Series 2010B Retail Certificates of Participation

Transcription

NEW ISSUE—BOOK-ENTRY ONLY RATING: See the caption “RATING” herein
$14,475,000
CASTAIC LAKE WATER AGENCY
RETAIL SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2010B
(SANTA CLARITA WATER DIVISION)
Dated: Date of Delivery
Due: August 1, as shown on the inside cover
The Certificates are being executed and delivered: (i) to provide funds to acquire certain improvements for the
benefit of the Agency’s Santa Clarita Water Division; and (ii) to pay certain costs of delivery.
Interest due with respect to the Certificates is payable on August 1, 2010 and each February 1 and August 1
thereafter. The Certificates are being executed and delivered in fully registered form and when executed and delivered
will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York.
Purchasers of the Certificates will not receive certificates representing their beneficial ownership in the Certificates
purchased. The principal and interest with respect to the Certificates are payable by the Trustee to Cede & Co. and
such interest and principal payments are to be disbursed to the beneficial owners of the Certificates through their
nominees. Individual purchases will be made in denominations of $5,000 or any integral multiple thereof.
The Certificates are subject to optional, mandatory and extraordinary prepayment prior to maturity
as described in this Official Statement.
The Certificates are payable from Series 2010B Installment Payments payable by the Agency and amounts on
deposit in certain funds and accounts established under the Trust Agreement. The obligation of the Agency to make
Series 2010B Installment Payments is a special obligation of the Agency payable solely from Net Retail System
Revenues. No revenues of the Agency’s Wholesale System are pledged to the payment of the Series 2010B Installment
Payments. The Agency has covenanted not to incur additional obligations payable from Net Retail System Revenues
senior to the Series 2010B Installment Payments. The Agency may incur additional obligations on a parity to the Series
2010B Installment Payments, subject to the terms and conditions set forth in the Installment Purchase Agreement.
THE OBLIGATION OF THE AGENCY TO MAKE THE SERIES 2010B INSTALLMENT PAYMENTS IS A
SPECIAL OBLIGATION OF THE AGENCY PAYABLE SOLELY FROM NET RETAIL SYSTEM REVENUES OF THE
AGENCY AND OTHER FUNDS DESCRIBED IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT
CONSTITUTE AN OBLIGATION OF THE AGENCY FOR WHICH THE AGENCY IS OBLIGATED TO PAY FROM
ANY OTHER AGENCY REVENUES OR TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE
AGENCY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE AGENCY TO MAKE
THE SERIES 2010B INSTALLMENT PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT DOES
NOT CONSTITUTE A DEBT OF THE AGENCY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL
SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION
OR RESTRICTION.
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, under existing
statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations
and compliance with certain covenants and requirements described in this Official Statement, the
portion of each Series 2010B Installment Payment constituting interest (and original issue discount)
with respect to the Certificates is excluded from gross income for federal income tax purposes and
is not an item of tax preference for purposes of calculating the federal alternative minimum
tax imposed on individuals and corporations. In the further opinion of Special Counsel, the
portion of each Installment Payment constituting interest (and original issue discount)
with respect to the Certificates is exempt from State of California personal income tax. See
the caption “TAX MATTERS” with respect to tax consequences relating to the Certificates.
This cover page contains certain information for quick reference only. It is not a summary of this
issue. Potential investors must read the entire Official Statement to obtain information essential to the
making of an informed investment decision.
The Certificates are offered when, as and if delivered and received by the Underwriter, subject to the approval
of the validity of the Installment Purchase Agreement and the Trust Agreement by Stradling Yocca Carlson &
Rauth, a Professional Corporation, Special Counsel, and certain other matters. Certain legal matters will be
passed upon for the Underwriter by its counsel, Ballard Spahr LLP, Salt Lake City, Utah, for the Agency
and the Corporation by McCormick, Kidman & Behrens, LLP, General Counsel to the Agency and the
Corporation, and for the Trustee by its counsel. It is anticipated that the Certificates will be available
for delivery through the facilities of The Depository Trust Company on or about May 11, 2010.
Citi
Dated: April 16, 2010
$14,475,000
MATURITY SCHEDULE
Maturity
(August 1)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Principal
Amount
$245,000
250,000
255,000
265,000
275,000
285,000
290,000
305,000
315,000
330,000
345,000
365,000
380,000
400,000
420,000
445,000
465,000
Interest
Rate
2.00%
2.00
3.00
3.00
4.00
4.00
3.00
3.25
5.00
5.00
5.00
5.00
5.00
5.25
5.25
5.25
5.25
Yield
0.50%
1.00
1.44
1.79
2.17
2.63
2.96
3.18
3.39
3.58
3.77
3.91
4.07
4.15
4.28
4.41
4.49
Price
101.825%
102.191
104.893
104.897
108.986
107.813
100.255
100.499
112.654
112.061
110.348*
109.106*
107.707*
109.081*
107.956*
106.845*
106.168*
$4,720,000 5.25% Term Certificates Due August 1, 2035 - Yield 4.74%, Price 104.086%*
$4,120,000 5.50% Term Certificates Due August 1, 2040 - Yield 4.79%, Price 105.678%*
* Priced to call on August 1, 2020.
BOARD OF DIRECTORS
R. J. Kelly, President
Peter Kavounas, Vice President
B.J. Atkins
Thomas P. Campbell
Edward A. Colley
William C. Cooper
Robert J. DiPrimio
Dean D. Efstathiou
E.G. “Jerry” Gladbach
Jacquelyn H. McMillan
William Pecsi
AGENCY STAFF
Dan Masnada, General Manager
April Jacobs, Secretary to the Board
Carlos Corrales, Controller
Valerie Pryor, Administrative Services Manager
SANTA CLARITA WATER DIVISION STAFF
Mauricio Guardado, Retail Manager
Elizabeth Ooms-Graziano, Senior Financial Analyst
SERVICES
General Counsel
McCormick, Kidman & Behrens, LLP
Costa Mesa, California
Special Counsel
Stradling Yocca Carlson & Rauth, A Professional Corporation
Newport Beach, California
Financial Advisor
Fieldman, Rolapp & Associates
Irvine, California
Trustee
U.S. Bank National Association
Los Angeles, California
(This page left intentionally blank)
Table of Contents
SCWD Obligations..................................... 20
Historic and Projected Financial Results of the
Santa Clarita Water Division....................... 20
CONSTITUTIONAL PROVISIONS................. 22
Article XIIIB .............................................. 22
Proposition 218 .......................................... 23
THE CORPORATION...................................... 24
TAX MATTERS............................................... 25
CERTAIN LEGAL MATTERS......................... 26
LITIGATION ................................................... 26
RATING........................................................... 27
UNDERWRITING............................................ 27
CONTINUING DISCLOSURE UNDERTAKING
......................................................................... 27
MISCELLANEOUS ......................................... 27
INTRODUCTION...............................................1
THE 2010B PROJECT........................................3
ESTIMATED SOURCES AND USES OF
FUNDS...............................................................4
THE CERTIFICATES.........................................4
Terms of the Certificates ...............................4
Prepayment of Certificates ............................5
Notice of Prepayment....................................6
Book-Entry Only System ..............................6
Transfers and Exchanges Upon Termination of
Book-Entry Only System ..............................6
Debt Service Schedule ..................................7
SECURITY FOR THE CERTIFICATES.............9
Retail System Revenue Pledge ......................9
Retail System Rate Covenant ........................9
Limitations on Parity and Superior
Obligations; Subordinate Obligations ..........10
THE CASTAIC LAKE WATER AGENCY ...... 11
Authority and Purpose ................................11
Agency Organization and Management .......11
Employee Relations ....................................13
Budget Process ...........................................14
Insurance ....................................................15
Wholesale Water System ............................15
SANTA CLARITA WATER DIVISION ........... 15
Acquisition by the Agency ..........................15
Santa Clarita Water Division Management and
Operation....................................................16
Santa Clarita Water Division Service Area ..16
Retail Water System ...................................16
Water Deliveries and Service Connections ..17
Retail Water Rate Structure and Billing.......19
Property Developer Fees .............................19
Impact Capacity Fees ..................................20
APPENDIX A INFORMATION RELATING
TO WHOLESALE WATER
SYSTEM .............................. A-1
APPENDIX B AUDITED FINANCIAL
STATEMENTS FOR FISCAL
YEAR ENDING
JUNE 30, 2009 ..................... B-1
APPENDIX C SUMMARY OF PRINCIPAL
LEGAL DOCUMENTS ....... C-1
APPENDIX D FORM OF
LEGAL OPINION ................ D-1
APPENDIX E DTC AND BOOK-ENTRY
ONLY SYSTEM....................E-1
APPENDIX F FORM OF CONTINUING
DISCLOSURE
CERTIFICATE...................... F-1
i
NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OR
SALE OF THE CERTIFICATES, OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND,
IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE AGENCY OR THE UNDERWRITER. THIS OFFICIAL
STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE
DESCRIBED ON THE COVER PAGE OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BY ANY SALE OF THE CERTIFICATES BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE
OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF
THE CERTIFICATES.
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 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 this information.
The information and expressions of opinion in this Official Statement 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 Agency since the date hereof.
This Official Statement contains forward-looking statements, including (a) statements containing
projections of Net Retail System Revenues, expenditures and other financial items, (b) statements of the plans and
objectives of the Agency for future operations of the water system, (c) statements of future economic performance
of the water system, and (d) statements of the assumptions underlying or relating to statements described in (a), (b)
and (c) above (collectively, “Forward-Looking Statements”). All statements other than statements of historical facts
included in this Official Statement, including without limitation statements under the caption “SANTA CLARITA
WATER DIVISION” and Appendix A—“INFORMATION RELATING TO WHOLESALE WATER SYSTEM”
regarding the Agency’s financial position, business strategy, capital resources and plans and objectives for future
operations of the water system, are Forward-Looking Statements. Although such expectations reflected in such
Forward-Looking Statements are reasonable, there can be no assurance that such expectations will prove to have
been correct. Statements of important factors (collectively, the “Cautionary Statements”) that could cause actual
results to differ materially from expectations of the Agency are disclosed in this Official Statement. All subsequent
written and oral Forward-Looking Statements attributable to the Agency or person acting on behalf of the Agency
are expressly qualified in their entirety by the Cautionary Statements.
This Official Statement is submitted in connection with the sale of the Certificates and may not be
reproduced or be used, as a whole or in part, for any other purpose.
In connection with the offering of the Certificates, the Underwriter may overallot or effect transactions
which stabilize or maintain the market price of the certificates 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 certificates to certain dealers and dealer banks and banks acting as agent and others at prices lower than the
public offering prices stated on the cover page of this Official Statement, and the Underwriter may change those
public offering prices from time to time.
THE CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “ACT”), IN RELIANCE UPON AN EXEMPTION CONTAINED IN THE ACT. THE
CERTIFICATES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY STATE.
The Agency maintains a website. However, the information presented there is not a part of this Official
Statement and should not be relied upon in making an investment decision with respect to the Certificates.
$14,475,000
INTRODUCTION
General. This Official Statement sets forth information concerning the sale and delivery of the
Castaic Lake Water Agency Retail System Revenue Certificates of Participation, Series 2010B (Santa Clarita
Water Division) (the “Certificates”) to be delivered by U.S. Bank National Association, as trustee (the
“Trustee”). See the caption “THE CERTIFICATES.”
Purposes of the Certificates. The Certificates are being executed and delivered: (i) to provide funds
to acquire certain improvements for the benefit of the Santa Clarita Water Division (“SCWD”) of the Castaic
Lake Water Agency (the “Agency”); and (ii) to pay certain costs of delivery.
Authority for Certificates. The Certificates are being executed and delivered under a Trust
Agreement, dated as of March 1, 2010 (the “Trust Agreement”), by and among the Trustee, the Agency and
Castaic Lake Water Agency Financing Corporation (the “Corporation”). The Corporation has assigned to the
Trustee the right of the Corporation to receive and collect the installment payments (the “Series 2010B
Installment Payments”) due from the Agency to the Corporation under the Installment Purchase Agreement,
dated as of March 1, 2010 (the “Installment Purchase Agreement”), by and between the Agency and the
Corporation, and other amounts payable by the Agency to the Corporation, pursuant to the Assignment
Agreement, dated as of March 1, 2010, by and between the Trustee and the Corporation (the “Assignment
Agreement”).
In connection with the authorization of the Certificates, the Agency adopted Resolution No. 2705 (the
“Authorizing Resolution”) approving the execution and delivery of the Installment Purchase Agreement and
the Trust Agreement on March 10, 2010 in order to allow the statutory validation period to run pursuant to
Chapter 9 (commencing with Section 860) of Title 10 of Part L of the Code of Civil Procedure of the State of
California (the “Validation Statute”) prior to execution and delivery of the Certificates. As of the date of this
Official Statement, no action challenging the validity of the Installment Purchase Agreement and the Trust
Agreement has been filed. However, there can be no assurance that an action will not be filed within the 60
day period provided under the Validation Statute or that a court exercising equitable powers or judicial
discretion would not hear an action challenging the validity of the Installment Purchase Agreement and the
Trust Agreement brought after the 60 day period provided under the Validation Statute.
Sources of Payment for the Certificates. The Certificates are payable from the Series 2010B
Installment Payments payable by the Agency and amounts on deposit in certain funds and accounts established
by the Trust Agreement. The obligation of the Agency to make the Series 2010B Installment Payments is a
special obligation of the Agency payable solely from Net Retail System Revenues of the Retail Water System
(as such terms are defined in the Installment Purchase Agreement) of the Agency and certain other funds and
accounts created under the Installment Purchase Agreement. Net Retail System Revenues include Retail
System Revenues remaining after payment of Retail System Operation and Maintenance Costs (as such terms
are defined in the Installment Purchase Agreement). SCWD transfers annually to the Agency, from Retail
System Revenues, funds for the repayment of an interfund advance (as herein particularly described under the
caption “SANTA CLARITA WATER DIVISION—SCWD Obligations,” the “Interfund Loan”) for the
acquisition by the Agency of the Santa Clarita Water Company (“SCWC”) (the prior owner of the Retail Water
System). Such annual transfers from Retail System Revenues are payable by SCWD, as a Retail System
Operation and Maintenance Cost, prior to the Series 2010B Installment Payments. Net Retail System
Revenues of the Agency DO NOT include the revenues of the wholesale water system of the Agency (the
“Wholesale System”). See the caption “SECURITY FOR THE CERTIFICATES.”
1
The obligation of the Agency to pay the Series 2010B Installment Payments does not constitute an
obligation of the Agency for which the Agency is obligated to levy any form of taxation or for which the
Agency has levied any form of taxation. The obligation of the Agency to make the Series 2010B Installment
Payments under the Installment Purchase Agreement does not constitute a debt of the Agency or of the State of
California (the “State”) or of any political subdivision of the State within the meaning of any constitutional or
statutory debt limitation or restriction. Under no circumstances is the Agency required to advance any moneys
derived from any source of income other than the funds described above, nor are any other funds or property of
the Agency liable for the payment of the Series 2010B Installment Payments. See the caption “SECURITY
FOR THE CERTIFICATES—Retail System Revenue Pledge.”
Additional Parity Obligations. The Agency has covenanted not to incur additional obligations
payable from Net Retail System Revenues senior to the Series 2010B Installment Payments. The Agency may
incur additional obligations on a parity with the Series 2010B Installment Payments, subject to the terms and
conditions described under the caption “SECURITY FOR THE CERTIFICATES—Limitations on Parity and
Superior Obligations; Subordinate Obligations.”
The Agency and the Retail Water System. The Agency is located in the northwestern portion of Los
Angeles County (the “County”), approximately 35 miles from downtown Los Angeles. The wholesale service
of the Agency (the “Wholesale Service Area”) has a population of approximately 250,000, and covers an area
of approximately 195 square miles. The majority of the Wholesale Service Area is located in the County, and
includes the City of Santa Clarita (the “City”) and other nearby communities. The Agency does not sell water
from the Wholesale System directly to retail users but sells water to four separate retail water purveyors, which
include SCWD and three other water retailers (collectively, the “Retail Purveyors”). See the caption “THE
CASTAIC LAKE WATER AGENCY.”
The Agency acquired all of the capital stock of SCWC in September 1999. The assets of SCWC were
subsequently transferred to the Agency and are operated by the Agency as the Retail Water System through
SCWD. The area served by SCWD (the “Retail Service Area”) encompasses approximately 56 square miles,
and includes portions of the City of Santa Clarita and unincorporated portions of Los Angeles County and has
a population of approximately 111,200. The Retail Service Area is served by groundwater pumped by SCWD
and imported water purchased by SCWD from the Wholesale System. See the caption “SANTA CLARITA
WATER DIVISION.”
Professionals Involved in the Offering. U.S. Bank National Association will act as Trustee with
respect to the Certificates. Certain proceedings in connection with the execution and delivery of the
Installment Purchase Agreement and the Trust Agreement are subject to the approval of Stradling Yocca
Carlson & Rauth, a Professional Corporation, Newport Beach, California, Special Counsel to the Agency
(“Special Counsel”). Certain legal matters will be passed upon for the Agency and the Corporation by
McCormick, Kidman & Behrens, LLP, General Counsel to the Agency and the Corporation. Ballard Spahr
LLP, Salt Lake City, Utah, is acting as counsel to the Underwriter. Fieldman, Rolapp & Associates is acting as
financial advisor to the Agency.
Other Information About this Official Statement. There follows in this Official Statement (and
attached appendices) a brief description of the Certificates, the security for the Certificates, the Agency and
certain other information relevant to the execution and delivery of the Certificates. The descriptions and
summaries of various documents in this Official Statement do not purport to be comprehensive or definitive,
and reference is made to each document for complete details of all terms and conditions. All statements in this
Official Statement are qualified in their entirety by reference to each document.
All capitalized terms used herein and not normally capitalized have the meanings assigned to them in
the Trust Agreement and the Installment Purchase Agreement, the summaries of which are included in
Appendix C, unless otherwise stated in this Official Statement.
2
The Appendices are integral parts of this Official Statement and must be read together with all other
parts of this Official Statement.
Authorized Obligation. The Agency has authorized the execution and delivery of $68,105,000*
aggregate principal amount of Castaic Lake Water Agency Refunding Revenue Certificates of Participation,
Series 2010A (2001 Refunding Project) (the “2010A Certificates”) to refund the $68,520,000 outstanding
aggregate principal amount Castaic Lake Water Agency Revenue Certificates of Participation, Series 2001. If
executed and delivered, the 2010A Certificates will be payable from installment payments (the “2010A
Installment Payments”) under an Installment Purchase Agreement, dated as of May 1, 2006 (the “2010A
Installment Purchase Agreement”), by and between the Agency and the Corporation. The 2010A Installment
Payments will be payable solely from net revenues of the Wholesale System remaining after payment of
Wholesale System operation and maintenance costs, amounts on deposit in a Wholesale System rate
stabilization fund and certain other funds and accounts created under the 2010A Installment Purchase
Agreement. No Retail System Revenues will be pledged to the payment of the 2010A Installment Payments.
There can be no assurance that the Agency will enter into the 2010A Installment Purchase Agreement or that
the Agency will execute and deliver the 2010A Certificates.
THE 2010B PROJECT
The proceeds of the Certificates are expected to be used by the Agency to undertake the following
projects (collectively, the “2010B Project”): (1) improvements to water storage tanks to increase emergency
storage capacity; (2) construction of and improvements to wells; and (3) tenant improvements and other costs
related to the purchase of an office building that will serve as the administrative offices of SCWD. Certain of
such costs have previously been paid by the Agency and Certificate proceeds will be used to reimburse the
Agency for such prior expenditures. The Agency currently expects to receive all necessary environmental and
other approvals in connection with the 2010B Project in a timely manner.
Pursuant to the terms of the Installment Purchase Agreement, the Agency has the right to substitute
projects for the 2010B Project. See Appendix C—“SUMMARY OF PRINCIPAL LEGAL DOCUMENTS”
under the caption “INSTALLMENT PURCHASE AGREEMENT—Acquisition of the 2010B Project—
Changes to the 2010B Project.”
The Agency is currently constructing certain components of the 2010B Project and expects to
complete all components of the 2010B Project described above on or before May 1, 2013. The Agency
expects to expend substantially all proceeds of the Certificates on or prior to such date.
*
Preliminary; subject to change.
3
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds(1) with respect to the Certificates are set forth below.
Table 1
Estimated Sources and Uses of Funds
(1)
(2)
Sources
Principal amount of Certificates
Net Original Issue Premium
TOTAL
$14,475,000
818,202
$15,293,202
Uses
Deposit to Acquisition Fund
Underwriter’s Discount
Costs of Delivery(2)
TOTAL
$15,000,000
105,482
187,720
$15,293,202
Amounts rounded to the nearest dollar.
Includes fees for Trustee, financial advisor’s fees, legal fees, printing costs, rating agency fees and other costs of delivery.
THE CERTIFICATES
Terms of the Certificates
The Certificates will be executed and delivered in the aggregate principal amount of $14,475,000 and
will be dated as of the date of execution and delivery. Interest with respect to the Certificates (other than at
maturity) is payable by check or draft of the Trustee mailed by first class mail on August 1, 2010 and each
February 1 and August 1 thereafter (each an “Interest Payment Date”). Interest is payable to the registered
Owner of the Certificates at the close of business on the fifteenth day of the month preceding the month of
such Interest Payment Date (the “Record Date”), provided, that in the case of an Owner of $1,000,000 or more
in aggregate principal amount of Certificates, upon written request of such Owner to the Trustee 15 days prior
to any Interest Payment Date, such interest will be paid on the Interest Payment Date in immediately available
funds by wire transfer to an account in the United States. Interest with respect to any Certificate which is
payable but has not been punctually paid or duly provided for on any Payment Date will immediately cease to
be payable to the owner on the relevant Record Date by virtue of having been such owner and such interest
will be payable to the person in whose name such Certificate is registered at the close of business on a special
record date as determined by the Trustee. Interest with respect to the Certificates will accrue at the rates per
annum and will mature on the dates set forth on the inside front cover page of this Official Statement. Interest
with respect to the Certificates will be computed based on a year consisting of 360 days and twelve 30-day
months. Individual purchases will be made in principal amounts of $5,000 and integral multiples thereof.
Principal of the Certificates is payable in lawful money of the United States of America at the
principal corporate trust office of the Trustee in St. Paul, Minnesota.
4
Prepayment of Certificates
Optional Prepayment. The Certificates maturing on or after August 1, 2021 are subject to optional
prepayment prior to their respective stated maturities, as a whole or in part on any date on or after August 1,
2020 in the order of maturity as directed by the Agency in a written request to the Trustee at least 60 days (or
such lesser number of days acceptable to the Trustee in its sole discretion) prior to such date and by lot within
each maturity, in integral multiples of $5,000 from amounts prepaid by the Agency pursuant to the Installment
Purchase Agreement at a Prepayment Price equal to the principal amount of the Certificates to be prepaid, plus
accrued interest represented thereby to the date fixed for prepayment, without premium.
Mandatory Prepayment. The Certificates with stated maturities on August 1, 2035 are subject to
mandatory sinking fund prepayment prior to such stated maturity, as a whole or in part on each August 1 on
and after August 1, 2028 in integral multiples of $5,000 solely from scheduled Series 2010B Installment
Payments paid by the Agency under the Installment Purchase Agreement, at a prepayment price of the
principal amount thereof (together with accrued interest evidenced to the date fixed for prepayment), without
premium, in accordance with the following schedule.
Term Certificates Due August 1, 2035
†
Mandatory Prepayment
Dates (August 1)
Mandatory Prepayments
2028
2029
2030
2031
2032
2033
2034
2035†
$490,000
515,000
545,000
570,000
600,000
635,000
665,000
700,000
Final Maturity.
The Certificates with stated maturities on August 1, 2040 are subject to mandatory sinking fund
prepayment prior to such stated maturity, as a whole or in part on each August 1 on and after August 1, 2036 in
integral multiples of $5,000 solely from scheduled Series 2010B Installment Payments paid by the Agency
under the Installment Purchase Agreement, at a prepayment price of the principal amount thereof (together
with accrued interest evidenced to the date fixed for prepayment), without premium, in accordance with the
following schedule.
Term Certificates Due August 1, 2040
†
Mandatory Prepayment
Dates (August 1)
Mandatory Prepayments
2036
2037
2038
2039
2040†
$740,000
780,000
820,000
865,000
915,000
Final Maturity.
Extraordinary Prepayment from Insurance or Eminent Domain Proceeds. The Certificates are
subject to prepayment prior to their respective stated maturities, as provided in a certificate of the General
5
Manager of the Agency, as a whole on any date or in part on any Payment Date in the order of maturity as
directed by the Agency in a written request provided to the Trustee at least 60 days (or such lesser number of
days acceptable to the Trustee in its sole discretion) prior to the Payment Date and by lot within each maturity
in integral multiples of $5,000 from prepaid Installment Payments made by the Agency from Net Proceeds of
insurance or condemnation awards, upon the terms and conditions of, and as provided for in, the Installment
Purchase Agreement and Trust Agreement, at a Prepayment Price equal to the principal amount thereof and
accrued interest represented thereby to the date fixed for prepayment, without premium.
Notice of Prepayment
Notice of prepayment will be mailed, first class postage prepaid, to the respective Owners of any
Certificates designated for prepayment at their addresses appearing on the Certificate registration books and to
the Information Services and by registered or certified or overnight mail to the Securities Depositories at least
30 days but not more than 60 days prior to the prepayment date.
Each such notice of prepayment will state the date of notice, the prepayment date, the place or places
of prepayment and the Prepayment Price, will designate the maturities, CUSIP numbers, if any, and, if less
than all of any such maturity is to be prepaid, the serial numbers of the Certificates of such maturity to be
prepaid by giving the individual number of each Certificate or by stating that all Certificates between two
stated numbers, both inclusive, have been called for prepayment and, in the case of Certificates to be prepaid in
part only, the respective portions of the principal amount thereof to be prepaid. Each such notice will also state
that on said date there will become due and payable on each of said Certificates the Prepayment Price thereof
or of said specified portion of the principal represented thereby in the case of a Certificate to be prepaid in part
only, together with interest accrued with respect thereto to the prepayment date, and that (provided that
moneys for prepayment have been deposited with the Trustee) from and after such prepayment date interest
with respect thereto will cease to accrue, and will require that such Certificate be then surrendered to the
Trustee. Any defect in the notice or the mailing will not affect the validity of the prepayment of any
Certificate.
Book-Entry Only System
One fully-registered Certificate for each maturity will be executed and delivered in the principal
amount of such Certificate. Such Certificates will be registered in the name of Cede & Co. and will be
deposited with DTC.
The Agency may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, the Certificates will be printed and delivered and will be
governed by the provisions of the Trust Agreement with respect to payment of principal and interest and rights
of exchange and transfer.
The Agency cannot and does not give any assurances that DTC participants or others will distribute
payments with respect to the Certificates received by DTC or its nominee as the registered Owner, or any
prepayment or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC
will service and act in the manner described in this Official Statement. See Appendix E hereto for additional
information concerning DTC.
Transfers and Exchanges Upon Termination of Book-Entry Only System
In the event the book-entry system described above is abandoned, the Certificates will be printed and
delivered as provided in the Trust Agreement. Thereafter, any Certificate may, in accordance with its terms,
be transferred upon the Certificate registration books by the person in whose name it is registered, in person or
by such person’s duly authorized attorney, upon surrender of such Certificate for cancellation at the corporate
trust office of the Trustee in St. Paul, Minnesota, accompanied by delivery of a duly executed instrument of
transfer in a form approved by the Trustee. Whenever any Certificate or Certificates are surrendered for
6
transfer, the Trustee will execute and deliver a new Certificate or Certificates of the same maturity, for a like
aggregate principal amount, and of authorized denomination or denominations. The Trustee may require the
payment by any Owner requesting any such transfer of any tax or other governmental charge required to be
paid with respect to such transfer. Following any transfer of Certificates the Trustee will cancel and destroy
the Certificates it has received.
Certificates may be exchanged at the corporate trust office of the Trustee, for a like aggregate
principal amount of Certificates of other authorized denominations of the same maturity. The Trustee may
charge a sum for each new Certificate executed and delivered upon any exchange except in the case of any
exchange of temporary Certificates for definitive Certificates. The Trustee may require the payment by the
Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to
such exchange. Following any exchange of Certificates the Trustee will cancel and destroy the Certificates it
has received.
The Trustee is not required to register the exchange or transfer of any Certificate (i) within 15 days
preceding selection of Certificates for prepayment or (ii) selected for prepayment (except for any unredeemed
portion thereof).
Debt Service Schedule
Set forth below is a table of the annual Series 2010B Installment Payments.
7
Table 2
Debt Service Schedule
Series 2010B Installment Payments
Period Ending
(August 1)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
TOTAL
Principal
Interest
$
245,000
250,000
255,000
265,000
275,000
285,000
290,000
305,000
315,000
330,000
345,000
365,000
380,000
400,000
420,000
445,000
465,000
490,000
515,000
545,000
570,000
600,000
635,000
665,000
700,000
740,000
780,000
820,000
865,000
915,000
$14,475,000
$
159,663.89
718,487.50
713,587.50
708,587.50
700,937.50
692,987.50
681,987.50
670,587.50
661,887.50
651,975.00
636,225.00
619,725.00
602,475.00
584,225.00
565,225.00
544,225.00
522,175.00
498,812.50
474,400.00
448,675.00
421,637.50
393,025.00
363,100.00
331,600.00
298,262.50
263,350.00
226,600.00
185,900.00
143,000.00
97,900.00
50,325.00
$14,631,551.39
8
Total
$
159,663.89
963,487.50
963,587.50
963,587.50
965,937.50
967,987.50
966,987.50
960,587.50
966,887.50
966,975.00
966,225.00
964,725.00
967,475.00
964,225.00
965,225.00
964,225.00
967,175.00
963,812.50
964,400.00
963,675.00
966,637.50
963,025.00
963,100.00
966,600.00
963,262.50
963,350.00
966,600.00
965,900.00
963,000.00
962,900.00
965,325.00
$ 29,106,551.39
SECURITY FOR THE CERTIFICATES
Each Certificate represents an undivided interest in the Series 2010B Installment Payments to be made
by the Agency under the Installment Purchase Agreement. Pursuant to the Assignment Agreement, the
Corporation has assigned substantially all of its right, title and interest in the Installment Purchase Agreement
to the Trustee, for the benefit of the Owners of the Certificates, including its right to receive the Series 2010B
Installment Payments thereunder and its right to exercise all the rights and remedies conferred on the
Corporation under the Installment Purchase Agreement.
The obligation of the Agency to make the Series 2010B Installment Payments is a special obligation
of the Agency payable solely from Net Retail System Revenues (which include the revenues of SCWD
remaining after payment of the Retail System Operation and Maintenance Costs, including payment of an
annual transfer from Retail System Revenues to the Wholesale System of the Agency to repay the Interfund
Loan), and certain other funds and accounts created under the Installment Purchase Agreement.
Retail System Revenue Pledge
All Retail System Revenues and all amounts on deposit in the Revenue Fund are irrevocably pledged
to the payment of the Series 2010B Installment Payments as provided in the Installment Purchase Agreement,
and the Retail System Revenues will not be used for any other purpose while any of the Series 2010B
Installment Payments remain unpaid; provided that out of the Retail System Revenues there may be
apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreement,
including payment of Retail System Operation and Maintenance Costs, including the Interfund Loan. Such
pledge constitutes a first lien on Retail System Revenues and the Revenue Fund and all amounts on deposit
therein as permitted in the Installment Purchase Agreement and is subject to the application of Retail System
Revenues in accordance with the Installment Purchase Agreement.
The obligation of the Agency to make the Series 2010B Installment Payments is payable from Net
Retail System Revenues. Net Retail System Revenues means, for any Fiscal Year of the Agency (currently,
the Agency’s Fiscal Year begins July 1) (“Fiscal Year”), the Retail System Revenues for such Fiscal Year less
the Retail System Operation and Maintenance Costs for such Fiscal Year, including payments with respect to
the Interfund Loan, as such terms are defined in Appendix C—“SUMMARY OF PRINCIPAL LEGAL
DOCUMENTS” under the caption “Installment Purchase Agreement—Definitions; Rules of Construction;
Contents of Certificates and Opinions.”
THE OBLIGATION OF THE AGENCY TO MAKE THE SERIES 2010B INSTALLMENT
PAYMENTS IS A SPECIAL OBLIGATION OF THE AGENCY PAYABLE SOLELY FROM NET RETAIL
SYSTEM REVENUES OF THE AGENCY AND OTHER FUNDS DESCRIBED IN THE INSTALLMENT
PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE AN OBLIGATION OF THE AGENCY FOR
WHICH THE AGENCY IS OBLIGATED TO PAY FROM ANY OTHER AGENCY REVENUES OR TO
LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AGENCY HAS LEVIED OR
PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE AGENCY TO MAKE THE
SERIES 2010B INSTALLMENT PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT
DOES NOT CONSTITUTE A DEBT OF THE AGENCY OR OF THE STATE OR OF ANY POLITICAL
SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY
DEBT LIMITATION OR RESTRICTION.
Retail System Rate Covenant
To the fullest extent permitted by law, the Agency will fix and prescribe, at the commencement of
each Fiscal Year, rates and charges for Retail Water Service which will be at least sufficient to yield during
each Fiscal Year Net Retail System Revenues equal to 120% of Debt Service for such Fiscal Year. The
Agency may make adjustments from time to time in such rates and charges and may make such classifications
thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Retail
9
System Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing
requirements.
Limitations on Parity and Superior Obligations; Subordinate Obligations
Additional Obligations Superior to Installment Payments. The Agency has covenanted in the
Installment Purchase Agreement that the Agency will not issue any additional evidences of indebtedness or
incur other additional obligations that are payable from or secured by a pledge of and lien on Retail System
Revenues, any money in the Revenue Fund superior to the pledge securing the Series 2010B Installment
Payments.
Additional Obligations on a Parity with the Installment Payments. The Agency has covenanted in
the Installment Purchase Agreement that the Agency may issue evidences of indebtedness or incur other
obligations that are payable from or secured by a pledge of and lien on Retail System Revenues, any money in
the Revenue Fund on a parity with the pledge securing the Series 2010B Installment Payments pursuant to the
following terms and conditions:
(1)
The Net Retail System Revenues for the most recent audited Fiscal Year preceding the date of
adoption by the Board of Directors of the Agency (the “Agency Board”) of the resolution authorizing the
issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both
a calculation prepared by the Agency and a special report prepared by an Independent Certified Public
Accountant or an Independent Financial Consultant on such calculation on file with the Agency, produce a
sum equal to at least 120% of the Debt Service for such Fiscal Year; and
(2)
The Net Retail System Revenues for the most recent audited Fiscal Year preceding the date of
execution of such Contract or the date of adoption by the Agency Board of the resolution authorizing the
issuance of such Bonds, as the case may be, including adjustments to give effect as of the first day of such
Fiscal Year to increases or decreases in income, rents, fees, rates and charges for the Retail Water Service
approved and in effect as of the date of calculation, as evidenced by both a calculation prepared by the Agency
and a special report prepared by an Independent Certified Public Accountant or an Independent Financial
Consultant on such calculation on file with the Agency, demonstrate a sum equal to at least 120% of the Debt
Service for such Fiscal Year plus the Debt Service which would have accrued on any Contracts executed or
Bonds issued since the end of such Fiscal Year assuming such Contracts had been executed or Bonds had been
issued at the beginning of such Fiscal Year plus the Debt Service which would have accrued had such Contract
been executed or such Bonds been issued at the beginning of such Fiscal Year; and
(3)
The estimated Net Retail System Revenues for the then current Fiscal Year and for each
Fiscal Year thereafter to and including the first complete Fiscal Year after the latest date of operation of any
uncompleted Project, as evidenced by a certificate on file with the Agency, including (after giving effect to the
completion of all such uncompleted Projects) an allowance for estimated Net Retail System Revenues for each
of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be
fixed and prescribed for the Retail Water Service and which are economically feasible and reasonably
considered necessary based on projected operations for such period, as evidenced by a certificate of the
Manager on file with the Agency, produce a sum equal to at least 120% of the estimated Debt Service for each
of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds
estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects
within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and
proportionate principal repayment provisions similar to the Contract last executed or then being executed or
the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such
uncompleted Projects.
Notwithstanding the foregoing, Bonds issued or Contracts executed to refund Bonds or Contracts may
be delivered without satisfying the conditions set forth above if Debt Service in each Fiscal Year after the
10
Fiscal Year in which such Bonds are issued or Contracts executed is not greater than Debt Service would have
been in each such Fiscal Year prior to the issuance of such Bonds or execution of such Contracts.
Subordinate Obligations. The Agency may at any time issue evidence of indebtedness or incur other
obligations for any lawful purpose that are payable from and secured by a lien on Retail System Revenues or
moneys in the Revenue Fund as may from time to time be deposited therein subordinate to the Series 2010B
Installment Payments.
THE CASTAIC LAKE WATER AGENCY
Authority and Purpose
The Agency was organized on April 20, 1962 under Assembly Bill No. 26, Chapter 28, California
Statutes of 1962, the Castaic Lake Water Agency Law (the “Agency Law”), enacted by the State Legislature.
The Agency was initially called the Upper Santa Clara Valley Water Agency until the State Legislature
changed the Agency’s name to the Castaic Lake Water Agency. The Agency is located in the northwestern
portion of the County, approximately 35 miles from downtown Los Angeles. The Wholesale Service Area of
the Agency has a population of approximately 250,000, and covers an area of approximately 195 square miles.
Under the Agency Law, the Agency is authorized to acquire water and water rights within the State; to
develop, store and transport such water; and to provide, sell and deliver water for beneficial uses and purposes.
The Agency Law also authorizes the Agency to exercise the power of eminent domain; to levy and collect
taxes; to fix, revise and collect rates or other charges for the delivery of water, use of facilities or property or
provisions for service; to borrow money, incur indebtedness and issue bonds; and to construct, operate and
maintain works for the development of hydroelectric power for use by the Agency in the operation of its
works.
The Agency provides supplemental wholesale water through its Wholesale System to SCWD and the
other three Retail Purveyors. Although the Agency entered into water service contracts with the Retail
Purveyors in the 1970s and 1980s, there are not currently any water service contracts with any of the Retail
Purveyors which the Agency enforces or which the Agency believes are enforceable. As a result, the Retail
Purveyors are not contractually obligated to purchase water from the Agency.
In September 1999, the Agency acquired the stock of SCWC. The assets of SCWC were subsequently
transferred to the Agency and are operated by the Agency as the Retail Water System through SCWD. The
Agency provides retail water service through SCWD. See the caption “SANTA CLARITA WATER
DIVISION.” Retail System Revenues from SCWD are accounted for as a separate enterprise fund of the
Agency.
Agency Organization and Management
The Agency Board includes a total of 11 members, of which three directors are nominated by the
Retail Purveyors other than SCWD, subject to Agency Board approval, and the remaining eight are elected by
the voting public for staggered four-year terms. The Agency is divided into three divisions for electoral
purposes, with two directors elected by the voters of each division and two additional directors elected at-large
by the voters of the Agency. The names of the current members of the Agency Board are set forth below,
together with brief biographical information regarding each member:
11
Table 3
Board of Directors
Elected/
Appointed
Expiration
of Term
(January)
R. J. Kelly, President and Director,
Division 1
Peter Kavounas, Vice President
and Director, Division 2
Edward A. Colley, Director,
Division 1
E.G. “Jerry” Gladbach, Director,
Division 2
William Pecsi, Director, Division 3
April 2003
2013
Business Owner
Jan. 1999
2011
Jan. 2003
2011
Water Services Administrator – Glendale
Water and Power
Teacher
Jan. 1985
2013
Retired Engineer
Jan. 1999
2013
Jacquelyn H. McMillan, Director,
Division 3
Jan. 2003
2011
William C. Cooper, Director at
Large
Jan. 1993
2013
Thomas P. Campbell, Director at
Large
Dean D. Efstathiou, Director, Los
Angeles County Waterworks
District No. 36
B. J. Atkins, Director, Newhall
County Water District
Robert J. DiPrimio, Director,
Valencia Water Company
Jan. 2001
2011
Jan. 1995
2011
Manager of Conveyance System,
Metropolitan Water District
Senior Governmental Affairs
Representative, Metropolitan Water
District
Retired Special Projects Manager – Water
System Operations, Metropolitan Water
District
Senior Engineer, Metropolitan Water
District
Retired Chief Deputy Director of Public
Works, Los Angeles County
Jan. 2001
2013
Business Owner
Jan. 1987
2013
President, Valencia Water Company
Name/Office
Occupation
The daily operations of the Agency are administered by the General Manager, Dan Masnada, and
other Agency staff.
Dan Masnada has held the position of General Manager of the Agency since April 2002, and is
responsible for implementing policies and directives of the Agency Board. Mr. Masnada has over twenty five
years of experience in the construction, operation and maintenance of public water systems. He received his
Bachelor of Science in Civil Engineering from Santa Clara University in 1975 and Master of Science in Civil
Engineering (with a Specialty Designation in Construction Engineering and Management) from Stanford
University in 1976. Prior to his employment at the Agency, Mr. Masnada served as Executive Director of the
Central Coast Water Authority, which constructed and operates and maintains the regional conveyance and
treatment facilities serving State Water Project water to 25 retail purveyors and municipalities in San Luis
Obispo and Santa Barbara Counties. Previous employment includes Manager Natural Resources of The
Newhall Land and Farming Company and Vice President of its wholly-owned subsidiary, Valencia Water
Company, and various production engineering positions with Exxon Company U.S.A. He is a registered civil
engineer in the State and a member of the American Society of Civil Engineers, American Water Works
Association and National Society of Professional Engineers. Mr. Masnada is a director on the Board of
Directors of the State Water Contractors, an organization representing 27 of the 29 agencies that have
contracted for water from the State Water Project.
12
April Jacobs is the Secretary of the Agency and has served as Secretary to the Agency Board since
August 2005. Ms. Jacobs has been employed by the Agency since January 2004. Prior to employment by the
Agency, Ms. Jacobs was employed at Valencia Water Company.
Valerie Pryor is the Administrative Services Manager for the Agency and serves as Chief Financial
Officer and Treasurer. She has held this position since 2003. Ms. Pryor holds a Master of Arts in Urban
Planning and a Bachelor of Arts in Geography from the University of California at Los Angeles as well as a
post-graduate Diploma in Economics from Bristol University. Prior to working for the Agency, Ms. Pryor
worked for the City of Los Angeles, as the head of Administrative Services for the Department of
Transportation. She also worked for the City of Los Angeles City Administrative Officer, performing budget
and policy analysis for a number of City of Los Angeles departments. She is a member of the California
Municipal Treasurer’s Association, the California Society of Municipal Finance Officers and the Government
Finance Officers Association. She serves as an Alternate Director for the State Water Project Contractors
Authority.
Carlos Corrales is the Controller of the Agency. Mr. Corrales holds a Master of Public Administration
from California State University Northridge and a Bachelor in Accounting from Polytechnic University of the
Philippines. Prior to working for the Agency, Mr. Corrales worked for the City of San Fernando, Los Angeles
County Metropolitan Transportation Authority and The Salvation Army. He is a member of the California
Society of Municipal Finance Officers, the Government Finance Officers Association and the Institute of
Management Accountant.
Employee Relations
The Agency has 112 full-time employees, of which 51 are assigned to SCWD, and 11 part-time
employees,. No Agency employees are represented by a labor union. The Agency has not experienced any
strike or other labor actions.
The Agency provides retirement benefits for its employees through a contractual agreement with the
California Public Employees’ Retirement System (“PERS”). The Agency makes the contribution required of
Agency employees on their behalf and on their account. The contribution rate for participants is 7% of the
participant’s covered salary. Additionally, the Agency is required to contribute the actuarially determined
remaining amounts necessary to fund the benefits for its members. The required employer contribution rate for
Fiscal Year 2010 is 11.935%. The contribution requirements of the plan members are established by State
statute, and the employer contribution rate is established and may be amended by PERS.
For Fiscal Year 2009, the Agency’s annual pension cost was $923,850 for PERS and was equal to the
Agency’s required and actual contributions. The required contribution was determined as part of the July 1,
2008, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions
included: (i) a 7.75% investment rate of return (net of administrative expense); (ii) projected annual salary
increases that vary by duration of service; and (iii) 3.25% per year cost of living adjustments to 14.65%
depending on age. Both assumptions (i) and (ii) included an inflation component of 3.00% and a payroll
growth rate of 3.25%. The actuarial value of PERS assets was determined using techniques that smooth the
effects of short-term volatility in the market value of investment over a thirty-year period (smoothed market
value). Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry
into PERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 30-year
period.
The required Fiscal Year 2010 employer contribution rate of 11.935% is equal to the annual pension
cost (“APC”) percentage of payroll. Gains and losses that occur in the operation of the CalPERS 2.0% at 55
Risk Pool Retirement Plan are amortized over a rolling 30-year period. If the plan’s accrued liability exceeds
the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be
lower than the payment calculated over a 30-year amortization period.
13
Trend information gives an indication of the progress made in accumulating sufficient assets to pay
benefits when due. The following is the most recent available three-year APC information for the plan.
Fiscal Year
2007
2008
2009
Percentage of
APC Contributed
APC
$834,957
834,015
923,850
Net Pension
Obligation
100%
100
100
-
The schedule below shows the history of the PERS 2.0% at 55 Risk Pool Retirement Plan actuarial
value of assets, actuarial accrued liability, and the relationship of the unfunded actuarial accrued liability
(“UAAL”) to payroll as of June 30, 2007:
Actuarial
Valuation
Date
Entry Age
Normal Accrued
Liability [A]
June 30, 2005
June 30, 2006
June 30, 2007
$2,891,460,651
2,754,396,608
2,611,746,790
Actuarial Value
of Assets [B]
Unfunded
Liability
(Excess
Assets) [A-B]
Funded
Status
[B/A]
$2,588,713,000
2,492,226,176
2,391,434,447
$302,747,651
262,170,432
220,312,343
89.5%
90.5
91.6
Annual Covered
Payroll [C]
UAAL/(Excess
Assets) as a %
of Payroll
[(A-B)/C]
$755,046,679
699,897,835
665,522,859
40.1%
37.5
33.1
PERS has recently announced significant investment losses in Fiscal Year 2009 and the Agency
expects that its APC will increase in future years as a result of such investment losses. The Agency cannot
predict at this time the magnitude of such APC increases, but does not expect such APC increases to have a
material adverse effect on the Agency’s obligation to make the Series 2010B Installment Payments.
The Governmental Accounting Standards Board recently published Statement No. 45 (“GASB 45”),
requiring governmental agencies that fund post-employment benefits on a pay-as-you-go basis, such as the
Agency (beginning for the Agency with the Fiscal Year ending June 30, 2009), to account for and report the
outstanding obligations and commitments related to such post-employment benefits in essentially the same
manner as for pensions. The Agency does offer post-employment healthcare benefits (medical and dental),
which are currently funded on a pay-as-you-go basis. In Fiscal Year 2009, the Agency paid $289,534 in
post-employment health care benefits, net of retiree contributions, for 30 eligible employees.
The Agency engaged an actuarial consultant to calculate the Agency’s post-employment benefits
liability. Results of this study, which remain subject to change, indicate that as of July 1, 2009, the total
UAAL for the Agency’s OPEB Program was $7,572,000. The annual amount required to be paid to amortize
this liability over 30 years and to accumulate an appropriate amount for current employers so that the UAAL
does not increase (the “Annual Required Contribution, or “ARC”) is $834,000. The Agency has budgeted to
fully pre-fund the ARC in Fiscal Year 2010. Pre-funding moneys are deposited in the California Employers’
Retiree Benefit Trust Fund through PERS. The Agency does not expect that any increased funding of
post-employment benefits will have a material adverse effect on the ability of the Agency to make payments
under the Installment Purchase Agreement.
Budget Process
The Agency staff provides the Agency Board with a budget including estimates of revenues and
expenditures for operations for the upcoming Fiscal Year, including Retail System and Operation and
Maintenance Costs of SCWD. The Agency Board conducts public meetings and makes such revisions as it
deems desirable, and typically adopts a final budget by July 1 each year. In July of each year the Agency
receives billing for the upcoming calendar year from DWR (for State Water Project water).
14
Insurance
The Agency is a member of the Association of California Water Agencies Joint Powers Insurance
Authority (the “JPIA”), an intergovernmental risk sharing joint powers authority created to provide
self-insurance programs for California water agencies. The JPIA arranges and administers programs of
insurance for the pooling of self-insured losses, and purchases excess insurance coverage for its members. The
JPIA began operations on October 1, 1979 and has continued without interruption since that time.
As of June 30, 2009, the Agency limits and deductibles for liability, property, and workers
compensation programs of the JPIA are as follows:
•
General and auto liability, public officials and employees’ errors and omissions: Total risk
financing self-insurance limits of $1,000,000, combined single limit per occurrence. The JPIA purchased
additional excess coverage layers of $49,000,000 for general, auto and public officials liability, which
increases the limits on the insurance coverage noted above.
•
Property losses are paid at the replacement cost for buildings, fixed equipment and personal
property on file, if replaced within two years after the loss, otherwise such losses are paid on a actual cash
value basis, subject to a $5,000 deductible per loss, and actual cash value for mobile equipment, subject to a
$1,000 deductible per loss, and licensed vehicles, subject to a $500 deductible per loss. The JPIA purchased
excess coverage for a combined total of $100,000,000 per occurrence.
•
Boiler and machinery coverage for the replacement cost up to $100,000,000 per occurrence,
subject to various deductibles depending on the type of equipment.
•
Workers compensation insurance up to State statutory limits for all work-related
injuries/illnesses covered by State law, and employer’s liability coverage up to $4,000,000. The JPIA is
self-insured up to $2,000,000 and excess coverage has been purchased.
In addition to the above, the Agency also has the following insurance coverage:
•
Crime coverage up to $1,000,000 per loss, including public employee dishonesty, including
public officials who are required by law to give bonds for the faithful performance of their service, forgery or
alteration and computer fraud, subject to a $1,000 deductible.
Wholesale Water System
Appendix A hereto presents information relating to the Agency’s wholesale water system. Such
information is presented for general purposes only. The Series 2010B Installment Payments are payable
solely from Net Retail System Revenues. No revenues of the Agency’s wholesale water system are pledged to
the payment of the Series 2010B Installment Payments.
SANTA CLARITA WATER DIVISION
Acquisition by the Agency
The Agency acquired the stock of SCWC in September 1999, and subsequently changed the corporate
status of SCWC to a not-for-profit corporation. The assets of SCWC were subsequently transferred to the
Agency and are operated by the Agency as the Retail Water System through SCWD. The Agency provides
retail water service within the Retail Service Area through SCWD.
15
Santa Clarita Water Division Management and Operation
Management. Oversight of SCWD is by the Agency Board. The daily operations of SCWD are
administered by the Retail Manager, Mauricio Guardado, and financial operations are overseen by Senior
Financial Analyst Elizabeth Ooms-Graziano.
