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BOARD MEMORANDUM

DATE: December 29, 2017

TO: SCV Water Board of Directors
FROM: Valerie L. Pryor
Assistant General Manager

SUBJECT: Authorize Various Actions to Dissolve the Valencia Water Company and Transfer
Operations to the Santa Clarita Valley Water Agency Including the Issuance of
Revenue Refunding Bonds and the Establishment of Two Interfund Loans

SUMMARY

Pursuant to SB 634, the Santa Clarita Valley Water Agency (SCVWA) has until January 1, 2018
to finalize a plan of dissolution for the Valencia Water Company (Company). In order to
dissolve the company and transfer operations to SCVWA, the following actions are required:

1. Refinancing existing Company loans through the issuance of revenue refunding bonds
through the Upper Santa Clara Valley Joint Powers Authority (JPA), with the debt
service fully paid by the Valencia Water Division.
2. Establishment of an Interfund Loan of the Valencia Water Division to pay the debt
service associated with the revenue refunding bonds.
3. Establishment of an Interfund Loan of the Valencia Water Division to reimburse the
wholesale system for the purchase of the stock of the Company.

DISCUSSION

2018A Revenue Refunding Bonds
Agency staff and its financing team reviewed the need to refinance the Valencia Water
Company loans, and recommended the most cost-efficient way to refinance the loans would be
through the issuance of bonds by SCVWA through the Upper Santa Clara Valley Joint Powers
Authority (JPA), with the debt service fully paid by the Valencia Water Division. On October 25,
2017, the Castaic Lake Water Agency Board of Directors approved Resolution No. 3205 which
approved various legal documents associated with the refunding transaction. Since that time,
the financing team has prepared a Preliminary Official Statement (POS) and has prepared for
the issuance of bonds during the month of January. The estimated principal amount of the
proposed bonds is $26,595,000, of which approximately $26,280,811 will be available to
refinance the VWC loans. The true interest cost of the bonds is estimated at 4.26% and the
cost of issuance including underwriter's discount and all other fees and charges paid to third
parties is estimated at $314,189. The total payment amount including all debt service payments
and projected fees and charges paid to third parties to the final maturity of the bonds in 2048 is
estimated at $49,601,139. The foregoing are estimates and the final costs will depend on
market conditions and can be expected to vary from the estimated amounts set forth above.
The bonds will be sold on January 16, 2018 with the closing and refunding of the existing loans
on January 31, 2018. Note that the existing loans in the amount of $24 million have been

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