, it is our opinion that the value of the subject
property, as of April 4, 2019, subject to the aforementioned Special and General Assumptions
and Limiting Conditions, is $55,000 per acre. Our estimate of market value is as shown in the
following calculation.
7.81 Acres x $55,000 = $429,550
Rounded $430,000
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ESTIMATED EXPOSURE TIME
The value estimate reflects a reasonable exposure time estimated at between six months and one year. According to the Uniform Standards of Professional Appraisal Practice, Exposure
Time is defined as the estimated length of time the property interest being appraised would have
been offered on the market prior to the hypothetical consummation of a sale at market value on
the effective date of the appraisal; a retrospective estimate based upon an analysis of past events
assuming a competitive and open market.
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Addenda
CLTA Preliminary Report Form Order Number: DIV-5854431 (7)
(Rev. 11/06) Page Number: 1
First American Title
First American Title Company
7676 Hazard Center Drive, Ste 1100
San Diego, CA 92108
Phone:
Fax:
Customer Reference:
Order Number: DIV-5854431 (7)
Title Officer: David L. Smith
Phone: (619)231-4659
Fax No.: (714)689-5374
E-Mail: titleunit7@firstam.com
Buyer:
. Owner: Otay Water District
Property: Highway 94
Jamul, CA
PRELIMINARY REPORT
In response to the above referenced application for a policy of title insurance, this company hereby reports that it is prepared to issue, or cause to be issued, as of the date hereof, a Policy or Policies of Title Insurance describing the land and the estate or
interest therein hereinafter set forth, insuring against loss which may be sustained by reason of any defect, lien or encumbrance not
shown or referred to as an Exception below or not excluded from coverage pursuant to the printed Schedules, Conditions and Stipulations of said Policy forms.
The printed Exceptions and Exclusions from the coverage and Limitations on Covered Risks of said policy or policies are set forth in
Exhibit A attached. The policy to be issued may contain an arbitration clause. When the Amount of Insurance is less than that set
forth in the arbitration clause, all arbitrable matters shall be arbitrated at the option of either the Company or the Insured as the exclusive remedy of the parties. Limitations on Covered Risks applicable to the CLTA and ALTA Homeowner's Policies of Title
Insurance which establish a Deductible Amount and a Maximum Dollar Limit of Liability for certain coverages are also set forth in
Exhibit A. Copies of the policy forms should be read. They are available from the office which issued this report.
Please read the exceptions shown or referred to below and the exceptions and exclusions set forth in Exhibit A of this report carefully. The exceptions and exclusions are meant to provide you with notice of matters which are not
covered under the terms of the title insurance policy and should be carefully considered.
It is important to note that this preliminary report is not a written representation as to the condition of title and
may not list all liens, defects, and encumbrances affecting title to the land.
Order Number: DIV-5854431 (7)
Page Number: 2
First American Title
This report (and any supplements or amendments hereto) is issued solely for the purpose of facilitating the issuance of a policy of
title insurance and no liability is assumed hereby. If it is desired that liability be assumed prior to the issuance of a policy of title
insurance, a Binder or Commitment should be requested.
Order Number: DIV-5854431 (7)
Page Number: 3
First American Title
Dated as of January 10, 2019 at 7:30 A.M.
The form of Policy of title insurance contemplated by this report is:
To Be Detrmined
A specific request should be made if another form or additional coverage is desired.
Title to said estate or interest at the date hereof is vested in:
Otay Water District
The estate or interest in the land hereinafter described or referred to covered by this Report is:
A fee.
The Land referred to herein is described as follows:
(See attached Legal Description)
At the date hereof exceptions to coverage in addition to the printed Exceptions and Exclusions in said
policy form would be as follows:
1. General and special taxes and assessments for the fiscal year 2019-2020, a lien not yet due or
payable.
2. General and special taxes and assessments for the fiscal year 2018-2019.
First Installment: $0.00, NOTAXDUE
Penalty: $0.00
Second Installment: $0.00, NOTAXDUE
Penalty: $0.00
Tax Rate Area: 79007
A. P. No.: 597-041-66
3. Taxes or assessments which are not shown as existing liens by the records of any taxing authority
that levies taxes or assessments on real property or by the public records.
4. The lien of supplemental taxes, if any, assessed pursuant to Chapter 3.5 commencing with Section 75
of the California Revenue and Taxation Code.
5. Rights of the public in and to that portion of the land lying within Highway 94, as disclosed by map
on file in the Office of the County Assessor of San Diego County.
6. Rights of the public in and to that portion of the land lying within any Road, Street, Alley or Highway.
Order Number: DIV-5854431 (7)
Page Number: 4
First American Title
7. An easement for right of way for public road purposes and incidental purposes, recorded November
17, 1928 in Book 1555 of Deeds, Page 147.
In Favor of: The County of San Diego
Affects: as described therein
Terms and provisions contained in the above document.
8. An easement for right to lay water pipes and incidental purposes, recorded November 17, 1928 in
Book 1555 of Deeds, Page 147.
In Favor of: J.A. Maxfield
Affects: as described therein
Terms and provisions contained in the above document.
9. An easement for public utilities and incidental purposes, recorded July 10, 1946 as Book 2174, Page
345 of Official Records of Official Records.
In Favor of: San Diego Gas and Electric Company
Affects: as described therein
Terms and provisions contained in the above document.
10. Any facts, rights, interests or claims that may exist or arise by reason of matters, if any, disclosed by
that certain Record of Survey Map No. 8961
11. Any facts, rights, interests or claims that may exist or arise by reason of matters, if any, disclosed by
that certain Record of Survey Map No. 11539.
12. An easement for right of way for access, ingress, egress road and utilities and incidental purposes,
recorded February 9, 2000 as Instrument No. 2000-0067066 of Official Records.
In Favor of: J.L. Sirimanne, a single man
Affects: as described therein
Terms and provisions contained in the above document.
13. Any facts, rights, interests, or claims which are not shown by the public records but which could be
ascertained by an inspection of said land or by making inquiry of persons in possession thereof.
14. Easements, claims of easement or encumbrances which are not shown by the public records.
15. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which
a correct survey would disclose, and which are not shown by public records.
16. Water rights, claims or title to water, whether or not shown by the public records.
17. Rights of parties in possession.
18. Prior to the issuance of any policy of title insurance, the Company will require:
Order Number: DIV-5854431 (7)
Page Number: 5
First American Title
19. With respect to the Otay Water District, we will require a copy of the resolution authorizing the
contemplated transaction and designating which officials shall have the power to execute on behalf of
the Otay Water District.
Order Number: DIV-5854431 (7)
Page Number: 6
First American Title
INFORMATIONAL NOTES
Note: The policy to be issued may contain an arbitration clause. When the Amount of Insurance is less
than the certain dollar amount set forth in any applicable arbitration clause, all arbitrable matters shall be
arbitrated at the option of either the Company or the Insured as the exclusive remedy of the parties. If
you desire to review the terms of the policy, including any arbitration clause that may be included,
contact the office that issued this Commitment or Report to obtain a sample of the policy jacket for the
policy that is to be issued in connection with your transaction.
1. The property covered by this report is vacant land.
2. According to the public records, there has been no conveyance of the land within a period of twenty-
four months prior to the date of this report, except as follows:
None
3. We find no open deeds of trust. Escrow please confirm before closing.
4. This preliminary report/commitment was prepared based upon an application for a policy of title
insurance that identified land by street address or assessor's parcel number only. It is the
responsibility of the applicant to determine whether the land referred to herein is in fact the land that
is to be described in the policy or policies to be issued.
The map attached, if any, may or may not be a survey of the land depicted hereon. First American
expressly disclaims any liability for loss or damage which may result from reliance on this map except to
the extent coverage for such loss or damage is expressly provided by the terms and provisions of the title
insurance policy, if any, to which this map is attached.
Order Number: DIV-5854431 (7)
Page Number: 7
First American Title
LEGAL DESCRIPTION
Real property in the City of Jamul, County of San Diego, State of California, described as follows:
A PORTION OF THAT LAND IN LOT 3 OF SECTION 10, TOWNSHIP 17 SOUTH, RANGE 1 EAST, SAN
BERNARDINO MERIDIAN SHOWN ON RECORD OF SURVEY MAP NO. 11539, IN THE COUNTY OF SAN
DIEGO, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
COMMENCING AT THE POINT OF INTERSECTION OF THE NORTHERLY LINE OF SAID LOT 3 WITH THE
EASTERLY RIGHT-OF-WAY LINE OF CAMPO ROAD (STATE HIGHWAY 94); THENCE ALONG SAID RIGHT-
OF-WAY LINE S 0°16’58" W, 350.00 FEET TO A POINT IN THE SOUTHERLY LINE OF A PARCEL OF LAND
DESCRIBED IN DEED TO KENNETH P. RUPE, RECORDED APRIL 18, 1986, AS FILE NO. 86-151549 OF
0FFICIAL RECORDS, SAID POINT BEING THE TRUE POINT OF BEGINNING; THENCE LEAVING SAID
RIGHT-OF-WAY, ALONG THE SOUTHERLY LINE OF SAID RUPE LAND, N 88°18’28" E 199.98 FEET;
THENCE LEAVING SAID SOUTHERLY LINE N 88°18'28" E 217.93 FEET; THENCE N 0°16’58" E 200.00
FEET TO THE NORTHERLY LINE OF LAND DESCRIBED IN DEED TO LAURENCE AND HELEN VAN
NORMAN, RECORDED FEBRUARY 18, 1983 AS FILE NO. 83-053734 OF OFFICIAL RECORDS; THENCE
ALONG SAID NORTHERLY LINE N 88°18'28" E 452.07 FEET TO THE NORTHEASTERLY CORNER OF SAID
VAN NORMAN LAND; THENCE ALONG THE EASTERLY LINE THEREOF S 0°16’58" W 394.86 FEET TO A
POINT IN THE NORTHERLY RIGHT-OF-WAY OF HILLSIDE DRIVE, BEING A POINT IN A CURVE CONCAVE
SOUTHEASTERLY HAVING A RADIUS OF 224.79 FEET, A RADIAL LINE THROUGH SAID POINT BEARS N
10°53’2I"W; THENCE SOUTHWESTERLY ALONG SAID NORTHERLY RIGHT-OF-WAY 92.78 FEET THOUGH
A CENTRAL ANGLE OF 23°38‘52"; THENCE S 55°27‘47" W 105.72 FEET TO THE BEGINNING OF A 175.23
FOOT RADIUS CURVE CONCAVE NORTHWESTERLY, THENCE 58.55 FEET ALONG SAID CURVE THOUGH
A CENTRAL ANGLE OF L9°08'3S"; THENCE S 74°36’22" W 287.37 FEET; THENCE LEAVING SAID
NORTHERLY RIGHT-OF-WAY N 24°04'31"E 235.35 FEET; THENCE S 87°27'56"W 244.73 FEET; THENCE S
0°16‘58"W 245.28 FEET TO SAID NORTHERLY RIGHT-OF-WAY; THENCE ALONG SAID RIGHT-OF-WAY S
74°36'22” W 46.38 FEET TO THE BEGINNING OF A 275.00 FOOT RADIUS CURVE CONCAVE NORTHERLY;
THENCE 65.76 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13°42’01 "; THENCE S
88°18’23" W 109.58 FEET TO THE EASTERLY RIGHT-OF-WAY OF CAMPO ROAD; THENCE ALONG SAID
CAMPO ROAD RIGHT-OF-WAY N 0°16’58" E 432.07 FEET TO THE TRUE POINT OF BEGINNING.
THIS LEGAL IS MADE PURSUANT TO THAT CERTAIN CERTIFICATE OF COMPLIANCE RECORDED
OCTOBER 14, 2004, AS INSTRUMENT NO. 2004-0976196 OF OFFICIAL RECORDS.
APN: 597-041-66
Order Number: DIV-5854431 (7)
Page Number: 8
First American Title
Order Number: DIV-5854431 (7)
Page Number: 9
First American Title
NOTICE
Section 12413.1 of the California Insurance Code, effective January 1, 1990, requires that any title insurance
company, underwritten title company, or controlled escrow company handling funds in an escrow or sub-
escrow capacity, wait a specified number of days after depositing funds, before recording any documents in
connection with the transaction or disbursing funds. This statute allows for funds deposited by wire transfer
to be disbursed the same day as deposit. In the case of cashier's checks or certified checks, funds may be
disbursed the next day after deposit. In order to avoid unnecessary delays of three to seven days, or more,
please use wire transfer, cashier's checks, or certified checks whenever possible.
Order Number: DIV-5854431 (7)
Page Number: 10
First American Title
EXHIBIT A
LIST OF PRINTED EXCEPTIONS AND EXCLUSIONS (BY POLICY TYPE)
CLTA STANDARD COVERAGE POLICY – 1990
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of:
1. (a) Any law, ordinance or governmental regulation (including but not limited to building or zoning laws, ordinances, or regulations)
restricting, regulating, prohibiting or relating (i) the occupancy, use, or enjoyment of the land; (ii) the character, dimensions or location of any improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the
dimensions or area of the land or any parcel of which the land is or was a part; or (iv) environmental protection, or the effect
of any violation of these laws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect, lien, or encumbrance resulting from a violation or alleged violation affecting the land has been
recorded in the public records at Date of Policy. (b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the
public records at Date of Policy.
2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy, but not excluding from coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser
for value without knowledge.
3. Defects, liens, encumbrances, adverse claims or other matters: (a) whether or not recorded in the public records at Date of Policy, but created, suffered, assumed or agreed to by the insured
claimant; (b) not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under
this policy; (c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy; or
(e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the insured mortgage or for the estate or interest insured by this policy.
4. Unenforceability of the lien of the insured mortgage because of the inability or failure of the insured at Date of Policy, or the inability or failure of any subsequent owner of the indebtedness, to comply with the applicable doing business laws of the state in which the
land is situated.
5. Invalidity or unenforceability of the lien of the insured mortgage, or claim thereof, which arises out of the transaction evidenced by the insured mortgage and is based upon usury or any consumer credit protection or truth in lending law.
6. Any claim, which arises out of the transaction vesting in the insured the estate of interest insured by this policy or the transaction
creating the interest of the insured lender, by reason of the operation of federal bankruptcy, state insolvency or similar creditors' rights laws.
EXCEPTIONS FROM COVERAGE - SCHEDULE B, PART I
This policy does not insure against loss or damage (and the Company will not pay costs, attorneys' fees or expenses) which arise by
reason of: 1. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments
on real property or by the public records.
Proceedings by a public agency which may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the public, records.
2. Any facts, rights, interests, or claims which are not shown by the public records but which could be ascertained by an inspection of
the land or which may be asserted by persons in possession thereof. 3. Easements, liens or encumbrances, or claims thereof, not shown by the public records.
4. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would
disclose, and which are not shown by the public records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b) or (c) are shown by the public records.
6. Any lien or right to a lien for services, labor or material not shown by the public records.
Order Number: DIV-5854431 (7)
Page Number: 11
First American Title
CLTA/ALTA HOMEOWNER'S POLICY OF TITLE INSURANCE (12-02-13) EXCLUSIONS
In addition to the Exceptions in Schedule B, You are not insured against loss, costs, attorneys' fees, and expenses resulting from:
1. Governmental police power, and the existence or violation of those portions of any law or government regulation concerning:
a. building; b. zoning;
c. land use;
d. improvements on the Land; e. land division; and
f. environmental protection. This Exclusion does not limit the coverage described in Covered Risk 8.a., 14, 15, 16, 18, 19, 20, 23 or 27.
2. The failure of Your existing structures, or any part of them, to be constructed in accordance with applicable building codes. This Exclusion
does not limit the coverage described in Covered Risk 14 or 15. 3. The right to take the Land by condemning it. This Exclusion does not limit the coverage described in Covered Risk 17.
4. Risks:
a. that are created, allowed, or agreed to by You, whether or not they are recorded in the Public Records; b. that are Known to You at the Policy Date, but not to Us, unless they are recorded in the Public Records at the Policy Date;
c. that result in no loss to You; or
d. that first occur after the Policy Date - this does not limit the coverage described in Covered Risk 7, 8.e., 25, 26, 27 or 28. 5. Failure to pay value for Your Title.
6. Lack of a right:
a. to any land outside the area specifically described and referred to in paragraph 3 of Schedule A; and b. in streets, alleys, or waterways that touch the Land.
This Exclusion does not limit the coverage described in Covered Risk 11 or 21.
7. The transfer of the Title to You is invalid as a preferential transfer or as a fraudulent transfer or conveyance under federal bankruptcy, state insolvency, or similar creditors' rights laws.
8. Contamination, explosion, fire, flooding, vibration, fracturing, earthquake, or subsidence.
9. Negligence by a person or an Entity exercising a right to extract or develop minerals, water, or any other substances.
LIMITATIONS ON COVERED RISKS
Your insurance for the following Covered Risks is limited on the Owner's Coverage Statement as follows:
For Covered Risk 16, 18, 19, and 21 Your Deductible Amount and Our Maximum Dollar Limit of Liability shown in Schedule A. The deductible amounts and maximum dollar limits shown on Schedule A are as follows:
Your Deductible Amount Our Maximum Dollar Limit of Liability
Covered Risk 16: 1% of Policy Amount Shown in Schedule A or $2,500 $10,000
(whichever is less)
Covered Risk 18: 1% of Policy Amount Shown in Schedule A or $5,000 $25,000 (whichever is less)
Covered Risk 19: 1% of Policy Amount Shown in Schedule A or $5,000 $25,000 (whichever is less)
Covered Risk 21: 1% of Policy Amount Shown in Schedule A or $2,500 $5,000 (whichever is less)
2006 ALTA LOAN POLICY (06-17-06)
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys'
fees, or expenses that arise by reason of:
1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting,
or relating to
(i) the occupancy, use, or enjoyment of the Land;
(ii) the character, dimensions, or location of any improvement erected on the Land;
Order Number: DIV-5854431 (7)
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First American Title
(iii) the subdivision of land; or
(iv) environmental protection;
or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5.
(b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 6.
2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8.
3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in
writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 11,
13, or 14); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage.
4. Unenforceability of the lien of the Insured Mortgage because of the inability or failure of an Insured to comply with applicable doing-business laws of the state where the Land is situated.
5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the
Insured Mortgage and is based upon usury or any consumer credit protection or truth-in-lending law. 6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction creating the
lien of the Insured Mortgage, is (a) a fraudulent conveyance or fraudulent transfer, or (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy.
7. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy
and the date of recording of the Insured Mortgage in the Public Records. This Exclusion does not modify or limit the coverage provided under Covered Risk 11(b).
The above policy form may be issued to afford either Standard Coverage or Extended Coverage. In addition to the above Exclusions from
Coverage, the Exceptions from Coverage in a Standard Coverage policy will also include the following Exceptions from Coverage:
EXCEPTIONS FROM COVERAGE
[Except as provided in Schedule B - Part II,[ t[or T]his policy does not insure against loss or damage, and the Company will not pay costs,
attorneys' fees or expenses, that arise by reason of: [PART I
[The above policy form may be issued to afford either Standard Coverage or Extended Coverage. In addition to the above Exclusions from Coverage, the Exceptions from Coverage in a Standard Coverage policy will also include the following Exceptions from Coverage:
1. (a) Taxes or assessments that are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real
property or by the Public Records; (b) proceedings by a public agency that may result in taxes or assessments, or notices of such
proceedings, whether or not shown by the records of such agency or by the Public Records. 2. Any facts, rights, interests, or claims that are not shown by the Public Records but that could be ascertained by an inspection of the Land or
that may be asserted by persons in possession of the Land.
3. Easements, liens or encumbrances, or claims thereof, not shown by the Public Records.
4. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land and not shown by the Public Records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or
title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the Public Records. 6. Any lien or right to a lien for services, labor or material not shown by the public records.
PART II
In addition to the matters set forth in Part I of this Schedule, the Title is subject to the following matters, and the Company insures against loss
or damage sustained in the event that they are not subordinate to the lien of the Insured Mortgage:]
2006 ALTA OWNER'S POLICY (06-17-06)
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys'
fees, or expenses that arise by reason of:
1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting,
or relating to
Order Number: DIV-5854431 (7)
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First American Title
(i) the occupancy, use, or enjoyment of the Land;
(ii) the character, dimensions, or location of any improvement erected on the Land;
(iii) the subdivision of land; or
(iv) environmental protection;
or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage
provided under Covered Risk 5. (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8.
3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in
writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 9 or
10); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Title. 4. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction vesting the
Title as shown in Schedule A, is (a) a fraudulent conveyance or fraudulent transfer, or (b) a preferential transfer for any reason not stated in Covered Risk 9 of this policy.
5. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy
and the date of recording of the deed or other instrument of transfer in the Public Records that vests Title as shown in Schedule A.
The above policy form may be issued to afford either Standard Coverage or Extended Coverage. In addition to the above Exclusions from Coverage, the Exceptions from Coverage in a Standard Coverage policy will also include the following Exceptions from Coverage:
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage, and the Company will not pay costs, attorneys' fees or expenses, that arise by reason of: [The above policy form may be issued to afford either Standard Coverage or Extended Coverage. In addition to the above Exclusions from
Coverage, the Exceptions from Coverage in a Standard Coverage policy will also include the following Exceptions from Coverage:
1. (a) Taxes or assessments that are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real
property or by the Public Records; (b) proceedings by a public agency that may result in taxes or assessments, or notices of such
proceedings, whether or not shown by the records of such agency or by the Public Records. 2. Any facts, rights, interests, or claims that are not shown by the Public Records but that could be ascertained by an inspection of the Land or
that may be asserted by persons in possession of the Land.
3. Easements, liens or encumbrances, or claims thereof, not shown by the Public Records.
4. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land and not shown by the Public Records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or
title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the Public Records. 6. Any lien or right to a lien for services, labor or material not shown by the Public Records.
7. [Variable exceptions such as taxes, easements, CC&R's, etc. shown here.]
ALTA EXPANDED COVERAGE RESIDENTIAL LOAN POLICY (07-26-10)
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to
(i) the occupancy, use, or enjoyment of the Land;
(ii) the character, dimensions, or location of any improvement erected on the Land;
(iii) the subdivision of land; or
(iv) environmental protection;
or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion 1(a) does not modify or limit the
coverage provided under Covered Risk 5, 6, 13(c), 13(d), 14 or 16. (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 5, 6, 13(c), 13(d),
First American Title
14 or 16.
2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8.
3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant;
(b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in
writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 11,
16, 17, 18, 19, 20, 21, 22, 23, 24, 27 or 28); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage.
4. Unenforceability of the lien of the Insured Mortgage because of the inability or failure of an Insured to comply with applicable doing-business
laws of the state where the Land is situated. 5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the
Insured Mortgage and is based upon usury or any consumer credit protection or truth-in-lending law. This Exclusion does not modify or limit
the coverage provided in Covered Risk 26. 6. Any claim of invalidity, unenforceability or lack of priority of the lien of the Insured Mortgage as to Advances or modifications made after the
Insured has Knowledge that the vestee shown in Schedule A is no longer the owner of the estate or interest covered by this policy. This
Exclusion does not modify or limit the coverage provided in Covered Risk 11. 7. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching subsequent to Date of
Policy. This Exclusion does not modify or limit the coverage provided in Covered Risk 11(b) or 25.
8. The failure of the residential structure, or any portion of it, to have been constructed before, on or after Date of Policy in accordance with applicable building codes. This Exclusion does not modify or limit the coverage provided in Covered Risk 5 or 6.
9. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction creating the
lien of the Insured Mortgage, is (a) a fraudulent conveyance or fraudulent transfer, or
(b) a preferential transfer for any reason not stated in Covered Risk 27(b) of this policy.
10. Contamination, explosion, fire, flooding, vibration, fracturing, earthquake, or subsidence.
11. Negligence by a person or an Entity exercising a right to extract or develop minerals, water, or any other substances.
Privacy Information We Are Committed to Safeguarding Customer Information In order to better serve your needs now and in the future, we may ask you to provide us with certain information. We understand that you may be concerned about what we will do with such information - particularly any personal or financial information. We agree that you have a right to know how we will utilize the personal information you provide to us. Therefore, together with our subsidiaries we have adopted this Privacy Policy to govern the use and handling of your personal information. Applicability This Privacy Policy governs our use of the information that you provide to us. It does not govern the manner in which we may use information we have obtained from any other source, such as information obtained from a public record or from another person or entity. First American has also adopted broader guidelines that govern our use of personal information regardless of its source. First American calls these guidelines its Fair Information Values. Types of Information Depending upon which of our services you are utilizing, the types of nonpublic personal information that we may collect include: Information we receive from you on applications, forms and in other communications to us, whether in writing, in person, by telephone or any other means; Information about your transactions with us, our affiliated companies, or others; and Information we receive from a consumer reporting agency. Use of Information We request information from you for our own legitimate business purposes and not for the benefit of any nonaffiliated party. Therefore, we will not release your information to nonaffiliated parties except: (1) as necessary for us to provide the product or service you have requested of us; or (2) as permitted by law. We may, however, store such information indefinitely, including the period after which any customer relationship has ceased. Such information may be used for any internal purpose, such as quality control efforts or customer analysis. We may also provide all of the types of nonpublic personal information listed above to one or more of our affiliated companies. Such affiliated companies include financial service providers, such as title insurers, property and casualty insurers, and trust and investment advisory companies, or companies involved in real estate services, such as appraisal companies, home warranty companies and escrow companies. Furthermore, we may also provide all the information we collect, as described above, to companies that perform marketing services on our behalf, on behalf of our affiliated companies or to other financial institutions with whom we or our affiliated companies have joint marketing agreements. Former Customers Even if you are no longer our customer, our Privacy Policy will continue to apply to you. Confidentiality and Security We will use our best efforts to ensure that no unauthorized parties have access to any of your information. We restrict access to nonpublic personal information about you to those individuals and entities who need to know that information to provide products or services to you. We will use our best efforts to train and oversee our employees and agents to ensure that your information will be handled responsibly and in accordance with this Privacy Policy and First American's Fair Information Values. We currently maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information. Information Obtained Through Our Web Site First American Financial Corporation is sensitive to privacy issues on the Internet. We believe it is important you know how we treat the information about you we receive on the Internet. In general, you can visit First American or its affiliates’ Web sites on the World Wide Web without telling us who you are or revealing any information about yourself. Our Web servers collect the domain names, not the e-mail addresses, of visitors. This information is aggregated to measure the number of visits, average time spent on the site, pages viewed and similar information. First American uses this information to measure the use of our site and to develop ideas to improve the content of our site. There are times, however, when we may need information from you, such as your name and email address. When information is needed, we will use our best efforts to let you know at the time of collection how we will use the personal information. Usually, the personal information we collect is used only by us to respond to your inquiry, process an order or allow you to access specific account/profile information. If you choose to share any personal information with us, we will only use it in accordance with the policies outlined above. Business Relationships First American Financial Corporation's site and its affiliates' sites may contain links to other Web sites. While we try to link only to sites that share our high standards and respect for privacy, we are not responsible for the content or the privacy practices employed by other sites. Cookies Some of First American's Web sites may make use of "cookie" technology to measure site activity and to customize information to your personal tastes. A cookie is an element of data that a Web site can send to your browser, which may then store the cookie on your hard drive. FirstAm.com uses stored cookies. The goal of this technology is to better serve you when visiting our site, save you time when you are here and to provide you with a more meaningful and productive Web site experience. -------------------------------------------------------------------------------- Fair Information Values Fairness We consider consumer expectations about their privacy in all our businesses. We only offer products and services that assure a favorable balance between consumer benefits and consumer privacy. Public Record We believe that an open public record creates significant value for society, enhances consumer choice and creates consumer opportunity. We actively support an open public record and emphasize its importance and contribution to our economy. Use We believe we should behave responsibly when we use information about a consumer in our business. We will obey the laws governing the collection, use and dissemination of data. Accuracy We will take reasonable steps to help assure the accuracy of the data we collect, use and disseminate. Where possible, we will take reasonable steps to correct inaccurate information. When, as with the public record, we cannot correct inaccurate information, we will take all reasonable steps to assist consumers in identifying the source of the erroneous data so that the consumer can secure the required corrections. Education We endeavor to educate the users of our products and services, our employees and others in our industry about the importance of consumer privacy. We will instruct our employees on our fair information values and on the responsible collection and use of data. We will encourage others in our industry to collect and use information in a responsible manner. Security We will maintain appropriate facilities and systems to protect against unauthorized access to and corruption of the data we maintain. Form 50-PRIVACY (9/1/10) Page 1 of 1 Privacy Information (2001-2010 First American Financial Corporation)
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NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Photographs of Comparable Market Data
Comparable No. 1 – Jefferson Road, Jamul
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Photographs of Comparable Market Data
Comparable No. 2 – 12931 Campo Road, Jamul
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Photographs of Comparable Market Data
Comparable No. 3 – Hillside Drive, Jamul
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Photographs of Comparable Market Data
Comparable No. 4 – Campo Road, Jamul
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Photographs of Comparable Market Data
Comparable No. 5 – 14110 Campo Road, Jamul
NEC Campo Road and Hillside Drive, Jamul (Otay Water District)
Anderson & Brabant, Inc.
Anderson & Brabant, Inc.
QUALIFICATIONS OF THE APPRAISER
Patricia Milich Cypher
I. Resident of San Diego County since 1974
II. Educational Background:
A. Graduated from Poway High School
B. Attended Palomar College, Grossmont College, and San Diego State University.
Course of study included Real Estate Appraisal, Real Estate Finance, Economics and Statistics.
C. Professional Education Completed:
1. Appraisal Institute
a. Residential Valuation – Course VIII
b. Uniform Standards of Professional Appraisal Practice c. Capitalization Theory and Techniques Part A
d. Real Estate Appraisal Principles – Course 1A1
e. Basic Valuation Procedures – Course 1A2
2. Lincoln Graduate Center
a. Manufactured Housing Appraisal Course 669 3. Seminars (Partial List):
Apartment Seminars
Impacts of Hazardous Substances on Real Estate
Residential Subdivisions
Impact of Changing Demographics Fair Lending
Federal & State Laws & Regulations Workshop
Applying Economic Forecasts
Mitigation Land Update & Valuation Issues
San Diego Retail Property Analysis Appraisal of Partial Interests
Damages, Diminution & Mitigation
Business Value in the World of Real Estate
Attorneys, Appraisers & Real Estate
Condemnation on Trial (Mock Trial) Applying Economic Forecast
Gramm-Leach-Bliley Act
Appraising Manufactured Homes
Guide to URAR
III. Professional Affiliations:
A. Candidate Member, Appraisal Institute
B. Certified General Real Estate Appraiser (AG002249) Office of Real Estate Appraisers, State of California
IV. Appraisal Experience:
Associate, Anderson & Brabant, Inc, 1983 to present
Administrative Assistant/Office Manager, Anderson & Brabant, 1981 to 1983
Anderson & Brabant, Inc.