Mauricio Guardado is the Retail Manager of SCWD. Mr. Guardado received his Bachelor of Science
degree in Civil Engineering from California State University Northridge. Prior to employment with the
Agency, Mr. Guardado worked as District Engineer for the Cucamonga Valley Water District, which operates
and maintains the water, recycled water and sewer collection system throughout a 56 square mile service area.
Mr. Guardado also served as engineer for the San Gabriel Valley Water Company. Mr. Guardado is a
registered civil engineer in the state of California and is also a member of American Water Works Association,
Association of California Water Agencies, American Society of Civil Engineers and The WateReuse
Association.
Elizabeth Ooms-Graziano is the Senior Financial Analyst of SCWD. Ms. Ooms-Graziano holds a
Bachelor’s degree in Accounting from California State University, Northridge. Prior to employment with the
Agency, Ms. Ooms-Graziano worked as Controller for Sunshine Canyon Landfill, Browning Ferris Industries
of California, a division of Allied Waste Incorporated, and also for Bradley Landfill and Simi Valley Landfill,
both divisions of Waste Management Incorporated as Staff Accountant, Accounting Supervisor, Assistant
Controller and Controller. Ms. Ooms-Graziano is a member of the California Society of Municipal Finance
Officers and the Government Finance Officers Association.
Insurance. Insurance for SCWD through the JPIA, a self-insured insurance pool, is currently
maintained through the Agency. See the caption “THE CASTAIC LAKE WATER AGENCY—Insurance.”
Employees and Employee Benefits. SCWD has 51 full-time employees. No SCWD employees are
represented by a labor union. SCWD has not experienced any strike or other labor actions.
The Agency provides retirement benefits for its employees through a contractual agreement with
PERS. The Agency makes the contribution required of Agency employees on their behalf and on their
account. SCWD’s current expense for providing employee benefits, including retirement benefits through
PERS, is approximately $1.94 million per year. In addition, SCWD offers post-employment health care
benefits. The Agency’s liability with regard to such benefits is discussed under the caption “THE CASTAIC
LAKE WATER AGENCY—Employee Relations.”
Santa Clarita Water Division Service Area
The SCWD service area encompasses approximately 56 square miles, or approximately 32,783 acres,
located in the northern portion of the County, serving portions of the City and certain unincorporated areas of
the County including the communities of Saugus, Canyon Country and a portion of West Newhall. The Retail
Service Area lies entirely within the Agency’s Wholesale Service Area boundaries and has a population of
approximately 111, 200.
Retail Water System
Water Supply. SCWD supplies potable water from both imported water purchased from the Agency,
accounting for approximately 55-65% of supply, and groundwater sources, accounting for approximately
35-45% of supply, depending upon annual operating conditions. See Table 5 under the caption “—Water
Deliveries and Service Connections.” Allocation rights to the groundwater basin have not been adjudicated.
Based on the 2008 Santa Clarita Valley Water Report, the groundwater basin has not been and is not projected
to be overdrafted on a long term historic basis.
16
Two of the wells in the Saugus Formation, which were taken out of service in 1997 due to the
discovery of perchlorate (a chemical used in the manufacture of solid rocket propellants, munitions and
fireworks) are being restored to service during the first quarter of 2010. See Appendix A—“INFORMATION
RELATING TO WHOLESALE WATER SYSTEM” under the caption “Water Supply Limitations—
Perchlorate Contamination in Certain Production Wells” for a description of remediation measures proposed
for these and other wells in the Saugus Formation contaminated with perchlorate.
Distribution System. The Retail System consists of approximately 300 miles of pipeline. System
pipe sizes range from 2 inches to 18 inches in diameter, with the majority of the piping ranging from 6 inches
to 14 inches in diameter.
Other Facilities. The Retail System currently includes 16 pressure zones that contain 27 reservoir
sites and 48 active storage tanks with a total storage capacity of 72.96 million gallons, or 223.91 acre feet.
Based upon the 2005 Water Master Plan, there is an overall storage surplus in the system of 4.50 million
gallons, or 1.38 acre feet. In addition to the storage tanks, there are five locations which utilize
hydropneumatic tanks to provide adequate system pressure to residential areas located at elevations near or
above the storage tanks.
The Retail System currently includes 29 active pump booster stations used to boost water throughout
the retail water system. The booster stations consist of one to four pumps with rated pump capacities ranging
from 59 to 2,200 gallons per minute.
Water Deliveries and Service Connections
SCWD currently provides water service to over 28,300 connections. Existing land use within the
retail service area is principally residential. As of December 31, 2009, approximately 93.67% of the retail
customers of the Agency were residential users (based on active accounts), 2.57% were commercial users,
0.07% were industrial users and 3.69% were other users (including public authorities, irrigators, government,
institutional and fire service).
The following table sets forth the ten largest customers of SCWD as of June 30, 2009, as determined
by the amount of their respective annual payments.
Table 4
Largest Customers by Annual Payments
Customer
Annual Payments
G. H. Palmer Properties
City of Santa Clarita
Hart School District
Los Angeles County Parks and Recreation
American Beauty HOA
Mariposa & Plum Canyon
Saugus Union School District
Pacific Crest HOA
Sand Canyon Oaks
Canyon View Estates
Total
$ 1,005,905
368,022
236,670
178,989
168,484
155,177
143,241
120,000
107,896
104,315
$ 2,588,699
Source: SCWD.
17
% of Total
Water Sales
4.7%
1.7
1.1
0.8
0.8
0.7
0.7
0.6
0.5
0.5
12.2%
The following table details a five-year history of water deliveries and service connections for the
Retail System, based on SCWD’s fiscal year ending June 30, 2009.
Table 5
Historic Water Deliveries and Service Connections
Fiscal Year
2009
2008
2007
2006
2005
Groundwater
(Acre Feet)
10,077
11,878
10,686
13,156
12,408
Imported
Water(1)
(Acre Feet)
Total Water
Deliveries
(Acre Feet)
Service
Connections
17,739
20,044
20,488
16,548
16,513
27,816
31,922
31,174
29,704
28,921
28,244
28,071
27,817
27,392
26,979
(1)
Supplied to SCWD by the Agency.
Source: SCWD.
The following tables project water deliveries and service for connections of SCWD for the current and
next four fiscal years.
Table 6
Projected Water Deliveries and Service Connections
Fiscal Year
2010
2011
2012
2013
2014
Groundwater
(Acre Feet)
12,000
14,000
14,000
14,000
14,000
Imported
Water
(Acre Feet)
Total Water
Deliveries
(Acre Feet)
Service
Connections
17,800
18,150
18,500
18,900
19,300
29,800
32,150
32,500
32,900
33,300
28,350
28,456
28,563
28,813
29,065
Source: SCWD.
The projected increase in service connections is based in part on the projection of an increase in
development activity within the SCWD service area beginning in Fiscal Year 2013. Failure of development
activity to increase as projected would have a material adverse impact upon new service connections.
18
The table below summarizes the additional development that could be expected to add accounts to the
Retail System, based on requests made by developers to SCWD as of December 31, 2009. The number of
units set forth below are those that SCWD currently anticipates will be developed in the future, not necessarily
units for which final maps or building permits have been issued.
Status of Tract Map
(1)
Proposed
Under Construction(2)
Under Design(3)
Totals
Number of Units
Connections
4,384
4,384
1,397
2,987
4,384
(1)
Represents all proposed tract map units expected to be developed in the future. Only a portion of such units are expected to
be developed in the next five years.
(2)
Based on engineering deposits received by SCWD from developers.
(3)
Based on inquiries to SCWD from developers.
Source: SCWD.
Retail Water Rate Structure and Billing
Rate Structure. Effective January 1, 2010, SCWD implemented a new water rate structure for retail
customers. The current water rate structure is a base rate based on meter size, which varies from $14.55 per
month to $617.06 per month, plus a three-tiered commodity charge for water for single family dwelling
residential customers based on hundreds of cubic feet (“HCF”), which includes a local SCWD water usage
charge and pass-through charges for purchased water and power. The pass-through charges are based on
current estimates of future costs and are subject to change based on actual costs incurred. Based upon a rate
study by Camp, Dresser & McKee Inc., SCWD estimates that the average monthly bill for single family
dwelling residential customers of the Retail System will be $58.30 under the current water rate structure.
However, because the current water rate structure has been in force only since January 2010, there can be no
assurance that actual monthly bills will reflect such estimate.
In September 2009, the Board of Directors adopted a three year rate structure with rate increases of
approximately 15% effective January 1, 2010, 12% effective January 1, 2011 and 7% effective January 1,
2012. The rates and charges of SCWD are not subject to regulation by or approval of the California Public
Utilities Commission or any other public agency; however, the Agency has complied with other procedural
and substantive requirements under law in setting rules for customers of SCWD. See the caption
“CONSTITUTIONAL PROVISIONS.”
Billing Procedures. Water charges are billed to customers monthly with a due date of 19 days from
presentation date (date mailed). Bills not paid after 25 days are considered past due, at which time a reminder
notice is sent. The due date of the reminder notice is 15 days from presentation date. If payment is not
received by the payment due date specified on the reminder notice, door hangers are hung notifying the
customers that their water will be turned off in 2 days if payment is not received. The cost to the customer of
reconnecting water service is based on the outstanding balance of the water bill plus a reconnect fee. If the
customer is shut off 3 times in a 12-month period, a deposit in the amount of 2 months’ billing may be required
in addition to the bill payment and reconnect fee. SCWD charges late fees and door hanger fees to recover
costs. New customers are required to provide proof of identity in order to open a new account
SCWD has averaged write-off expenses as the result of delinquent accounts of less than 0.23% of total
billings over the past four years.
Property Developer Fees
In 2009, SCWD collected $2,957,739 in deposits from developers for water facilities that are currently
under construction. As of December 31, 2009, SCWD held $2,056,050 in unexpended deposits with respect to
19
approximately 14 residential subdivisions at various stages of development and various smaller residential,
commercial and industrial development projects. Such deposits are refundable to the extent that the design or
construction of such development projects is halted. Property developer fees do not constitute Retail System
Revenues and are not pledged to repayment of the Series 2010B Installment Payments.
Impact Capacity Fees
SCWD charges new developments an Offsite Improvement Costs charge for storage and production
based on meter size. On December 9, 2009, the Agency Board approved an increase in the existing Offsite
Improvement Costs charge (now called an “Impact Capacity Fee”). Developers must also submit a deposit to
cover the initial planning phase of a project. Before SCWD commences construction of improvements,
developers will sign an agreement to contribute the amount required to cover the cost of the facilities to be
developed by SCWD, which will provide for the developer’s application for a water main extension, including
the installation of a distribution plant or other special facilities, for furnishing public utility water service
(including but not limited to fire flow) to properties under development. Impact Capacity Fees are refundable
or partially refundable to the extent that the construction of development projects is not commenced or such
projects are reduced in scope. Impact Capacity Fees constitute Retail System Revenues and are pledged to
repayment of the Series 2010B Installment Payments. However, SCWD’s historic and projected operating
results do not reflect receipt of Impact Capacity Fee revenues. See Tables 7 and 8 under the caption “—
Historic and Projected Financial Results of the Santa Clarita Water Division.”
SCWD Obligations
Operation and Maintenance Costs. The Agency acquired SCWC’s stock through condemnation in
September 1999 at a purchase price of approximately $63,000,000. At the time of the purchase, the Agency’s
financial advisor prepared a financial analysis of SCWC’s cash flow which demonstrated that it was financially
feasible for SCWC to fund the acquisition of the company with SCWC’s own revenue stream. Accordingly,
the acquisition was treated as an interfund advance from the Agency.
SCWD is currently repaying the Interfund Loan plus interest at a rate of 5.04% per annum. SCWD’s
annual payment for its fiscal year ending June 30, 2010 is $4,080,000. Interfund Loan payments increase by
approximately $100,000 each fiscal year, provided that, if necessary due to the financial condition of the retail
division in any fiscal year, SCWD may make payments of interest only or pay an amount in excess of the
scheduled payment. Under such circumstances, the interest rate remains 5.04% per annum. The final
Interfund Loan payment is scheduled to be paid in 2028.
Pursuant to the Installment Purchase Agreement, the Agency has established an Interfund Loan
Prepayment Fund. In the event that SCWD prepays all or a portion of the amounts due under the Interfund
Loan or deposits amounts in the Interfund Loan Prepayment Fund in any fiscal year, Retail System Operation
and Maintenance Costs for the succeeding fiscal year shall be net of such prepayments or deposits. See
Appendix C—“SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” under the caption “INSTALLMENT
PURCHASE AGREEMENT—Security—Interfund Loan Prepayment Fund.”
Parity Obligations. The Agency does not expect to incur any Contracts or Bonds for the benefit of
SCWD during the current and next four Fiscal Years, other than the Installment Purchase Agreement.
Historic and Projected Financial Results of the Santa Clarita Water Division
The Agency currently accounts for the Retail System Revenues and Retail System Operation and
Maintenance Costs separately from the other operating funds and accounts of the Agency as an enterprise fund
of the Agency in the Agency audit. Accordingly, there are no separate basic financial statements for SCWD.
20
Historic Santa Clarita Water Division Operating Results. The table below is a summary of the
operating results of SCWD for fiscal years 2005 through 2009. These results have not been audited and
exclude certain non-cash items and include certain other adjustments.
Table 7
Historic Operating Results
(Fiscal Years ending June 30)
2005
2006
Revenues
Water Sales(1)
Other(2)
Total Operating Revenues
$ 14,247,738
776,125
$ 15,023,863
$ 15,512,614
1,349,554
$ 16,862,168
Operation and Maintenance Costs
Interfund Loan Payments to Agency(3)
Sources of Supply
Pumping
Water Treatment
Transmission and Distribution
Customer Service
Administrative and General Other
Other
Overhead Absorption(4)
Total Operation and Maintenance Costs
$ 3,500,000
3,454,439
2,132,199
332,907
1,880,902
598,562
2,741,484
106,374
(170,881)
$ 14,575,986
$
5,730,000
2,899,009
2,051,530
612,144
2,236,217
698,650
3,071,698
83,983
(136,538)
$ 17,246,693
Net Revenues
$
$
447,877
(384,525)
2007
2008
2009
$ 18,106,943
1,364,380
$ 19,471,323
$ 19,574,505
3,501,872
$ 23,076,377
$ 21,139,498
830,831
$ 21,970,329
$
3,515,200
3,779,409
2,595,945
765,710
3,050,364
1,077,516
3,278,655
(367,565)
$ 17,695,234
$ 3,880,200
4,466,965
2,310,136
831,340
2,182,427
1,056,261
2,962,110
(597,301)
$ 17,092,138
$
3,979,800
4,813,108
2,553,546
949,464
3,375,826
836,957
2,783,138
(207,826)
$ 19,084,013
$
$ 5,984,239
$
1,776,089
2,886,316
(1)
Represents sale of water to SCWD’s individual accounts; also includes revenues related to Fire Protection service accounts, sales to
mutual water companies in the Retail Service Area and miscellaneous water service income. Excludes Impact Capacity Fee
revenues described under the caption “—Impact Capacity Fees.”
(2)
Includes investment income and rental income.
(3)
Repayment of Interfund Loan.
(4)
Represents clearing accounts previously maintained to clear materials, supplies and equipment before allocation to expenses and
projects.
Sources: SCWD and Agency’s Comprehensive Annual Financial Report.
Projected Retail System Revenues and Retail System Operation and Maintenance Costs and Debt
Service Coverage. The following table provides a projection of the operating results and debt service coverage
of SCWD for Fiscal Years 2010 through 2014, reflecting the Agency’s estimate of projected financial results
and debt service coverage based on significant assumptions concerning future events and circumstances, and
based on the assumption set forth in the footnotes to the table. Such assumptions are material in the
development of the financial projections of the Agency and variations in the assumptions may produce
substantially different fiscal results. Actual operating results and debt service coverage achieved during the
projection period may vary from those presented in the forecast and such variations could be material.
21
Table 8
Projected Retail System Revenues and Retail System Operation
and Maintenance Costs and Debt Service Coverage
(Fiscal Years ending June 30)
2010
2011
2012
2013
2014
$24,377,213
228,600
$24,605,813
$ 26,856,604
228,600
$ 27,085,204
$28,302,487
228,600
$28,531,087
$ 29,073,326
228,600
$ 29,301,926
$ 4,080,000
5,780,883
2,466,819
1,085,000
3,588,337
828,900
3,439,202
$21,269,141
$
6,908,086
2,569,017
1,106,699
3,711,236
845,478
3,543,156
$18,683,672
$ 4,279,800
7,566,309
2,656,909
1,128,833
3,838,638
862,387
3,650,596
$ 23,983,472
$ 4,380,000
8,051,829
2,761,447
1,151,410
3,970,715
879,635
3,761,648
$24,956,684
$ 4,480,200
8,551,350
2,870,521
1,174,438
4,107,645
897,228
3,876,443
$ 25,957,825
Revenues Available for Debt Service
$ 1,636,117
$ 5,922,141
$ 3,101,732
$ 3,574,403
$ 3,344,101
Debt Service
Installment Purchase Agreement
$
$
$
$
$
Revenues
Water Sales(1)
Other(2)
Total Operating Revenues
$22,410,258
495,000
$22,905,258
Operation and Maintenance Costs
Interfund Loan Payments to Agency(3)
Sources of Supply(4)
Pumping(5)
Water Treatment(6)
Transmission and Distribution(7)
Customer Service(8)
Administrative and General Other(9)
Total Operation and Maintenance Costs
Debt Service Coverage
(10)
Revenues Available for Other Purposes
-
518,908
961,038
961,088
959,763
-
11.41
3.23
3.72
3.48
$ 1,636,117
$ 5,403,233
$ 2,140,694
$ 2,613,315
$ 2,384,338
(1)
Represents sale of water to SCWD’s individual accounts; also includes revenues related to Fire Protection service accounts, sales to
mutual water companies in the Retail Service Area and miscellaneous water service income. Projected to increase approximately
10% per annum from Fiscal Year 2010 budgeted amounts in Fiscal Years 2011 and 2012, approximately 5% per annum in Fiscal
Year 2013 and approximately 3% per annum thereafter. Excludes Impact Capacity Fee revenues described under the caption “—
Impact Capacity Fees.”
(2)
Includes investment income, rental income and cellular sites. Projected to decrease in Fiscal Year 2011 as a result of lower
investment rates. Investment rates projected to remain at Fiscal Year 2011 levels thereafter.
(3)
Represents scheduled repayments of Interfund Loan. See the caption “—SCWD Obligations—Operation and Maintenance Costs”
for a discussion of potential prepayments with respect to the Interfund Loan. The Agency has deposited an amount equal to the
scheduled Interfund Loan payment due in Fiscal Year 2011 in the Interfund Loan Prepayment Fund.
(4)
Increases attributable to projected increases in wholesale water rates. See the caption “WHOLESALE WATER SYSTEM—Water
Rates and Charges.” Projected to increase approximately 20% per annum from Fiscal Year 2010 budgeted amounts in Fiscal Year
2011, approximately 10% per annum in Fiscal Year 2012 and approximately 6% per annum thereafter.
(5)
Projected to increase by approximately 4% per annum from Fiscal Year 2010 budgeted amounts due to increases in pumping rates
and volumes.
(6)
Projected to increase approximately 2% per annum from Fiscal Year 2010 budgeted amounts.
(7)
Projected to increase approximately 3.5% per annum from Fiscal Year 2010 budgeted amounts. Reflects expenses related to well
rehabilitations beginning in Fiscal Year 2013.
(8)
(9)
(10)
Debt Service Coverage calculated as Revenues Available for Debt Service divided by Debt Service.
Source: SCWD.
CONSTITUTIONAL PROVISIONS
Article XIIIB
An initiative constitutional amendment entitled Limitations on Government Appropriations was
approved by California voters on November 6, 1979. Under the amendment which adds Article XIIIB to the
California Constitution (“Article XIIIB”), State and local government agencies are subject to an annual
limitation on certain appropriations. Appropriations subject to limitation consist of “tax revenues,” State
22
subventions and certain other funds (together herein referred to as “proceeds of taxes”). Article XIIIB does not
affect the appropriation of money excluded from the definition of “appropriations subject to limitation,” such
as debt service on indebtedness existing or authorized before January 1, 1979 or subsequently authorized by
the voters and appropriations mandated by any court having proper jurisdiction. Article XIIIB also excludes
from limitation the appropriation of proceeds from regulatory licenses, user charges or other fees to the extent
such proceeds equal “the costs reasonably borne by such entity in providing the regulations, product or
service.”
In general terms, Article XIIIB provides that the appropriations limit will be based on certain 1978-79
expenditures and will be adjusted annually to reflect changes in cost of living, population and transfer of
financial responsibility of providing services from one governmental unit to another. Article XIIIB also
provides that if an agency’s revenues in any year exceed the amount which is appropriated by such agency in
compliance with the provisions of Article XIIIB, the excess must be returned during the next two fiscal years
by revising tax rates or fee schedules.
Proposition 218
General. An initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”) was
approved by the voters of the State of California at the November 5, 1996 general election. The Initiative
added Article XIIIC and Article XIIID to the California Constitution. According to the “Title and Summary”
of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local
governments to impose taxes and property-related assessments, fees and charges.”
Article XIIID. Article XIIID defines the terms “fee” and “charge” to mean “any levy other than an
ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an
incident of property ownership, including user fees or charges for a property-related service.” A
“property-related service” is defined as “a public service having a direct relationship to property ownership.”
Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel
map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident
of property ownership.
Article XIIID requires that any agency imposing or increasing any property-related fee or charge must
provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to
be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be
imposed or increased if a majority of owners of the identified parcels file written protests against it. As a
result, if and to the extent that a fee or charge imposed by a local government for water or wastewater service
is ultimately determined to be a “fee” or “charge” as defined in Article XIIID, the local government’s ability to
increase such fee or charge may be limited by a majority protest.
In addition, Article XIIID includes a number of limitations applicable to existing fees and charges
including provisions to the effect that: (i) revenues derived from the fee or charge shall not exceed the funds
required to provide the property-related service; (ii) such revenues shall not be used for any purpose other than
that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or
person as an incident of property ownership shall not exceed the proportional cost of the service attributable to
the parcel and (iv) no such fee or charge may be imposed for a service unless that service is actually used by,
or immediately available to, the owner of the property in question. Property-related fees or charges based on
potential or future use of a service are not permitted.
Based upon the California Second District Court of Appeal decision in Howard Jarvis Taxpayers
Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the California
Supreme Court, it was generally believed that Article XIIID did not apply to charges for metered water, which
had been held to be commodity charges related to consumption of the service, not property ownership. The
Agency was of the opinion that, under similar reasoning, the water rates imposed by the Agency for retail
water service by SCWD were not subject to Article XIIID. In a decision rendered in February, 2004, the
23
California Supreme Court in Richmond et al. v. Shasta Community Services District (S105078) upheld a Third
District Court of Appeal decision that water connection fees were not property-related fees or charges subject
to Article XIIID while at the same time stating in dicta that fees for ongoing water service through an existing
connection were property related fees and charges. In October 2004, the California Supreme Court granted
review of the decision of the Fourth District Court of Appeal in Bighorn-Desert View Water Agency v.
Beringson, 120 Cal. App. 4th 891 (2004), in which the appellate court had relied on Howard Jarvis Taxpayers
Association v. City of Los Angeles and rejected the Supreme Court’s dicta in Richmond et al. v. Shasta
Community Services District. On March 23, 2005, the California Fifth District Court of Appeal held in
Howard Jarvis Taxpayers Association v. City of Fresno, 127 Cal. App. 4th 914 (2005) that an “in lieu” fee
which is payable to the City of Fresno’s general fund from its water utility and which is included in the city’s
water rate structure was invalid. In reaching its decision, the court concluded that the city’s water rates were
“property related” fees, governed by the limitations of Article XIIID. The City of Fresno requested a review of
this decision by the California Supreme Court, which denied review. On July 24, 2006 the Supreme Court
ruled in Bighorn-Desert View Water Agency v. Verjil. The Court restated the dicta in Richmond et al. v. Shasta
Community Services District that fees and charges for ongoing domestic water service through an existing
connection were property related fees and charges under Article XIIID. The Agency does not believe the
procedural or substantive provisions of Article XIIID apply to its wholesale rates and charges. The Agency
has complied with the procedural and substantive provisions of Article XIIID with respect to rates and charges
for the Retail Water System since 2007.
Article XIIIC. Article XIIIC provides that the initiative power shall not be prohibited or otherwise
limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of
initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments.
Article XIIIC does not define the terms “local tax,” “assignment,” “fee” or “charge.” On July 24, 2006, the
Supreme Court held in Bighorn-Desert View Water Agency v. Verjil that the provisions of Article XIIIC
included rates and fees charged for domestic water use. The Supreme Court noted, however, that the decision
did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations
of the public agency involved in the litigation. The Agency and its general counsel do not believe that
Article XIIIC grants to the voters within the jurisdiction of the Agency the power to repeal or reduce wholesale
rates and charges or retail fees and charges levied by SCWD in a manner which would be inconsistent with the
statutory or contractual obligations of the legislative body of Agency. However, there can be no assurance of
the availability of particular remedies adequate to protect the beneficial owners of the Certificates. Remedies
available to beneficial owners of the Certificates in the event of a default by the Agency are 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 specific limitations on remedies contained in the applicable documents themselves,
the right and obligation with respect to the Installment Purchase Agreement is subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’
rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial
discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of
California. The various opinions of counsel to be delivered with respect to such documents, including the
opinion of Special Counsel (the form of which is attached as Appendix D), will be similarly qualified.
Other Initiatives. Articles XIIIC and XIIID were enacted by voter initiative. There can be no
assurance that the voters of the State will not approve another initiative that could affect the Agency, its
operations or financial condition or the Net Retail System Revenues.
THE CORPORATION
The Corporation was organized on April 18, 1990 pursuant to the Nonprofit Public Benefit
Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporations Code),
solely for the purpose of providing financial assistance to the Agency in acquiring, constructing, improving
and developing certain real and personal property together with appurtenances for the use, benefit and
24
enjoyment of the public. The Corporation was formed at the request of the Agency to assist in financings such
as the installment purchase described in this Official Statement. The five members of the Board of Directors
of the Corporation include four members of the Agency Board and the General Manager of the Agency. The
Corporation has no liability to the Owners, and has pledged none of its moneys, funds or assets to any Series
2010B Installment Payments or any payments under the Certificates.
TAX MATTERS
In the opinion of Special Counsel, under existing statutes, regulations, rulings and judicial decisions,
and assuming the accuracy of certain representations and compliance with certain covenants and requirements
described herein, the portion of each Series 2010B Installment Payment constituting interest with respect to the
Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference
for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In
the further opinion of Special Counsel, the portion of each Series 2010B Installment Payment constituting
interest with respect to the Certificates is exempt from State personal income tax. Special Counsel notes that,
with respect to corporations, the portion of each Series 2010B Installment Payment constituting interest with
respect to the Certificates is not included as an adjustment in the calculation of alternative minimum taxable
income.
The difference between the issue price of a Certificate (the first price at which a substantial amount of
the Certificates of the same series and maturity is to be sold to the public) and the stated redemption price at
maturity with respect to such Certificate constitutes original issue discount. Original issue discount accrues
under a constant yield method, and original issue discount will accrue to a Certificate Owner before receipt of
cash attributable to such excludable income. The amount of original issue discount deemed received by the
Certificate Owner will increase the Certificate Owner’s basis in the Certificate. In the opinion of Special
Counsel, the amount of original issue discount that accrues to the owner of the Certificate is excluded from the
gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of
the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State
personal income tax.
Special Counsel’s opinion as to the exclusion from gross income of the portion of each Series 2010B
Installment Payment constituting interest (and original issue discount) with respect to the Certificates is based
upon certain representations of fact and certifications made by the Agency and others and is subject to the
condition that the Agency complies with all requirements of the Code that must be satisfied subsequent to the
execution and delivery of the Certificates to assure that the portion of each Series 2010B Installment Payment
constituting interest (and original issue discount) with respect to the Certificates will not become includable in
gross income for federal income tax purposes. Failure to comply with such requirements of the Code might
cause the portion of each Series 2010B Installment Payment constituting interest (and original issue discount)
with respect to the Certificates to be included in gross income for federal income tax purposes retroactive to
the date of execution and delivery of the Certificates. The Agency has covenanted to comply with all such
requirements.
The amount by which a Certificate Owner’s original basis for determining loss on sale or exchange in
the applicable Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an
earlier call date) constitutes amortizable Certificate premium, which must be amortized under Section 171 of
the Code; such amortizable Certificate premium reduces the Certificate Owner’s basis in the applicable
Certificate (and the amount of tax-exempt interest received), and is not deductible for federal income tax
purposes. The basis reduction as a result of the amortization of Certificate premium may result in a Certificate
Owner realizing a taxable gain when a Certificate is sold by the Owner for an amount equal to or less (under
certain circumstances) than the original cost of the Certificate to the Owner. Purchasers of the Certificates
should consult their own tax advisors as to the treatment, computation and collateral consequences of
amortizable Certificate premium.
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The IRS has initiated an expanded program for the auditing of tax exempt bond issues, including both
random and targeted audits. It is possible that the Certificates will be selected for audit by the IRS. It is also
possible that the market value of the Certificates might be affected as a result of such an audit of the
Certificates (or by an audit of similar municipal obligations). No assurance can be given that in the course of
an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation
thereof) subsequent to the execution and delivery of the Certificates to the extent that it adversely affects the
exclusion from gross income of interest with respect to the Certificates or their market value.
It is possible that subsequent to the execution and delivery of the Certificates there might be federal,
state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that
affect the federal, state, or local tax treatment of the Certificates or the market value of the Certificates. No
assurance can be given that subsequent to the execution and delivery of the Certificates such changes or
interpretations will not occur.
Special Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not
occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person,
whether any such actions or events are taken or do occur. The Trust Agreement, the Installment Purchase
Agreement and the Tax Certificate relating to the Certificates permit certain actions to be taken or to be
omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Counsel expresses
no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the
Certificates for federal income tax purposes with respect to any Certificate if any such action is taken or
omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth.
Although Special Counsel has rendered an opinion that the portion of each Series 2010B Installment
Payment constituting interest (and original issue discount) with respect to the Certificates is excluded from
gross income for federal income tax purposes provided that the Agency continues to comply with certain
requirements of the Code, the ownership of the Certificates and the accrual or receipt of interest (and original
issue discount) with respect to the Certificates may otherwise affect the tax liability of certain persons. Special
Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of
the Certificates, all potential purchasers should consult their tax advisors with respect to collateral tax
consequences relating to the Certificates.
A copy of the proposed form of opinion of Special Counsel is attached hereto as Appendix D.
CERTAIN LEGAL MATTERS
The validity of the Installment Purchase Agreement and the Trust Agreement are subject to the
approval of Stradling Yocca Carlson & Rauth, A Professional Corporation, Newport Beach, California, acting
as Special Counsel. The form of such legal opinion is attached hereto as Appendix D and such legal opinion
will be attached to each Certificate.
Certain legal matters will be passed upon for the Agency and the Corporation by McCormick,
Kidman & Behrens, LLP, as General Counsel. Certain legal matters will be passed upon for the Underwriter
by its counsel Ballard Spahr LLP, Salt Lake City, Utah (“Underwriter’s Counsel”). Certain legal matters will
be passed upon for the Trustee by its counsel. Payment of the fees of Special Counsel and Underwriter’s
Counsel is contingent upon execution and delivery of the Certificates.
LITIGATION
Except as otherwise described in this Official Statement, there is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or,
to the knowledge of the Agency, threatened against the Agency affecting the existence of the Agency or the
titles of its officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the
Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way
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contesting or affecting the action of the Agency contemplated by any of said documents, or in any way
contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or
contesting the powers of the Agency or its authority with respect to the Certificates or any action of the
Agency contemplated by any of said documents. As described in Appendix A hereto, there is a series of
lawsuits and proceedings to which the Agency is a party which may affect the Agency’s Wholesale System
operation and its water supply. Additionally, there exist other lawsuits and claims against the Agency, which
are incidental to the ordinary course of operations of the Retail Water System.
RATING
The Agency expects that Standard and Poor’s Ratings Services, a Division of The McGraw-Hill
Companies, Inc. (“S&P”) will assign the Certificates the rating of “AA”. There is no assurance that any credit
ratings given to the Certificates will be maintained for any period of time or that the rating may not be lowered
or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Any downward revision or
withdrawal of such rating may have an adverse effect on the market price of the Certificates. Such rating
reflects only the views of S&P and an explanation of the significance of such rating may be obtained from
S&P.
UNDERWRITING
The Certificates are being purchased by Citigroup Global Markets Inc. (the “Underwriter”) pursuant
to a Purchase Contract, dated April 16, 2010, by and between the Underwriter and the Agency (the “Purchase
Contract”). The purchase price of the Certificates is equal to $15,187,720.04, being the aggregate principal
amount of the Certificates of $14,475,000, less an underwriter’s discount of $105,481.86 and plus original
issue premium of $818,201.90. The Purchase Contract provides that the Underwriter will purchase all of the
Certificates, if any are purchased. The obligation to make such purchase is subject to certain terms and
conditions set forth in the Purchase Contract, the approval of certain legal matters by counsel, and certain other
conditions.
The Underwriter may offer and sell Certificates to certain dealers and others at a price lower than the
offering price stated on the cover page of this Official Statement. The offering price may be changed from
time to time by the Underwriter.
CONTINUING DISCLOSURE UNDERTAKING
The Agency has covenanted in a Continuing Disclosure Certificate dated the date of execution and
delivery of the Certificates (the “Continuing Disclosure Certificate”) to provide annually certain financial
information and operating data relating to the Retail Water System of the Agency by not later than 270 days
following the end of its Fiscal Year (commencing with Fiscal Year 2010) including the audited Financial
Statements of the Agency for each such Fiscal Year (together, the “Annual Report”), and to provide notices of
the occurrence of certain other enumerated events.
The Annual Report will be filed by the Agency with the Municipal Securities Rulemaking Board’s
Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at
http://emma.msrb.org/ (“EMMA”). The notices of material events will be timely filed by the Agency with
EMMA. The form of the Continuing Disclosure Certificate is attached hereto at Appendix F.
The Agency has not failed to comply in any material respect with the terms of existing continuing
disclosure agreements of the Agency in the last five years.
MISCELLANEOUS
Insofar as any statements made in this Official Statement involve matters of opinion or of estimates,
whether or not expressly stated, they are set forth as such and not as representations of fact. No representation
27
is made that any of the statements will be realized. Neither this Official Statement nor any statement which
may have been made verbally or in writing is to be construed as a contract with the Owners of the Certificates.
The execution and delivery of this Official Statement have been duly authorized by the Agency.
/s/ R.J. Kelly
President
/s/ April Jacobs
Secretary
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APPENDIX A
INFORMATION RELATING TO WHOLESALE WATER SYSTEM
The following information relates to the Agency’s wholesale water system. Such information is presented
for general purposes only. The Series 2010B Installment Payments are payable solely from Net Retail System
Revenues. No revenues of the Agency’s wholesale water system are pledged to the payment of the Series 2010B
Sources of Supply
Table A Amounts from the State Water Project. The Wholesale System of the Agency is supplied with
water from the State Water Project through DWR under the State Water Project Contract. On April 30, 1963, the
Agency entered into an agreement with DWR which, as amended from time-to-time, provides for a contract
Table A Amount of 95,200 acre feet per year. See the Official Statement under the caption “LITIGATION” for a
discussion of litigation relating to the Agency’s acquisition of 41,000 acre feet per year of State Water Project
Table A Amount. The State Water Project Contract expires by its terms in 2038, but contains a provision granting
the Agency the right to renew. The Agency currently expects to renew the State Water Project Contract on or
prior to the end of the current term upon substantially similar financial terms.
The Agency owns and operates water conveyance pipelines and water treatment facilities to supply water
delivered through the State Water Project to the Retail Purveyors, including SCWD. The California Aqueduct
releases water to the Agency at the Castaic Lake Reservoir (the “Castaic Reservoir”). The Castaic Reservoir is a
multiple use reservoir owned by DWR which serves as the terminal point of the west branch of the California
Aqueduct.
Groundwater Banking Programs. The Agency has initiated three groundwater banking accounts in two
separate programs. Two accounts are in the Semitropic Water Storage District’s Groundwater Banking Program.
These accounts are short-term, ten-year accounts. The Agency anticipates that if such water is not used, it will be
transferred to another groundwater banking program prior to 2012 and 2013, respectively. Withdrawals of water
from the accounts in a given year may be limited by hydrology and the demands of other Program participants. In
September 2005 the Agency initiated participation in the Rosedale-Rio Bravo Water Storage District Groundwater
Banking Program. This program allows the storage of 200,000 acre feet of the Agency’s State Water Project
Table A amount or other State Water Project supplies, and has a contract term through 2035, renewable according
to the terms of the Agency’s water supply contract with DWR. To date, the Agency has available over 110,000
acre feet stored in its banking programs, including approximately 65,000 acre feet stored in the long-term
Rosedale Rio Bravo Program and the rest stored in two short-term programs.
Recycled Water. Starting in September 2003, the Agency began adding recycled water to its supply. The
Agency is currently serving about 400 acre feet per year of recycled water to the Valencia Water Company. In
future years, the Agency may be capable of delivering as much as 17,000 acre feet per year of recycled water,
based on a report entitled “Reclaimed Water System Master Plan” dated September 1993 and a draft report
entitled “Recycled Water Master Plan” dated May 2002, both prepared for the Agency by Kennedy/Jenks
Consultants. The environmental impact report for the 2002 draft Recycled Water Master Plan was approved by
the Agency Board in March 2007.
Buena Vista and Rosedale-Rio Bravo Water Acquisition. On May 22, 2007, the Agency entered into a
Purchase Agreement with Buena Vista Water Storage District and Rosedale-Rio Bravo Water Storage District to
purchase up to 11,000 acre feet of water per year for a 30-year period. This supply is from a program that
provides for the capture, spreading, storage, recovery and export of water, including high-flow Kern River water
which is a pre-1914 appropriative water right. The term of the Agreement is from January 1, 2007 through
December 31, 2036. When the original term expires, the BVWSD-RRBWSD Acquisition Agreement is
anticipated to be extended to a date certain consistent with any extensions of the Agency’s Water Supply Contract
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with DWR, although there can be no assurance of such extension or the terms of any such extension. Payments
under the BVWSD-RRBWSD Acquisition Agreement are expressly subordinate to the payment of the Installment
Payments.
Other Water Supply Agreements. In 2009, the Agency entered into an agreement with DWR to
participate in the Yuba Water Accord program (the “Yuba Water Accord”). This non-State Water Project water
supply is available to the Agency in critically dry years as a result of DWR agreements with Yuba County Water
Agency and the United States Bureau of Reclamation (the “Bureau”) relating to settlement of water rights issues
on the Lower Yuba River in northern California. Additional supplies may be available in wetter years. The
quantity of water varies depending on hydrology, and the extent of participation by other State Water Project
contractors. The Agency currently projects receiving up to 1,277 acre feet per year pursuant to the Yuba Water
Accord.
The Newhall Land Development Company owns rights to approximately 1,600 acre feet per year of Kern
River water from the Nickel Ranch (the “Nickel Ranch Program”). The Agency currently expects that such water
will be allocated to the Newhall Ranch project and will effectively offset demand for Agency water in the future.
Water Supply Limitations
Factors beyond the control of the Agency could impair the ability of the Agency to supply water to the
Retail Agencies, including SCWD, in an amount sufficient to allow SCWD to yield Net Retail System Revenues
sufficient to pay the Series 2010B Installment Payments when due. Such factors could include, without limitation,
the following:
Weather Patterns. The Agency’s existing sources of water could become limited due to changes in
statewide weather patterns caused by climate changes and other factors. The Santa Clarita Valley was not
adversely affected during the statewide drought from 1987 through 1992 because the combination of State Water
Project deliveries to the Agency and locally supplied groundwater were sufficient to meet demand. However,
there can be no assurance that currently available water supplies would be sufficient to meet demand under current
and future conditions in the event of long-term climate changes that could alter snowpack levels or precipitation
patterns. In its most recent California Water Plan (Bulletin 160-05), DWR assessed the possible impacts of
climate changes on the state’s future water supplies and the State Water Project. The Agency, as a State Water
Project contractor, will receive updated information from DWR on any impacts to its State Water Project
allocations and will update its water supply planning accordingly.
Challenges to Department of Water Resources Water Supplies. DWR faces various challenges in
continuing to supply imported water to its respective member agencies. The ability of the Agency to service the
Retail Purveyors is significantly dependent upon its receipt of imported water from DWR. No assurance can be
given that additional water supplies will be secured, or that the Agency will receive its full Table A Amount
pursuant to its contract with DWR. Investors should refer to Annual Reports prepared by DWR to obtain more
information pertaining to water supply matters.
DWR has entered into certain continuing disclosure agreements pursuant to which it is contractually
obligated for the benefit of owners of certain outstanding obligations to file with certain information repositories
annual reports, notices of certain material events as defined under Rule 15c2-12 of the Exchange Act
(“Rule 15c2-12”) and annual audited financial statements (the “Department of Water Resources Information”).
This information is to be filed by DWR with the Municipal Securities Rulemaking Board’s Electronic Municipal
Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/.
DWR disclosure documents and annual reports should be reviewed for information pertaining to water supply
matters. DWR has not entered into any contractual commitment with the Agency, the Trustee or the Owners of the
Certificates to provide Department of Water Resources Information to the Agency or the Owners of the
Certificates. Neither the Agency nor the Underwriter assume any responsibility for the accuracy of the
Department of Water Resources Information.
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Water Treatment and Monitoring. The Agency, as the operator of a facility which treats water on behalf
of public water systems for the purpose of rendering it safe for human consumption, is subject to the California
Safe Drinking Water Act and the Drinking Water Regulatory Program of the State Department of Public Health in
implementation of amendments to that act which were added in 1989 and 1996, as well as other state and federal
statutes and regulations concerning water quality. To comply with the State Department of Public Health
Regulations for Primary and Secondary Drinking Water Standards outlined under the California Administrative
Code Title 22, the Agency has a water quality laboratory at the Rio Vista Plant. This laboratory is fully accredited
by the State Department of Public Health. Continuous water quality monitoring and daily testing are performed at
both treatment plants.
Agency facilities currently comply with all applicable State and federal regulations regarding both plant
design and water quality standards.
Perchlorate Contamination in Certain Production Wells. In 1997, four production wells in the Saugus
Formation were found to be contaminated with perchlorate (a chemical used in the manufacture of solid rocket
propellants, munitions and fireworks). The Saugus Formation provides the Santa Clarita Valley with firming
supplies of water during dry years, and all of the affected wells are owned by Retail Purveyors. Two additional
production wells in the alluvial aquifer tested positive for perchlorate in 2002 and 2005. Three of the wells are
owned by Agency and serve SCWD, two wells are owned by Valencia Water Company, and the other well is
owned by Newhall County Water District. All six wells were temporarily closed after the detection of
perchlorate. Valencia Water Company has since abandoned one impacted well and replaced it with a new well
drilled in an uncontaminated portion of the Saugus Formation. In addition, Valencia Water Company’s Q-2 well
was temporarily closed and outfitted with wellhead treatment in 2005, but was restored to service without
wellhead treatment in 2007. The total production capacity of the three remaining closed wells is 7,200 gallons per
minute, which represents about 10% of the total production capacity of the Retail Purveyors.
The Agency and the affected Retail Purveyors filed suit in November 2000 against the current and prior
owners of the Whittaker-Bermite industrial site, a 996 acre site upon which a munitions manufacturing facility
that is the suspected source of the perchlorate contamination was located, seeking restoration of the lost
production capacity and other specified damages. The litigation was filed in federal court pursuant to the
Comprehensive Environmental Response, Compensation & Liability Act of 1980 (42 USC Section 9601 et seq. or
“CERCLA”). The defendants to the litigation served the Agency with counterclaims alleging that the Agency and
the affected Retail Purveyors contributed to the migration of the perchlorate contamination from the
manufacturing facility through the pumping of groundwater from the affected wells.
In May 2007, a comprehensive settlement was executed by the Agency, the Retail Purveyors, and the
defendants (the “Perchlorate Contamination Settlement”), which involves estimated potential payment of up to
$100,000,000 by the defendants. Funds have been deposited in escrow which will be disbursed to the Agency and
the Retail Purveyors to pay for the costs of restoration of wells and contamination removal. The clean-up program
is now underway. The Agency has completed construction of the perchlorate treatment facility and related
distribution system and is in the process of returning the SCWD Saugus 1 and 2 wells (two of the four wells that
were shut down in 1997) to service during the first quarter of 2010. The perchlorate treatment facility will include
an ion exchange process located at the Rio Vista Intake Pump Station. The Perchlorate Contamination Settlement
also provides funds to assist in the payment of operation and maintenance costs for such system for up to 30 years,
which the agencies estimate to cost as much as $50,000,000.
Approximately $18,000,000 has been reimbursed to the agencies for past expenditures pursuant to the
Percholarate Contamination Settlement. Another $5,000,000 to $10,000,000 will be available to construct wells
and pipelines to supply water that will replace capacity lost from contaminated wells. An additional $10,000,000
is available to allow the agencies to immediately treat any additional wells that could become impacted by
perchlorate contamination in the future. An escrow account established by the defendants and their insurers is the
source of this “rapid response fund.”
A-3
The Perchlorate Contamination Settlement also calls for the agencies to seek grant funding, such as
money made available by the Department of Defense or the State, to pay for monitoring, treatment, and other
costs not covered by the agreement.
Wholesale Water Rates and Charges
Wholesale rates and charges are charged by the Agency to the Retail Purveyors, including SCWD, are set
by action of the Agency Board. Such wholesale rates and charges are not subject to the approval of the voters or
other governmental entities. See the Official Statement under the caption “CONSTITUTIONAL PROVISIONS.”
In August 2009, the Agency Board adopted a rate structure for calendar years 2010, 2011 and 2012 that is
designed to recover operating costs. The rates that have been established are as follows: $400 per acre foot
effective January 1, 2010, $478 per acre foot effective January 1, 2011 (including $20 per acre foot designated for
operating reserves) and $507 per acre foot effective January 1, 2012 (including $20 per acre foot designated for
operating reserves). No further approval of the Agency Board is required for such rates to become effective.
There can be no assurance, however, that the Agency Board will not alter such future increases prior to their
effective date.
The Retail Purveyors, including SCWD, are billed on a monthly basis and must remit payment to the
Agency within 30 days of billing to remain eligible to receive future water deliveries.
In recent years several initiative measures have been proposed or adopted which affect the ability of local
governments to increase taxes and rates. There is no assurance that the electorate or the State legislature will not
at some future time approve additional limitations that could affect the ability of the Agency to implement rate
increases. See the Official Statement under the caption “CONSTITUTIONAL PROVISIONS.”
Litigation
Water Transfer Litigation. On December 17, 2009, the California Court of Appeal held in an action
entitled Planning and Conservation League (“PCL”) v. Castaic Lake Water Agency, et al., 180 Cal.App.4th 210
(modified and rehearing denied, January 14, 2010) that the Agency’s environmental review of a transfer of 41,000
acre feet of water per year from Kern County Water Agency (“KCWA”) and Wheeler Ridge Maricopa Water
Storage District to the Agency was valid in all respects. On January 26, 2010, PCL and the California Water
Impact Network filed a Petition for Review of the California Court of Appeal’s decision in this action. On March
10, 2010, the California Supreme Court denied the Petition for Review. This decision finally resolves all known
legal challenges to this source of Agency water.
Delta Litigation. Various legal challenges have been filed impacting the export of water from the
Sacramento-San Joaquin River Delta (the “Delta”) by DWR through the State Water Project (“SWP”) and by the
Bureau through the Central Valley Project (“CVP”). The initial cases filed are Watershed Enforcers v. Broderick
(California Department of Fish and Game), et al. (Alameda County Superior Court, J. Smith, presiding) (the
“Watershed Smelt Litigation”), relating to the SWP; Natural Resources Defense Council v. Kempthorne (United
States Department of the Interior) (United States District Court for the Eastern District of California, J. Wanger,
presiding) (the “Delta Smelt OCAP Litigation”) and Pacific Coast Federation of Fisherman’s
Association/Institute for Fisheries Resources v. Gutierrez (United States Department of Commerce) (United States
District Court for the Eastern District of California, J. Wanger, presiding) (the “Salmon OCAP Litigation”),
relating to the CVP; and State Water Contractors (“SWC”), San Luis and Delta Mendota Water Authority
(“SLDMWA”), Westlands Water District (“WWD”), et al. v. California Department of Fish and Game
(Sacramento Superior Court) (“Longfin Smelt Litigation”), which also relates to the operations of the SWP.
Each lawsuit constitutes a challenge to either a Biological Opinion (“BO”) related to the CVP, a required
“incidental take” permit related to the SWP, or a threatened species determination by the State Fish and Game
Commission. Each challenge is premised upon a claim of recent population declines of the Delta smelt and
salmon in the Delta. While there are other potential causes for the decline of these Delta fish, these challenges
threaten to curtail SWP and CVP deliveries.
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Watershed Smelt Litigation. On October 4, 2006, Watershed Enforcers, a project of the
California Sportfishing Protection Alliance, filed an action against DWR in the Alameda County Superior Court,
alleging that DWR was operating SWP pumping facilities without obtaining a “take” permit under the California
Endangered Species Act (“CESA”). KCWA and SWC, a non-profit association of twenty-seven public agencies,
including the Agency, intervened as real-parties-in-interest in the action in support of DWR. The fish species at
issue were endangered winter-run Chinook salmon, threatened Delta smelt and spring-run Chinook. The court
determined that DWR did not have the required State permit to “take” protected fish species in the Delta, and, on
April 17, 2007, issued a final order directing DWR to shut down its Delta export pumps in 60 days unless it
obtained a determination from the State Department of Fish and Game (“DFG”) that SWP operations are in
compliance with CESA. Immediate appeals were filed, which stayed enforcement of such order. In July 2009,
DWR obtained a Consistency Determination (the “CD”) from DFG providing CESA incidental take coverage and
DWR, SWC and KCWA dismissed their appeals.
The CD for Delta smelt, however, is based upon the December 2008 Operating Criteria and Plan
(“OCAP”) BO (the “2008 BO”) issued by the United States Fish and Wildlife Service (“FWS”) to the Bureau. If
the litigation challenging the 2008 BO is successful and the 2008 BO is ruled invalid, this may, in turn, render the
CD issued by DFG to DWR invalid absent a court order allowing the CD to remain in effect until FWS issues a
new BO. SWC has filed a challenge in Kern County Superior Court to DFG’s recently issued CD to provide a
judicial remedy to continue SWP operations in the event that the 2008 BO is ruled invalid.
