LOS ANGELES -- Water supply issues likely will dominate the agenda of the new general manager at the East Bay Municipal Utility District in California, which plans Tuesday to sell $180 million of bonds for water and wastewater purposes.
District officials are developing an updated Water Supply Management Program to maximize use of the district's existing resources, improve water delivery, and meet long-term needs.
"That is going to be the foundation for our long-term strategy," said Jorge Carrasco, who became general manager of the district a month ago after 17 years in city government.
Mr. Carasco, formerly a city manager of Scottsdale, Ariz., and Austin, Tex., said yesterday that "we're only just beginning to see the peak of the iceberg" in regard to difficult water-related decisions in California.
Like other water suppliers across California, the East Bay district -- which serves more than one million people along the eastern shore of San Francisco bay -- has confronted five years of drought conditions. In response, the district adopted a conservation program and is developing the water management program to study, among other things, alternative approaches to increase future water supplies.
Rating agency analysts continue to view the East Bay district as a solid credit.
"We see it as very stable," said Barbara Flickinger, vice president and manager of Far West regional ratings for Moody's. The district's strong customer base and reputation for good management continues to buttress its operations, she noted.
Indeed, Moody's this week raised its ratings on the district's senior lien and subordinated revenue wasterwater bonds. It upgraded the senior lien wastewater bonds to Aa from A1, and raised the subordinated bond rating to A1 from A.
The district plans to take competitive bids Tuesday on $130 million of subordinated water system revenue bonds and $50 million of subordinated wastewater system revenue bonds.
A diversified mix of commercial, residential, and industrial users helped support the upgrade, Moody's said, along with strong financial operations that reflect the implementation of annual rate increases and new operating fees.
Moody's also confirmed its Aa rating on the district's senior lien water revenue bonds and assigned an A1 rating to its subordinated water revenue bonds.
Standard & Poor's Corp. rates the senior lien water system bonds AA-minus; the subordinate water system debt A-plus; the senior lien wastewater bonds AA-minus, and the subordinate wastewater debt A-plus.
The district's water conservation efforts were so successful that they actually produced slight financial erosion because of the decreased usage, but the district is positioned to "be able to stand those sort of stresses," noted Christine Ruppert, an assistant vice president of Standard & Poor's Corp.
Proceeds from the water system bonds will finance various improvements for the district's capital improvement program, which totals a projected $497.8 million over the next five years. Bond sales are expected to provide $356 million of this total.
Separately, the district estimates it will spend $245 million on capital improvements -- including $122 million from bond issues -- for its wastewater system from fiscal 1992 to 1996.
Some of the proceeds also will retire a portion of the district's commercial paper outstanding.
The district does not expect to sell additional bond issues for about two years.
By that time, Mr. Carrasco noted that the district should have completed its work on the updated water supply management program.
Among other key issues, Mr. Carasco said the district plans to study various land-use developments in watersheds that feed its water supply. He also said the district will review its budgeting and financial planning processes, with an eye toward identifying potential improvements.
He added that another issue emerged in connection with the devastating fire that swept through the hillsides of Oakland on October 20, causing extensive property damage and loss of life.
The burned areas represent only a small portion of the district's water system territory, Mr. Carrasco said, adding that the financial impact on the district is minuscule.
Nevertheless, "it just reminds us to review and improve our emergency processes," particularly in preparation for a disaster like an earthquake, Mr. Carrasco said.
Mr. Carrasco said he was attracted to the East Bay district because "it has a great reputation in the industry."
He said he particularly welcomed "the chance to concentrate on a particular discipline" for a regional provider of services, as opposed to the multiple issues facing a city official.
Water is "significant as a public service issue" also involves numerous environmental aspects, Mr. Carrasco said, adding that the district's board has encouraged him to participate in the discussion of statewide issues affecting water.
Ms. Ruppert noted that Mr. Carrasco has "proved himself elsewhere" and in recent meetings with rating agency officials left an impression of being "a very solid, business-like manager."