Qualifications of the Appraiser – Patricia Milich Cypher
Page Two
V. Expert Witness:
Superior Court, San Diego County
VI. Types of Appraisals:
Residential Property: Single-Family, Condominiums, Apartments (1000+ units),
Subdivisions, Mobile Home Parks, Existing and Proposed
Commercial Property: Office Buildings, Shopping Centers, Office Condominiums,
Preschool, Motels, Existing and Proposed Industrial Property: Single/Multi-Tenant, Existing and Proposed
Vacant Land: Industrial, Commercial, Residential, Rural and Mitigation
Agricultural: Ranches, Avocado and Citrus Groves, Etc.
Special Purpose Appraisals: Leasehold Estates, Possessory Interest, Historical Appraisals,
Fractional Interests, Easements and Partial Acquisitions
VIII. Partial List of Appraisal Clients:
Banks
Bank of America California Federal Bank Escondido National Bank
First Interstate Bank
First Pacific National Bank
Industrial Bank of Japan Palomar Savings & Loan Redlands Federal Bank
Union Bank of California
Wells Fargo Bank
Government Agencies and Municipalities California Department of Transportation City of Carlsbad
City of Colton
City of Escondido
City of Laguna Beach City of La Mesa City of San Bernardino
City of San Diego
City of San Marcos
City of Vista County of San Diego Fallbrook Union Elementary School District
Oceanside Unified School District
Poway Unified School District
Vista Unified School District
Law Firms Adams, Duque & Hazeltine Asaro, Keagy, Freeland & McKinley
Best, Best & Krieger
Daley & Heft
Endeman, Lincoln, Turek & Heater Foley, Lardner, Weissburg & Aronson Luce, Forward, Hamilton & Scripps
Post, Kirby, Noonan & Sweat
Rutan & Tucker
Singer, Richard Smith & Peltzer White & Bright
Wingert, Grebing, Anello & Brubaker
Wolfe & MacDonald
Others American Real Estate Group Centremark
Chicago Title
Commonwealth Title Company
Continental Wingate Mortgage Industrial Indemnity Mission City, Inc.
Park Homes, Inc.
Republic Realty Mortgage Corporation
Vedder Park Management
Anderson & Brabant, Inc.
QUALIFICATIONS OF THE APPRAISER
James Brabant, MAI Anderson & Brabant, Inc.
353 W. Ninth Avenue Escondido, CA 92025
(760) 741-4146 Ext. 312
Email: jlbrabant@aol.com
I. Resident of San Diego County since 1977
II. Educational Background:
A. University of Southern California, B.S. degree in Real Estate — 1960
B. School of Theology at Claremont, Master of Theology — 1966
C. Professional Education Completed:
1. Appraisal Institute
a. "Basic Appraisal Principles, Methods and Techniques" — Course I-A
b. "Capitalization Theory and Techniques" — Course I-B
c. "Urban Properties" — Course II
d. "Investment Analysis" — Course IV
e. "Standards of Professional Practice"
f. "Litigation Valuation"
g. Special Applications of Appraisal Analysis Course 301
2. Lincoln Graduate Center
a. Manufactured Housing Appraisal Course 669
3. Continuing Education (Partial List):
USPAP Course and Updates (every two years)
Four Hour Federal and State Laws, 1/16
Fundamentals of Separating Real Property, Personal Property, and Intangible
Business Assets 4/12
Eminent Domain Case Update, 10/95, 3/97, 10/07, 4/10
Business Practice and Ethics, 6/07, 7/12
San Diego Apartment & Housing Seminar, 10/98, 5/07, 9/11
Appraiser as Expert Witness, 12/06
Deal and Development Analysis – Downtown S.D., 9/05
Litigation Seminar, 11/04, 11/07, 11/10
Appraising Manufactured Housing, 1/04
Economic and Real Estate Forum, 09/02
Gramm-Leach-Bliley Act, 10/01
Condemnation on Trial (Participant), 5/00
Digging Into Ground Leases, 2/15
Unique Appraisal Assignments (Participant), 2/14
Appraisal of Partial Interests; 6/98
Vineyard Valuation, 11/12
Downtown San Diego Development, 9/15
Anderson & Brabant, Inc.
Qualifications of the Appraiser — James Brabant, MAI Page Two
III. Professional Affiliations:
A. Member, Appraisal Institute, MAI (1985 President, San Diego Chapter)
B. Realtor Member, North County Association of Realtors
C. Member, International Right of Way Association
D. Real Estate Brokers License, State of California
E. Teaching Credential, State of California, Community College Level
F. Certified General Real Estate Appraiser (AG002100)
Office of Real Estate Appraisers, State of California
IV. Appraisal Experience:
Co-Owner — Anderson & Brabant, Inc., Since 1979
Co-Owner — Robert M. Dodd & Associates, Inc., 1977 - 1979
Appraisal Manager — California First Bank, Huntington Beach, California, 1974 - 1977
Staff Appraiser — California First Bank, San Diego, California, 1972 - 1974
Staff Appraiser — O. W. Cotton Co., San Diego, California, 1970 - 1972
Staff Appraiser — Davis Brabant, MAI, Huntington Park, California, 1960 - 1962
V. Teaching Experience:
Southwestern College, Chula Vista, California, "Real Estate Appraisal"
VI. Expert Witness:
Superior Court, San Diego, Los Angeles, Riverside, and San Bernardino Counties
Rent Control Hearings: Cities of Oceanside, Escondido, Ventura, Concord, Yucaipa, Carpenteria,
Palmdale, San Marcos, Carson, Watsonville
Various Arbitration Hearings
Assessment Appeals Boards of Riverside County, San Diego County and Orange County
Federal Bankruptcy Courts in San Diego County & Santa Barbara County
United States District Court – Northern District of California
VII. Types of Appraisals:
Residential Property: Single-family residence, condominiums, apartments,
subdivisions, existing and proposed
Commercial Property: Office buildings, shopping centers, office condominiums, etc.,
existing and proposed
Industrial Property: Single/multi-tenant, business parks, etc., existing and proposed
Vacant Land: Industrial, commercial, residential, and rural
Agricultural: Ranches, avocado and citrus groves, etc.
Special Purpose Appraisals: Leasehold estates, possessory interest, historical appraisals, etc.
Mobile Home Parks: For a variety of purposes including rent hearings, park closure, park
conversions, failure to maintain litigation, eminent domain, etc.
Anderson & Brabant, Inc.
Qualifications of the Appraiser — James Brabant, MAI Page Three
VIII. Partial List of Appraisal Clients:
Banks Bank of America
Bank of New York City National Bank
Downey Savings Fidelity Federal Bank First Interstate Bank
First Pacific National Bank Flagship Federal Savings Great Western Bank
Industrial Bank of Japan Palomar Savings & Loan
Redlands Federal Bank
Union Bank of California Wells Fargo Bank
Government Agencies and Municipalities California Department of
Transportation/Caltrans
Carlsbad Municipal Water District City of Carlsbad
City of Chula Vista
City of Colton City of Concord
City of Escondido City of Laguna Beach City of La Mesa
City of Salinas City of San Bernardino City of San Diego
City of San Marcos City of Vista
City of Yucaipa
County of San Diego Fallbrook Public Utility District
Metropolitan Water District
Oceanside Unified School District Pacific Telephone
Poway Municipal Water District
Ramona Unified School District SANDAG (San Diego Assoc. of Govts.)
San Diego County Water Authority
San Diego Unified Port District San Marcos Unified School District
U.S. Depart. of the Interior Bureau of Indian Affairs U.S. Department of Justice
Law Firms Aleshire & Wynder, LLP
Asaro, Keagy, Freeland. & McKinley Best, Best & Krieger
Daley & Heft
Endeman, Lincoln, Turek & Heater Foley & Lardner, LLP
Fulbright & Jaworski
Gray, Cary, Ware & Freidenrich Higgs, Fletcher & Mack
Latham & Watkins
Lounsbery, Ferguson, Altona & Peak Luce, Forward, Hamilton & Scripps
McDonald & Allen McInnis, Fitzgerald, Rees, Sharkey & McIntyre O'Melveny & Meyers
Procopio, Cory, Hargreaves & Savitch Rutan & Tucker Singer, Richard
Sullivan Wertz McDade & Wallace Tatro & Zamoyski
Thorsnes Bartolotta & McGuire
Woodruff, Spradlin & Smart Worden Williams, APC
Title Companies Chicago Title
Fidelity National Title Insurance
First American Title St. Paul Title
Title Insurance & Trust
Others
Avco Community Developers Coldwell Banker Dixieline Lumber
Golden Eagle Insurance National Steel & Shipbuilding Co.
Northern San Diego County Hospital District
Prudential Insurance Corp. Rosenow, Spevacek, Group San Diego Gas & Electric Co.
San Luis Rey Downs (Vessels) Steefel, Levitt & Weiss
Tellwright-Campbell, Inc.
Transamerica Relocation Service Vedder Park Management
EXHIBIT C
Split Zoning Vacant Land Parcel
7.81 Acres | Sale Price $525,000
5.61 Acres RR (Rural Residential)
2.2 Acres C32 (Convenience Commercial)
Vince Provenzano
President of Brokerage
Vince@PacificCoastCommercial.com
Lic. 00780182
(619)469-3600 | 10721 Treena St., Ste 200 | San Diego, CA 92131 | www.PacificCoastCommercial.com | Lic. 01209930
Tyler McKee
Sales & Leasing Associate
Tyler@PacificCoastCommercial.com
Lic. 02082617
The information contained herein has been given to us by the owner of the property or other sources we deem reliable, we have no reason to doubt its accuracy, but we do not guarantee it. All information including zoning and use should be verified prior to purchase.
FOR SALE EXHIBIT D
Property Overview
Development Opportunity
Mixed-Use Vacant Land Parcel
Parcel Size: 7.81 Acre Lot
APN # 597-041-66-00
Sale Price: $525,000
• Located in the Community of Jamul in San Diego County
• County of San Diego - Split Zoning:
2.2 Acres C32 (Convenience Commercial) and 5.61 Acres RR
(Rural Residential)
• Subject Property has Frontage Along Campo Road and
Hillside Drive
EXISTING LAYOUT
Immediate Freeway
Access To Highway 94
Bordered by San Diego National Wildlife
Refuge & U.S Fish Wildlife Services
Property Offers Beautiful
Views of Jamul Hillside
Average Household Income:
$149,200 within a 3 Mile Radius (2019)
Information Source: CoStar
Jamul is closely linked to the community of Dulzura, which
is about ten miles further southeast on Highway 94/Campo
Road. Located northwest of central Jamul is Rancho San
Diego, with the urban and suburban communities of
Spring Valley and El Cajon further west. The rural
communities of La Cresta, Crest and Harbison Canyon are
further north on the south side of Interstate 8. The
community of Alpine and the Japatul Valley area are
northeast of the subject, beyond the Loveland Reservoir.
The area is geographically diverse including steep
mountains, massive rock formations, rolling hills, open
valleys and deep canyons.
29,890 full time population 5,756 day time population 30,987 population growth (2024)
$101,859 avg. household income
$692,135 median home value
15 minutes el cajon
29 minutes downtown San Diego 651 businesses * demographics source: costar, based upon a 5 mile radius
9 minutes rancho san diego
Jamul | Market Snapshot
SURROUNDING AREA
AERIAL
EXHIBIT E
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
9/19/2019
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
9/19/2019
Jeanne Blumenfeld
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
9/19/2019
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
9/19/2019
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
9/19/2019
DocuSign Envelope ID: C0331BF0-157E-45EB-AD7D-4AA9E6F84FE1
9/19/2019
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Bob Kennedy
Engineering Manager
CIP/G.F. NO: P1210-008000 DIV. NO. ALL
APPROVED BY: Dan Martin, Assistant Chief of Engineering
Rod Posada, Chief, Engineering
Mark Watton, General Manager
SUBJECT: Informational Item – Forming a Working Group with Otay Water
District and Sweetwater Authority to Explore the Potential
and Feasibility of Using Recycled Water to Augment Existing
Local Supplies Available to Our Mutual Customers
GENERAL MANAGER’S RECOMMENDATION:
No recommendation. This is an informational item only.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
After its August 28, 2019 meeting, the Chair for the Sweetwater
Authority’s (SWA) Governing Board sent a letter (Exhibit A) to
the President of the Otay Water District (District) Board of
Directors (Board) inviting the District’s Board to form a
working group to jointly explore the potential and feasibility
of using recycled water to augment existing local water supplies
available to the customers for both agencies. SWA’S letter asked
the District’s Board to seriously consider this invitation from
SWA.
AGENDA ITEM 13b
2
The Board could decide to form a working group with SWA and
establish a charter for the group that identifies the goals,
direction, and establish boundaries for the group. As an
alternative, the District’s Board could utilize the Engineering,
Operations, and Water Resources Committee to review the reports
the SWA Board prepares and provide suggestions or direction to
the District to update previous studies the District has
prepared or to study further the alternatives identified in the
studies.
BACKGROUND INFORMATION:
On October 3, 2018, staff presented an informational item to the
Board on potable water, recycled water, and wastewater treatment
studies prepared by the District and other agencies over the
last twenty-five years. On May 17, 2019, the District’s General
Manager directed District’s staff to share all this information
with SWA’s staff.
On August 8, 2019, SWA staff contacted the District to get
information on wastewater flows on the County of San Diego
Sanitation District’s Spring Valley trunk sewer transmission
pipeline, the City of Chula Vista’s wastewater flows and the
District’s Ralph W. Chapman Water Reclamation Facility (RWCWRF)
wastewater flows. Staff provided the information requested
along with the study prepared with SWA’s assistance entitled,
“Feasibility of IPR/DPR – RWCWRF Purification Plant to
Sweetwater Reservoir” that was completed June 28, 2016 (2016
IPR/DPR Study).
A separate study from the one the SWA Board proposed to the
District’s Board was also initiated at SWA’s August 28, 2019
meeting. SWA authorized the commission of a consultant study to
analyze approaches to increase local water supplies. One such
approach includes the use of Title 22 reclaimed water to achieve
this goal.
FEASIBILITY OF IPR/DPR – RWCWRF PURIFICATION PLANT TO SWEETWATER
RESERVOIR
There have been many studies to look at alternate sources of
potable water, recycled water, and wastewater treatment in
reports prepared by the District or other agencies over the last
twenty-five years. The most recent is the 2016 IPR/DPR Report.
In the short time since this report was prepared, the District’s
costs for construction materials and labor have increased.
Additionally, staff has identified several elements in this
3
report that were not addressed including the need for a chlorine
contact basin and a plan to dispose of non-spec water.
At the time this 2016 IPR/DPR Report was prepared, the cost of
the 2016 IPR/DPR Report product water was already very high for
both options studied. Option 1 studied the cost for an Advanced
Water Purification Facility (AWPF) for RWCWRF effluent and
Option 2 studied the cost for an AWPF for effluent from RWCWRF
and from the City of San Diego’s South Bay Water Reclamation
Plant (SBWRP). Adjusting this per acre-foot (AF) cost to
include the chlorine contact basin, the cost to dispose of non-
spec water, ENR’s construction cost adjustment, along with
District’s recent material and labor costs in 2019 dollars:
Option 1 - Only RWCWRF flows
2016 Costs - $3,860/AF (brine to sewer) to $4,780/AF (hauling
brine)
2019 Adjustment - $4,825/AF to $5,975/AF
Option 2 - RWCWRF & SBWRP flows
2016 Costs - $3,450/AF (brine to sewer) to $4,380/AF (hauling
brine)
2019 Adjustment - $4,140/AF to $5,250/AF
These costs do not include changes to the regulatory
requirements for IPR reservoir augmentation that have occurred
since the report was prepared. The cost of addressing these
regulatory changes are expected to increase the cost of this
purified water even higher.
Regulatory Changes Since 2016
California Code of Regulations Title 22 establishes the
requirements for recycled water treatment, quality, and
allowable use.
District staff is monitoring the City (City) of San Diego’s Pure
Water Project to identify regulatory changes since the 2016
IPR/DPR Study was prepared. The State Water Resources Control
Board Division of Drinking Water (DDW) and the Regional Water
Quality Control Board (RWQCB) will both regulate IPR reservoir
augmentation projects.
DDW will regulate the purified water treatment, reservoir
storage, and the re-treatment of the stored water. The RWQCB
will regulate the discharge of purified recycled water to
4
reservoirs through the issuance of a National Pollution
Discharge Elimination System (NPDES) permit issued pursuant to
the federal Clean Water Act under the authority delegated by the
U.S. Environmental Agency (EPA). The City is expecting an
administrative draft version of the Pure Water NPDES permit
sometime around October 2019. All the final DDW and RWQCB
monitoring will be incorporated in this NPDES permit.
The City's Title 22 report added biological activated carbon
(BAC) to the City's treatment train to provide an additional
barrier against toxic organic compounds that was not in the
District’s 2016 IPR/DPR Report. DDW's concept approval letter
implemented a few monitoring requirements that the City’s team
were not anticipating.
The City was able to get the RWQCB to agree to a biostimulation
compliance strategy where the City receives a pure water total
nitrogen concentration limit of 2 mg/L (compared to the 1 mg/L
limit the District’s 2016 IPR/DPR Report anticipated).
Additionally, Padre Dam Municipal Water District (Padre Dam) has
a RWQCB concept approval for a 3 mg/L total nitrogen limit for
Padre Dam’s Pure Water project. This Padre Dam limit is based
on implementing a more expensive treatment scheme that increases
overall Reverse Osmosis (RO) recovery but results in higher
product water total nitrogen concentrations.
District staff is waiting for the exact product water
concentration limits and monitoring requirements specified in
the RWQCB NPDES permit for the San Diego Pure Water project.
The City is expecting that the RWQCB may end up establishing
concentration limits for a large number of constituents, even
for constituents beyond those identified as requiring limits in
the RWQCB Reasonable Potential Analysis (RPA) process.
Almost all the changes to the regulations for potable reuse
District staff has seen applied to the City’s Pure Water Project
would increase the cost of an IPR reservoir augmentation project
the District studied in 2016.
SWA Request for Qualifications – Feasibility Study
On September 3, 2019, SWA issued a Request for Qualifications
(RFQ) entitled, “Feasibility Study to Maximize Reservoir Assets
and Expand Local Water Supply.” SWA is seeking a consultant to
conduct a feasibility study with a cost/benefit analysis for
maximizing the Loveland and Sweetwater Reservoirs and for
developing new water resources such as recycled water and
5
potable reuse. District staff has discussed the initial scope
of this effort with SWA staff, but SWA staff does not anticipate
they will need anything from the District this fiscal year.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
No fiscal impact as this is an informational item only.
STRATEGIC GOAL:
This Project supports the District’s Mission statement, “To
provide exceptional water and wastewater service to its
customers, and to manage District resources in a transparent and
fiscally responsible manner” and the General Manager’s Vision,
“To be a model water agency by providing stellar service,
achieving measurable results, and continuously improving
operational practices.”
LEGAL IMPACT:
None.
BK/DM/RP:jf
P:\Bob Kennedy\Staff Report\SWA Alternative Water Supply Study\Staff Report - Forming a Working Group with SWA
11-6-19.doc
Attachments: Attachment A – Committee Action
Exhibit A – SWA Board Meeting letter to Otay WD
ATTACHMENT A
SUBJECT/PROJECT:
P1210-008000
Informational Item – Forming a Working Group with Otay
Water District and Sweetwater Authority to Explore the
Potential and Feasibility of Using Recycled Water to
Augment Existing Local Supplies Available to Our Mutual
Customers
COMMITTEE ACTION:
The Engineering, Operations, and Water Resources Committee
(Committee) reviewed this item at a meeting held on October 23,
2019, and the following comments were made:
• Staff stated that the Chair for the Sweetwater Authority’s
(SWA) Governing Board sent a letter to the Otay Water
District (District) inviting the District to participate in
a working group. Details of the proposed formation of a
working group are provided in Exhibit A of the staff
report.
• Staff provided a background on potable water, recycled
water, and wastewater treatment studies/reports prepared by
the District. Information of the studies are provided on
page 2 of the staff report.
• Staff discussed the cost of the District’s 2016 IPR/DPR
Report product water. Details of the costs are provided on
page 3 of the staff report.
• Staff discussed regulatory changes since 2016, which is
detailed on page 3 and 4 of the staff report.
• As noted in the staff report, on September 3, 2019, SWA
issued a Request for Qualifications (RFQ) entitled,
“Feasibility Study to Maximize Reservoir Assets and Expand
Local Water Supply.” Additional details of the RFQ are
provided on page 4 of the staff report.
• It was noted that if the Board approves the formation of a
working group, the group would consist of two (2) SWA and
two (2) District board members.
The Committee recommended that this item go to the full Board
for discussion and possible formation of a working group.
EXHIBIT A
STAFF REPORT
TYPE MEETING: Regular Board Meeting MEETING DATE: November 6, 2019
SUBMITTED BY: Mark Watton,
General Manager
W.O./G.F. NO:DIV. NO.
APPROVED BY: Mark Watton, General Manager
SUBJECT: Approve Agreement for General Counsel Services
GENERAL MANAGER’S RECOMMENDATION:
Approve an agreement with the law firm of Artiano Shinoff Abed
Blumenfeld Carelli Sleeth & Wade, A Professional Corporation, for a
term of two (2) years through December 31, 2021, to provide general
counsel services to the District.
COMMITTEE ACTION:
Please see Attachment A.
PURPOSE:
To present for the Board’s consideration an agreement with the law
firm of Artiano Shinoff Abed Blumenfeld Carelli Sleeth & Wade, A
Professional Corporation, for a term of two (2) years through
December 31, 2021, to provide general counsel services to the
District.
ANALYSIS:
Artiano Shinoff Abed Blumenfeld Carelli Sleeth & Wade, A Professional
Corporation (ASAB), has served as the District’s special counsel
since January 1, 2011. The District’s current contract with ASAB was
for a two-year period and is set to expire at the end of calendar
year 2019.
While ASAB’s costs have increased, their rate has remained the same
over the eight years that they have provided counsel services to the
District, with the exception of a slight reduction in their rate in
AGENDA ITEM 14a
2
2012. The attached agreement proposes a 10% increase to their
current contract rates which are 100 hours for a flat fee of $20,000
per month and, thereafter, the hourly rates are $240 for partners,
$210 for associates, and $95 for paralegal time. The new proposed
rate is $22,000 for 100 hours of legal services per month and,
thereafter, the hourly rates would be $260 for partners, $230 for
associates, and $105 for paralegal time.
The District has been happy with the services provided by ASAB and
recommends that the board approve the proposed agreement as per the
terms indicated in the agreement (Attachment B). If approved, the
agreement would provide for a two (2) year term expiring on December
31, 2021.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
The agreement allows for one hundred (100) hours or $22,000 per
calendar month of basic retainer services as described in the
attached agreement. Additional services, as described in Section 4.b
of the agreement, and time in excess of the one hundred (100) hours
will be compensated on an hourly basis based on the rates noted in
the agreement.
LEGAL IMPACT:
None.
Attachments:
Attachment A – Committee Actions
Attachment B – Correspondence from ASAB and their Proposed Legal
Services Agreement
ATTACHMENT A
SUBJECT/PROJECT:
Approve Agreement for General Counsel Services
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff is requesting that the Board approve an agreement with the
law firm of Artiano Shinoff Abed Blumenfeld Carelli Sleeth & Wade
(ASAB), A Professional Corporation, for a term of two (2) years
through December 31, 2021, to provide general counsel services to
the District.
• Information was reviewed in the staff report.
• The Committee indicated that they have been satisfied with ASAB’s
services and felt it was a good value.
• Staff indicated that General Manager Watton had solicited the
general counsel rates from two local water agencies and ASAB’s
rates were lower.
• Staff also indicated that they have been happy with the services
ASAB has provided the District.
Upon completion of the discussion, the committee supported staff’s
recommendation and presentation to the full board as an action item.
Attachment B
9.TERMINATION. The Client or the Law Firm may, at any time, with or withoutreason, terminate this Agreement upon thirty (30) days prior written notice to the other party. In the event of termination, the Law Firm shall be entitled to payment only for acceptable and allowable work performed under this Agreement through the date of termination.
THE FOREGOING IS AGREED TO BY:
DATED:
DATED:
____ --32019 OTAY WATER DISTRICT
-------
By: Mark Watton General Manager
, 2019 ARTIANO SHINOFF ABED BLUMENFELD CARELLI SLEETH & WADE, APC
By: Jeanne Blumenfeld, Esq.
Page 3 of3
STAFF REPORT
TYPE MEETING: Regular Board Meeting MEETING DATE: November 6, 2019
SUBMITTED BY: Mark Watton,
General Manager
W.O./G.F. NO: DIV. NO.
APPROVED BY: Susan Cruz, District Secretary
Mark Watton, General Manager
SUBJECT: Board of Directors 2019 and 2020 Calendars of Meetings
GENERAL MANAGER’S RECOMMENDATION:
At the request of the Board, the attached Board of Director’s meeting calendars for 2019 and 2020 are being presented for discussion.
PURPOSE: This staff report is being presented to provide the Board the
opportunity to review the 2019 and 2020 Board of Director’s meeting calendars and amend the schedules as needed.
COMMITTEE ACTION: N/A
ANALYSIS:
The Board requested that this item be presented at each meeting so they may have an opportunity to review the Board meeting calendar schedule and amend it as needed.
STRATEGIC GOAL:
N/A
FISCAL IMPACT: None.
LEGAL IMPACT: None.
Attachment: Calendars of Meetings for 2019 and 2020
G:\UserData\DistSec\WINWORD\STAFRPTS\Board Meeting Calendar 11-06-19.doc
Agenda Item 14b
Board of Directors, Workshops
and Committee Meetings
2019
Regular Board Meetings:
Special Board or Committee Meetings (3rd
Wednesday of Each Month or as Noted)
January 2, 2019
February 6, 2019
March 6, 2019
April 3, 2019
May 1, 2019
June 5, 2019
July 3, 2019
August 7, 2019
September 4, 2019
October 2, 2019
November 6, 2019
December 4, 2019 (Canceled)
January 16, 2019
February 20, 2019
March 20, 2019
April 17, 2019
May 22, 2019
June 19, 2019
July 24, 2019
August 21, 2019
September 18, 2019
October 23, 2019
November 20, 2019 (Canceled)
December 2019 (TBD)
SPECIAL BOARD MEETINGS:
BOARD WORKSHOPS:
Board of Directors, Workshops
and Committee Meetings
2020
Regular Board Meetings:
Special Board or Committee Meetings (3rd
Wednesday of Each Month or as Noted)
January 8, 2020
February 5, 2020
March 4, 2020
April 1, 2020
May 6, 2020
June 3, 2020
July 1, 2020
August 5, 2020
September 2, 2020
October 7, 2020
November 4, 2020
December 2, 2020
January 22, 2020
February 19, 2020
March 18, 2020
April 22, 2020
May 20, 2020
June 17, 2020
July 22, 2020
August 19, 2020
September 23, 2020
October 21, 2020
November 18, 2020
December 16, 2020
SPECIAL BOARD MEETINGS:
BOARD WORKSHOPS:
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2019
SUBMITTED BY: Eid Fakhouri, Finance Manager PROJECT: DIV. NO. All
APPROVED BY: Kevin Koeppen, Assistant Chief Financial Officer
Joseph R. Beachem, Chief Financial Officer
Mark Watton, General Manager
SUBJECT: Retiree Healthcare Benefits - Review of the FY 2019 Actuarial
Valuation Report and Net Cost of the Enhancement of the Retiree
Healthcare Benefits
GENERAL MANAGER’S RECOMMENDATION:
This staff report is an informational item that provides findings to
the Board of Directors regarding:
1.The latest actuarial valuation performed as of June 30, 2019.
2.The actuarial evaluation determining the net cost or savings of
the Other Post Employment Benefit (OPEB) Plan enhancement versus
the increased employee contributions to PERS.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
Every two years the District is required to hire an Actuary to
perform a study that determines the District’s liability for OPEB
benefits and the annual Actuarially Determined Contributions (ADC).
The District has received the 2019 Actuarial Report prepared by Luis
Murillo of Nyhart. The District’s ADC for the fiscal periods ending
June 30, 2020 and June 30, 2021 is calculated as part of the
actuarial report and is reported in the Administrative Expenses of
the District’s financial statements and budget reports. In addition
to the actuarial study, Nyhart was asked to evaluate and compare the
cost of the enhancement of the OPEB benefits to the benefit of the
increased employee contributions.
AGENDA ITEM 15a
ANALYSIS:
Every two years the District hires an actuarial firm to prepare the
OPEB evaluation which is used to determine the District’s liability
associated with the OPEB benefits and the ADC. This evaluation has
been completed and the findings are presented in this Staff Report.
Actuarially Determined Contribution (ADC)
The ADC is equal to the normal cost plus an amortization of the net
Unfunded Accrued OPEB Liability. From FY 2019 to FY 2020 the ADC has
decreased from $1,065,019 to $786,245 resulting in a $278,774
reduction. The reduction is primarily due to the Unfunded Accrued
Liability (UAL) which became fully funded in this year, FY 2020,
leaving the normal cost as the only component of the annual ADC in
future years.
The Total (Accrued) OPEB Liability for June 30, 2019 was $27.2 million.
This is a net increase of $0.8 million from June 30, 2017. The liability
increased by $3.2M due to the additional service years earned by
eligible employees between 2017 and 2019 and interest on the total OPEB
liability.
The increase of $3.2M is offset by $2.1M of decreases as the result of
updated employee census data and lower actual medical premiums costs
than what was projected in the FY 2017 Actuarial Valuation. Changes in
assumptions were also made that further decreased the liability by
$0.3M, resulting in an overall net increase of $0.8M in the Total OPEB
Liability for June 30, 2019.
Assumption Changes
Key assumption changes had an overall positive net effect on the
liabilities set forth in the actuarial report. The key assumption
changes include the following;
Description
2019
Valuation
2017
Valuation Comments
Payroll Increases 2.75%3.00%
Updated to reflect most current
employee census data, MOU
changes and recent payroll trends.
Mortality MP2018 MP2016
Updated to reflect the most recent
mortality rates under CalPERS
pension plan. People are living
longer.
Dental Participation Rate 100.00%80.00%
Updated to reflect 100% of eligible
active employees are assumed to
elect dental coverage.
Spouse Coverage 2 Yrs Older 3 Yrs Older
Updated to reflect most current
data that shows male spouses are
assumed to be 2 years older than
female spouses.
KEY ASSUMPTION CHANGES
Cost/Savings of Plan and Contribution Changes
Since the 2011 OPEB enhancement, staff has reported to the Board on
four occasions regarding the net savings status. Nyhart conducted the
current OPEB contribution study that analyzed the adequacy of the OPEB
member contributions against the cost of the FY 2011 plan enhancements.