Delta Smelt OCAP Litigation. In 2005, a coalition of environmental and sportfishing
organizations challenged the no jeopardy and no adverse modification findings in a 2005 OCAP BO in the United
States District Court for the Eastern District of California. In May 2007, Judge Wanger ruled that the 2005 OCAP
BO was unlawful and inadequate. Following a subsequent remedies hearing, the court determined that the water
supply to the SWP and CVP would have to be reduced by up to one-third (approximately 2,000,000 acre feet per
year) to mitigate for impacts to the declining population of Delta smelt, and based on that determination issued an
interim injunction, which was to remain in effect until a new BO for Delta smelt was prepared.
The 2008 BO prepared by FWS and delivered to the Bureau on December 15, 2008 appeared to create
water supply impacts greater than those that had already resulted from the Delta Smelt OCAP Litigation court’s
interim injunction. This led to the filing of five separate challenges to the 2008 BO in 2009 by SLDMWA, SWC,
Metropolitan Water District of Southern California (“MWD”), Central Delta Water Agency, and the Coalition for
a Sustainable Delta. The challenges have been consolidated and are currently pending before Judge Wanger. On
May 28, 2009, Judge Wanger granted the motion for preliminary injunction filed by plaintiffs SLDMWA and
WWD, which were subsequently joined by SWC and the other plaintiffs, finding that plaintiffs were likely to
prevail on their National Environmental Policy Act (“NEPA”) challenge to the 2008 BO. Thereafter, the plaintiffs
filed motions for summary judgment, which Judge Wanger granted and determined that the Bureau must perform
environmental review under NEPA prior to implementing a BO resulting in a further reduction in water deliveries
from the SWP and CVP. A court hearing on interim remedies scheduled for January 21-23 and February 2-3,
2010 was recently continued to March 16-19, 2010.
Salmon OCAP Litigation. In the Salmon OCAP Litigation, the United States District Court for
the Eastern District of California issued a summary judgment order invalidating a 2004 BO related to salmon and
steelhead, finding it unlawful and inadequate on a variety of legal grounds. A new BO was released on June 4,
2009 (the “2009 BO”) by the National Marine Fisheries Services which contained new measures concerning
complex habitat management schemes and studies which are likely to cause additional water supply impacts. As a
result, seven separate actions challenging the 2009 BO were filed in the United States District Court for the
Eastern District of California and assigned to Judge Wanger, including challenges by the SWC, MWD, and
KCWA.
Longfin Smelt Litigation. In January 2009, SWC, SLDMWA and WWD filed challenges in
Sacramento County Superior Court to the State Fish & Game Commission’s listing of the longfin smelt as a
threatened species under CESA. The actions are currently pending and the parties recently filed a joint request for
a one-year stay of the proceedings to permit further resolution of the ongoing Delta Smelt OCAP Litigation.
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The Agency cannot predict the outcome of these Delta-related cases. However, the Agency believes that
any new decision or order by a State or Federal court related to one of more of the above-described BOs and
leading to adverse decisions reducing SWP supplies would not have a material impact on the Agency’s ability to
pay the Series 2010B Installment Payments, which are payable from Net Retail System Revenues.
DWR disclosure documents and annual reports filed by DWR pursuant to Rule 15c2-12 with the
Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities
disclosures, maintained on the Internet at http://emma.msrb.org/, should be reviewed for information pertaining
to the above-described Delta-related cases. DWR has not entered into any contractual commitment with the
Agency, the Trustee or the Owners of the Certificates to provide such information to the Agency or the Owners of
the Certificates. Neither the Agency nor the Underwriter assume any responsibility for the accuracy of such
disclosures.
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APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE AGENCY FOR
FISCAL YEAR ENDING JUNE 30, 2009
Castaic Lake Water Agency
Santa Clarita, California
Comprehensive Annual Financial Report
For The Fiscal Year Ended
June 30, 2009
27234 Bouquet Canyon Road Santa Clarita, California 91350
< Page Intentionally Left Blank >
For The Fiscal Year Ended
June 30, 2009
Prepared by:
Valerie L. Pryor, Administrative Services Manager
Carlos V. Corrales, Controller
Mauricio E. Guardado Jr., Retail Manager
Elizabeth Ooms-Graziano, Senior Financial Analyst
For The Fiscal Year Ended June 30, 2009
Table of Contents
Page No.
i - ii
Table of Contents
Introductory Section
Letter of Transmittal
Organizational Chart
Mission Statement, Board of Directors and General Manager
Agency Service Area Map
Government Finance Officers Association –
Certificate of Achievement for Excellence in Financial Reporting
I
XI
XII
XIII
XIV
Financial Section
Independent Auditor’s Report
Management’s Discussion and Analysis
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets
Statement of Activities
Fund Financial Statements:
Balance Sheet – Governmental Funds
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of
Activities
Statement of Net Assets – Water Enterprise Fund
Statement of Revenues, Expenses and Changes in Fund Net Assets –
Water Enterprise Fund
Statement of Cash Flows – Water Enterprise Fund
Notes to the Basic Financial Statements
1
2
7
8
9
10
11
12
13
14
15
16-48
Required Supplementary Information
Schedule of Revenues, Expenditures and Changes in Fund Balance –
Budget and Actual – General Fund
Budget and Actual – Pledged Revenue Fund
Budget and Actual – State Water Contract Fund
Schedule of Funding Progress – Other Post Employment Benefits (OPEB) Plan
Other Supplementary Information
Budget and Actual – Certificates of Participation Fund
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50
51
52
53
For The Fiscal Year Ended June 30, 2009
Table of Contents, (continued)
Page No.
Statistical Information Section
Statistical Section – Table of Contents
Net Assets by Component – Last Eight Fiscal Years
Changes in Net Assets – Last Eight Fiscal Years
Fund Balances – Governmental Funds – Last Ten Fiscal Years
Changes in Fund Balances – Governmental Funds – Last Ten Fiscal Years
Governmental Fund Revenues – Last Ten Fiscal Years
Governmental Fund Expenditures – Last Ten Fiscal Years
Assessed Valuations – Last Ten Fiscal Years
Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years
Property Tax Levies and Collections – Last Ten Fiscal Years
Principal Property Tax Payers – Current Fiscal Year and Nine Years Ago
Ratio of Outstanding Debt – Last Ten Fiscal Years
Ratio of General Bonded Debt Outstanding – Last Ten Fiscal Years
Direct and Overlapping Governmental Activities Debt
Debt Coverage – Last Ten Fiscal Years
Demographic and Economic Statistics – Last Ten Fiscal Years
Principal Employers – Last Three Fiscal Years
Operating and Capacity Indicators – Last Ten Fiscal Years
54
55
57
59
61
63
65
67
68
69
70
71
72
73
74
75
76
77
Report on Internal Controls and Compliance
Independent Auditor’s Report on Internal Controls and Compliance Over
Financial Reporting Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards
-ii-
78
Introductory Section
September 10, 2009
The Board of Directors of the
It is our pleasure to submit the Comprehensive Annual Financial Report (CAFR) for the Castaic Lake
Water Agency (Agency) for the fiscal year ended June 30, 2009. Agency staff, following guidelines set
forth by the Governmental Accounting Standards Board (GASB), prepared this financial report. The
Agency is ultimately responsible for both the accuracy of the data and the completeness and the fairness
of presentation, including all disclosures in this financial report. We believe that the data presented is
accurate in all material respects. This report is designed in a manner that we believe necessary to enhance
your understanding of the Agency’s financial position and activities.
State Law and Agency by-laws require the Agency to obtain an annual audit of its financial statements by
an independent certified public accountant. The accounting firm of Charles Z. Fedak & Company, CPAs
has conducted the audit of the Agency’s financial statements. Their unqualified Independent Auditor’s
Report appears in the Financial Section.
Generally Accepted Accounting Principles (GAAP) requires that management provide a narrative
introduction, overview, and analysis to accompany the financial statements in the form of a
Management’s Discussion and Analysis (MD&A) section. This letter of transmittal is designed to
complement the MD&A and should be read in conjunction with it. The Agency’s MD&A can be found
immediately following the Independent Auditors’ Report.
Agency Profile
The Agency is located in the northwestern portion of Los Angeles County approximately 35 miles from
downtown Los Angeles. The Agency’s wholesale service area has a population of approximately 260,000
and covers an area of approximately 195 square miles or 124,000 acres. The majority of the service area
is located in Los Angeles County, encompassing most of the valley and adjacent hill country along the
Upper Santa Clara River. Approximately 20 square miles of the service area extends into unincorporated
rural portions of Ventura County. The service area is a semi-arid region and includes the City of Santa
Clarita and other nearby communities.
I
The agency provides supplemental wholesale water to four local retail water purveyors – CLWA Santa
Clarita Water Division (SCWD), Los Angeles County Waterworks District No. 36, Newhall County
Water District (NCWD) and the Valencia Water Company (VWC). During FY 2009, actual water sales
were as follows:
Purveyor
Santa Clarita Water Division
Newhall County Water Agency
L.A. County Waterworks District #36
Total Water Sales
Acre-feet
18,499
13,641
4,848
1,288
38,276
The Agency began to sell recycled water in 2004. During FY 2009, 296 AF of recycled water was sold to
the Valencia Water Company to provide service to the golf course and median landscaping in the
Westridge Development.
Facilities
The Agency owns and operates water conveyance pipelines and water treatment facilities to supply water
delivered from the State Water Project (SWP) to the four retail purveyors within its service area. The
Department of Water Resources (DWR) transports water via the California Aqueduct to Castaic Lake and
releases water to the Agency through the outlet tower at Castaic Lake. The reservoir is a multiple use
reservoir that is the terminal point of the West Branch of the California Aqueduct, and stores
approximately 320,000 acre-feet of water. The Agency’s major facilities consist of the Earl Schmidt
Intake Pump Station (ESIPS), the 56 million gallons per day (mgd) Earl Schmidt Filtration Plant (ESFP),
the Rio Vista Intake Pump Station (RVIPS), the 30 mgd Rio Vista Water Treatment Plant (RVWTP) and
a system of pipelines and ancillary facilities which convey treated water to the four retail purveyors.
The Agency’s major facilities are described in more detail as follows:
o
Intake Piping – The ESFP receives water from a connection to the State Water Project’s 60-inch
diameter outlet conduit from the Castaic Reservoir. A 54-inch diameter conduit extends from the
State’s outlet conduit and eventually decreases in diameter to 42 inches before forming the header
manifold for the ESIPS.
o
ESIPS – The Earl Schmidt Intake Pump Station is located near the shore of the afterbay below
Castaic Dam located at the southern end of Castaic Reservoir. The pump station consists of five
350 horsepower vertical turbine pumps, each with a rating of 1.2 to 15.5 mgd. The pumping units
are used when the water level in the reservoir falls below the elevation necessary to permit
gravity flow of water from the reservoir to the filtration plant. The pump station can deliver at
least 56 mgd to the Earl Schmidt Filtration Plant.
o
ESFP – The Earl Schmidt Filtration Plant, located at the southern end of the Castaic Reservoir,
treats State Water Project water for domestic use. The ESFP was completed in 1980 with an
original capacity of 12.5 mgd and was expanded to a capacity of 25 mgd in 1988. In 2001, the
ESFP was re-rated at 33.6 mgd. In 2005, the ESFP was expanded to 56 mgd. The treatment
process includes ozonation, coagulation, contact clarification, and filtration through anthracite
filters. Chloramination occurs after treatment. Wash water is recovered, treated and returned to
the headworks. The ESFP also includes sludge drying facilities, an air-water filter backwash
system, and facilities for chemical application of coagulants, disinfectants, pH control, and taste
and odor control. Two steel tanks provide a total of ten million gallons of treated water storage.
II
o
RVIPS – The Rio Vista Intake Pump Station pumps water from the Metropolitan Water District
(MWD) Foothill Feeder to the Rio Vista Water Treatment Plant via a 102-inch diameter raw
water pipeline.
o
RVWTP – The Rio Vista Water Treatment Plant is located in the City of Santa Clarita and treats
water for domestic use. Its current capacity is 30 mgd; however, the site has sufficient land area
for a treatment plant with an ultimate capacity of 120 mgd. The plant is currently being expanded
to 60 mgd. The treatment process technology includes ozonation, coagulation, contact
clarification and filtration through anthracite filters. Chloramination occurs after treatment.
Wash water is recovered and returned to the headworks. The RVWTP includes sludge drying
facilities, an air-water filter backwash system, and facilities for chemical application of
coagulants, disinfectants, pH control, and taste and odor control. Two clearwell reservoirs
provide a total of 30 million gallons of treated water storage.
The RVWTP site includes the seven-acre Water Conservatory Garden and Learning Center. The
purpose of this facility is to inform and educate Santa Clarita Valley residents about the source
and treatment of their water supply, as well as means to conserve this precious resource. The
Garden and other water education programs of the Agency have received numerous awards,
honors and grants from the American Water Works Association, the Association of California
Water Agencies and the California Department of Education, among others.
o
Outlet Piping and Water Distribution Systems – The Agency maintains a network of transmission
pipelines, pump stations and reservoirs that conveys treated water from the ESFP and RVWTP.
The Castaic Conduit serves as the pipeline connection between ESFP and RVWTP. It also serves
as the main pipeline for conveying treated water to the retail purveyors through a series of
turnouts and laterals.
The portion of the Castaic Conduit between the SWP outlets works and the ESIPS has a normal
design capacity of 67 mgd. Downstream of ESFP, the Castaic Conduit was designed with a
nominal capacity of 51 mgd along the length of the 54-inch diameter pipeline, which extends
approximately five miles southeast through the center of the Agency’s service area, eventually
transitioning to a 39-inch diameter pipeline with a design capacity of 27 mgd, where it connects
with the Honby and Newhall Laterals which, in turn, provide water to the retail purveyors.
Approximately two miles of 84-inch pipeline with a nominal capacity of 124 mgd connect the
RVWTP to the 39-inch diameter pipeline.
The Newhall Parallel connects to the 84-inch treated water pipeline and provides additional water
to the southern portion of Valencia. The Newhall Parallel begins as a 54-inch pipeline and
reduces to a 24-inch pipeline. Additionally, the Agency has constructed three phases of the
Magic Mountain Pipeline, a 42-inch pipeline that connects to the Newhall Parallel and will
provide water to the western portion of the Agency’s area.
The Agency delivers water to the retail purveyors through 25 turnouts, as follows: CLWA Santa
Clarita Water Divisions – 12, Los Angeles County Waterworks District #36 – 2, Newhall County
Water District – 4 and Valencia Water Company – 7.
o
Recycled Water System – The Agency distributes recycled water from the Los Angeles County
Sanitation Districts. The facilities include a 24-inch recycled water pipeline that runs from the
Valencia Water Reclamation Plant south to the TPC at Valencia golf course, as well as a recycled
water reservoir located near the golf course.
o
Sand Canyon Pipeline System – The Sand Canyon Pipeline System consists of a booster pump
station, pipeline and reservoir to convey imported water from the end of the existing Honby
Lateral to the southern Sand Canyon area. The reservoir also provides emergency storage. The
III
48-inch pipeline is approximately five miles in length and delivers water to retail purveyors
through six turnouts. The Sand Canyon Pump Station has a capacity of 30,000 gallons per minute
(gpm). The Sand Canyon Reservoir can store up to 7 million gallons of water.
o
Perchlorate Treatment and Distribution Systems – The Agency is in the process of constructing
perchlorate treatment and distribution systems, including the Saugus 1 and 2 wells. In 1997, four
production wells in the Saugus Formation were found to be contaminated with perchlorate (a
chemical used in the manufacture of solid rocket propellants, munitions and fireworks). Two
additional production wells in the alluvial aquifer tested positive for perchlorate in 2002 and
2005. At this time, two of the affected wells have been returned to service, and the Agency is
constructing facilities to treat the remaining water. The Agency is currently constructing a
perchlorate treatment facility, a distribution system and Saugus 1 and 2 wells, all of which are
anticipated to be operational in November 2009. The treatment facilities will include an ion
exchange process located at the RVIPS. The Saugus 1 and 2 wells will restore lost capacity and
will contain groundwater contamination emanating from the contaminated sites.
o
Groundwater Banking Programs – The Agency has three groundwater banking accounts in two
separate programs. Two accounts are in the Semitropic Water Storage Districts Groundwater
Banking Program. These accounts are short-term, ten-year accounts. One account was initiated
in 2002 and contains a balance of 16,650 acre-feet of excess State Water Project Table A amount
that must be delivered to the Agency (or another Agency groundwater account) prior to the end of
2012. The other account was initiated in 2003 and contains 29,270 acre-feet of excess State
Water Project Table A amount that must be delivered to the Agency (or another Agency
groundwater account) prior to the end of 2013. For both accounts, the Agency anticipates using
the banked water prior to 2012 and 2013, respectively, and 4,950 AF is being extracted from the
first account during 2009. The Agency anticipates that if such water is not used, it will be
transferred to another groundwater banking program prior to 2012 and 2013, respectively.
Withdrawals of water from the accounts in a given year may be limited by hydrology and the
demands of other Program participants.
In September 2005, the Agency initiated participation in the Rosedale-Rio Bravo Water Storage
District Groundwater Banking Program. This program allows the storage of 20,000 acre-feet
annually of the Agency’s State Water Project Table A amount of other State Water Project
supplies, and has a contract term through 2035, renewable according to the terms of the Agency’s
water supply contract with Department of Water Resources.
Santa Clarita Water Division
The Santa Clarita Water Division’s (SCWD) sources of supply are imported water purchased from the
Agency and local groundwater. SCWD’s distribution system consists of approximately 300 miles of
pipeline. System pipe sizes range from 2 inches to 18 inches in diameter, with the majority of the piping
ranging from 6 inches to 14 inches in diameter. SCWD’s system also includes 27 storage reservoir sites
consisting of 48 active storage tanks with a total capacity of 74 million gallons.
In addition to the storage reservoirs, there are five locations which utilize hydropneumatic tanks to
provide adequate system pressure to residential areas located at elevations near or above the storage
reservoirs.
There are currently 29 active booster stations used to boost water throughout the SCWD water system.
Individual booster stations consist of one to four pumps and range from total capacities of 59 to 2,200
gallons per minute.
IV
Revenue Sources
The Agency’s major revenue sources are as follows:
o
Water Sales (Wholesale) – The Agency bills its four purveyors monthly for water purchased from
the Castaic Lake Water Agency. The water rate for the last three years has been as follows:
$210/AF on January 1, 2007
The Agency also charges its tenant farmer for water used at the Devil’s Den Ranch. In FY
2003/04, the Agency began selling recycled water.
o
Water Sales (Retail) - SCWD adopted a new rate structure effective March 2007. This structure
will be in place for three years. The rate design meets the requirements of both the current and
proposed California Urban Water Conservation Council Best Management Practice 11 –
Conservation Rate Structure (BMP 11). The SCWD charges retail water rates designed to meet
the cost of service. The rates consist of five components as follows:
x
Meter service charge, - the meter service charge is intended to cover 50% of fixed costs
and is a base monthly charge based on customer meter size. The remaining 50% of fixed
costs, while fixed, are closely related to water production and operation of the system.
By including these costs in the variable rates, those customers who use more water pay a
proportionately higher percentage of those costs.
x
The fixed costs include administration and general expenses, debt service and capital
project reserve funds. A typical residential customer uses a ¾” meter. The monthly
charge has been as follows:

x
$15.70 on March 1, 2007
$17.01 on January 1, 2008
$17.23 on January 1, 2009
Usage or commodity charge - The usage or commodity charge is the variable component
of the rate and is based on usage. The commodity charge has been as follows:
a. $0.6059 per ccf on March 1, 2007
b. $0.6814 per ccf on January 1, 2008
c. $0.7053 per ccf on January 1, 2009
x
Purchased water surcharge - The purchased water surcharge is a pass-through charge that
covers the cost of water purchased from CLWA. The purchased water surcharge has
been as follows:
x
Power/Energy surcharge – The power surcharge is a pass-through charge that covers the
cost of electricity to produce the water. The power surcharge has been as follows:
V
o
Facility Capacity Fees – The Agency reviews and establishes its facility capacity fee rates yearly
through a public hearing process. These fees are paid to the Agency directly by developers or
property owners within the Wholesale Service Area shortly before the issuance of building
permits by the County of Los Angeles and the City of Santa Clarita. Facility Capacity Fee
Revenues are used to pay future users share of the Agency’s Certificate of Participation Debt.
o
One Percent Property Tax Revenues – The Counties of Los Angeles and Ventura levy a 1%
property tax on behalf of all taxing agencies in the County, including the Agency. The taxes are
allocated to the taxing agencies within the County on the basis of a formula established by State
Law enacted in 1979 and modified from time to time. Under this formula, the County and all
other taxing entities receive a base year allocation plus an allocation on the basis of “situs”
growth in assessed value (due to new construction, change of ownership, or a 2% allowance
allowed under Article XIIIA of the State Constitution) prorated among the jurisdictions which
serve the tax rate area within which the growth occurs.
During FY 2006/07, the Board of Directors adopted a three-year program of annual 15% rate
increases for the wholesale water rate to be implemented beginning in January 2007. An amount
of 1% of the property tax revenues would be used to offset shortages between wholesale water
rate revenues and operating expenses and maintain a fund balance of $300,000 in the Operating
Fund. The goal would be to fully cover operating expenses with operating revenues by 2010.
After that, it is expected that rate increases will continue to be required, and would be calculated
to recover operating expenditures. That is, future increases in the wholesale water rate would be
tied to increases in operating expenses and fully cover operating expenses.
o
Agency-Set Property Tax Revenues – The Counties of Los Angeles and Ventura also levy for the
Agency a special tax rate to pay for the Agency’s share of payments to the State of California
Department of Water Resources for its fixed and variable charges. These revenues, and the
interest earned thereon, is restricted to pay only these specific payments.
o
Other Sources of Revenue – Capital Grants, Investment Income and Other.
All revenues of the Agency, except the Agency-set tax revenues and corresponding interest, are
irrevocably pledged to the payment of COP debt.
The following chart reflects the Agency’s revenue mix for the year ending June 30, 2009, as follows:
TotalAgencyRevenues$96,847
(InThousands)
Other
$17,174
Wholesale
Sales$9,933
CapitalGrants
$1,268
RetailSales
$21,463
Investment
Income$9,492
Facility
CapacityFees
$1,825
PropertyTax
$35,692
VI
Local Economy
The Agency’s service area is considered a premier community for raising families and building
businesses. The area is known for its attractive residential neighborhoods, low crime rate and excellent
schools. Prospects for the future economic strength of the area are excellent.
The Santa Clarita Valley is part of a comprehensive transportation network, which includes three major
freeways, commuter rail which serves over 2,000 passengers daily and easy access to the ports of Los
Angeles and Long Beach. There are a number of recreational and historical facilities located in the Santa
Clarita Valley, including the Six Flags Magic Mountain amusement park and Gene Autry’s Melody
Ranch. The service area is adjacent to the Angeles National Forest, and includes nearby Castaic Lake, the
Placerita Canyon Nature Center and Vasquez Rocks County Park.
Also located in the Santa Clarita Valley are the Canyon Theatre Guild, Disney Studios, Santa Clarita
Repertory Theater, as well as the Friendly Valley, Valencia Country Club, Robinson’s Ranch,
Tournament Players Club and Vista Valencia golf courses.
The Agency evaluates land use data and housing construction in the service area in conjunction with the
retail water purveyors and projections prepare by “One Valley One Vision” (OVOV), a joint planning
effort by the City of Santa Clarita and the Los Angeles County Department of Regional Planning. The
OVOV projections indicate a 1.6 percent annual growth rate of population and households for the City of
Santa Clarita and a 3.7 to 3.8 percent annual growth rate for unincorporated areas. This results in a
combined growth rate of 2.3 to 2.4 percent. The retail water purveyors project an average annual increase
of 2.2 percent through the year 2030, consistent with the OVOV projections.
The growth projections are consistent with the Agency’s and the retailers’ Urban Water Management Plan
(UWMP). Currently, the 2005 UWMP is in effect and has a planning horizon to the year 2030. This
document provides information on water use, water resources, recycled water, water quality, reliability
planning, demand management measures and water shortage contingency planning. The 2005 UWMP
projects future demands for residential, industrial, institutional, landscape, agricultural and other
purposes, and lists available and planned supplies to meet that demand. The 2005 UWMP has found that,
based on conservative water supply and demand assumptions over the next 25 years in combination with
conservation of non-essential demand during certain dry years, the 2005 UWMP will successfully achieve
this goal. The operating and capital programs in the FY 2009/10 Budget support the UWMP.
As of December 31, 2008, the retail water purveyors served about 68,989 connections, as follows:
Retail Water Purveyor
CLWA Santa Clarita Water Division
Newhall County Water Agency
L.A. County Waterworks District #36
Total Connections
Connections
28,194
29,924
9,540
1,331
68,989
Long-term Financial Planning
Facility Capacity Fees - The fiscal year capital budget is generally based on the Data Document
Providing Economic Justification for Proposed Facility Capacity Fees. This document is prepared every
one to three years to provide the data concerning the estimated cost of facilities to supply water for new
development, and the proposed method and basis for allocating the costs among those lands on which
new development occurs. The report considers the estimated long-term costs of the Capital Improvement
Program (CIP) activities of the Agency.
The Agency’s proposed CIP activities are developed to fulfill the Agency’s stated mission, which is to
provide reliable, quality water at a reasonable cost to the Santa Clarita Valley. The proposed CIP is
VII
structured to include facilities for the treatment, storage and transmission of water as well as the
acquisition of additional water supplies. The proposed CIP also contains elements to increase reliability
through a combination of additional water supplies, water banking, storage and conjunctive use.
The Data Document Providing Economic Justification for Proposed Facility Capacity Fees analyzes
projected water demand, proposed and actual development, the economic climate, water conservation
activities and the status of the CIP. This information is used to develop each fiscal year CIP and to
apportion costs between existing and new users. Existing users fund their portion of the CIP through 1%
Property Tax revenues and new users fund their portion of the CIP through the Facility Capacity Fees.
The Facility Capacity Fees are adjusted as necessary depending on the CIP and development activity.
During FY 2008/09, the Agency updated its Facility Capacity Fees and new fees went into effect January
12, 2009.
Certificates of Participation (COP) – COP’s have been issued to finance the Agency’s Capital Program.
Future users’ share of the debt service is funded from Facility Capacity Fees. Existing users’ share is
funded from One Percent Property Tax revenues. The following is a summary of the four issues to date.
o
1994, 2004 and 2008A COPs - In June 1990, the Agency issued $132 million in COPs to acquire
and construct the Rio Vista Water Treatment Plant and related facilities. These were advance
refunded in August 1994, in the amount of $124.6 million. In May 2004, the Agency refunded
$28,475,000 million of the 1994 COPs (2004 Series A) in a fixed rate refunding. In June 2004,
the Agency refunded $37,350,000 of the 1994 COPs into a variable to fixed swap agreement for
$40,000,000 (2004 Series B). At the time, the unrefunded 1994 COP’s totaled $40,565,000. In
May 2008, the Agency refunded all of the 2004B certificates (2008 Series A); the swap
agreement remains in effect for the 2008A certificates. The remaining balance after FY 2008/09
payments is $88,095,000 as follows: $28,240,000 unrefunded (Series 1994); $20,780,000 for
2004 Series A; and $39,075,000 for 2008 Series A. Payments totaling $10,109,877 are due
during FY 2009/10. Approximately $7.9 million in payments will be from Facility Capacity Fee
Revenues and $2.2 million from One Percent Property Tax Revenues.
o
1999 and 2006A COPs - In August 1999, the Agency issued $75.8 million in COPs to provide
funds to (a) reimburse the Agency for the acquisition of approximately 41,000 acre-feet of
supplemental water from the DWR and (b) to acquire certain capital improvements to the
Agency’s Wholesale System. In December 2006, the Agency advance refunded $45,520,000 of
the 1999 certificates (2006 Series A). The unrefunded 1999 COP’s totaled $38,162,808 after the
refunding. The remaining balance after FY 2008/09 payments is $80,507,808 as follows:
$35,992,808 unrefunded and $44,515,000 Series A. Payments totaling $3,373,322 are due during
FY 2009/10. Approximately $2.6 million in payments will be from Facility Capacity Fee
Revenues and $761,000 million from One Percent Property Tax Revenues.
o
2001 COPs - In March, 2001, the Agency issued $80 million in COPs to provide funds to acquire
certain capital improvements to the Agency’s Wholesale System. The remaining balance after
FY 2008/09 payments is $70,360,000. Payments totaling $5,355,400 are due during FY 2009/10.
Approximately $4.7 million in payments will be from Facility Capacity Fee Revenues and
$600,000 from One Percent Property Tax Revenues.
o
2006C COPs - In December, 2006, the Agency issued $89.8 million in COP’s to provide funds to
acquire certain capital improvements to the Agency’s Wholesale System. The remaining balance
after FY 2008/09 payment is $88,305,000. Payments totaling $5,867,988 are due during FY
2009/10. Approximately $3.6 million in payments will be from Facility Capacity Fee Revenues
and $2.3 million from One Percent Property Tax Revenues.
VIII
State Water Project Contract – On April 30, 1963, the Agency entered into a water supply contract with
the Department of Water Resources under which the Agency agreed to make payments which include,
among other charges, capital charges and operation and maintenance charges. These contracts are
deemed to be voter approved indebtedness for purposes of Article XIIIA of the California Constitution,
and the Agency levies a tax sufficient to provide for all payments.
Buena Vista/Rosedale-Rio Bravo Water Acquisition - On May 22, 2007, the Agency entered into a 30year agreement with the Buena Vista Water Storage District and the Rosedale-Rio Bravo Water Storage
District for the acquisition of 11,000 acre-feet (AF) of water supply per year for a 30-year period. The
purchase price was established in FY 2006/07 at $486.85 per AF, or $5,335,350. The purchase price will
be adjusted each calendar year by the Consumer Price Index (All Urban Consumers – All Items –
Southern California Area). The current purchase price is $520.84 per AF.
Relevant Financial Policies and Controls
The Agency’s Financial Policies include the Reserve Policy, the Water Rate Policy, the Investment
Policy, the Debt Management Policy and the Purchasing Policy. The Agency’s Controls include the
Budgetary Control, Internal Control Structure and Risk Management.
Reserve Policy
The Agency’s reserve policy is to set aside as “reserves” an amount equal to three times the annual (fiscal
year) COP debt obligation.
Water Rate Policy
The Agency’s wholesale water rate is $275 per AF. This rate became effective January 1, 2009. The
water rate does not consist of a separate fixed and variable rate, but is billed in total to the four purveyors
each month for water taken the preceding month.
Investment Policy
The Board of Directors annually adopts an Investment Policy that conforms to California State Law,
Agency ordinances and resolutions, prudent money management and the “prudent person” standards. The
objectives of the Investment Policy are safety, liquidity and yield. Agency funds are normally invested in
the State Treasurer’s Local Agency Investment Fund, the Los Angeles County Pooled Investment Fund,
Certificates of Deposit, Government Agency Obligations or other specifically authorized investments.
Debt Management Policy
The Agency’s Debt Management Policy includes the Agency’s written guidelines and restrictions that
affect the amount and type of debt issued, the issuance process and the management of the debt portfolio.
The policy is designed to provide justification for the structure of debt issuance, identify policy goals and
demonstrate a commitment to long-term financial planning. The Interest Rate Swap Policy supplements
the Debt Management Policy.
Purchasing Policy
The Board of Directors has adopted a Purchasing Policy which provides uniform procedures for acquiring
equipment, goods and services for the Agency. Improvements or units of construction work are subject to
the competitive bidding requirements of Public Contract Code, section 21530 et seq.
Budgetary Control
The Board of Directors annually adopts a balanced operating and capital budget prior to the new fiscal
year. The budget authorizes and provides the basis for reporting and control of financial operations and
accountability for the Agency’s operations and capital projects. The Board of Directors monitors the
budget through monthly Finance and Expenditures reports, Quarterly Investment Reports and Midyear
and Yearend Budget reports.
IX
The Board of Directors must approve all supplemental appropriations to the Budget and transfers between
major funds. The legal level of budgetary control is at the fund level. The General Manager is authorized
to direct the Administrative Services Manager to transfer within individual fund budgets.
Internal Controls
Agency management is responsible for the establishment and maintenance of the internal control structure
that ensures that the assets of the Agency are protected from loss, theft, or misuse. The internal control
structure also ensures that adequate accounting data are compiled to allow for the preparation of financial
statements in conformity with generally accepted accounting principles. The Agency’s internal control
structure is designed to provide reasonable assurance that these objectives are met. The concept of
reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be
derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.
Risk Management
The Agency is a member of the Association of California Water Agencies/Joint Powers Insurance
Authority (ACWA/JPIA). The purpose of ACWA/JPIA is to arrange and administer risk management
programs for the pooling of self-insured losses, and the purchase of excess insurance and workers’
compensation coverage.
Major Initiatives
Major initiatives include the Rio Vista Water Treatment Plant Expansion project and funding of various
minor capital project and ongoing water supply reliability activities.
Awards and Acknowledgments
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting, to the Castaic Lake Water Agency for
its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2008. This was the
fourth year that the Agency has achieved these prestigious awards. In order to be awarded a Certificate of
Achievement for Excellence in Financial Reporting, a government unit must publish an easily readable
and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both
Generally Accepted Accounting Principles (GAAP) and all applicable legal requirements.
A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only.
We believe that our current comprehensive annual financial report continues to meet the requirements of
the GFOA Certificate of Achievement Program requirements, and we are submitting it to GFOA to
determine its eligibility for another certificate.
Preparation of this report was accomplished by the combined efforts of Agency staff. We appreciate the
dedicated efforts and professionalism that our staff members bring to the Agency. We would also like to
thank the members of the Board of Directors for their continued support in the planning and
implementation of Castaic Lake Water Agency’s fiscal policies.
Respectfully submitted,
X
Organizational Chart
XI
Our Mission Statement
"Providing Reliable Quality Water at a Reasonable cost to
the Santa Clarita Valley."
Board of Directors as of June 30, 2009
Name
R. J. Kelly
Peter Kavounas
E. G. "Jerry" Gladbach
Robert J. DiPrimo
Dean D. Efstathiou
William Cooper
William Pecsi
Thomas Campbell
Edward Colley
Jacque McMillan
B. J. Atkins
Title
Division
Elected/
Appointed
President
Vice-President
Director
Director
Director
Director
Director
Director
Director
Director
Director
1
2
2
VWC
LA Co. #36
At-Large
3
At-Large
1
3
NCWD
Elected
Elected
Elected
Appointed
Appointed
Elected
Elected
Elected
Elected
Elected
Appointed
Dan Masnada, General Manager
27234 Bouquet Canyon Road
Santa Clarita, California 91350-2173
(661) 297-1600
www.clwa.org
XII
Term
Expires
January 2013
January 2011
January 2013
January 2013
January 2011
January 2013
January 2013
January 2011
January 2011
January 2011
January 2013
Service Area
XIII
XIV
Financial Section
Independent Auditor’s Report
Board of Directors
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund and the aggregate remaining fund information of the Castaic Lake Water
Agency (Agency) as of and for the year ended June 30, 2009, which collectively comprise the Agency’s
basic financial statements as listed in the table of contents. These basic financial statements are the
responsibility of the Agency’s management. Our responsibility is to express an opinion on these basic
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the basic financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the basic financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall basic financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund
and the aggregate remaining fund information of the Castaic Lake Water Agency as of June 30, 2009, and
the respective changes in net assets and cash flows, where applicable, thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued a report dated September 10,
2009, on our consideration of the Agency’s internal control over financial reporting and our tests of its
compliance with certain provisions of laws, regulations, contracts, 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 the internal
control over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be read in conjunction with this report in
considering the results of our audit. This report can be found on page 78.
Management’s discussion and analysis and the required supplementary information are not required parts
of the basic financial statements but are supplementary information required by the Governmental
Accounting Standards Board. We have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the Agency’s basic financial statements. The accompanying budgetary information
is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The budgetary information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole. The accompanying introductory section and statistical information
section are presented for the purposes of additional analysis and are not required parts of the basic
financial statements. Therefore, we did not audit this information and express no opinion on it
September 10, 2009
Cypress, California
1
For the Year Ended June 30, 2009
The following Management’s Discussion and Analysis (MD&A) of activities and financial performance
of the Castaic Lake Water Agency (Agency) provides an introduction to the financial statements of the
Agency for the fiscal year ended June 30, 2009. We encourage readers to consider the information
presented here in conjunction with the transmittal letter in the Introductory Section and with the basic
financial statements and related notes, which follow this section.
Financial Highlights
x
The Agency's net assets increased 2.50% or $8.04 million to $330.24 million due primarily to a
$17.14 million increase in capital assets and the results of this year's operations.
x
Total revenues from all sources decreased by 3.46% or $3.47 million from the prior year due
primarily to decreased facility capacity fees and investment earnings.
x
Total expenses increased by 16.69% or $12.70 million from the prior year primarily due to
increased operations and maintenance costs and State Water Contract payments.
Using This Financial Report
This annual report consists of a series of financial statements. The Statement of Net Assets and the
Statement of Activities provides information about the activities and performance of the Agency using
accounting methods similar to those used by private sector companies. The Statement of Net Assets
includes all of the Agency’s investments in resources (assets) and the obligations to creditors (liabilities).
It also provides the basis for computing a rate of return, evaluating the capital structure of the Agency and
assessing the liquidity and financial flexibility of the Agency. All of the current year’s revenue and
expenses are accounted for in the Statement of Activities. This statement measures the success of the
Agency’s operations over the past year and can be used to determine the Agency’s profitability and credit
worthiness.
Government-wide Financial Statements
Statement of Net Assets and Statement of Activities
One of the most important questions asked about the Agency’s finances is, “Is the Agency better off or
worse off as a result of this year’s activities?” The Statement of Net Assets and the Statement of
Activities report information about the Agency in a way that helps answer this question. These statements
include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting
used by most private sector companies. All of the current year’s revenues and expenses are taken into
account regardless of when the cash is received or paid.
These two statements report the Agency’s net assets and changes in them. Think of the Agency’s net
assets – the difference between assets and liabilities – as one way to measure the Agency’s financial
health, or financial position. Over time, increases or decreases in the Agency’s net assets are one
indicator of whether its financial health is improving or deteriorating. You will need to consider other
non-financial factors; however, such as changes in the Agency’s property tax base and the types of grants
the Agency applies for to assess the overall financial health of the Agency.
Fund Financial Statements
Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance
Governmental funds are used to account for essentially the same functions reported as governmental
activities in the government-wide financial statements. However, unlike the government-wide financial
statements, governmental fund financial statements focus on near-term inflows and outflows of spendable
resources, as well as on balances of spendable resources available at the end of the fiscal year. Such
information may be useful in evaluating a government’s near term financing requirements.
2
Because the focus of governmental funds is narrower that of the government-wide financial statements, it
is useful to compare the information presented for governmental funds with similar information presented
for governmental activities in the government-wide financial statements. By doing so, readers may better
understand the long-term impact of the government’s near term financing decisions. Both the
governmental fund balance sheet and the governmental fund statement of revenues, expenditures and
changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds
and governmental activities.
Propriety funds are used to report the same functions presented as business-type activities in the
government-wide financial statements. The Agency maintains one type of propriety fund: the Water
Enterprise Fund. The Agency uses the enterprise fund to account for the Water Enterprise Fund.
The Water Enterprise Fund accounts for all activities necessary to provide retail water distribution to the
area know as the Santa Clarita Valley. Some of these activities include, but are not limited to, operations
and maintenance.
The notes provide additional information that is essential to a full understanding of the data provided in
the government-wide and fund financial statements. The notes to the basic financial statements can be
found on pages 16 through 48.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the Agency’s budgetary information and other post
employment benefits (OPEB) funding progress. Required supplementary information can be found on
pages 49 through 52. Other supplementary information can be found on page 53.
Government-wide Financial Analysis
Net Assets (in millions)
Governmental Activities
2009
Assets:
Current and other assets
Capital assets, net
$
2008
Business-Type Activities
2009
2008
Total Agency
2009
2008
265.65
370.61
284.34
353.99
(40.81)
91.38
(40.93)
90.86
224.84
461.99
243.41
444.85
Total assets
636.26
638.33
50.57
49.93
686.83
688.26
Liabilities:
Current liabilities
Non-current liabilities
22.06
328.46
21.71
336.18
5.62
0.45
7.97
0.20
27.68
328.91
29.68
336.38
350.52
357.89
6.07
8.17
356.59
366.06
32.53
258.18
(4.97)
8.52
261.57
10.35
91.38
(46.88)
90.86
(49.10)
123.91
258.18
(51.85)
99.38
261.57
(38.75)
285.74
280.44
44.50
41.76
330.24
322.20
Total liabilities
Net assets:
Net investment in capital assets
Restricted
Unrestricted
Total net assets
$
3
As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position.
In the case of the Agency, assets of the Agency exceeded liabilities by $330.24 million as of June 30,
2009. Compared to prior year, net assets of the Agency increased 2.50% or $8.04 million. The Agency's
net assets are made-up of three components: (1) net investment in capital assets, (2) restricted net assets
and (3) unrestricted net assets. The majority of the change in net asset position was due to an increase in
the Agency's net investment in capital assets of $24.53 million.
Change in Net Assets (in millions)
2009
Revenues:
Program revenues:
Charges for services
Cap. grants and contribs.
$
2008
2009
2008
Total Agency
2009
2008
11.76
-
19.35
-
21.46
1.28
19.65
6.42
33.22
1.28
39.00
6.42
General revenues:
Property taxes
Investment earnings
Other revenues
35.69
9.20
16.96
33.96
12.13
5.39
0.29
0.21
0.57
2.85
35.69
9.49
17.17
33.96
12.70
8.24
Total revenues
73.61
70.83
23.24
29.49
96.85
100.32
51.29
17.02
-
38.56
18.93
-
20.50
18.62
51.29
17.02
20.50
38.56
18.93
18.62
68.31
57.49
20.50
18.62
88.81
76.11
5.30
13.34
2.74
10.87
8.04
24.21
280.44
267.10
41.76
30.89
322.20
297.99
285.74
280.44
44.50
41.76
330.24
322.20
Expenses:
Wholesale water operations
Interest on long-term debt
Water enterprise fund
Total expenses
Change in net assets
Net assets, beginning of year
Net assets, end of year
$
Government and Business-type activities increased the Agency's net assets by $8.04 million accounting
for the 2.50% increase in the net assets of the Agency. Key elements for this increase are as follows:
Governmental activities increased the Agency’s net assets by $5.30 million, thereby accounting for
growth of 1.89%. Total revenues increased by $2.78 million or 3.92% from the prior year primarily due
to a $1.73 million increase in property tax, $9.61 million increase in Perchlorate reimbursement and offset
by $7.37 million decrease in facility capacity fees. In addition, total expenses increased by 18.82% or
$10.82 million from prior year primarily due to an increase in operations and maintenance costs and State
Water Contract payments.
Business activities increased the Agency’s net assets by $2.74 million or 6.56%. Total revenues
decreased by $6.25 million or 21.19% from the prior year mainly from decreases in capital contributions.
4
Fund Financial Analysis
The General fund is the operating fund of the Agency. At the end of the fiscal year, the fund balance of
General fund was $0.30 million.
The Pledged Revenue fund balance decreased by $11.85 million, mainly due to transfers to the Certificate
of Participation Fund for debt payment.
The State Water Contract fund balance decreased by $5.84 million, due to increased payments to the
Department of Water Resources (DWR) variable and fixed charges.
The Certificate of Participation fund balance decreased by $0.83, million due to debt payment.
Capital Asset Administration
Capital Assets (in millions)
2009
Capital assets:
Non-depreciable
Depreciable
$
Total capital assets
Accumulated depreciation
Total capital assets, net
$
2008
2009
2008
Total
2009
2008
70.09
407.42
67.52
382.86
7.82
117.46
6.82
115.62
77.91
524.88
74.34
498.48
477.51
450.38
125.28
122.44
602.79
572.82
(106.90)
(96.39)
(33.90)
(31.58)
(140.80)
(127.97)
370.61
353.99
91.38
90.86
461.99
444.85
At the end of fiscal year 2009, the Agency’s investment in capital assets amounted to $461.99 million (net
of accumulated depreciation). This investment in capital assets includes land, transmission and
distribution systems, pumping plants and rights, buildings and structures, equipment, vehicles and
construction-in-process. Major capital asset additions in the governmental activities area included the ongoing construction of the Rio Vista Water Treatment Plant Expansion and various other projects. Major
capital asset additions in the business-type activities area included upgrades to water tanks and mains and
developer contributions to the water retail enterprise’s transmission and distribution system. A significant
portion of these additions were constructed by the Agency and/or sub-contractors and transferred out of
construction-in-process upon completion of these various projects. The capital assets of the Agency are
more fully analyzed in Note 5 to the basic financial statements.
Long-Term Debt Administration
Long-term Debt (in millions)
2009
Long-term debt:
Certificates of participation
Total long-term debt
2008
2009
2008
Total
2009
2008
$
338.08
345.47
-
-
338.08
345.47
$
338.08
345.47
-
-
338.08
345.47
Long-term debt changed between fiscal years primarily due to (1) a decrease of $9.40 million due to
principal payments on the certificates of participation and (2) accretion of debt principal of $2.20 million
on the 1999 certificates of participation. The long-term debt position of the Agency is more fully analyzed
in Note 7 to the basic financial statements.
5
Conditions Affecting Current Financial Position
The Agency continues to monitor the legal and water supply issues associated with the State Water
Project (SWP). A number of court actions in the last two years have resulted in operational impacts to the
SWP, and ongoing litigation may result in additional, more adverse operational impacts. In addition, dry
weather conditions have the potential to impact deliveries in 2009 and 2010. The Agency, in coordination
with the local water retailers, continues to address the impacts through planning for and managing a
diverse water supply portfolio. The Agency will continue to monitor and support the Department of
Water Resources in its efforts to implement short and long-term actions, such as the Bay Delta
Conservation Plan process, to provide for the recovery of endangered and threatened species and their
habitats in the Delta and protect and restore water supplies.
Requests for Information
This financial report is designed to provide the Agency’s funding sources, customers, stakeholders and
other interested parties with an overview of the Agency’s financial operations and financial condition.
Should the reader have questions regarding the information included in this report or wish to request
additional financial information, please contact the Agency’s Administrative Services Manager at 27234
Bouquet Canyon Road, Santa Clarita, California 91350-2173 or (661) 297-1600.
6
Basic Financial Statements
June 30, 2009
Governmental
Activities
Assets
Assets:
Cash and cash equivalents (note 2)
Cash and cash equivalents with fiscal agent (note 2)
Investments (note 2)
Accrued interest receivable
Accounts receivable – water sales and services
Accounts receivable – other
Property taxes receivable
Internal balances (note 3)
Materials and supplies inventory
Prepaid expenses and other deposits
Deferred charges, net (note 6)
Capital assets - not being depreciated (note 5)
Capital assets, net - being depreciated (note 5)
Total assets
Business-type
Activities
Total
$
59,573,592
14,645,002
123,177,344
361,130
980,803
4,539,836
1,634,538
59,132,871
454,771
1,146,108
70,087,838
300,522,891
11,738,132
3,004,060
43,382
2,935,694
160,773
(59,132,871)
389,693
46,050
7,822,178
83,561,506
71,311,724
14,645,002
126,181,404
404,512
3,916,497
4,700,609
1,634,538
389,693
500,821
1,146,108
77,910,016
384,084,397
$
636,256,724
50,568,597
686,825,321
$
5,943,227
187,162
5,583,046
1,930,187
115,014
414,073
3,086,300
-
7,873,414
302,176
414,073
3,086,300
5,583,046
166,918
10,175,745
74,286
-
241,204
10,175,745
168,645
389,475
327,901,607
226,296
222,858
-
394,941
612,333
327,901,607
350,515,825
6,069,014
356,584,839
32,533,377
40,382,995
12,465,520
14,645,002
190,685,320
(4,971,315)
91,383,684
(46,884,101)
123,917,061
40,382,995
12,465,520
14,645,002
190,685,320
(51,855,416)
285,740,899
44,499,583
330,240,482
Liabilities and Net Assets
Liabilities:
Accounts payable and accrued expenses
Accrued salaries and wages
Customer deposits and unearned revenue
Advances for construction
Accrued interest – certificates of participation
Long-term liabilities - due within one year:
Compensated absences (note 4)
Certificates of participation (note 7)
Long-term liabilities - due in more than one year:
Other post employment benefits obligation, (note 13)
Certificates of participation, net of premium (note 7)
Total liabilities
Net assets:
Invested in capital asset, net of related debt (note 8)
Restricted for facility capacity fees
Restricted for state water contract
Restricted for debt service
Restricted for capital improvement
Unrestricted
Total net assets
$
See accompanying notes to the basic financial statements
7
Expenses
Functions/Programs
Governmental activities:
Wholesale water agency
$
Total governmental activities
Business-type activities:
Retail water enterprise
Total government
$
Program Revenues
Capital
Charges for
Grants and
Services
Contributions
Net (Expense) Revenue and
Changes in Net Assets
Governmental
Business-type
Activities
Activities
Total
51,285,178
17,021,922
11,758,318
-
-
(39,526,860)
(17,021,922)
-
(39,526,860)
(17,021,922)
68,307,100
11,758,318
-
(56,548,782)
-
(56,548,782)
20,503,320
21,462,927
1,267,966
88,810,420
33,221,245
1,267,966
General revenues:
Property taxes levied for general purposes
Interest and investment earnings
Other revenues
(56,548,782)
$
Total general revenues
$
8
2,227,573
2,227,573
2,227,573
(54,321,209)
35,692,587
9,197,675
16,960,566
294,234
213,168
35,692,587
9,491,909
17,173,734
61,850,828
507,402
62,358,230
5,302,046
2,734,975
8,037,021
280,438,853
41,764,608
322,203,461
285,740,899
44,499,583
330,240,482
Balance Sheet – Governmental Funds
June 30, 2009
Pledged
Revenue
General
Assets:
Cash and investments
Cash and cash equivalents with fiscal agent
Accounts receivable – water sales, net
Property taxes receivable
Due from other funds (note 3)
Advances to other funds (note 3)
Total assets
Liabilities:
Accounts payable
Accrued expenses
Due to other funds (note 3)
Certificates
of
Participation
Total
Governmental
Funds
$
74,965
309,015
109,339
980,803
-
145,372,279
348,966
980,803
4,230,821
971,879
207,967
25,110,000
59,132,871
12,593,692
12,164
662,659
137,465
-
24,710,000
14,645,002
-
182,750,936
14,645,002
361,130
980,803
4,539,836
1,634,538
454,771
26,090,803
59,132,871
$
1,474,122
236,355,586
13,405,980
39,355,002
290,590,690
$
586,960
187,162
400,000
4,415,807
980,803
940,460
-
24,710,000
5,943,227
187,162
26,090,803
1,174,122
5,396,610
940,460
24,710,000
32,221,192
109,339
-
207,967
40,382,995
131,235,143
59,132,871
-
137,465
12,328,055
-
14,645,002
454,771
40,382,995
131,235,143
59,132,871
12,328,055
14,645,002
Total liabilities
Fund balances:
Reserved for: (note 9)
Prepaid and deposits
Facility capacity fees
Capital improvements
Advances to other funds
State water contract
Debt service
Unreserved reported in:
General fund
190,661
Total fund balances
Total liabilities and fund balances
State
Water
Contract
$
-
-
-
190,661
300,000
230,958,976
12,465,520
14,645,002
258,369,498
1,474,122
236,355,586
13,405,980
39,355,002
290,590,690
9
Reconciliation of the Balance Sheet of Governmental
Funds to the Statement of Net Assets
June 30, 2009
Total fund balances – Governmental funds
$
Deferred charges are expended in governmental funds as a costs of debt issuance
while the Statement of Net Assets includes those deferred changes among the assets
of the Agency and amortize them over the life of the debt service.
