HomeMy WebLinkAboutItem 7a - Approval of Participation in the Nacimiento Water Project 2026 Revenue Refunding Bonds Item 7a
Department: Utilities
Cost Center: 6002-Water Source of Supply
For Agenda of: 8/18/2026
Placement: Business
Estimated Time: 30 minutes
FROM: Aaron Floyd, Public Works & Utilities Director
Prepared By: Shane Whittington, Utilities Business Manager
SUBJECT: APPROVAL OF PARTICIPATION IN THE NACIMIENTO WATER
PROJECT 2026 REVENUE REFUNDING BONDS
RECOMMENDATION
1. Adopt a draft Resolution titled “Resolution of the City Council of the City of San Luis
Obispo, California, in Connection with the Refunding of the 2015 Nacimiento Water
Project Revenue Refunding Bonds, Approving Certain Disclosures Regarding the City
and Authorizing Certain Actions in Connection with Such Refunding”, and;
2. Approve certain disclosures regarding the City of San Luis Obispo, describing certain
demographic, financial, statistical and other information of the City of San Luis Obispo
to be included in Appendix A to the Preliminary Official Statement and the Official
Statement that will be used by the Underwriter in the marketing and sal e of the SLO
County Financing Authority (County of San Luis Obispo, California) Nacimiento Water
Project Revenue Refunding Bonds, 2026 Series A (the “2026 Revenue Refunding
Bonds”); and
3. Authorize the refunding of the SLO County Financing Authority Nacimie nto Water
Project Revenue Refunding Bonds, 2015 Series A; and
4. Approve the execution and delivery of a Continuing Disclosure Agreement; and
5. Authorize the taking of all necessary actions in connection with such issuance of 2026
Revenue Refunding Bonds.
REPORT-IN-BRIEF
In 2004, the City of San Luis Obispo entered into a Nacimiento Project Water Delivery
Entitlement Contract with the San Luis Obispo County Flood Control and Water
Conservation District (District) in connection with the Nacimiento Water Project. In
September 2007, the San Luis Obispo County Financing Authority (Authority) issued
$157,845,000 Nacimiento Water Project Revenue Bonds, 2007 Series A (the “2007A
Bonds”) and $38,565,000 Nacimiento Water Project Revenue Bonds, 2007 Series B
(Taxable) to finance the Project. In August 2015, the Authority issued Revenue Refunding
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Bonds to partially refund the 2007A Bonds, resulting in the currently outstanding 2015
Series A Bonds (the “2015A Bonds”). In April 2018, the Authority issued Revenue
Refunding Bonds to refund the remaining outstanding 2007A Bonds, resulting in the
currently outstanding 2018 Series A Bonds.
The Authority is proposing to refund the outstanding 2015 A Bonds to reduce future debt
service costs. The refinancing would not extend the existing September 1, 2038 final
maturity date. The transaction is currently estimated to produce systemwide net present
value savings of approximately $5.1 million, or 6.8 percent of the refunded principal,
exceeding the applicable debt-policy savings thresholds.
Based on current good faith estimates, the refinancing would save the City
approximately $3.2 million over the remaining term of the bonds, or an average of
approximately $256,000 annually.
The City Council is being asked to adopt a resolution (Attachment A) authorizing the
Authority to proceed with the refunding and approving the City’s related disclosure and
financing documents. All amounts are preliminary good faith estimates and may change
based on interest rates, market conditions, and the final structure of the bonds at the time
of sale.
If market conditions deteriorate such that the refunding no longer meets the applicable
debt-management thresholds, City staff would consult with the Authority, the District, and
the financing team regarding whether to pause or cancel the bond sale rather than
proceed with an uneconomic refinancing.
POLICY CONTEXT
California Government Code Sections 5850–5854, relating to general bond provisions,
and Sections 53630–53686, relating to the deposit and investment of local agency funds,
establish statutory requirements applicable to the proposed financing.
Government Code Section 5852.1 requires the governing body to obtain and publicly
disclose specified good faith estimates of financing costs before authorizing the issuance
of bonds with a term exceeding 13 months. In addition, Government Code Section
53635.7 requires any decision involving borrowing of $100,000 or more to be discussed,
considered, and deliberated as a separate item of business on the governing body’s
agenda.
The 2026 Revenue Refunding Bonds will be issued by the San Luis Obispo County
Financing Authority and authorized by the participating partner agencies, including the
City of San Luis Obispo. Consistent with the debt management policies of the participating
agencies, debt refunding may be considered when it produces net present value savings
of at least 3 percent.
The City’s Capital Financing and Debt Management Policies state:
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“Refinancings that produce net present value savings of less than five percent will
be considered on a case-by-case basis, provided that the present value savings
are at least three percent (3%) of the refunded debt.”