This study shows that the unfunded liability created by the plan
enhancement is equal to $11,494,824 as of June 30,2019. At the time of
the enhancement no assets had been initially contributed by the
employees. In the following 8 years, the accumulated employee
contributions have reached $8,826,872 resulting in a 77% funded status
and a net OPEB liability (NOL) of $2,667,952. This is a fairly rapid
increase in the funding level of the enhancement. The study shows
annual employee contributions will continue to exceed the annual plan
benefit costs resulting in the employee contributions fully funding the
liability, associated with the enhancement, by FY 2028.
Funding Status
In addition to the District funding the ADC for the plan, it also
budgeted and paid for the retiree medical premiums. As a result of
funding the retiree medical premiums through the budget and not from
the Trust, the funding level has been accelerated. With the various
assumption changes, and the accelerated funding, the actuarial study
shows the Trust funding level has reached 100% in the initial part of
this fiscal year, which is one year earlier than anticipated in the
prior actuarial study.
Now that full funding has been reached, the District will continue to
make annual contributions to the OPEB fund equal to the ADC and
reimburse itself for the direct cash payments and implied subsidy for
the fiscal year. This approach will ensure the fund remains at 100%
funded while withdrawing adequate funds to cover the annual direct cash
payments. As communicated to the Board on May 2, 2019, staff is
projecting to utilize the reimbursed funds to make additional
contributions to CalPERS and accelerate the funding of the District’s
unfunded pension liability. The valuation projects the District will
be reimbursed $1,111,291 for retiree medical expenses in FY 2020. As
part of the FY 2021 budget, staff will be proposing to implement the
Board’s plan to use the reimbursed funds to make an additional CalPERS
contribution, reducing the District’s unfunded pension liability. The
use of these funds as planned is already incorporated into the
District’s rate modeling and therefore will not put any added pressure
on rates. Staff is currently working with CalPERS to evaluate the
savings associated with this strategy, which will be presented as part
of the FY 2021 budget.
Budget Impact
The budgeted and projected OPEB ADC amounts, which were based on the
2017 actuarial valuation, estimated as part of the FY 2020 budget
were greater than the current actuarially projected costs. As a
result, staff anticipates savings of $364,755, which is the
difference between the $1,151,000 budgeted expense and the $786,245
ADC expense based on the updated actuarial valuation contribution.
After all assumption and projection changes are factored into the
actuarial calculations, the funding level of the Trust is expected to
reach 100% by the end of FY 2020. The timing of becoming 100% funded
is projected to occur one year earlier than what was anticipated with
the previous study.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
This is an informational item and has no fiscal impact on the
District.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning.
LEGAL IMPACT:
N/A
Attachments:
A – Committee Action
B – Actuarial Valuation
C – OPEB Contribution Study
D – Nyhart Presentation
ATTACHMENT A
SUBJECT/PROJECT:
Retiree Healthcare Benefits - Review of the FY 2019
Actuarial Valuation Report and Net Cost of the Enhancement
of the Retiree Healthcare Benefits
COMMITTEE ACTION:
The Finance and Administration Committee reviewed this item at a
meeting held on October 23, 2019 and the following comments were made:
• Staff provided a report on the findings of the latest actuarial
valuation of the Other Post Employee Benefits (OPEB) performed as
of June 30, 2019 and the net cost of the OPEB enhancement versus
the increase employee contributions to PERS. The District’s OPEB
primarily consists of retiree medical coverage.
• It was indicated that every 2 years the District is required to
have an actuarial valuation performed to determine the District’s
liability for the OPEB benefits and an Annual Actuarial
Determined Contribution (ADC). The valuation presented today was
performed as of June 30, 2019 and covers FY’s 20 and 21 ADC. The
prior study was performed as of June 30, 2017.
• Staff reviewed information in the staff report.
• The District’s FY20 ADC is $786,245 which is $278,774 less than
last year’s ADC of $1.06 million. The decrease is primarily due
to the unfunded liability component of the ADC being fully funded
in FY20. The total OPEB accrued liability for June 30, 2019 is
$27.2 million, which is a net increase of $800,000 from the June
30, 2017 valuation. As the District has remained steady in
making consistent ADC payments toward the plan, and due to
various assumption changes (reference the bottom of page 2 of the
staff report) and the updated census data, the plan has now
reached 100% funded status. This is one year earlier than
anticipated in the prior actuarial study.
• It was noted the District’s OPEB funding status is not typical of
agencies and that very few have a funding policy that targets the
ADC. Water agencies, however, do seem to be much better funded
than other public agencies.
• Staff introduced Mssrs. Louis Murillo and James Burn, of Nyhart,
who reviewed the findings of the actuarial report and the Net
Cost of the enhancement of the retiree healthcare benefits in
detail:
− The District’s retiree health program and the actuarial
valuation process was reviewed (please reference slide
numbers 3 to 10).
− It was indicated that the District’s projected total present
value of future health benefits (including those to be
earned in the future by existing employees) is $34.2 million
and the benefits earned as of June 30, 2019 are $27.2
million.
− The total accrued liability is $27.2 million and the
District’s unfunded liability is $0 because the assets in
the trust of $27.2 million now matches the accrued
liability.
− The FY 19/20 ADC is $786,245. The District may reimburse
itself for retiree medical cash payments of $940,476 and the
Implicit Subsidy of $170,815 for a total of $1.1 million.
In the future, the District plans to use the $1.1 million
reimbursement towards paying down the CalPERS pension
liability.
− Nyhart also performed a study which reviewed if the
increased cost of the OPEB benefits implemented in 2011 is
being funded by the changes in the employee contractual
contributions (7% for unrepresented employees and 7.75% for
represented employees). The study shows that the
contractual employee contributions are greater than the
recommended contribution (please reference slide number 10
of the presentation) which is contributing to the
accelerated funding of the OPEB unfunded liability.
• In response to an inquiry from the Committee, it was indicated
that the District has $27.2 million in assets in the OPEB trust
fund and the assets will continue to grow. As the District makes
the ADC each year, the trust should have enough assets to cover
all future OPEB costs.
• Mr. Murillo indicated, in response to another inquiry from the
Committee, that they utilized CalPERS’ study on mortality rates
in their actuarial study. CalPERS’ last study was performed in
2017 and the study estimated the average life expectancy from the
retirement age of 55 is an additional 25 to 30 years.
• It was indicated that once a retiree reaches 65, the Districts
medical benefits plan becomes supplemental to Medicare and the
premiums for these retirees decreases. Also, the implied subsidy
goes away once the retiree becomes Medicare eligible.
• The Committee pointed out that the board has considered the
possibility that the surplus earnings from the OPEB trust could
be used to pay down other expenses like the CalPERS pension
liability. Staff stated that this recommendation will be
presented during the next budget cycle.
• The Committee also suggested that staff could present their
recommendation (i.e., no change to District practice is
recommended) along with the possible alternatives for the board
to consider.
Upon completion of the discussion, the committee accepted staffs’
report and supported presentation to the full board as an
informational item.
October 6, 2019
PRIVATE
Mr. Eid Fakhouri
Finance Manager
Otay Water District
2554 Sweetwater Springs Blvd
Spring Valley, CA 91978-2096
Re: OPEB Actuarial Valuation & Contribution Study
Dear Mr. Fakhouri:
We are presenting our report of the June 30, 2019 actuarial valuation conducted on behalf
of Otay Water District (the “District”) for its retiree health program.
The purpose of the valuation is to measure the District’s liability for other postemployment
benefits (OPEB) and to determine an actuarially determined contribution (ADC). The ADC is
a target or recommended contribution to a defined benefit OPEB plan for the reporting
period, determined in accordance with parameters set by the District and in conformity with
Actuarial Standards of Practice. The valuation results will also serve as the basis for
complying with GASB 75 for the fiscal year ending June 30, 2020.
The Nyhart Company is an employee owned actuarial, benefits and compensation consulting
firm specializing in group health and retiree health and qualified pension plan valuations.
We have set forth the results of our study in this report.
We have enjoyed working on this assignment and are available to answer any questions.
Sincerely,
NYHART
Luis Murillo, ASA, MAAA
Consulting Actuary
LM:rl
Enclosure
Otay Water District
OPEB Actuarial Valuation & Study
Retiree Health Program
As of June 30, 2019
K:\Retmed\Otay Water District\FYE6302020\Actuarial Valuation Report Otay WD Draft 6302019.docx
Otay Water District
OPEB Actuarial Valuation & Study
Retiree Health Program
As of June 30, 2019
Table of Contents
Page
Section I. Executive Summary...................................................................................................................... 1
Section II. Financial Results ........................................................................................................................... 5
Section III. Projected Cash Flows ................................................................................................................... 9
Section IV. Benefit Plan Provisions ................................................................................................................ 11
Section V. Valuation Data .............................................................................................................................. 14
Section VI. Actuarial Assumptions and Methods ........................................................................................ 15
Section VII. Actuarial Certification .................................................................................................................. 19
Section VIII. Definitions ..................................................................................................................................... 21
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SECTION I. EXECUTIVE SUMMARY
Background
The Otay Water District (the “District”) selected Nyhart to perform an updated actuarial valuation of its retiree
health program. The purpose of the valuation is to measure the District’s liability for OPEB benefits and to
determine an actuarially determined contribution (ADC) for the fiscal periods ending June 30, 2020 and June
30, 2021. The ADC is a target or recommended contribution to a defined benefit OPEB plan for the applicable
period, determined in accordance with parameters set by the District and in conformity with Actuarial
Standards of Practice. The valuation results will also serve as the basis for complying with GASB 75 for the fiscal
year ending June 30, 2020
The District currently provides health coverage to approximately 133 employees who are earning service credits
towards eligibility for health coverage at retirement. In addition, there are 76 retired or disabled retirees
currently receiving health coverage from the District. Data statistics for the current covered population can be
found in Section V of the report.
At retirement, the District provides a contribution for the continuation of medical and dental coverage for
eligible employees. For current employees, eligibility for a District contribution requires retirement from the
District on or after age 55 with at least 20 (15 for un-represented employees hired prior to January 1, 2013)
years of District service. The District’s contribution is equal to 100% of the retiree premium and 88% of the
dependent premium. Employees may retire as early as age 50 if retiring under disability or under hardship with
a reduced District contribution. Some current retirees retired under different provisions and may also have
District paid life insurance. Section IV of the report details the plan provisions and current premium costs that
were included in the valuation.
The District participates in the Special District Risk Management Authority (SDRMA) health benefit pool. Under
SDRMA, the premium rates charged to the District are based on the experience of all participating employers
and the premiums are the same for both active and non-Medicare eligible retired employees covered under
the same plan. An implied rate subsidy can exist when the non-Medicare rates for retirees are the same as for
active employees. Since non-Medicare eligible retirees are typically much older than active employees, their
actual medical costs are typically higher than for active employees. Both GASB accounting standards and
actuarial standards of practices (ASOPs) require that implied rate subsidies be considered in the valuation of
medical costs. This valuation includes an estimate of the liability for the implicit rate subsidy.
Results of the Retiree Health Valuation
We have determined the amount of the present value of the projected District contributions (actuarial liability)
for OPEB benefits, as of June 30, 2019, the valuation date, is $34,203,778. This amount includes $30,939,078 for
the District’s direct (explicit) contribution for retiree health benefits and $3,264,700 for the implicit rate subsidy
and is based on a discount rate of 7.0%. The amount represents the present value of all District contributions
for retiree health benefits projected to be paid by the District for current and future retirees. If the District had
this amount in a fund earning interest at the rate of 7.0% per year, and all other actuarial assumptions were
met, the fund would have enough to pay the District’s required contribution for retiree health benefits. This
includes benefits for the current retirees as well as current active employees expected to retire in the future.
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The actuarial liability is apportioned into past service, current service and future service components; the past
service component (actuarial accrued liability now referred to as Total OPEB Liability), the current service
component (normal cost or current year accrual) and the future service component (not yet accrued liability).
The table below presents the liability components (separately for the District’s explicit contribution towards
retiree health benefits and the implicit contribution due to the rate subsidy) as of June 30, 2019, the valuation
date.
Explicit Liability Implicit Liability Total Liability
1. Actuarial Liability $30,939,078 $3,264,700 $34,203,778
2. Total (Accrued) OPEB Liability $24,696,154 $2,481,177 $27,177,331
3. Normal Cost/Service Cost $ 654,537 $ 81,162 $ 735,699
4. Present Value of Future Normal Costs (1. – 2. – 3.) $ 5,588,387 $ 702,361 $ 6,290,748
Note: The above results do not include employees not yet hired as of the valuation date.
Changes from Prior Valuation
The valuation reflects updated census, plan and premium information. In addition, there were several
assumption and method changes including updates to the healthcare costs and trends, and an an update to
the mortality table to reflect recent experience. A reconciliation of the approximate change in the liabilities from
the prior valuation is provided below:
Actuarial
Liability
Total (Accrued)
OPEB Liability
June 30, 2017 Valuation @7.0% $33.7M $26.4M
Increase due to passage of time (additional accruals plus interest less benefit
payments)
2.5M
3.2M
Increase due to liability for new entrants 0.8M 0.0M
Net experience gain and actuarial differences ( 2.3M) ( 2.1M)
Net decrease due to updated assumptions and methods ( 0.5M) ( 0.3M)
June 30, 2019 Valuation @7.0% $34.2M $27.2M
$27,177,331
$735,699
$6,290,748 June 30, 2019
Total (Accrued) OPEB Liability
Service Cost
Future Service Accruals
Actuarial Liability is $34,203,778
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Plan Assets
The District pre-funds the OPEB benefits through the California Employers’ Retiree Benefit Trust (CERBT). The
market value of assets as of June 30, 2019 is $27,197,350. For funding purposes, the District has selected an
asset smoothing method to determine the actuarial value of assets. The smoothing method recognized any
asset gains or losses over 5 years recognizing 20% per year. The actuarial value of assets at June 30, 2019 is
$27,189,779. The table below compares the market value rate of return and the actuarial value rate of return
to the assumed rate of return over past years:
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Market Value Rate of Return 11.2% 18.1% -0.1% 1.3% 10.5% 7.8% 6.3%
Actuarial Value Rate of Return 7.7% 9.8% 7.4% 7.3% 7.1% 6.8% 5.7%
Expected Rate of Return 7.25% 7.25% 7.25% 7.25% 7.25% 7.00% 7.00%
Note: Amounts prior to fiscal year 2013-14 are from prior actuary’s report.
The Net (unfunded) OPEB Liability/(Asset) at June 30, 2019 is ($12,448). The Plan’s funded ratio (actuarial value
of assets over Total OPEB Liability) is 100%.
Funding
The District’s funding policy is to pre-fund the actuarially determined contribution (ADC) (previously referred to
as an annual required contribution) through the CERBT under investment strategy 1. The District’s practice is
to fund the ADC into the CERBT in addition to making direct payments for benefits for the retirees without
seeking reimbursement from the CERBT. Based on this practice, the OPEB plan is expected to reach full funding
by the 2020-21 fiscal year. Section II – I provides a projection of the District contributions and the plan’s funded
status.
Actuarially Determined Contribution (ADC)
The actuarially determined contribution (ADC) is determined based on the normal cost (current accrual for
benefits being earned) plus an amortization of the net (unfunded accrued) OPEB liability at June 30, 2019 over
20 years (on a level-percentage of pay basis). The ADC is equal to $786,245 (5.97% of payroll) for the fiscal year
ending June 30, 2020 and includes $700,355 for the District’s explicit contribution and $85,890 for the implicit
rate subsidy. The projected ADC for the fiscal year ending June 30, 2021 is $807,867.
Actuarial Basis
The actuarial valuation is based on the assumptions and methods outlined in Section VI of the report. To the
extent that a single or a combination of assumptions is not met, the future liability may fluctuate significantly
from its current measurement. As an example, the healthcare cost increase anticipates that the rate of increase
in medical cost will be at moderate levels and decline over several years. Increases higher than assumed would
bring larger liabilities and expensing requirements. Another key assumption used in the valuation is the
discount (interest) rate which is based on the expected rate of return of plan assets. Sensitivity for a 1% increase
and decrease in the healthcare trend rates and for a 1% increase and decrease in the discount rate is provided
in Section II-H.
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Scheduled to take effect in 2022, the "Cadillac Tax" is a 40% non-deductible excise tax on employer-sponsored
health coverage that provides high-cost benefits. For insured plans, the insurance company is responsible for
payment of the excise tax. For self-funded plans, the employer is responsible for payment of the excise tax. The
valuation includes an estimate of the additional liability for the Cadillac Tax.
The valuation is based on the census, plan and rate information provided by the District. To the extent that the
data provided lacks clarity in interpretation or is missing relevant information, this can result in liabilities
different than those presented in the report. Often missing or unclear information is not identified until future
valuations.
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SECTION II. FINANCIAL RESULTS
A. Valuation Results
The table below presents the employer liabilities associated with the District’s retiree health benefits. The
actuarial liability is the present value of all District contributions projected to be paid under the program.
The total OPEB liability (TOL), previously referred to as the actuarially accrued liability, reflects the amount
attributable to the past service of current employees and retirees. The normal cost reflects the accrual
attributable for the current period and includes interest.
Explicit Implicit Total
1. Actuarial Liability or Present Value of Benefits
Actives $18,701,908 $2,494,313 $21,196,221
Retirees 12,237,170 770,387 13,007,557
Total $30,939,078 $3,264,700 $34,203,778
2. Total OPEB Liability (TOL)
Actives $12,458,984 $1,710,790 $14,169,774
Retirees 12,237,170 $770,387 13,007,557
Total $24,696,154 $2,481,177 $27,177,331
3. Normal Cost $654,537 $81,162 $735,699
No. of Active Employees 133
Average Age 47.6
Average Past Service 10.7
No. of Retired Employees 76
Average Age 69.9
Average Retirement Age 57.7
B. Reconciliation of Market Value of Plan Assets
The reconciliation of Plan Assets for the last two fiscal years is presented below:
Fiscal Year Ending
6/30/2018 6/30/2019
1. Beginning Market Value of Assets $21,722,258 $24,560,448
2. Contribution 1,116,418 1,065,019
3. Fund Earnings (gross) 1,741,675 1,593,174
4. Benefit Payments 0 0
5. Investment Expenses ( 8,406) ( 8,992)
6. Administrative Expenses ( 11,497) ( 12,299)
7. Ending Market Value of Assets $24,560,448 $27,197,350
8. Estimated Return on Assets 7.8% 6.3%
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C. Development of Actuarial Value of Assets
The actuarial value of assets is based on the expected market value appreciation. The actual market
appreciation or depreciation, both realized and unrealized, is phased in over five years as the expected
growth is phased out. The table below presents the development of the actuarial value of assets.
6/30/2016 6/30/2017 6/30/2018 6/30/2019
1 Market value of assets $27,197,350
2 Actual rate of return 1.29% 10.53% 7.78% 6.31%
3 Expected rate of return 7.25% 7.25% 7.00% 7.00%
4 Actual fund earnings $ 227,011 $2,011,263 $ 1,733,269 $1,584,182 5,555,725
5 Expected fund earnings 1,278,200 1,384,011 1,559,230 1,756,077 5,977,516
6 Gain(loss) [(4) - (5)] ($1,051,189) $ 627,252 $ 174,039 ($ 171,895)
7 Percent of gain/(loss) recognized
6/30/2017 80% 60% 40% 20%
8 Recognized gain/(loss)
[(6) x (7)] ($840,950) $376,351 $69,616 ($34,379)
($429,362)
9. Blended value of assets at 6/30/2019 [(1) - (4) + (5) + (8)] $27,189,779
10.Percent increase/(decrease) of (9) over (1) (0.03%)
11.Actuarial value of assets, not more than 120% nor less than 80% of market value $27,189,779
D. Development of Actuarial Value of Assets
The actuarial value of assets is based on the market value of assets including any contribution receivable
or benefits payable. The actuarial value of assets at June 30, 2019 is $27,189,779.
E. Development of Net OPEB Liability (NOL)
The table below presents the development of the net OPEB liability previously referred to as the unfunded
actuarial accrued liability. The net OPEB liability is the excess of the TOL over the actuarial value of plan
assets.
Explicit Implicit Total
1. Total (Accrued) OPEB Liability $24,696,154 $2,481,177 $27,177,331
2. Actuarial Value of Assets (24,696,154) (2,493,625) (27,189,779)
3. Net (Unfunded Accrued) OPEB Liability (NOL) $0 ($12,448) ($12,448)
F. Amortization of NOL
The amortization of the NOL component of the actuarially determined contribution (ADC) is being
amortized over a period of 20 years on a level-percentage of pay basis. Under the level-percentage of pay
method, the amortization payment is scheduled to increase in future years based on wage inflation.
1. NOL $0 ($12,448) ($12,448)
2. Amortization Factor 13.06191 13.06191 13.06191
3. Amortization of NOL $0 ($953) ($953)
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G. Actuarially Determined Contribution (ADC)
The table below presents the development of the actuarially determined contribution (ADC) for the fiscal
year ending June 30, 2020 and for the fiscal years ending June 30, 2021.
Explicit Implicit Total
FY2019/2020
1. Normal Cost $ 700,355 $ 86,843 $ 787,198
2. Amortization of NOL 0 (953) (953)
3. Actuarially Determined Contribution (ADC) $ 700,355 $ 85,890 $ 786,245
4. Estimated Payroll $13,176,602 $13,176,602 $13,176,602
5. ADC as % of Payroll 5.32% 0.65% 5.97%
FY2020/2021*
1. Normal Cost $ 719,615 $ 89,231 $ 808,846
2. Amortization of NOL 0 (979) (979)
3. Actuarially Determined Contribution (ADC) $ 719,615 $ 88,252 $ 807,867
4. Estimated Payroll $13,538,959 $13,538,959 $13,538,959
5. ADC as % of Payroll 5.32% 0.65% 5.97%
* Excludes projected gain from additional contribution if the District does not reimburse direct District contributions
for benefits. See Section I for adjusted ADC.
H. Sensitivity Analysis:
The impact of a 1% decrease and increase in the discount (interest) rate and the impact of a 1% increase
and decrease in future healthcare trend rates on the District’s actuarial liability, TOL, NOL and the ADC is
provided below:
1% Decrease in Discount Rate
Dollar
($) Increase/
(Decrease)
Percentage
(%) Increase/
(Decrease)
- Actuarial Liability $6,944,819 20%
- TOL $4,144,287 15%
- NOL $4,144,287 NA
- ADC $522,052 66%
1% Increase in Discount Rate
- Actuarial Liability ($5,307,259) (16%)
- TOL ($3,365,614) (12%)
- NOL ($3,365,614) NA
- ADC ($454,292) (58%)
1% Increase in Future Healthcare Trend Rates
- Actuarial Liability $6,832,117 20%
- TOL $4,659,486 17%
- NOL $4,659,486 NA
- ADC $584,150 74%
1% Decrease in Future Healthcare Trend Rates
- Actuarial Liability ($5,307,072) (16%)
- TOL ($3,710,101) (14%)
- NOL ($3,710,101) NA
- ADC ($453,056) (58%)
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I. Ten - Year Projection of Net OPEB Liability (NOL) and Actuarially Determined Contribution (ADC)
A ten - year projection of the District’s contributions and funded status is provided below.
Fiscal
Year
ADC
District Contributions BOY Net
(Accrued)
OPEB
Liability
Funded
%
Cash
Payments
Implicit
Subsidy
Trust
Funding
Trust*
Reimb.
Total
District
Contrib.
2019-20 $786,245 $940,476 $170,815 $786,245 $(1,111,291) $786,245 $ 0 100%
2020-21 $807,867 $964,411 $167,592 $807,867 $(1,132,003) $807,867 $ 0 100%
2021-22 $830,083 $1,018,571 $159,265 $830,083 $(1,177,836) $830,083 $ 0 100%
2022-23 $852,910 $1,079,253 $160,314 $852,910 $(1,239,567) $852,910 $ 0 100%
2023-24 $876,365 $1,143,824 $178,193 $876,365 $(1,322,017) $876,365 $ 0 100%
2024-25 $900,465 $1,224,470 $203,379 $900,465 $(1,427,849) $900,465 $ 0 100%
2025-26 $925,228 $1,294,047 $209,237 $925,228 $(1,503,284) $925,228 $ 0 100%
2026-27 $950,672 $1,382,258 $214,391 $950,672 $(1,596,649) $950,672 $ 0 100%
2027-28 $976,815 $1,494,790 $213,674 $976,815 $(1,708,464) $976,815 $ 0 100%
2028-29 $1,003,678 $1,625,939 $195,078 $1,003,678 $(1,821,017) $1,003,678 $ 0 100%
* Once full funding is reached, the projections assume the District makes a contribution to the CERBT equal to the ADC
and reimburses itself for the direct cash payments and implied subsidy for the fiscal year.
The ten-year projections are based on an open group projection that assumes the total aggregate payroll
increases in accordance with the aggregate payroll assumption, new hires are assumed to have the same
normal cost percentage as the current actives and no new hires will retire during the ten-year projection
period. Actual results may vary significantly based on the District’s actual experience in future years. Future
gains from the District payments in excess of the actuarially determined contribution are amortized over
20 years until full funding is reached.
0%
20%
40%
60%
80%
100%
120%
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000
2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Ten Year Projection of Funded Ratio, ADC, Direct (Cash
plus Subsidy) Contributions for Benefits
Actuarially Determined Contribution (ADC)Direct (Cash plus Subsidy) Contributions for Benefits
Funded Status
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SECTION III. PROJECTED CASH FLOWS
The valuation process includes the projection of the expected benefits (including the explicit District
contribution and the implicit rate subsidy) to be paid by the District under its retiree health benefits program.
This expected cash flow takes into account the likelihood of each employee reaching age for eligibility to retire
and receive health benefits. The projection is performed by applying the turnover assumption to each active
employee for the period between the valuation date and the expected retirement date. Once the employees
reach their retirement date, a certain percent are assumed to enter the retiree group each year. Employees
already over the latest assumed retirement age as of the valuation date are assumed to retire immediately.
The per capita cost as of the valuation date is projected to increase at the applicable healthcare trend rates
both before and after the employee's assumed retirement. The projected per capita costs are multiplied by the
number of expected future retirees in a given future year to arrive at the cash flow for that year. Also, a certain
number of retirees will leave the group each year due to expected deaths or reaching a limit age and this group
will cease to be included in the cash flow from that point forward. Because this is a closed-group valuation, the
number of retirees dying each year will eventually exceed the number of new retirees, and the size of the cash
flow will begin to decrease and eventually go to zero.
The expected employer cash flows associated for direct payments for benefit for selected future years are
provided in the following table:
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Projected Employer Total Direct Contributions for Benefits – Representative Years
Fiscal Year Explicit (Cash) Implicit (Subsidy) District Total
2019/20 $ 940,476 $170,815 $ 1,111,291
2020/21 $ 964,411 $167,592 $ 1,132,003
2021/22 $ 1,018,571 $159,265 $ 1,177,836
2022/23 $ 1,079,253 $160,314 $ 1,239,567
2023/24 $ 1,143,824 $178,193 $ 1,322,017
2024/25 $ 1,224,470 $203,379 $ 1,427,849
2025/26 $ 1,294,047 $209,237 $ 1,503,284
2026/27 $ 1,382,258 $214,391 $ 1,596,649
2027/28 $ 1,494,790 $213,674 $ 1,708,464
2028/29 $ 1,625,939 $195,078 $ 1,821,017
2029/30 $ 1,791,717 $230,655 $ 2,022,372
2030/31 $ 1,945,580 $251,915 $ 2,197,495
2031/32 $ 2,098,978 $281,388 $ 2,380,366
2032/33 $ 2,266,640 $335,705 $ 2,602,345
2033/34 $2,437,381 $381,940 $ 2,819,321
2034/35 $2,622,163 $439,440 $ 3,061,603
2035/36 $2,784,444 $470,239 $ 3,254,683
2036/37 $2,920,426 $460,439 $ 3,380,865
2037/38 $3,049,038 $473,236 $ 3,522,274
2038/39 $3,158,009 $413,423 $ 3,571,432
2039/40 $3,277,860 $399,096 $ 3,676,956
2040/41 $3,392,351 $364,372 $ 3,756,723
2041/42 $3,508,020 $347,108 $ 3,855,128
2042/43 $3,588,143 $273,645 $ 3,861,788
2043/44 $3,699,589 $269,756 $ 3,969,345
2044/45 $3,768,558 $195,248 $ 3,963,806
2045/46 $3,858,728 $203,812 $ 4,062,540
2050/51 $4,179,638 $107,022 $ 4,286,660
2055/56 $4,285,662 $ 72,282 $ 4,357,944
2060/61 $4,078,587 $ 13,339 $ 4,091,926
2065/66 $3,578,821 $ 0 $ 3,578,821
2070/71 $2,814,526 $ 0 $ 2,814,526
2075/76 $1,941,584 $ 0 $ 1,941,584
2080/81 $1,164,661 $ 0 $ 1,164,661
2085/86 $ 609,720 $ 0 $ 609,720
2090/91 $ 270,073 $ 0 $ 270,073
2095/96 $ 87,375 $ 0 $ 87,375
2100/01 $ 15,935 $ 0 $ 15,935
2105/06 $ 644 $ 0 $ 644
2110/11 $ 0 $ 0 $ 0
2115/16 $ 0 $ 0 $ 0
All Years $185,418,636 $9,095,318 $194,513,954
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SECTION IV. BENEFIT PLAN PROV ISIONS
This study analyzes the post-employment benefit plan provided by the District. The District provides
continuation of health, and in some cases, life insurance benefits to full-time eligible employees at retirement.
Eligibility for continuation of coverage requires retirement directly from both the District and CalPERS. Eligibility
is based on the employee meeting certain age and years of District service requirements which varies by
employee group. In addition, the District’s contribution varies depending on an employee’s date of retirement
and date of hire as follows:
Un-Represented Employees
Employees Retiring After July 15, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 20 years (15 years if hired prior
to 1/1/2013) years of continuous full-time District. The District’s contribution towards medical and dental
benefits is 100% of the retiree premium and 88% of the dependent premium.
Employees retiring under disability or hardship may retire early and receive a reduction to the District
contribution based on the table below. Disability retirement requires at least 10 years of District service and
Hardship retirement requires at least 20 years (15 years if hired prior to 1/1/2013) of District service.
Age Percentage
50 70%
51 76%
52 82%
53 88%
54 94%
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 88% of the applicable premium. Coverage continues for spouse’s lifetime and to
dependent age 19. Upon death of an eligible active employee, spouse may continue coverage on the same
basis if they were eligible to retire at the time of their death.