258,369,498
1,146,108
Capital assets used in governmental activities are not current financial resources
and, therefore, are not reported in the governmental funds balance sheet. However,
the Statement of Net Assets includes those capital assets among the assets of the
Agency as a whole.
Beginning balance, net of depreciation
Current year additions
Current year depreciation
Ending balance, net of depreciation
$
353,992,566
27,126,850
(10,508,687)
370,610,729
Long-term liabilities applicable to the Agency are not due and payable in the
current period and accordingly are not reported as governmental fund libailities.
All liabilities both current and long-term, are reported in the Statement of Net Assets.
Other post employment benefits obligation
Compensated absences and retirement payable
Premium on debt
Certificates of participation
(168,645)
(556,393)
(5,476,532)
(332,600,820)
(338,802,390)
Interest on long-term debt is not accrued in governmental funds, but rather is
recognized as an expenditure when due.
(5,583,046)
$
Net assets of governmental activities
10
285,740,899
Statement of Revenues, Expenditures and Changes in Fund Balances– Governmental Funds
Pledged
Revenue
State
Water
Contract
-
21,296,561
9,831,410
7,114
1,824,712
95,082
8,889,540
15,764,070
14,396,026
254,052
1,196,496
54,083
-
35,692,587
9,831,410
7,114
1,824,712
95,082
9,197,675
16,960,566
-
57,708,489
15,846,574
54,083
73,609,146
8,394,622
24,564,749
2,640,269
16,484,367
2,562,101
-
3,295,972
1,750,276
2,061,030
866,709
14,142,601
1,235,358
788,433
16,484,367
27,126,850
General
Revenues:
Property taxes
Water sales – Agency
Water sales – Devil's Den/Ranch
Facility capacity fee
Laboratory fees
Other
$
Total revenues
Expenditures:
Water treatment operations
Water resources
Maintenance
Water quality compliance
Administration
Management
Engineering
State water contract payments
Capital outlay
Debt service:
Interest expense
Certificates of participation payments
Bond issuance costs
3,295,972
1,750,276
2,061,030
866,709
3,107,710
1,235,358
788,433
-
Total expenditures
Excess of revenues over(under) expenditures
Other financing sources(uses):
Transfers in (note 3)
Transfers out (note 3)
Total other financing sources(uses)
$
-
13,105,488
32,959,371
21,686,737
(13,105,488)
24,749,118
(5,840,163)
13,105,488
-
(36,598,715)
13,105,488
(36,598,715)
-
Net change in fund balances
Fund balance, beginning of year
Fund balance, end of year
-
Certificates
of
Participation
14,965,694
9,405,000
6,187
Total
Governmental
Funds
14,965,694
9,405,000
6,187
24,376,881
92,128,477
(24,322,798)
(18,519,331)
-
23,493,227
-
36,598,715
(36,598,715)
-
23,493,227
(11,849,597)
(5,840,163)
300,000
242,808,573
18,305,683
15,474,573
276,888,829
300,000
230,958,976
12,465,520
14,645,002
258,369,498
11
(829,571)
(18,519,331)
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of
Governmental Funds to the Statement of Activities
Net change in fund balances – Total governmental funds
$
When capital assets that are to be used in governmental activities are purchased or constructed,
the resources expended for those assets are reported as expenditures in governmental funds.
However, in the Statement of Revenues, Expenses and Changes in Net Assets the cost of those
assets is allocated over their estimated useful lives and reported as depreciation expense. This is the
amount that capital expenditures ($27,126,850) exceeded depreciation ($10,508,687) in the current period.
(18,519,331)
16,618,163
Repayment of long-term debt is reported as expenditures in governmental funds, and thus, has the
effect of reducing fund balance because current financial resources have been used. For the Agency
as a whole, however, the principal payments reduce the liabilities in the Statement of Net Assets and
do not result in an expense in the Statement of Revenues, Expenses and Change in Net Assets.
9,405,000
The accretion of interest on long-term debt is not reported as an expenditure in governmental funds
but as an addition to principal outstanding in the statement of activities.
(2,224,536)
Deferred charges consist of capitalized debt issuance costs, original issue premiums and original issue
discounts on debt issued by the entity. These amounts are amortized over the life of the debt service.
108,772
Some expenses reported in the Statement of Revenues, Expenses and Changes in Net Assets do not
require the use of current financial resources and therefore are not reported as expenditures in the
governmental funds:
Net change in accrued interest for the current period
Net change in compensated absences for the current period.
Net change in other post retirement benefits obligation for the current period.
Change in net assets of governmental activities
168,308
(85,685)
(168,645)
$
12
5,302,046
Statement of Net Assets – Water Enterprise Fund
June 30, 2009
Business-Type
Activities
Assets
Current assets:
Cash and cash equivalents
Accounts receivable – water sales and services
$
11,738,132
43,382
2,935,694
160,773
389,693
46,050
15,313,724
Total current assets
Non-current assets:
Investments
Capital assets – not being depreciated
Capital assets, net – being depreciated
3,004,060
7,822,178
83,561,506
Total non-current assets
94,387,744
Total assets
$
109,701,468
$
1,630,265
115,014
414,073
3,086,300
Liabilities and Net Assets
Current liabilities:
Accrued wages and related payables
Customer deposits and deferred revenue
Advances for construction
Long-term liabilities - due within one year:
Due to other funds
74,286
299,922
5,619,860
Total current liabilities
Non-current liabilites:
Long-term liabilities - due in more than one year:
Other post employment benefits obligation
Advances to other funds
226,296
222,858
59,132,871
59,582,025
Total non-current liabilities
65,201,885
Total liabilities
Net assets:
Net investment in capital assets
Unrestricted
91,383,684
(46,884,101)
$
Total net assets
See accompanying notes to the basic financial statements.
13
44,499,583
Statement of Revenues, Expenses and Changes in Fund Net Assets – Water Enterprise Fund
Business-type
Activities
Operating revenues:
Water consumption sales and services
Other charges and services
$
21,139,498
323,429
Total operating revenues
21,462,927
Operating expenses:
Source of supply
Pumping
Water treatment
Transmission and distribution
Customer accounts
Engineering
General and administrative
4,813,108
2,553,546
949,464
3,375,826
836,957
386,124
2,397,014
Total operating expenses
15,312,039
Operating income before overhead absorption
Overhead absorption
Operating income before depreciation and amortization
Depreciation and amortization
6,150,888
207,826
6,358,714
(2,391,290)
3,967,424
Operating income
Non-operating revenue(expense)
Interest earnings
Interest expense
Other non-operating revenues, net
294,234
(3,007,817)
213,168
(2,500,415)
Total non-operating, net
1,467,009
Net income before capital contributions
1,267,966
Capital contributions – developer and customer
2,734,975
41,764,608
$
14
44,499,583
Statement of Cash Flows – Water Enterprise Fund
Business-type
Activities
Cash flows from operating activities:
Cash receipts from customers for water sales and services
Cash paid to employees for salaries and wages
Cash paid to vendors and suppliers for materials and services
$
Net cash provided by operating activities
20,951,652
(3,307,511)
(12,065,506)
5,578,635
Cash flows from non-capital financing activities:
Cash paid to other funds
(1,169,185)
Net cash used by non-capital financing activities
(1,169,185)
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets
Capital contributions
Increase(decrease)in construction deposits
(5,779,293)
1,246,741
(1,903,440)
Net cash used in capital and related financing activities
(6,435,992)
Cash flows from investing activities:
Purchase of investments
Proceeds from sale of investments
Interest earnings
(2,940,521)
2,000,000
346,337
Net cash used by investing activities
(594,184)
(2,620,726)
Net increase in cash and cash equivalents
14,358,858
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
11,738,132
$
3,967,424
Reconciliation of operating income to net cash provided by operating activities:
Operating income
Adjustments to reconcile operating income to net cash provided by operating activities:
Deprecation and amortization
Other non-operating revenues, net
Changes in assets and liabilities:
(Increase)decrease in assets:
Accounts receivable – water sales and services, net
Increase(decrease) in liabilities:
Accrued salaries and wages
Customer deposits and deferred revenue
Compensated absences
2,391,290
249,134
(643,506)
(116,903)
(42,089)
(1,676)
(196,048)
31,460
(89,048)
28,597
1,611,211
Total adjustments
Net cash provided by operating activities
$
5,578,635
Non-cash investing, capital and financing transactions:
Developer contributions of capital assets
$
1,365,483
15
June 30, 2009
(1)
Reporting Entity and Summary of Significant Accounting Policies
A. Organization and Operations of the Reporting Entity
The Castaic Lake Water Agency (Agency) (formerly the Upper Santa Clara Valley Water Agency) was
organized on April 20, 1962, by virtue of Assembly Bill No. 26, Chapter 28, California Statutes of 1962
to contract with the State of California for the delivery of a portion of the water to be brought over the
Tehachapi Mountains from the Sacramento-San Joaquin Delta through the state water resources
development system.
The Agency provides supplemental wholesale water to four local retail water purveyors as follows: the
Newhall County Water District, the Valencia Water Company, the Los Angeles County Waterworks
District No. 36, and the Santa Clarita Water Company (blended component unit – retail water enterprise
fund). The Agency covers an area of approximately 195 square miles situated in northwest Los Angeles
County. It is divided into three elective divisions; its governing board is made up of two directors from
each division, one director at-large, and one director appointed by each of the four retail water purveyors.
The Agency’s operations to date have consisted of participation in the development of the State Water
Project, construction of its water treatment and delivery facilities and the sale of water to local water
distribution agencies. All costs incurred by the Agency for construction, engineering, contract payments
to the State Water Project and administrative costs through June 30, 1980, were capitalized. Water sales
commenced during the fiscal year ended June 30, 1981.
Blended Component Units
The criteria used in determining the scope of the financial reporting entity is based on the provisions of
Governmental Accounting Statements No. 14 and 39 (an amendment of No. 14). The Agency is the
primary governmental unit based on the foundation of a separately elected governing board that is elected
by the citizens in a general popular election. Component units are legally separate organizations for which
the elected officials of the primary government are financially accountable. The Agency is financially
accountable if it appoints a voting majority of the organization’s governing body and: 1) It is able to
impose its will on that organization, or 2) there is a potential for the organization to provide specific
financial benefits to, or impose specific financial burdens on, the primary government. The Agency has
accounted for the Santa Clarita Water Company (Company) and the Castaic Lake Water Agency
Financing Corporation (Corporation) as blended component units. Accordingly, these basic financial
statements present the Agency and its component units, the Company and the Corporation.
The Agency acquired 100% of the outstanding shares of the Santa Clarita Water Company (Company)
through a Stock Purchase Agreement (Agreement). The Agreement was entered into in the settlement of
the Agency’s condemnation action files against the Company in which the Agency planned to exercise
the power of eminent domain to acquire the Company. The Agency sells and distributes water to
residential and commercial customers located in the Santa Clarita Valley of Southern California. The
stock sale resulting in the acquisition of assets and assuming the liabilities of the Company became
effective September 3, 1999. The acquisition of the Company was intended to maximize local revenues
within the Santa Clarita Water Company’s service area and integrate them with the Agency’s resources.
This will reduce long-term capital costs and increase water reliability while enhancing the Agency’s
financial strength. Although the Company is legally separate, it is included as a blended component unit –
water enterprise fund of the Agency, as it is in substance part of the Agency’s operations. There are no
separate basic financial statements prepared for the Company.
16
Notes to the Basic Financial Statements, continued
June 30, 2009
(1)
Reporting Entity and Summary of Significant Accounting Policies, continued
A. Organization and Operations of the Reporting Entity, continued
The Castaic Lake Water Agency Financing Corporation (Corporation) was formed in 1990. The
Corporation is a California nonprofit public benefit corporation formed to assist the Castaic Lake Water
Agency (Agency) by acquiring, constructing, operating and maintaining facilities, equipment, or other
property needed by the Agency and leasing or selling such property to the Agency and as such has no
employees or other operations. Although the Corporation is legally separate, it is included as a blended
component unit of the Agency, as it is in substance part of the Agency’s operations. There are no separate
basic financial statements prepared for the Corporation.
On October 25, 1988, the Agency purchased land and equipment owned by Producers Cotton Oil
Company. Of the 8,459 acres of land purchased in Kern and Kings Counties, approximately, 7,759 acres
are within the Devil’s Den Water District (District). The District encompasses 8,676 acres. The cost of
acquiring the land and equipment was approximately $5.0 million. The land is being leased to an outside
party to the Agency under terms of an operating lease agreement. The annual lease payments received by
the Agency range from $50 to $92 per acre foot of all water supplied to the leased property. The
accompanying basic financial statements contain all above-mentioned land and water allocation
transactions.
B. Basis of Accounting and Measurement Focus
The basic financial statements of the Agency are composed of the following:
x
x
x
Government-wide financial statements
Fund financial statements
Notes to the basic financial statements
Government-wide Financial Statements
These statements are presented on an economic resources measurement focus and the accrual basis of
accounting for both governmental and business-like activities. Accordingly, all of the Agency’s assets and
liabilities, including capital assets, are included in the accompanying Statement of Net Assets. The
Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are
recognized in the period in which they are earned and expenses are recognized in the period incurred,
regardless of when the related cash flows take place. The Statement of Activities demonstrates the degree
to which the operating expenses of a given function are offset by operating revenues. Operating expenses
are those that are clearly identifiable with a specific function. The types of transactions reported as
operating revenues for the Agency are charges for services directly related to the operations of the
Agency. Charges for services include revenues from customers or applicants who purchase, use, or
directly benefit from goods, services, or privileges provided by the Agency. Taxes, operating grants and
other items not properly included among operating revenues are reported instead as non-operating
revenues. Contributed capital and capital grants are included as capital contributions.
17
June 30, 2009
(1)
B. Basis of Accounting and Measurement Focus, continued
Fund Financial Statements
These statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in
Fund Balances for all major governmental funds. Accompanying these statements is a schedule to
reconcile and explain the differences in fund balances as presented in these statements to the net assets
presented in the Government-wide Financial Statements.
Governmental funds are accounted for on a spending or current financial resources measurement focus
and the modified accrual basis of accounting. Accordingly, only current assets and liabilities are included
on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances present
increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in
net current assets. Under modified accrual basis of accounting, revenues are recognized in the accounting
period in which they become measurable and available to finance expenditures of the current period.
Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual
(generally 60-days after year-end) are recognized when due. The primary sources susceptible to accrual
for the Agency are property tax, interest earnings, investment revenue and operating and capital grant
revenues. Expenditures are generally recognized under the modified accrual basis of accounting when the
related fund liability is incurred. However, exceptions to this rule include principal and interest on debt,
which are recognized when due.
Inter-fund activity in the amount of $36,598,715 (see note 3) has been eliminated from the general
governmental function for the government-wide financial statements except for charges between the
Agency’s Water Enterprise Fund and various other functions of the government. Elimination of these
charges prevents any potential distortion of the direct costs and program revenues for the various
functions considered.
The accrual basis of accounting is followed by the proprietary fund. Under the accrual basis of
accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred
or economic asset used. Unbilled water and utility services receivables are recorded at year end.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Revenues are
recognized in the accounting period in which they are earned and expenses are recognized in the period
incurred, regardless of when the related cash flows take place. Operating revenues, such as water sales,
result from exchange transactions associated with the principal activity of the Company. Exchange
transactions are those in which each party receives and gives up essentially equal values. Non-operating
revenues, such as grant funding and investment income, result from non-exchange transactions, in which,
the Agency gives (receives) value without directly receiving (giving) value in exchange.
When both restricted and unrestricted resources are available for use, it is the Agency’s policy to use
restricted resources first, and then unrestricted resources as they are needed.
Private sector standards of accounting and financial reporting issued prior to December 1, 1989, are
generally followed in both the government-wide and propriety fund financial statements to the extent that
those standards do not conflict with or contradict guidance of the Governmental Accounting Standards
Board. Governments also have the option of following subsequent private-sector guidance for their
business-type activities and enterprise funds, subject to this same limitation. The Agency has elected not
to follow subsequent private-sector guidance.
18
June 30, 2009
(1)
B. Basis of Accounting and Measurement Focus, continued
The accounts of the Agency are organized on the basis of funds, each of which is considered a separate
accounting entity with a self-balancing set of accounts established for the purpose of carrying out specific
activities or attaining certain objectives in accordance with specific regulations, restrictions or limitations.
Funds are organized into two major categories: governmental and proprietary categories. An emphasis is
placed on major funds within the governmental and proprietary categories. A fund is considered major if
it is the primary operation fund of the Agency or meets the following criteria:
a) Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or
proprietary fund are at least 10 percent of the corresponding total for all funds of that category or
type; and
b) Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund
or proprietary fund are at least 5 percent of the corresponding total for all governmental and
proprietary funds combined.
c) The entity has determined that a fund is important to the financial statement user.
The funds of the financial reporting entity are described below:
Governmental Fund Types
General Fund – This fund is used to account for all financial resources except those required to be
accounted for in another fund.
Special Revenue Funds – These funds are used to account for the proceeds of specific revenue sources
that are legally restricted for special purposes.
Debt Service Funds – These funds are used to account for the accumulation of resources for, and the
payment of, general long-term debt principal, interest and related costs.
Proprietary Fund Types
Enterprise Funds – These funds account for operations that are financed and operated in a manner
similar to a private enterprise – where the intent of the entity is that the costs (expenses, including
depreciation) of providing goods or services to the general public on a continuing basis be financed or
recovered primarily through user charges.
The major funds of the Agency are:
Governmental Funds
General Fund – is the general operating fund of the Agency. It is used to account for all expenditures
except those required to be accounted for in another fund.
Pledged Revenue Fund – is used to account for all financial resources and all revenues collected by
the Agency expect those required to be accounted for in another fund.
State Water Contract Fund – is used to account for all revenues derived from a tax collected to-payfor participation in the State Water Project. Its use is restricted for costs of the State Water Project.
Certificates of Participation Fund – is used to account for resources and payments of various
certificates of participation issued by the Agency.
19
June 30, 2009
(1)
Proprietary Fund
Water Enterprise Fund – is used to account for the operations of the Agency’s retail water enterprise
division including the amount of funds advanced to the fund to purchase the Company.
C. Financial Statement Elements
1. Cash and Cash Equivalents
Substantially all of the Agency’s cash is invested in interest bearing accounts. The Agency considers
all highly liquid investments with a maturity of three months or less to be cash equivalents.
2. Investments and Investment Policy
The Agency has adopted an investment policy directing the Treasurer to deposit funds in financial
institutions.
Changes in fair value that occur during a fiscal year are recognized as investment income reported for
that fiscal year. Investment income includes interest earnings, changes in fair value, and any gains or
losses realized upon the liquidation or sale of investments. The Agency’s policy is to hold its
investments until maturity or until market values equal or exceed cost.
3. Property Taxes and Assessments
The Counties of Los Angeles and Ventura Assessor’s Offices assesses all real and personal property
within each respective County each year. The Counties of Los Angeles and Ventura Tax Collector’s
Offices bills and collects the Agency’s share of property taxes and/or tax assessments. The Counties
of Los Angeles and Ventura Treasurer’s Office remits current and delinquent property tax collections
to the Agency throughout the year. Property tax in California is levied in accordance with Article 13A
of the State Constitution at one percent (1%) of countywide assessed valuations.
Property taxes receivable at year-end are related to property taxes and tax assessments collected by
the Counties of Los Angeles and Ventura, which have not been credited to the Agency's cash balance
as of June 30. The property tax calendar is as follows:
Lien date
Levy date
Due dates
Collection dates
March 1
July 1
November 1 and March 1
December 10 and April 10
4. Accounts Receivable
The Agency extends credit to customers in the normal course of operations. Management deems all
accounts receivable as collectible at year-end. Accordingly, an allowance for doubtful accounts has
not been recorded.
5. Materials and Supplies Inventory
Materials and supplies inventory consists primarily of water meters, pipe and pipefittings for
construction and repair to the Agency’s retail water transmission and distribution system. Inventory
is valued at cost using a weighted average method. Inventory items are charged to expense at the time
that individual items are withdrawn from inventory or consumed.
6. Prepaid Expenses
Certain payments to vendors reflect costs or deposits applicable to future accounting periods and are
recorded as prepaid items in the basic financial statements.
20
June 30, 2009
(1)
C. Financial Statement Elements, continued
7. Deferred Charges
The deferred charges are from issuance costs, and unamortized premiums and discounts on the
Agency’s certificates of deposit that will be amortized over the remaining life of their respective debt
service.
8. Premium on Debt Issued
The premium received on debt issued will be amortized over the remaining life of the respective debt
service.
9. Capital Assets
Capital assets acquired and/or constructed are capitalized at historical cost. Agency policy has set the
capitalization threshold for reporting capital assets at $5,000. Donated assets are recorded at estimated
fair market value at the date of donation and/or historical cost. Upon retirement or other disposition of
capital assets, the cost and related accumulated depreciation are removed from the respective balances
and any gains or losses are recognized. Depreciation is recorded on a straight-line basis over the
estimated useful lives of the assets as follows:
x
x
x
x
x
x
x
x
Castaic turnout, reservoirs, tanks and water mains – 50 years
Treatment plant and facilities – 2 to 50 years
Maintenance facility – 30 years
Lighting and roads – 25 years
Fencing – 5 to 25 years
Meters and services – 2 to 40 years
Office furniture and equipment – 2 to 20 years
Vehicles, tools and equipment – 1 to 20 years
x
x
x
x
x
x
x
Wells – 30 years
Pumping – equipment, structures and improvements – 10 to 30 years
Water treatment equipment and storage tanks – 10 to 30 years
Transmission and distribution mains – 60 years
Services, meters and hydrants– 30 years
Structures and improvements – 25 to 30 years
Furniture, equipment, tools and other – 6 to 20 years
21
June 30, 2009
(1)
10. Compensated Absences
The Agency's policy is to permit employees to accumulate an unlimited amount of earned vacation
and sick leave. Accumulated vacation time is accrued at year-end to account for the Agency's
obligation to the employees for the amount owed.
Governmental fund types recognize the vested vacation and sick leave as expenditure in the current
year to the extent it is paid during the year. The General Fund has been used in prior years to liquidate
compensated absences for vested vacation as a result of resignations or retirements. Accrued vacation
and sick leave relating to governmental funds is included as a long-term liability in the in the
Statement of Net Assets as those are payable from future resources and within the Statement of Net
Assets for amounts relating to the proprietary fund type.
11. Net Assets/Fund Balances
The government-wide financial statements utilize a net assets presentation. Net assets categorizes are
as follows:
x
Net Investment in Capital Assets – This component of net assets consists of capital assets,
net of accumulated depreciation and reduced by any outstanding debt outstanding against the
acquisition, construction or improvement of those assets.
x
Restricted Net Assets – This component of net assets consists of constraints placed on net
assets use through external constraints imposed by creditors, grantors, contributors, or laws or
regulations of other governments or constraints imposed by law through constitutional
provisions or enabling legislation.
x
Unrestricted Net Assets – This component of net assets consists of net assets that do not
meet the definition of restricted or net investment in capital assets.
In the fund financial statements, reserves and designations segregate portions of fund balances that
are either not available or have been earmarked for specific purposes. Reservations and designations
of fund balance are described below:
x
Reserved – Some of the assets reported in governmental funds are not available for spending
in the subsequent year's budget. Fund balance also is reserved to indicate situations where a
position of fund balance is not available for spending on any and all purposes of the fund.
x
Unreserved Designated – Designations essentially reflect a government's self imposed
limitations on the use of otherwise available current financial resources.
12. Water Sales
Water sales, retail and wholesale, are billed on a monthly cyclical basis. Estimated unbilled water
revenue through June 30, has been accrued at year-end for the water enterprise fund.
13. Facility Capacity Fee
Assembly Bill 4175 was signed into California law on September 16, 1986 and became effective
January 1, 1987. This bill authorizes the Agency to impose standby charges and a facility capacity fee
to generate revenues to pay for future Agency expansion. The Agency’s Board of Directors elected to
begin imposing facility capacity fees on October 1, 1987, but has not elected to impose any standby
charges.
22
June 30, 2009
(1)
14. Capital Contributions
Capital contributions represent cash and capital asset additions contributed to the Agency by property
owners, granting agencies or real estate developers desiring services that require capital expenditures
or capacity commitment.
15. Use of Estimates
The preparation of the basic financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported changes in net assets during the reporting period. Actual results could
differ from those estimates.
16. Budgetary Policies
The Agency follows specific procedures in establishing the budgetary data reflected in the financial
statements. Each April, the Agency’s General Manager and Administrative Services Manager
prepare and submit a capital and operating budget to the Board of Directors and adopted no later than
June of each year. Annual budgets are adopted on a basis consistent with generally accepted
accounting principles for all government and proprietary funds. Annual budgets are adopted on the
modified accrual basis of accounting for government fund types and accrual basis for the proprietary
fund. The adopted budget becomes operative on July 1.
The Board of Directors must approve all supplemental appropriations to the budget and transfers
between major funds. The legal level of budgetary control is at the fund level. Budget information
is presented as required supplementary information for the general fund, pledged revenue fund, state
water contract fund, and certificate of participation fund. The Adopted Original Budget is also the
Final Budget as there was no supplemental budget appropriations for the fiscal year ended June 30,
2009.
(2)
Cash and Investments
Cash and investments as of June 30, are classified in the Statement of Net Assets as follows:
2009
Cash and cash equivalents
Cash and cash equivalents with fiscal agent
Investments and cash equivalents
Total cash and investments
$
71,311,724
14,645,002
126,181,404
$
212,138,130
Cash and investments as of June 30, consist of the following:
2009
Cash on hand
Deposits with financial institutions
Investments and cash equivalents
Total cash and investments
23
$
1,600
15,245,767
196,890,763
$
212,138,130
June 30, 2009
(2)
Cash and Investments, continued
Investments Authorized by the California Government Code and the Agency’s Investment Policy
The table below identifies the investment types that are authorized by the Agency in accordance with the
California Government Code (or the Agency’s investment policy, where more restrictive). The table also
identifies certain provisions of the California Government Code (or the Agency’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 trustees that are governed by the
provisions of debt agreements of the Agency, rather than the general provisions of the California
Government Code or the Agency’s investment policy.
Maximum
Maximum
Maximum
Percentage
Investment
Authorized
Maturity
Of Portfolio
in One Issuer
Investment Type
5 years
None
None
U.S. Treasury Obligations
5 years
None
None
Federal Agency Securities
180 days
30%
5%
Banker's Acceptances
270 days
10%
5%
Commercial Paper
5 years
30%
10%
Certificates of Deposit
5 years
30%
5%
Medium-Term Notes
Repurchase agreements
30 days
10%
None
Money Market Mutual Funds
N/A
20%
10%
Los Angeles County Pooled Investment Fund (LACPIF)
N/A
20%
None
N/A
None
None
California Local Agency Investment Fund (LAIF)
* Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.
Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustees are governed by provisions of the debt agreements,
rather than the general provisions of the California Government Code or the Agency’s investment policy.
The table below identifies the investment types that are authorized for investments held by bond trustee.
The table also identifies certain provisions of these debt agreements that address interest rate risk, credit
risk, and concentration of credit risk.
Authorized
Investment Type
U.S. Treasury Obligations
U.S. Agency Securities
Banker's Acceptances
Commercial Paper
Money Market Mutual Funds
Investment Contracts
Maximum
Maturity
None
None
180 days
270 days
N/A
30 years
24
Maximum
Percentage
Of Portfolio
None
None
None
None
None
None
Maximum
Investment
in One Issuer
None
None
None
None
None
None
June 30, 2009
(2)
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. With respect to investments, custodial credit risk generally applies only to direct
investments in marketable securities. Custodial credit risk does not apply to a local government’s indirect
investment in securities through the use of mutual funds or government investment pools (such as LAIF).
The California Government Code and the Agency’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 governmental 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 Agency
deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public
deposits. The Agency had deposits with bank balances of $600,765 as of June 30, 2009. Of the bank
balances, up to $250,000 is federally insured and the remaining balance is collateralized in accordance
with the Code; however, the collateralized securities are not held in the Agency’s name.
Investment in State Investment Pool
The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by
the California Government Code under the oversight of the Treasurer of the State of California. The fair
value of the Agency’s investment in this pool is reported in the accompanying financial statements at
amounts based upon the Agency’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.
Los Angeles County Pooled Investment Fund
The Los Angeles County Pooled Investment Fund (LACPIF) is a pooled investment fund program
governed by the County of Los Angeles Board of Supervisors, and administered by the County of Los
Angeles Treasurer and Tax Collector. Investments in LACPIF are highly liquid as deposits and
withdrawals can be made at anytime without penalty. LACPIF does not impose a maximum investment
limit.
The County of Los Angeles’ bank deposits are either Federally insured or collateralized in accordance
with the California Government Code. Pool detail is included in the County of Los Angeles’
Comprehensive Annual Financial Report (CAFR). Copies of the CAFR may be obtained from the County
of Los Angeles Auditor-Controller’s Office – 500 West Temple Street – Los Angeles, CA 90012.
25
June 30, 2009
(2)
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. Information about the sensitivity of the fair values of the Agency’s
investments to market interest rate fluctuations is provided by the following table that shows the
distribution of the Agency’s investments by maturity date:
Maturities of investments and cash equivalents at June 30, 2009 were as follows:
Investment Type
Federal Home Loan Bank
$
Federal Home Loan Mortgage Corp.
Federal National Mortgage Association
Local Agency Investment Fund (LAIF)
Money market funds
Total
$
Total
47,166,300
43,244,610
35,280,030
56,050,977
1,022,478
14,126,368
196,890,763
Remaining Maturity (in Months)
12 Months
13 to 24
25-60
Or Less
Months
Months
34,997,500
2,000,000
10,168,800
40,140,300
3,104,310
34,280,030
1,000,000
56,050,977
1,022,478
14,126,368
180,617,653
6,104,310
10,168,800
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, the Agency’s investment policy, or debt agreements, and the actual rating as of yearend for each investment type.
Credit ratings of investments and cash equivalents as of June 30, 2009 were as follows:
Minimum
Legal
Total
Rating
Investment Types
$
Federal Home Loan Mortgage Corp.
Local Area Investment Fund (LAIF)
Money market funds
Total
$
47,166,300
43,244,610
35,280,030
56,050,977
1,022,478
14,126,368
196,890,763
26
AAA
AAA
AAA
N/A
AAA
N/A
Exempt
From
Disclosure
Rating as of Year End
Not
AAA
Rated
$
14,126,368
47,166,300
43,244,610
35,280,030
-
56,050,977
1,022,478
-
$
14,126,368
125,690,940
57,073,455
June 30, 2009
(2)
Concentration of Credit Risk
The investment policy of the Agency contains no limitations on the amount that can be invested in any
one issuer beyond that stipulated by the California Government Code. Investments in any one issuer
(other than for U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or
more of total Agency investments are as follows:
Issuer
Federal Home Loan M ortgage Corp.
(3)
Amount
Investment type
Federal agency securities
$
47,166,300
43,244,610
35,280,030
Interfund Receivables and Payables
Due from/to Other Funds
Receivable Fund
Payable Fund
Amount
Pledged Revenue
Cert. of Particip.
Pledged Revenue
General Fund
400,000
General Fund
Pledged Revenue
980,803
Total
$
$
24,710,000
26,090,803
Due from the Pledged Revenue Fund to the Certificate of Participation Fund is to provide funds for next
fiscal year’s debt service payments.
Advances to/from Other Funds
Receivable Fund
Pledged Revenue
Payable Fund
Water Enterprise
Amount
$
59,132,871
Advances from the Pledged Revenue Fund to the Water Enterprise Fund are to provide funds for the
acquisition of the Company and amount to $59,132,871 at June 30, 2009. The advance bears annual
interest of 5.04%. The advance plus any accrued interest is due the 25th of each month.
Interfund Transfers
Transfers From
Transfers to
Pledged Revenue
General Fund
Pledged Revenue
Cert. of Particip.
Total
Amount
$
13,105,488
23,493,227
$
36,598,715
Transfers are used to move revenues received and recorded in the Pledged Revenue Fund to: (1) the
General Fund to provide resources to pay for expenditures and (2) Certificates of Participation Fund to
provide funds to pay debt service payments as they become due.
27
June 30, 2009
(4)
Compensated Absences
Compensated absences comprise unpaid vacation leave, sick leave, personal and other leave which is
accrued as earned. The District’s liability for compensated absences is determined annually.
The changes to governmental compensated absences balance at June 30, were as follows:
Balance
2008
$
470,707
Earned
307,181
Balance
2009
Taken
221,495
556,393
Current
Portion
166,918
Long-Term
Portion
389,475
The changes to business-type compensated absences balance at June 30, were as follows:
Balance
2008
$
268,547
Earned
154,460
Balance
2009
Taken
125,863
28
297,144
Current
Portion
74,286
Long-Term
Portion
222,858
June 30, 2009
(5)
Capital Assets
Changes in capital assets for the year were as follows:
Balance
2008
Non-depreciable assets:
Land
Construction-in-process
$
Additions/
Transfers
Deletions/
Transfers
Balance
2009
28,372,111
39,143,104
23,902,507
(21,329,884)
28,372,111
41,715,727
67,515,215
23,902,507
(21,329,884)
70,087,838
116,544,079
29,103,742
112,927,974
15,745,473
1,649,965
4,638,901
99,535,527
398,243
304,220
188,310
737,821
103,624
481,430
504,000
2,562,101
6,334,728
2,043,410
11,001,772
1,358,487
56,518
118,328
52,551
1,026,333
-
119,106,180
35,438,470
114,971,384
26,747,245
1,649,965
4,638,901
100,894,014
398,243
304,220
188,310
794,339
221,952
533,981
1,530,333
382,863,310
24,554,228
-
407,417,537
(51,289,681)
(2,275,067)
(20,229,937)
(6,334,085)
(923,964)
(856,748)
(12,980,839)
(223,020)
(245,401)
(144,610)
(420,533)
(32,420)
(278,037)
(151,617)
(2,296,991)
(1,246,431)
(2,847,702)
(534,946)
(32,999)
(132,540)
(2,813,060)
(7,965)
(7,158)
(6,277)
(123,227)
(44,390)
(123,858)
(291,143)
-
(53,586,672)
(3,521,498)
(23,077,639)
(6,869,031)
(956,963)
(989,288)
(15,793,899)
(230,985)
(252,559)
(150,887)
(543,760)
(76,810)
(401,895)
(442,760)
Total accum depr. and amort.
(96,385,959)
(10,508,687)
-
(106,894,646)
Total depreciable assets, net
286,477,351
14,045,541
-
300,522,891
353,992,566
37,948,048
Total non-depreciable assets
Depreciable assets:
Contractual state water project rights
Contractual water rights - other agencies
Treatment plant
Water mains
Reservoirs and tanks
Reclaimed water
Control system
Castaic turnout
Services and meters
Maintenance facility
Large tools and equipment
Furniture and fixtures
Vehicles
Office equipment
Total depreciable assets
Accumulated depreciation and amortization:
Contractual state water project rights
Contractual water rights - other agencies
Treatment plant
Water mains
Reclaimed water
Control system
Castaic turnout
Services and meters
Maintenance facility
Large tools and equipment
Furniture and fixtures
Vehicles
Office equipment
$
29
(21,329,884)
370,610,729
June 30, 2009
(5)
Capital Assets, continued
A significant portion of these additions were constructed by the Agency and/or sub-contractors and
transferred out of construction-in-process upon completion of these various projects. Depreciation
expenses under governmental activities, wholesale water agency, totaled $10,508,687.
Changes in capital assets for the year were as follows:
Balance
2008
Non-depreciable assets:
Land and land rights
$
Additions/
Transfers
Deletions/
Transfers
Balance
2009
640,837
6,183,418
5,779,293
(4,781,370)
640,837
7,181,341
Total non-depreciable assets
6,824,255
5,779,293
(4,781,370)
7,822,178
Depreciable assets:
Transmission and distribution mains
Services
Hydrants
Boosters
Meters
Wells
Structures and improvements
Machinery and equipment
Transportation equipment
General plant
57,592,443
20,621,244
13,272,657
8,019,320
6,327,486
2,784,661
1,536,610
1,681,543
2,599,982
1,140,759
38,546
336,450
433,998
316,075
104,342
59,077
678,558
-
(1,014,278)
1,014,278
(156,329)
724,626
(529,128)
(8,897)
(77,462)
(39,169)
-
56,578,165
21,971,972
13,706,655
7,862,991
7,368,187
2,255,533
1,640,952
1,731,723
3,201,078
1,101,590
38,546
115,615,251
1,928,500
(86,359)
117,457,392
Total depreciable assets
Accumulated depreciation and amortization:
Transmission and distribution mains
Services
Hydrants
Boosters
Meters
Wells
Structures and improvements
Machinery and equipment
Transportation equipment
General plant
Total accumulated depreciation and amortization
Total depreciable assets, net
(11,216,689)
(6,813,851)
(4,289,965)
(2,837,450)
(2,269,419)
(856,491)
(690,147)
(658,429)
(1,152,296)
(782,339)
(9,138)
(752,551)
(508,650)
(300,063)
(195,287)
(132,949)
(150,212)
(45,655)
(52,071)
(186,080)
(65,419)
(2,353)
1,902
69,716
-
(11,969,240)
(7,322,501)
(4,590,028)
(3,032,737)
(2,402,368)
(1,006,703)
(735,802)
(708,598)
(1,268,660)
(847,758)
(11,491)
(31,576,214)
(2,391,290)
71,618
(33,895,886)
(14,741)
83,561,506
(4,796,111)
91,383,684
84,039,037
$
90,863,292
(462,790)
5,316,503
Major capital asset additions in the business-type activities area included developer contributions to the
water retail enterprise’s transmission and distribution system and various other projects. A significant
portion of these additions were constructed by the Agency and/or sub-contractors and transferred out of
construction-in-process upon completion of these various projects. Depreciation expenses under businesstype activities, retail water enterprise, totaled $2,391,290.
30
June 30, 2009
(5)
Capital Assets, continued
Construction-In-Process
The Agency has been involved in various construction projects throughout the year. The balances of the
various construction projects that comprise the construction-in-process balances at year-end are as
follows:
2008
The balance at June 30, consists of the following projects:
Rio Vista water treatment plant and expansion
Recycled water project
Lateral extension and storage projects
Perchlorate groundwater treatment
Various minor projects
2009
$
11,749,297
2,265,992
12,355,863
10,233,364
2,538,588
7,733,462
2,440,971
1,489,126
27,615,634
2,436,534
$
39,143,104
41,715,727
2008
The balance at June 30, consists of the following projects:
Internal construction projects
Developer on-site construction projects
(6)
2009
$
720,026
5,463,392
560,378
6,620,963
$
6,183,418
7,181,341
Deferred Charges
Deferred charges are being amortized over the length of the debt service, as follows:
Original
Amount
The Balance at June 30, consists of the following:
Deferred charges:
1999 Series A Revenue COP's
2004 Series A Revenue Refunding COP's
2006 Series A Revenue Refunding COP's
2006 Series C Revenue COP's
Deferred charges, net
Accumulated
Amortization
Balance
$
2,913,577
518,571
(2,938,998)
58,890
95,822
1,222,225
(963,099)
(145,488)
544,259
(7,682)
(9,582)
(142,387)
1,950,478
373,083
(2,394,739)
51,208
86,240
1,079,838
$
1,870,087
(723,979)
1,146,108
31
June 30, 2009
(7)
Certificates of Participation
The following is a summary of the Agency’s Certificates of Participation debt as of June 30:
Balance
2008
Certificates of Participation (COPs):
1994 Revenue Refunding COPs
1999 Series A Revenue COPs - Current Interest
1999 Series A Revenue COPs - Capital Appr.
2001 Series A Revenue COPs
2004 Series A Revenue Refunding COPs
Premium on issuance - 2006 Series A
2006 Series C Revenue COPs
Premium on issuance - 2006 Series C
$
Total
Less: Current Portion
Total Non-Current
Payments/
Retirements
Balance
2009
32,800,000
2,275,000
37,936,284
72,130,000
20,835,000
44,675,000
1,045,724
89,830,000
4,646,553
39,300,000
2,224,536
-
(4,560,000)
(1,110,000)
(1,770,000)
(55,000)
(160,000)
(49,796)
(1,525,000)
(165,949)
(225,000)
28,240,000
1,165,000
40,160,820
70,360,000
20,780,000
44,515,000
995,928
88,305,000
4,480,604
39,075,000
345,473,561
2,224,536
(9,620,745)
338,077,352
(9,620,745)
$
Additions
335,852,816
(10,175,745)
327,901,607
1994 Refunding Revenue Certificates of Participation
On June 1, 1990, the Corporation issued $132,000,000 of certificates of participation to provide financing
for the acquisition and construction of a second water treatment plant and related facilities (Project). On
August 31, 1994, the Corporation issued $124,600,000 of certificates of participation to provide funds to
refund in advance the June 1, 1990 certificates of participation issued by the Agency. A portion of the
issuance of debt from the certificates of participation issued in 1994 were placed in an escrow fund to
provide the debt service on the 1990 Certificates of Participation through August 1, 2000, and the
prepayment price for all certificates outstanding on August 1, 2000. The advance refunding met the
requirements of an in-substance defeasance and the certificates of participation were removed from the
Agency’s long-term liabilities. The refunded 1990 Certificates of Participation were paid in full on
August 1, 2000.
The 1994 Certificates of Participation are payable solely from installment payments to be made by the
Agency. The Agency has pledged for payment of the installment payments from all revenue derived from
the ownership of its water system, including existing portions, on or after June 1, 1990. These revenues
are deposited into the Pledged Revenue Fund and after payment of operation and maintenance costs,
including contingency reserves, the remaining reserves are to be used to pay the installment payments on
the certificates. Management believes that the physical condition of the water system meets the stated
requirements of the installment purchase agreements with the Corporation.
On May 5, 2004, the Agency refunded $28,475,000 of the 1994 certificates (2004 Series A). On June 10,
2004, the Agency refunded $37,350,000 of the 1994 certificates and concurrently entered into a variableto-fixed swap agreement for $40,000,000 (2004 Series B). On May 9, 2008, the Agency refunded all of
the 2004B certificates (2008 Series A). The Certificates are payable by installment payments according
to their respective Installment Agreements. Interest is payable semi-annually August 1 and February 1,
and principal is due annually on August 1st. The outstanding balance at June 30, 2009 is $88,095,000 as
follows: $28,240,000 Series 1994; $20,780,000 for 2004 Series A; and $39,075,000 for 2008 Series A.
(See 2004 Series A, 2004 Series B and 2008 Series A Certificates of Participation for their respective debt
service requirements.)
32
June 30, 2009
(7)
Certificates of Participation, continued
1994 Refunding Revenue Certificates of Participation, continued
Annual debt service requirements on the on the 1994 Refunding Revenue Certificates of Participation are
as follows:
Fiscal Year
2010
2011
2012
2013
2014
Principal
$
Total
Less current portion
Total non-current
Interest
Total
4,890,000
5,245,000
5,625,000
6,020,000
6,460,000
1,823,475
1,456,081
1,069,075
661,500
225,400
6,713,475
6,701,081
6,694,075
6,681,500
6,685,400
28,240,000
5,235,531
33,475,531
(4,890,000)
$
23,350,000
1999 Series A Revenue Certificates of Participation
In August 1999, the Corporation issued $75,813,498 of certificates of participation to finance certain
capital improvements to the Agency’s wholesale water system and reimbursement of the Agency’s cost of
acquisition of certain state water project entitlements. The certificates are payable solely from installment
payments to be made by the Agency. The Agency has pledged for payment of the installment payments
all revenues derived from the ownership of its water system (which expressly excluded revenues derived
from the retail sales of water). These revenues are deposited into the Pledged Revenue Fund and after
payment of operation and maintenance costs, including contingency reserves, the remaining reserves are
to be used to pay the installment payments on the certificates.
On December 7, 2006, the Agency refunded $45,520,000 of the 1999 certificates (2006 Series A). A total
of $45,520,000 from the 2006 Series A COPs was used to pay off the outstanding principal of the 1999
Series A Revenue Certificates of Participation. As a result, the 1999 Series A Revenue Certificates of
Participation are considered retired and the liability for those obligations has been removed from the
financial statements. The Agency completed the advance refunding to reduce the Agency’s total debt
service payments over the next 24 years by achieving a 5.6% net present value savings.
The Certificates are payable by installment payments according to their respective Installment
Agreements. Interest is payable semi-annually August 1 and February 1, and principal is due annually on
August 1st. The outstanding balance at June 30, 2009, is $85,840,820 as follows: $41,325,820 Series
1999 remaining; and $44,515,000 Series 2006 A (refunded portion of 1999 Series A). (See 2006 Series A
Certificates of Participation for their respective debt service requirements.)
The par amount of the certificates is comprised of $1,165,000 current interest serial certificates and
$23,408,498 (original amount) capital appreciation certificates. Interest on the current interest certificates
is payable semi-annually on February 1 and August 1 at rates ranging from 4.0% to 5.5%. No regular
payments of interest are made on the capital appreciation certificates prior to maturity. Interest on the
capital appreciation certificates is compounded semi-annually on February 1 and August 1 and is payable
at maturity. The interest compounded annually is added to the principal amount outstanding.
The yield to maturity for the capital appreciation certificates ranges from 5.76% to 5.8%. Principal on the
capital appreciation certificates matures annually on August 1 from 2021 through 2030. All the
certificates are subject to extraordinary prepayment as a whole or in part on any date in order of maturity
if the Agency makes prepaid installment payments from insurance proceeds or condemnation awards.
33
June 30, 2009
(7) Certificates of Participation, continued
1999 Series A Revenue Certificates of Participation, continued
Annual debt service requirements on the on the 1999 Series A Revenue Certificates of Participation are as
follows:
Fiscal Year
2010
Principal
$
Total
Total non-current
Interest
Total
1,165,000
27,378
1,192,378
1,165,000
27,378
1,192,378
(1,165,000)
$
-
Below is a schedule of future annual principal to be issued that will be added to the capital appreciation
certificate’s current outstanding principal balance of $40,160,820.
Fiscal
Year
Balance as of June 30, 2009
Principal
Issued
$
Annual principal issued:
2010
2011
2012
2013
2014
2015-2017
2018-2022
2023-2027
2028-2031
Total
40,160,820
2,354,981
2,493,075
2,639,268
2,794,032
2,957,873
9,955,586
20,584,799
16,071,245
4,438,321
$
104,450,000
2001 Series A Revenue Certificates of Participation
In February 2001, the Corporation issued $80,000,000 of certificates of participation to finance certain
capital improvements to the Agency’s wholesale water system and reimbursement of the Agency’s cost of
acquisition of the outstanding stock of the Santa Clarita Water Company (the retail company). The
certificates are payable solely from installment payments to be made by the Agency. By the first
supplement dated June 13, 2001, to the installment agreement dated February 2001, between the Agency
and the Corporation, the Agency agreed to apply solely to the acquisition of certain capital improvements
the amount which could have been reimbursed to the Agency for the acquisition of the stock of the
Company.
34
June 30, 2009
(7)
2001 Series A Revenue Certificates of Participation, continued
The certificates are payable solely from installment payments to be made by the Agency. The Agency has
pledged for payment of the installment payments all revenues derived from the ownership or operation of
its water system. These revenues are deposited into the Pledged Revenue Fund and after payment of
operation and maintenance costs, including contingency reserves, the remaining reserves are to be used to
pay the installment payments on the certificates.
Additional security for the certificates is provided by a rate covenant and reserve requirement. Pursuant to
the rate covenant, the Agency is required to establish a special rate stabilization fund and maintain a
balance in that fund that at a minimum exceeds the Agency’s required installment payments for the
current year. This determination is made annually on July 1. If the balance does not exceed the required
minimum level, the Agency must fix and collect rates and charges for water service sufficient to yield
revenues equal to 120% of the certificates debt service for the fiscal year and any amounts required to be
paid pursuant to the surety bond described below. If the balance equals the required level, the Agency
must fix and collect revenues (other than developer impact fees) sufficient to yield revenues equal to
120% of operation and maintenance costs for the fiscal year. Pursuant to the reserve requirement,
$5,362,900 was placed in a debt service reserve fund on the issuance date of the certificates. The full
amount was funded with proceeds from the certificates. At June 30, 2009, the amount held in reserve was
$5,362,900.
Interest on the certificates is payable semi-annually on February 1 and August 1. Principal matures
August 1 of each year through August 1, 2030. Certificates maturing on or after August 1, 2011, are
subject to call in whole or in part beginning on February 1, 2001, at the option of the Agency, at prices
ranging from 100% to 101% of the principal amount of the certificates. Certificates maturing on August
1, 2023 are subject to mandatory redemption in part on August 1, 2018. Certificates maturing in August 1,
2029 are subject to mandatory redemption in part on any August 1 or after August 1, 2024. Certificates
are in denominations of $5,000 and bear interest from the date of issue to their maturity dates at rates
ranging from 4.0% to 6.0% per annum. Annual debt service requirements on the on the 2001 Series A
Revenue Certificates of Participation are as follows:
Fiscal Y ear
2010
2011
2012
2013
2014
2015-2019
2020-2024
2025-2029
2030-2031
$
Total
Total non-current
Principal
Interest
1,840,000
1,915,000
1,990,000
2,075,000
2,195,000
12,760,000
16,445,000
21,135,000
10,005,000
3,515,400
3,440,300
3,360,956
3,257,663
3,140,537
13,878,026
10,082,858
5,297,375
521,750
5,355,400
5,355,300
5,350,956
5,332,663
5,335,537
26,638,026
26,527,858
26,432,375
10,526,750
70,360,000
46,494,865
116,854,865
(1,840,000)
$
68,520,000
35
Total
June 30, 2009
(7)
2004 Series A Revenue Refunding Certificates of Participation (Fixed Rate)
In May 2004, the Corporation issued $29,085,000 of certificates of participation to provide funds to
prepay $28,475,000 of the Agency’s outstanding 1994 Refunding Revenue Certificates of Participation,
acquire a reserve policy and pay certain costs of delivery. The certificates are payable solely from
installment payments to be made by the Agency. Interest on the certificates is payable semi-annually on
February 1 and August 1. Principal matures August 1 of each year through August 1, 2020. Certificates
are in denominations of $5,000 and bear interest from the date of issue to their maturity dates at rates
ranging from 2.0% to 4.0% per annum. Annual debt service requirements on the 2004 Series A Revenue
Refunding Certificates of Participation are as follows:
Fiscal Y ear
2010
2011
2012
2013
2014
2015-2017
2018-2021
$
Total
Total non-current
Principal
Interest
Total
55,000
55,000
55,000
60,000
60,000
7,935,000
12,560,000
1,033,826
1,032,245
1,030,485
1,028,350
1,025,950
2,492,625
1,295,000
1,088,826
1,087,245
1,085,485
1,088,350
1,085,950
10,427,625
13,855,000
20,780,000
8,938,481
29,718,481
(55,000)
$
20,725,000
2004 Series B Revenue Refunding Certificates of Participation (Adjustable Rate)
In June 2004, the Corporation issued $40,000,000 of certificates of participation to provide funds to
prepay $37,350,000 of the Agency’s outstanding 1994 Refunding Revenue Certificates of Participation.
