LOS ANGELES -- Voters in Santa Barbara, Calif., on Tuesday approved a bond-financed aqueduct to connect the drought-stricken city with the state water project and also backed the first desalination plant to serve a major U.S. city.
Tuesday's state water vote involved individual elections by separate water purveyors throughout Santa Barbara County.
Enough purveyors -- including those in Santa Barbara, Montecito, and Goleta -- authorized bonds to make the state water connection feasible, Stanley Hatch, a partner of Hatch & Parent, said yesterday. Mr. Hatch's firm is providing general counsel services for the project.
California will pay for part of the $450 million aqueduct, while the portion in Santa Barbara County will be financed locally.
Cities and special districts in the county are expected to form a joint powers authority to finance their portion of the costs, Mr. Hatch said, adding that a local revenue bond issue ranging from $120 million to $150 million is possible.
Smith Barney, Harris Upham & Co. will serve as lead underwriter on the transaction, Mr. Hatch said. Rauscher Pierce Refsnes Inc. is the financial adviser, and Brown & Wood is bond counsel. A bond sale is possible by next year, Mr. Hatch said.
Tuesday's election marked a breakthrough for Santa Barbara, where a harsh debate has raged for years over obtaining state water. Voters rejected a connection to state water a dozen years ago, with opponents citing concern that the new water supply would spur too much growth in the coastal resort city.
But a five-year drought, combined with dwindling local water supplies, prompted reconsideration of alternative water sources.
Santa Barbara voters approved the state water connection by a 55.2% to 44.8% margin. They favored contstruction of the desalination plant by an 82.5% to 17.5% margin.
Sandra Lizarraga, deputy city administrative officer for Santa Barbara, noted yesterday that "there is still a fair amount of work to do" before the aqueduct is constructed, including completing the design and obtaining permits. Construction could take at least five years, she noted.
In the meantime, city officials last year decided to move forward on the construction of a plant that will desalt ocean water for domestic use. Although desalted water is much more expensive than existing water supplies, Santa Barbara officials concluded it was the best solution for guaranteeing a short-term supply of water.
Ionics Inc., a Watertown, Mass.-based company, has entered a five-year contract with Santa Barbara to build, finance, own, and operate a desalination facility.
Santa Barbara's desalination decision "was historic in terms of anticipated trends in the United States, particularly California, toward privatization of water treatment facilities, and local control of water supplies, and community 'drought-proofing' against future periods of inadequate rainfall," Arthur Goldstein, Ionics' chairman and chief executive officer, said in a recent statement.
The desalination facility in Santa Barbara will cost an estimated $30 million. City officials are investigating the possibility of using tax-exempt private-activity bonds to help finance the plant, Ms. Lizarraga said.
Ionics will sell the city drinking water at an initial estimated cost of $1,935 per acre foot, which is about nine times the cost of regular water supplies in other parts of the state.
Voter approval of both the state water connection and desalination "puts them in a better position than they were" in terms of having breathing room on water supplies, said John Costagliola, an assistant vice president of Standard & Poor's Corp. in San Francisco.
He added, however, that "there's still the uncertainties" on how fast the aqueduct can be constructed and whether the state will have an ample water supply to meet the needs of the affected coastal cities.
Proposed desalination plants also are drawing attention elsewhere, including one in Marin County, Calif., and another off the Mexican coastline that is being studied by major Southern California utilities.