Employees Retiring On or Prior to July 15, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 5 years of District service if
hired prior to 1/1/1981 or age plus District service greater than or equal to age 70 if hired on or after 1/1/1981.
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 15 years of continuous full-
time District service if hired prior to 1/1/2013 or 20 years if hired on or after 1/1/2013. The District’s contribution
towards medical and dental benefits is 100% of the retiree premium and 88% (100% if retiring prior to
12/29/2003) of the dependent premium. The District also provides $3,000 of life insurance to age 65 and $1,950
from age 65 to age 70 (plus $1,000/$650 of spouse life insurance if hired prior to 1/1/1981 and retiring prior to
12/29/2003).
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 100% (88% if retired on or after 12/29/2003) of the applicable premium to spouse
Medicare eligibility age or age 19 for dependent.
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Represented Employees
Employees Retiring After August 10, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 20 years of District service. The
District’s contribution towards medical and dental benefits is 100% of the retiree premium and 88% (100% if
retiring prior to 12/29/2003) of the dependent premium.
Employees retiring under disability or hardship retire may retire early and receive a reduction to the District
contribution based on the table below Disability retirement requires at least 10 years of District service and
Hardship retirement requires at least 20 years of District service.
Age Percentage
50 70%
51 76%
52 82%
53 88%
54 94%
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 88% of the applicable premium. Coverage continues for spouse’s lifetime. Upon death of
an eligible active employee, spouse (and dependent to age 19) may continue coverage on the same basis.
Employees Retiring On or Prior to August 10, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 5 years of District service if
hired prior to 1/1/1981 or age plus District service greater than or equal to age 70 if hired on or after 1/1/1981.
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 15 years of District service if
hired prior to 1/1/2013 or 20 years if hired on or after 1/1/2013. The District’s contribution towards medical and
dental benefits is 100% of the retiree premium and 88% (100% if retiring prior to 12/29/2003) of the dependent
premium. The District also provides $3,000 of life insurance to age 65 and $1,950 from age 65 to age 70 (plus
$1,000/$650 of spouse life insurance if hired prior to 1/1/1981 and retiring prior to 12/29/2003).
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 100% (88% if retired on or after 12/29/2003) of the applicable premium to spouse
Medicare eligibility age or age 19 for dependent.
Directors
Directors elected prior to 1/1/1995 were eligible to continue retiree health benefits and receive a District
contribution for Medical and Dental if retiring on or after age 60 with at least 12 years of District service.
Directors elected on or after 1/1/1995 are not eligible for retiree health benefits.
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Premium Rates
The District currently offers the following health plans to eligible retirees. The premiums billed for retiree
medical coverage under age 65 (Medicare eligibility age) are the same as those for active medical coverage.
Thus, the District is providing a “rate subsidy” to the retirees based on this blended rate. Actuarial Standard of
Practice (ASOP) 6 and GASB require that when an employer provides benefits to both active employees and
retirees through the same plan, the benefits to retirees should be segregated and measured independently.
This requires valuing any “rate subsidy” as an additional financial obligation to the District. All premiums are
monthly and are effective for the calendar year.
2019
Gold
PPO
EPO
HMO 15
Kaiser
HMO
Dental
Plan
Retiree Only $ 765.00 $ 851.70 $ 826.20 $ 694.62 $ 55.34
Retiree Plus One $1,524.90 $1,697.28 $1,651.38 $1,369.86 $ 88.37
Retiree Plus Family $1,980.84 $2,205.24 $2,143.02 $1,775.82 $130.84
Retiree Only With Medicare $ 539.58 NA NA $ 248.88 $ 55.34
Retiree and Spouse With Medicare $1,079.16 NA NA $ 477.36 $ 88.37
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SECTION V. VALUATION DATA
The valuation was based on the census furnished to us by the District. A reconciliation and summary data
statistics as of the Valuation Date are provided in the following tables:
Data Reconciliation Actives Retirees Disableds Survivors Total
June 30, 2017 131 77 2 0 210
Terminated/Duplicates ( 13) 0 0 0 ( 13)
Retired ( 4) 4 0 0 0
Deaths 0 ( 7) 0 0 ( 7)
Survivor Benefits 0 0 0 0 0
New Hires 19 0 0 0 19
June 30, 2019 133 74 2 0 209
The following tables display the age distribution for retirees and the age/service distribution for active
employees.
Age Distribution of Eligible Retired Participants & Beneficiaries
Age Pre-65 Post- 65 Total
<50 0 0 0
50-54 0 0 0
55-59 7 0 7
60-64 14 0 14
65-69 0 19 19
70-74 0 19 19
75-79 0 10 10
80+ 0 7 7
Total: 21 55 76
Average Age: 60.3 72.9 69.4
Average Retirement Age: 55.7 58.5 57.7
Age/Service Distribution of All Active Benefit Eligible Employees
Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 Total Un-repr. Repr.
20-24 0 0 0 0
25-29 8 0 8 1 7
30-34 2 2 1 5 1 4
35-39 5 2 2 1 10 1 9
40-44 8 8 8 1 25 6 19
45-49 3 6 15 7 2 1 0 34 10 24
50-54 3 2 6 4 4 0 1 20 5 15
55-59 1 3 6 6 1 1 1 19 7 12
60-64 0 3 5 2 0 0 0 10 5 5
65-69 0 0 1 1 0 0 0 2 0 2
70+ 0 0 0 0 0 0 0 0 0 0
Total: 30 26 44 22 7 2 2 133 36 97
Average Age: 47.8 50.3 46.6
Average Service: 10.9 12.8 10.0
Estimated Payroll: $13,176,601 $4,908,902 $8,267,699
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SECTION VI. ACTUARIA L ASSUMPTIONS AND ME THODS
The liabilities set forth in this report are based on the actuarial assumptions described in this section.
Fiscal Year: July 1st to June 30th
Valuation Date: June 30, 2019
Funding Periods Covered: FY2019/20 and FY2020/21
Funding Policy: The actuarially determined contribution (ADC) assuming the District’s funding
strategy is to fund the normal cost (current accrual for benefits being earned)
plus an amortization of the net (unfunded accrued) OPEB liability at June 30,
2019 over 20 years. The District will fund the ADC plus direct contributions for
retiree benefits until the net OPEB liability reaches zero (0).
Expected Rate of Return: 7.0% per annum. This discount rate assumes the District continues to fully fund
for its retiree health benefits through the California Employers’ Retiree Benefit
Trust (CERBT) under its investment allocation strategy 1. The rate reflects the
CERBT published median interest rate for strategy 1 of 7.28% with an additional
margin for adverse deviation.
Discount Rate: 7.0% per annum.
Sensitivity analysis showing a 1% increase or decrease in the discount rate is
also provided.
Inflation: 2.75% per annum
Payroll Increases: 2.75% per annum, in aggregate
[The prior valuation used 3.00%]
Merit Increases: Merit increases from the most recent CalPERS pension plan experiences study.
The benefits are not payroll related but each individual’s projected cost is
allocated over their lifetime as a level-percentage of pay.
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Pre-retirement Turnover: According to the termination rates under the CalPERS pension plan. Sample
rates for Miscellaneous employees are as follows:
Entry Age
Service 20 30 40 50
0 17.42% 16.06% 14.68% 13.32%
5 8.68% 7.11% 5.54% 0.97%
10 6.68% 5.07% 0.71% 0.38%
15 5.03% 3.47% 0.23% 0.04%
20 3.70% 0.21% 0.05% 0.01%
25 2.29% 0.05% 0.01% 0.01%
30 0.05% 0.01% 0.01% 0.01%
Pre-retirement Mortality: According to the pre-retirement mortality rates under the CalPERS pension plan
updated to reflect the most recent experience study with mortality
improvements using Mortality Improvement Scale MP 2018.
[The prior valuation used Mortality Improvement Scale MP 2016]
Post-retirement Mortality: According to the pre-retirement mortality rates under the CalPERS pension plan
updated to reflect the most recent experience study with mortality
improvements using Mortality Improvement Scale MP 2018.
[The prior valuation used Mortality Improvement Scale MP 2016]
Retirement Age: According to the retirement rates under the most recent CalPERS pension plan
experience study. According to the following retirement tables:
Miscellaneous Tier 1: 2.7% @55
Miscellaneous Tier 2: 2.0% @62
Disability Retirement: According to the disability rates for Miscellaneous employees under the
CalPERS pension plan updated to reflect the most recent experience study.
Hardship Retirement: Loss will be incorporated upon event
Participation Rates: 100% of eligible active employees are assumed to elect medical coverage and
100% of eligible active employees are assumed to elect dental coverage at
retirement. Actual plan coverage is used for current retirees.
[The prior valuation used 80% dental election.]
Plan Participation: Future retirees are assumed to elect plan coverage based on current plan
elections to Medicare eligibility then PPO coverage. PPO coverage is assumed
for all future retirees currently waiving coverage.
Spouse Coverage: The current coverage status is used for both current and future retirees. 100%
are assumed to elect coverage for their spouse, if currently covering their
spouse (80% if waived coverage). Male spouses are assumed to be 2 years older
than female spouses. Actual spouse ages are used for current retirees.
[The prior valuation used an age difference of 3 years between males and females.]
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Dependent Coverage: 10% of future retirees with family coverage are assumed to continue dependent
coverage to the retiree’s age 65.
Medicare Eligibility: 100% of future retirees are assumed to be eligible for and elect Medicare
coverages.
Average Claim Costs: The valuation was based on the premiums rates furnished by the District. These
costs include medical and prescription drug for both active and retired
employees. A claim cost curve was developed using an assumption for aging
based on an assumed population for the Special District Risk Management
Authority (SDRMA) pool using Tower Watson HealthMaps. This results in an
expected claim cost for every 5 year age bracket. Sample annual medical/Rx
costs are provided in the table below.
Age EPO Kaiser PPO HMO
50-54 $10,455 $8,527 $ 9,391 $10,142
55-59 $13,011 $10,611 $11,686 $12,621
60-64 $16,833 $13,728 $15,119 $16,329
Medical Trend Rates: Medical costs are adjusted in future years by the following trends:
Year
2020 Actual
2021 6.5%
2022 6.0%
2023 5.5%
2024+ 5.0%
Dental Trend Rates:
Year Trend
2020+ 4.0%
Life Insurance: Life insurance costs are assumed to remain constant in future years.
Cadillac Tax: 1.25% load on the non-Medicare liabilities
Actuarial Cost Method: The actuarial cost method used to determine the allocation of the retiree health
actuarial liability to the past (accrued), current and future periods is the Entry
Age Normal (EAN) cost method. The EAN cost method is a projected benefit cost
method which means the “cost” is based on the projected benefit expected to
be paid at retirement.
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The EAN normal cost equals the level annual amount of contribution from the
employee’s date of hire (entry date) to their retirement date that is sufficient to
fund the projected benefit. While both are acceptable methods, typically for
plans unrelated to pay the normal cost is calculated to remain level in dollars
and for pay-related plans the normal cost is calculated to remain level as a
percentage of pay. The District has elected to determine the EAN normal cost as
a level percentage of pay. The EAN actuarial accrued liability equals the present
value of all future benefits for retired and current employees and their
beneficiaries less the portion expected to be funded by future normal costs.
All eligible employees and participating retirees and spouses as of the
measurement date listed in the data provided by the District were included in
the valuation in accordance with the provisions of the Plan.
Future New Entrants: Closed group valuation so none assumed.
Actuarial Value of Assets: Any assets of the plan will be valued using an asset smoothing method
spreading asset gains and losses over 5 years.
Amortization of NOL: For funding purposes, the unfunded actuarial accrued or net OPEB liability
(NOL) is being amortized over 20 years on a level percentage of pay basis using
a fresh start method. Future experience gains and losses may be amortized over
a rolling (open) 15-year period and plan and assumption changes will be
amortized over fixed (closed) 20 year periods.
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SECTION VII. ACTUARIAL CERTIFICAT ION
This report summarizes the actuarial valuation for the Otay Water District (the “District”) as of June 30, 2019.
The purpose of the valuation is to measure the District’s liability for OPEB benefits and to determine an
actuarially determined contribution (ADC) for the fiscal periods ending June 30, 2020 and June 30, 2021. The
ADC is a target or recommended contribution to a defined benefit OPEB plan for the applicable period,
determined in accordance with the parameters and in conformity with Actuarial Standards of Practice. The
valuation results will also serve as the basis for complying with GASB 75 applicable for the fiscal year ending
June 30, 2020.
To the best of our knowledge, the report presents a fair position of the funded status of the plan. The valuation
is based upon our understanding of the plan provisions as summarized within the report. The information
presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this
report and participant information and asset information furnished to us by the Plan Sponsor. We have
reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior
information provided but have not audited the information at the source, and therefore do not accept
responsibility for the accuracy or the completeness of the data on which the information is based. When
relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the
purpose of the measurement. We are not aware of any significant issues with and have relied on the data
provided.
The discount rate and other economic assumptions have been selected by the Plan Sponsor. Demographic
assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the
actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated
experience of the Plan. All calculations have been made in accordance with generally accepted actuarial
principles and practice.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to such factors as the following:
plan experience differing from that anticipated by the economic or demographic assumptions;
changes in economic or demographic assumptions;
increases or decreases expected as part of the natural operation of the methodology used for these
measurements (such as the end of an amortization period); and
changes in plan provisions or applicable law.
While some sensitivity analysis was provided in the report, we did not perform an analysis of the potential range
of future measurements due to the limited scope of our engagement.
To our knowledge, there have been no significant events prior to the current year's measurement date or as of
the date of this report that could materially affect the results contained herein.
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Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or
appear to impair the objectivity of this report. Our professional work is in full compliance with the American
Academy of Actuaries “Code of Professional Conduct” Precept 7 regarding conflict of interest. The undersigned
meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion
contained herein.
Should you have any questions please do not hesitate to contact me.
Certified by:
Luis Murillo, ASA, MAAA Randy Gomez, FSA, MAAA, Date: October 6, 2019
Consulting Actuary Consulting Actuary
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SECTION VIII. DEFINITIONS
The definitions of the terms used in the actuarial valuations are noted below.
Actuarial Assumptions – Assumptions as to the occurrence of future events affecting health care costs, such
as: mortality, turnover, disablement and retirement; changes in compensation and Government provided
health care benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to
determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost
Methods; and other relevant items.
Actuarial Cost Method – A procedure for determining the Actuarial Present Value of Future Benefits and
expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the
form of a Service Cost (or normal cost) and a Total (Accrued) OPEB Liability.
Actuarially Determined Contribution - A target or recommended contribution to a defined benefit OPEB plan
for the reporting period, determined in accordance with the parameters and in conformity with Actuarial
Standards of Practice.
Annual OPEB Cost – An accrual-basis measure of the periodic cost of an employer’s participation in a defined
benefit OPEB plan.
Actuarial Present Value (also referred to as Actuarial Liability) – The value of an amount or series of
amounts payable or receivable at various times, determined as of a given date by the application of a
particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of
amounts is:
a. adjusted for the probable financial effect of certain intervening events (such as changes in
coverage, marital status, etc.);
b. multiplied by the probability of the occurrence of an event (such as survival, death, disability,
termination of employment, etc.) on which the payment is conditioned; and
c. discounted according to an assumed rate (or rates) of return to reflect the time value of money.
Deferred Outflow / (Inflow) of Resources – represents the following items that have not been recognized in
the OPEB Expense:
a. Differences between expected and actual experience of the OPEB plan
b. Changes in assumptions
c. Differences between projected and actual earnings in OPEB plan investments (for funded plans
only)
Explicit Subsidy – The difference between (a) the amounts required to be contributed by the retirees based on
the premium rates and (b) actual cash contribution made by the employer.
Funded Ratio – The actuarial value of assets expressed as a percentage of the actuarial accrued liability.
Healthcare Cost Trend Rate – The rate of change in the per capita health claims costs over time as a result of
factors such as medical inflation, utilization of healthcare services, plan design, and technological
developments.
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Implicit Rate Subsidy – In an experience-rated healthcare plan that includes both active employees and
retirees with blended premium rates for all plan members, the difference between (a) the age-adjusted
premiums approximating claim costs for retirees in the group (which, because of the effect of age on claim
costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts
required to be contributed by the retirees.
Normal Cost – The portion of the Actuarial Present Value of plan benefits and expenses which is allocated to
a valuation year by the Actuarial Cost Method.
OPEB – Benefits (such as death benefits, life insurance, disability, and long-term care) that are paid in the period
after employment and that are provided separately from a pension plan, as well as healthcare benefits paid in
the period after employment, regardless of the manner in which they are provided. OPEB does not include
termination benefits or termination payments for sick leave.
OPEB Expense – Changes in the Net OPEB Liability in the current reporting period, which includes Service Cost,
interest cost, changes of benefit terms, expected earnings on OPEB Plan investments, reduction of active
employees’ contributions, OPEB plan administrative expenses, and current period recognition of Deferred
Outflows / (Inflows) of Resources.
Pay-as-you-go – A method of financing a benefit plan under which the contributions to the plan are generally
made at about the same time and in about the same amount as benefit payments and expenses becoming
due.
Per Capita Costs – The current cost of providing postretirement health care benefits for one year at each age
from the youngest age to the oldest age at which plan participants are expected to receive benefits under the
plan.
Present Value of Future Benefits – Total projected benefits include all benefits estimated to be payable to
plan members (retirees and beneficiaries, terminated employees entitled to benefits but not yet receiving them,
and current active members) as a result of their service through the valuation date and their expected future
service. The actuarial present value of total projected benefits as of the valuation date is the present value of
the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value
(present value) of money and the probabilities of payment. Expressed another way, it is the amount that would
have to be invested on the valuation date so that the amount invested plus investment earnings will provide
sufficient assets to pay total projected benefits when due.
Real Rate of Return – the rate of return on an investment after adjustment to eliminate inflation.
Select and Ultimate Rates – Actuarial assumptions that contemplate different rates for successive years.
Instead of a single assumed rate with respect to, for example, the healthcare trend rate assumption, the actuary
may apply different rates for the early years of a projection and a single rate for all subsequent years. For
example, if an actuary applies an assumed healthcare trend rate of 6.5% for year 20W0, 6.0% for 20W1, 5.5%
for 20W2, then 5.0% for 20W3 and thereafter, then 6.5%, 6% and 5.5% are select rates, and 5% is the ultimate
rate.
Service Cost (also referred to as Normal Cost) – The portion of the Actuarial Present Value of projected
benefit payments that are attributed to a valuation year by the Actuarial Cost Method.
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Substantive Plan – The terms of an OPEB plan as understood by the employer(s) and plan participant.
Total OPEB Liability (also referred to as Actuarial Accrued Liability) – That portion, as determined by a
particular Actuarial Cost Method, of the Actuarial Present Value of Future Benefits which is attributed to past
periods of employee service (or not provided for by the future Service Costs).
October 8, 2019
PRIVATE
Mr. Eid Fakhouri
Finance Manager
Otay Water District
2554 Sweetwater Springs Blvd
Spring Valley, CA 91978-2096
Re: OPEB Actuarial Valuation & Contribution Study
Dear Mr. Fakhouri:
We are presenting our report of the June 30, 2019 OPEB Contribution Study conducted on
behalf of Otay Water District (the “District”) for its retiree health program. The purpose of the
study is to measure the funding adequacy of the member OPEB contributions established in
2011 to fund OPEB benefit enhancements.
The Nyhart Company is an employee owned actuarial, benefits and compensation consulting
firm specializing in group health and retiree health and qualified pension plan valuations.
We have set forth the results of our study in this report.
We have enjoyed working on this assignment and are available to answer any questions.
Sincerely,
NYHART
Luis Murillo, ASA, MAAA
Consulting Actuary
LM:rl
Enclosure
Otay Water District
OPEB Contribution Study of the
Retiree Health Program
As of June 30, 2019
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Otay Water District
OPEB Contribution Study
Retiree Health Program
As of June 30, 2019
Table of Contents
Page
Section I. Executive Summary ..................................................................................................................... 1
Section II. OPEB Contribution Study ............................................................................................................ 3
Section III. Benefit Plan Provisions ................................................................................................................ 5
Section IV. Valuation Data .............................................................................................................................. 8
Section V. Actuarial Assumptions and Methods ........................................................................................ 9
Section VI. Actuarial Certification .................................................................................................................. 13
Section VII. Definitions ..................................................................................................................................... 14
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SECTION I. EXECUTIVE SUMMARY
This study analyzes the adequacy of the OPEB member contributions established in conjunction with
enhancements to the OPEB benefits ( previously the “Prior Plan”) provided to employees hired on or after July
1, 1993. These enhancements are reflected in the District’s current plan outlined in Section III. Along with these
enhancements, member OPEB contributions were established as additional member paid contributions for
their CalPERS pension benefits.
Background
Along with the enhanced benefit, member OPEB contributions were established as additional member paid
contributions for their CalPERS pension benefits. The member OPEB contributions are outlined below:
Unrepresented Represented
CalPERS Member Contributions Classic New Classic New
Required CalPERS Member Contribution 8.00% 7.00% 8.00% 7.00%
Additional CalPERS Member Contribution 0.00% 1.00% 0.75% 1.75%
Total CalPERS Member Contribution 8.00% 8.00% 8.75% 8.75%
Prior CalPERS Member Contribution 1.00% 1.00% 1.00% 1.00%
Member Contribution for OPEB Funding 7.00% 7.00% 7.75% 7.75%
Below is a description of the Prior Plan before the enhancements were established:
Effective July 1, 2011, employees hired on or after July 1, 1993 became eligible for the current plan described
in Section V of the report. Prior to this, these employees were limited to medical coverage only to Medicare
eligibility subject to the following terms:
Eligibility: Retirement from the District on or after age 55 with at least 15 years of service or disability
retirement on or after age 50 with at least 10 years of service. No coverage for hardship.
District Contribution: 50% of the retiree only premium.
Spouse and Dependent Coverage: Retiree could cover eligible spouse and dependents on a self-pay
basis.
Death Benefit: Coverage ceases upon death of the retiree.
Benefits: Medical (Gold PPO) Only; no dental, vision or life insurance.
Actuarial Basis
In order to estimate whether the additional OPEB member contributions are sufficient to cover the enhanced
benefits, an actuarially determined contribution is calculated and compared to the contractual member
contributions. For purposes of this study, the actuarially determined contribution (ADC) is equal to the normal
cost increase due to the enhanced benefits plus an amortization of the unfunded enhanced benefit. The
projected normal costs are based on the normal costs expected for new entrants into the plan based on the
current population. The unfunded enhanced benefit is defined as: the difference between the accumulated
member contributions with earnings and the increase in the total OPEB Liability due to the enhanced benefits.
For purposes of this study, the accumulated member contributions are treated as the actuarial value of assets
and the increased liability due to the enhanced benefit is considered the Total OPEB Liability. The detailed
results are shown on Section II-C and we provide ten-year projections of funded status, ADC, and OPEB member
contributions. The accumulated OPEB member contributions are provided in Section II-A of the report.
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The results of the study are based on the June 30, 2019 actuarial valuation and on the assumptions and
methods outlined in Section V of the report. To the extent that a single or a combination of assumptions is not
met, the future liability may fluctuate significantly from its current measurement. As an example, the healthcare
cost increase anticipates that the rate of increase in medical cost will be at moderate levels and decline over
several years. Increases higher than assumed would bring larger liabilities and expensing requirements.
Another key assumption used in the valuation is the discount (interest) rate which is based on the expected
rate of return of plan assets. Actual results will vary from projections shown in this report, perhaps significantly,
due to changes in the assumptions, plan provisions, participant demographics, interest rate movement, actual
asset performance, and other actual experience of the plan. Depending on the use of this information,
additional cost projections may be necessary to quantify the sensitivity of results. While a diligent effort has
been made to produce reasonable projections, by their very nature, projections are speculative. Plan sponsors
are cautioned against placing too much reliance on any particular scenario.
Actuarially Determined Contribution
Based on the analysis, the OPEB member contributions are greater than the ADC for the next ten years. As of
June 30, 2019, the ADC as a percent of payroll is 6.82% while the OPEB member contribution is 7.0% for
unrepresented employees and 7.75% for represented employees. Based on the projections, the ADC as a
percent of payroll decreases over the next ten years while the OPEB member contribution remains constant as
a percent of payroll. The enhanced benefit’s funded ratio (actuarial value of assets over Total OPEB Liability) is
77% at June 30, 2019 and reaches 101% by 2028 (assuming the OPEB member contribution remains the same
over the next several years).
This is not to be confused with the funding of the OPEB as a whole, which is 100% funded. This evaluation
looks only at the enhancement to the plan as if it were separate.
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SECTION II. OPEB CONTRIBUTION STUDY
Below are the results of the contribution study.
A. Accumulated OPEB Member Contributions (Assets for OPEB Funding)
The accumulated assets associated with the Member OPEB Contributions are estimated based on applying
the estimated annual rate of return to the beginning year accumulated amount for a full year and for the
exposure period for the Annual Member OPEB Contributions. For projection purposes in Section C, the
valuation assumed rate of return on CERBT assets is applied. For fiscal years after 2014-15, the exposure
assumes member OPEB contributions are made on average in the middle of the year.
Fiscal
Year
Estimated
Annual
CERBT
Return
Average
Contribution
Exposure
(Years)
Unrepresented Employees Represented Employees
Total
Accumulated
Member OPEB
Contribution
Annual
Member
OPEB
Contribution
Accumulated
Member
OPEB
Contribution
Annual
Member
OPEB
Contribution
Accumulated
Member
OPEB
Contribution
2011-12 0.38% 0.37 $138,652 $ 138,847 $259,304 $ 259,669 $ 398,516
2012-13 11.20% 0.33 $320,012 $ 485,819 $557,397 $ 866,021 $1,351,840
2013-14 18.30% 0.30 $309,934 $ 900,684 $590,760 $1,645,810 $2,546,494
2014-15 ( 0.24%) 0.39 $304,850 $1,203,087 $603,073 $2,244,639 $3,447,726
2015-16 1.29% 0.50 $299,510 $1,521,513 $665,992 $2,946,318 $4,467,831
2016-17 10.53% 0.50 $290,396 $1,987,478 $653,638 $3,944,743 $5,932,221
2017-18 7.78% 0.50 $297,454 $2,451,129 $669,526 $4,947,214 $7,398,343
2018-19 6.31% 0.50 $338,115 $2,954,577 $594,166 $5,872,295 $8,826,872
Note: Amounts prior to fiscal year 2015-16 are from the prior actuary’s report.
B. Funded Status of Current Plan Vs. Prior Plan
The table below presents the June 30, 2019 liabilities and related funding measures of the Current Plan vs.
the Prior Plan (employee hired on or after July 1, 1993 received the prior plan benefits).
Current Plan Prior Plan Difference
1. Actuarial Liability or Present Value of Benefits
Actives $21,196,221 $5,397,290 $15,798,931
Retirees 13,007,557 11,728,706 1,278,851
Total $34,203,778 $17,125,996 $17,077,782
2. Total (Accrued) OPEB Liability (TOL)
Actives $14,169,774 $3,953,800 $10,215,974
Retirees 13,007,557 11,728,706 1,278,851
Total $27,177,331 $15,682,506 $11,494,825
3. Actuarial Value of Assets* ( 8,826,872)
4. Net (Unfunded) OPEB Liability (NOL) $ 2,667,953
5. Funded % 77%
6. 2019-20 Normal Cost $ 735,699 $ 163,290 $ 572,409
7. Normal Cost as % of Payroll 4.34%
8. Amortization of NOL $ 204,152
* Note: assets are based on the accumulated Member OPEB contributions.
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C. Ten-Year Projection of OPEB Contributions and Plan Funded Status of the Enhanced Benefit
The tables below present a ten-year projection of the District and Member contributions along with the Net
(Unfunded) OPEB Liability (NOL) and plan funding percentage (%) for the enhanced benefit.
The ten-year projections are based on an open group projection that assumes the total aggregate payroll
increases in accordance with the aggregate payroll assumption, new hires are assumed to have a similar
normal cost percentage as current actives. Actual results may vary significantly based on the District’s actual
experience in future years. Future gains from the District payments in excess of the actuarially determined
contribution are amortized over the remaining amortization period. The amortization period is 20 years for
the fiscal year ending June 30, 2020.
FYE
1 – Increased
liability due to
enhancement
2 - Accumulated
member contributions
3 – NOL
(1 - 2)
4 - Funded
Status
(2 / 1)
4 - NOL Payment
(3 amortized over
remaining period)
2020 $11,494,824 $8,826,872 $2,667,952 77% $204,152
2021 $12,790,518 $10,386,393 $2,404,125 81% $190,264
2022 $14,173,788 $12,075,512 $2,098,276 85% $172,199
2023 $15,713,360 $13,896,354 $1,817,006 88% $155,088
2024 $17,329,939 $15,865,957 $1,463,982 92% $130,395
2025 $19,114,436 $17,980,680 $1,133,756 94% $105,776
2026 $21,021,749 $20,236,013 $ 785,736 96% $ 77,120
2027 $22,954,826 $22,652,687 $ 302,139 99% $ 31,353
2028 $25,083,105 $25,213,006 ($129,901) 101% $ 0
2029 $27,238,813 $27,888,326 ($649,513) 102% $ 0
FYE
1 -
Projected
Payroll
2 - NOL
Payment
3 - Normal
Cost
4 – ADC
(2 + 3)
5 - Contractual
Contribution
6 - ADC as
% of Pay
(4 / 1)
Contractual
Contribution
as % of pay
(5 / 1)
2020 $13,176,602 $204,152 $693,934 $898,086 $984,370 6.82% 7.47%
2021 $13,538,959 $190,264 $713,017 $903,281 $1,011,440 6.67% 7.47%
2022 $13,911,280 $172,199 $732,625 $904,824 $1,039,255 6.50% 7.47%
2023 $14,293,840 $155,088 $752,772 $907,861 $1,067,834 6.35% 7.47%
2024 $14,686,921 $130,395 $773,473 $903,868 $1,097,200 6.15% 7.47%
2025 $15,090,811 $105,776 $794,744 $900,520 $1,127,373 5.97% 7.47%
2026 $15,505,808 $ 77,120 $816,599 $893,719 $1,158,375 5.76% 7.47%
2027 $15,932,218 $ 31,353 $839,056 $870,409 $1,190,231 5.46% 7.47%
2028 $16,370,354 $ 0 $862,130 $862,130 $1,222,962 5.27% 7.47%
2029 $16,820,539 $ 0 $885,838 $885,838 $1,256,593 5.27% 7.47%
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SECTION III. BENEFIT PLAN PROVISIONS
This study analyzes the post-employment benefit plan provided by the District. The District provides
continuation of health, and in some cases, life insurance benefits to full-time eligible employees at retirement.