The certificates are payable solely from installment payments to be made by the Agency. Interest on the
certificates is payable weekly based on Auction Rates for generally successive 7-day Auction Periods.
Principal matures August 1 of each year through August 1, 2020. Certificates are in denominations of
$25,000. The interest rate on the refunding certificates is adjusted by the remarketing agent daily based on
market interest rates. On May 9, 2008, the Agency refunded all of the 2004B certificates (2008 Series A).
(See 2008 Series A Certificates of Participation for their respective debt service requirements.)
36
June 30, 2009
2006 Series A Revenue Refunding Certificates of Participation
In December 2006, the Corporation issued $45,520,000 of certificates of participation to provide funds to
prepay $45,385,000 of the Agency’s outstanding 1999 A Revenue Certificates of Participation. The
certificates are payable solely from installment payments to be made by the Agency. Pursuant to the
reserve requirement, $3,317,609 was placed in a debt service reserve fund on the issuance date of the
certificates. Interest on the certificates is payable semi-annually on February 1 and August 1. Principal
matures August 1 of each year through August 1, 2030. Certificates are in denominations of $5,000 and
bear interest from the date of issue to their maturity dates at rates ranging from 3.35% to 5.00% per
annum. Annual debt service requirements on the on the 2006 Series A Revenue Refunding Certificates of
Participation are as follows:
Fiscal Y ear
2010
2011
2012
2013
2014
2015-2019
2020-2024
2025-2029
2030-2031
$
Total
Total non-current
Principal
Interest
Total
165,000
1,330,000
1,385,000
1,430,000
1,490,000
8,410,000
10,620,000
13,430,000
6,255,000
2,015,944
1,986,044
1,932,610
1,877,176
1,818,786
8,096,355
5,808,880
2,971,353
284,514
2,180,944
3,316,044
3,317,610
3,307,176
3,308,786
16,506,355
16,428,880
16,401,353
6,539,514
44,515,000
26,791,662
71,306,662
(165,000)
$
44,350,000
Premium on Issuance – 2006 A
The Series 2006 A Certificates of Participation are structured as serial bonds with maturities ranging from
2007 through 2023 and two term bonds maturing on 2026 and 2030 respectively. Yields for the serial
bonds range from 3.35% to 4.08% (yields to call for maturities 2017 through 2023), with the term bonds
yielding 4.41% and 4.46% (yields to call). Market conditions required that the maturities after 2016 be
structured in a manner that resulted in them being price to the August 1, 2016, par call date. The ultimate
structure produced an original issue premium of $1,145,317 that will be amortized over the life of the
debt service.
2006 Series C Revenue Certificates of Participation
In December 2006, the Corporation issued $89,830,000 of certificates of participation to finance certain
capital improvements to the Agency’s wholesale water system. The certificates are payable solely from
installment payments to be made by the Agency. The Agency has pledged for payment of the installment
payments all revenues derived from the ownership or operation of its water system. These revenues are
deposited into the Pledged Revenue Fund and after payment of operation and maintenance costs,
including contingency reserves, the remaining reserves are to be used to pay the installment payments on
the certificates.
Additional security for the certificates is provided by a rate covenant and reserve requirement. Pursuant to
the rate covenant, the Agency is required to establish a special rate stabilization fund and maintain a
balance in that fund that at a minimum exceeds the Agency’s required installment payments for the
current year. This determination is made annually on July 1.
37
June 30, 2009
2006 Series C Revenue Certificates of Participation, continued
If the balance does not exceed the required minimum level, the Agency must fix and collect rates and
charges for water service sufficient to yield revenues equal to 120% of the certificates debt service for the
fiscal year and any amounts required to be paid pursuant to the surety bond described below.
If the balance equals the required level, the Agency must fix and collect revenues (other than developer
impact fees) sufficient to yield revenues equal to 120% of operation and maintenance costs for the fiscal
year. Pursuant to the reserve requirement, $5,866,322 was placed in a debt service reserve fund on the
issuance date of the certificates. The full amount was funded with proceeds from the certificates. At June
30, 2008, the amount held in reserve was $5,866,322. Interest on the certificates is payable semi-annually
on February 1 and August 1. Principal matures August 1 of each year through August 1, 2037.
Certificates are in denominations of $5,000 and bear interest from the date of issue to their maturity dates
at rates ranging from 3.5% to 5.0% per annum.
Annual debt service requirements on the on the 2006 Series C Revenue Certificates of Participation are as
follows:
Fiscal Y ear
2010
2011
2012
2013
2014
2015-2019
2020-2024
2025-2029
2030-2034
2035-2037
$
Total
Total non-current
Principal
Interest
Total
1,595,000
1,660,000
1,725,000
1,810,000
1,880,000
10,645,000
13,550,000
17,290,000
22,080,000
16,070,000
4,272,988
4,207,888
4,131,563
4,053,369
3,985,400
18,612,500
15,620,000
11,783,000
6,885,000
1,231,250
5,867,988
5,867,888
5,856,563
5,863,369
5,865,400
29,257,500
29,170,000
29,073,000
28,965,000
17,301,250
88,305,000
74,782,958
163,087,958
(1,595,000)
$
86,710,000
Premium on Issuance – 2006 C
The Series 2006 C Certificates of Participation are structured as serial bonds with maturities ranging from
2008 through 2026 and two term bonds maturing on 2030 and 2036, respectively. Yields for the serial
bonds range from 3.40% to 4.14% (yields to call for maturities 2017 through 2026), with the term bonds
yielding 4.16% and 4.20% (yields to call). Market conditions required that the maturities after 2016 be
structured in a manner that resulted in them being price to the August 1, 2016, par call date. The ultimate
structure produced an original issue premium of $4,978,449 that will be amortized over the life of the
debt service.
2008 Series A Revenue Refunding Certificates of Participation
In May 2008, the Agency refunded all of the 2004B certificates; the swap agreement remains in effect for
the 2008A certificates (2008 Series A). The certificates are payable solely from installment payments to
be made by the Agency. Interest on the certificates is calculated weekly at rates for Weekly Interest Rate
Periods and payable monthly. Principal matures August 1 of each year through August 1, 2020.
Certificates are in denominations of $100,000 and bear interest from the date of issue to their maturity.
The interest rate on the refunding certificates is determined by the remarketing agent on Tuesday of each
week during the Weekly Interest Rate Period.
38
June 30, 2009
2008 Series A Revenue Refunding Certificates of Participation, continued
Annual debt service requirements on the on the 2008 Series A Revenue Refunding Certificates of
Participation are as follows:
Fiscal Y ear
2010
2011
2012
2013
2014
2015-2019
2020-2021
Principal
$
Total
Total non-current
Interest
Total
250,000
275,000
275,000
300,000
275,000
25,850,000
11,850,000
2,057,576
2,043,318
2,061,330
2,009,815
1,998,226
6,267,161
443,055
2,307,576
2,318,318
2,336,330
2,309,815
2,273,226
32,117,161
12,293,055
39,075,000
16,880,481
55,955,481
(250,000)
$
38,825,000
Interest Rate Swaps on Certificates of Participation
On June 10, 2004, the Agency entered into an interest rate swap agreement in connection with the 2004
Series B Refunding Certificates of Participation. On May 9, 2008, the Agency refunded all of the 2004B
certificates (2008 Series A); the swap agreement was amended and restated as of May 6, 2008 to relate to
the 2008A certificates.
Objective: The objective of the interest rate swap is to lower the Agency’s borrowing costs when
compared against fixed-rate certificates. The swap is structured with the expectation that the Agency’s
variable interest rate on the certificates will be hedged to produce a synthetic fixed rate of 3.815%.
Terms of the Swap: In June 2004, the Agency and Citibank, N.A. entered into an interest rate swap
agreement pursuant to which the Agency pays Citibank a fixed interest rate of 3.815%. The Agency
receives a variable interest payment from Citibank expected to closely match the variable interest
payments on the certificates. The notional amount of the swap, on which the interest payments from both
parties are calculated, declines in tandem with the principal amount of the certificates. This interest rate
swap agreement is accounted for as a hedge, and the associated interest rate differential to be paid or
received is charged to interest expense of the certificates. The swap agreement is in effect to August 1,
2020.
Fair Value: Because interest rates have declined, the swap had a negative fair value or marked-to-market
value of $3.47 million as of June 30, 2009. The fair value was arrived at by taking into account certain
interest rate curves as reported by Bloomberg Professional Services and utilizing standard interest rate
swap valuation methodology. The methodology incorporated the Agency’s option to cancel the swap,
without any cash settlement of the then fair value, starting on August 1, 2014.
39
June 30, 2009
Credit Risk: The swap counterparty, Citibank N.A., was rated AA by Standard & Poor’s and Aa1 by
Moody’s Investors Service as of June 30, 2008. To mitigate the potential for credit risk, if the
counterparty’s credit quality falls below AA- by Standard & Poor’s or Aa3 by Moody’s Investors Service,
the fair value of the swap (if the swap has a positive fair value) will be collateralized by the counterparty
as follows: 1) with bonds, debentures and other debt issued or guaranteed by the United States of
America equaling 110% of the fair value, or 2) with securities issued by the Federal Home Loan
Mortgage Corporation or the Federal National Mortgage Association equaling 110% of the fair value, or
3) other securities to be agreed upon and in an amount to be agreed upon by the Agency, the counterparty,
and the Swap insurer. The collateral would be held by a third-party custodian.
Basis Risk: The Agency is exposed to basis risk when there is a mismatch between the actual variable
interest rate on the bonds and the variable rate index used to determine the swap payments the Agency
receives from Citibank, N.A. At the time the swap agreement was executed, the variable rate the Agency
received from Citibank, N.A. was equal to the actual rate on the bonds pursuant to terms of the
agreement. However, under the terms of the swap agreement, this changed during FY2007/08, and the
Agency instead received the variable rate index (61% of 1-mo LIBOR + 0.21%) from Citibank, N.A.
The Agency received the variable rate index for the entirety of the fiscal year ending June 30, 2009. As
such, the transaction is currently subject to basis risk, which could increase or decrease the overall net
debt service the Agency pays on its bonds.
Termination Risk: The Agency or the counterparty may terminate the swap if the other party fails to
perform under the terms of the contract. In the event of termination due to default, the defaulting party
will pay the non-defaulting party the excess (if any) of the sum of the settlement amount and the unpaid
amounts owed less then unpaid amounts due from the non-defaulting party. The swap may be terminated
by the Agency if the counterparty’s credit quality rating is falls below AA- by Standard & Poor’s or Aa3
by Moody’s Investors Service. If the swap is terminated, the variable-rate certificates of participation
would no longer carry a synthetic interest rate.
(8)
Net Investment in Capital Assets
This component of net assets consists of capital assets, net of accumulated depreciation and reduced by
any outstanding debt outstanding against the acquisition, 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 invested in capital assets, net of related debt.
Rather, that portion of the debt is included in the same net assets component as the unspent proceeds. At
June 30, 2009, the net investment in capital assets for governmental activities was $32,533,377 and the
net investment in capital assets for business-type activities was $91,383,684.
Governmental
Activities
The balance consists of the following:
Capital assets, net
COPs payable
Total
40
Business-type
Activities
$
370,610,729
(338,077,352)
91,383,684
-
$
32,533,377
91,383,684
June 30, 2009
(9)
Reserves of Fund Balances
In the fund financial statements, governmental funds report reservations of fund balances for amounts that
are not available for appropriation or are legally restricted by outside parties for a specific purpose.
Facility Capacity Fee – The majority of the Agency’s Capital Improvement Program (CIP) is debt
financed. The future users portion of the CIP is funded by a charge referred to as a facility capacity fee,
and which is in the nature of a connection fee, for the right to make a new retail connection to the water
distribution system of any retail water distributor within the agency which obtains all, or any portion of its
water supplies form the agency. The amount of fees collected each year is dependent upon market
demand and general economic conditions. In the past several years the Agency’s service area has
experienced rather substantial building activity and as a result, fees collected have exceeded the annual
debt service. At June 30, 2009, fund balance of $40,382,995 has been reserved as fees collected have
exceeded the related costs.
Capital Improvements – 1% property tax and 2006 certificate of participation proceeds, which have not
been expended, have been reserved for the Agency’s capital improvements.
Advances to Other Funds – Fund balance of $59,132,871 has been reserved for the amount advanced to
the Enterprise Fund for the acquisition of the stock of the Company. This amount is reserved as the funds
are considered not to be available to fund current expenditures.
State Water Contract – Fund balance reserved for payments on the state water contract.
Debt Service – Fund balance reserved for payment of debt service.
(10) Deferred Compensation Savings Plans
457 Deferred Compensation Savings Plan
For the benefit of its employees, the Agency participates in a 457 Deferred Compensation Program
(Program). The purpose of this Program is to provide deferred compensation for public employees that
elect to participate in the Program. Generally, eligible employees may defer receipt of a portion of their
salary until termination, retirement, death or unforeseeable emergency. Until the funds are paid or
otherwise made available to the employee, the employee is not obligated to report the deferred salary for
income tax purposes.
Federal law requires deferred compensation assets to be held in trust for the exclusive benefit of the
participants. Accordingly, the Agency is in compliance with this legislation. Therefore, these assets are
not the legal property of the Agency, and are not subject to claims of the Agency’s general creditors.
Market value of all plan assets held in trust by Lincoln Financial Services at June 30, 2009 was
$4,233,602.
The Agency has implemented GASB Statement No. 32, Accounting and Financial Reporting for Internal
Revenue Code Section 457 Deferred Compensation Plans. Since the Agency has little administrative
involvement and does not perform the investing function for this plan, the assets and related liabilities are
not shown on the statement of net assets.
41
June 30, 2009
(11) Defined Benefit Plan
401(a) Defined Benefit Plan
Also, for the benefit of its employees, the Agency participates in a 401(a) Defined Benefit Program
(401(a) Program. The purpose of this 401(a) Program is to provide a defined benefit for public employees
who fully contribute to their 457 Program. Generally, the Agency will match up to a certain amount for
employees who fully contribute to their 457 Plan for the year. Until the funds are paid or otherwise made
available to the employee, the employee is not obligated to report the defined benefit for income tax
purposes.
Federal law requires defined benefit assets to be held in trust for the exclusive benefit of the participants.
Accordingly, the Agency is in compliance with this legislation. Therefore, these assets are not the legal
property of the Agency, and are not subject to claims of the Agency’s general creditors. Market value of
all plan assets held in trust by Lincoln Financial Services at June 30, 2009 was $186,837.
(12) Defined Benefit Pension Plan
Plan Description
The Agency contributes to the California Public Employees Retirement System (CalPERS), a costsharing multi-employer defined benefit pension plan. CalPERS provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries.
CalPERS acts as a common investment and administrative agent for participating public agencies within
the State of California. Benefit provisions and all other requirements are established by state statute and
the Agency. Copies of CalPERS annual financial report may be obtained from their executive Office: 400
P Street, Sacramento, CA, 95814.
Funding Policy
The contribution rate for plan members in the CalPERS, 2.0% at 55 Risk Pool Retirement Plan is 7% of
their annual covered salary. The Agency makes these contributions required of Agency employees on
their behalf and for their account. Also, the Agency is required to contribute the actuarially determined
remaining amounts necessary to fund the benefits for its members. The required employer contribution
rates are equal to the annual pension costs (APC) percentage of payroll for fiscal years 2009, 2008, and
2007 as noted below. The contribution requirements of the plan members are established by State statute,
and the employer contribution rate is established and may be amended by CalPERS. For Fiscal years
2009, 2008, and 2007, the Agency’s annual contributions for the CalPERS plan were equal to the
Agencies required and actual contributions for each fiscal year as follows:
Three Years CalPERS Funding Information
Annual
Pension
Cost (APC)
Fiscal
Year
2006-2007
2007-2008
2008-2009
$
834,957
834,015
923,850
Percentage
of APC
Contributed
100%
100%
100%
42
Net
Pension
Obligation
APC
Percentage
of Payroll
-
12.293%
11.975%
11.935%
June 30, 2009
(13) Other Post Employment Benefits Payable
The Agency provides other post-employment benefits (OPEB) to qualified employees who retire from the
Agency and meet the Agency’s vesting requirements. During the fiscal year ended June 30, 2009, the
Agency implemented GASB Statement No. 45, which changed the accounting and financial reporting
used by local government employers for post employment benefits. Previously, the costs of such benefits
were generally recognized as expenses of local government employers on a pay-as-you-go basis. In April
2009, the Agency participated in CalPERS California Employer’s Retiree Benefit Trust Program
(CERBT), a Prefunding Plan trust fund intended to perform an essential government function within the
meaning of Section 115 of the Internal Revenue Code as an agent multiple-employer plan as defined in
GASB Statement No. 45. The new reporting requirements for these benefit programs as they pertain to
the Agency are set forth below.
Plan Description – Eligibility
The following requirements must be satisfied in order to be eligible for post employment medical and
dental benefits:
Full time employees hired before January 1, 2009 - attainment of age 55 and retirement from the Agency
(the Agency must be the last employer prior to retirement).
Full time employees hired on or after January 1, 2009 – attainment of age 55 and requires at least five
years of CalPERS-eligible service earned through employment with the Agency. The amount of benefit
is base on the number of CalPERS credited years ranging from 50% to 100% of premium paid by the
Agency. The maximum benefit amounts are set by the State each year as provided by Government Code
Section 22825.2(1).
Membership in the OPEB plan consisted of the following members as of June 30:
2009
Active plan members
Retirees and beneficiaries receiving benefits
Separated plan members entitled to but not
yet receiving benefits
Total plan membership
2008
2007
104
30
101
28
100
25
-
-
-
134
129
125
Plan Description – Benefits
The Agency offers post employment medical and dental benefits to retired employees who satisfy the
eligibility rules. Spouses and surviving spouses are also eligible to receive benefits. Retirees may enroll in
any plan available through the Agency’s medical and dental programs. The contribution requirements of
Plan members and the District are established and may be amended by the Board of Directors.
Funding Policy
The Agency is required to contribute the Annual Required Contribution (ARC) of the Employer, an
amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC
represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each
year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty
years. The current ARC rate is 16.91% of the annual covered payroll.
During the fiscal year 2008/09, the Agency partially pre-funded the cost of the post-employment benefit
plan. The Agency partially pre-funded the plan and maintains reserves (and records a liability) for the
difference between the funded amount and the actuarially determined ARC cost.
43
June 30, 2009
(13)
Other Post Employment Benefits Payable, continued
Annual Cost
For the year ended June 30, 2009, the Agency’s ARC cost is $1,148,000. The Agency’s net OPEB
payable obligation amounted to $394,941 for the year ended June 30, 2009. The Agency contributed
$463,525 and $289,534 in adjustment contributions for current retiree OPEB premiums for the year ended
June 30, 2009.
The balance at June 30, consists of the following:
2009
Annual OPEB expense:
Annual required contribution (ARC)
Interest on net OPEB obligation
Adjustment to annual required contribution
$
Total annual OPEB expense
Change in net OPEB payable obligation:
Age adjusted contributions made
Contributions to irrevocable trust
Total change in net OPEB payable obligation
OPEB payable – beginning of year
2008
1,148,000
-
-
-
1,148,000
-
-
(289,534)
(463,525)
-
-
(753,059)
-
-
-
-
-
-
-
OPEB payable – end of year
$
2007
394,941
The Agency’s annual OPEB cost, the percentage of the annual OPEB cost contributed to the Plan, and the
net OPEB obligation for fiscal year 2009 and the two preceding years were as follows:
Three-Year History of Net OPEB Obligation
Fiscal
Year
Ended
2009
2008*
2007*
Annual
OPEB
Cost
$
1,148,000
-
Age
Adjusted
Contribution
753,059
-
Percentage
of Annual OPEB
Cost Contributed
65.60%
Net OPEB
Obligation
Payable
$
-
394,941
-
* The information is not available.
GASB No. 45 was implemented in fiscal year 2009.
Funded Status and Funding Progress of the Plan
The most recent valuation (dated July 1, 2008) includes an Actuarial Accrued Liability and Unfunded
Actuarial Accrued Liability of $8,759,475. No trend information is reported because the fiscal year ended
June 30, 2009, is the first year the Agency implemented GASB 45. The covered payroll (annual payroll of
active employees covered by the plan) for the year ended June 30, 2009 was $6,787,000. The ratio of the
unfunded actuarial accrued liability to annual covered payroll is 129.06%. (See page 52)
44
June 30, 2009
(13)
Other Post Employment Benefits Payable, continued
Actuarial Methods and Assumptions
Actuarial valuations involve estimates of the value of reported amounts and assumptions about the
probability of events far into the future. Actuarially determined amounts are subject to continual revision
as actual results are compared to past expectations and new estimates are made about the future.
Calculations are based on the types of benefits provided under the terms of the substantive plan at the
time of each valuation and the pattern of sharing of costs between the employer and plan members to that
point. Consistent with the long-term perspective of actuarial calculations, actuarial methods and
assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued
liabilities for benefits.
The following is a summary of the actuarial assumptions and methods:
Valuation date
Actuarial cost method
Amortization method
Remaining amortization period
Asset valuation method
Actuarial assumptions:
Investment rate of return
Projected salary increase
Inflation - discount rate
Individual salary growth
(14)
July 1, 2008
Entry age normal cost method
Level percent of payroll amortization
30 Years as of the valuation date
30 Year smoothed market
7.75% – Projected at July 1, 2008
3.25%
7.75%
Agency bi-annual salary survey
Risk Management
The Agency is exposed to various risks of loss related to torts, theft of, damage to and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. The Agency is a member of the
Association of California Water Agencies/Joint Powers Insurance Authority (ACWA/JPIA), an
intergovernmental risk sharing joint powers authority created to provide self-insurance programs for
California water agencies. The purpose of the ACWA/JPIA is to arrange and administer programs of selfinsured losses and to purchase excess insurance coverage. As of June 30, 2009, the Agency limits and
deductibles for liability, property, and workers compensation programs of the ACWA/JPIA are as
follows:
x
General and auto liability, public officials and employees’ errors and omissions: Total risk
financing self-insurance limits of $1,000,000, combined single limit per occurrence. The
ACWA/JPIA purchased additional excess coverage layers: $49 million for general, auto and
public officials liability, which increases the limits on the insurance coverage noted above.
x
Property loss is paid at the replacement cost for buildings, fixed equipment and personal property
on file, if replaced within two years after the loss, otherwise paid on actual cash value basis,
subject to a $5,000 deductible per loss; and actual cash value for mobile equipment, subject to a
$1,000 deductible per loss, and licensed vehicles, subject to a $500 deductible per loss.
ACWA/JPIA purchased excess coverage for a combined total of $100 million per occurrence.
x
Boiler and machinery coverage for the replacement cost up to $100 million per occurrence,
subject to various deductibles depending on the type of equipment.
x
Workers compensation insurance up to California statutory limits for all work related
injuries/illnesses covered by California law, and Employer’s Liability Coverage up to $4 million.
The Authority is self-insured up to $2 million and excess loss insurance has been purchased.
45
June 30, 2009
(14)
Risk Management, continued
In addition to the above, the Agency also has the following insurance coverage:
x
Crime coverage up to $1,000,000 per loss includes public employee dishonesty, including Public
Officials who are required by law to give bonds for the faithful performance of their service,
forgery or alteration and computer fraud, subject to a $1,000 deductible.
Settled claims have not exceeded any of the coverage amounts in any of the last three fiscal years. There
were no reductions in insurance coverage in fiscal year 2009. Liabilities are recorded when it is probable
that a loss has been incurred and the amount of the loss can be reasonably estimated net of the respective
insurance coverage. Liabilities include an amount for claims that have been incurred but not reported
(IBNR). There were no IBNR claims payable as of June 30, 2009.
(15) Governmental Accounting Standards Board Statements Issued, Not Yet Effective
The Governmental Accounting Standards Board (GASB) has issued several pronouncements prior to June
30, 2009, that has effective dates that may impact future financial presentations.
Governmental Accounting Standards Board Statement No. 51
In June 2007, the GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible
Assets. This statement requires that all intangible assets not specifically excluded by its scope provisions
be classified as capital assets. This statement is not effective for the Agency until the fiscal year ended
June 30, 2010. This statement is not expected to have a significant impact on the presentation of the
Agency’s financial statements.
Governmental Accounting Standards Board Statement No. 53
In June 2008, the GASB issued Statement No. 53, Accounting and Financial Reporting for Derivative
Instruments. This statement addresses the recognition, measurement, and disclosure of information
regarding derivative instruments entered into by state and local governments. This statement is not
effective for the Agency until the fiscal year ended June 30, 2010. This statement is not expected to have
a significant impact on the presentation of the Agency’s financial statements.
(16) Commitments and Contingencies
Department of Water Resources (DWR) Water Contract Commitment
On April 30, 1963, a contract was entered into between the State of California acting by and through its
Department of Water Resources and the Agency (the Contract), pursuant to the provisions of the
California Water Resources Development Bond Act, the State Central Valley Project Act, and other
applicable laws of the State of California. The contract provides for a maximum annual water entitlement
for the Agency of up tot 41,500 acre feet. As amended, on January 1, 1991, the Agency began receiving
the Devil’s Den agricultural entitlement of 12,700 acre feet. In March 1999, the Agency purchased an
additional 41,000 acre feet from Wheeler Ridge-Maricopa Water Storage District, bringing the total
maximum entitlement to 95,200 acre feet. The agreement contemplated water delivery of 20,100 acre
feet beginning in 1981, with increasing deliveries through the years until the maximum entitlement was
reached in 1991. However, as of June 30, 2003, the water delivery objectives of the Contract cannot be
achieved unless additional conservation features are constructed. The term of the Contract is for the
project re-payment period or 75 year, whichever is longer, and provides for a pledge of certain Agency
revenues to the bondholders of the State under the Bond Act.
Provision is made in the Contract for two general charges: (1) a Delta water charge and (2) a
transportation charge, which are divided into components. The Delta water charge is intended to return to
the Sate all costs of project conservation facilities including capital, maintenance, operation and
replacement components, and is charged to the Agency on the basis of water entitlement and/or delivery.
The transportation charge is for facilities necessary to deliver water to the contractors and also includes a
capital, maintenance, operation and replacement component.
46
June 30, 2009
16) Commitments and Contingencies, continued
At June 30, 2009, the remaining estimated commitment for these charges is as follows:
Calendar year ending December 31,
2009
2010
2011
2012-2016
2017-2021
2022-2026
2027-2031
2032-2035
Amount
$
Total
$
20,563,167
21,801,760
22,459,593
116,480,134
112,067,709
105,106,185
98,494,507
75,827,255
572,800,310
Buena Vista/Rosedale-Rio Bravo (BVRRB) Water Acquisition Commitment
On May 22, 2007, the Agency entered into a 30-year agreement with the Buena Vista Water Storage
District and Rosedale-Rio Bravo Water Storage District for the acquisition of 11,000 acre-feet (AF) of
water supply per year for a 30-year period. The purchase price was established in FY 2006/07 at $486.85
per AF, or $5,335,350. The purchase price will be adjusted each calendar year by Consumer Price Index
(All Urban Consumers – All Items – Southern California Area). The current purchase price is $520.84
per AF.
Payments due under the DWR and BVRRB agreements are similar in nature to a long-term operating
lease, since the Agency does not take title to any assets of the DWR and BVRRB at the end of the water
delivery period. Accordingly, no liability under this contract is recorded in the Statement of Net Assets.
Litigation
In the ordinary course of operations, the Agency is subject to claims and litigation from outside parties.
After consultation with legal counsel, the Agency believes the ultimate outcome of such matters, if any,
will not materially affect its financial condition.
Grant Awards
Grant funds received by the Agency are subject to audit by the grantor agencies. Such audit could lead to
requests for reimbursements to the grantor agencies for expenditures disallowed under terms of the grant.
Management of the Agency believes that such disallowances, if any, would not be significant.
47
June 30, 2009
(16) Commitments and Contingencies, continued
Construction Contracts
The Agency has a variety of agreements with private parties relating to the installation, improvement or
modification of water facilities and distribution systems and other Agency activities. The financing of
such contracts is being provided primarily from the Agency’s replacement reserves and advances for
construction. The Agency has committed to approximately $38,973,153 of open construction contracts as
of June 30, 2009. The contracts outstanding include:
Project Name
RVWTP Expansion
Perchlorate distribution
Perchlorate distribution
Sand Canyon Reservoir Acc Rd
ESFP chemical storage and del
Total
Approved
Contract
Contractor
GSE Construction, Inc.
$
Blois Construction, Inc.
Socal Pacific Construction, Inc.
Nye & Nelson, Inc.
Socal Pacific Construction, Inc.
Sub-Total
Mains, services & hydrants
Booster station
1.5 M G tank-Pardee Homes
Booster station-Tract 52833
2-0.5 MG tanks-Pardee
2-0.5 MG tanks-Pardee
Valley center well
Hydrant & 12" valve
SC-12 tie-Rolling Hills
Lost Canyon to Mitchell Well
Mesa Engineering
Mesa Engineering
Mesa Engineering
Mesa Engineering
Pacific Tank
Mesa Engineering
Mesa Engineering
Pacific Tank
Mesa Engineering
Bset Drilling
Mesa Engineering
Staats Const.
Mesa Engineering
Mesa Engineering
Mesa Engineering
Mesa Engineering
Sub-Total
Total
$
48
Construction
Costs
to Date
Balance
to
Complete
36,961,800
14,245,378
5,107,501
1,137,400
473,738
1,403,433
11,788,865
4,847,019
986,929
468,560
35,558,367
2,456,513
260,482
150,471
5,178
57,925,817
19,494,806
38,431,011
1,000,499
175,602
307,357
298,657
462,237
530,728
142,906
601,800
395,107
556,645
93,580
920,596
219,442
351,370
204,049
254,665
839,341
170,892
304,807
294,470
460,500
481,498
138,196
598,800
343,334
497,095
90,386
787,046
206,067
321,450
185,976
253,240
161,158
4,710
2,550
4,187
1,737
49,230
4,710
3,000
51,773
59,550
3,194
133,550
13,375
29,920
18,073
1,425
6,515,240
5,973,098
542,142
64,441,057
25,467,904
38,973,153
Required Supplementary Information
Schedule of Revenues, Expenditures and Changes in Fund Balance
Budget and Actual – General Fund
Revenues
Property taxes
Water sales – Agency
Water sales – Devil's Den/Ranch
Laboratory fees
Other
$
Total revenues
Expenditures:
Water resources
Maintenance
Administration
Management
Engineering
Total expenditures
Excess of revenues (under) expenditures
Other financing sources:
Transfers in
Total other financing sources
Actual
Budgetary
Basis
Variance
Positive
(Negative)
-
-
-
-
-
-
4,385,200
1,602,600
2,347,800
979,600
3,299,800
1,422,500
691,100
3,295,972
1,750,276
2,061,030
866,709
3,107,710
1,235,358
788,433
1,089,228
(147,676)
286,770
112,891
192,090
187,142
(97,333)
14,728,600
13,105,488
1,623,112
(14,728,600)
(13,105,488)
1,623,112
14,728,600
13,105,488
(1,623,112)
14,728,600
13,105,488
(1,623,112)
-
Net change in fund balance
Fund balance – beginning of period
Fund balance – end of period
Original &
Final
Budget
$
49
-
300,000
300,000
300,000
300,000
-
Budget and Actual – Pledged Revenue Fund
Original &
Final
Budget
Revenues:
Property taxes
Water sales - Agency
Water sales - Devil's Den/Ranch
Laboratory fees
Other
$
Actual
Budgetary
Basis
Variance
Positive
(Negative)
20,714,600
11,315,400
7,200
7,200,000
90,800
6,401,000
8,942,900
21,296,561
9,831,410
7,114
1,824,712
95,082
8,889,540
15,764,070
581,961
(1,483,990)
(86)
(5,375,288)
4,282
2,488,540
6,821,170
54,671,900
57,708,489
3,036,589
39,542,600
13,723,300
24,564,749
8,394,622
14,977,851
5,328,678
53,265,900
32,959,371
(20,306,529)
1,406,000
24,749,118
23,343,118
(39,383,600)
(36,598,715)
2,784,885
(39,383,600)
(36,598,715)
2,784,885
(37,977,600)
(11,849,597)
26,128,003
242,808,573
242,808,573
204,830,973
230,958,976
Total revenues
Expenditures:
Capital outlay
Administration
Total expenditures
Transfers out
Fund balance - beginning of period
Fund balance - end of period
$
50
Budget and Actual – State Water Contract Fund
Original &
Final
Budget
Revenues
Property taxes
Other
$
Total revenues
Expenditures:
Administration
Capital Outlay
Total expenditures
Transfers out
Fund balance – beginning of period
Fund balance – end of period
$
51
Actual
Budgetary
Basis
Variance
Positive
(Negative)
13,907,600
339,800
-
14,396,026
254,052
1,196,496
488,426
254,052
1,196,496
14,247,400
15,846,574
1,938,974
2,996,020
14,705,300
3,000,000
2,640,269
16,484,367
2,562,101
355,751
(16,484,367)
437,899
20,701,320
21,686,737
(15,690,717)
(6,453,920)
(5,840,163)
(13,751,743)
-
-
-
-
-
-
(6,453,920)
(5,840,163)
18,305,683
18,305,683
11,851,763
12,465,520
(13,751,743)
Schedule of Funding Progress – Other Post Employment Benefits Plan (OPEB)
The schedule of funding progress below shows the Agency’s actuarial value of plan assets, actuarial
accrued liability, unfunded actuarial accrued liability, their relationship, and the relationship of the
unfunded actuarial accrued liability to payroll.
Actuarial
Value of
Plan Assets
(a)
Actuarial
Valuation
Date
7/1/2008
$
463,525
Actuarial
Accrued
Liability
(b)
9,223,000
Unfunded
Actuarial
Accrued
Liability (UAAL)
(b-a)
8,759,475
Funded
Ratio
(a/b)
5.03%
Covered
Payroll
(c)
$
6,787,000
UAAL as a
Percentage
of Covered
Payroll
((b-a)/c)
129.06%
GASB No. 45 was implemented in fiscal year 2009 and there was no other actuarial valuation available prior to implementation.
52
Other Supplementary Information
Budget and Actual – Certificates of Participation Fund
Original &
Final
Budget
Revenues:
Other
Actual
Budgetary
Basis
Variance
Positive
(Negative)
$
164,000
-
54,083
-
(109,917)
-
Total revenues
164,000
54,083
(109,917)
Expenditures:
Interest expense
Principal payments expense
Bond issuance costs
15,250,023
9,405,000
-
14,965,694
9,405,000
6,187
284,329
(6,187)
24,655,023
24,376,881
278,142
(24,491,023)
(24,322,798)
278,142
24,655,023
-
23,493,227
-
1,161,796
-
24,655,023
23,493,227
1,161,796
Total expenditures
Transfers in
Transfers out
164,000
Fund balance - beginning of period
Fund balance - end of period
$
53
(829,571)
15,474,573
15,474,573
15,638,573
14,645,002
(829,571)
Statistical Section
Statistical Section
This part of the Agency’s comprehensive annual financial report presents detailed information as a
context for understanding what the information in the financial statements, note disclosures, and required
supplementary information says about the Agency’s overall financial health.
Table of Contents
Page No.
Financial Trends
These schedules contain information to help the reader understand how
the Agency’s financial performance and well-being have changed over
time.
55
Revenue Capacity
These schedules contain information to help the reader assess the Agency’s
most significant own-source revenue, water sales.
67
Debt Capacity
These schedules present information to help the reader assess the affordability
of the Agency’s current levels of outstanding debt and the Agency’s ability
to issue additional debt in the future.
71
Demographic Information
This schedule offers demographic indicators to help the reader understand
the environment within which the Agency’s financial activities take place.
75
Operating Information
This schedule contains service and infrastructure data to help the reader
understand how the information in the Agency’s financial report relates to
the service the Agency provides.
77
54
Net Assets by Component
Last Eight Fiscal Years
Fiscal Year
Governmental activities
Invested in capital assets, net of related debt
Restricted
Unrestricted
$
Total governmental activities net assets
Business-type activities
2002
2003
2004
2005
2006
52,470,394
129,539,949
(4,194,104)
59,024,560
154,402,666
1,502,587
(13,814,808)
244,710,911
9,126,042
23,863,608
205,441,420
16,582,635
16,202,644
213,243,334
22,754,814
177,816,239
214,929,813
240,022,145
245,887,663
252,200,792
$
Unrestricted
63,174,471
62,860,482
71,284,753
73,607,123
78,671,449
(57,393,530)
(54,856,673)
(59,029,584)
(57,555,593)
(57,151,272)
5,780,941
8,003,809
12,255,169
16,051,530
21,520,177
115,644,865
121,885,042
57,469,945
97,470,731
94,874,093
129,539,949
(61,587,634)
154,402,666
(53,354,086)
244,710,911
(49,903,542)
205,441,420
(40,972,958)
213,243,334
(34,396,458)
$
183,597,180
222,933,622
252,277,314
261,939,193
273,720,969
20
05
Primary government
20
04
Total business-type activities net assets
$
Restricted
Unrestricted
Total primary government net assets
$500,000,000
$400,000,000
Net Assets
$300,000,000
$200,000,000
$100,000,000
$0
Fiscal Year
Note: The Agency began to report accrual information when it implemented GASB Statement 34 in fiscal year 2002.
Source: Castaic Lake Water Agency audited financial statements
55
20
09
20
08
20
07
20
06
20
03
20
02
($100,000,000)
Fiscal Year
2007
2008
2009
24,985,031
218,955,854
23,161,726
8,519,004
261,573,357
10,346,492
32,533,377
258,178,837
(4,971,315)
267,102,611
280,438,853
285,740,899
84,453,333
(53,562,143)
90,863,292
(49,098,684)
91,383,684
(46,884,101)
30,891,190
41,764,608
44,499,583
109,438,364
218,955,854
(30,400,417)
99,382,296
261,573,357
(38,752,192)
123,917,061
258,178,837
(51,855,416)
297,993,801
322,203,461
330,240,482
56
Last Eight Fiscal Years
Fiscal Year
2002
Expenses
Wholesale water operations
$
Total governmental activities expenses
2003
2004
2005
2006
27,024,591
15,467,035
29,125,468
15,323,683
32,761,995
13,609,987
34,515,111
15,288,323
31,947,220
13,735,436
42,491,626
44,449,151
46,371,982
49,803,434
45,682,656
13,848,342
14,343,877
15,275,983
16,442,910
16,882,065
56,339,968
58,793,028
61,647,965
66,246,344
62,564,721
21,871,731
43,385,135
36,460,809
27,029,026
18,523,222
12,492,268
1,880,262
12,613,885
3,679,976
14,531,302
4,817,892
14,600,129
5,215,408
15,719,778
5,488,544
14,372,530
16,293,861
19,349,194
19,815,537
21,208,322
(20,619,895)
524,188
(1,064,016)
1,949,984
(9,911,173)
4,073,211
(22,774,408)
3,372,627
(27,159,434)
4,326,257
(5,837,962)
(19,401,781)
(22,833,177)
Water enterprise
Total primary government expenses
Program Revenues
Charges for services – wholesale water operations
Charges for services – water enterprise
Capital grants and contributions
Total business-type activities program revenues
Net (Expense)/Revenue
Total primary government net expense
(20,095,707)
General Revenues and Other Changes in Net Assets
Property taxes
Investment income
Other income
Total governmental activities
Investment income
Other income
Total business-type activities
Total primary government
Total primary government
$
885,968
29,662,530
8,688,133
556,960
31,359,376
6,702,681
115,533
27,994,094
5,789,396
112,992
21,854,724
6,560,796
224,406
25,471,956
7,882,254
118,353
38,907,623
38,177,590
33,896,482
28,639,926
33,472,563
118,531
359,641
94,666
178,218
42,996
504,843
124,422
299,312
272,604
869,786
478,172
272,884
547,839
423,734
1,142,390
39,385,795
38,450,474
34,444,321
29,063,660
34,614,953
18,287,728
1,002,360
37,113,574
2,222,868
23,985,309
4,621,050
5,865,518
3,796,361
6,313,129
5,468,647
19,290,088
39,336,442
28,606,359
9,661,879
11,781,776
Change in Net Assets
$50,000,000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
Fiscal Year
Note: The Agency began to report accrual information when it implemented GASB Statement 34 in fiscal year 2002.
57
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
$0
Fiscal Year
2007
2008
2009
34,087,974
17,174,794
38,557,149
18,929,576
51,285,178
17,021,922
51,262,768
57,486,725
68,307,100
19,475,839
18,620,416
20,503,320
70,738,607
76,107,141
88,810,420
21,435,813
19,348,883
11,758,318
18,118,199
9,375,529
19,649,755
6,417,457
21,462,927
1,267,966
27,493,728
26,067,212
22,730,893
(29,826,955)
8,017,889
(38,137,842)
7,446,796
(56,548,782)
2,227,573
(21,809,066)
(30,691,046)
(54,321,209)
31,166,802
10,289,735
3,272,237
33,964,175
12,131,840
5,378,069
35,692,587
9,197,675
16,960,566
44,728,774
51,474,084
61,850,828
589,923
763,201
573,857
2,852,765
294,234
213,168
1,353,124
3,426,622
507,402
46,081,898
54,900,706
62,358,230
14,901,819
9,371,013
13,336,242
10,873,418
5,302,046
2,734,975
24,272,832
24,209,660
8,037,021
58
Fund Balances – Governmental Funds
Last Ten Fiscal Years
Fiscal Year
2000
General Fund
Reserved
Unreserved
$
2002
2004
68
10,697
20,643
16,080
59,649
19,743
68
10,697
20,643
75,729
$ 125,474,731
213,340,210
225,722,951
251,572,927
330,728,883
125,474,731
213,340,210
225,722,951
251,572,927
330,728,883
Total all other governmental funds
$900,000
$800,000
$700,000
$600,000
Dollars
$500,000
$400,000
$300,000
$200,000
$100,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
$0
20
00
2003
19,743
-
Total general fund
All Other Governmental Funds
Reserved
2001
Fiscal Year
59
Fiscal Year
2005
2006
2007
2008
2009
-
16,819
799,397
108,986
191,014
196,871
103,129
109,339
190,661
-
816,216
300,000
300,000
300,000
225,726,498
185,793,570
281,788,216
276,588,828
258,069,498
225,726,498
185,793,570
281,788,216
276,588,828
258,069,498
$350,000,000
$300,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
Fiscal Year
60
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
$0
20
Fund Balances
$250,000,000
Changes in Fund Balances – Governmental Funds
Fiscal Year
2000
Revenues
Expenditures
$
Excess of revenues over (under)
expenditures
Other Financing Sources (Uses)
Proceeds from long-term debt
Operating transfers in
Operating transfers out
Total Other Financing Sources (Uses)
Net change in fund balances
$
Debt service as a percentage of non capital expenditures
2001
2002
2003
31,144,740
40,210,664
50,159,660
43,723,975
60,549,326
51,980,076
77,688,500
53,408,922
70,357,291
62,211,930
(9,065,924)
6,435,685
8,569,250
24,279,578
8,145,361
76,452,668
29,416,523
(29,416,523)
81,410,119
29,135,411
(29,135,411)
1,492,807
23,833,158
(23,833,158)
1,580,344
26,154,481
(26,154,481)
71,065,681
30,192,676
(30,192,676)
76,452,668
81,410,119
1,492,807
1,580,344
71,065,681
67,386,744
87,845,804
10,062,057
25,859,922
79,211,042
39.95%
44.04%
43.96%
43.73%
46.24%
$125,000,000
$100,000,000
$75,000,000
$50,000,000
Change in Fund Balance
$25,000,000
$0
($25,000,000)
($50,000,000)
($75,000,000)
($100,000,000)
Fiscal Year
61
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
($125,000,000)
20
00
2004
Fiscal Year
2005
2006
2007
2008
2009
55,668,952
162,518,185
51,995,786
92,993,043
66,164,593
113,990,133
70,822,967
76,022,355
73,609,146
92,128,477
(106,849,233)
(40,997,257)
(47,825,540)
(5,199,388)
(18,519,331)
1,771,119
28,434,115
(28,434,115)
1,874,975
33,399,791
(33,399,791)
143,303,976
80,190,557
(80,190,557)
33,335,882
(33,335,882)
36,598,715
(36,598,715)
1,771,119
1,874,975
143,303,976
(39,122,282)
95,478,436
(5,199,388)
36.07%
40.91%
(105,078,114)
40.08%
45.40%
-
(18,519,331)
37.50%
62
Governmental Fund Revenues
Fi sca l Year
2 00 0
Prop erty tax es
Water sal es - Ag ency
Water sal es - Dev il's Den /R anch
Facility capacit y fee
Lab o ratory fees
In terest
Reim bu rsem ents fro m o ther g ov ernm ent s
Other
To tal g o vernm en tal rev en ues
2 0 01
2002
2 00 3
2 0 04
$
1 6 ,1 4 9 ,5 6 1
4 ,6 7 9 ,4 7 6
3 5 1 ,3 9 4
5 ,5 1 4 ,8 6 6
1 3 9 ,3 3 8
3 ,1 2 2 ,3 0 9
9 2 0 ,5 8 9
2 6 7 ,2 0 7
17 ,98 8 ,94 7
5 ,05 0 ,97 4
21 6 ,43 9
16 ,82 3 ,43 2
12 4 ,72 8
9 ,33 1 ,27 3
10 3 ,82 9
52 0 ,03 8
2 9,5 3 0,5 34
5,3 0 7,4 05
8,9 28
1 6,3 7 7,5 98
1 7 7,8 00
8,5 9 0,1 01
5 5 6,9 60
3 1 ,6 1 3 ,4 1 6
5 ,7 3 8 ,6 6 7
3 1 1 ,3 9 5
3 0 ,1 0 5 ,4 5 7
1 9 1 ,7 8 0
6 ,7 1 7 ,8 4 2
2 ,8 9 4 ,4 1 0
1 1 5 ,5 3 3
27 ,9 94 ,09 4
7 ,0 86 ,75 7
1 80 ,80 7
29 ,0 73 ,47 0
1 19 ,77 5
5 ,7 89 ,39 6
1 12 ,99 2
$
3 1 ,1 4 4 ,7 4 0
50 ,15 9 ,66 0
6 0,5 4 9,3 26
7 7 ,6 8 8 ,5 0 0
70 ,3 57 ,29 1
$ 9 0,0 0 0,0 0 0
$ 8 0,0 0 0,0 0 0
$ 7 0,0 0 0,0 0 0
$ 6 0,0 0 0,0 0 0
Revenues
$ 5 0,0 0 0,0 0 0
$ 4 0,0 0 0,0 0 0
$ 3 0,0 0 0,0 0 0
$ 2 0,0 0 0,0 0 0
$ 1 0,0 0 0,0 0 0
Fi
63
lY
20
09
8
20
0
07
20
20
06
20
05
20
04
20
03
20
02
1
20
0
20
00
$0
Fiscal Year
2005
2006
2007
2008
2009
21,854,724
7,497,748
42,432
19,344,720
144,126
6,560,796
224,406
25,471,956
7,366,376
96,231
10,930,741
129,874
7,882,254
118,354
31,166,808
8,653,258
456,963
12,192,365
133,227
10,289,735
3,272,237
33,964,175
10,035,533
20,819
9,197,376
95,155
12,131,840
5,378,069
35,692,587
9,831,410
7,114
1,824,712
95,082
9,197,675
16,960,566
55,668,952
51,995,786
66,164,593
70,822,967
73,609,146
64
Governmental Fund Expenditures
Fiscal Year
2000
Water resources
Maintenance
Management and Administration
Engineering
Capital outlay
Debt service:
Principal
Interest
Discount on certificates
Issuance costs
$
Total governmental expenditures
$
2001
2002
2003
2004
1,510,874
1,554,407
486,727
2,582,220
396,846
10,098,014
7,603,453
1,387,283
1,671,536
474,977
2,750,944
357,882
12,046,868
8,484,885
1,675,874
1,708,958
601,392
6,680,896
382,268
13,086,121
8,666,166
1,974,258
1,674,485
546,962
5,518,236
439,053
13,691,126
10,172,830
2,165,160
1,100,784
1,184,524
586,995
7,386,752
494,802
10,789,038
17,233,597
3,300,000
9,764,546
1,491,520
1,422,057
3,805,000
11,753,357
991,243
3,945,000
15,233,401
-
3,985,000
15,406,972
-
5,635,000
15,229,594
405,684
40,210,664
43,723,975
51,980,076
53,408,922
62,211,930
180,000,000
160,000,000
140,000,000
120,000,000
Expenditures
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
Fiscal Year
65
20
09
20
08
20
07
20
06
20
05
4
20
0
20
03
2
20
0
20
01
20
00
-
Fiscal Year
2005
2006
2007
2008
2009
2,309,507
1,148,487
1,385,888
644,293
5,249,661
579,220
11,933,100
50,621,964
3,014,978
1,465,599
1,681,886
732,276
6,330,451
555,747
5,256,621
53,296,758
3,314,922
1,092,406
1,772,771
742,508
7,424,163
606,441
10,117,164
22,470,432
3,565,133
1,222,234
1,835,902
790,097
9,050,675
593,133
13,368,361
20,947,111
3,295,972
1,750,276
2,061,030
866,709
15,377,959
788,433
16,484,367
27,126,850
71,800,000
16,796,283
49,782
6,835,000
13,823,727
-
53,725,325
12,724,001
-
8,160,000
16,104,142
385,567
9,405,000
14,965,694
6,187
162,518,185
92,993,043
113,990,133
76,022,355
92,128,477
66
Assessed Valuations – Los Angeles and Ventura Counties
Fiscal
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Los Angeles
County
$
12,447,542,518
14,021,929,618
15,448,824,281
17,209,012,030
19,567,307,922
22,320,368,880
26,726,931,679
30,170,105,930
32,925,381,541
34,456,856,037
Secured
Ventura
County
11,598,612
12,376,502
12,729,497
13,137,215
14,607,860
13,214,641
24,345,222
26,888,038
27,260,648
27,921,923
Totals
Los Angeles
County
12,459,141,130
14,034,306,120
15,461,553,778
17,222,149,245
19,581,915,782
22,333,583,521
26,751,276,901
30,196,993,968
32,952,642,189
34,484,777,960
771,741,897
706,736,188
854,312,495
834,333,529
807,016,399
795,317,454
843,544,054
946,158,845
1,048,909,083
1,226,855,382
Unsecured
Ventura
County
48,214
48,638
433,040
439,536
449,092
456,457
465,032
474,776
483,493
650,042
Note: Property in Los Angeles and Ventura County are reassessed each year. Property is assessed at actual value, therefore, the
assessed values are equal to the actual values.
