Financing the regional water project could be a hard sell, according to investment analysts.


In a response to Monterey County’s request for proposals to underwrite the desalination plant, Wedbush Securities, the largest California-based investment bank, says financing the regional water project will be expensive and risky.


“We believe that the WPA [water purchase agreement] is not sufficient, in its current form, to support the Regional Project financing,” it reads. “This is not a criticism of the WPA, but recognition that it does not provide the investor protections that will be required to bring this credit to the CPCFA and thence to the municipal market.”


But Wedbush also says if the project is structured properly, it could achieve an “A” bond rating.


The analysis says the project is expensive compared to other desal facilities seeking state approval, such as the two planned for Carlsbad and Huntington Beach, and is a riskier investment. “In this instance, the market will perceive not only those traditional project finance issues but also the fact that the financial interests of the partners are not well aligned; that is, the financial risk falls directly on Cal Am ratepayers with little recourse to the public project owner-operators.” 


The county hasn’t made the report, obtained by the Weekly, public.


County officials rejected Wedbush’s proposal and selected Citicorp, although the Board of Supervisors hasn’t seen either proposal, says Supervisor Lou Calcagno. “Just because Citicorp is doing the financial analysis doesn’t mean the county is going to approve the plan,” he says. “We requested it get the board’s approval before any financing package would be accepted. The county is doing everything it can, not only to protect itself but to protect the ratepayers.”


The California Pollution Control Financing Authority was slated on March 17 to hold a public hearing on the “proposed issuance… of revenue bonds… not to exceed $415,000,000,” to finance the regional water project. Calcagno and other supervisors weren’t aware of the March 17 hearing. Monterey County Water Resources Manager Curtis Weeks did not return calls.


“Wedbush is a top firm as far as bonding is concerned, so I have faith in their opinion that the three-way agreement [between MCWRA, Marina Coast Water District and Cal Am] must be rewritten because the risk is too high to get a good interest rate,” says Libby Downey, who sits on the Monterey Regional Water Pollution Control Agency board and has worked on the regional water project in that capacity. Downey, a Monterey City Councilwoman, says she is not speaking as a council member on this issue. “The Peninsula is on the hook to pay for this, even if less expensive water becomes available. Our grandchildren will be paying for this for years.”