Eligibility for continuation of coverage requires retirement directly from both the District and CalPERS. Eligibility
is based on the employee meeting certain age and years of District service requirements which vary by
employee group. In addition, the District’s contribution varies depending on an employee’s date of retirement
and date of hire as follows:
Un-Represented Employees
Employees Retiring After July 15, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 20 years (15 years if hired prior
to 1/1/2013) of continuous full-time District service. The District’s contribution towards medical and dental
benefits is 100% of the retiree premium and 88% of the dependent premium.
Employees retiring under disability or hardship may retire early and receive a reduction to the District
contribution based on the table below. Disability retirement requires at least 10 years of District service and
Hardship retirement requires at least 20 years (15 years if hired prior to 1/1/2013) of District service.
Age Percentage
50 70%
51 76%
52 82%
53 88%
54 94%
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 88% of the applicable premium. Coverage continues for spouse’s lifetime and to
dependent age 19. Upon death of an eligible active employee, their spouse may continue coverage on the same
basis if eligible to retire at the time of their death.
Employees Retiring On or Prior to July 15, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 5 years of District service if
hired prior to 1/1/1981 or age plus District service greater than or equal to age 70 if hired on or after 1/1/1981.
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 15 years of continuous full-
time District service if hired prior to 1/1/2013 or 20 years if hired on or after 1/1/2013. The District’s contribution
towards medical and dental benefits is 100% of the retiree premium and 88% (100% if retiring prior to
12/29/2003) of the dependent premium. The District also provides $3,000 of life insurance to age 65 and $1,950
from age 65 to age 70 (plus $1,000/$650 of spouse life insurance if hired prior to 1/1/1981 and retiring prior to
12/29/2003).
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 100% (88% if retired on or after 12/29/2003) of the applicable premium to spouse
Medicare eligibility age or age 19 for dependent.
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Represented Employees
Employees Retiring After August 10, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 20 years of District service. The
District’s contribution towards medical and dental benefits is 100% of the retiree premium and 88% (100% if
retiring prior to 12/29/2003) of the dependent premium.
Employees retiring under disability or hardship retire may retire early and receive a reduction to the District
contribution based on the table below Disability retirement requires at least 10 years of District service and
Hardship retirement requires at least 20 years of District service.
Age Percentage
50 70%
51 76%
52 82%
53 88%
54 94%
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 88% of the applicable premium. Coverage continues for spouse’s lifetime. Upon death of
an eligible active employee, spouse (and dependent to age 19) may continue coverage on the same basis.
Employees Retiring On or Prior to August 10, 2011
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 5 years of District service if
hired prior to 1/1/1981 or age plus District service greater than or equal to age 70 if hired on or after 1/1/1981.
Eligibility for benefits requires obtaining at least age 55 and retiring with at least 15 years of District service if
hired prior to 1/1/2013 or 20 years if hired on or after 1/1/2013. The District’s contribution towards medical and
dental benefits is 100% of the retiree premium and 88% (100% if retiring prior to 12/29/2003) of the dependent
premium. The District also provides $3,000 of life insurance to age 65 and $1,950 from age 65 to age 70 (plus
$1,000/$650 of spouse life insurance if hired prior to 1/1/1981 and retiring prior to 12/29/2003).
Spouse and eligible dependents may continue coverage upon death of the retiree and receive a District
contribution equal to 100% (88% if retired on or after 12/29/2003) of the applicable premium to spouse
Medicare eligibility age or age 19 for dependent.
Directors
Directors elected prior to 1/1/1995 were eligible to continue retiree health benefits and receive a District
contribution for Medical and Dental if retiring on or after age 60 with at least 12 years of District service.
Directors elected on or after 1/1/1995 are not eligible for retiree health benefits.
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Premium Rates
The District currently offers the following health plans to eligible retirees. The premiums billed for retiree
medical coverage under age 65 (Medicare eligibility age) are the same as those for active medical coverage.
Thus, the District is providing a “rate subsidy” to the retirees based on this blended rate. Actuarial Standard of
Practice (ASOP) 6 and GASB require that when an employer provides benefits to both active employees and
retirees through the same plan, the benefits to retirees should be segregated and measured independently.
This requires valuing any “rate subsidy” as an additional financial obligation to the District. All premiums are
monthly and are effective for the calendar year.
2019
Gold
PPO
EPO
HMO 15
Kaiser
HMO
Dental
Plan
Retiree Only $ 765.00 $ 851.70 $ 826.20 $ 694.62 $ 55.34
Retiree Plus One $1,524.90 $1,697.28 $1,651.38 $1,369.86 $ 88.37
Retiree Plus Family $1,980.84 $2,205.24 $2,143.02 $1,775.82 $130.84
Retiree Only With Medicare $ 539.58 NA NA $ 248.88 $ 55.34
Retiree and Spouse With Medicare $1,079.16 NA NA $ 477.36 $ 88.37
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SECTION IV. VALUATION DATA
The study was based on the census information used for the June 30, 2019 actuarial valuation furnished to us
by the District. A reconciliation and summary data statistics as of the Valuation Date are provided in the
following tables:
Data Reconciliation Actives Retirees Disableds Survivors Total
June 30, 2017 131 77 2 0 210
Terminated/Duplicates ( 13) 0 0 0 ( 13)
Retired ( 4) 4 0 0 0
Deaths 0 ( 7) 0 0 ( 7)
Survivor Benefits 0 0 0 0 0
New Hires 19 0 0 0 19
June 30, 2019 133 74 2 0 209
The following tables display the age distribution for retirees and the age/service distribution for active
employees.
Age Distribution of Eligible Retired Participants & Beneficiaries
Age Pre-65 Post- 65 Total
<50 0 0 0
50-54 0 0 0
55-59 7 0 7
60-64 14 0 14
65-69 0 19 19
70-74 0 19 19
75-79 0 10 10
80+ 0 7 7
Total: 21 55 76
Average Age: 60.3 72.9 69.4
Average Retirement Age: 55.7 58.5 57.7
Age/Service Distribution of All Active Benefit Eligible Employees
Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 Total Un-repr. Repr.
20-24 0 0 0 0
25-29 8 0 8 1 7
30-34 2 2 1 5 1 4
35-39 5 2 2 1 10 1 9
40-44 8 8 8 1 25 6 19
45-49 3 6 15 7 2 1 0 34 10 24
50-54 3 2 6 4 4 0 1 20 5 15
55-59 1 3 6 6 1 1 1 19 7 12
60-64 0 3 5 2 0 0 0 10 5 5
65-69 0 0 1 1 0 0 0 2 0 2
70+ 0 0 0 0 0 0 0 0 0 0
Total: 30 26 44 22 7 2 2 133 36 97
Average Age: 47.8 50.3 46.6
Average Service: 10.9 12.8 10.0
Estimated Payroll: $13,176,601 $4,908,902 $8,267,699
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SECTION V. ACTUARIAL ASSUMPTI ONS AND METHODS
The liabilities set forth in this report are based on the actuarial assumptions described in this section. The
assumptions used were the same as those used for the June 30, 2019 actuarial valuation.
Fiscal Year: July 1st to June 30th
Valuation Date: June 30, 2019
Funding Periods Covered: FY2019/20 and FY2020/21
Funding Policy: The actuarially determined contribution (ADC) assuming the District’s funding
strategy is to fund the normal cost (current accrual for benefits being earned)
plus an amortization of the net (unfunded accrued) OPEB liability at June 30,
2019 over 20 years. The District will fund the ADC plus direct contributions for
retiree benefits until the net OPEB liability reaches zero (0).
Expected Rate of Return: 7.0% per annum. This discount rate assumes the District continues to fully fund
for its retiree health benefits through the California Employers’ Retiree Benefit
Trust (CERBT) under its investment allocation strategy 1. The rate reflects the
CERBT published median interest rate for strategy 1 of 7.28% with an additional
margin for adverse deviation.
Discount Rate: 7.0% per annum.
Sensitivity analysis showing a 1% increase or decrease in the discount rate is
also provided.
Inflation: 2.75% per annum
Payroll Increases: 2.75% per annum, in aggregate
[The prior valuation used 3.00%]
Merit Increases: Merit increases from the most recent CalPERS pension plan experiences study.
The benefits are not payroll related but each individual’s projected cost is
allocated over their lifetime as a level-percentage of pay.
Pre-retirement Turnover: According to the termination rates under the CalPERS pension plan. Sample
rates for Miscellaneous employees are as follows:
Entry Age
Service 20 30 40 50
0 17.42% 16.06% 14.68% 13.32%
5 8.68% 7.11% 5.54% 0.97%
10 6.68% 5.07% 0.71% 0.38%
15 5.03% 3.47% 0.23% 0.04%
20 3.70% 0.21% 0.05% 0.01%
25 2.29% 0.05% 0.01% 0.01%
30 0.05% 0.01% 0.01% 0.01%
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Pre-retirement Mortality: According to the pre-retirement mortality rates under the CalPERS pension plan
updated to reflect the most recent experience study with mortality
improvements using Mortality Improvement Scale MP 2018.
[The prior valuation used Mortality Improvement Scale MP 2016]
Post-retirement Mortality: According to the pre-retirement mortality rates under the CalPERS pension plan
updated to reflect the most recent experience study with mortality
improvements using Mortality Improvement Scale MP 2018.
[The prior valuation used Mortality Improvement Scale MP 2016]
Retirement Age: According to the retirement rates under the most recent CalPERS pension plan
experience study. According to the following retirement tables:
Miscellaneous Tier 1: 2.7% @55
Miscellaneous Tier 2: 2.0% @62
Disability Retirement: According to the disability rates for Miscellaneous employees under the
CalPERS pension plan updated to reflect the most recent experience study.
Hardship Retirement: Loss will be incorporated upon event
Participation Rates: 100% of eligible active employees are assumed to elect medical coverage and
100% of eligible active employees are assumed to elect dental coverage at
retirement. Actual plan coverage is used for current retirees.
[The prior valuation used 80% dental election.]
Plan Participation: Future retirees are assumed to elect plan coverage based on current plan
elections to Medicare eligibility then PPO coverage. PPO coverage is assumed
for all future retirees currently waiving coverage.
Spouse Coverage: The current coverage status is used for both current and future retirees. 100%
are assumed to elect coverage for their spouse, if currently covering their
spouse (80% if waived coverage). Male spouses are assumed to be 2 years older
than female spouses. Actual spouse ages are used for current retirees.
[The prior valuation used an age difference of 3 years between males and females.]
Dependent Coverage: 10% of future retirees with family coverage are assumed to continue dependent
coverage to the retiree’s age 65.
Medicare Eligibility: 100% of future retirees are assumed to be eligible for and elect Medicare
coverages.
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Average Claim Costs: The valuation was based on the premiums rates furnished by the District. These
costs include medical and prescription drug for both active and retired
employees. A claim cost curve was developed using an assumption for aging
based on an assumed population for the Special District Risk Management
Authority (SDRMA) pool using Tower Watson HealthMaps. This results in an
expected claim cost for every 5 year age bracket. Sample annual medical/Rx
costs are provided in the table below.
Age EPO Kaiser PPO HMO
50-54 $10,455 $8,527 $ 9,391 $10,142
55-59 $13,011 $10,611 $11,686 $12,621
60-64 $16,833 $13,728 $15,119 $16,329
Medical Trend Rates: Medical costs are adjusted in future years by the following trends:
Year PPO
2020 Actual
2021 6.5%
2022 6.0%
2023 5.5%
2024+ 5.0%
Dental Trend Rates:
Year Trend
2020+ 4.0%
Life Insurance: Life insurance costs are assumed to remain constant in future years.
Cadillac Tax: 1.25% load on the non-Medicare liabilities
Actuarial Cost Method: The actuarial cost method used to determine the allocation of the retiree health
actuarial liability to the past (accrued), current and future periods is the Entry
Age Normal (EAN) cost method. The EAN cost method is a projected benefit cost
method which means the “cost” is based on the projected benefit expected to
be paid at retirement.
The EAN normal cost equals the level annual amount of contribution from the
employee’s date of hire (entry date) to their retirement date that is sufficient to
fund the projected benefit. While both are acceptable methods, typically for
plans unrelated to pay the normal cost is calculated to remain level in dollars
and for pay-related plans the normal cost is calculated to remain level as a
percentage of pay. The District has elected to determine the EAN normal cost as
a level percentage of pay. The EAN actuarial accrued liability equals the present
value of all future benefits for retired and current employees and their
beneficiaries less the portion expected to be funded by future normal costs.
All eligible employees and participating retirees and spouses as of the
measurement date listed in the data provided by the District were included in
the valuation in accordance with the provisions of the Plan.
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Future New Entrants: Closed group valuation so none assumed.
Actuarial Value of Assets: Any assets of the plan will be valued using an asset smoothing method
spreading asset gains and losses over 5 years.
Amortization of NOL: For funding purposes, the unfunded actuarial accrued or net OPEB liability
(NOL) is being amortized over 20 years on a level percentage of pay basis using
a fresh start method. Future experience gains and losses may be amortized over
a rolling (open) 15-year period and plan and assumption changes will be
amortized over fixed (closed) 20 year periods.
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SECTION V I. ACTUARIAL CERTIFICAT ION
This report summarizes the results of the contribution study for the Otay Water District (the “District”) as of
June 30, 2019. The purpose of the study is to measure the District’s liability for OPEB benefits and to determine
an actuarially determined contribution (ADC) for the fiscal periods ending June 30, 2020 and June 30, 2021.
To the best of our knowledge, the report presents a fair position of the funded status of the plan. The valuation
is based upon our understanding of the plan provisions as summarized within the report. The information
presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this
report and participant information and asset information furnished to us by the Plan Sponsor. We have
reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior
information provided but have not audited the information at the source, and therefore do not accept
responsibility for the accuracy or the completeness of the data on which the information is based. When
relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the
purpose of the measurement. We are not aware of any significant issues with and have relied on the data
provided.
The discount rate and other economic assumptions have been selected by the Plan Sponsor. Demographic
assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the
actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated
experience of the Plan. All calculations have been made in accordance with generally accepted actuarial
principles and practice.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to such factors as the following:
plan experience differing from that anticipated by the economic or demographic assumptions;
changes in economic or demographic assumptions;
increases or decreases expected as part of the natural operation of the methodology used for these
measurements (such as the end of an amortization period); and
changes in plan provisions or applicable law.
While some sensitivity analysis was provided in the report, we did not perform an analysis of the potential range
of future measurements due to the limited scope of our engagement.
To our knowledge, there have been no significant events prior to the current year's measurement date or as of
the date of this report that could materially affect the results contained herein.
Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or
appear to impair the objectivity of this report. Our professional work is in full compliance with the American
Academy of Actuaries “Code of Professional Conduct” Precept 7 regarding conflict of interest. The undersigned
meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion
contained herein.
Should you have any questions please do not hesitate to contact me.
Certified by:
Luis Murillo, ASA, MAAA Randy Gomez, FSA, MAAA, Date: October 8, 2019
Consulting Actuary Consulting Actuary
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SECTION VI. DEFINITIONS
The definitions of the terms used in the actuarial valuations are noted below.
Actuarial Assumptions – Assumptions as to the occurrence of future events affecting health care costs, such
as: mortality, turnover, disablement and retirement; changes in compensation and Government provided
health care benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to
determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost
Methods; and other relevant items.
Actuarial Cost Method – A procedure for determining the Actuarial Present Value of Future Benefits and
expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the
form of a Service Cost (or normal cost) and a Total (Accrued) OPEB Liability.
Actuarially Determined Contribution - A target or recommended contribution to a defined benefit OPEB plan
for the reporting period, determined in accordance with the parameters and in conformity with Actuarial
Standards of Practice.
Annual OPEB Cost – An accrual-basis measure of the periodic cost of an employer’s participation in a defined
benefit OPEB plan.
Actuarial Present Value (also referred to as Actuarial Liability) – The value of an amount or series of
amounts payable or receivable at various times, determined as of a given date by the application of a
particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of
amounts is:
a. adjusted for the probable financial effect of certain intervening events (such as changes in
coverage, marital status, etc.);
b. multiplied by the probability of the occurrence of an event (such as survival, death, disability,
termination of employment, etc.) on which the payment is conditioned; and
c. discounted according to an assumed rate (or rates) of return to reflect the time value of money.
Deferred Outflow / (Inflow) of Resources – represents the following items that have not been recognized in
the OPEB Expense:
a. Differences between expected and actual experience of the OPEB plan
b. Changes in assumptions
c. Differences between projected and actual earnings in OPEB plan investments (for funded plans
only)
Explicit Subsidy – The difference between (a) the amounts required to be contributed by the retirees based on
the premium rates and (b) actual cash contribution made by the employer.
Funded Ratio – The actuarial value of assets expressed as a percentage of the actuarial accrued liability.
Healthcare Cost Trend Rate – The rate of change in the per capita health claims costs over time as a result of
factors such as medical inflation, utilization of healthcare services, plan design, and technological
developments.
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Implicit Rate Subsidy – In an experience-rated healthcare plan that includes both active employees and
retirees with blended premium rates for all plan members, the difference between (a) the age-adjusted
premiums approximating claim costs for retirees in the group (which, because of the effect of age on claim
costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts
required to be contributed by the retirees.
Normal Cost – The portion of the Actuarial Present Value of plan benefits and expenses which is allocated to
a valuation year by the Actuarial Cost Method.
OPEB – Benefits (such as death benefits, life insurance, disability, and long-term care) that are paid in the period
after employment and that are provided separately from a pension plan, as well as healthcare benefits paid in
the period after employment, regardless of the manner in which they are provided. OPEB does not include
termination benefits or termination payments for sick leave.
OPEB Expense – Changes in the Net OPEB Liability in the current reporting period, which includes Service Cost,
interest cost, changes of benefit terms, expected earnings on OPEB Plan investments, reduction of active
employees’ contributions, OPEB plan administrative expenses, and current period recognition of Deferred
Outflows / (Inflows) of Resources.
Pay-as-you-go – A method of financing a benefit plan under which the contributions to the plan are generally
made at about the same time and in about the same amount as benefit payments and expenses becoming
due.
Per Capita Costs – The current cost of providing postretirement health care benefits for one year at each age
from the youngest age to the oldest age at which plan participants are expected to receive benefits under the
plan.
Present Value of Future Benefits – Total projected benefits include all benefits estimated to be payable to
plan members (retirees and beneficiaries, terminated employees entitled to benefits but not yet receiving them,
and current active members) as a result of their service through the valuation date and their expected future
service. The actuarial present value of total projected benefits as of the valuation date is the present value of
the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value
(present value) of money and the probabilities of payment. Expressed another way, it is the amount that would
have to be invested on the valuation date so that the amount invested plus investment earnings will provide
sufficient assets to pay total projected benefits when due.
Real Rate of Return – the rate of return on an investment after adjustment to eliminate inflation.
Select and Ultimate Rates – Actuarial assumptions that contemplate different rates for successive years.
Instead of a single assumed rate with respect to, for example, the healthcare trend rate assumption, the actuary
may apply different rates for the early years of a projection and a single rate for all subsequent years. For
example, if an actuary applies an assumed healthcare trend rate of 6.5% for year 20W0, 6.0% for 20W1, 5.5%
for 20W2, then 5.0% for 20W3 and thereafter, then 6.5%, 6% and 5.5% are select rates, and 5% is the ultimate
rate.
Service Cost (also referred to as Normal Cost) – The portion of the Actuarial Present Value of projected
benefit payments that are attributed to a valuation year by the Actuarial Cost Method.
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Substantive Plan – The terms of an OPEB plan as understood by the employer(s) and plan participant.
Total OPEB Liability (also referred to as Actuarial Accrued Liability) – That portion, as determined by a
particular Actuarial Cost Method, of the Actuarial Present Value of Future Benefits which is attributed to past
periods of employee service (or not provided for by the future Service Costs).
November 2019
Otay Water District
June 30, 2019 Updated
OPEB Actuarial Valuation
Retiree Health Program & Contribution Study
1
Purpose of June 30, 2019 OPEB Valuation
•Latest funding valuation
•Develop recommended actuarially determined contribution (ADC)
•Fund normal cost (current benefit accrual) plus payment towards net (unfunded
accrued) OPEB liability
•No requirement to prefund
•Earnings used to pay future contributions for benefits
•Commitment to prefund ADC allows for higher discount rate for accounting
•District’s Funding Practice: Prefund the ADC to CERBT and make direct
payments for retirees until funding level at 100%
•OPEB Contribution Study
•Extended OPEB for employees hired on or after July 1, 1993
•Established Employee Contribution (7.0% Unrepr./7.75% Repr.)
•Comply With GASB 75 Accounting Requirements
•Biennial full valuations still required, permitted to projected interim year
Page 2
District Retiree Health Program
•Benefits Provided: continuation of lifetime medical and dental benefits
•District direct (Cash) contributions: 100% of the retiree premium and 88% of the spouse/dependent premium
•Reduced District contributions for employees retiring early (age 50 to 55) under disability or hardship
•Some employees retired under different eligibility and contributions
•Eligibility: retire from the District on or after age 55 with at least 20 (15 for un-represented employees hired prior to 1/1/2013) years of District service.
•District participates in SDRMA for medical coverage
•Community-rated program
•Implied subsidy as non-Medicare premiums based on pool of actives and non-Medicare retirees
3
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
25 30 35 40 45 50 55 60 65
An
n
u
a
l
C
l
a
i
m
C
o
s
t
s
Age
Average Cost
Actual Cost
•Exists when non-Medicare retirees & actives pooled together for Medical coverage
•Retiree Cost > Pooled Groups Average Costs
•Implied Rate Subsidy = Expected Retiree Cost less Average Cost (Premium Charged for Coverage)
•Required to be included as employer liability
•ASOP 6 –GASB defers to ASOPs
•GASB 74 & 75
4
Implied Subsidy Defined
Retiree Expected Cost minus Average Costs (Premium Charged)
Actuarial Valuation Process
•Updated Funding Valuation
•Collect plan, census, & rate (premium) information
•133 active employees eligible for health benefits
•76 retirees currently receiving District contribution
•Project District’s direct (cash plus Implied Subsidy)
contributions expected to be paid for all future
years (Projected Cash Flows)
•Demographic assumptions: e.g. mortality, withdrawal,
retirement
•Financial assumptions: e.g. discount (interest rate), healthcare
costs, healthcare trend
•Discount projected cash flows to measurement
date to determine present value (in Today’s $s) of
District’s Pay-Go costs
•Allocate present value to past (Accrued or Earned),
current period accrual & future accruals using
actuarial cost method
Page 5
5
Projected District Pay-Go Costs*
* Net of any required retiree contributions for coverage Page 6
Fiscal Year
Projected
# of Retirees
Explicit
(Cash)Pay-Go
Costs
Implied
Subsidy
Projected
Direct Pay-Go
Costs % Incr
2019/20 76 $ 940,476 $170,815 $1,111,291
2020/21 75 $ 964,411 $167,592 $1,132,003 2%
2021/22 75 $1,018,571 $159,265 $1,177,836 4%
2022/23 75 $1,079,253 $160,314 $1,239,567 5%
2023/24 75 $1,143,824 $178,193 $1,322,017 7%
2024/25 77 $1,224,470 $203,379 $1,427,849 8%
2025/26 77 $1,294,047 $209,237 $1,503,284 5%
2026/27 77 $1,382,258 $214,391 $1,596,649 6%
2027/28 79 $1,494,790 $213,674 $1,708,464 7%
2028/29 82 $1,625,939 $195,078 $1,821,017 7%
::::
All Years $185.4M $9.1M $194.5M
Present Value (In Today’s $s)Assuming 7.0%Interest Rate $ 30.9M $3.3M $ 34.2M
Portion Accrued (Earned)$ 24.7M $2.5M $ 27.2M
Funded Status 100%
6
7
Funding Valuation Results at June 30, 2019
•Total (Accrued) OPEB
Liability = $27,200,000
•100% Funded
•Recommended ADC (Contribution) = Fund
Current Year Accrual plus 20 Yr Amortization
of Unfunded Liability
•$786,245 in 2019/20 or 6.0% of payroll
•Employees Contribute 7.0% of pay (7.75% for
Unrepresented) –
$984,370 estimated in 2019/20
$27,177,331
$735,699
$6,290,748
Present Value of Projected Direct
(Cash plus Implied Subsidy)
$34,203,778
Total (Accrued) OPEB
Liability
Service Cost
Future Service Accruals
8
Comparison of Prior Funded Status & Contributions
6/30/2017 6/30/2019
Actuarial Accrued Liability $26,450,000 $27,200,000
Actuarial Value of Assets (AVA)*(22,060,000)(27,200,000)
Unfunded Actuarial Accrued
Liability $4,390,000 $0
Funded Percentage AVA 83%100%
ADC
FY2017/18 $1,116,000 N/A
FY2018/19 $1,065,000 $N/A
FY2019/20 $1,011,000 $786,000
FY2020/21 $955,000 $808,000
•AVA -$8,000 accumulated gains not recognized
•Key assumption changes:
updates based on the 2017
the CalPERS experience
study; mostly offsetting
•Decrease in 2019/20
contribution primarily due to experience gains
•Assumed rate of return is
7.0%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2014-15 2015-16 2016-17 2017-18 2018-19
Rate of Return -AVA vs. MVA
AVA MVA
* Projections assume that employees terminating or retiring will be replaced with comparable employees with aggregate
payroll increasing 2.75%9
Projected District Contributions*
Fiscal Year
Recommended
Contribution
(ADC)
Cash Payments Implied Subsidy
Trust
Reimbursement to
District
TotalContr.EmployeeOPEB Contr.
DistrictContr. Net ofEmployee
Plan
Funded
%
2019/20 $786,245 $940,476 $170,815 $(1,111,291)$786,245 $984,370 ($198,125)100%
2020/21 $807,867 $964,411 $167,592 $(1,132,003)$807,867 $1,011,440 ($203,573)100%
2021/22 $830,083 $1,018,571 $159,265 $(1,177,836)$830,083 $1,039,255 ($209,172)100%
2022/23 $852,910 $1,079,253 $160,314 $(1,239,567)$852,910 $1,067,834 ($214,924)100%
2023/24 $876,365 $1,143,824 $178,193 $(1,322,017)$876,365 $1,097,200 ($220,835)100%
2024/25 $900,465 $1,224,470 $203,379 $(1,427,849)$900,465 $1,127,373 ($226,908)100%
2025/26 $925,228 $1,294,047 $209,237 $(1,503,284)$925,228 $1,158,375 ($233,147)100%
2026/27 $950,672 $1,382,258 $214,391 $(1,596,649)$950,672 $1,190,231 ($239,559)100%
2027/28 $976,815 $1,494,790 $213,674 $(1,708,464)$976,815 $1,222,962 ($246,147)100%
2028/29 $1,003,678 $1,625,939 $195,078 $(1,821,017)$1,003,678 $1,256,593 ($252,915)100%
10
OPEB Contribution Study
Study compares
increased cost of extending OPEB
benefits to the
additional employee contributions received
by the District
•7.75% for Represented
•7.00% for Unrepresented
employees
ADC = Recommended
Actuarially Determined
Contribution
NOL = Net (unfunded
accrued) OPEB Liability
FYE 1 -Projected Payroll
2 -NOL
Payment
3 -Normal Cost
4 –ADC
(2 + 3)
5 -
Contractual
EmployeeContribution
6 -ADC as % of Pay(4 / 1)
Contractual
Contribution
as % of pay(5 / 1)
2020 $13,176,602 $204,152 $693,934 $898,086 $984,370 6.82%7.47%
2021 $13,538,959 $190,264 $713,017 $903,281 $1,011,440 6.67%7.47%
2022 $13,911,280 $172,199 $732,625 $904,824 $1,039,255 6.50%7.47%
2023 $14,293,840 $155,088 $752,772 $907,861 $1,067,834 6.35%7.47%
2024 $14,686,921 $130,395 $773,473 $903,868 $1,097,200 6.15%7.47%
2025 $15,090,811 $105,776 $794,744 $900,520 $1,127,373 5.97%7.47%
2026 $15,505,808 $ 77,120 $816,599 $893,719 $1,158,375 5.76%7.47%
2027 $15,932,218 $ 31,353 $839,056 $870,409 $1,190,231 5.46%7.47%
2028 $16,370,354 $ 0 $862,130 $862,130 $1,222,962 5.27%7.47%
2029 $16,820,539 $ 0 $885,838 $885,838 $1,256,593 5.27%7.47%
11
GASB 75 Impact
GASB 75 Accounting for Fiscal Year Ending June 30, 2020 based
on Measurement Date of June 30, 2019
•Recognize Net (Unfunded Accrued) OPEB Liability (NOL) on District’s Financial Statement
•Measured at June 30, 2019; Net OPEB Asset is $20,000 (Market Value Basis)
•Note Disclosures and Required Supplementary Information (RSI) Similar to
GASB 68
•Added Interest Rate and Healthcare Trend Rate Sensitivity Measurements
•GASB 75 Expensing Required Every Fiscal Year –Faster Recognition of
Gains/Losses
-Interim period updates required
•GASB 74 Disclosure of Net (Unfunded) OPEB Liability (NOL) –To be provided by CERBT (the OPEB Plan)
Questions
12
STAFF REPORT
TYPE MEETING:Regular Board MEETING DATE:November 6, 2019
SUBMITTED
BY:
Mark Watton
General Manager
W.O./G.F.
NO:
N/A DIV.
NO.
N/A
APPROVED BY: Mark Watton, General Manager
SUBJECT:General Manager’s Report
GENERAL MANAGER:
Rainbow/Fallbrook Detachment and Annexation
For the last several months Rainbow Municipal Water District (Rainbow) and Fallbrook Public Utility District (Fallbrook) have
expressed an interest in pursuing efforts to detach from the San Diego County Water Authority (SDCWA) and annex into the Eastern Municipal Water District (Eastern), so that they can obtain wholesale water from Eastern. My understanding is that Eastern will merely serve as a pass-through entity, delivering Metropolitan Water
District water to Fallbrook and Rainbow, but will not be providing any facilities, storage, water rights or other water reliability
infrastructure.
The matter first surfaced at the May 23, 2019 SDCWA regular Board
meeting, where SDCWA General Counsel announced to the SDCWA Board that Rainbow and Fallbrook were evaluating detachment from SDCWA
based on information SDCWA had received from a meeting with Tom Kennedy, General Manager of Rainbow.
On July 30, 2019, delegates from the SDCWA, including SDCWA Board Chair Jim Madaffer, attended a meeting with Rainbow and Fallbrook at
which the SDCWA requested a proposal for the detachment. Rainbow and Fallbrook contend that they provided a statement to the SDCWA and its Board members on August 21, 2019, explaining the framework of their intentions to detach from the SDCWA. However, to date, Rainbow and Fallbrook have failed to provide details of their proposed detachment
to the SDCWA or its member agencies.