Source: Los Angeles and Ventura County Assessor offices
67
Totals
771,790,111
706,784,826
854,745,535
834,773,065
807,465,491
795,773,911
844,009,086
946,633,621
1,049,392,576
1,227,505,424
Direct and Overlapping Property Tax Rates
Fiscal
Year
General
Levy
Castaic Lake
Water Agency
Los Angeles
County
School
Districts
County
Sanitation
Districts
County
Flood
Control
Total
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
1.000000
1.000000
1.000000
1.000000
1.000000
1.000000
1.000000
1.000000
1.000000
1.000000
0.060614
0.060614
0.123017
0.106227
0.066000
0.056169
0.049327
0.040000
0.040000
0.040000
0.001314
0.001314
0.001128
0.001033
0.000992
0.000923
0.000795
0.000663
0.000000
0.000000
0.026663
0.000298
0.041235
0.069731
0.079461
0.064493
0.064422
0.052689
0.061636
0.062621
0.001015
0.000498
0.000561
0.000487
0.000328
0.000321
0.000000
0.000000
0.000000
0.000000
0.001519
0.001552
0.001073
0.000881
0.000462
0.000245
0.000049
0.000052
0.000000
0.000000
1.091125
1.064276
1.167014
1.178359
1.147243
1.122151
1.114593
1.093404
1.101636
1.102621
68
Property Tax Levies and Collections
Fiscal
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Taxes
Levied
$
14,990,891
16,783,235
29,206,338
30,581,534
26,613,032
28,180,368
30,232,559
30,960,063
33,283,505
35,395,364
Collected within the
Fiscal Year of the Levy
Percentage
Amount
of Levy
14,292,831
15,973,034
28,023,885
28,692,841
24,692,446
26,233,000
28,992,344
28,740,556
31,168,378
33,257,381
95.34%
95.17%
95.95%
93.82%
92.78%
93.09%
95.90%
92.83%
93.65%
93.96%
Notes:
(1) Property tax collected by the Agency differ from the balance collec ted above due to ERAF Shift.
69
Collections
in Subsequent
Years
Amount
352,047
398,972
443,127
1,178,213
1,424,326
1,184,838
1,002,356
2,426,245
2,795,797
2,435,206
Total Collections
Percentage
Amount
of Levy
14,644,878
16,372,006
28,467,012
29,871,054
26,116,772
27,417,838
29,994,700
31,166,801
33,964,175
35,692,587
(1)
(1)
97.69%
97.55%
97.47%
97.68%
98.14%
97.29%
99.21%
100.67%
102.05%
100.84%
Principal Property Tax Payers
Current Fiscal Year and Nine Years Ago
2009
Assessed
Value
Customer
LNR Valencia Town Center
Newhall Land & Farming
Premier Parks Incorporated
RREEF America Reit II Corp D
California Institute of Arts
Town Center Apartments I
EQR Essex Place Financing
Newhl Land & Farming
Lexington Lion Clarita LP
LNR Town Center Entertainment
$
Total
Total Assessed Value
$
2000
Percentage
of Total
Assessed
Value
Percentage
of Total
121,832,284
112,779,360
71,693,365
69,586,987
58,724,600
52,060,080
48,808,499
47,858,400
43,275,547
36,261,476
0.3411%
0.3158%
0.2008%
0.1949%
0.1644%
0.1458%
0.1367%
0.1340%
0.1212%
0.1015%
46,865,598
44,274,758
12,550,908
10,123,763
22,032,927
8,566,262
6,313,316
18,245,123
839,227
13,948,814
0.3542%
0.3346%
0.0949%
0.0765%
0.1665%
0.0647%
0.0477%
0.1379%
0.0063%
0.1054%
541,048,314
1.5150%
136,895,098
1.0347%
35,712,283,384
100.00%
13,230,931,241
100.00%
70
Ratio of Outstanding Debt
Total
Fiscal
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
General
Obligation Bonds
$
2,000,000
1,000,000
-
Certificates of
Participation
Per
Capita
Debt
194,987,668
273,592,787
272,140,594
269,735,938
263,058,953
264,830,071
259,870,046
351,727,989
345,473,561
338,077,352
196,987,668
274,592,787
272,140,594
269,735,938
263,058,953
264,830,071
259,870,046
351,727,989
345,473,561
338,077,352
As a Share of
Personal Income
1,303.42
1,783.38
1,717.97
1,655.46
1,594.47
1,576.80
1,524.57
1,985.39
1,951.33
1,908.42
4.39%
5.85%
5.58%
5.30%
5.00%
4.84%
4.58%
5.78%
5.48%
5.06%
$400,000,000
$350,000,000
$300,000,000
Dollars
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
Fiscal Year
Source: Castaic Lake Water Agency Audited Financial Statements
71
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
$0
Ratio of General Bonded Debt Outstanding
Fiscal
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
General
Obligation Bonds
$
Percentage of
Taxable Value
of Property
Per
Capita
0.02%
0.01%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
13.23
6.49
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2,000,000
1,000,000
-
N/A - Not applicable
Sources: Castaic Lake Water Agency audited financial statements,
Assessed Values at Schedule, and Demographic and Economics
Schedule
72
Direct and Overlapping Governmental Activities Debt
At June 30, 2009
Overlapping Debt:
Los Angeles County Flood Control District
Los Angeles County Sanitation District
Los Angeles Unified School District
$
Debt
Outstanding
Estimated
Percentage
Applicable
99,210,000
375,594,995
7,325,045,000
1.700%
1.700%
1.700%
Estimated
Share of
Direct and
Overlapping
Debt
1,686,570
6,385,115
124,525,765
Total overlapping debt
132,597,450
Agency Governmental Activities Direct Debt
338,077,352
100.000%
Total direct and overlapping debt
$
2008/09 Assessed Valua tion: $35,683,711,419
Debt to Assessed Valuation Ratios
338,077,352
Direct Debt
Overlapping Debt
Total Debt
Source: County of Los Angeles 2008 CAFR (2009 CAFR not available)
73
0.95%
0.37%
1.32%
470,674,802
Debt Coverage
Fiscal Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Revenues
$
(1)
21,598,222
40,260,336
39,852,555
53,464,957
54,114,110
40,280,631
35,792,676
52,489,442
56,145,308
57,708,489
(2 )
Expenses
(5,560,634)
(5,553,408)
(6,353,501)
(6,765,472)
(7,846,597)
(8,816,584)
(10,178,151)
(11,295,585)
(11,972,443)
(13,105,488)
Net Available
Revenues
(3)
Principal
16,037,588
34,706,928
33,499,054
46,699,485
46,267,513
31,464,047
25,614,525
41,193,857
44,172,865
44,603,001
Debt Service
Interest
3,300,000
3,805,000
2,945,000
3,985,000
5,635,000
2,445,000
6,835,000
7,015,000
8,160,000
9,405,000
Notes: The Agency only has debt outstanding for Governmental Activities.
(1) Per official statements, revenue pledged includes amounts collected from all sources
(2) Expenses are General Fund expenditures only
(3) Includes only normal principal payments (does not include payments as a result of refinancing or issuance of debt)
74
9,764,546
11,753,357
15,233,401
15,406,972
15,229,594
16,796,283
13,823,727
12,724,001
16,104,142
14,965,694
Total
13,064,546
15,558,357
18,178,401
19,391,972
20,864,594
19,241,283
20,658,727
19,739,001
24,264,142
24,370,694
Coverage
Ratio
1.23
2.23
1.84
2.41
2.22
1.64
1.24
2.09
1.82
1.83
Demographic and Economic Statistics
(1)
Year
City of
Santa Clarita
Population
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
151,131
153,973
158,408
162,937
164,982
167,954
170,455
177,158
177,045
177,150
County of Los Angeles
Personal
Income
(thousands of
Population
dollars)
Unemployment
Rate
5.4%
5.7%
6.8%
7.0%
6.5%
5.3%
5.0%
4.9%
8.2%
12.6%
9,487,409 $
9,653,900
9,817,400
9,966,200
10,107,451
10,226,506
10,336,231
10,331,939
10,363,850
10,393,185
Personal
Income
per Capita
281,834,553
294,508,314
302,123,332
311,285,326
322,180,312
333,456,623
344,127,235
355,138,307
369,174,348
392,000,000
29,706
30,507
30,774
31,234
31,876
32,607
33,293
34,373
35,621
37,717
180,000
Population
170,000
160,000
150,000
140,000
20
09
20
08
20
07
20
06
20
05
20
04
20
03
02
20
20
01
20
00
130,000
Fiscal Year
Population
11,000,000
10,500,000
10,000,000
9,500,000
20
09
20
08
20
07
20
20
07
20
06
20
05
20
04
03
20
20
02
20
01
20
00
9,000,000
$40,000
$35,000
$30,000
$25,000
Fiscal Year
Notes:
75
09
20
08
20
06
5
20
0
4
20
0
3
20
0
2
20
0
20
01
$20,000
20
00
Per Capita Income
Fiscal Year
Principal Employers
Last Three Fiscal Years
2008
Number of
Employees
Six Flags Magic Mountain
Princess Cruises
Henry Mayo Newhall Memorial Hospital
H.R. Textron
The Master's College
Specialty Laboratories
Arvato Services
California Institute of Art
Aerospace Dynamics
Fanfare Media Works
2007
Percent of
Total
Employment
Number of
Employees
2006
Percent of
Total
Employment
Number of
Employees
Percent of
Total
Employment
3,689
2,100
1,212
845
755
725
586
500
450
407
15.64%
8.90%
5.14%
3.58%
3.20%
3.07%
2.48%
2.12%
1.91%
1.73%
3,165
2,100
1,133
845
748
725
586
500
420
407
9.18%
8.90%
4.80%
3.58%
3.17%
3.07%
2.48%
2.12%
1.78%
1.73%
3,878
1,850
1,355
688
741
700
505
510
437
407
19.09%
9.11%
6.67%
3.39%
3.65%
3.45%
2.00%
2.49%
2.51%
2.15%
Total
11,269
47.77%
10,629
40.81%
11,071
54.51%
All Others
12,323
52.23%
12,963
59.19%
9,243
45.50%
Total employment in
Santa Clarita
23,592
100.00%
23,592
100.00%
20,314
100.00%
Source: City of Santa Clarita 2008 CAFR ( 2009 CAFR not available)
76
Operating and Capacity Indicators
District Employees by Department
Department
Water Resources
Maintenance
Water Treatment Operations
Water Quality Compliance
Administration
Engineering
Management
Retail (Water Enterprise)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
17
8
8
6
5
4
3
35
17
10
7
7
5
4
3
36
15
10
7
6
5
4
4
38
16
11
6
5
8
4
3
41
20
12
6
5
10
5
3
45
17
11
7
6
12
5
2
49
12
11
9
6
15
8
2
48
11
10
10
6
16
7
2
43
11
11
10
6
19
8
2
46
12
13
9
6
19
9
2
46
86
89
89
94
106
109
111
105
113
116
125
120
115
110
105
100
95
90
Number of Employees
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
09
20
08
07
20
20
20
06
05
20
04
20
03
20
02
20
01
20
20
00
0
Fiscal Year
Fiscal
Y ear
W ater in
Storage (AF)
State W ater
Purchased
Service
C onnections
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
307,710
276,377
304,188
314,523
277,601
307,677
311,870
269,786
297,804
252,006
40,680
31,939
68,817
55,736
89,735
55,828
94,972
74,141
49,549
39,221
22,910
23,548
24,175
25,175
26,161
26,979
27,392
27,817
28,071
28,244
O ther Operating and C apac ity Indicators
(1)
Retail D ivision (W ater Enterprise)
A verage
M aximum
M iles of
C onsumptio n (M GD)
Capacity (M GD )
W ater M ains
N/A
N/A
N/A
N/A
N/A
23
24
24
25
25
AF - Acre feet
MGD - Millions of G allons per Da y
N/A - Data not applicable or not available
Sources: Castaic Lake W ater Agency Administration D epartment
77
N /A
N /A
N /A
N /A
N /A
49
49
49
79
72
N/A
N/A
N/A
N/A
N/A
295
305
305
305
308
N umber of
Fire Hydrants
N /A
N /A
N /A
N /A
N /A
2,413
2,459
2,493
2,923
2,931
Report on Internal Controls and Compliance
Independent Auditor’s Report on Internal Controls and Compliance
Over Financial Reporting Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
Board of Directors
We have audited the basic financial statements of the Castaic Lake Water Agency (Agency) as of and for
the year ended June 30, 2009, and have issued our report thereon dated September 10, 2009. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Agency’s internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
Agency’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the Agency’s internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the Agency’s ability to initiate, authorize, record, process, or
report financial data reliably in accordance with generally accepted accounting principles such that there
is more than a remote likelihood that a misstatement of the Agency’s financial statements that is more
than inconsequential will not be prevented or detected by the Agency’s internal control. A material
weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a
remote likelihood that a material misstatement of the financial statements will not be prevented or
detected by the Agency’s internal control. Our consideration of internal control over financial reporting
was for the limited purpose described in the first paragraph of this section and would not necessarily
identify all deficiencies in internal control that might be significant deficiencies or material weaknesses.
We did not identify any deficiencies in internal control over financial reporting that we consider to be
material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Agency’s financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts and grants, 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 that are required to be reported under
Government Auditing Standards.
This report is intended solely for the information and use of the Board of Directors and management and
is not intended to be and should not be used by anyone other than these specified parties.
September 10, 2009
Cypress, California
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APPENDIX C
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
The following is a summary of certain provisions of the Installment Purchase Agreement and the Trust
Agreement which are not described elsewhere. This summary does not purport to be comprehensive and
reference should be made to the respective agreement for a full and complete statement of the provisions
thereof.
INSTALLMENT PURCHASE AGREEMENT
Definitions. Unless the context otherwise requires, the terms defined in the Installment Purchase
Agreement will for all purposes thereof and of any amendment thereof or supplement thereto and of any report or
other document mentioned in the Installment Purchase Agreement or any amendment thereof or supplement thereto
have the meanings defined in the Installment Purchase Agreement, the following definitions to be equally applicable
to both the singular and plural forms of any of the terms defined therein. All capitalized terms used in the
Installment Purchase Agreement and not defined therein have the meanings ascribed thereto in the Trust Agreement.
Accountant’s Report. The term “Accountant’s Report” means a report signed by an Independent Certified
Public Accountant.
Agency. The term “Agency” means Castaic Lake Water Agency, an agency duly organized and existing
under and by virtue of the laws of the State of California, including the Law.
Bonds. The term “Bonds” means all revenue bonds or notes of the Agency authorized, executed, issued
and delivered by the Agency, the payments of which are on a parity with the Series 2010B Installment Payments and
secured by a pledge of and lien on the Retail System Revenues and are payable from Net Retail Revenues.
Contracts. The term “Contracts” means the Installment Purchase Agreement and any amendments and
supplements thereto, and all contracts of the Agency authorized and executed by the Agency, the Installment
Payments under which are on a parity with the Series 2010B Installment Payments and which are secured by a
pledge and lien on the Retail System Revenues and are payable from Net Retail System Revenues.
Corporation. The term “Corporation” means Castaic Lake Water Agency Financing Corporation, a
nonprofit public benefit corporation duly organized and existing under and by virtue of the laws of the State of
California.
Debt Service. The term “Debt Service” means, for any Fiscal Year, the sum of: (1) the interest payable
during such Fiscal Year on all outstanding Bonds, assuming that all outstanding serial Bonds are retired as
scheduled and that all outstanding term Bonds are prepaid or paid from sinking fund payments as scheduled (except
to the extent that such interest is capitalized or is reasonably anticipated to be reimbursed to the Agency by the
United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the
American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17,
2009)), or any future similar program)); (2) that portion of the principal amount of all outstanding serial Bonds
maturing in such Fiscal Year or maturing in the next succeeding Fiscal Year accruing during such Fiscal Year in
each case computed as if such principal amounts were deemed to accrue daily during such Fiscal Year in equal
amounts; (3) that portion of the principal amounts of all outstanding term Bonds required to be prepaid or paid in
such Fiscal Year or during the next succeeding Fiscal Year in each case computed as if such principal amounts were
deemed to accrue daily during such Fiscal Year in equal amounts; and (4) that portion of the Installment Payments
required to be made during such Fiscal Year or the next succeeding Fiscal Year in each case computed as if such
Installment Payments were deemed to accrue daily during such Fiscal Year in equal amounts (except to the extent
that the interest portion of such Installment Payments is capitalized); provided that, as to any such Bonds or
Installment Payments bearing or comprising interest at other than a fixed rate, the rate of interest used to calculate
Debt Service will be assumed to bear interest at a fixed rate equal to the higher of: (i) the then current variable
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interest rate borne by such Bonds or Contracts plus 1%; and (ii) the highest average variable rate borne over a sixth
month period during the preceding 24 months by outstanding variable rate debt issued by the Agency or, if no such
variable rate debt is at the time outstanding, by variable rate debt of which the interest rate is computed by reference
to an index comparable to that to be utilized in determining the interest rate for the debt then proposed to be issued;
provided further that if any series or issue of such Bonds or Installment Payments have twenty-five percent (25%) or
more of the aggregate principal amount of such series or issue due in any one year, Debt Service will be determined
for the Fiscal Year of determination as if the principal of and interest on such series or issue of such Bonds or
Installment Payments were being paid from the date of incurrence thereof in substantially equal annual amounts
over a period of thirty (30) years from the date of calculation; and provided further that the amount on deposit in a
debt service reserve fund on any date of calculation of Debt Service will be deducted from the amount of principal
due at the final maturity of the Bonds and Contracts for which such debt service reserve fund was established and in
each preceding year until such amount is exhausted; provided further that Debt Service will be reduced by the
amount of investment earnings credited to any debt service fund created with respect to Contracts or Bonds; and
provided further that if the Bonds or Contracts constitute Paired Obligations, the interest rate on such Bonds or
Contracts will be the resulting linked rate or the effective fixed interest rate to be paid by the Agency with respect to
such Paired Obligations.
Event of Default. The term “Event of Default” means an event described in the Installment Purchase
Agreement.
Fiscal Year. The term “Fiscal Year” means the period beginning on July 1 of each year and ending on the
last day of June of the next succeeding year, or any other twelve-month period selected and designated as the official
Fiscal Year of the Agency.
Independent Certified Public Accountant. The term “Independent Certified Public Accountant” means any
firm of certified public accountants appointed by the Agency, and each of whom is independent pursuant to the
Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants.
Independent Financial Consultant. The term “Independent Financial Consultant” means a financial
consultant or firm of such consultants appointed by the Agency, and who, or each of whom: (1) is in fact
independent and not under domination of the Agency; (2) does not have any substantial interest, direct or indirect,
with the Agency; and (3) is not connected with the Agency as an officer or employee of the Agency, but who may
be regularly retained to make reports to the Agency.
Initial Rating Requirement. The term “Initial Rating Requirement” means a long-term debt rating of A- or
better by S&P and A3 of better by Moody’s.
Installment Payment Date; Series 2010B Installment Payment Date. The term “Installment Payment Date”
means any date on which Installment Payments are scheduled to be paid by the Agency under and pursuant to any
Contract. The term “Series 2010B Installment Payment Date” means the second Business Day preceding each
Payment Date pursuant to the Trust Agreement.
Installment Payments; Series 2010B Installment Payments. The term “Installment Payments” means the
payments scheduled to be paid by the Agency under and pursuant to the Contracts. The term “Series 2010B
Installment Payments” means the Installment Payments scheduled to be paid by the Agency under and pursuant to
the Installment Purchase Agreement.
Installment Purchase Agreement. The term “Installment Purchase Agreement” means the Installment
Purchase Agreement, by and between the Agency and the Corporation, dated as of March 1, 2010, as originally
executed and as it may from time to time be amended or supplemented in accordance therewith.
Interfund Loan. The term “Interfund Loan” means the interfund advance of cash by the Agency for the
acquisition of the Santa Clarita Water Company, which interfund advance is subject to repayment in monthly
installments by the Agency’s Santa Clarita Water Division from Retail System Revenues in accordance with the
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payment schedule set forth as an attachment to Agency Resolution No. 2479 adopted by the Board of Directors of
the Agency on August 9, 2006.
Interfund Loan Prepayment Fund. The term “Interfund Loan Prepayment Fund” means the fund by that
name established in the Installment Purchase Agreement.
Law. The term “Law” means Castaic Lake Water Agency Law of the State of California (being Chapter
103-15(d) and (e) of the Water Code-Appendix of the State of California), including all laws amendatory thereof or
supplemental thereto.
Manager. The term “Manager” means the General Manager of the Agency, or any other person designated
by the General Manager to act on behalf of the General Manager.
Minimum Rating Requirement. The term “Minimum Rating Requirement” means a long-term debt rating
of Baa2 by S&P or BBB by Moody’s.
Net Proceeds. The term “Net Proceeds” means, when used with respect to any casualty insurance or
condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all
expenses (including attorneys’ fees) incurred in the collection of such proceeds.
Net Retail System Revenues. The term “Net Retail System Revenues” means, for any Fiscal Year, the
Retail System Revenues for such Fiscal Year less the Retail System Operation and Maintenance Costs for such
Fiscal Year.
Paired Obligation Provider. The term “Paired Obligation Provider” means a party to a Paired Obligation
other than the Agency.
Paired Obligations. The term “Paired Obligations” means any Bond or Contract (or portion thereof)
designated as Paired Obligations in the resolution, indenture or other document authorizing the issuance or
execution and delivery thereof, which are simultaneously issued or executed and delivered: (i) the principal of which
is of equal amount maturing and to be redeemed or prepaid (or cancelled after acquisition thereof) on the same dates
and in the same amounts; and (ii) the interest rates which, taken together, are reasonably expected to result in a fixed
interest rate obligation of the Agency for the term of such Bond or Contract, as certified by an Independent Financial
Consultant in writing, and which comply with the provisions of the Installment Purchase Agreement.
Project; 2010B Project. The term “Project” means any additions, betterments, extensions or improvements
to the Agency’s Retail Water System designated by the Board of Directors of the Agency as a Project, the
acquisition and construction of which has been or will be paid for with the proceeds of any Contracts or Bonds. The
term “2010B Project” means the additions, betterments, extensions and improvements to the Retail Water System
described in the Installment Purchase Agreement.
Purchase Price. The term “Purchase Price” means the principal amount plus interest thereon owed by the
Agency to the Corporation under the terms of the Installment Purchase Agreement as provided therein.
Retail System Operation and Maintenance Costs. The term “Retail System Operation and Maintenance
Costs” means: (i) costs spent or incurred for maintenance and operation of the Retail Water System calculated in
accordance with generally accepted accounting principles, including (among other things) the reasonable expenses
of management and repair and other expenses necessary to maintain and preserve the Retail Water System in good
repair and working order, and including administrative costs of the Agency that are charged directly or apportioned
to the Retail Water System, including but not limited to salaries and wages of employees, payments to the Public
Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, consultants,
attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the
Agency or charges (other than debt service payments) required to be paid by it to comply with the terms of the
Certificates or of the Installment Purchase Agreement or any Contract or of any resolution or indenture authorizing
the issuance of any Bonds or of such Bonds; (ii) cost of purchased water, including but not limited to water
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purchased by the Retail Water System from the Agency; and (iii) amounts scheduled to be paid in any Fiscal Year
by the Retail Water System pursuant to the Interfund Loan (net of any prepayment thereof in prior Fiscal Years or
any amounts on deposit in the Interfund Loan Prepayment Fund on the last day of the prior Fiscal Year); but
excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of
intangibles or other bookkeeping entries of a similar nature.
Retail System Revenues. The term “Retail System Revenues” means all income, rents, rates, fees, charges
and other moneys derived by the Agency from the ownership or operation of the Retail Water System on or after the
date of the Installment Purchase Agreement, including, without limiting the generality of the foregoing: (1) all
income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the Agency
from the sale, furnishing and supplying of the water or other services, facilities, and commodities sold, furnished or
supplied through the facilities of or in the conduct or operation of the business of the Retail Water System; (2) the
earnings on and income derived from the investment of such income, rents, rates, fees, charges, or other moneys,
including Retail Water System reserves; (3) the proceeds of any development impact capacity fees or any other
connection fees collected by the Agency in connection with the Retail Water System; and (4) the proceeds of any
stand-by or water availability charges collected by the Agency in connection with the Retail Water System; but
excluding in all cases revenues of the Wholesale System and customers’ deposits or any other deposits or advances
subject to refund until such deposits or advances have become the property of the Agency and excluding any
proceeds of taxes or assessments restricted by law to be used by the Agency to pay bonds later issued and payments
by the Retail Water System to the Agency in accordance with the Interfund Loan.
Retail Water Service. The term “Retail Water Service” means the retail water service made available or
provided by the Retail Water System.
Retail Water System. The term “Retail Water System” means the whole and each and every part of the
retail water system of the Agency, including the portion thereof existing on the date of the Installment Purchase
Agreement, and including the 2010B Project and all additions, betterments, extensions and improvements to the
Retail Water System or any part thereof later acquired or constructed, but not including the Wholesale System and
any existing retail water distribution systems later acquired by the Agency unless the Board of Directors of the
Agency determines by resolution that such facilities acquired by the Agency will be included in the Retail Water
System for purposes of the Installment Purchase Agreement.
Revenue Fund. The term “Revenue Fund” means the Retail System Revenue Fund established in the
Installment Purchase Agreement.
Subordinate Obligations. The term “Subordinate Obligations” means all revenue bonds or notes of the
Agency and all contracts of the Agency payable from Retail System Revenues, which are secured by a pledge and
lien on the Retail System Revenues subordinate to the pledge of and lien on the Retail System Revenues described
in the Installment Purchase Agreement and are payable from Net Retail System Revenues subordinate to the
Trust Agreement. The term “Trust Agreement” means the Trust Agreement, by and among the Agency, the
Corporation and the Trustee, dated as of March 1, 2010, as originally executed and as it may from time to time be
amended or supplemented in accordance with its terms.
Trustee. The term “Trustee” means U.S. Bank National Association, Los Angeles, California, acting in its
capacity as Trustee under and pursuant to the Trust Agreement, and its successors and assigns.
Wholesale System. The term “Wholesale System” means the whole and each and every part of the
wholesale water system of the Agency, including the portion thereof existing on the date of the Installment Purchase
Agreement, and all additions, betterments, extensions and improvements to such wholesale water system or any part
thereof later acquired or constructed, but not including the Retail Water System and any other retail water
distribution facilities of the Agency.
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ACQUISITION OF THE 2010B PROJECT
Acquisition and Construction of the 2010B Project. The Corporation has agreed to cause the 2010B
Project, and any additions or modifications thereto to be constructed, acquired or installed by the Agency as its
agent, and the Agency will enter into contracts and provide for, as agent of the Corporation, the complete acquisition
of the 2010B Project. The Agency has agreed that it will cause the construction, acquisition and installation of the
2010B Project to be diligently performed after the deposit of funds with the Trustee pursuant to the Trust
Agreement, upon satisfactory completion of design work and compliance with CEQA and approval by the Board of
Directors of the Agency, unforeseeable delays beyond the reasonable control of the Agency only excepted. The
Corporation is under no liability of any kind or character whatsoever for the payment of any cost of the 2010B
Project and all such costs and expenses will be paid by the Agency, regardless of whether the funds deposited in the
Acquisition Fund are sufficient to cover all such costs and expenses.
Changes to the 2010B Project. The Agency may substitute other improvements for those listed as
components of the 2010B Project in the Installment Purchase Agreement, but only if the Agency first files with the
Corporation and the Trustee a statement of the Agency identifying the improvements to be substituted and the
improvements to Agency facilities they replace in the 2010B Project and stating that the estimated costs of
construction, acquisition and installation of the substituted improvements are not less than such costs for the
improvements previously planned.
Purchase and Sale of the 2010B Project. In consideration for the Series 2010B Installment Payments as set
forth in the Installment Purchase Agreement, the Corporation has agreed to sell, and has sold, to the Agency, and the
Agency has agreed to purchase, and has purchased, from the Corporation, the 2010B Project at the purchase price
specified in the Installment Purchase Agreement and otherwise in the manner and in accordance with the provisions
of the Installment Purchase Agreement.
Title. All right, title and interest in the 2010B Project will vest in the Agency immediately upon acquisition
of each component of the 2010B Project.
Acquisition Fund. There has been continued with the Agency a fund known as the “Acquisition Fund,”
which the Agency will maintain and hold in trust separate and apart from other funds held by it. The moneys in the
Acquisition Fund will be applied to the payment of the costs of acquisition of the 2010B Project and of expenses
incidental thereto. Before any payment is made from the Acquisition Fund, the Manager will cause to be filed with
the Treasurer of the Agency a Written Requisition in the form set forth in the Installment Purchase Agreement.
Upon receipt of such Written Requisition, the Treasurer will pay the amount set forth therein. The Treasurer need
not make any such payment if he or she has received notice of any lien, right to lien or attachment upon, or claim
affecting the right to receive payment of, any of the moneys so to be paid, which has not been released and will not
be released simultaneously with such payment.
When the 2010B Project has been constructed and acquired in accordance with the Installment Purchase
Agreement, a statement of the Agency stating the fact and date of such acquisition, construction and acceptance and
stating that all of such costs of acquisition and incidental expenses have been determined and paid (or that all of
such costs and expenses have been paid less specified claims which are subject to dispute and for which a retention
in the Acquisition Fund is to be maintained in the full amount of such claims until such dispute is resolved), will be
delivered to the Treasurer of the Agency and the Trustee by the Manager. Upon the receipt of such statement, the
Treasurer of the Agency will transfer any remaining balance in the Acquisition Fund not needed for Acquisition
Fund purposes (but less the amount of any such retention which amount will be certified to the Treasurer of the
Agency by the Manager) to the Trustee, which will transfer such amounts to the Revenue Fund.
SERIES 2010B INSTALLMENT PAYMENTS
Purchase Price. (a) The Purchase Price to be paid by the Agency under the Installment Purchase
Agreement to the Corporation is the sum of the principal amount of the Agency’s obligations thereunder plus the
interest to accrue on the unpaid balance of such principal amount from the date thereof over the term thereof, subject
to prepayment as provided therein.
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(b)
The principal amount of the payments to be made by the Agency under the Installment
Purchase Agreement is set forth therein.
(c)
The interest to accrue on the unpaid balance of such principal amount is as specified in
the Installment Purchase Agreement, and will be paid by the Agency as and constitutes interest paid on the principal
amount of the Agency’s obligations under the Installment Purchase Agreement.
Series 2010B Installment Payments. The Agency will, subject to its rights of prepayment provided in the
Installment Purchase Agreement, pay the Corporation the Purchase Price in installment payments of interest and
principal in the amounts and on the Series 2010B Installment Payment Dates as set forth in a certificate of the
General Manager of the Agency, a copy of which will be delivered to the Trustee by the Agency and is attached to
the Installment Purchase Agreement.
Each Series 2010B Installment Payment will be paid to the Corporation in lawful money of the United
States of America. In the event the Agency fails to make any of the payments required to be made by it under the
Installment Purchase Agreement, such payment will continue as an obligation of the Agency until such amount has
been fully paid and the Agency has agreed to pay the same with interest accruing thereon at the rate or rates of
interest then applicable to the remaining unpaid principal balance of the Series 2010B Installment Payments if paid
in accordance with their terms.
The obligation of the Agency to make the Series 2010B Installment Payments is absolute and
unconditional, and until such time as the Purchase Price has been paid in full (or provision for the payment thereof
has been made pursuant to the Installment Purchase Agreement), the Agency will not discontinue or suspend any
Series 2010B Installment Payments required to be made by it under the Installment Purchase Agreement when due,
whether or not the Retail Water System or any part thereof is operating or operable or has been completed, or its use
is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such payments will not be
subject to reduction whether by offset or otherwise and will not be conditional upon the performance or
nonperformance by any party of any agreement for any cause whatsoever.
SECURITY
Allocation of Revenues. In order to carry out and effectuate the pledge and lien contained in the
Installment Purchase Agreement, the Agency has agreed and covenanted that all Retail System Revenues will be
received by the Agency in trust under the Installment Purchase Agreement and deposited when and as received in
the “Retail System Revenue Fund,” which fund the Agency has agreed and covenanted to maintain and to hold
separate and apart from other funds so long as any Installment Payments or Bonds remain unpaid. Moneys in the
Revenue Fund will be used and applied by the Agency as provided in the Installment Purchase Agreement.
The Agency will, from the moneys in the Revenue Fund, pay all Retail System Operation and Maintenance
Costs (including amounts reasonably required to be set aside in contingency reserves for Retail System Operation
and Maintenance Costs, the payment of which is not then immediately required) as such Retail System Operation
and Maintenance Costs become due and payable. All remaining moneys in the Revenue Fund will be set aside by
the Agency at the following times in the following respective special funds in the following order of priority and all
moneys in each of such funds will be held in trust and applied, used and withdrawn only for the purposes authorized
in the Installment Purchase Agreement:
(a)
Certificate Payment Fund. On or before each Series 2010B Installment Payment Date,
the Agency will, from the moneys in the Revenue Fund, transfer to the Trustee for deposit in the Certificate Payment
Fund a sum equal to the Series 2010B Installment Payment coming due on such Series 2010B Installment Payment
Date. The Agency will also, from the moneys in the Revenue Fund, transfer to the applicable trustee or payee for
deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such
moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions
of the Contract, resolution or indenture relating thereto. No deposit need be made in the Certificate Payment Fund
as Series 2010B Installment Payments if the amount in the Certificate Payment Fund is at least equal to the amount
of the Series 2010B Installment Payment due and payable on the next succeeding Series 2010B Installment Payment
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Date. All money in the Certificate Payment Fund will be used and withdrawn by the Trustee in accordance with the
Trust Agreement.
(b)
Subordinate Obligations. On or before the payment of principal or interest is due with
respect to any Subordinate Obligations, the Agency will from moneys in the Revenue Fund, transfer to the
applicable trustee or payee for deposit in the applicable payment fund, without preference or priority, and in the
event of any insufficiency of such moneys ratably without discrimination or preference, payment on such
Subordinate Obligations in accordance with the provisions of such Subordinate Obligation.
(c)
Surplus. On the last day of each month, moneys on deposit in the Revenue Fund not
required to make any of the payments required by the Installment Purchase Agreement may be expended by the
Agency at any time for any purpose permitted by law, including but not limited to deposit in the Interfund Loan
Prepayment Fund in accordance with the Installment Purchase Agreement.
Investments. All moneys held by the Agency in the Revenue Fund, the Acquisition Fund and the Interfund
Loan Prepayment Fund will be invested in Permitted Investments and the investment earnings thereon will remain
on deposit in such funds, except as otherwise provided in the Installment Purchase Agreement.
Interfund Loan Prepayment Fund. There has been established a special fund designated as the “Interfund
Loan Prepayment Fund” to be held by the Agency. On or prior to June 30 of any Fiscal Year, the Agency may make
deposits into the Interfund Loan Prepayment Fund in accordance with the Installment Purchase Agreement or from
Agency reserves. Moneys transferred by the Agency from the Revenue Fund to the Interfund Loan Prepayment
Fund in accordance with the Installment Purchase Agreement or from Agency reserves will be held in the Interfund
Loan Prepayment Fund and applied in accordance with the Installment Purchase Agreement.
The Agency may withdraw all or any portion of the amounts on deposit in the Interfund Loan Prepayment
Fund and apply such amounts to the prepayment of the installments due under the Interfund Loan in the succeeding
Fiscal Year or, with the approval of the Board of Directors of the Agency, for any other purpose permitted by the
COVENANTS OF THE AGENCY
Compliance with Installment Purchase Agreement and Ancillary Agreements. The Agency will punctually
pay the Series 2010B Installment Payments in strict conformity with the terms of the Installment Purchase
Agreement, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained
therein required to be observed and performed by it, and will not terminate the Installment Purchase Agreement for
any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute
failure of consideration, destruction of or damage to the 2010B Project, commercial frustration of purpose, any
change in the tax or other laws of the United States of America or of the State of California or any political
subdivision of either or any failure of the Corporation to observe or perform any agreement, condition, covenant or
term contained in the Installment Purchase Agreement required to be observed and performed by it, whether express
or implied, or any duty, liability or obligation arising out of or connected therewith or the insolvency, or deemed
insolvency, or bankruptcy or liquidation of the Corporation or any force majeure, including acts of God, tempest,
storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial
disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental
authorities.
The Agency will faithfully observe and perform all the agreements, conditions, covenants and terms
contained in the Trust Agreement required to be observed and performed by it, and, subject to the Installment
Purchase Agreement, each of the agreements, conditions, covenants and terms contained in the Installment Purchase
Agreement and the Trust Agreement is an essential and material term of the purchase of and payment for the 2010B
Project by the Agency pursuant to, and in accordance with, and as authorized under the Law.
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The Agency will faithfully observe and perform all the agreements, conditions, covenants and terms
required to be observed and performed by it pursuant to all outstanding Contracts and Bonds as such may from time
to time be executed or issued, as the case may be.
Against Encumbrances. The Agency will not make any pledge of or place any lien on Retail System
Revenues or the moneys in the Revenue Fund except as provided in the Installment Purchase Agreement. The
Agency may at any time, or from time to time, issue evidences of indebtedness or incur other obligations for any
lawful purpose which are payable from and secured by a pledge of and lien on Retail System Revenues or any
moneys in the Revenue Fund as may from time to time be deposited therein, provided that such pledge and lien will
be subordinate in all respects to the pledge of and lien thereon provided in the Installment Purchase Agreement.
Against Sale or Other Disposition of Property. The Agency will not enter into any agreement or lease
which impairs the operation of the Retail Water System or any part thereof necessary to secure adequate Retail
System Revenues for the payment of the Series 2010B Installment Payments, or which would otherwise impair the
rights of the Corporation under the Installment Purchase Agreement or the operation of the Retail Water System.
Any real or personal property which has become nonoperative or which is not needed for the efficient and proper
operation of the Retail Water System, or any material or equipment which has become worn out, may be sold if such
sale will not impair the ability of the Agency to pay the Series 2010B Installment Payments and if the proceeds of
such sale are deposited in the Revenue Fund.
Nothing in the Installment Purchase Agreement restricts the ability of the Agency to sell any portion of the
Retail Water System if such portion is immediately repurchased by the Agency and if such arrangement cannot by
its terms result in the purchaser of such portion of the Retail Water System exercising any remedy which would
deprive the Agency of or otherwise interfere with its right to own and operate such portion of the Retail Water
System.
Against Competitive System. The Agency and the Corporation have acknowledged that certain public and
private agencies, corporations, districts or other political subdivisions currently operate retail water supply and
distribution systems within the boundaries of the Agency and that nothing contained in the Installment Purchase
Agreement is intended to alter or affect such activities. The Agency: (i) will not, to the extent permitted by law,
acquire, construct, maintain or operate; and (ii) will not, to the extent permitted by law and within the scope of its
powers, permit any other public or private agency, corporation, district or political subdivision or any person
whomsoever to acquire, construct, maintain or operate within the service area of the Retail Water System any water
importation and treatment facilities competitive with the Retail Water System.
Tax Covenants. Notwithstanding any other provision of the Installment Purchase Agreement, absent an
opinion of Special Counsel that the exclusion from gross income of interest with respect to the Certificates will not
be adversely affected for federal income tax purposes, the Agency and the Corporation have covenanted to comply
with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to
the Certificates and have specifically covenanted, without limiting the generality of the foregoing, as follows:
(a)
Private Activity. The Agency and the Corporation will not take or omit to take any
action or make any use of the proceeds of the Certificates or of any other moneys or property which would cause the
Certificates to be “private activity bonds” within the meaning of Section 141 of the Code.
(b)
Arbitrage. The Agency and the Corporation will make no use of the proceeds of the
Certificates or of any other amounts or property, regardless of the source, or take or omit to take any action which
would cause the Certificates to be “arbitrage bonds” within the meaning of Section 148 of the Code.
(c)
Federal Guarantee. The Agency and the Corporation will make no use of the proceeds of
the Certificates or take or omit to take any action that would cause the Certificates to be “federally guaranteed”
within the meaning of Section 149(b) of the Code.
(d)
Information Reporting. The Agency and the Corporation will take or cause to be taken
all necessary action to comply with the informational reporting requirements of Section 149(e) of the Code
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necessary to preserve the exclusion of interest with respect to the Certificates pursuant to Section 103(a) of the
Code.
(e)
Hedge Bonds. The Agency and the Corporation will make no use of the proceeds of the
Certificates or any other amounts or property, regardless of the source, or take any action or refrain from taking any
action that would cause the Certificates to be considered “hedge bonds” within the meaning of Section 149(g) of the
Code unless the Agency and the Corporation take all necessary action to assure compliance with the requirements of
Section 149(g) of the Code to maintain the exclusion from gross income of interest for federal income tax purposes
with respect to the Certificates.
(f)
Miscellaneous. The Agency and the Corporation will take no action, or omit to take any
action, inconsistent with the expectations stated in any Tax Certificate executed with respect to the Certificates and
will comply with the covenants and requirements stated therein and incorporated by reference in the Installment
Purchase Agreement.
The foregoing tax covenants are not applicable to, and nothing contained in the Installment Purchase
Agreement prevents the Agency from issuing Bonds or executing and delivering Contracts, the interest with respect
to which has been determined by Special Counsel to be subject to federal income taxation.
Maintenance and Operation of the Retail Water System. The Agency will maintain and preserve the Retail
Water System in good repair and working order at all times and will operate the Retail Water System in an efficient
and economical manner and will pay all Retail System Operation and Maintenance Costs as they become due and
payable.
Payment of Claims. The Agency will pay and discharge any and all lawful claims for labor, materials or
supplies which, if unpaid, might become a lien on the Retail System Revenues or the funds or accounts created
under the Installment Purchase Agreement or the Trust Agreement or on any funds in the hands of the Agency
pledged to pay the Series 2010B Installment Payments or to the Owners prior or superior to the lien of the Series
2010B Installment Payments or which might impair the security of the Series 2010B Installment Payments.
Compliance with Contracts. The Agency will comply with, keep, observe and perform all agreements,
conditions, covenants and terms, express or implied, required to be performed by it contained in all contracts for the
use of the Retail Water System and all other contracts affecting or involving the Retail Water System, to the extent
that the Agency is a party thereto.
Insurance. (a) The Agency will procure and maintain or cause to be procured and maintained insurance on
the Retail Water System with responsible insurers in such amounts and against such risks (including accident to or
destruction of the Retail Water System) as are usually covered in connection with facilities similar to the Retail
Water System so long as such insurance is available from reputable insurance companies.
In the event of any damage to or destruction of the Retail Water System caused by the perils covered by
such insurance, the Net Proceeds thereof will be applied to the reconstruction, repair or replacement of the damaged
or destroyed portion of the Retail Water System. The Agency will begin such reconstruction, repair or replacement
promptly after such damage or destruction occurs, and will continue and properly complete such reconstruction,
repair or replacement as expeditiously as possible, and will pay out of such Net Proceeds all costs and expenses in
connection with such reconstruction, repair or replacement so that the same will be completed and the Retail Water
System will be free and clear of all claims and liens.
If such Net Proceeds exceed the costs of such reconstruction, repair or replacement, then the excess Net
Proceeds will be applied in part to the prepayment of Series 2010B Installment Payments as provided in the
Installment Purchase Agreement and in part to such other fund or account as may be appropriate and used for the
retirement of Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of Series
2010B Installment Payments then bears to the aggregate unpaid principal amount of such Bonds and Contracts. If
such Net Proceeds are sufficient to enable the Agency to retire the entire obligation evidenced by the Installment
Purchase Agreement prior to the final due date of the Series 2010B Installment Payments as well as the entire
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obligations evidenced by Bonds and Contracts then remaining unpaid prior to their final respective due dates, the
Agency may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Retail Water System,
and thereupon such Net Proceeds will be applied to the prepayment of Series 2010B Installment Payments as
provided in the Installment Purchase Agreement and to the retirement of such Bonds and Contracts.
(b)
The Agency will procure and maintain such other insurance which it deems advisable or
necessary to protect its interests and the interests of the Corporation, which insurance will afford protection in such
amounts and against such risks as are usually covered in connection with municipal retail water systems similar to
the Retail Water System.
(c)
Any insurance required to be maintained by clause (a) above and, if the Agency
determines to procure and maintain insurance pursuant to clause (b) above, such insurance, may be maintained
under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually
maintained in connection with municipal retail water systems similar to the Retail Water System and is, in the
opinion of an accredited actuary, actuarially sound.
All policies of insurance required to be maintained in the Installment Purchase Agreement must provide
that the Trustee and the Corporation be given thirty (30) days’ written notice of any intended cancellation thereof or
reduction of coverage provided thereby.
Accounting Records; Financial Statements and Other Reports. The Agency will keep appropriate
accounting records in which complete and correct entries will be made of all transactions relating to the Retail Water
System, which records will be available for inspection by the Corporation and the Trustee at reasonable hours and
under reasonable conditions. The Trustee has no duties to inspect such records.
Protection of Security and Rights of the Corporation. The Agency will preserve and protect the security of
the Installment Purchase Agreement and the rights of the Corporation to the Series 2010B Installment Payments
under the Installment Purchase Agreement and will warrant and defend such rights against all claims and demands
of all persons.
Payment of Taxes and Compliance with Governmental Regulations. The Agency will pay and discharge
all taxes, assessments and other governmental charges which may be lawfully imposed upon the Retail Water
System, or any part thereof or upon the Retail System Revenues when the same become due. The Agency will duly
observe and conform with all valid regulations and requirements of any governmental authority relative to the
operation of the Retail Water System, or any part thereof, but the Agency is not required to comply with any
regulations or requirements so long as the validity or application thereof is contested in good faith.
Collection of Rates and Charges. The Agency will have in effect at all times by-laws, rules and regulations
requiring each customer who purchases water from the Retail Water System to pay the rates and charges applicable
to the Retail Water Service and providing for the billing thereof and for a due date and a delinquency date for each
bill. In each case where such bill remains unpaid in whole or in part after it becomes delinquent, the Agency may
disconnect such purchaser from the Retail Water System, and such purchaser is not thereafter reconnected to the
Retail Water System except in accordance with Agency by-laws or rules and regulations governing such situations
of delinquency.
Eminent Domain Proceeds. If all or any part of the Retail Water System is taken by eminent domain
proceedings, the Net Proceeds thereof will be applied as follows:
(a)
If: (1) the Agency files with the Corporation and the Trustee a certificate showing: (i) the
estimated loss of annual Net Retail System Revenues, if any, suffered or to be suffered by the Agency by reason of
such eminent domain proceedings; (ii) a general description of the additions, betterments, extensions or
improvements to the Retail Water System proposed to be acquired and constructed by the Agency from such Net
Proceeds; and (iii) an estimate of the additional annual Net Retail System Revenues to be derived from such
additions, betterments, extensions or improvements; and (2) the Agency, on the basis of such certificate filed with
the Corporation and the Trustee, determines that the estimated additional annual Net Retail System Revenues will
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sufficiently offset the estimated loss of annual Net Retail System Revenues resulting from such eminent domain
proceedings so that the ability of the Agency to meet its obligations under the Installment Purchase Agreement will
not be substantially impaired (which determination is final and conclusive), then the Agency will promptly proceed
with the acquisition and construction of such additions, betterments, extensions or improvements substantially in
accordance with such certificate and such Net Proceeds will be applied for the payment of the costs of such
acquisition and construction, and any balance of such Net Proceeds not required by the Agency for such purpose
will be deposited in the Revenue Fund.
(b)
If the foregoing conditions are not met, then such Net Proceeds will be applied in part to
the prepayment of Series 2010B Installment Payments as provided in the Installment Purchase Ageement and in part
to such other fund or account as may be appropriate and used for the retirement of Bonds and Contracts in the same
proportion which the aggregate unpaid principal balance of Series 2010B Installment Payments then bears to the
aggregate unpaid principal amount of such Bonds and Contracts.
Further Assurances. The Agency will adopt, deliver, execute and make any and all further assurances,
instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the
performance of the Installment Purchase Agreement and for the better assuring and confirming unto the Corporation
of the rights and benefits provided to it therein.
Enforcement of Contracts. So long as any of the Certificates are outstanding, the Agency will not
voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any
action under or in connection with any contracts previously or later entered into which contracts provide for water to
be supplied to the Agency which will reduce the supply of water thereunder (except as provided therein) if such
rescission or amendment would in any manner impair or adversely affect the rights of the owners from time to time
of the Certificates.
PREPAYMENT OF SERIES 2010B INSTALLMENT PAYMENTS
Prepayment. (a) The Agency may or will, as the case may be, prepay from the Net Proceeds as provided in
the Installment Purchase Agreement the Series 2010B Installment Payments in whole or in part in the order of
payment date as directed by the Agency, at a prepayment price equal to the sum of the principal amount prepaid plus
accrued interest thereon to the date of prepayment.
(b)
The Agency may prepay the Series 2010B Installment Payments, as a whole or in part, in
the order of payment date as directed by the Agency, on the date and at the prepayment price (expressed as a
percentage of the principal amount of the Certificates to be prepaid) plus accrued interest thereon to the date of
prepayment, as set forth in the Trust Agreement.
Notwithstanding any such prepayment, the Agency will not be relieved of its obligations under the
Installment Purchase Agreement until the Purchase Price has been fully paid (or provision for payment thereof has
been provided to the written satisfaction of the Corporation and the Trustee) and the requirements of the Installment
Purchase Agreement have been satisfied.
Method of Prepayment. Before making any prepayment pursuant to the Installment Purchase Agreement,
the Agency will, within five (5) days following the event permitting the exercise of such right to prepay or creating
such obligation to prepay or a determination to prepay, give written notice to the Corporation and the Trustee
describing such event and specifying the date on which the prepayment will be paid, which date will be not less than
sixty (60) nor more than seventy-five (75) days from the date such notice is given.
EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION
Events of Default and Acceleration of Maturities. If one or more of the following Events of Default
happen: (1) if default is made by the Agency in the due and punctual payment of any Series 2010B Installment
Payment or any Contract or Bond when and as the same becomes due and payable; (2) if default is made by the
Agency in the performance of any of the agreements or covenants required in the Installment Purchase Agreement
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or in connection with any Contract or Bond to be performed by it, and such default continues for a period of sixty
(60) days after the Agency has been given notice in writing of such default by the Corporation; (3) if the Agency
files a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America or any state therein, or if a court of competent jurisdiction approves a
petition filed with or without the consent of the Agency seeking arrangement or reorganization under the federal
bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the
provisions of any other law for the relief or aid of debtors any court of competent jurisdiction assumes custody or
control of the Agency or of the whole or any substantial part of its property; or (4) if payment of the principal of any
Contract or Bond is accelerated in accordance with its terms; then and in each and every such case upon the
occurrence of such Event of Default specified in clauses (3) and (4) above, without any notice to the Agency or any
other act by any person, the entire principal amount of the unpaid Series 2010B Installment Payments and the
accrued interest thereon will be immediately due and payable and for any other Event of Default the Corporation
may, by notice in writing to the Agency declare the entire principal amount of the unpaid Series 2010B Installment
Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the
same will become immediately due and payable, anything contained in the Installment Purchase Agreement to the
contrary notwithstanding. The foregoing, however, is subject to the condition that if at any time after the entire
principal amount of the unpaid Series 2010B Installment Payments and the accrued interest thereon has been so
declared due and payable and before any judgment or decree for the payment of the moneys due has been obtained
or entered the Agency deposits with the Corporation a sum sufficient to pay the unpaid principal amount of the
Series 2010B Installment Payments or the unpaid payment of any other Contract or Bond referred to in clause (1)
above due prior to such declaration and the accrued interest thereon, with interest on such overdue installments, at
the rate or rates applicable to the remaining unpaid principal balance of the Series 2010B Installment Payments or
such Contract or Bond if paid in accordance with their terms, and the reasonable expenses of the Corporation, and
any and all other defaults known to the Corporation (other than in the payment of the entire principal amount of the
unpaid Series 2010B Installment Payments and the accrued interest thereon due and payable solely by reason of
such declaration) has been made good or cured to the satisfaction of the Corporation, if appropriate, or provision
deemed by the Corporation, if appropriate, to be adequate has been made therefor, then and in every such case the
Corporation, if appropriate, by written notice to the Agency, may rescind and annul such declaration and its
consequences; but no such rescission and annulment will extend to or affect any subsequent default or impair or
exhaust any right or power consequent thereon.
Application of Funds Upon Acceleration. Upon the date of the declaration of acceleration as provided in
the Installment Purchase Agreement, all Retail System Revenues thereafter received by the Agency will be applied
in the following order: First, to the payment, without preference or priority, and in the event of any insufficiency
ratably without any discrimination or preference, of the fees, costs and expenses of the Corporation and Trustee, if
any, in carrying out the foregoing provisions, including reasonable compensation to their respective accountants and
counsel; Second, to the payment of the Retail System Operation and Maintenance Costs; Third, to the payment of
the entire principal amount of the unpaid Series 2010B Installment Payments and the unpaid principal amount of all
Bonds and Contracts and the accrued interest thereon, with interest on the overdue installments at the rate or rates of
interest applicable to the Series 2010B Installment Payments and such Bonds and Contracts if paid in accordance
with their respective terms; and Fourth, to the payment of Subordinate Obligations in accordance with the terms
thereof.
Other Remedies of the Corporation. The Corporation has the right: (a) by mandamus or other action or
proceeding or suit at law or in equity to enforce its rights against the Agency or any director, officer or employee
thereof, and to compel the Agency or any such director, officer or employee to perform and carry out its or his duties
under the Law and the agreements and covenants required to be performed by it or him contained in the Installment
Purchase Agreement; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the
Corporation; or (c) by suit in equity upon the happening of an Event of Default to require the Agency and its
directors, officers and employees to account as the trustee of an express trust.
Notwithstanding anything contained in the Installment Purchase Agreement, the Corporation has no
security interest in or mortgage on the 2010B Project, the Retail Water System or other assets of the Agency and no
default under the Installment Purchase Agreement will result in the loss of the 2010B Project, the Retail Water
System, or other assets of the Agency.
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Non-Waiver. Nothing in the Installment Purchase Agreement affects or impairs the obligation of the
Agency, which is absolute and unconditional, to pay the Series 2010B Installment Payments to the Corporation at
the respective due dates or upon prepayment from the Net Retail System Revenues, the Revenue Fund and the other
funds in the Installment Purchase Agreement pledged for such payment, or affects or impairs the right of the
Corporation, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the
contract embodied therein.
A waiver of any default or breach of duty or contract by the Corporation will not affect any subsequent
default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of
duty or contract. No delay or omission by the Corporation to exercise any right or remedy accruing upon any
default or breach of duty or contract will impair any such right or remedy or be construed to be a waiver of any such
default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the
Corporation by the Law or by the Installment Purchase Agreement may be enforced and exercised from time to time
and as often as deemed expedient by the Corporation.
If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined
adversely to the Corporation, the Agency and the Corporation will be restored to their former positions, rights and
remedies as if such action, proceeding or suit had not been brought or taken.
Remedies Not Exclusive. No remedy conferred upon or reserved to the Corporation in the Installment
Purchase Agreement is intended to be exclusive of any other remedy, and each such remedy will be cumulative and
in addition to every other remedy given under the Installment Purchase Agreement or now or later existing in law or
in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy
conferred by the Law or any other law.
Exercise of Remedies. Notwithstanding any other provision of the Installment Purchase Agreement: (i) the
Installment Purchase Agreement and all rights and remedies of the Corporation thereunder have been assigned as of
the date of the Installment Purchase Agreement by the Corporation to the Trustee; and (ii) the exercise by the
Trustee of such rights and remedies will be subject to the provisions of the Trust Agreement.
DISCHARGE OF OBLIGATIONS
Discharge of Obligations. When: (a) all or any portion of the Series 2010B Installment Payments have
become due and payable in accordance with the Installment Purchase Agreement or a written notice of the Agency
to prepay all or any portion of the Series 2010B Installment Payments has been filed with the Trustee; and (b) there
has been deposited with the Trustee at or prior to the Series 2010B Installment Payment Dates or date (or dates)
specified for prepayment, in trust for the benefit of the Corporation or its assigns and irrevocably appropriated and
set aside to the payment of all or any portion of the Series 2010B Installment Payments, sufficient moneys and noncallable Permitted Investments, issued by the United States of America and described in clause (A) of the definition
thereof, the principal of and interest on which when due will provide money sufficient to pay all principal,
prepayment premium, if any, and interest of such Series 2010B Installment Payments to their respective Series
2010B Installment Payment Dates or prepayment date or dates as the case may be; and (c) provision has been made
for paying all fees and expenses of the Trustee, then and in that event, the right, title and interest of the Corporation
in the Installment Purchase Agreement and the obligations of the Agency thereunder will, with respect to all or such
portion of the Series 2010B Installment Payments as have been so provided for, thereupon cease, terminate, become
void and be completely discharged and satisfied (except for the right of the Trustee and the obligation of the Agency
to have such moneys and such Permitted Investments applied to the payment of such Series 2010B Installment
Payments).
In such event, upon request of the Agency the Trustee will cause an accounting for such period or periods
as may be requested by the Agency to be prepared and filed with the Agency and execute and deliver to the Agency
all such instruments as may be necessary or desirable to evidence such total or partial discharge and satisfaction, as
the case may be, and, in the event of a total discharge and satisfaction, the Trustee will pay over to the Agency, after
payment of all amounts due the Trustee pursuant to the Trust Agreement as an overpayment of Series 2010B
Installment Payments, all such moneys or such Permitted Investments held by it pursuant to the Installment Purchase
Agreement other than such moneys and such Permitted Investments, as are required for the payment or prepayment
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of the Series 2010B Installment Payments, which moneys and Permitted Investments will continue to be held by the
Trustee in trust for the payment of the Series 2010B Installment Payments and will be applied by the Trustee to the
payment of the Series 2010B Installment Payments of the Agency.
MISCELLANEOUS
Liability of Agency Limited. Notwithstanding anything contained in the Installment Purchase Agreement,
the Agency is not required to advance any moneys derived from any source of income other than the Net Retail
System Revenues and the other funds provided therein and in the Trust Agreement for the payment of the Series
2010B Installment Payments or for the performance of any agreements or covenants required to be performed by it
contained therein. The Agency may, however, advance moneys for any such purpose so long as such moneys are
derived from a source legally available for such purpose and may be legally used by the Agency for such purpose.
Benefits of Installment Purchase Agreement Limited to Parties. Nothing contained in the Installment
Purchase Agreement, expressed or implied, is intended to give to any person other than the Agency or the
Corporation and its assigns any right, remedy or claim under or pursuant thereto, and any agreement or covenant
required therein to be performed by or on behalf of the Agency or the Corporation will be for the sole and exclusive
benefit of the other party.
Successor Is Deemed Included in all References to Predecessor. Whenever either the Agency or the
Corporation is named or referred to in the Installment Purchase Agreement, such reference includes the successor to
the powers, duties and functions that are presently vested in the Agency or the Corporation, and all agreements and
covenants required thereby to be performed by or on behalf of the Agency or the Corporation will bind and inure to
the benefit of the respective successors thereof whether so expressed or not.
Waiver of Personal Liability. No director, officer or employee of the Agency will be individually or
personally liable for the payment of the Series 2010B Installment Payments, but nothing contained in the Installment
Purchase Agreement relieves any director, officer or employee of the Agency from the performance of any official
duty provided by any applicable provisions of law or thereby.
Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required by the
Installment Purchase Agreement to be performed by or on the part of the Agency or the Corporation is contrary to
law, then such agreement or agreements, such covenant or covenants or such portions thereof will be null and void
and will be deemed separable from the remaining agreements and covenants or portions thereof and will in no way
affect the validity thereof. The Agency and the Corporation have declared that they would have executed the
Installment Purchase Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause
and phrase thereof irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions,
sentences, clauses or phrases thereof or the application thereof to any person or circumstance may be held to be
unconstitutional, unenforceable or invalid.
Assignment. The Installment Purchase Agreement and all right, title and interest of the Corporation
thereunder including its right to receive the Series 2010B Installment Payments will be assigned by the Corporation
to the Trustee, pursuant to the Assignment Agreement with the express consent of the Agency.
Net Contract. The Installment Purchase Agreement will be deemed and construed to be a net contract, and
the Agency will pay absolutely net during the term thereof the Installment Payments and all other payments required
thereunder, free of any deductions and without abatement, diminution or set-off whatsoever.
California Law. THE INSTALLMENT PURCHASE AGREEMENT WILL BE CONSTRUED AND
GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
Effective Date. The Installment Purchase Agreement will become effective upon its execution and
delivery, and terminate when the Purchase Price has been fully paid (or provision for the payment thereof has been
made to the written satisfaction of the Corporation and the Trustee).
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Indemnification of Corporation. The Agency has agreed to indemnify and hold harmless the Corporation
and its directors, officers and employees if and to the extent permitted by law, from and against all claims, advances,
damages and losses, including legal fees and expenses, arising out of or in connection with the acceptance or the
performance of its duties under the Installment Purchase Agreement, the Trust Agreement and the Assignment
Agreement; provided that no indemnification will be made for willful misconduct, negligence or breach of an
obligation under the Installment Purchase Agreement, the Trust Agreement or the Assignment Agreement by the
Corporation.
Amendments Permitted. (a) The Installment Purchase Agreement and the rights and obligations of the
Corporation and the Agency and of the Owners of the Certificates and of the Trustee may be modified or amended
at any time by an amendment thereto which will become binding when the written consent of the Owners of a
majority in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as
provided in the Trust Agreement, have been filed with the Trustee. No such modification or amendment may: (1)
extend the stated maturities of the Certificates, or reduce the rate of interest represented thereby, or extend the time
of payment of interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the
prepayment thereof, without the consent of the owner of each Certificate so affected; or (2) reduce the aforesaid
percentage of Owners of Certificates whose consent is required for the execution of any amendment or modification
of the Installment Purchase Agreement; or (3) modify any of the rights or obligations of the Trustee or the
Corporation without its written consent thereto.
(b)
The Installment Purchase Agreement and the rights and obligations of the Corporation
and the Agency and of the Owners of the Certificates may also be modified or amended, but only to the extent
permitted by law and only for any one or more of the following purposes: (1) to add to the covenants and
agreements of the Corporation or the Agency contained in the Installment Purchase Agreement other covenants and
agreements thereafter to be observed or to surrender any right or power therein reserved to or conferred upon the
Corporation or the Agency, and which will not adversely affect the interests of the Owners of the Certificates; (2) to
cure, correct or supplement any ambiguous or defective provision contained in the Installment Purchase Agreement
or in regard to questions arising thereunder, as the Corporation or the Agency may deem necessary or desirable and
which will not adversely affect the interests of the Owners of the Certificates; (3) to make such other amendments or
modifications as may be in the best interests of the Owners of the Certificates; and (4) to make any amendments or
supplements necessary or appropriate to preserve or protect the exclusion of interest with respect to the Certificates
from gross income for federal income tax purposes under the Code or the exemption of such interest from State
personal income taxes.
No amendment may modify any of the rights or obligations of the Trustee without the written consent of
the Trustee thereto.
Paired Obligation Provider Guidelines. For purposes of the Installment Purchase Agreement, Paired
Obligations must comply with the following conditions: (a) A Paired Obligation Provider will initially have a
long-term rating equal to or better than the Initial Rating Requirement; (b) So long as the long-term rating of the
Paired Obligation Provider is not reduced below the Minimum Rating Requirement, the interest rate evidenced by
such Paired Obligation will be deemed to be equal to the irrevocable fixed interest rate attributable thereto for
purposes of the Installment Purchase Agreement; and (c) In the event that a Paired Obligation Provider does not
maintain the Minimum Rating Requirement and the Agency does not replace such Paired Obligation Provider with
another Paired Obligation Provider which maintains the Initial Rating Requirement within ten (10) Business Days of
notice that the Paired Obligation Provider has not maintained the Minimum Rating Requirement: (1) interest with
respect to such Paired Obligations will be computed for purposes of the Installment Purchase Agreement without
regard to payments to be received from the Paired Obligation Provider.
TRUST AGREEMENT
DEFINITIONS; RULES OF CONSTRUCTION; CONTENTS OF CERTIFICATES AND OPINIONS
Definitions. Unless the context otherwise requires, the terms defined in the Trust Agreement will for all
purposes thereof and of any amendment thereof or supplement thereto and of any report or other document
mentioned therein or in any amendment thereof or supplement thereto have the meanings defined in the Trust
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Agreement, the following definitions to be equally applicable to both the singular and plural forms of any of the
terms defined therein. All capitalized terms used in the Trust Agreement and not defined therein have the meanings
ascribed thereto in the Installment Purchase Agreement.
Assignment Agreement. The term “Assignment Agreement” means that certain Assignment Agreement,
by and between the Corporation and the Trustee, dated as of March 1, 2010 as originally executed or as it may from
time to time be amended or supplemented in accordance with its terms.
Beneficial Owner. The term “Beneficial Owner” means with respect to any Certificate while in book-entry
form, as provided in the Trust Agreement, the person who is the beneficial owner of such Certificate, according to
the records of the Securities Depository or its agent, and with respect to any Certificate not in book-entry form, the
Owner thereof.
Business Day. The term “Business Day” means any day of the year other than Saturday or Sunday on
which banks in New York, New York and Los Angeles, California, are not authorized or obligated by law or
executive order to close and on which the New York Stock Exchange is not closed.
Certificate Payment Fund. The term “Certificate Payment Fund” means the fund by that name established
and held by the Trustee pursuant to the terms of the Trust Agreement.
Certificates. The term “Certificates” means the Castaic Lake Water Agency Retail System Revenue
Certificates of Participation, Series 2010B (Santa Clarita Water Division) executed and delivered by the Trustee
pursuant to the Trust Agreement.
Code. The term “Code” means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder, as the same may be amended from time to time, and any successor provisions of law.
Reference to a particular section of the Code will be deemed to be a reference to any successor to any such section.
Delivery Cost Fund. The term “Delivery Cost Fund” means the fund by that name established in the Trust
Agreement.
DTC. The term “DTC” means The Depository Trust Company, New York, New York, a limited purpose
trust company organized under the laws of the State of New York in its capacity as securities depository for the
Certificates.
Information Services. The term “Information Services” means the Municipal Securities Rulemaking
Board; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other
addresses and/or such other services providing information with respect to called bonds as the Agency may
designate in a Written Request of the Agency delivered to the Trustee.
Installment Payments. The term “Installment Payments” means the installment payments payable by the
Agency pursuant to the Installment Purchase Agreement and in the amounts and at the times set forth in the
Installment Payment Date. The term “Installment Payment Date” means each date on which Installment
Payments are scheduled to be paid by the Agency pursuant to the Installment Purchase Agreement.
Installment Purchase Agreement. The term “Installment Purchase Agreement” means the Installment
Purchase Agreement, dated as of March 1, 2010, between the Agency and the Corporation, as originally executed or
as it may from time to time be amended in accordance with its terms.
Interest Fund. The term “Interest Fund” means the fund by that name established in the Trust Agreement.
Letter of Representations. The term “Letter of Representations” means the letter of the Agency and the
Trustee delivered to and accepted by DTC on or prior to delivery of the Certificates as book-entry certificates setting
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forth the basis on which DTC serves as depository for such book-entry certificates, as originally executed or as it
may be supplemented or revised or replaced by a letter from the Agency and the Trustee delivered to and accepted
by DTC.
Nominee. The term “Nominee” means the nominee of DTC, which may be DTC, as determined from time
to time pursuant to the Trust Agreement.
Outstanding. The term “Outstanding,” when used as of any particular time with reference to Certificates,
means (subject to the provisions of the Trust Agreement) all Certificates except: (1) Certificates cancelled by the
Trustee or delivered to the Trustee for cancellation; (2) Certificates paid or deemed to have been paid within the
meaning of the Trust Agreement; and (3) Certificates in lieu of or in substitution for which other Certificates have
been executed and delivered by the Trustee pursuant to the Trust Agreement.
Owner. The term “Owner” or “Certificate Owner” or “Owner of Certificates” or any similar term, when
used with respect to the Certificates, means any person who is the registered owner of any Outstanding Certificate.
Participants. The term “Participants” means those broker-dealers, banks and other financial institutions
from time to time for which DTC holds book-entry certificates as securities depository.
Payment Dates; Payment Date. The term “Payment Dates” means: (i) August 1, 2010 and each February 1
and August 1 thereafter; and (ii) any date on which the unpaid Installment Payments are declared to be due and
payable immediately and provided such declaration is not rescinded or annulled, all in accordance with the
Permitted Investments. The term “Permitted Investments” means any of the following which at the time of
investment are legal investments under the laws of the State for moneys held under the Trust Agreement and then
proposed to be invested therein (the Trustee is entitled to rely upon any investment direction from the Agency as a
certification that such investment is a Permitted Investment): (A) for all purposes, including defeasance investments
in refunding escrow accounts: (1) cash (insured at all times by the Federal Deposit Insurance Corporation or
otherwise collateralized with obligations described in clause (2) below); or (2) direct obligations of (including
obligations issued or held in book-entry form on the books of) the Department of the Treasury of the United States
of America; (B) for all purposes other than defeasance investments in refunding escrow accounts: (1) obligations of
any of the following federal agencies which obligations represent the full faith and credit of the United States of
America, including the Export-Import Bank; Farm Credit System Financial Assistance Corporation; Farmers Home
Administration; General Services Administration; United States Maritime Administration; Small Business
Administration; Government National Mortgage Association (GNMA); United States Department of Housing &
Urban Development (PHA’s); and Federal Housing Administration; (2) senior debt obligations rated “AAA” by
Standard & Poor’s Ratings Group (“S&P”) and “Aaa” by Moody’s Investors Service, Inc. (“Moody’s”) issued by
the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; (3) U.S. dollar
denominated deposit accounts, 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 “P- 1+” by S&P and “P-1”
by Moody’s and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not
considered as the rating of the bank); (4) 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; (5) investments in a money market fund rated “AAAm” or “AAAm-G” or better by S&P,
including any fund for which the Trustee or an affiliate acts as investment advisor or provides other services; (6)
pre-refunded Municipal Obligations defined as follows: any 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: (a) which are rated, based on an irrevocable escrow account
or fund (the “escrow”), in the highest rating category of S&P and Moody’s or any successors thereto; or (b) (i)
which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of
cash or obligations described in paragraph (A)(2) above, which escrow may be applied only to the payment of such
principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or
dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate; and
(ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay
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principal of and interest and redemption premium, if any, on the bonds or other obligations described in the
definition of Permitted Investments on the maturity date or dates specified in the irrevocable instructions referred to
above, as appropriate; (7) Certificates of deposit with a maturity not to exceed ten (10) years on deposit with
financial institutions rated “A” or better by S&P and “A” or better by Moody’s, unless such certificates of deposit
are insured with the Federal Deposit Insurance Corporation; (8) Time deposits with a maturity not to exceed five (5)
years on deposit with financial institutions rated “A” or better by S&P and “A” or better by Moody’s, unless such
certificates of deposit are insured with the Federal Deposit Insurance Corporation; (9) Municipal obligations: (i)
registered treasury notes or bonds of any of the other 49 states, in addition to the State, payable solely out of the
revenues from a revenue producing property owned, controlled, or operated by a state or by a department, board,
agency or authority of any of the other 49 states, in addition to the State (“Revenue Obligations”). Revenue
Obligations may have either fixed or adjustable rates of interest. Revenue Obligations with fixed rates of interest
must be rated “A+” or better by S&P and “A1” or better by Moody’s, or as otherwise approved by the Agency’s
Board of Directors with a maturity of no greater than ten (10) years from the date of purchase. Revenue Obligations
with adjustable rates of interest must be rated “A-1+” or better by S&P and “P-1” or better by Moody’s, or as
otherwise approved by the Agency’s Board of Directors; (ii) taxable or tax exempt bonds, notes, warrants, or other
evidences of indebtedness of any local agency within the State, including bonds, notes, warrants, or other evidences
of indebtedness payable solely out of the revenues from a revenue producing property owned, controlled, or
operated by either the local agency, a department, board, agency, or authority of the local agency, or of any local
agency within the State (“Local Agency Obligations”) with a maturity of no more than ten (10) years from the date
of purchase. Local Agency Obligations may have either fixed or adjustable rates of interest. Local Agency
Obligations with fixed rates of interest must be rated “A+” or better by S&P and “A1” or better by Moody’s, or as
otherwise approved by the Agency’s Board of Directors (the minimum rating will apply to the local agency,
irrespective of any credit enhancement) as of the date of purchase. Local Agency Obligations with adjustable rates
of interest must be rated “A-1+” or better by S&P and “P-1” or better by Moody’s, or as otherwise approved by the
Agency’s Board of Directors; (10) The California State Local Agency Investment Fund; and (11) The Los Angeles
County Investment Pool.
Prepayment Fund. The term “Prepayment Fund” means the fund by that name established in the Trust
Agreement.
Prepayment Price. The term “Prepayment Price” means, with respect to any Certificate (or portion
thereof), the principal amount with respect to such Certificate (or portion thereof ) plus the applicable premium, if
any, payable upon prepayment thereof pursuant to the provisions of such Certificate and the Trust Agreement.
Principal Fund.
Agreement.
The term “Principal Fund” means the fund by that name established in the Trust
Rebate Fund. The term “Rebate Fund” means the fund by that name established in the Trust Agreement.
Record Date. The term “Record Date” means, with respect to any Payment Date relating to the
Certificates, the fifteenth (15th) day of the calendar month preceding such Payment Date.
Securities Depository. The term “Securities Depository” means The Depository Trust Company, a New
York banking corporation, its successors and assigns, or if: (i) the then Securities Depository resigns from its
functions as depository of the Certificates; or (ii) the Agency discontinues the use of the Securities Depository
pursuant to the Trust Agreement, any other securities depository which agrees to follow the procedures required to
be followed by a securities depository in connection with the Certificates.
Securities Depositories. The term “Securities Depositories” means: The Depository Trust Company, 55
Water Street, New York, New York 10001, Fax-(212) 855-7232 or 7233; and, in accordance with then current
guidelines of the Securities and Exchange Commission, such other addresses as such depositories may specify
and/or such other securities depositories as the Agency may designate in a Written Request of the Agency delivered
to the Trustee.
Special Counsel. The term “Special Counsel” means an attorney at law or a firm of attorneys selected by
the Agency of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds and
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certificates of participation issued by states and their political subdivisions duly admitted to the practice of law
before the highest court of California.
State. The term “State” means the State of California.
Statement of the Corporation or Agency. The term “Statement of the Corporation or Agency” means a
statement signed: (i) by or on behalf of the Corporation by its President or a Vice President; or (ii) by the Agency by
the President of its Board of Directors and by the Secretary of its Board of Directors or by any two persons (whether
or not officers of the Board of Directors of the Agency) who are specifically authorized by resolution of the Agency
to sign or execute such a document on its behalf. If and to the extent required by the provisions of the Trust
Agreement, each Statement of the Corporation or Agency must include the statements provided for in the Trust
Agreement.
Tax Certificate. The term “Tax Certificate” means the Tax Certificate dated the date of the initial
execution and delivery of the Certificates, concerning certain matters pertaining to the use and investment of
proceeds of the Certificates executed by and delivered to the Agency on the date of execution and delivery of the
Certificates, including any and all exhibits attached thereto.
Trust Agreement. The term “ Trust Agreement” means the Trust Agreement, by and among the Agency,
the Corporation and the Trustee, dated as of March 1, 2010, as originally executed or as it may from time to time be
amended or supplemented as provided for therein.
Trustee. The term “Trustee” means U.S. Bank National Association, a national banking association duly
organized and existing under and by virtue of the laws of the United States of America having a principal corporate
trust office in Los Angeles, California, or its successor or assignee as Trustee under the Trust Agreement.
Written Consent of the Corporation or Agency; Written Requisition of the Corporation or Agency; Written
Order of the Corporation or Agency; Written Request of the Corporation or Agency. The terms “Written Consent of
the Corporation or Agency,” “Written Order of the Corporation or Agency,” “Written Request of the Corporation or
Agency,” and “Written Requisition of the Corporation or Agency” mean, respectively, a written consent, order,
request or requisition signed by or on behalf of: (i) the Corporation by its President or a Vice President; or (ii) the
Agency by the President of its Board of Directors or its Manager or its Administrative Services Manager and by the
Secretary of its Board of Directors or by any two persons (whether or not officers of the Board of Directors of the
Agency) who are specifically authorized by resolution of the Agency to sign or execute such a document on its
behalf.
Rules of Construction. Words of any gender include all genders, and words importing persons include
corporations and associations, including public bodies, as well as natural persons. Unless the context otherwise
indicates, words importing the singular number include the plural number and vice versa.
Content of Statements and Opinions. Every statement or opinion with respect to compliance with a
condition or covenant provided for in the Trust Agreement, including each Statement of the Corporation, must
include: (a) a statement that the person or persons making or giving such statement or opinion have read such
covenant or condition and the definitions in the Trust Agreement relating thereto; (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements or opinions contained in such
statement or opinion are based; (c) a statement that, in the opinion of the signers, they have made or caused to be
made such examination or investigation as is necessary to enable them to express an informed opinion as to whether
or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the
signers, such condition or covenant has been complied with.
Any such statement or opinion made or given by an officer of the Corporation may be based, insofar as it
relates to legal or accounting matters, upon a statement or opinion of or representations by counsel or accountants,
unless such officer knows, or in the exercise of reasonable care should have known, that the statement or opinion or
representations with respect to the matters upon which his statement or opinion may be based, as aforesaid, are
erroneous. Any such statement or opinion made or given by counsel or accountants may be based, insofar as it
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relates to factual matters, upon information which is in the possession of the Corporation, or upon the statement or
opinion of or representations by an officer or officers of the Corporation, unless such counsel, accountant or
consultant knows, or in the exercise of reasonable care should have known, that the statement or opinion or
representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous.
CERTIFICATES; TERMS AND PROVISIONS
Certificate Registration Books. The Trustee will keep or cause to be kept, at its corporate trust office in St.
Paul, Minnesota, sufficient books for the registration and transfer of the Certificates, which will upon reasonable
prior notice and at all reasonable times be open to inspection by the Corporation or the Agency; and, upon
presentation for such purpose, the Trustee will, under such reasonable regulations as it may prescribe, register or
transfer or cause to be registered or transferred, on said books, Certificates as provided in the Trust Agreement.
The person in whose name any Certificate is registered will be deemed the Owner thereof for all purposes
of the Trust Agreement, and payment of or on account of the interest with respect to and principal of, Prepayment
Price represented by such Certificate will be made only to or upon the order in writing of such registered owner,
which payments will be valid and effectual to satisfy and discharge liability upon such Certificate to the extent of the
sum or sums so paid.
Certificates Mutilated, Lost, Destroyed or Stolen. If any Certificate becomes mutilated, the Trustee will
execute and deliver a new Certificate of like tenor, maturity, and principal amount, in exchange and substitution for
the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so mutilated.
Every mutilated Certificate so surrendered to the Trustee will be canceled by it and destroyed. If any
Certificate is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee,
and, if such evidence is satisfactory to the Trustee and indemnity satisfactory to the Trustee is given indemnifying
the Trustee, the Corporation and the Agency, the Trustee, at the expense of the Certificate Owner, will execute and
deliver a new Certificate of like tenor and maturity, and numbered as the Trustee determines, in lieu of and in
substitution for the Certificate so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding
the actual cost of preparing each new Certificate executed under the Trust Agreement and of the expenses which
may be incurred by the Trustee thereunder. Any Certificate executed under the provisions of the Trust Agreement in
lieu of any Certificate alleged to be lost, destroyed or stolen will be equally and proportionately entitled to the
benefits of the Trust Agreement with all other Certificates secured thereby. The Trustee is not required to treat both
the original Certificate and any replacement Certificate as being Outstanding for the purpose of determining the
principal amount of Certificates which may be executed under the Trust Agreement or for the purpose of
determining any percentage of Certificates Outstanding thereunder, but both the original and replacement Certificate
will be treated as one and the same. Notwithstanding any other provision of the Trust Agreement, in lieu of
delivering a new Certificate for a Certificate which has been mutilated, lost, destroyed or stolen and which has
matured or has been selected for prepayment, the Trustee may make payment of such Certificate upon receipt of
indemnity satisfactory to the Trustee.
Book-Entry System. (a) Except as otherwise provided in the Trust Agreement, each Certificate will be
executed and delivered in the form of one global certificate for each maturity registered in the name of the Securities
Depository or its nominee, and ownership thereof will be maintained in book-entry form by the Securities
Depository for the account of the Participants thereof. “Securities Depository” means The Depository Trust
Company, appointed as Securities Depository in the Trust Agreement, and its successors and assigns or if the then
Securities Depository resigns from its functions as depository of the Certificates or if the Agency discontinues the
use of the Securities Depository pursuant to clause (c) below, any other securities depository which agrees to follow
the procedures required to be followed by a securities depository in connection with the Certificates and which is
appointed by the Agency. “Participant” means a member of, or participant in, the Securities Depository.
Initially, the Certificates will be registered in the name of Cede & Co., as the nominee of The Depository
Trust Company. Except as provided in clause (c) below, the Certificates may be transferred, in whole but not in
part, only to the Securities Depository or a nominee of the Securities Depository, or to a successor Securities
Depository appointed or approved by the Agency or to a nominee of such successor. Each global certificate will
bear a legend substantially to the following effect: “Except as otherwise provided in the Trust Agreement the global
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certificate may be transferred, in whole but not in part, only to another nominee of the Securities Depository (as
defined in the Trust Agreement) or to a successor Securities Depository or to a nominee of a successor Securities
Depository.”
With respect to book-entry Certificates, the Agency and the Trustee have no responsibility or obligation to
any Participant or to any person on behalf of which such a Participant holds an interest in such book-entry
Certificates. Without limiting the immediately preceding sentence, the Agency and the Trustee have no
responsibility or obligation with respect to: (i) the accuracy of the records of DTC, the Nominee, or any Participant
with respect to any ownership interest in book-entry Certificates; (ii) the delivery to any Participant, Beneficial
Owner or any other person, other than the Securities Depository, of any notice with respect to book-entry
Certificates, including any notice of prepayment; (iii) the selection by DTC and its Participants of the beneficial
interests in book-entry Certificates to be prepaid in the event the Agency prepays the Certificates in part; (iv) the
payment, to any Participant, Beneficial Owner of Certificates or other person, other than the Securities Depository,
of any amount of principal of, premium, if any, or interest with respect to book-entry Certificates; or (v) any consent
given by the Securities Depository as Owner of any Certificates. The Agency and the Trustee may treat and
consider the person in whose name each book-entry Certificate is registered in the registration books as the absolute
owner of such book-entry Certificate for all purposes, whatsoever, including without limitation, payment of
principal of, Prepayment Price or interest with respect to such Certificate, giving notices of prepayment and other
matters with respect to such Certificate and registering transfers with respect to such Certificate. The Trustee will
pay all principal of, Prepayment Price or interest with respect to the Certificates only to or upon the order of the
respective Owner, as shown in the registration books, or his respective attorney duly authorized in writing, and all
such payments will be valid and effective to fully satisfy and discharge the Agency’s obligations with respect to
payment of principal of, Prepayment Price or interest with respect to the Certificates to the extent of the sum or sums
so paid. No person other than an Owner, as shown in the registration books, will receive a Certificate evidencing the
obligation to make payments of principal of, Prepayment Price or interest with respect to the Certificates. Upon
delivery by DTC to the Owner and the Trustee, of written notice to the effect that DTC has determined to substitute
a new nominee in place of the Nominee, and subject to the provisions in the Trust Agreement with respect to Record
Dates, the word Nominee in the Trust Agreement will refer to such nominee of DTC.
The Agency and the Trustee are entitled to treat the person in whose name any Certificate is registered as
the Owner thereof for all purposes of the Trust Agreement and any applicable laws, notwithstanding any notice to
the contrary received by the Trustee or the Agency; and the Agency and the Trustee have no responsibility for
transmitting payments to, communicating with, notifying, or otherwise dealing with any Beneficial Owners of the
Certificates. Neither the Agency nor the Trustee have any responsibility or obligation, legal or otherwise, to any
such Beneficial Owners or to any other party, including DTC or its successor (or Substitute Depository or its
successor), except to the Owner of any Certificates, and the Trustee may rely conclusively on its records as to the
identity of the Owners of the Certificates.
(b)
In order to qualify the book-entry Certificates for DTC’s book-entry system, the Agency
and the Trustee will execute and deliver to DTC a Letter of Representations. The execution and delivery of a Letter
of Representations will not in any way impose upon the Agency or the Trustee any obligation whatsoever with
respect to persons having interests in such book-entry Certificates other than the Owners, as shown on the
Certificate registration books. By executing a Letter of Representations, the Trustee has agreed to take all action
necessary at all times so that the Agency will be in compliance with all representations of the Agency in such Letter
of Representations. In addition to the execution and delivery of a Letter of Representations, the Agency and the
Trustee will take such other actions, not inconsistent with the Trust Agreement, as are reasonably necessary to
qualify book-entry Certificates for DTC’s book-entry program.
(c)
If at any time the Securities Depository notifies the Trustee and the Agency that it is
unwilling or unable to continue as Securities Depository with respect to any or all series of the Certificates or if at
any time the Securities Depository are no longer be registered or in good standing under the Securities Exchange
Act of 1934, as amended, or other applicable statute or regulation and a successor Securities Depository is not
appointed by the Agency within 90 days after the Agency receives notice or becomes aware of such condition, or if
the Securities Depository ceases to function as the Securities Depository without prior notice, as the case may be,
clauses (a) and (b) above will no longer be applicable and the Trustee will execute and deliver certificates
representing the Certificates so affected as provided below, provided that the Trustee is not required to deliver such
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new Certificates within a period of less than sixty (60) days from the date of receipt of such Written Request from
the Agency. In addition, the Agency may determine at any time that the Certificates are no longer represented by
global certificates and that the provisions of clauses (a) and (b) above no longer apply to such Certificates. In such
event, the Trustee will execute and deliver, in exchange for a global certificate, certificates representing the
Certificates registered in such names and authorized denominations as the Securities Depository, pursuant to
instructions from the Participants or otherwise, instructs the Trustee, provided that the Trustee is not required to
deliver such new Certificates within a period of less than sixty (60) days from the date of receipt of such Written
Request from the Agency. The Trustee will deliver such certificates representing the Certificates to the persons in
whose names the Certificates are so registered.
(d)
In the case of a partial prepayment or an advance refunding of any Certificates
evidencing a portion of the principal maturing in a particular year, DTC or its successor (or any Substitute
Depository or its successor) will make an appropriate notation on such Certificates indicating the date and amounts
of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Letter of
Representations. The Trustee is not liable for such Depository’s failure to make such notations or errors in making
such notations.
Notwithstanding any other provision of the Trust Agreement to the contrary, so long as
(e)
any Certificate is registered in the name of Cede & Co., as nominee of The Depository Trust Company, all payments
with respect to the principal of, Prepayment Price or interest with respect to such Certificate and all notices with
respect thereto will be made and given, respectively, to The Depository Trust Company as provided in the applicable
Letter of Representations of the Agency addressed to The Depository Trust Company with respect thereto
notwithstanding any inconsistent provisions in the Trust Agreement.
(f)
Transfer of Certificates to Substitute Depository. (i) The Certificates will be initially
executed and delivered as provided in the Trust Agreement. Registered ownership of such Certificates, or any
portions thereof, may not thereafter be transferred except: (A) to any successor of DTC or its nominee, or of any
substitute depository designated pursuant to clause (B) below (“Substitute Depository”); provided that any successor
of DTC or Substitute Depository will be qualified under any applicable laws to provide the service proposed to be
provided by it; (B) to any Substitute Depository, upon: (1) the resignation of DTC or its successor (or any Substitute
Depository or its successor) from its functions as depository; or (2) a determination by the Agency that DTC (or its
successor) is no longer able to carry out its functions as depository; provided that any such Substitute Depository
will be qualified under any applicable laws to provide the services proposed to be provided by it; or (C) to any
person as provided below, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its
successor) from its functions as depository; or (2) a determination by the Agency that DTC or its successor (or
Substitute Depository or its successor) is no longer able to carry out its functions as depository.
(ii)
In the case of any transfer pursuant to clauses (A) or (B) above, upon receipt of
all Outstanding Certificates by the Trustee, together with a written request of the Agency to the Trustee designating
the Substitute Depository, a single new Certificate, which the Agency will prepare or cause to be prepared, will be
executed and delivered for each maturity of Certificates then Outstanding, registered in the name of such successor
or such Substitute Depository or their Nominees, as the case may be, all as specified in such written request of the
Agency. In the case of any transfer pursuant to clause (C) above, upon receipt of all Outstanding Certificates by the
Trustee, together with a written request of the Agency to the Trustee, new Certificates, which the Agency will
prepare or cause to be prepared, will be executed and delivered in such denominations and registered in the names of
such persons as are requested in such written request of the Agency, subject to the limitations of the Trust
Agreement, provided that the Trustee is not required to deliver such new Certificates within a period of less than
sixty (60) days from the date of receipt of such written request from the Agency.
(iii)
In the case of a partial prepayment or an advance refunding of any Certificates
evidencing a portion of the principal maturing in a particular year, DTC or its successor (or any Substitute
Depository or its successor) will make an appropriate notation on such Certificates indicating the date and amounts
of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Letter of
Representations. The Trustee is not liable for such Depository’s failure to make such notations or errors in making
such notations.
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(iv)
The Agency and the Trustee are entitled to treat the person in whose name any
Certificate is registered as the Owner thereof for all purposes of the Trust Agreement and any applicable laws,
notwithstanding any notice to the contrary received by the Trustee or the Agency; and the Agency and the Trustee
have no responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any
Beneficial Owners of the Certificates. Neither the Agency nor the Trustee have any responsibility or obligation,
legal or otherwise, to any such Beneficial Owners or to any other party, including DTC or its successor (or
Substitute Depository or its successor), except to the Owner of any Certificates, and the Trustee may rely
conclusively on its records as to the identity of the Owners of the Certificates.
VALIDITY OF CERTIFICATES
Validity of Certificates. The validity of the execution and delivery of the Certificates is not dependent on
and will not be affected in any way by any proceedings taken by the Agency, the Corporation or the Trustee with
respect to or in connection with the Installment Purchase Agreement. The recital contained in the Certificates that
all acts, conditions and things required by the Constitution and statutes of the State of California and the Trust
Agreement to exist, to have happened and to have been performed precedent to and in the delivery thereof do exist,
have happened and have been performed in due time, form and manner as required by law will be conclusive
evidence of their validity and of compliance with the provisions of law in their delivery.
PREPAYMENT OF CERTIFICATES
Selection of Certificates for Prepayment. Whenever less than all of the Certificates are called for
prepayment, the Trustee will select the Certificates or portions thereof to be prepaid from the Outstanding
Certificates in accordance with the Trust Agreement. The Trustee will promptly notify the Agency in writing of the
numbers of the Certificates or portions thereof so selected for prepayment.
Partial Prepayment of Certificate. Upon surrender of any Certificate prepaid in part only, the Trustee will
execute and deliver to the Owner thereof, at the expense of the Agency, a new Certificate or Certificates of
authorized denominations equal in aggregate principal amount to the unprepaid portion of the Certificate
surrendered and of the same interest rate and maturity.
Effect of Prepayment. When notice of prepayment has been duly given as aforesaid, and moneys for
payment of the Prepayment Price of, together with interest accrued to the prepayment date with respect to, the
Certificates (or portions thereof) so called for prepayment are held by the Trustee, the Certificates (or portions
thereof) so called for prepayment will, on the prepayment date designated in such notice, become due and payable at
the Prepayment Price specified in such notice and interest accrued thereon to the prepayment date; and from and
after the prepayment date interest represented by the Certificates so called for prepayment will cease to accrue, said
Certificates (or portions thereof) will cease to be entitled to any benefit or security under the Trust Agreement, and
the Owners of said Certificates will have no rights in respect thereof except to receive payment of said Prepayment
Price and accrued interest. All Certificates prepaid pursuant to the provisions of the Trust Agreement will be
cancelled upon surrender thereof and destroyed by the Trustee.
INSTALLMENT PAYMENTS
Pledge and Deposit of Installment Payments. The Installment Payments have been irrevocably pledged to,
and will be used for, the punctual payment of the Certificates, and the Installment Payments will not be used for any
other purpose while any of the Certificates remain Outstanding. Such pledge constitutes a first and exclusive lien on
the Installment Payments in accordance with the terms of the Trust Agreement.
All Installment Payments to which the Corporation may at any time be entitled (including income or profit
from investments pursuant to the Trust Agreement) will be paid directly to the Trustee pursuant to the terms of the
Assignment Agreement, and if received by the Corporation at any time will be deposited by the Corporation with the
Trustee within one Business Day after the receipt thereof, and the Trustee will deposit all Installment Payments as
and when received in the Certificate Payment Fund. All moneys at any time deposited in the Certificate Payment
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Fund will be held by the Trustee in trust for the benefit of the Owners from time to time of the Certificates, but will
nevertheless be disbursed, allocated and applied solely for the uses and purposes set forth in the Trust Agreement.
Certificate Payment Fund. There has been established with the Trustee the Certificate Payment Fund
which the Trustee has covenanted to maintain and hold in trust separate and apart from other funds held by it so long
as any Installment Payments remain unpaid. The Trustee will transfer from the Certificate Payment Fund the
following amounts at the times and in the manner provided in the Trust Agreement, and will deposit such amounts
in one or more of the following respective funds, each of which the Trustee will establish and maintain and hold in
trust separate and apart from other funds held by it, and each of which will be disbursed and applied only as
authorized in the Trust Agreement. Such amounts will be so transferred to and deposited in the following respective
funds in the following order of priority, the requirements of each such fund at the time of deposit to be satisfied
before any transfer is made to any fund subsequent in priority:
(a)
Interest Fund. The Trustee, on each Installment Payment Date (commencing on July 30,
2010) will deposit in the Interest Fund an amount representing the portion of the Installment Payments designated as
interest coming due on the next succeeding February 1 and August 1, as the case may be. No deposit need be made
into the Interest Fund so long as there is in such fund moneys sufficient to pay the interest portion of all Certificates
then Outstanding on the next February 1 or August 1, as the case may be. Except as provided in the Trust
Agreement, moneys in the Interest Fund will be used and withdrawn by the Trustee solely for the purpose of paying
the interest with respect to the Certificates when due and payable (including accrued interest on any Certificates
prepaid prior to maturity pursuant to the Trust Agreement).
(b)
Principal Fund. The Trustee, on the Installment Payment Date prior to each August 1
(commencing on the Installment Payment Date prior to August 1, 20__), will deposit in the Principal Fund an
amount equal to the principal coming due with respect to the Certificates on the next succeeding August 1. No
deposit need be made into the Principal Fund so long as there is in such fund moneys sufficient to pay the portion of
all Certificates then Outstanding designated as principal and coming due on the next succeeding August 1. Except
as provided in the Trust Agreement, moneys in the Principal Fund will be used and withdrawn by the Trustee solely
for the purpose of paying the principal with respect to the Certificates when due and payable.
(c)
Prepayment Fund. Moneys to be used for prepayment pursuant to the Installment
Purchase Agreement and paid by the Agency pursuant thereto will be transferred by the Trustee from the Certificate
Payment Fund and deposited in the Prepayment Fund on the prepayment date specified in the Written Request of the
Agency filed with the Trustee pursuant to the Installment Purchase Agreement. Said moneys will be set aside in the
Prepayment Fund solely for the purpose of prepaying the Certificates in advance of their respective stated maturities
and will be applied on or after the date specified for prepayment pursuant to the Trust Agreement to the payment of
the Prepayment Price with respect to the Certificates to be prepaid upon presentation and surrender of such
Certificates.
Investment of Moneys in Special Funds. Any moneys in the Certificate Payment Fund, the Interest Fund,
the Principal Fund, the Delivery Cost Fund and the Prepayment Fund will be invested by the Agency or, upon the
Written Request of the Agency, by the Trustee, in Permitted Investments which will mature on or before the dates
when such moneys are scheduled to be needed for payment from such fund and in accordance with the limitations
set forth in the Trust Agreement. Securities acquired as an investment of moneys in a fund will be credited to such
fund.
In the absence of written investment direction from the Agency, the Trustee will invest moneys held by it
solely in Permitted Investments specified in clause (B)(5) of the definition thereof.
Any interest, profit or other income on such investments will be deposited by the Trustee in the Certificate
Payment Fund established under the Trust Agreement.
Subject to the further provisions of the Trust Agreement, the Trustee may sell or present for prepayment
any obligations so purchased at the direction of the Agency whenever necessary in order to provide moneys to meet
any payment, and the Trustee is not liable or responsible for any loss resulting from such investment. The Trustee
may act as principal or agent in the acquisition or disposition of any investment. The Trustee may commingle any
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of the funds or accounts established pursuant to the Trust Agreement into a separate fund or funds for investment
purposes only; provided, however, that all funds or accounts held by the Trustee under the Trust Agreement will be
accounted for separately notwithstanding such commingling.
The Agency has acknowledged that to the extent regulations of the Comptroller of the Currency or other
applicable regulatory entity grant the Agency the right to receive brokerage confirmations of security transactions as
they occur, the Agency will not receive such confirmations to the extent permitted by law. The Trustee will furnish
the Agency periodic cash transaction statements which include detail for all investment transactions made by the
Trustee under the Trust Agreement. The Trustee may make any investments under the Trust Agreement 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 under the Trust Agreement.
Pledge of Moneys in Funds. All amounts on deposit in the Certificate Payment Fund, the Interest Fund, the
Principal Fund and the Prepayment Fund have been irrevocably pledged to the Owners of the Certificates as
provided in the Trust Agreement. Such pledge constitutes a first and exclusive lien on the Certificate Payment
Fund, the Interest Fund, the Principal Fund and the Prepayment Fund for the benefit of the Owners of the
Certificates in accordance with the terms of the Trust Agreement and of the Installment Purchase Agreement,.
Amounts deposited in the Delivery Cost Fund, or the Rebate Fund are not pledged to the Owners of the Certificates.
Rebate Fund. (a) Establishment. The Trustee will establish an account for the Certificates designated the
“Rebate Fund.” Absent an opinion of Special Counsel that the exclusion from gross income for federal income tax
purposes of interest with respect to the Certificates will not be adversely affected, the Agency will cause to be
deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Trust Agreement
and the Tax Certificate. All money at any time deposited in the Rebate Fund will be held by the Trustee in trust for
payment to the United States Treasury. All amounts on deposit in the Rebate Fund will be governed by the Trust
Agreement and the Tax Certificate, unless and to the extent that the Agency delivers to the Trustee an opinion of
Special Counsel that the exclusion from gross income for federal income tax purposes of interest with respect to the
Certificates will not be adversely affected if such requirements are not satisfied. The Trustee will be deemed
conclusively to have complied with the provisions of the Trust Agreement and the Tax Certificate if the Trustee
follows the directions of the Agency and the Trustee has no independent responsibility to or liability resulting from
failure of the Trustee to enforce compliance by the Agency with the Tax Certificate or the provisions of the Trust
Agreement.
(i)
Annual Computation. Within 55 days of the end of each Certificate Year (as
such term is defined in the Tax Certificate), the Agency will calculate or cause to be calculated the amount of
rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury
Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable
arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section
148(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into
account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made),
for such purpose treating the last day of the applicable Certificate Year as a computation date, within the meaning of
Section 1.148-1(b) of the Treasury Regulations (the “Rebatable Arbitrage”). The Agency will obtain expert advice
as to the amount of the Rebatable Arbitrage to comply with the foregoing provision.
(ii)
Annual Transfer. Within 55 days of the end of each Certificate Year, upon the
written Request of the Agency, an amount will be deposited to the Rebate Fund by the Trustee from any Retail
System Revenues legally available for such purpose (as specified by the Agency in the aforesaid written Request), if
and to the extent required so that the balance in the Rebate Fund will equal the amount of Rebatable Arbitrage so
calculated in accordance with clause (i) above. In the event that immediately following the transfer required by the
previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on
deposit therein, upon written Request of the Agency, the Trustee will withdraw the excess from the Rebate Fund and
then credit the excess to the Revenue Fund.
(iii)
Payment to the Treasury. The Trustee will pay, as directed by Request of the
Agency, to the United States Treasury, out of amounts in the Rebate Account: (A) Not later than 60 days after the
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end of: (X) the fifth Certificate Year; and (Y) each applicable fifth Certificate Year thereafter, an amount equal to at
least 90% of the Rebatable Arbitrage calculated as of the end of such Certificate Year; and (B) Not later than 60
days after the payment of all the Certificates, an amount equal to 100% of the Rebatable Arbitrage calculated as of
the end of such applicable Certificate Year, and any income attributable to the Rebatable Arbitrage, computed in
accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations.
