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Agenda Item 25.

City Council Meeting

Meeting Date:	05/15/2018
FROM:	Bill Gallardo

Subject:

Approval of Agreement Memorializing Class A Stock Purchases and Overview of City Equity Ownership of California Domestic Water Company

RECOMMENDATION

Authorized the Mayor to execute a purchase agreement memorializing the City of Brea's purchases and ownership of Class A Preferred Stock with California Domestic Water Company.

BACKGROUND/DISCUSSION

The City of Brea has relied on two sources of water to service its residential and commercial customers. As a major shareholder of the California Domestic Water Company (CDWC), it purchases water produced by CDWC in the Main San Gabriel Basin, also when necessary, the City purchases imported water from the Metropolitan Water District of Orange County (MWDOC) and this water is the most costly source of water. CDWC provides approximately 80-90% of the City's water supply. In Fiscal Year 2017-2018, the City is entitled to 8,819.87 acre feet of water from CDWC. There is no potable groundwater in Brea to provide its residents and businesses so therefore it must solely obtain water from these two entities.

The City purchased Water Rights in the Main San Gabriel Basin and Class A Preferred Stock from California Domestic Water Company (CDWC) from the period of 2011 to 2014. The purchase of additional Water Rights and Class A Preferred Stock adds permanent water supply to the City and is a long term benefit to the community.

In December 2011, 665 acre feet of water rights were identified in the Council staff report as being purchased, for which CDWC issued 664.14 shares of Class A Preferred Stock to Brea. The City of La Habra, also a shareholder in CDWC, purchased during the same period 664.13 shares of Class A Preferred Stock.

During the review of documents in conjunction with these water purchases it was determined the City had only letter agreements or in the case of the City's first purchase in December 2011 no written agreement; however, each purchase was supplemented by either a CDWC stock certificate showing ownership in Class A Preferred Stock or in the case of the purchase of water rights, Brea received adjudicated Fee Title of Water Rights in the Main San Gabriel Basin.

It was agreed by all parties to formalize a new agreement which would clearly define all the rights and privileges due to the City for currently holding 687.89 shares of CDWC Class A Preferred Stock. Over the past several months the City of Brea along with the City of La Habra and representatives of CDWC worked diligently together to create a revised agreement identical to both parties (Brea and La Habra) to memorialize the Class A Preferred Stock purchases and would be a template for future purchases.

Attached is a summary of the transactions and review of shareholders equity for Brea's Common Stock and Class A Preferred Stock which was prepared by Lynda Noriega, President of Cal Domestic Water Company (Attachment A).

FISCAL IMPACT/SUMMARY

None, as the shares of stock detailed in the attached agreement have been previously approved by the Council and purchased.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Jim Markman, City Attorney

Attachments
CDWC Brea Shareholder Equity
Class A Agreement
Exhibit A
Exhibit B
Exhibit C