Agenda Item 16
2
The SDCWA issued Public Records Act requests to Rainbow, Fallbrook and the San Diego LAFCO. The SDCWA recently provided Otay with the responsive records from the three agencies, at Otay’s request.
The process for detachment and annexation is prescribed by the
Cortese/Knox/Hertzberg Local Government Reorganization Act of 2000 (Government Code Section 56000, et seq.) as well as San Diego LAFCO policy. It begins with an application for a change of organization
that is submitted to LAFCO together with a resolution of application by an affected local agency (Rainbow and Fallbrook.) To date neither
Rainbow nor Fallbrook have submitted an application to the San Diego LAFCO.
San Diego LAFCO expects that Rainbow and Fallbrook’s anticipated proposal will involve the following four distinct approvals under the
LAFCO statute:
• Amendment to the Eastern sphere of influence to add the affected
territory (i.e., Fallbrook and Rainbow’s jurisdictional boundaries).
• Annexation of the affected territory to Eastern.
• Amendment to the County Water Authority sphere of influence to remove the affected territory.
• Detachment of the affected territory from County Water Authority.
On October 7, at its regular meeting the San Diego LAFCO voted to adopt a Memorandum of Understanding with Riverside LAFCO to clarify
and establish approval responsibilities for the expected reorganization proposal by Fallbrook and Rainbow. The MOU was
developed in consultation with Riverside LAFCO as well as input from Fallbrook, Rainbow and the County Water Authority and it provides as follows:
• San Diego LAFCO assumes principal county status for all related
approvals for the reorganization proposal. This includes specific delegation by Riverside LAFCO for San Diego LAFCO to take action on the Eastern sphere of influence.
• San Diego LAFCO will follow its own policies and procedures in
evaluating all related approvals for the reorganization proposal. The policies and procedures of Riverside LAFCO may be considered but not binding on San Diego LAFCO.
3
• Riverside LAFCO agrees to provide technical staff assistance to
San Diego LAFCO in the evaluation of the reorganization proposal as requested, including – but not limited to – analysis of
Eastern MWD and its ability to assume wholesale water supply responsibilities for Fallbrook and Rainbow. All technical
services provided by Riverside LAFCO will be billed at its established hourly staff rate with reimbursements paid by the applicants – Fallbrook and Rainbow – through collection by San
Diego LAFCO.
• San Diego LAFCO agrees to consult with and provide opportunities
for Riverside LAFCO to comment on all related recommendations on the reorganization proposal ahead of consideration by the
Commission.
• The MOU remains in effect unless both LAFCOs agree to terminate. The San Diego LAFCO also directed staff to work with all the agencies
who are impacted and to conduct an investigation into the financial impacts of the reorganization. Tom Kennedy, Jack Bebee, Nick Kanetis (Deputy General Manager Eastern), Claire Collins, Esq. (the County
Water Authority Special LAFCO counsel), Jeanne Blumenfeld Esq. General Counsel for Otay, and a farmer spoke when the Commission took
comments. Jeanne Blumenfeld also submitted a letter to be put into the record which expressed Otay’s support for the MOU. In addition, it requested that San Diego LAFCO ensure that Rainbow and Fallbrook engage in meaningful dialogue regarding the proposed reorganization with the SDCWA and its other 22 member agencies, before they initiate
proceedings to detach from SDCWA and annex to Eastern.
San Diego LAFCO Legislative Policy L-107 requires a “proposal applicant” to meet with “affected agencies” or their representatives at the earliest possible stage and prior to the submission of a
proposal requesting LAFCO consideration of a change of organization or reorganization, “for the purpose of identifying and attempting to
resolve any issues associated with the proposed jurisdictional change(s).”
There are many important issues associated with Rainbow and Fallbrook’s proposed detachment from SDCWA and their annexation to
Eastern. The impacts of the proposed reorganization will be felt by San Diego County, the SDCWA, and its 22 remaining member agencies. Neither Fallbrook nor Eastern have discussed their proposed actions
with the SDCWA member agencies. Otay, as one of the SDCWA member agencies, is particularly concerned about the financial ramifications
of the proposed reorganization and the effect they will have on its rate payers. Rate neutrality is one of the primary concerns. Otay and the remaining member agencies have not conferred authority on the
4
SDCWA to discuss the issues associated with the detachment on their behalf.
Recently, Fallbrook’s General Manager, Jack Bebee expressed an intent to meet with Otay. I have scheduled a meeting with him and our
respective counsel, on November 20. At the meeting we hope to learn specific details of the detachment proposal including financial and environmental impacts, impacts on water supply reliability, and all
other impacts to the region as a whole that would result from a detachment. I believe that it is Fallbrook and Rainbow’s
responsibility to conduct the relevant analyses, and inform Otay, the SDCWA and its remaining member agencies of all relevant factors and impacts of the detachment and annexation. Once we have the analyses,
we can attempt to resolve them before Rainbow and Fallbrook submit a proposal to the San Diego LAFCO. ADMINISTRATIVE SERVICES:
GIS:
• NASSCO Certification Training – The District hosted the National Association of Sewer Service Companies certification training for
the Pipe Assessment Certification Program, Manhole Assessment Certification Program, and Lateral Assessment Program. Keeping the District’s sewer asset condition assessment practice with the national unified standard is key to the District’s Asset Management program. Operations and GIS staff attended the initial and re-
certification training, and all passed the certification exam. Also in attendance were employees from Moulton Niguel Water District, City of Chula Vista, Kennedy Jenks, NV5, and other agencies. The
training program was a successful event. Staff from other agencies appreciated Otay’s hospitality and the trainer’s well-rounded
utility experience and knowledge.
Human Resources: • Deferred Comp Transition - All funds have been successfully
transferred to Voya as planned. HR will be working over the next few months to finalize any plan documents related to this
transition. Voya representatives will be on-site as needed for employee meetings to ensure that employees receive any requested information regarding the transition.
• Open Enrollment/Health Fair – Open Enrollment was held from October 14th through October 31st. A Health Fair was held on
October 15th and an open enrollment informational meeting was held on October 23rd.
• Holiday Party - Mark your calendars to attend the Holiday Party on December 14th, 6:00 pm to 10:00 pm, at the Chula Vista Golf Course.
5
• Promotions/Recruitments:
o The Permit Technician position was recently filled through an
internal promotion.
o The District is currently recruiting for a Senior Accountant and
is preparing to recruit for a Customer Service Representative and SCADA/Instrumentation Technician. These positions are critical to District operations.
IT Operations:
• ECS Imaging Digital Transformation Award - The District was
selected for the annual ECS Digital Transformation Award. ECS is the provider of the District's Enterprise Content Management System (ECMS), Laserfiche, which is used by over 40,000 private and public agencies around the world. The Laserfiche ECMS is used by District staff to manage its core data repository, including public record
compliance and workflow automation, which minimizes manual paper-based processes. Otay was recognized as a leader in technology and
data migration practices, content management, and workflow automation. Staff also shared its practices via a presentation at the October 10th annual user conference in Riverside.
• Monthly Board Audio Streaming - During the District’s October Board meeting, 21 customers engaged in the listening of the live monthly
meeting. The live audio broadcast was aired for 3 hours and 30 minutes. Purchasing & Facilities:
• Lobby Security Enhancements - With the installation of the security glass at the Customer Service Desk, the barrier and access control
features of the Lobby Enhancement project are now complete. Items remaining are the removal of the two architectural feature walls that will open up visual sight lines within the Lobby and the expansion of the Public Service conference room. The completion of this portion is on hold pending the issuance of a new or alternate
procurement as the original solicitation resulted in no bid.
• San Miguel Fire Protection District Inspection - The District
passed its annual fire inspection in Operations, the Warehouse, and the Fuel Island. The inspection was conducted by an inspector from the San Miguel Fire Protection District. The inspector stated that
everything looked good while marking the inspection report with “No Violations” punctuated with an emoticon.
• BidSync Solicitations - During the last period, there was one (1) solicitation advertised on BidSync:
o “1200 Pressure Zone Improvements - Phase 1 (CIP P2653)” – For
the demolition of an existing vault, two 8-inch ductile iron
6
water main laterals, driveway widening, and a custom fabricated double leaf gate and all other work and appurtenances in accordance with the contract documents. The engineer’s estimate
is $150,000.00. The solicitation closed October 9, 2019, at 4:00 PM.
Safety & Security:
• Update -- America’s Water Infrastructure Act of 2018 (AWIA 2018) – The framework for compliance with the vulnerability assessment was
completed. Meetings with department stakeholders began on October 22nd to have required information reviewed, verified and
updated. The deadline for compliance is March 31, 2020. Staff estimates having a final document for certification by February 2020 or sooner.
• Service Truck Cranes (STC) Regulatory Compliance Staff Certification – A total of 16 employees, responsible for the
operation of District-owned service truck cranes, have been certified following the National Commission for the Certification
of Crane Operators guidelines and the regulatory requirements established under Cal/OSHA. Staff is required to re-certify every 5 years.
• Active Shooter Live Training Exercise: o A live Active Shooter Awareness training and exercise was
completed for District staff. This training augments staff’s existing active shooter training and knowledge and provides
expanded awareness information.
o District EOC Staff Active Shooter Tabletop Exercise – Members of the District’s EOC completed an Active Shooter tabletop exercise. The District’s Active Shooter Emergency Response
procedure draft was utilized for this purpose. The lessons learned will be compiled to address identified gaps in the response process.
• Monthly WebEOC Emergency Preparedness & Tabletop Exercise - District EOC staff successfully completed the monthly exercise for October. The exercise consisted of: “Under the Regional Weblinks, explore the CAL FIRE Current Incidents page, and the Santa Ana
Wildfire threat index. On the District’s status board, note what the Threat Level is for today and include ’Oct test’ in the title.”
Finance:
• Sewer Cost of Service Study – Staff is in the process of completing
a cost of service study for sewer. The objective of this study is to establish a rate calculation that will provide for more
consistent revenues to meet the requirements of current and projected debt issuances. The cost of service study is anticipated
7
to be brought to the Board in February or March, followed by a Proposition 218 hearing in September or October, with rates becoming effective on January 1, 2021.
• 2021 Budget – Staff has begun the planning process for the FY 2021 budget. At this time staff will be preparing the budget to be presented to the Board in a similar manner as the FY 2020 budget, with multiple meetings beginning in March and finishing with the
June Board meeting.
• AMR Change Outs – The AMR change out project has been delayed until
November 4th due to the contractor being delayed on a project in Northern California. Concord Utility Services will begin by
changing out registers from November through mid-December. Then, in January and February, full meter change outs will be completed. Customers will be notified prior to work being done in their area. Financial Reporting:
• The financial reporting for September 30, 2019 is as follows:
o For the third month ending September 30, 2019, there are total revenues of $29,945,159 and total expenses of $28,414,587. The
revenues exceeded expenses by $1,530,572.
• The financial reporting for investments for September 30, 2019 is as follows:
o The market value shown in the Portfolio Summary and in the Investment Portfolio Details as of September 30, 2019 total $66,509,987 with an average yield to maturity of 1.971%. The
total earnings year-to-date are $341,037. ENGINEERING AND WATER SYSTEM OPERATIONS:
Engineering:
• 870-2 Pump Station Replacement: This project consists of a new Pump
Station to replace the existing Low Head 571-1 and High Head 870-1 Pump Stations. The project also includes the replacement of the existing liner and cover for the 571-1 Reservoir (36.7 MG). In
October 2019, the Station’s contractor Pacific Hydrotech continued to install conduit and pull wire to equipment located within the
Station’s chemical room, generator room, and for the gas engines. The contractor also constructed the exterior fuel containment area and installed the diesel fuel tank. Work to install the exterior lighting foundations was also completed. The Station’s gas meter was set by SDG&E. Environmental compliance during construction
continues to be monitored by Helix Environmental. A Board tour of
8
the 870-2 Pump Station project was conducted on October 8, 2019. The project is within budget and scheduled to be completed in February 2020. (P2083 & P2562)
• Campo Road Sewer Replacement: The existing sanitary sewer from Avocado Road to Singer Lane is undersized and located in environmentally sensitive areas that are difficult to access. The Campo Road Sewer Replacement project will install approximately
7,420 linear feet of new 15-inch gravity sewer pipe and includes abandonment of the existing sewer main. The project’s environmental
permit also limits work adjacent to the environmentally sensitive area during the months of February through September. During the month of October 2019, the contractor Wier Construction completed
the testing of the sewer main and manholes installed between Avocado Boulevard and Via Mercado and completed corrective work. The
contractor also completed the pavement restoration work along eastbound and westbound Campo Road. Work to abandon the existing sewer main located within the environmentally sensitive areas of the
project began. It is anticipated that the overall project, which includes restoration work in the Avocado Village Shopping Center and
sewer abandonment will complete in late November 2019. (S2024)
• Vista Vereda and Hidden Mesa Water Pipelines Replacement: The
existing 1950’s steel water line along Vista Vereda, between Vista Grande Road and Hidden Mesa Trail in the Hillsdale area, has
experienced leaks and is nearing the end of its useful life. The existing water main is located primarily within easements, many of which have had significant improvements performed over the years
since the water line was constructed. This project will replace the existing water lines with new water lines in both Vista Vereda
and Hidden Mesa Road. During October 2019, the District’s construction contractor Cass Arietta Construction, Inc., completed the work required to connect the new water main in Vista Vereda to
the existing main located in Vista Grande. Pavement restoration work for Vista Vereda is scheduled to begin in November 2019. It
is anticipated that construction will be completed in December 2019. (P2574 & P2625)
• Temporary Lower Otay Pump Station Redundancy: This project will add a second pump to the District’s existing Temporary Lower Otay Pump
Station (TLOPS) to provide redundancy. The Air Pollution Control District (APCD) of San Diego County issued an Authority to Construct on July 18, 2019. The redundant trailer vendor’s (Hawthorne)
purchase agreement was revised on August 5, 2019 to include a Selective Catalyst Reduction (SCR) emissions control system, and a
Diesel Particulate Filter (DPF) to supplement the DPF prepackaged with the CAT engine, to facilitate permitting with APCD. During October 2019, the District’s construction contractor Tharsos, Inc., was working on submittals associated with the project’s
9
construction. The construction contract includes grading, mechanical, structural, electrical, instrumentation & control, and installation of the trailer. It is anticipated that work on the
project will be completed in June 2020. This project is within budget. (P2619)
• 711-3 Reservoir Cover/Liner Replacement: The existing cover/liner at the 711-3 Reservoir was installed in 2002 and shows substantial
deterioration that has necessitated its replacement. During October 2019, the construction contractor Layfield performed work to
locate and repair leaks found at the reservoir liner/vault locations. It is anticipated that the leaks will be located, repaired, and that the reservoir will be refilled, tested, and
placed into service in November 2019. Layfield has been notified that the contractor is responsible for all costs associated with
failed tests and the work required to repair leaks. The project is within budget. (P2561)
• Portable Trailer Mounted VFD Pumps: This project consists of procurement of a portable trailer mounted hydropneumatic pump
station designed for deployment at up to seven (7) existing sites including four (4) hydropneumatic pump stations and three (3) small pressure zones each fed by a single gravity reservoir. The trailer
vendor, Cortech Engineering, delivered revised shop drawings for the portable trailer on October 10, 2019. Delivery of the trailer is
anticipated in February 2020. This project is within budget and on schedule. (P2640)
• District Surplus Property: On January 2, 2019, the Board adopted a resolution declaring the District owned La Presa Avenue parcels as surplus real property and authorized the General Manager to dispose of the surplus properties in accordance with applicable statutes and laws, and in the best interest of the District. The La Presa
Avenue parcels was one of four sites identified as surplus property. This parcel is approximately 0.69 acre or 127’ x 234’.
On February 22, 2019, staff solicited offers for the lease or sale of the surplus properties from Preferred Entities, as required by Government Code § 54222 et seq. As a Preferred Entity, the County
of San Diego expressed an interest in purchasing the La Presa Avenue property to add to the 177-acre Dictionary Hill Open Space
Preserve and its South County Multiple Species Conservation Plan. On April 16, 2019 the District’s As-Needed appraiser Anderson & Brabant, Inc., completed the appraisal of the La Presa Avenue
property with the opinion of a $30,000 value. The County accepted this dollar amount and on August 21, 2019 the District and the
County of San Diego executed a Real Property Contract and on October 11, 2019 escrow for the property was closed. The District is working with a Broker to dispose of the remaining three properties and will bring these offers to the Board for approval.
10
• 1485-2 Pump Station Diesel Fuel Leak: On June 5, 2019, a property owner of the land adjacent to the Pump Station noticed small
staining on the retaining wall and what appeared to be some type of fuel oil (due to the odor). It was brought to the attention of
District water system operators at the site. The District’s fleet shop supervisor estimates that the quantity of fuel that leaked was about 100 gallons and that it was a slow leak, probably occurring
over a year or longer. Although the majority of the fuel was contained on District property, and out of an abundance of caution,
the County of San Diego (County) Department of Environmental Health and the Office of Emergency Services were notified of the leak on June 6, 2019. On September 6th, Operations staff removed additional
contaminated soil from the neighboring resident’s property, and Geocon took additional samples in areas previously over the
residential limit. The lab results came back with diesel concentrations below the limit. Operations backfilled the excavations with new native soil and returned the site to the
previous condition. District staff is submitting a workplan to remediate the impact of the leak on the District’s property, along
with the lab results for the residential property. The workplan outlines recommendations made by the County during their site visit in August, which includes removing and replacing the wall drain for
the retaining wall that acted as a conduit for the leaking diesel fuel. District Utility Maintenance staff removed contaminated soil
and a portion of the drain line in the area from where the leak originated up to the Pump Station building. The wall drain was replaced, and the excavation was backfilled. This section was paved on October 21, 2019. The remainder of the drain line must be removed in the tight area between the building and the retaining
wall along with any contaminated soil. (P1320-010000)
• 1200 Pressure Zone Improvements: The first phase of this project
consists of connections for a Portable Trailer Mounted VFD Trailer Pump (P2640) at the 1200-1 Pump Station/978-1 Reservoir site in
support of the 1200-1 Reservoir Interior & Exterior Coating Project (CIP P2533) starting late fall next year. The first phase also includes demolition of an existing vault and widening of an existing driveway to provide access and a location to operate the trailer pump. Award of the first phase is scheduled for the
November 2019 board meeting. The second phase of this project will include replacement of the 1200-1 Pump Station discharge header and other improvements scheduled for next year. This project is within
budget and on schedule. (P2653)
• Mexican Society of Hydraulic Engineers: On October 12, 2019, staff attended the Mexican Society of Hydraulic Engineers in Tecate, Mexico and made a presentation to approximately 40 attendees. The
11
presentation included an overview of the Otay Water District, the facilities, technologies, water resources, and future/vision. The presentation was well received and offered a view of how
utilities are managed on the north side of the Border.
• AWWA Conference – Global Water: On October 24, 2019, staff attended the Global Water track held in San Diego and made a presentation titled, “The Challenges in Supplying Water to Baja
Mexico.” The attendees were given an overview of the challenges on the water supply issues in the Baja California area, which relies
mostly on the Colorado River water.
• For the month of September 2019, the District sold 33 meters (38
EDUs), generating $339,119 in revenue. Projection for this period was 51.3 meters (61 EDUs), with a budgeted revenue of $536,772. The total revenue for Fiscal Year 2020 is $1,743,753 against the annual budget of $6,441,264.
Water System Operations (reporting for September):
• On Tuesday, September 3rd, staff assisted Inspections with a developer project shutdown and isolated a section of main on Airway
Road between Britannia Boulevard and Cactus Road. The isolation was necessary so that the contractor could drop a tee and make a
connection for Continental Street. In addition, a defective saddle was found which extended the shutdown to September 13th; however, no customers affected.
• The following events occurred on Monday, September 9th:
o Staff performed a planned shutdown at Otay Mesa Road and Alta Road to replace a worn 2-inch saddle on the 24-inch AC line for
the Air Vac to be extended. The shutdown lasted from 8:00 AM to 4:15 PM and water trailers were provided for affected customers.
o SDCWA performed a treated water shutdown for Pipeline 4 repairs. The District was not affected by this shutdown.
• Under the terms and agreement between the District and Mexico, on
September 17th water deliveries to Tijuana, Mexico began at a rate of 5.5 MGD. A target of 220 AF was met by September 30th.
• On Monday, September 23rd, the City of San Diego South Bay Water Reclamation Plant notified the District of a planned shutdown for Tuesday, September 24th for emergency repair work. The service was restored in eight (8) hours.
12
Purchases and Change Orders:
• The following table summarizes purchases and Change Orders issued during the period from September 23 through October 25, 2019 that
were within staff’s signatory authority:
Date Action Amount
Contractor/ Consultant Project
9/23/19 P.O. $7,900.00 Dig-Smart, LLC
Dig-Smart Annual
Software Maintenance
9/23/2019 P.O. $2,160.00 Nth Generation Computing, Inc. Security Software Renewal
9/30/2019 P.O. $4,000.00 POSM Software,
LLC
Pipeline CCTV POSM
Support Renewal
10/1/2019 P.O. $1,154.00 Ranroy Printing Company Printing Services
10/3/2019 P.O. $3,845.00 Lizardi Training Center, LLC Safety Training
10/8/2019 P.O. $7,800.00 Cibola Systems
Corporation
Audio/Video
Consulting Services
10/9/2019 P.O. $1,500.00 Grossmont-Cuyamaca Community College
Annual HAZWOPER Training
10/9/2019 P.O. $49,000.00 Environmental
Systems Research
ESRI EEAP Annual
Software Support
10/9/2019 P.O. $23,761.60 Insight Public Sector, Inc.
Email/Web Security Licenses and Support
10/24/2019 P.O. $3,449.25 Underground
Solutions
Kempton Street
Water Line Relocation (P2655)
10/25/2019 P.O. $1,121.52 Piping Technology and Products,
Inc.
Portable Water
Pumps (ap000)
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Water Conservation and Sales:
• Water Conservation - September 2019 usage was 17% lower than September 2013. Since September 2018, customers have saved an
average of 15% over 2013 levels.
•
• The September potable water purchases were 2,770.8 acre-feet which is 4.8% above the budget of 2,643.1 acre-feet. The cumulative purchases through September were 8,699.2 acre-feet which is 3.2% above the cumulative budget of 8,429.6 acre-feet.
14
• The September recycled water purchases and production were 409.2
acre-feet which is 6.0% below the budget of 435.4 acre-feet. The cumulative production and purchases through September were 1,402.4
acre-feet which is 1.7% below the cumulative budget of 1,426.8 acre-feet.
Potable, Recycled, and Sewer (Reporting up to the month of September):
• Total number of potable water meters: 50,863.
• Total number of sewer connections: 4,738.
• Recycled water consumption for the month of September:
o Total consumption: 465.12 acre-feet or 151,559,760 gallons. o Average daily consumption: 5,051,992 gallons per day. o Total cumulative recycled water consumption since September 1, 2018: 1415 acre-feet. o Total number of recycled water meters: 730.
• Wastewater flows for the month of September:
o Total basin flow: 1,537,847 gallons per day. This is an increase of 3.36 percent from September 2018.
o Spring Valley Sanitation District flow to Metro: 510,338 gallons per day.
15
o Total Otay flow: 1,027,567 gallons per day. o Flow processed at the Ralph W. Chapman Water Recycling Facility: 775,443 gallons per day.
o Flow to Metro from Otay Water District: 252,080 gallons per day.
• By the end of September there were 6,749 wastewater EDUs.
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
JUL AUG
-$200,000
-$400,000
-$600,000
-$800,000
-$1,000,000
-$1,200,000
SEP
COMPARATIVE BUDGET SUMMARY
NET REVENUES AND EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
OCT NOV DEC JAN FEB
The year-to-date actual net revenues through September show a positive variance of $100,273.
-YTD Actual Net Revenues
-YTD Budget Net Revenues
--vTD Variance in Net Revenues
MAR APR MAY
REVENUES:
4110 Potable Water Sales
31-4118 Recycled Water Sales
4140 Potable Energy Charges
4120 Potable System Charges
4150 Potable MWD & CW A Fixed Charges
4310 Potable Penalties
Total Water Sales
4210 Sewer Charges
4133 Meter Fees
4136 Capacity Fee Revenues
4414 Non-Operating Revenues
4621 Tax Revenues
4512 Interest
Total Revenues
EXPENSES:
5511 Potable Water Purchases
5515 Recycled Water Purchases
5523 CWA-Infrastructure Access Charge
5521 CWA-Customer Service Charge
5524 CWA-Reliability Charge
5522 CWA-Emergency Storage Charge
5531 MWD-Capacity Res Charge
5532 MWD-Readiness to Serve Charge
Subtotal Water Purchases
5411 Power Charges
Payroll & Related Costs
Material & Maintenance
Administrative Expenses
5251 Legal Fees
Expansion Reserve
Replacement Reserve
OPEB Trust
General Fund Reserve
Total Expenses
EXCESS REVENUES(EXPENSE)
F:/MORPT/FS2020-0919
OTAY WATER DISTRICT
COMPARATIVE BUDGET SUMMARY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
Annual
Budget Actual Budget
$ 52,353,600 $ 16,399,767 $ 16,136,700
9,816,800 3,670,005 3,786,900
2,366,100 705,128 681,600
16,078,600 3,956,590 3,921,000
12,258,800 3,022,347 3,011,100
894,400 202,844 223,500
93,768z300 27z956,681 27,760 800
2,890,000 760,673 757,200
229,400 46,780 57,600
1,868,900 481,868 467,100
2,065,900 471,427 480,300
4,615,900 140,582 136,000
367,900 87 148 92,100
$ 105,806,300 $ 29,945,159 $ 29,751,100
$ 37,282,800 $ 11,349,310 $ 11,000,600
4,058,400 1,706,600 1,706,600
2,380,800 532,392 532,500
1,659,600 404,010 404,100
2,377,200 528,040 528,000
4,579,800 1,115,698 I, 115,700
606,600 156,493 156,600
870,000 197,863 237,000
53z815,200 15 990,406 15,681,100
3,184,700 890,421 931,300
21,157,700 4,760,972 4,868,000
3,834,100 892,484 993,725
5,713,800 1,232,701 1,321,476
620,000 277,403 155,000
4,927,300 1,231,800 1,231,825
7,513,000 1,878,300 1,878,250
1,038, I 00 259,500 259,525
954,400 238,600 238,600
$ I 05,806,300 $ 28,414,587 $ 28,320,801
$ $ 1,530,572 $ 1,430,299
Exhibit A
YTD
Variance Var%
$ 263,067 1.6%
(116,895) (3.1%)
23,528 3.5%
35,590 0.9%
11,247 0.4%
{20,656) {9.2%}
195,881 0.7%
3,473 0.5%
(10,820) (18.8%)
14,768 3.2%
(8,873) (1.8%)
4,582 3.4%
{4,952) (5.4%)
$ 194,059 0.7%
$ (348,71 0) (3.2%)
0.0%
108 0.0%
90 0.0%
(40) (0.0%)
2 0.0%
107 0.1%
39,137 16.5%
(309,306) (2.0%)
40,879 4.4%
107,028 2.2%
101,241 10.2%
88,775 6.7%
(122,403) (79.0%)
25 0.0%
(50) (0.0%)
25 0.0%
0.0%
$ (93,786) (0.3%)
$ 100,273
10/28/2019 4:06 PM
OTAY WATER DISTRICT
INVESTMENT PORTFOLIO REVIEW
September 30,2019
INVESTMENT OVERVIEW & MARKET STATUS:
At the latest Federal Reserve Board's regular scheduled meeting on September 18, 2019, the federal funds rate was decreased from 2.00-
2.25 to 1. 75-2.00% in light of the implications of global developments for the economic outlook as well as muted inflation pressures. The
action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions, and inflation near the
Committee's symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook remain. There have been no
further changes made to the federal funds rate at the most recent meeting which was held on October 11, 2019. The Committee will continue
to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a
strong labor market and inflation near its symmetric 2 percent objective as it contemplates the future path of the target range for the federal
funds rate. In determining the timing and size of future adjustments to the target range for the federal funds rate, they went on to say: "the
Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent
inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions,
indicators of inflation pressures and inflation expectations, and readings on financial and international devf!lopments. "
The District's effective rate ofreturn for the month of September 2019 was 1.93%, which was three basis points higher than the previous
month. LAIF return on deposits was six basis points lower than the previous month, reaching an average effective yield of 2.28% for the
month of September 2019. Based on our success at maintaining a competitive rate of return on our portfolio during this extended period of
low interest rates, no changes in investment strategy regarding returns on investment are being considered at this time. The desired portfolio
mix is important in mitigating any liquidity risk from unforeseen changes in LAIF or County Pool policy.
In accordance with the District's Investment Policy, all District funds continue to be managed based on the objectives, in priority order, of
safety, liquidity, and return on investment.
PORTFOLIO COMPLIANCE: September 30, 2019
Investment State Limit Otay Limit Otay Actual
8.01: Treasury Securities 100% 100% 0
8.02: Local Agency Investment Fund (Operations) $65 Million $65 Million $27.19 Million
8.02: Local Agency Investment Fund (Bonds) 100% 100% $11.80 Million
8.03: Federal Agency Issues 100% 100% $25.71 Million
8.04: Certificates of Deposit 30% 15% 0
8.05: Short-Term Commercial Notes 25% 10% 0
8.06: Medium-Term Commercial Debt 30% 10% 0
8.07: Money Market Mutual Funds 20% 10% 0
8.08: San Diego County Pool 100% 100% 0.43%
12.0: Maximum Single Financial Institution 100% 50% 2.23%
Target: Meet or Exceed 100% of LAIF
~ 3.00
Ill E Ui Ill > .5 c 0 c .... :I -;
IIi:
Performance Measure FY-20
Return on Investment
Month
•Otay o Difference
Otay Water District
Investment Portfolio: 09/30/2019
$25,712,675~
38.68% ~
Total Cash and Investments: $66,468,525(Book Value)
39,276,886
59.09%
0 Banks (Passbook/Checking/CO) • Pools (LAIF & County) 0 Agencies & Corporate Notes
Investments
Federal Agency Issues-Callable
Federal Agency Issues-Coupon
BOND PROCEEDS (lAIF)
Local Agency Investment Fund (LAIF)
San Diego County Pool
Investments
Cash
Passbook/Checking (not included in yield calculations)
Total Cash and Investments
Total Earnings
Current Year
Average Dally Balance
Effective Rate of Return
Par
Value
22,000,000.00
3,650,000.00
11,800,000.00
27,192,774.13
264,111.60
64,926,885.73
1,478,964.47
66,405,850.20
September 30 Month Ending
107,907.46
67,858,927.19
1.93%
OTAY
Portfolio Management
Portfolio Summary
September 30, 2019
Market
Value
21,969,660.00
3,699,530.50
11,619,365.24
27,237,446.66
265,000.00
65,031,022.62
1,478,964.47
66,509,987.09
Fiscal Year To Date
341,036.62
70,636,955.29
1.92%
Book
Value
22,000,000.00
3,712,675.23
11,800,000.00
27,192,774.13
264,111.60
64,989,560.96
1,476,964.47
66,468,525.43
%of Days to YTM YTM
Portfolio Term Maturity 360 Equlv. 366 Equiv.