In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in
the Rebate Fund is not sufficient to make such payment when such payment is due, the Agency will calculate or
cause to be calculated the amount of such deficiency and deposit an amount received from any legally available
source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant
to the rebate fund provisions of the Trust Agreement will be made to the Internal Revenue Service Center, Ogden,
Utah 84201 on or before the date on which such payment is due, and will be accompanied by Internal Revenue
Service Form 8038-T, or be made in such other manner as provided under the Code.
(b)
Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after
prepayment and payment of the Certificates and the payments described in clause (a) above being made may be
withdrawn by the Agency and utilized in any manner by the Agency.
(c)
Survival of Defeasance. Notwithstanding anything in the Trust Agreement to the
contrary, the obligation to comply with the rebate fund requirements of the Trust Agreement will survive the
defeasance or payment in full of the Certificates.
COVENANTS
Corporation and Agency to Perform Installment Purchase Agreement. The Corporation and Agency have
covenanted and agreed with the Owners of the Certificates to perform all obligations and duties imposed on them
under the Installment Purchase Agreement and, together with the Trustee, to enforce the Installment Purchase
Agreement against the other party thereto in accordance with its terms. The Corporation and the Agency will in all
respects promptly and faithfully keep, perform and comply with all the terms, provisions, covenants, conditions and
agreements of the Installment Purchase Agreement to be kept, performed and complied with by it. The Corporation
and the Agency have agreed not to do or permit anything to be done, or omit or refrain from doing anything, in any
case where any such act done or permitted to be done, or any such omission of or refraining from action, would or
might be a ground for cancellation or termination of the Installment Purchase Agreement.
Agency Budgets. On or prior to the fifteenth day after the beginning of each Fiscal Year, the Agency will
certify to the Trustee that the amounts budgeted for payment of Installment Payments are fully adequate for the
payment of all Installment Payments due under the Installment Purchase Agreement for such Fiscal Year. If the
amounts so budgeted are not adequate for the payment of Installment Payments due under the Installment Purchase
Agreement, the Agency will take such action as may be necessary to cause such annual budget to be amended,
corrected or augmented so as to include therein the amounts required to be raised by the Agency in the then ensuing
Fiscal Year for the payment of Installment Payments due under the Installment Purchase Agreement and will notify
the Trustee of the proceedings then taken or proposed to be taken by the Agency.
Tax Covenants. Notwithstanding any other provision of the Trust Agreement, absent an opinion of Special
Counsel that the exclusion from gross income of interest with respect to the Certificates will not be adversely
affected for federal income tax purposes, the Agency and the Corporation have covenanted to comply with all
applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the
Certificates and have specifically covenanted, without limiting the generality of the foregoing, as follows:
(a)
Private Activity. The Agency and the Corporation will not take or omit to take any
action or make any use of the proceeds of the Certificates or of any other moneys or property which would cause the
Certificates to be “private activity bonds” within the meaning of Section 141 of the Code.
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(b)
Arbitrage. The Agency and the Corporation will make no use of the proceeds of the
Certificates or of any other amounts or property, regardless of the source, or take or omit to take any action which
would cause the Certificates to be “arbitrage bonds” within the meaning of Section 148 of the Code.
(c)
Federal Guarantee. The Agency and the Corporation will make no use of the proceeds of
the Certificates or take or omit to take any action that would cause the Certificates to be “federally guaranteed”
within the meaning of Section 149(b) of the Code.
(d)
Information Reporting. The Agency and the Corporation will take or cause to be taken
all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code necessary
to preserve the exclusion of interest with respect to the Certificates pursuant to Section 103(a) of the Code.
(e)
Hedge Bonds. The Agency and the Corporation will make no use of the proceeds of the
Certificates or any other amounts or property, regardless of the source, or take any action or refrain from taking any
action that would cause the Certificates to be considered “hedge bonds” within the meaning of Section 149(g) of the
Code unless the Agency and the Corporation take all necessary action to assure compliance with the requirements of
Section 149(g) of the Code to maintain the exclusion from gross income of interest for federal income tax purposes
with respect to the Certificates.
(f)
Miscellaneous. The Agency and the Corporation will take no action, or omit to take any
action, inconsistent with its expectations stated in any Tax Certificate executed with respect to the Certificates and
will comply with the covenants and requirements stated therein and incorporated by reference in the Trust
Agreement.
The foregoing tax covenants are not applicable to, and nothing contained in the Trust Agreement prevents
the Agency from issuing Bonds or executing and delivering Contracts the interest with respect to which has been
determined by Special Counsel to be subject to federal income taxation.
Accounting Records and Reports. The Trustee will keep or cause to be kept proper books of record and
account in which complete and correct entries will be made of all transactions made by it relating to the receipts,
disbursements, allocation and application of the Installment Payments, and such books will be available upon
reasonable prior notice for inspection by the Agency and by any Owner of Certificates, or his agent or
representative, at reasonable hours and under reasonable conditions. Each month, so long as the Certificates are
Outstanding, the Trustee will furnish to the Agency a statement covering receipts, disbursements, allocation and
application of amounts on deposit in the funds and accounts created under the Trust Agreement held by it.
Compliance with Trust Agreement. The Trustee will not execute, or permit to be executed, any Certificates
in any manner other than in accordance with the provisions of the Trust Agreement, and the Agency will not suffer
or permit any default by it to occur under the Trust Agreement, but will faithfully observe and perform all the
covenants, conditions and requirements thereof.
Observance of Laws and Regulations. To the extent necessary to assure their performance under the Trust
Agreement, the Corporation and the Agency will well and truly keep, observe and perform all valid and lawful
obligations or regulations now or later imposed on them by contract, or prescribed by any law of the United States of
America, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the
continued enjoyment of any and every right, privilege or franchise now owned or later acquired by the Corporation
or the Agency, respectively, including its right to exist and carry on its business, to the end that such contracts, rights
and franchises will be maintained and preserved, and will not become abandoned, forfeited or in any manner
impaired.
Compliance with Contracts. The Agency will comply with the terms, covenants and provisions, express or
implied, of all contracts for the use of the 2010B Project by the Agency, and all other contracts and agreements
affecting or involving the 2010B Project to the extent that the Agency is a party thereto.
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Prosecution and Defense of Suits. The Agency will promptly, upon request of the Trustee or any
Certificate Owner, from time to time take such action as may be necessary or proper to remedy or cure any defect in
or cloud upon the title to the Retail Water System or any part thereof, whether now existing or later developing, will
prosecute all such suits, actions and other proceedings as may be appropriate for such purpose and indemnify and
save the Trustee, the Corporation and every Certificate Owner harmless from all loss, cost, damage and expense,
including attorneys’ fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or
proceeding.
The Agency will defend against every suit, action or proceeding at any time brought against the Trustee,
the Corporation or any Certificate Owner upon any claim arising out of the receipt, application or disbursement of
any of the Installment Payments or involving the rights of the Trustee, the Corporation or any Certificate Owner
under the Trust Agreement; provided that the Trustee, the Corporation or any Certificate Owner at such party’s
election may appear in and defend any such suit, action or proceeding. The Agency will indemnify and hold
harmless the Trustee, the Corporation and the Certificate Owners against any and all liability claimed or asserted by
any person, arising out of such receipt, application or disbursement, and indemnify and hold harmless the Certificate
Owners against any attorneys’ fees or other expenses which any of them may incur in connection with any litigation
to which any of them may become a party by reason of ownership of Certificates. The Agency will promptly
reimburse the Corporation, the Trustee or any Certificate Owner in the full amount of any attorneys’ fees or other
expenses which the Corporation or such Owner may incur in litigation or otherwise in order to enforce such party’s
rights under the Trust Agreement or the Certificates, provided that such litigation is concluded favorably to such
party’s contentions therein.
Notwithstanding anything to the contrary above, the Trustee will have no duty or liability whatsoever to
monitor or notify any party with respect to the timeliness, sufficiency or validity of any such recording, re-recording,
filing, filing of continuation statements and the like with respect to the Trust Agreement; it having been expressly
understood and agreed that the Trustee’s duties under the Trust Agreement will be exclusively limited to following
the express written filing or recording instructions of the Agency, from time to time with respect to the above
described actions so long as the Agency supplies said recording or filing instruments.
Recordation and Filing. The Trustee, upon written direction of the Agency, will record, register, file,
renew, refile and re-record all such documents, including financing statements, as may be required by law in order to
maintain a security interest in the Trust Agreement and the Assignment Agreement, all in such manner, at such
times and in such places as may be required by, and to the extent permitted by law in order fully to preserve, protect
and perfect the security of the Certificate Owners and the rights and security interests of the Trustee. The Trustee,
upon written direction of the Agency, will (subject to the Trust Agreement) do whatever else may be necessary or be
reasonably required in order to perfect and continue the lien of the Trust Agreement and the Assignment Agreement.
Eminent Domain. If all or any part of the 2010B Project is taken by eminent domain proceedings (or sold
to a government threatening to exercise the power of eminent domain), the Net Proceeds therefrom will be applied
in the manner specified in the Installment Purchase Agreement.
Further Assurances. Whenever and so often as requested so to do by the Trustee or any Certificate Owner,
the Corporation and the Agency will promptly execute and deliver or cause to be executed and delivered all such
other and further instruments, documents or assurances, and promptly do or cause to be done all such other and
further things, as may be necessary or reasonably required in order to further and more fully vest in the Trustee and
the Certificate Owners all rights, interest, powers, benefits, privileges and advantages conferred or intended to be
conferred upon them by the Trust Agreement.
Continuing Disclosure. The Agency will comply with and carry out all of its obligations under the
Continuing Disclosure Certificate to be executed and delivered by the Agency in connection with the delivery of the
Certificates. Notwithstanding any other provision of the Trust Agreement, failure of the Agency to comply with the
continuing disclosure certificate will not be considered an Event of Default; however, any Owner or Beneficial
Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific
performance by court order, to cause the Agency to comply with its obligations under the foregoing provisions. For
purposes of the Trust Agreement, “Beneficial Owner” means any person which has or shares the power, directly or
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indirectly, to make investment decisions concerning ownership of any Certificates (including persons holding
Certificates through nominees, depositories or other intermediaries).
DEFAULT AND LIMITATION OF LIABILITY
Notice of Non-Payment. In the event of delinquency in the payment of any Installment Payments due by
the Agency pursuant to the Installment Purchase Agreement, the Trustee will, after one Business Day following the
date upon which such delinquent Installment Payment was due, immediately give written notice of the delinquency
and the amount of the delinquency to the Agency and the Corporation.
Action on Default or Termination. Upon the occurrence of an Event of Default (as that term is defined in
the Installment Purchase Agreement), which event constitutes a default under the Trust Agreement, and in each and
every such case during the continuance of such Event of Default, the Trustee or the Owners of not less than a
majority in aggregate principal amount of Certificates at the time Outstanding will be entitled, upon notice in writing
to the Agency to exercise the remedies provided to the Corporation in the Installment Purchase Agreement.
Upon declaration of the entire principal amount of the unpaid Installment Payments and the accrued interest
thereon to be due and payable immediately and provided such declaration is not rescinded or annulled, all in
accordance with the Installment Purchase Agreement, the Trustee may apply all moneys received as Installment
Payments and all moneys held in any fund or account under the Trust Agreement (other than the Rebate Fund) to the
payment of the entire principal amount of the Certificates and the accrued interest with respect thereto, with interest
on the overdue Certificates at the rate or rates of interest applicable to the Certificates if paid in accordance with
their terms.
Other Remedies of the Trustee. The Trustee has the right: (a) by mandamus or other action or proceeding
or suit at law or in equity to enforce its rights against the Agency or any director, officer or employee thereof, and to
compel the Agency or any such director, officer or employee to perform or carry out its or his duties under law and
the agreements and covenants required to be performed by it or him contained in the Trust Agreement; (b) by suit in
equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or (c) by suit in equity
upon the happening of any default under the Trust Agreement to require the Agency and its directors, officers and
employees to account as the trustee of an express trust.
Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee will not affect any
subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or
breach of duty or contract. No delay or omission by the Trustee to exercise any right or remedy accruing upon any
default or breach of duty or contract will impair any such right or remedy or be construed to be a waiver of any such
default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the
Trustee by law or by the Trust Agreement may be enforced and exercised from time to time and as often as deemed
expedient by the Trustee.
If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined
adversely to the Trustee, the Trustee and the Agency will be restored to their former positions, rights and remedies
as if such action, proceeding or suit had not been brought or taken.
Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee in the Trust Agreement is
intended to be exclusive of any other remedy, and each such remedy will be cumulative and in addition to every
other remedy given under the Trust Agreement or now or later existing in law or in equity or by statute or otherwise
and may be exercised without exhausting and without regard to any other remedy conferred by any law.
No Obligation by the Agency to Owners. Except for the payment of Installment Payments when due in
accordance with the Installment Purchase Agreement and the performance of the other covenants and agreements of
the Agency contained in the Installment Purchase Agreement and the Trust Agreement, the Agency has no
obligation or liability to the Owners of the Certificates with respect to the Trust Agreement or the execution,
delivery or transfer of the Certificates, or the disbursement of Installment Payments to the Owners by the Trustee;
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provided, however, that nothing contained in the Trust Agreement affects the rights, duties or obligations of the
Trustee expressly set forth therein.
Trustee Appointed Agent for Certificate Owners; Direction of Proceedings. The Trustee has been
appointed the agent and attorney of the Owners of all Certificates outstanding under the Trust Agreement for the
purpose of filing any claims relating to the Certificates. The Owners of a majority in aggregate principal amount of
the Certificates Outstanding under the Trust Agreement will, upon tender to the Trustee of reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with such direction, have the right to direct
the method and place of conducting all remedial proceedings by the Trustee, provided such direction is in
accordance with law and the provisions of the Trust Agreement and that the Trustee has the right to decline to
follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Certificate Owners
not parties to such a direction.
Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of
Default, has taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Trust Agreement,
whether upon its own discretion or upon the request of the Owners of a majority in aggregate principal amount of
the Certificates then outstanding pursuant to the Trust Agreement, it will have full power, in the exercise of its
discretion for the best interests of the Owners of the Certificates, with respect to the continuance, discontinuance,
withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee will not,
unless there no longer continues an Event of Default under the Trust Agreement, discontinue, withdraw,
compromise or settle, or otherwise dispose of, any litigation pending at law or in equity, if at the time there has been
filed with it a written request signed by the Owners of at least a majority in principal amount of the Certificates
Outstanding under the Trust Agreement opposing such discontinuance, withdrawal, compromise, settlement or other
disposal of such litigation.
Limitation on Certificate Owners’ Right to Sue. No Owner of any Certificate executed and delivered under
the Trust Agreement has the right to institute any suit, action or proceeding at law or in equity, for any remedy under
or upon the Trust Agreement, unless: (a) such Owner has previously given to the Trustee written notice of the
occurrence of an Event of Default under the Trust Agreement; (b) the Owners of at least a majority in aggregate
principal amount of all the Certificates then Outstanding have made written request upon the Trustee to exercise the
powers granted in the Trust Agreement or to institute such action, suit or proceeding in its own name; (c) said
Owners have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request; and (d) the Trustee has refused or omitted to comply with such request for a period
of sixty (60) days after such written request has been received by, and said tender of indemnity has been made to,
the Trustee.
Such notification, request, tender or indemnity and refusal or omission have been declared, in every case, to
be conditions precedent to the exercise by any Owner of Certificates of any remedy under the Trust Agreement; it
having been understood and intended that no one or more Owners of Certificates have any right in any manner
whatever by his or their action to enforce any right under the Trust Agreement, except in the manner provided
therein, and that all proceedings at law or in equity to enforce any provision of the Trust Agreement will be
instituted, had and maintained in the manner provided therein and for the equal benefit of all Owners of the
Outstanding Certificates.
The right of any Owner of any Certificate to receive payment of the principal of (and premium, if any) and
interest with respect to such Certificate, as provided in the Trust Agreement, on and after the respective due dates
expressed in such Certificate, or to institute suit for the enforcement of any such payment on or after such respective
dates, will not be impaired or affected without the consent of such Owner, notwithstanding the provisions of the
Trust Agreement.
No Obligation with Respect to Performance by Trustee. Neither the Agency nor the Corporation have any
obligation or liability to any of the other parties to the Trust Agreement or to the Owners of the Certificates with
respect to the performance by the Trustee of any duty imposed upon it under the Trust Agreement.
No Liability to Owners for Payment. The Corporation has no obligation or liability to the Owners of the
Certificates with respect to the payment of the Installment Payments by the Agency when due, or with respect to the
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performance by the Agency of any other covenant made by it in the Installment Purchase Agreement or the Trust
Agreement. Except as provided in the Trust Agreement, the Trustee has no obligation or liability to the Owners of
the Certificates with respect to the payment of the Installment Payments by the Agency when due, or with respect to
the performance by the Agency of any other covenant made by it in the Installment Purchase Agreement or the Trust
Agreement.
No Responsibility for Sufficiency. The Trustee is not responsible for the sufficiency of the Trust
Agreement, the Installment Purchase Agreement, or of the assignment made to it by the Assignment Agreement of
rights to receive Installment Payments pursuant to the Installment Purchase Agreement, or the value of or title to the
2010B Project. The Trustee is not responsible or liable for selection or liquidation of investments or any loss
suffered in connection with any investment of funds made by it under the terms of and in accordance with the Trust
Agreement.
Indemnification of Trustee. The Agency will indemnify the Trustee and hold it harmless against any loss,
liability, expenses or advances, including but not limited to fees and expenses of counsel and other experts, incurred
or made without negligence or willful misconduct on the part of the Trustee: (i) in the exercise and performance of
any of the powers and duties under the Trust Agreement or the Installment Purchase Agreement by the Trustee; (ii)
relating to or arising out of the Project, or the conditions, occupancy, use, possession, conduct or management of, or
work done in or about, or from the planning, design, acquisition, installation or construction of the Project or any
part thereof; or (iii) arising out of or relating to any untrue statement or alleged untrue statement of any material fact
or omission or alleged omission to state a material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading in any official statement or other offering circular
utilized in connection with the sale of the Certificates, including the costs and expenses of defending itself against
any claim of liability arising under the Trust Agreement. Such indemnity will survive payment of the Certificates
and discharge of the Trust Agreement or resignation or removal of the Trustee.
THE TRUSTEE
Employment of Trustee. In consideration of the recitals set forth in the Trust Agreement and for other
valuable consideration, the Agency has agreed to employ the Trustee to receive, hold, invest and disburse the
moneys received pursuant to the Installment Purchase Agreement for credit to the various funds and accounts
established by the Trust Agreement; to execute, deliver and transfer the Certificates; and to apply and disburse the
Installment Payments received from the Agency to the Owners of Certificates; and to perform certain other
functions; all as provided in and subject to the terms and conditions of the Trust Agreement.
Acceptance of Employment. In consideration of the compensation provided for in the Trust Agreement,
the Trustee has accepted the employment above referred to subject to the terms and conditions of the Trust
Agreement. The Trustee is responsible for the performance of the duties specifically set forth in the Trust
Agreement, and no implied duties or obligations will be read into the Trust Agreement against the Trustee.
Trustee; Duties, Removal and Resignation. By executing and delivering the Trust Agreement, the Trustee
has accepted the duties and obligations of the Trustee provided in the Trust Agreement, but only upon the terms and
conditions set forth therein.
The Agency, or, if the Agency is in default under the Installment Purchase Agreement, the Owners of a
majority in aggregate principal amount of all Certificates outstanding, may by Written Request to the Trustee, upon
thirty (30) days notice to the Trustee, remove the Trustee initially a party to the Trust Agreement, and any successor
thereto, and may appoint a successor Trustee, but any such successor must be a corporation, association or federally
chartered savings institution, authorized to exercise corporate trust powers, doing business and having a corporate
trust office in California, which has (or the parent holding company of which has) a combined capital (exclusive of
borrowed capital) and surplus of at least seventy-five million dollars ($75,000,000) and subject to supervision or
examination by federal or state authorities. If such corporation, association or institution publishes a report of
condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above
referred to, then for the purposes of the Trust Agreement the combined capital and surplus of such corporation,
association or institution will be deemed to be its combined capital and surplus as set forth in its most recent report
of condition so published.
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The Trustee may at any time resign by giving written notice to the Agency and by giving to the Certificate
Owners notice of such resignation by mail at the addresses shown on the registration books maintained by the
Trustee. Upon receiving such notice of resignation, the Agency will promptly appoint a successor Trustee by an
instrument in writing; provided, however, that in the event that the Agency does not appoint a successor Trustee
within thirty (30) days following receipt of such notice of resignation, the resigning Trustee may at the expense of
the Agency petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or
removal of the Trustee and appointment of a successor Trustee will become effective upon written acceptance of
appointment by the successor Trustee.
Compensation of the Trustee. The Agency will from time to time, subject to any agreement in effect with
the Trustee, pay to the Trustee reasonable compensation for its services and reimburse the Trustee for all its
advances and expenditures, including but not limited to advances to and fees and expenses of independent
appraisers, accountants, consultants, counsel, agents and attorneys-at-law or other experts employed by it in the
exercise and performance of its powers and duties under the Trust Agreement. Such compensation and
reimbursement will be paid by the Agency and amounts owing therefor will constitute a charge on the moneys in the
Revenue Fund and payable by the Agency; provided, however, that the Trustee will not otherwise have any claims,
except in accordance with the Trust Agreement, or lien for payment of compensation for its services against any
other moneys held by it in the funds or accounts established under the Trust Agreement but may take whatever legal
actions are lawfully available to it directly against the Agency.
Protection of the Trustee. The Trustee will be protected and incur no liability in acting or proceeding in
good faith upon any resolution, notice, telegram, request, consent, waiver, certificate, statement, affidavit, voucher,
bond, requisition or other paper or document which it in good faith believes to be genuine and to have been adopted,
executed or delivered by the proper party or pursuant to any of the provisions of the Trust Agreement, and the
Trustee is under no duty to make any investigation or inquiry as to any statements contained or matters referred to in
any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of
such statements. The Trustee is not bound to recognize any person as an Owner of any Certificate or to take any
action at the written request of any such person unless such Certificate is deposited with the Trustee or satisfactory
evidence of the ownership of such Certificate is furnished to the Trustee and such ownership is recorded in the
Trustee’s books required to be maintained pursuant to the Trust Agreement. The Trustee may consult with counsel,
who may be counsel to the Corporation or the Agency, with regard to legal questions, and the opinion of such
counsel will be full and complete authorization and protection in respect of any action taken or suffered by it under
the Trust Agreement in good faith in accordance therewith.
Whenever in the administration of its duties under the Trust Agreement, the Trustee deems it necessary or
desirable that a matter be proved or established prior to taking or suffering any action thereunder, such matter
(unless other evidence in respect thereof is specifically prescribed in the Trust Agreement) will be deemed to be
conclusively proved and established by a certificate of the Corporation or the Agency and such certificate will be
full warranty to the Trustee for any action taken or suffered under the provisions of the Trust Agreement upon the
faith thereof, but in its discretion the Trustee may (but has no duty), in lieu thereof, accept other evidence of such
matter or may require such additional evidence as to it may seem reasonable.
The Trustee may buy, sell, own, hold and deal in any of the Certificates provided pursuant to the Trust
Agreement, and may join in any action which any Owner may be entitled to take with like effect as if the Trustee
were not a party to the Trust Agreement. The Trustee, either as principal or agent, may also engage in or be
interested in any financial or other transaction with the Agency or the Corporation, and may act as depositary,
trustee, or agent for any committee or body of Owners of Certificates or of obligations of the Corporation or the
Agency as freely as if it were not Trustee under the Trust Agreement.
The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers of the Trust
Agreement and perform the duties required of it thereunder by or through attorneys, agents, or receivers, and will be
entitled to advice of counsel concerning all matters of trust and its duties thereunder, and the Trustee is not
answerable for the default or misconduct of any such attorney, agent or receiver selected by it with reasonable care.
The Trustee is not answerable for the exercise of any discretion or power under the Trust Agreement or for anything
whatever in connection with the funds and accounts established thereunder, except only for its own willful
misconduct or negligence.
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The recitals, statements and representations by the Agency or the Corporation contained in the Trust
Agreement or in the Certificates will be taken and construed as made by and on the part of the Agency or
Corporation and not by the Trustee and the Trustee does not assume, and will not have, any responsibility or
obligations for the correctness of any thereof.
The Trustee undertakes to perform such duties, and only such duties as are specifically set forth in the Trust
Agreement and no implied duties or obligations will be read into the Trust Agreement against the Trustee.
No provision in the Trust Agreement requires the Trustee to risk or expend its own funds or otherwise incur
any financial liability in the performance of any of its duties thereunder if it has reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or liability is not assured to it. The Trustee is
entitled to interest on all amounts advanced by it under the Trust Agreement at the maximum rate permitted by law.
In accepting the trust created by the Trust Agreement, the Trustee acts solely as Trustee for the Owners and
not in its individual capacity and all persons, including without limitation the Owners and the Agency or the
Corporation having any claim against the Trustee arising from the Trust Agreement will look only to the funds and
accounts held by the Trustee thereunder for payment except as otherwise provided therein. Under no circumstances
will the Trustee be liable in its individual capacity for the obligations evidenced by the Certificates.
The Trustee makes no representation or warranty, express 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 or fitness for the use contemplated by the Agency or the Corporation of the
Project. In no event will the Trustee be liable for incidental, indirect, special or consequential damages in
connection with or arising from the Installment Purchase Agreement or the Trust Agreement for the existence,
furnishing or use of the Project.
The Trustee will not be deemed to have knowledge of any Event of Default under the Trust Agreement or
the Installment Purchase Agreement unless and until it has actual knowledge thereof or has received notice thereof
at its corporate trust office at the address set forth in the Trust Agreement.
The Trustee is not accountable for the use or application by the Agency, or the Corporation or any other
party of any funds which the Trustee has released in accordance with the terms of the Trust Agreement.
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
Certificates.
Before taking any action under the Trust Agreement, the Trustee may require indemnity satisfactory to the
Trustee be furnished from any expenses and to protect it against any liability it may incur thereunder.
The immunities extended to the Trustee also extend to its directors, officers, employees and agents.
The Trustee is not liable for any action taken or not taken by it in accordance with the direction of a
majority (or other percentage provided for in the Trust Agreement) in aggregate principal amount of Certificates
outstanding relating to the exercise of any right, power or remedy available to the Trustee. The permissive right of
the Trustee to do things enumerated in the Trust Agreement will not be construed as a duty.
The Trustee is authorized and directed to execute the Assignment Agreement in its capacity as Trustee
under the Trust Agreement.
Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which
it may be consolidated or any company resulting from any merger, conversion or consolidation to which it must be a
party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business
(provided such company is eligible under the Trust Agreement), will be the successor to the Trustee without the
execution or filing of any paper or further act, anything in the Trust Agreement to the contrary notwithstanding.
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AMENDMENT OF TRUST AGREEMENT
Amendments Permitted. (a) The Trust Agreement and the rights and obligations of the Agency and of the
Owners of the Certificates and of the Trustee may be modified or amended at any time by an amendment to the
Trust Agreement which will become binding when the written consents of the Owners of a majority in aggregate
principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in the Trust
Agreement, have been filed with the Trustee. No such modification or amendment may: (1) extend the stated
maturities of the Certificates, or reduce the rate of interest represented thereby, or extend the time of payment of
interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the prepayment
thereof, without the prior consent of the Owner of each Certificate so affected; or (2) reduce the aforesaid percentage
of Owners of Certificates whose consent is required for the execution of any amendment or modification of the
Trust Agreement; or (3) modify any of the rights or obligations of the Trustee or the Corporation without its prior
written consent thereto.
(b)
The Trust Agreement and the rights and obligations of the Corporation and the Agency
and of the Owners of the Certificates may also be modified or amended at any time by an amendment thereto which
will become binding upon adoption, without the consent of the Owners of any Certificates, but only to the extent
permitted by law and only for any one or more of the following purposes: (1) to add to the covenants and
agreements of the Corporation or the Agency contained in the Trust Agreement other covenants and agreements
thereafter to be observed or to surrender any right or power reserved to or conferred upon the Corporation or the
Agency, and which will not adversely affect the interests of the Owners of the Certificates; (2) to cure, correct or
supplement any ambiguous or defective provision contained in the Trust Agreement or in regard to questions arising
under the Trust Agreement, as the Corporation or the Agency may deem necessary or desirable and which will not
adversely affect the interests of the Owners of the Certificates; and (3) to make such other amendments or
modifications as may be in the best interests of the Owners of the Certificates.
Endorsement or Replacement of Certificates After Amendment or Supplement. After the effective date of
any action taken as provided in the Trust Agreement, the Trustee may determine that the Certificates may bear a
notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the
Trustee to the Owner of any Outstanding Certificate and presentation of such Owner’s Certificate for such purpose
at the principal corporate trust office of the Trustee a suitable notation as to such action will be made on such
Certificate. If the Trustee so determines, new Certificates so modified as in the opinion of the Trustee are necessary
to conform to such action will be prepared, and in that case upon demand of the Trustee to the Owner of any
Outstanding Certificates such new Certificates will be exchanged at the corporate trust office of the Trustee without
cost to each Owner for Certificates then Outstanding upon surrender of such Outstanding Certificates.
Amendment of Particular Certificates. The foregoing provisions do not prevent any Owner from accepting
any amendments to the particular Certificates held by him, provided that due notation thereof is made on such
Certificates.
DEFEASANCE
Discharge of Trust Agreement. When the obligations of the Agency under the Installment Purchase
Agreement cease pursuant thereto (except for the right of the Trustee and the obligation of the Agency to have the
money and Permitted Investments mentioned therein applied to the payment of Installment Payments as therein set
forth and the obligation to apply moneys on deposit in the Rebate Fund as provided in the Trust Agreement), then in
that case the obligations created by the Trust Agreement will thereupon cease, terminate and become void except for
the obligation of the Agency to direct the Trustee to apply money on deposit in the Rebate Fund as provided in the
Trust Agreement which will continue until such moneys are so applied and the right of the Owners to have applied
and the obligation of the Trustee to apply such moneys and Permitted Investments to the payment of the Certificates
as set forth in the Trust Agreement and, subject to application of moneys on deposit in the Rebate Fund as provided
in the Trust Agreement, the Trustee turns over to the Agency, after provision for payment of amounts due the
Trustee thereunder, as an overpayment of Installment Payments, any surplus in the Certificate Payment Fund and all
balances remaining in any other funds or accounts other than moneys and Permitted Investments held for the
payment of the Certificates at maturity or on prepayment, which moneys and Permitted Investments will continue to
be held by the Trustee in trust for the benefit of the Owners and will be applied by the Trustee to the payment, when
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due, of the principal and interest and premium, if any, represented by the Certificates, and after such payment, the
Trust Agreement will become void.
If moneys or non-callable securities described in clause (A) of the definition of Permitted Investments are
deposited with and held by the Trustee as provided in the Trust Agreement, the Trustee will within thirty (30) days
after such moneys or Permitted Investments have been deposited with it, mail a notice, first class postage prepaid, to
the Owners at the addresses listed on the registration books kept by the Trustee pursuant to the Trust Agreement,
setting forth: (a) the date fixed for prepayment of the Certificates; (b) a description of the moneys or securities
described in clause (A) of the definition of Permitted Investments so held by it; and (c) that the Trust Agreement has
been discharged and released in accordance with its provisions.
Deposit of Money or Securities with Trustee. Whenever in the Trust Agreement or the Installment
Purchase Agreement 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 prepay any Certificates, the money or securities to be so deposited or
held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Trust
Agreement and will be: (a) lawful money of the United States of America in an amount equal to the principal
amount and all unpaid interest represented by such Certificates to maturity, except that, in the case of Certificates
which are to be prepaid prior to maturity and in respect of which notice of such prepayment has been given as
provided in the Trust Agreement or provision satisfactory to the Trustee has been made for the giving of such notice,
the amount to be deposited or held will be the principal amount or Prepayment Price and all unpaid interest to such
date of prepayment, if any, represented by such Certificates; or (b) non-callable securities described in clause (A) of
the definition of Permitted Investments which will provide money sufficient to pay the principal at maturity or upon
prepayment plus all accrued interest to maturity or to the prepayment date, as the case may be, represented by such
Certificates to be paid or prepaid, as such amounts become due, be the principal amount or Prepayment Price and all
unpaid interest to such date of prepayment, if any, represented by such Certificates, provided that, in the case of
Certificates which are to be prepaid prior to the maturity thereof, notice of such prepayment has been given as
provided in the Trust Agreement or provision satisfactory to the Trustee has been made for the giving of such notice;
provided, in each case, that the Trustee will have been irrevocably instructed (by the terms of the Trust Agreement
and the Installment Purchase Agreement or by Written Request of the Agency) to apply such money or securities to
the payment of such principal, Prepayment Price and interest represented by such Certificates.
Unclaimed Moneys. Anything contained in the Trust Agreement to the contrary notwithstanding, any
moneys held by the Trustee in trust for the payment and discharge of the interest or principal or Prepayment Price
represented by any of the Certificates which remain unclaimed for two years after the date of deposit of such
moneys if deposited with the Trustee after the date when the interest, principal, or Prepayment Price represented by
such Certificates have become payable, will at the Written Request of the Agency be repaid by the Trustee to the
Agency as its absolute property free from trust, and the Trustee will thereupon be released and discharged with
respect thereto and the Owners will look only to the Agency for the payment of the interest and principal or
Prepayment Price represented by such Certificates; provided, however, that before being required to make any such
payment to the Agency, the Trustee will, at the written request and expense of the Agency, first mail a notice to the
Owners of the Certificates so payable that such moneys remain unclaimed and that after a date named in such notice,
which date must not be less than thirty (30) days after the date of the mailing of such notice, the balance of such
moneys then unclaimed will be returned to the Agency.
MISCELLANEOUS
Benefits of Trust Agreement Limited to Parties. Nothing contained in the Trust Agreement, expressed or
implied, is intended to give to any person other than the Agency, the Trustee, the Corporation and the Owners any
claim, remedy or right under or pursuant to the Trust Agreement, and any agreement, condition, covenant or term
required in the Trust Agreement to be observed or performed by or on behalf of the Agency will be for the sole and
exclusive benefit of the Trustee, the Corporation and the Owners.
Successor Deemed Included in all References to Predecessor. Whenever either the Agency, the
Corporation or the Trustee or any officer thereof is named or referred to in the Trust Agreement, such reference
includes the successor to the powers, duties and functions that are presently vested in the Agency, the Corporation or
the Trustee or such officer, and all agreements, conditions, covenants and terms required by the Trust Agreement to
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be observed or performed by or on behalf of the Agency, the Corporation or the Trustee or any officer thereof will
bind and inure to the benefit of the respective successors thereof whether so expressed or not.
Execution of Documents by Owners. Any declaration, consent, request or other instrument which is
permitted or required in the Trust Agreement to be executed by Owners may be in one or more instruments of
similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date
of the execution by any Owner or such Owner’s attorney of any declaration, consent, request or other instrument or
of any writing appointing such attorney may be proved by the certificate of any notary public or other officer
authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that
the person signing such declaration, request or other instrument or writing 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, or
by such other proof as the Trustee may accept which it may deem sufficient.
The ownership of any Certificates and the amount, Payment Date, number and date of owning the same
may be proved by the books required to be kept by the Trustee pursuant to the provisions of the Trust Agreement.
Any declaration, consent, request or other instrument in writing of the Owner of any Certificate will bind
all future Owners of such Certificate with respect to anything done or suffered to be done by the Agency or the
Trustee in good faith and in accordance therewith.
Disqualified Certificates. Certificates owned or held by or for the account of the Corporation or the
Agency (but excluding Certificates held in any pension or retirement fund) will not be deemed Outstanding for the
purpose of any consent or other action or any calculation of Outstanding Certificates provided for in the Trust
Agreement, and will not be entitled to consent to or take any other action provided for therein.
The Trustee may adopt appropriate regulations to require each Owner of Certificates, before his consent
provided for in the Trust Agreement will be deemed effective, to reveal if the Certificates as to which such consent
is given are disqualified as provided in the Trust Agreement.
Waiver of Personal Liability. No director, officer or employee of the Agency or the Corporation will be
individually or personally liable for the payment of the interest, principal or Prepayment Price represented by the
Certificates, but nothing contained in the Trust Agreement relieves any director, officer or employee of the Agency
or Corporation from the performance of any official duty provided by any applicable provisions of law or by the
Installment Purchase Agreement or the Trust Agreement.
Destruction of Certificates. Whenever in the Trust Agreement provision is made for the cancellation by the
Trustee of any Certificates, the Trustee will destroy such Certificates and upon written request deliver a certificate of
such destruction to the Agency.
Funds and Accounts. Any fund required by the Trust Agreement 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 will at all times be
maintained in accordance with sound industry practices and with due regard for the protection of the security of the
Certificates and the rights of every Owner thereof.
Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms required in the
Trust Agreement to be observed or performed by or on the part of the Agency, the Corporation or the Trustee are
contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or
such term or terms will be null and void and will be deemed separable from the remaining agreements, conditions,
covenants and terms of the Trust Agreement and will in no way affect the validity of the Trust Agreement or of the
Certificates, and the Owners will retain all the benefit, protection and security afforded to them under any applicable
provisions of law. The Agency, the Corporation and the Trustee have declared that they would have executed the
Trust Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase
thereof and would have authorized the execution and delivery of the Certificates pursuant thereto irrespective of the
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fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases thereof or the
application thereof to any person or circumstances may be held to be unconstitutional, unenforceable or invalid.
California Law. THE TRUST AGREEMENT WILL BE CONSTRUED AND GOVERNED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
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APPENDIX D
FORM OF LEGAL OPINION
Upon execution and delivery of the Certificates, Stradling Yocca Carlson & Rauth, a Professional
Corporation, Special Counsel, proposes to render its final approving opinion in substantially the following
form:
May __, 2010
27234 Bouquet Canyon Road
Santa Clarita, California 91350
Re:
$_________ Castaic Lake Water Agency
Retail System Revenue Certificates of Participation, Series 2010B
(Santa Clarita Water Division)
Members of the Board of Directors:
We have acted as Special Counsel to the Castaic Lake Water Agency (the “Agency”) in connection
with the execution and delivery of $_________ aggregate principal amount of the Castaic Lake Water Agency
Retail System Revenue Certificates of Participation, Series 2010B (Santa Clarita Water Division), dated the
date hereof (the “Certificates”), each evidencing and representing an interest of the registered owner thereof in
the right to receive Installment Payments (as that term is defined in the Trust Agreement hereinafter
mentioned) under and pursuant to that certain Installment Purchase Agreement, dated as of March 1, 2010 (the
“Agreement”), by and between the Agency and the Castaic Lake Water Agency Financing Corporation (the
“Corporation”), which right to receive such Installment Payments has been assigned by the Corporation to U.S.
Bank National Association, as trustee (the “Trustee”), pursuant to the Assignment Agreement, dated as of
March 1, 2010, by and between the Trustee and the Corporation. The Certificates have been executed by the
Trustee pursuant to the terms of the Trust Agreement, dated as of March 1, 2010 (the “Trust Agreement”), by
and among the Agency, the Corporation and the Trustee.
In connection with our representation we have examined a certified copy of the proceedings relating to
the Certificates. As to questions of fact material to our opinion, we have relied upon the certified proceedings
and other certifications of public officials furnished to us without undertaking to verify the same by
independent investigations.
Based upon the foregoing and after examination of such questions of law as we have deemed relevant
in the circumstances, but subject to the limitations set forth herein, we are of the opinion that:
1.
The proceedings show lawful authority for the execution and delivery by the Agency of the
Agreement and the Trust Agreement under the laws of the State of California now in force, and the Agreement
and the Trust Agreement have been duly authorized, executed and delivered by the Agency, and, assuming due
authorization, execution and delivery by the Trustee and the Corporation, as appropriate, are valid and binding
obligations of the Agency enforceable against the Agency in accordance with their respective terms.
2.
The Certificates, assuming due execution and delivery by the Trustee, are entitled to the
benefits of the Trust Agreement.
3.
The obligation of the Agency to make the Installment Payments from Net Retail System
Revenues (as defined in the Agreement) is an enforceable obligation of the Agency and does not constitute a
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debt of the Agency, or of the State of California or of any political subdivision thereof in contravention of any
constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the Agency
is obligated to levy or pledge any form of taxation or for which the Agency has levied or pledged any form of
taxation.
4.
Under existing statutes, regulations, rulings and judicial decisions, the portion of each
Installment Payment constituting interest with respect to the Certificates is excluded from gross income for
federal income tax purposes and is not an item of tax preference for purposes of calculating the federal
alternative minimum tax imposed on individuals and corporations. With respect to corporations, the portion of
each Installment Payment constituting interest with respect to the Certificates is not included as an adjustment
in the calculation of alternative minimum taxable income.
5.
The portion of each Installment Payment constituting interest is exempt from State of
California personal income tax.
The opinions expressed herein as to the exclusion from gross income of the portion of each
Installment Payment constituting interest with respect to the Certificates are based upon certain representations
of fact and certifications made by the Agency and others and are subject to the condition that the Agency
complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be
satisfied subsequent to the execution and delivery of the Certificates to assure that such portion of each
Installment Payment constituting interest with respect to the Certificates will not become includable in gross
income for federal income tax purposes. Failure to comply with such requirements of the Code might cause
the portion of each Installment Payment with respect to the Certificates constituting interest to be included in
gross income for federal income tax purposes retroactive to the date of execution and delivery of the
Certificates. The Agency has covenanted to comply with all such requirements.
The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or
not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether
any such actions or events are taken or do occur. The Trust Agreement, the Agreement and the Tax Certificate
relating to the Certificates permit certain actions to be taken or to be omitted if a favorable opinion of Special
Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from
gross income of the portion of each Installment Payment constituting interest with respect to the Certificates
for federal income tax purposes with respect to any Certificate if any such action is taken or omitted based
upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no
other opinion regarding tax consequences with respect to the Certificates.
The opinions expressed herein are based upon our analysis and interpretation of existing laws,
regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities.
We call attention to the fact that the rights and obligations under the Trust Agreement, the Agreement and the
Certificates are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are
sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against
public agencies in the State of California.
Respectfully submitted,
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APPENDIX E
DTC AND BOOK-ENTRY ONLY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained
from sources that the Agency and the Underwriter believe to be reliable, but neither the Agency nor the
Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of
the procedures and record keeping with respect to beneficial ownership interests in the Certificates, payment
of principal, premium, if any, accreted value, if any, and interest with respect to the Certificates to DTC
Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the
Certificates and other related transactions by and between DTC, the DTC Participants and the Beneficial
Owners is based solely on information provided by DTC.
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
Certificates. The Certificates will be executed and delivered 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 Certificate will be executed and delivered for each annual
maturity of the Certificates, each in the aggregate principal amount of such annual maturity, and will be
deposited with DTC.
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 Standard & Poor’s highest rating: AAA. 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
and www.dtc.org.
Purchases of Certificates under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Certificates on DTC’s records. The ownership interest of each actual
purchaser of each Certificate (“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 Certificates 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 Certificates,
except in the event that use of the book-entry system for the Certificates is discontinued.
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To facilitate subsequent transfers, all Certificates 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 Certificates 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 Certificates; DTC’s records reflect only the identity of the
Direct Participants to whose accounts such Certificates 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.
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 Certificates may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Certificates, such as prepayments,
tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of
Certificates may wish to ascertain that the nominee holding the Certificates 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.
Prepayment notices shall be sent to DTC. If less than all of the Certificates within a maturity are
being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in
such maturity to be prepaid.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Certificates unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the Agency 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 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Prepayment proceeds, distributions, and dividend payments on the Certificates 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
the Agency or the Trustee, 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, the Trustee, or
the Agency, subject to any statutory or regulatory requirements as may be in effect from time to time.
Payment of prepayment 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 the Agency or the Trustee,
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.
A Certificate Owner shall give notice to elect to have its Certificates purchased or tendered, through
its Participant, to the Trustee, and shall effect delivery of such Certificate by causing the Direct Participant to
transfer the Participant’s interest in the Certificates, on DTC’s records, to the Trustee. The requirement for
physical delivery of Certificates in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Certificates are transferred by Direct Participants on DTC’s records
and followed by a book-entry credit of tendered Certificates to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Certificates at any time
by giving reasonable notice to the Agency or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, physical Certificates are required to be printed and delivered.
The Agency may decide to discontinue use of the system of book-entry only transfers through DTC
(or a successor securities depository). In that event, Certificates will be printed and delivered to DTC.
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THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE
CERTIFICATES, WILL SEND ANY NOTICE OF PREPAYMENT OR OTHER NOTICES TO OWNERS
ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC
PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR
EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING
TO THE PREPAYMENT OF THE CERTIFICATES CALLED FOR PREPAYMENT OR OF ANY OTHER
ACTION PREMISED ON SUCH NOTICE.
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APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
Upon the execution and delivery of the Certificates, the Agency proposes to enter into a Continuing
Disclosure Certificate in substantially the following form:
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the
Castaic Lake Water Agency (the “Agency”) in connection with the execution and delivery of $________ Retail
System Revenue Certificates of Participation, Series 2010B (Santa Clarita Water Division) (the “Certificates”). The
Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of March 1, 2010 (the “Trust
Agreement”), by and among the Agency, the Castaic Lake Water Agency Financing Corporation (the
“Corporation”) and U.S. Bank National Association, as trustee (the “Trustee”). The Agency covenants and agrees
as follows:
1.
Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered
by the Agency for the benefit of the Holders and Beneficial Owners of the Certificates and in order to assist the
Participating Underwriter in complying with the Rule.
2.
Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized
terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the Agency pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Certificate.
“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 Certificates (including persons holding Certificates
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Certificates for federal
income tax purposes.
“EMMA” shall mean the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access
System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/.
“Fiscal Year” shall mean the one-year period ending on the last day of June of each year.
“Holder” shall mean a registered owner of the Certificates.
“Installment Purchase Agreement” shall mean that certain Installment Purchase Agreement executed and
entered into as of March 1, 2010, by and between the Agency and the Corporation.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
“Official Statement” shall mean the Official Statement of the Agency dated _____, 2010 delivered in
connection with the Certificates.
“Participating Underwriter” shall mean any of the original underwriters of the Certificates required to
comply with the Rule in connection with offering of the Certificates.
“Rule” shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as the same may be amended from time to time.
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3.
Provision of Annual Reports.
(a)
The Agency shall provide not later than 270 days following the end of its Fiscal Year
(commencing with the Fiscal Year 2010) to EMMA an Annual Report relating to the immediately preceding Fiscal
Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which 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 Certificate.
(b)
If the Agency is unable to provide to EMMA an Annual Report by the date required in
subsection (a), the Agency shall send to EMMA a notice in the manner prescribed by the Municipal Securities
Rulemaking Board.
4.
following:
Content of Annual Reports. The Annual Report shall contain or incorporate by reference the
(a)
The audited financial statements of the Agency for the prior Fiscal Year, prepared in
accordance with generally accepted accounting principles as promulgated to apply to governmental entities from
time to time by the Governmental Accounting Standards Board. If the Agency’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
come available;
(b)
Principal amount of the Certificates outstanding;
(c)
Balance in the Reserve Fund and a statement of the reserve requirement with respect
thereto;
(d)
An update of the information in the following tables or paragraphs under caption entitled
“SANTA CLARITA WATER DIVISION” in the Official Statement:
1.
“Table __ - SANTA CLARITA WATER DIVISION – Largest Customers by
Annual Payments” on page __;
2.
“Table __ - SANTA CLARITA WATER DIVISION - Historic Water Deliveries
and Service Connections” on page __; and
3.
“Table __ - SANTA CLARITA WATER DIVISION - Historic Operating
Results” on page __; and
(e)
A description of additional Contracts or Bonds (as defined in the Installment Purchase
Agreement) executed or issued by the Agency during the most recently-completed fiscal year.
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 Agency or related public entities, which have been submitted to EMMA or
the Securities and Exchange Commission; provided, that if any document included by reference is a final official
statement, it must be available from the Municipal Securities Rulemaking Board; and provided further, that the
Agency shall clearly identify each such document so included by reference.
5.
Reporting of Significant Events.
(a)
Pursuant to the provisions of this Section 5, the Agency shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Certificates, if material:
1.
principal and interest payment delinquencies;
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2.
non-payment related defaults;
3.
modifications to rights of Certificateholders;
4.
optional, contingent or unscheduled Certificate calls;
5.
defeasances;
6.
rating changes;
7.
adverse tax opinions or events affecting the tax-exempt status of the Certificates;
8.
unscheduled draws on the debt service reserves reflecting financial difficulties;
9.
unscheduled draws on the credit enhancements reflecting financial difficulties;
10.
substitution of the credit or liquidity providers or their failure to perform; and
11.
release, substitution or sale of property securing repayment of the Certificates.
(b)
Whenever the Agency obtains knowledge of the occurrence of a Listed Event, the
Agency shall as soon as possible determine if such event would be material under applicable federal securities laws.
(c)
If the Agency determines that knowledge of the occurrence of a Listed Event would be
material under applicable federal securities laws, the Agency shall promptly file a notice of such occurrence with
EMMA. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be
given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected
Certificates pursuant to the Trust Agreement.
6.
Customarily Prepared and Public Information. Upon request, the Agency shall provide to any
person financial information and operating data regarding the Agency which is customarily prepared by the Agency
and is publicly available.
7.
Termination of Obligation. The Agency’s obligations under this Disclosure Certificate shall
terminate upon the legal defeasance, prior prepayment or payment in full of all of the Certificates. If such
termination occurs prior to the final maturity of the Certificates, the Agency shall give notice of such termination in
the same manner as for a Listed Event under Section 5(c).
8.
Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the
Agency may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived,
provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the
Rule.
9.
Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the
Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure
Certificate or any other means of communication, or including any other information in any notice of occurrence of
a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Agency chooses to include
any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by
this Disclosure Certificate, the Agency shall not thereby have any obligation under this Disclosure Certificate to
update such information or include it in any future notice of occurrence of a Listed Event.
10.
Default. In the event of a failure of the Agency to comply with any provision of this Disclosure
Certificate, any Holders or Beneficial Owners of at least 50% aggregate principal amount of the Certificates may
take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court
order, to cause the Agency to comply with its obligations under this Disclosure Certificate. A default under this
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Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy
under this Disclosure Certificate in the event of any failure of the Agency to comply with this Disclosure Certificate
shall be an action to compel performance.
No Holder or Beneficial Owner of the Certificates may institute such action, suit or proceeding to compel
performance unless they shall have first delivered to the Agency satisfactory written evidence of their status as such,
and a written notice of and request to cure such failure, and the Agency shall have refused to comply therewith
within a reasonable time.
11.
Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Agency, the
Participating Underwriter and Holders and Beneficial Owners from time to time of the Certificates, and shall create
no rights in any other person or entity.
Dated: May ___, 2010
By:
Its:
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President of the Board of Directors
CASTAIC LAKE WATER AGENCY • RETAIL SYSTEM REVENUE CERTIFICATES OF PARTICIPATION (SANTA CLARITA WATER DIVISION), SERIES 2010B