HomeMy WebLinkAbout2010-04-27 - AGENDA REPORTS - VALENCIA WATER FRANCHISE (2)CONSENT CALENDAR
DATE:
SUBJECT:
DEPARTMENT:
Agenda Item:
CITY OF SANTA CLARITA
AGENDA REPORT
City Manager Approval:
Item to be presented by:
April 27, 2010
CONSENT TO VALENCIA WATER COMPANY
HYPOTHECATION OF ASSETS IN ACCORDANCE WITH CITY
FRANCHISE ORDINANCE NO. 91-5
City Attorney
RECOMMENDED ACTION
City Council:
Consent to the Valencia Water Company's ("Val -Water") hypothecation (mortgage)
of its assets installed in the City of Santa Clarita ("City") in accordance with water
pipeline franchise Ordinance No. 91-5 ("Franchise").
BACKGROUND
Val -Water has notified the City of its intent to issue senior secured notes ("Notes") in
order to refinance its existing debt and reimburse its treasuries for monies expended. In
connection with the Notes, Val -Water intends to grant a security interest in its real
property and other collateral, including the assets installed in the City pursuant to the
rights granted under the Franchise and place such Franchise in trust with all of Val -
Water's collateral for the purpose of securing the indebtedness. This is referred to as
"hypothecation." The intended hypothecation of Val -Water's collateral does not involve
a transfer or change in control of the company, or a transfer or placing into trust of its
stock. Val -Water intends the transaction to close as soon as possible in order to take
advantage of the favorable interest rates currently available. Val -Water has also applied
to the City Council to consent to its intended hypothecation, if such consent is necessary.
City Ordinance No. 91-5, enacted February 26, 1991 and granting a franchise to Val -
Water, provides in Section 6 that Val -Water shall not hypothecate or place the franchise
or any part thereof in trust without the prior consent of the City Council. Consequently,
LA 44825-6746-2150 v4 n
City Council consent to Val -Water's intended hypothecation of its assets installed in the
City is required pursuant to Ordinance No. 91-5.
In connection with Val -Water's application for consent to its intended hypothecation of
assets, Ordinance No. 91-5, subsection F, requires that a Transfer Fee be paid equal to the
greater of $2,000 or the City's actual costs to process the application. Val -Water has
agreed to pay the City's fees related to the review of Val -Water's request upon receipt of
an invoice from the City for the Transfer Fee.
ALTERNATIVE ACTIONS
1. Do not consent to Val -Water's hypothecation of its assets installed in the City in
accordance with water pipeline franchise Ordinance No. 91-5.
2. Other action as determined by Council.
FISCAL IMPACT
There is no direct fiscal impact on the City by this action.
ATTACHMENTS
Letter From Val -Water Requesting City Council Consent
LA #4825-6746-2150 v4
Ffi NOSSAMAN LLP
VIA EMAIL AND US MAIL
April 27, 2010
Mr. Kenneth R. Pulskamp
City Manager
City of Santa Clarita
23920 Valencia Boulevard, Suite 300
Santa Clarita, California 91355-2196
Re: Consent of City of Santa Clarita of
Valencia Water Company Refinancing Under
Franchise Ordinance No. 91-5
Dear Mr. Pulskamp:
ATTORNEYS AT LAW
50 California Street
34th Floor
San Francisco, CA 94111
T 415.398.3600
F 415.398.2438
Yuliya A. Oryol
D 415.438.7256
yoryol@nossaman.com
Refer To File #: 270151-
00122701510012
This letter is intended to inform the City of Santa Clarita ("City") of and, if necessary, obtain its
consent to place the water pipeline franchise granted to Valencia Water Company ("Valencia")
by Ordinance No. 91-5 ("Franchise") in trust as explained below in connection with the
refinancing transaction contemplated by Valencia.
Valencia is in the process of issuing senior secured notes ("Notes") in order to refinance its
existing debt and reimburse its treasuries for monies expended. In connection with the Notes,
Valencia intends to grant a security interest in its real property and other collateral, including the
assets installed in the City pursuant to the rights granted to Valencia under the Franchise and
place such Franchise in trust with all of Valencia's collateral for the purpose of securing the
indebtedness. Please note that the intended pledge of Valencia's collateral does not involve a
transfer or change in control of Valencia, or a transfer or placing into trust of Valencia's stock.
We appreciate your prompt attention to this matter since time is of the esser)3.Fv2tdgj V E D
hereby agrees to pay the City's fees related to the review of this request. If we may provide you
with additional information, please do not hesitate to contact me directly. A;'r;; 0i',
Sincere) KEN PULSKAMP
Sincerely, CITY MANAGER
Yuliya A. Oryol
of Nossaman LLP
cc: Robert DiPrimio
Greg Milleman
Marty Mattes, Esq.
247423_1.DOC
nossaman.com