33.65 1,065 126 1.464 1.505
5,71 736 710 1.454 1.474
18.16 1 2.249 2.260
41.64 2.249 2.260
0.44 2.220 2.251
100.00% 410 84 1.944 1.971
0.686 0.900
410 84 1.944 1.971
I hereby certify that the investments contained in this report are made in accordance with the District Investment Policy Number 27 adopted by the Board of Directors on May 01, 2019. The market value
information pro · e Data Corporation. The investments provide sufficient liquidity to meet the cash flow requirements of the District for the next six months of expenditures.
Reporting period 0910112019-0913012019
Run Date: 10/22/2019-14:53
IO-zc:; -t<t
Portfolio OT A Y
AP
PM (PRF _PM1) 7,3 0
Report Ver 7.3 5
Average
CUSIP Investment # Issuer Balance
Federal Agency Issues-Callable
3133EGWF8 2369 Federal Farm Credit Bank
3130A9NJ6 2371 Federal Home Loan Bank
3130MBM9 2374 Federal Home Loan Bank
3130ADC26 2382 Federal Home Loan Bank
3134GB4S8 2381 Federal Home Loan Mortgage
3136G4DZ3 2370 Federal National Mortage Assoc
3136G4FY4 2372 Federal National Mortage Assoc
3136G4DR1 2373 Federal National Mortage Assoc
3136G4JU8 2375 Federal National Mortage Assoc
3135GOS53 2377 Federal National Mortage Assoc
3136G4MA8 2379 Federal National Mortage Assoc
Subtotal and Average 22,000,000.00
Federal Agency Issues -Coupon
313378JP7 2384 Federal Home Loan Bank
313378JP7 2385 Federal Home Loan Bank
Subtotal and Average 3,218,623.23
BOND PROCEEDS (LAIF)
LAIF 2018 9015 STATE OF CALIFORNIA
Subtotal and Average 11,800,000.00
Local Agency Investment Fund (LAIF)
LAIF 9001 STATE OF CALIFORNIA
Subtotal and Average 27,709,440.80
San Diego County Pool
SO COUNTY POOL 9007 San Diego County
Subtotal and Average 284,111.60
Total and Average 67,858,927.19
Run Date: 10/22/2019-14:53
OTAY
Portfolio Management
Portfolio Details -Investments
September 30, 2019
Purchase
Date Par Value Market Value Book Value
1010312016 2,000,000,00 1,999,920.00 2,000,000.00
1012612016 2,000,000.00 1,999,640.00 2,000,000.00
1212712016 2,000,000.00 1,998,080.00 2,000,000.00
0112912018 2,000,000.00 1,999,000.00 2,000,000.00
1212812017 2,000,000.00 2,001,080.00 2,000,000.00
1012512016 2,000,000.00 1,999,000.00 2,000,000.00
1110812016 2,000,000.00 1,998,520.00 2,000,000.00
1012712016 2,000,000.00 1,999,220.00 2,000,000.00
1213012016 2,000,000.00 1,998,780.00 2,000,000.00
0112712017 2,000,000.00 1,998,280.00 2,000,000.00
0212812017 2,000,000.00 1 ,998,140.00 2,000,000.00
22,000,000.00 21,989,660.00 22,000,000.00
0910512019 1,005,000.00 1,018,637.85 1,022,257.15
0910512019 2,645,000,00 2,680,892.65 2,690,418.08
3,660,000.00 3,699,530.50 3,712,675.23 ----
11,800,000.00 11,819,385.24 11,800,000.00
11,800,000.00 11 ,819,385.24 11 ,800,000.00
27,192,774.13 27,237,446.88 27,192,774.13
27,192,774.13 27,237,446.88 27,192,774.13
284,111.60 285,000.00 284,111.60
284,111.60 286,000.00 284,111.60
64,926,886.73 66,031,022.62 64,989,560.96
Stated
Rate
1.170
1.200
1.450
2.200
2.000.
1.200
1_250
1.100
1.580
1.700
1.700
2.375
2.375
2.280
2.280
2.251
Page 1
YTM Daysto Maturity
S&P 360 Maturity Date
M 1.154 2 1010312019
M 1.183 10 1011112019
M 1.430 87 1212712019
M 2.170 486 0112912021
M 1.973 363 0912812020
M 1.184 24 1012512019
M 1.233 38 1110812019
M 1.085 16 1011712019
M 1.558 90 1213012019
M 1.677 118 0112712020
M 1.677 150 0212812020 ---------
1.484 126
1.454 710 0911012021
1.454 710 0911012021 ---------
1.454 710
2.249 ---------
2.249
2.249 ---------
2.249
2.220 ---------
2.220
1.944 84
Portfolio OT A Y
AP
PM (PRF _PM2) 7.3 0
Report Ver 7,3 5
CUSIP Investment# Issuer
Union Bank
UNION MONEY 9002 STATE OF CALIFORNIA
PETTY CASH 9003 STATE OF CALIFORNIA
UNION OPERATING 9004 STATE OF CALIFORNIA
PAYROLL 9005 STATE OF CALIFORNIA
RESERVE-10 COPS 9010 STATE OF CALIFORNIA
RESERVE-10 BABS 9011 STATE OF CALIFORNIA
UBNA-FLEX ACCT 9014 STATE OF CALIFORNIA
Average Balance
Total Cash and Investments
Run Date: 10/2212019-14:53
Average
Balance
0.00
67,868,927.19
OTAY
Portfolio Management
Portfolio Details -Cash
September 30, 2019
Purchase
Date Par Value
07/01/2019 30,002.19
2,950.00
1,330,496.78
07/01/2019 28,249.67
07/01/2019 15,845.63
07/01/2019 36,473.03
07/01/2019 34,947.17
66,406,860.20
Market Value
30,002.19
2,950.00
1,330,496.78
28,249.67
15,845.63
36,473.03
34,947.17
66,609,987.09
Book Value
30,002.19
2,950.00
1,330,496.78
28,249.67
15,845.63
36,473.03
34,947.17
66,468,626.43
Stated
Rate
0.010
1.000
0.010
0.010
S&P
Page2
YTM Daysto
360 Maturity
0.010
0.000
0.986
0.000
0.010
0.010
0.000
1.944 84
Portfolio OT A Y
AP
PM (PRF _PM2) 7 .3.0
Percent
CUSIP Investment# Issuer of Portfolio
Issuer: STATE OF CALIFORNIA
BOND PROCEEDS (LAIF)
Subtotal and Balance
Union Bank
UNION MONEY 9002 STATE OF CALIFORNIA
UNION OPERATING 9004 STATE OF CALIFORNIA
RESERVE-10 COPS 9010 STATE OF CALIFORNIA
RESERVE-10 BABS 9011 STATE OF CALIFORNIA
UBNA-FLEX ACCT 9014 STATE OF CALIFORNIA
Subtotal and Balance
Local Agency Investment Fund (LAIF)
LAIF 9001 STATE OF CALIFORNIA
Subtotal and Balance
Issuer Subtotal 60.946%
Issuer: Federal Farm Credit Bank
Federal Agency Issues-Callable
Subtotal and Balance
Issuer Subtotal 3.012%
Issuer: Federal Home Loan Bank
Federal Agency Issues-Callable
Subtotal and Balance
Federal Agency Issues -Coupon
313378JP7 2384 Federal Home Loan Bank
313378JP7 2385 Federal Home Loan Bank
Run Date: 10/22/2019 • 14:58
OTAY
Activity Report
Sorted By Issuer
September 1, 2019-September 30, 2019
Par Value
Beginning Current Transaction
Balance Rate Date
11 ,800,000.00
0.010
1.000
0.010
0.010
4,620,433.30
2.280
28,892,774.13
46,313,207.43
2,000,000.00
2,000,000.00
6,000,000.00
2.375 09/05/2019
2.375 09/05/2019
Par Value
Purchases or Redemptions or
Deposits Withdrawals
20,000.07 0.00
1,477,700,07 921,636.02
12,186.74 1,034,501.91
32,073.26 2,722,644.34
0.00 4,646.70
1,641,960.14 4,683,428.97
3,100,000.00 4,800,000.00
3,100,000.00 4,800,000.00
4,641,960.14 9,483,428.97
0.00 0.00
1,005,000.00 0.00
2,645,000.00 0.00
Ending
Balance
11,800,000.00
1 ,478,964.47
27,192,774.13
40,471 0 738.60
2,000,000.00
2,000,000.00
6,000,000.00 ------
Portfolio OT A Y
AP
DA (PRF _DA) 7.2.0
Report Var 7,3 5
Percent
CUSIP Investment# Issuer of Portfolio
Subtotal and Balance
Issuer Subtotal 14.532%
Issuer: Federal Home Loan Mortgage
Federal Agency Issues-Callable
Subtotal and Balance
Issuer Subtotal 3.012%
Issuer: Federal National Mortage Assoc
Federal Agency Issues-Callable
Subtotal and Balance
Issuer Subtotal 18.071%
Issuer: San Diego County
San Diego County Pool
Subtotal and Balance
Issuer Subtotal 0.428%
Total 100.000%
Run Date: 1012212019-14:58
OTAY
Activity Report
September 1, 2019-September 30, 2019
Par Value
Beginning Current Transaction Purchases or
Balance Rate Date Deposits
0.00 3,660,000.00
6,000,000.00 3,660,000.00
2,000,000.00
2,000,000.00 0.00
12,000,000.00
12,000,000.00 0.00
284,111.60
284,111.60 0.00
67,697,319.03 8,291,960.14
ParValut~
Redemptions or
Withdrawals
0.00
0.00
0.00
0.00
o.oo
9,483,428.97
Page2
Ending
Balance
3,660,000.00
9,660,000.00
2,000,000.00
2,000,000.00
12,000,000.00
12,000,000.00
284,111.60
284,111.60
66,406,860.20
Portfolio OT A Y
AP
OA (PRF _DA) 7 2.0
Report Ver 7.3 5
OTAY
Duration Report
Sorted by Investment Type -Investment Type
Through 09/30/2019
Investment Book Par
Security ID Investment# Fund Issuer Class Value Value
3133EGWF8 2369 99 Federal Farm Credit Bank Fair 2,000,000.00 2,000,000.00
3136G4DZ3 2370 99 Federal National Mortage Assoc Fair 2,000,000.00 2,000,000.00
3130A9NJ6 2371 99 Federal Home Loan Bank Fair 2,000,000.00 2,000,000.00
3136G4FY4 2372 99 Federal National Mortage Assoc Fair 2,000,000.00 2,000,000.00
3136G4DR1 2373 99 Federal National Mortage Assoc Far 2,000,000.00 2,000,000.00
3130AABM9 2374 99 Federal Home Loan Bank Fair 2,000,000.00 2,000,000.00
3136G4JU8 2375 99 Federal National Mortage Assoc Fair 2,000,000.00 2,000,000.00
3135GOS53 2377 99 Federal National Mortage Assoc Fair 2,000,000.00 2,000,000.00
3136G4MA8 2379 99 Federal National Mortage Assoc Fair 2,000,000.00 2,000,000,00
3134GB4S8 2381 99 Federal Home Loan Mortgage Fair 2,000,000.00 2,000,000.00
3130ADC26 2382 99 Federal Home Loan Bank Fair 2,000,000,00 2,000,000.00
313378JP7 2384 99 Federal Home Loan Bank Fair 1 ,022,257.15 1,005,000.00
313378JP7 2385 99 Federal Home Loan Bank Fair 2,690,418.08 2,645,000.00
LAIF 2018 9015 99 STATE OF CALIFORNIA Fair 11,800,000.00 11,800,000.00
LA IF 9001 99 STATE OF CALIFORNIA Fair 27,192,774.13 27,192,774.13
SDCOUNTY 9007 99 San Diego County Fair 284,111.60 284,111 .60
Report Total 64,989,660.96 64,926,886.73
Run Date: 10/2212019-14:48 Page 1
Market Current YTM
Value Rate 360
1 ,999,920.00 1.170000 1.154
1,999,000.00 1.200000 1.184
1 ,999,640.00 1.200000 1.183
1,998,520.00 1.250000 1.233
1 ,999,220.00 1.100000 1.085
1 ,998,080.00 1.450000 1.430
1,998,780.00 1.580000 1.558
1 ,998,280.00 1.700000 1.677
1 ,998,140.00 1.700000 . 1.677
2,001,080.00 2 000000 1.973
1,999,000.00 2.200000 2.170
1,018,637.85 2.375000 1.454
2,680,892.65 2.375000 1.454
11,819,385.24 2.280000 2.249
27,237,446.88 2.280000 2.249
285,000.00 2.251000 2.220
66,031,022.62
Current
Yield
1.178
1.301
1.236
1.399
1.178
1.644
1.703
1.874
1.888
1.945
2.239
1.662
1.662
2.280
2.280
2.251
2.014
Maturity/ Modified
Call Date Duration
10/03/2019 0.005
10/25/2019 0.065
10/11/2019 0.027
11/08/2019 0.104
10/17/2019 0.043
12/27/2019 0.238
12/30/2019 0.246
01/27/2020 0.323
02/28/2020 0.410
09/28/2020 0.977
01/29/2021 1.296
09/10/2021 1.891
09/10/2021 1.891
0.000
0.000
0.000
0.222
Portfolio OT A Y
AP
DU (PRF _DU) 7 1.1
Report Ver. 7 3 5
CUSIP Investment #
Fund: Treasury Fund
3134GB4S8
3136G4DZ3
3136G4JU8
3136G4MA8
3136G4FY4
3136G4DR1
3135GOS53
313378JP7
3130AABM9
3130A9NJ6
3130ADC26
2381
2370
2375
2379
2372
2373
2377
2384
2374
2371
2382
313378JP7 2385
PETTY CASH 9003
RESERVE-10 COPS 9010
LAIF 2018 9015
RESERVE-10 BABS 9011
PAYROLL 9005
UBNA-FLEX ACCT 9014
UNION MONEY 9002
UNION OPERATING 9004
LAIF 9001
3133EGWF8 2369
SO COUNTY POOL 9007
Run Dale: 10/22/2019-14:46
Fund
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
99
Investment
Class Maturity
Date
Fair Value 09/28/2020
Fair Value 10/25/2019
Fair Value 12/30/2019
Fair Value 02/28/2020
Fair Value 11/08/2019
Fair Value 10/17/2019
Fair Value 01/27/2020
Fair Value 09/10/2021
FairValue 12/27/2019
Fair Value 10/11/2019
Fair Value 01/29/2021
Fair Value 09/10/2021
Amortized
Amortized
Fair Value
Amortized
Amortized
Amortized
Amortized
Amortized
Fair Value
Fair Value 10/03/2019
Fair Value
Subtotal
Total
OTAY
GASB 31 Compliance Detail
Sorted by Fund-Fund
September 1, 2019-September 30, 2019
Beginning
Invested Value
2,000,240.00
1,997,620.00
1,998,180.00
1,998,180.00
1,997,280.00
1,997,580.00
1,997,660.00
0.00
1,996,340.00
1,998,220.00
2,000,380.00
0.00
2,950.00
1,038,160.80
11,820,199.12
2,727,044.11
28,249.67
39,593.87
10,002.12
774,432.73
28,942,232.49
1,998,340.00
283,000.00
67,646,884.91
67,646,884.91
Purchase
of Principal
0.00
0.00
o.oo
0.00
0.00
0.00
0.00
1,022,899.05
0.00
0.00
0.00
2,692,107.45
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3,716,006.60
3,716,006.60
Addition
to Principal
0.00
o.oo
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
12,186.74
0.00
32,073 26
0.00
0.00
20,000.07
1,477,700.07
3,100,000.00
0.00
0.00
4,641,960.14
4,641,960.14
Redemption
of Principal
0.00
0.00
0.00
0.00
0.00
0,00
0,00
0.00
0.00
0.00
0,00
0.00
0.00
1,034,501.91
0.00
2,722,644.34
0.00
4,646.70
0.00
921,636,02
4,800,000.00
0.00
0.00
9,483,428.97
9,483,428.97
Adjustment in Value
Amortization
Adjustment
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Change In
Market Value
840.00
1,380.00
600.00
-40.00
1,240,00
1,640.00
620.00
-4,261,20
1,740.00
1,420.00
-1 ,380,00
-11,214.80
0.00
o.oo
-813.88
0.00
0,00
0.00
0.00
0.00
-4,785.61
1,580.00
2,000.00
-9,435.49
-9,435.49
Ending
Invested Value
2,001 ,080.00
1,999,000.00
1,998,780.00
1,998,140.00
1,998,520.00
1,999,220.00
1,998,280.00
1,018,637.85
1,998,080.00
1,999,640.00
1,999,000.00
2,680,892.65
2,950.00
15,845.63
11,819,385.24
36,473.03
28,249.67
34,947.17
30,002.19
1,330,496.78
27,237,446.88
1,999,920.00
285,000.00
66,609,987.09
66,609,987.09
Portfolio OTAY
AP
GO (PRF _GO) 7 1 1
Report Ver 7 3 5
OTAY
Interest Earnings
Sorted by Fund -Fund
September 1, 2019-September 30, 2019
Yield on Beginning Book Value
Security Ending Beginning Ending Maturity
CUSIP Investment# Fund Type Par Value Book Value Book Value Date
-----
Fund: Treasury Fund
3134GB4S8 2381 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 09/28/2020
3136G4DZ3 2370 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 10/25/2019
3136G4JU8 2375 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 12/30/2019
3136G4MA8 2379 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 02128/2020
3136G4FY4 2372 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 11/08/2019
3136G4DR1 2373 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 1011712019
3135GOS53 2377 99 MC1 2,000,000.00 2,000,000.00 2,000,000,00 0112712020
313378JP7 2384 99 FAC 1,005,000.00 0.00 1,022,257.15 09/10/2021
3130AABM9 2374 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 1212712019
3130A9NJ6 2371 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 1011112019
3130ADC26 2382 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 01/2912021
313378JP7 2385 99 FAC 2,645,000.00 0.00 2,690,418.08 0911012021
RESERVE-10 COPS 9010 99 PA1 15,845.63 1 ,038,160.80 15,845.63
LAIF 2018 9015 99 LA2 11 ,800,000.00 11,800,000.00 11,800,000.00
RESERVE-10 BABS 9011 99 PA1 36,473.03 2,727,044.11 36,473.03
UNION MONEY 9002 99 PA1 30,002.19 10,002.12 30,002.19
UNION OPERATING 9004 99 PA1 1,330,496.78 774,432.73 1,330,496,78
LAIF 9001 99 LA1 27,192,774.13 28,892,774.13 27,192,774.13
3133EGWF8 2369 99 MC1 2,000,000.00 2,000,000.00 2,000,000.00 10/03/2019
SO COUNTY POOL 9007 99 LA3 284,111.60 284,111.60 284,111.60
Subtotal 66,339,703.36 67,626,526.49 66,402,378.69
Total 66,339,703.36 67,526,525.49 66,402,378.59
Run Date: 10/2212019-14:49
CurrentAnnuallzed Interest
Rate Yield Earned
2.000 2,028 3,333.33
1.200 1,217 2,000.00
1.580 1.602 2,633.34
1.700 1.724 2,833.34
1.250 1.267 2,083.34
1.100 1.115 1,833,33
1.700 1.724 2,833.33
2.375 1.485 1,723.86
1.450 1.470 2,416.66
1.200 1.217 2,000.00
2.200 2.231 3,666.67
2.375 1.485 4,536.91
0.010 0.001 1,26
2.280 2.280 22,112.88
0.010 0,001 3.25
0.010 0.011 0.09
1.000 2.867 1,824.77
2.280 2.187 51,926.73
1.170 1.186 1,950.00
2.251 2.251 525,64 ---
1.866 110,238.73
1.856 110,238.73
Adjusted Interest Earnings
Amortization/
Accretion
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-641.90
0.00
0.00
0.00
-1,689.37
0.00
0.00
0.00
0.00
0.00
0,00
0.00
0.00
-2,331.27
-2,331.27
Adjusted Interest
Earnings
3,333.33
2,000.00
2,633.34
2,833.34
2,083.34
1,833.33
2,833.33
1,081.96
2,416.66
2,000,00
3,666.67
2,847.54
1.26
22,112.88
3.25
0.09
1,824.77
51 ,926.73
1,950.00
525.64
107,907.46
107,907.46
Portfolio OTAY
AP
IE (PRF _IE) 7 2.0
Report Ver 7 3 5
Check Total
12,177.95
11,750.50
1048379 09/09/19 AS-NEEDED SODIUM HYPOCHLORITE 655.96
1048048 09/03/19 AS-NEEDED SODIUM HYPOCHLORITE 377.18
1048294 09/06/19 AS-NEEDED SODIUM HYPOCHLORITE 929.28
1047841 08/29/19 AS-NEEDED SODIUM HYPOCHLORITE 819.95
1048049 09/03/19 AS-NEEDED SODIUM HYPOCHLORITE 1,311.93
1048380 09/09/19 AS-NEEDED SODIUM HYPOCHLORITE 1,219.00
1047842 08/29/19 AS-NEEDED SODIUM HYPOCHLORITE 1,836.70
1048296 09/06/19 AS-NEEDED SODIUM HYPOCHLORITE 1,639.91
AS-NEEDED SODIUM HYPOCHLORITE 2,951.84
1048295 09/06/19 AS-NEEDED SODIUM HYPOCHLORITE 2,623.85
2053118 09/25/19 01910 ABCANA INDUSTRIES INC 1048050 09/03/19
1049562 10/03/19 AS-NEEDED SODIUM HYPOCHLORITE 546.64
1049151 09/25/19 AS-NEEDED SODIUM HYPOCHLORITE 125.73
1049266 09/27/19 AS-NEEDED SODIUM HYPOCHLORITE 874.62
1049705 10/07/19 AS-NEEDED SODIUM HYPOCHLORITE 579.43
1049510 10/02/19 AS-NEEDED SODIUM HYPOCHLORITE 907.42
1049225 09/26/19 AS-NEEDED SODIUM HYPOCHLORITE 874.62
1049153 09/25/19 AS-NEEDED SODIUM HYPOCHLORITE 1,137.00
1049444 09/30/19 AS-NEEDED SODIUM HYPOCHLORITE 1,093.27
1049563 10/03/19 AS-NEEDED SODIUM HYPOCHLORITE 1,355.66
1049226 09/26/19 AS-NEEDED SODIUM HYPOCHLORITE 1,246.33
AS-NEEDED SODIUM HYPOCHLORITE 1,596.18
1049445 09/30/19 AS-NEEDED SODIUM HYPOCHLORITE 1,413.60
2053267 10/23/19 01910 ABCANA INDUSTRIES INC 1049706 10/07/19
1048572 09/12/19 AS-NEEDED SODIUM HYPOCHLORITE 677.83
1048573 09/12/19 AS-NEEDED SODIUM HYPOCHLORITE 612.23
1048726 09/16/19 AS-NEEDED SODIUM HYPOCHLORITE 1,093.27
1048851 09/18/19 AS-NEEDED SODIUM HYPOCHLORITE 959.89
1048904 09/19/19 AS-NEEDED SODIUM HYPOCHLORITE 1,209.16
1048903 09/19/19 AS-NEEDED SODIUM HYPOCHLORITE 1,202.60
1049154 09/23/19 AS-NEEDED SODIUM HYPOCHLORITE 1,497.78
1048574 09/12/19 AS-NEEDED SODIUM HYPOCHLORITE 1,421.25
AS-NEEDED SODIUM HYPOCHLORITE 1,858.56
1048575 09/12/19 AS-NEEDED SODIUM HYPOCHLORITE 1,645.38
2053204 10/09/19 01910 ABCANA INDUSTRIES INC 1048727 09/16/19
281.01
2053266 10/23/19 14617 A GLASCO INC 83284 09/26/19 BULLET-RESISTANT BARRIER - CS DESK 28,207.06 28,207.06
Amount
2053157 10/02/19 19821 1704 CACTUS RD LLC Ref002567606 09/30/19 UB Refund Cst #0000251641 281.01
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
Page 1 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
14,791.98
2,635.50
1,893.18
9,280.39 9,280.39
ELECTRICAL DESIGN (ENDING 7/31/19)14,270.82 14,270.82
2053206 10/09/19 17525 CALIFORNIA COMMERCIAL SECURITY 0201908412 09/13/19 MILESTONE VIDEO MGMT SFTW SERVICES
2053125 09/25/19 14112 BSE ENGINEERING INC 754115103 07/31/19
1,608.71
2053124 09/25/19 08156 BROWNSTEIN HYATT FARBER 772841 09/11/19 LEGISLATIVE ADVOCACY CONSULT SVC 6,475.95 6,475.95
59.50 59.50
2053163 10/02/19 19817 BROOKFIELD RESIDENTIAL Ref002567602 09/30/19 UB Refund Cst #0000244280 1,608.71
CUSTOMER REFUND 1,653.48 1,653.48
2053237 10/16/19 19828 BRENNAN AND ASSOCIATES Ref002567750 10/14/19 UB Refund Cst #0000069978
2053245 10/16/19 19834 BEVERLY J THOMAS 8113101519 10/15/19
4,446.99
2053162 10/02/19 19815 AYRES GROUP Ref002567599 09/30/19 UB Refund Cst #0000233433 352.33 352.33
117,337.25 117,337.25
2053271 10/23/19 07785 AT&T 000013612397 09/12/19 TELEPHONE SERVICES (8/12/19 - 09/11/19)4,446.99
EXPENSE REIMBURSEMENT (8/19/19)126.65 126.65
2053244 10/16/19 17264 ARTIANO SHINOFF ABED 302681 09/25/19 PROFESSIONAL SERVICES (THRU 8/31/19)
2053161 10/02/19 19121 APUY, MELISSA 081919 08/10/19
EMP ASSIST PROG (OCT 2019 - DEC 2019)946.59
77942 10/01/19 EMP ASSIST PROG (JULY 2019 - SEPT 2019)946.59
2053205 10/09/19 08967 ANTHEM EAP 77969 10/01/19
360.13
2053153 10/02/19 19781 ALICE GRELIAK Ref002567607 09/30/19 UB Refund Cst #0000253036 36.43 36.43
9,610.00 9,610.00
2053123 09/25/19 18296 ALBIREO ENERGY LLC PIN0003000 08/31/19 REPLACEMENT OF BATTERIES 360.13
AS-NEEDED UTILITY LOCATING (SEPT 2019)11,155.00 11,155.00
2053122 09/25/19 15024 AIRX UTILITY SURVEYORS INC 1908312019 09/06/19 AS-NEEDED UTILITY LOCATING (AUG 2019)
131614435 09/04/19 AS-NEEDED AQUA AMMONIA 828.00
2053270 10/23/19 15024 AIRX UTILITY SURVEYORS INC 2009302019 10/01/19
2,689.50
2053121 09/25/19 07732 AIRGAS SPECIALTY PRODUCTS INC 131614434 09/04/19 AS-NEEDED AQUA AMMONIA 1,807.50
73.37 73.37
2053269 10/23/19 07732 AIRGAS SPECIALTY PRODUCTS INC 131618749 10/02/19 AS-NEEDED AQUA AMMONIA 2,689.50
DEVELOPER PLAN REVIEW (7/1/19-8/30/19)7,560.18 7,560.18
2053160 10/02/19 19811 AIDA RADWAN Ref002567595 09/30/19 UB Refund Cst #0000223250
2053159 10/02/19 11462 AEGIS ENGINEERING MGMT INC 1441 09/05/19
1,013.64
2053158 10/02/19 13901 ADVANCED INDUSTRIAL SVCS INC 708312019 08/20/19 803-2 RES COAT & UPGRADE (ENDING 8/31/19)66,690.00 66,690.00
1,650.00 1,650.00
2053120 09/25/19 18122 ACC BUSINESS 192279732 08/27/19 INTERNET CIRCUIT SERVICES (7/11/19-8/10/19)1,013.64
SHAREPOINT SVCS (8/12/19-8/16/19)525.00 525.00
2053268 10/23/19 08488 ABLEFORCE INC 8850 10/08/19 SHAREPOINT SVCS (9/12/19-9/16/19)
2053119 09/25/19 08488 ABLEFORCE INC 8807 09/16/19
1048154 09/05/19 AS-NEEDED SODIUM HYPOCHLORITE 229.59
1047786 08/28/19 AS-NEEDED SODIUM HYPOCHLORITE 196.79
Page 2 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
2,308.00
16,929.79
17,949.86
1,018,999.73
110,080.69
BUSINESS MEETING 135.00 135.00
L240557 09/25/19 ALLEGRO METERS & REGISTERS 18,373.85
2053213 10/09/19 02612 COUNCIL OF WATER UTILITIES 091719 10/03/19
ALLEGRO METERS & REGISTERS 63,175.82
L209246 09/25/19 ALLEGRO METERS & REGISTERS 28,531.02
L177464 09/16/19 ALLEGRO METERS & REGISTERS 34,758.05
2053273 10/23/19 18943 CORE & MAIN LP 595 L209247 09/25/19
ALLEGRO METERS & REGISTERS 878,159.27
L177491 09/16/19 ALLEGRO METERS & REGISTERS 106,082.41
2053212 10/09/19 18943 CORE & MAIN LP 595 L056841 09/13/19
L304473 10/04/19 INVENTORY 4,644.03
L314032 10/07/19 INVENTORY 1,784.34
INVENTORY 6,012.45
L177474 09/25/19 INVENTORY 5,509.04
L145444 09/12/19 INVENTORY 7,151.48
2053272 10/23/19 18331 CORE & MAIN LP L255184 09/25/19
4,193.63 4,193.63
2053211 10/09/19 18331 CORE & MAIN LP L167135 09/12/19 INVENTORY 9,778.31
EXPENSE REIMBURSEMENT (9/28/19)165.00 165.00
2053127 09/25/19 18331 CORE & MAIN LP K979507 08/29/19 INVENTORY
2053167 10/02/19 11696 COFFIN, SHANNON 092819 09/28/19
13035 08/31/19 BACTERIOLOGICAL TESTING (8/20/19)113.00
13034 08/31/19 BACTERIOLOGICAL TESTING (8/20/19)103.00
13038 08/31/19 BACTERIOLOGICAL TESTING (8/28/19)302.00
13032 08/31/19 BACTERIOLOGICAL TESTING (8/1/19)290.00
13037 08/31/19 BACTERIOLOGICAL TESTING (8/26/19)510.00
13033 08/31/19 BACTERIOLOGICAL TESTING (8/20/19)302.00
20.00 20.00
2053126 09/25/19 04119 CLARKSON LAB & SUPPLY INC 13036 08/31/19 BACTERIOLOGICAL TESTING (8/22/19-8/26/19)688.00
CUSTOMER REFUND 2,046.00 2,046.00
2053210 10/09/19 08895 CITY OF LA MESA 21395 09/11/19 FINGERPRINTING SERVICES
2053209 10/09/19 00848 CASS CONSTRUCTION INC 1800091019 09/10/19
134.70
2053166 10/02/19 00848 CASS CONSTRUCTION INC 908312019 08/31/19 WATER LINE REPLACEMENT (ENDING 8/31/19)97,110.90 97,110.90
149.80 149.80
2053165 10/02/19 19582 CARRIVEAU, MATTHEW 092419092519 09/25/19 EXPENSE REIMBURSEMENT (9/24/19-9/25/19)134.70
CONSTRUCTION FOR 870-2 PS (8/1/19-8/31/19)2,755.50 2,755.50
2053246 10/16/19 19830 CARRILLO PROP INVS LLC Ref002567753 10/14/19 UB Refund Cst #0000252146
2053208 10/09/19 15177 CAROLLO ENGINEERS INC 0180314 09/13/19
21.68
2053207 10/09/19 04653 CARO, PATRICIA PC100719 10/07/19 TRAVEL ADVANCEMENT (10/28/19-10/30/19)144.00 144.00
2053164 10/02/19 19820 CARLENE MENO Ref002567605 09/30/19 UB Refund Cst #0000250988 21.68
Page 3 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
841.50
3,142.00
148.68
314.62
BI-WEEKLY PAYROLL DEDUCTION 75.00 75.00
10/03/19 BI-WEEKLY PAYROLL DEDUCTION 75.00 75.00
2053248 10/16/19 19640 FRANCHISE TAX BOARD Ben2567794 10/17/19
160.19
1699860 09/13/19 FLEET WASH SERVICES 154.43
2053172 10/02/19 19640 FRANCHISE TAX BOARD Ben2567666
FLEET WASH SERVICES 239.10 239.10
2053247 10/16/19 11962 FLEETWASH INC 1700772 09/20/19 FLEET WASH SERVICES
2053279 10/23/19 11962 FLEETWASH INC 1702521 08/23/19
FLEET WASH SERVICES 115.15
1684666 08/30/19 FLEET WASH SERVICES 33.53
2053171 10/02/19 11962 FLEETWASH INC 1692323 09/06/19
99.00
2053278 10/23/19 02591 FITNESS TECH 11445 10/01/19 GYM EQUIPMENT MAINTENANCE 135.00 135.00
99.00 99.00
2053277 10/23/19 17888 FIRST AMERICAN DATA TREE LLC 9003400919 09/30/19 DOCUMENT SERVICE (MONTHLY)99.00
INVENTORY 402.99 402.99
2053132 09/25/19 17888 FIRST AMERICAN DATA TREE LLC 9003400819 08/31/19 DOCUMENT SERVICE (MONTHLY)
2053214 10/09/19 03546 FERGUSON WATERWORKS # 1083 0689321 09/11/19
155.59
2053131 09/25/19 03546 FERGUSON WATERWORKS # 1083 0689049 09/12/19 INVENTORY 9,575.53 9,575.53
20.62 20.62
2053276 10/23/19 13825 ENRIQUEZ, LUIS 101519101619 10/17/19 EXPENSE REIMBURSEMENT (10/15/19-10/16/19)155.59
TRAVEL ADVANCEMENT (9/29/19-10/4/19)412.52 412.52
2053239 10/16/19 19831 EMILY PAREDES Ref002567754 10/14/19 UB Refund Cst #0000252227
2053130 09/25/19 14323 EDWARDS, JEFFREY 091919JE 09/19/19
1,769.29
2053170 10/02/19 17956 DW CONSTRUCTION WOD1049 09/19/19 WORK ORDER REFUND D1049-090394 327.82 327.82
7,900.00 7,900.00
2053238 10/16/19 19832 DOUG SHELLSTROM Ref002567755 10/14/19 UB Refund Cst #0000256208 1,769.29
TRAILER/WATER MIXER - 944-2 RESERVOIR 21,865.00 21,865.00
2053169 10/02/19 15855 DIG-SMART LLC 1359 08/14/19 DIGSMART SOFTWARE MAINTENANCE
2053129 09/25/19 11797 D&H WATER SYSTEMS INC I 2019-1045 09/03/19
1,487.00
5363081719 08/17/19 UPFP PERMIT RENEWAL (10/31/19-10/31/20)1,171.00
5365081719 08/17/19 UPFP PERMIT RENEWAL (10/31/19-10/31/20)484.00
UPFP PERMIT RENEWAL (10/31/19-10/31/20)484.00 484.00
2053168 10/02/19 00184 COUNTY OF SAN DIEGO 5364071719 08/17/19 UPFP PERMIT RENEWAL (10/31/19-10/31/20)
2053275 10/23/19 00184 COUNTY OF SAN DIEGO 1354082119 09/30/19
2003193E602420919 10/04/19 SHUT DOWN TEST (9/26/19)153.00
2003193E602480919 10/04/19 SHUT DOWN TEST (9/26/19)153.00
7,462.22 7,462.22
2053274 10/23/19 00184 COUNTY OF SAN DIEGO 2003193E602240919 10/04/19 SHUT DOWN TEST (9/26/19)535.50
BUSINESS MEETING 135.00 135.00
2053128 09/25/19 00099 COUNTY OF SAN DIEGO DPWAROTAYMWD081909/19/19 EXCAVATION PERMITS (AUG 2019)
2053213 10/09/19 02612 COUNCIL OF WATER UTILITIES 091719 10/03/19
Page 4 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
6,872.73
9,519.00
19,284.34
98.64
0141620 09/27/19 AS-NEEDED ENVIRO (7/27/19-8/31/19)1,104.98
0141272 09/26/19 AS-NEEDED ENVIRO (7/27/19-8/30/19)720.00
0141276 09/26/19 SAN MIGUEL HMA (7/27/19-8/30/19)9,811.75
0141653 09/30/19 AS-NEEDED ENVIRO (7/27/19-8/30/19)8,530.18
1,590.00
2053285 10/23/19 15622 ICF JONES & STOKES INC 0141599 09/26/19 AS-NEEDED ENVIRO (7/27/19-8/30/19)13,161.47
33.76 33.76
2053216 10/09/19 13349 HUNSAKER & ASSOCIATES 2019070288 09/10/19 LAND SURVEYING SERVICES (7/27/19-8/30/19)1,590.00
UB Refund Cst #0000224846 1,821.99 1,821.99
2053178 10/02/19 19818 HORACIO MIRELES Ref002567603 09/30/19 UB Refund Cst #0000249350
25428310919 10/09/19 WATER USAGE (8/8/19-10/7/19)49.32
2053177 10/02/19 19812 HOMEFED OTAY LAND II LLC Ref002567596 09/30/19
103.12
2053284 10/23/19 00062 HELIX WATER DISTRICT 243300100919 10/09/19 WATER USAGE (8/7/19-10/7/19)49.32
5,573.32 5,573.32
2053135 09/25/19 00062 HELIX WATER DISTRICT 070119 07/01/19 WEB HOSTING (JULY 2019 - JUNE 2020)103.12
UB Refund Cst #0000231573 34.65 34.65
2053283 10/23/19 02008 HELIX ENVIRONMENTAL 73839 09/30/19 AS-NEEDED ENVIRO (ENDING 9/22/19)
09/26/19 POTABLE PIPELINE REPLACEMENT (AUG 2019)42,180.28 42,180.28
2053176 10/02/19 19814 HELEN NEGRETE Ref002567598 09/30/19
14,667.00
11646516 09/20/19 MONOCHLORAMINE ANALYZER SUPPLIES 4,617.34
2053282 10/23/19 18436 HAZEN AND SAWYER DPC 200940027
PRESCRIPTION GLASS REIMBURSEMENT 400.00 400.00
2053215 10/09/19 00174 HACH COMPANY 11616161 08/30/19 ANNUAL HACH EQUIP PM SERVICE
09/30/19 LANDSCAPING SERVICES (SEPT 2019)9,144.00 9,144.00
2053251 10/16/19 09715 GUTIERREZ, JUAN 073119 07/31/19
9,144.00
18461 09/03/19 LANDSCAPING SERVICES (REPLACE VALVE)375.00
2053281 10/23/19 12907 GREENRIDGE LANDSCAPE INC 18645
CRADLEPOINT MODEM 462.25 462.25
2053134 09/25/19 12907 GREENRIDGE LANDSCAPE INC 18536 08/29/19 LANDSCAPING SERVICES (AUGUST 2019)
100996899 09/05/19 CRADLEPOINT NETCLOUD BUNDLES 859.09
2053280 10/23/19 03537 GHA TECHNOLOGIES INC 101002003 09/30/19
745.42 745.42
2053133 09/25/19 03537 GHA TECHNOLOGIES INC 100995096 08/28/19 CRADLEPOINT NETCLOUD BUNDLES 6,013.64
BI-WEEKLY PAYROLL DEDUCTION 125.00 125.00
2053175 10/02/19 19807 FRANCISCO MARQUEZ Ref002567590 09/30/19 UB Refund Cst #0000042960
2053174 10/02/19 19768 FRANCHISE TAX BOARD Ben2567668 10/03/19
576.57
2053250 10/16/19 19768 FRANCHISE TAX BOARD Ben2567796 10/17/19 BI-WEEKLY PAYROLL DEDUCTION 125.00 125.00
576.57 576.57
2053249 10/16/19 19740 FRANCHISE TAX BOARD Ben2567798 10/17/19 BI-WEEKY PAYROLL DEDUCTION 576.57
2053173 10/02/19 19740 FRANCHISE TAX BOARD Ben2567670 10/03/19 BI-WEEKY PAYROLL DEDUCTION
Page 5 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
33,604.63
18,305.29
21,863.26
99,750.09
33.15
2053155 10/02/19 18674 MAHIR ALKATIB Ref002567600 09/30/19 UB Refund Cst #0000240412 33.15 33.15
8,217.05 8,217.05
2053184 10/02/19 19808 MADELEINE TOLAND Ref002567591 09/30/19 UB Refund Cst #0000047561 33.15
SAFETY TRAINING 3,845.00 3,845.00
2053289 10/23/19 18905 M RAE ENGINEERING INC 908312019 10/01/19 PIPE CP IMPROVE PHASE II (ENDING 8/31/19)
2053288 10/23/19 19823 LIZARDI TRAINING CENTER LLC 100 10/09/19
99.03
2053183 10/02/19 19308 LIGHT HOUSE BUILDERS INC WOD1024 09/19/19 WORK ORDER REFUND D1024-090354 946.39 946.39
768.75 768.75
2053241 10/16/19 19829 LAURA RUIZ Ref002567752 10/14/19 UB Refund Cst #0000251028 99.03
UB Refund Cst #0000014410 143.15 143.15
2053137 09/25/19 12276 KONECRANES INC 154175049 09/17/19 CRANE INSPECTIONS
OWS-010 08/23/19 RPLCMNT 1-TON & DUMP TRUCKS CP #3, 5 & 6 47,061.02
2053182 10/02/19 19806 KEITH RIDGEWAY Ref002567588 09/30/19
117.25 117.25
2053181 10/02/19 05109 KEARNY PEARSON FORD OWS-011 08/23/19 RPLCMNT 1-TON & DUMP TRUCKS CP #3, 5 & 6 52,689.07
UB Refund Cst #0000001943 298.64 298.64
2053180 10/02/19 19816 JOSEPH COOPER Ref002567601 09/30/19 UB Refund Cst #0000243011
2053240 10/16/19 19826 JOHN PRICE Ref002567748 10/14/19
35,912.03
2053219 10/09/19 10563 JCI JONES CHEMICALS INC 800601 09/13/19 AS-NEEDED CHLORINE GAS 2,450.40 2,450.40
150.00 150.00
2053287 10/23/19 16996 JAUREGUI & CULVER INC 209302019 09/25/19 FUEL SYSTEM IMPROVE (ENDING 9/30/19)35,912.03
ANTENNA SUBLEASE (OCT 2019)1,845.00 1,845.00
2053154 10/02/19 19696 JASON GIRE Ref002567594 09/30/19 UB Refund Cst #0000188376
2053253 10/16/19 17106 IWG TOWERS ASSETS II LLC 508024 10/01/19
12,754.01
157477 07/31/19 BILL PROCESSING SERVICES (JULY 2019)6,680.14
157965 08/05/19 BILL PROCESSING SERVICES (JULY 2019)2,429.11
BILL PROCESSING SERVICES (JULY 2019)331.05 331.05
2053179 10/02/19 08969 INFOSEND INC 157478 07/31/19 BILL PROCESSING SERVICES (JULY 2019)
2053252 10/16/19 08969 INFOSEND INC 159581 09/10/19
158898 08/30/19 BILL PROCESSING SERVICES (AUG 2019)4,544.70
159352 09/03/19 BILL PROCESSING SERVICES (AUG 2019)2,441.90
855.43
2053218 10/09/19 08969 INFOSEND INC 158899 08/30/19 BILL PROCESSING SERVICES (AUG 2019)11,318.69
855.43 855.43
2053286 10/23/19 17816 INDUSTRIAL SCIENTIFIC CORP 2252872 09/30/19 GAS DETECTION PROGRAM (9/1/19-9/30/19)855.43
GAS DETECTION PROGRAM (8/12/19-9/11/19)316.93 316.93
2053136 09/25/19 17816 INDUSTRIAL SCIENTIFIC CORP 2243392 08/31/19 GAS DETECTION PROGRAM (8/1/19-8/31/19)
2053217 10/09/19 17816 INDUSTRIAL SCIENTIFIC CORP 2249787 09/12/19
0141598 09/26/19 AS-NEEDED ENVIRO (7/27/19-8/30/19)170.00
0141273 09/27/19 AS-NEEDED ENVIRO (7/27/19-8/30/19)106.25
Page 6 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
28,873.20
1,980.00 1,980.00
TOWEL LAUNDRY SERVICE 259.30 259.30
2053224 10/09/19 00137 PETTY CASH CUSTODIAN 100819 10/08/19 PETTY CASH REIMBURSEMENT (OCT 2019)
2053256 10/16/19 19310 PALM LAUNDRY INC OWD009 10/02/19
19,668.74
2053192 10/02/19 18562 PACIFIC WESTERN BANK 2108312019 09/06/19 RET/PACIFIC HYDROTECH A#7533 (AUG 2019)19,279.76 19,279.76
373,706.01 373,706.01
2053294 10/23/19 18562 PACIFIC WESTERN BANK 2209302019 10/07/19 RET/PACIFIC HYDROTECH A#7533 (SEPT 2019)19,668.74
870-2 PS REPLACEMENT (ENDING 8/31/19)366,315.49 366,315.49
2053293 10/23/19 06646 PACIFIC HYDROTECH CORPORATION 2209302019 10/07/19 870-2 PS REPLACEMENT (ENDING 9/30/19)
2053191 10/02/19 06646 PACIFIC HYDROTECH CORPORATION 2108312019 09/06/19
53.91
2053190 10/02/19 19809 OTTO BULSTER Ref002567592 09/30/19 UB Refund Cst #0000054279 63.69 63.69
500.00 500.00
2053189 10/02/19 19819 OLGA ARAGON Ref002567604 09/30/19 UB Refund Cst #0000249772 53.91
ENGINEERING DESIGN (7/1/19-7/26/19)18,455.00 18,455.00
2053292 10/23/19 19846 O'DAY CONSULTANTS INC 48548 10/03/19 PROPERTY EVALUATION
2053223 10/09/19 18332 NV5 INC 135864 09/10/19
2,160.00
2053222 10/09/19 07447 NTU TECHNOLOGIES INC 10776 07/22/19 POLYMER 908 14,539.04 14,539.04
24,429.75 24,429.75
2053291 10/23/19 02027 NTH GENERATION COMPUTING INC 35289H 09/27/19 SOFTWARE RENEWAL (9/18/19-9/17/20)2,160.00
GEOTECHNICAL SERVICES (6/30/19-7/26/19)9,270.00 9,270.00
2053221 10/09/19 00761 NINYO & MOORE GEOTECHNICAL 231195 09/20/19 GEOTECHNICAL SERVICES (7/26/19-8/30/19)
2053188 10/02/19 00761 NINYO & MOORE GEOTECHNICAL 230992 09/03/19
53.04
2053255 10/16/19 02848 NEWMAN, PATRICK 101019 10/10/19 EXPENSE REIMBURSEMENT (10/10/19)140.00 140.00
29.24 29.24
2053187 10/02/19 19813 MYROSLAVA ESPONIZA Ref002567597 09/30/19 UB Refund Cst #0000231158 53.04
HWUE - WATERSMART FIELD SERVICES 133.50 133.50
2053186 10/02/19 19822 MONICA MEZA Ref002567608 09/30/19 UB Refund Cst #0000256610
2053220 10/09/19 16613 MISSION RESOURCE CONSERVATION 405 10/03/19
42,630.75
2053140 09/25/19 18773 MICRO MOTION INC 40555607 09/05/19 MAG FLOWMETER 11,379.18 11,379.18
38,930.00 38,930.00
2053290 10/23/19 16608 MICHAEL BAKER INT'L INC 1060606 09/19/19 ENGINEERING DESIGN (6/24/19-9/1/19)42,630.75
TEMP METER W/BACKFLOW 8,356.09 8,356.09
2053139 09/25/19 16608 MICHAEL BAKER INT'L INC 1059064 09/05/19 870-2 PS INSPECT SERVICES (ENDING 9/1/19)
09/19/19 WORK ORDER REFUND D1000-090338 6,517.65 6,517.65
2053138 09/25/19 06648 MEASUREMENT CONTROL 210160 09/04/19
20,320.62
MTR17109040419 04/04/19 METER REFUND 8,552.58
2053185 10/02/19 10114 MCV23 LLC WOD1000
UB Refund Cst #0000091621 67.00 67.00
2053254 10/16/19 19475 MASS TRANSIT PROPERTIES LLC WOD0990A 05/03/19 WORK ORDER REFUND D0990-090304
2053242 10/16/19 19645 MARVASIA SMITH Ref002567751 10/14/19
18674 MAHIR ALKATIB Ref002567600 UB Refund Cst #0000240412
Page 7 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
2,399.25
3,898.00
092519 09/25/19 UTILITY EXPENSES (MONTHLY)56,278.95
091719 09/26/19 UTILITY EXPENSES (MONTHLY)47,180.41
250.00 250.00
2053197 10/02/19 00121 SAN DIEGO GAS & ELECTRIC 092719A 09/27/19 UTILITY EXPENSES (MONTHLY)85,139.22
ASSESSOR DATA (MONTHLY)125.00 125.00
2053146 09/25/19 00003 SAN DIEGO COUNTY WATER AUTH 1894 09/04/19 SOCAL WATER SMART HEW HET WBIC
2053259 10/16/19 02586 SAN DIEGO COUNTY ASSESSOR 201900758 10/01/19
95.00
2053297 10/23/19 19377 SAGEVIEW ADVISORY GROUP LLC 201930113 10/01/19 INVEST ADVISOR SVCS - (2019 Q3)5,750.00 5,750.00
21.76 21.76
2053156 10/02/19 19641 ROSEMARY CANNON Ref002567589 09/30/19 UB Refund Cst #0000038124 95.00
TUITION REIMBURSEMENT 581.00 581.00
2053196 10/02/19 19805 ROSE MARIE ELLIS-DOOLEY Ref002567587 09/30/19 UB Refund Cst #0000010311
2053229 10/09/19 06412 ROMERO, TANYA TAM100719 10/07/19
271.16
2053258 10/16/19 04542 ROBAK, MARK 090119093019A 09/30/19 MILEAGE REIMBURSEMENT (9/1/19-9/30/19)80.04 80.04
33.64 33.64
2053228 10/09/19 04542 ROBAK, MARK 090119093019 09/30/19 EXPENSE REIMBURSEMENT (9/1/19-9/30/19)271.16
WELDING, 5325 RICK POST 4,050.00 4,050.00
2053145 09/25/19 04542 ROBAK, MARK 080119083119 09/23/19 MILEAGE REIMBURSEMENT (8/1/19-8/31/19)
2053144 09/25/19 00521 RICK POST WELD & WET TAPPING 12359 09/03/19
DESIGN SERVICES (7/27/19-8/30/19)2,350.00
0070177 09/25/19 CAMPO RD SUPP SVCS (7/27/19-8/30/19)1,548.00
2053296 10/23/19 08972 RICK ENGINEERING COMPANY 17829D18 10/02/19
16,250.00
2053143 09/25/19 15647 RFYEAGER ENGINEERING LLC 19253 09/03/19 CORROSION SERVICES (8/1/19-8/31/19)7,275.00 7,275.00
2,000.00 2,000.00
2053295 10/23/19 15647 RFYEAGER ENGINEERING LLC 19272 10/03/19 CORROSION SERVICES (9/1/19-9/30/19)16,250.00
PRINTING SERVICES 1,154.00 1,154.00
2053142 09/25/19 04552 REA & PARKER RESEARCH 090619 09/06/19 EMPLOYEE SURVEY
2053195 10/02/19 00766 RANROY PRINTING COMPANY 28589 07/31/19
7,500.00
2053141 09/25/19 17616 RAMIREZ, LARRY 091919LR 09/19/19 TRAVEL ADVANCEMENT (9/29/19-10/4/19)412.52 412.52
4,000.00 4,000.00
2053227 10/09/19 10819 PREDICTIVE MAINTENANCE 191757 09/12/19 ANNUAL VIBRATION TESTING 7,500.00
EXPENSE REIMBURSEMENT (9/21/19-9/25/19)2,104.05 2,104.05
2053194 10/02/19 16208 POSM SOFTWARE LLC 2474 08/07/19 POSM SUPPORT RENEWAL (9/12/19-9/12/20)
2053257 10/16/19 03351 POSADA, ROD 092119092519 10/10/19
PROFESSIONAL WRITING SERVICES 1,349.25
1273 10/02/19 PROFESSIONAL WRITING SERVICES 1,050.00
2053226 10/09/19 06419 PLANT SOUP INC 1261 08/14/19
1,131.58
2053225 10/09/19 15081 PINOMAKI DESIGN 5895 10/01/19 OUTSIDE SERVICES 297.50 297.50
2053193 10/02/19 00137 PETTY CASH CUSTODIAN 100119 10/01/19 PETTY CASH REIMBURSEMENT (OCT 2019)1,131.58
Page 8 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
193,819.80
100,337.11
95.12
16,666.48
1,197.21
UNDERGROUND ALERTS (MONTHLY)640.30205330310/23/19 00427 UNDERGROUND SERVICE ALERT 920190494 10/01/19
DIG SAFE BOARD FEES (MONTHLY)619.61
820190498 09/01/19 UNDERGROUND ALERTS (MONTHLY)577.60
2053149 09/25/19 00427 UNDERGROUND SERVICE ALERT 18dsbfe4637 09/01/19
6,200.00
2053263 10/16/19 14177 THOMPSON, MITCHELL 090119093019 09/30/19 MILEAGE REIMBURSEMENT (9/1/19-9/30/19)223.30 223.30
6,747.00 6,747.00
2053302 10/23/19 18064 THE HOWARD E NYHART CO INC 0154082 09/30/19 ACTUARIAL SERVICES (SEPT 2019)6,200.00
SUPERVISORY TRAINING 5,425.00 5,425.00
2053301 10/23/19 03236 THE CENTRE FOR ORGANIZATION TCFOE2928 09/26/19 MANAGEMENT TRAINING
2053232 10/09/19 03236 THE CENTRE FOR ORGANIZATION TCFOE2910 09/11/19
2,500.00
2053231 10/09/19 17704 T&T JANITORIAL INC 2018-5776 08/31/19 JANITORIAL SERVICES (AUG 2019)4,780.00 4,780.00
173.95 173.95
2053200 10/02/19 18376 SVPR COMMUNICATIONS 1294 08/31/19 COMMUNICATION CONSULTANT (AUG 2019)2,500.00
EMPLOYEE PROGRAM (SEPT 2019)640.00 640.00
2053199 10/02/19 19810 SUSAN SROUR Ref002567593 09/30/19 UB Refund Cst #0000091010
472589 09/04/19 UNLEADED GAS & DIESEL 4,985.50
2053148 09/25/19 07362 SUSAN MARCUS 090519 09/05/19
9,830.70
2053147 09/25/19 10339 SUPREME OIL COMPANY 472588 09/04/19 UNLEADED GAS & DIESEL 11,680.98
80.00 80.00
2053300 10/23/19 15974 SUN LIFE FINANCIAL 38166090119 10/21/19 LIFE INSURANCE AND STD/LTD 9,830.70
CERTIFICATION RENEWAL 105.00 105.00
2053262 10/16/19 05755 STATE WATER RESOURCES 34188101519 10/15/19 CERTIFICATION RENEWAL
090119093019 09/30/19 MILEAGE REIMBURSEMENT (9/1/19 - 9/30/19)44.08
2053198 10/02/19 05755 STATE WATER RESOURCES 9733093019 09/30/19
221.00
2053261 10/16/19 16229 SMITH, TIMOTHY 080119083119 08/31/19 MILEAGE REIMBURSEMENT (8/1/19-8/31/19)51.04
2,118.34 2,118.34
2053230 10/09/19 15708 SEISMIC SWITCH INC 5323 09/23/19 SEISMIC SWITCH 221.00
EXPENSE REIMBURSEMENT (10/15/19-10/16/19)149.79 149.79
2053299 10/23/19 07783 SCRIPPS CENTER FOR EXECUTIVE 31560 09/10/19 EXECUTIVE PHYSICAL
100419A 10/04/19 UTILITY EXPENSES (MONTHLY)86.06
2053298 10/23/19 15446 SCOTT, ADAM 101519101619 10/17/19
UTILITY EXPENSES (MONTHLY)99,755.03
092619 10/10/19 UTILITY EXPENSES (MONTHLY)496.02
091819 09/18/19 UTILITY EXPENSES (MONTHLY)39.70
2053260 10/16/19 00121 SAN DIEGO GAS & ELECTRIC 100419 10/10/19
092419 09/24/19 UTILITY EXPENSES (MONTHLY)81.77
092419A 09/24/19 UTILITY EXPENSES (MONTHLY)64.20
092319 09/23/19 UTILITY EXPENSES (MONTHLY)4,846.55
02799706157 09/19/19 UTILITY EXPENSES (MONTHLY)189.00
Page 9 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
1,259.91
8,871.39
7,565.46
2,222.50 2,222.50
GARDEN FUND CONTRIBUTION (2019 Q2)22,990.00 22,990.00
2053151 09/25/19 15726 WATER SYSTEMS CONSULTING INC 4080 08/31/19 HYDRAULIC MODELING (ENDING 8/31/19)
2053233 10/09/19 14879 WATER CONSERVATION GARDEN JPA 9312 09/23/19
635181 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 216.00
635187 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 216.00
635193 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635170 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 216.00
635186 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635189 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635183 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635185 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635194 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635169 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 324.00
635190 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 378.32
635180 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 345.30
635188 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 432.00
635174 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 378.32
635179 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 432.00
635184 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 432.00
635176 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 540.00
635177 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 432.00
ANNUAL SITE SECURITY INSPECTION & SERV 680.31
635175 07/29/19 ANNUAL SITE SECURITY INSPECTION & SERV 599.21
634379 07/09/19 SECURITY EQUIPMENT INSTALL & MAINT 216.00
2053265 10/16/19 15807 WATCHLIGHT CORPORATION 635182 07/29/19
631123 06/28/19 SECURITY EQUIPMENT INSTALL & MAINT 1,071.44
631026 06/29/19 SECURITY EQUIPMENT INSTALL & MAINT 941.27
640972 09/15/19 SECURITY ALARM MONITORING 2,472.92
631122 06/28/19 SECURITY EQUIPMENT INSTALL & MAINT 1,296.00
14,831.00
2053150 09/25/19 15807 WATCHLIGHT CORPORATION 631387 07/05/19 SECURITY EQUIPMENT INSTALL & MAINT 2,873.76
4,927.00 4,927.00
2053304 10/23/19 08028 VALLEY CONSTRUCTION MANAGEMENT SD107711 10/05/19 CMIS (9/1/19-9/30/19)14,831.00
PORT. TOILET RENTAL 79.96 79.96
2053201 10/02/19 03207 USA IMAGING INC 4334 03/22/19 SCANNING SERVICES
2053264 10/16/19 15675 UNITED SITE SERVICES INC 114-9186494 09/25/19
UNDERGROUND ALERTS (MONTHLY)640.30
18dsbfe5248 10/01/19 DIG SAFE BOARD FEES (MONTHLY)619.61
2053303 10/23/19 00427 UNDERGROUND SERVICE ALERT 920190494 10/01/19
Page 10 of 11
Check Total Amount
CHECK REGISTER
Otay Water District
Date Range: 9/19/2019 - 10/23/2019
Check #Date Vendor Vendor Name Invoice Inv. Date Description
Amount Pd Total:3,815,892.12
Check Grand Total:3,815,892.12
281.76
2053236 10/09/19 18215 ZAYO GROUP LLC 2019100024566 10/01/19 COLOCATION SERVICES (OCT 2019)2,117.20 2,117.20
772.50 772.50
2053243 10/16/19 19827 YVONNE DYKES Ref002567749 10/14/19 UB Refund Cst #0000060379 281.76
EMPLOYEE BENEFITS (AUG 2019)772.50 772.50
2053307 10/23/19 08023 WORKTERRA 0094611 09/30/19 EMPLOYEE BENEFITS (SEPT 2019)
2053203 10/02/19 08023 WORKTERRA 0094314 08/31/19
177.00
2053152 09/25/19 19770 WILMER BASS 8610091919 09/19/19 CUSTOMER REFUND 700.00 700.00
342,128.53 342,128.53
2053202 10/02/19 02230 WILLIAMSON, KELLI 092219092519 09/25/19 EXPENSE REIMBURSEMENT (9/22/19-9/25/19)177.00
RET/WIER CONSTRUCTION A#2222 (AUG 2019)18,006.77 18,006.77
2053235 10/09/19 18101 WIER CONSTRUCTION CORP 2608312019 09/11/19 SEWER REPLACEMENT (AUG 2019)
2053234 10/09/19 18173 WESTERN ALLIANCE BANK 0608312019 09/11/19
1,875.00
2053306 10/23/19 01343 WE GOT YA PEST CONTROL INC 26637 09/28/19 AS-NEEDED BEE REMOVAL SVCS 125.00 125.00
2053305 10/23/19 15726 WATER SYSTEMS CONSULTING INC 4150 09/30/19 HYDRAULIC MODELING (ENDING 9/30/19)1,875.00
Page 11 of 11