Based on estimates prepared by the Authority’s and District’s municipal advisors, the
proposed refinancing is expected to generate approximately $5.1 million in net present
value savings, or 6.8 percent of the refunded debt. Accordingly, the proposed refinancing
is consistent with the City’s debt management policies, as well as the policies of the other
participating organizations.
DISCUSSION
Background
In 2004, the City entered into a Nacimiento Project Water Delivery Entitlement Contract
with the San Luis Obispo County Flood Control and Water Conservation District (Dist rict),
in connection with the Nacimiento Water Project for the supply of additional water for the
use and benefit of the lands and inhabitants served by the City of San Luis Obispo. In
September 2007, the SLO County Financing Authority (Authority) issued $157,845,000
Nacimiento Water Project Revenue Bonds, 2007 Series A (the “2007A Bonds”) and
$38,565,000 Nacimiento Water Project Revenue Bonds, 2007 Series B (Taxable) to
finance the Project. In August 2015, the Authority issued Revenue Refunding Bonds to
partially refund the 2007A Bonds, resulting in the currently outstanding 2015 Series A
Bonds (the “2015A Bonds”). In April 2018, the Authority issued Revenue Refunding
Bonds to refund the remaining outstanding 2007A Bonds, resulting in the currently
outstanding 2018 Series A Bonds.
The table below summarizes the currently outstanding Nacimiento Water Project Bonds.
Table 1. Nacimiento Water Project Bonds
Nacimiento Water Project
Bonds
Purpose Original
Par Amount
Outstanding
Par Amount
Final
Maturity
2007 Series B (Taxable) Project Funding $38,565,000 $26,840,000 09/01/2040
2015 Series A
(Tax-Exempt)*
Refunding $107,115,000 $80,160,000 09/01/2038
2018 Series A
(Tax-Exempt)
Refunding $27,045,000 $22,005,000 09/01/2040
TOTAL: $172,725,000 $129,005,000
*To be refunded by the 2026 Refunding Revenue Bonds.
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The security structure and debt service payments on the Nacimiento Water Project
Revenue Bonds are funded by the delivery contracts between the District and the
Atascadero Mutual Water Company, the City of El Paso de Robles, the City of San Luis
Obispo, and the Templeton Community Services District (collectively, the “Participating
Agencies” or each “Participating Agency”). Th e District allocates Capital Projects
Installment Debt Service among all Participating Agencies, according to the proportion of
Nacimiento Project Construction Costs paid by each Participating Agency (see Table 2
for Project Installment Debt Service by Participating Agency).
Table 2. Nacimiento Capital Projects Installment Debt Service Allocation
Participating Agency Tax-Exempt
Bonds
Taxable
Bonds
% Total of
Bond Debt Service
Atascadero Mutual Water Company 0.00% 98.74% 20.08%
City of El Paso de Robles 45.03% 0.57% 35.99%
City of San Luis Obispo 52.28% 0.69% 41.79%
Templeton Community Services District 2.69% 0.00% 2.14%
TOTAL: 100.00% 100.00% 100.00%
Overview
The current tax-exempt interest
rate environment creates an
opportunity to achieve annual
debt service savings by
refunding the outstanding 2015A
Bonds through the issuance of
2026 Revenue Refunding
Bonds. The 2015A Bonds
became callable1 on September
1, 2025, and can be refinanced for debt service savings at any time. The proposed
issuance of 2026 Revenue Refunding Bonds is expected to refinance all $75.5 million of
the outstanding 2015A Bonds (specifically, the maturities of th e 2015A Bonds from
September 1, 2027, through September 1, 20382). The transaction will not extend the
final maturity of the original 2015A Bonds. The 2015A Bonds currently bear interest rates
ranging from 3.0% to 5.0%.
Estimated Savings
Based on preliminary tax-exempt pricing yields provided by the Authority’s and the
District’s Municipal Advisor, KNN Public Finance, and the Underwriter, Loop Capital
Markets, as of the week of June 29, 2026, the 2026 Revenue Refunding Bonds are
projected to generate approximately $6.2 million in total annual debt service savings for
the Participating Agencies, with each Participant Agency receiving savings proportional
to its share of the annual debt service obligations.
1 Callable describes a bond that the issuer can buy back or redeem before the maturity date.
2 Based on market conditions as of the week of June 29, 2026. Preliminary and subject to change.
2026 Revenue Refunding Bonds: Estimated Results
2026 Revenue Refunding Bonds Par: $68,650,000
Refunded 2015A Bonds Par: $75,480,000
Total Gross Savings: $6,154,822
Present Value Savings ($): $5,146,355
Present Value Savings (%): 6.82%
*Based on market conditions as of the week of June 29,
2026. Preliminary and subject to change.
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On a net present value (“NPV”) basis, the estimated savings through the issuance of the
2026 Revenue Refunding Bonds is $5.1 million or 6.8% of refunded 2015A Bond par
amount. The Authority’s Debt Policy requires that any issuance of current refunding bonds
achieve at least 3% NPV savings, calculated net of costs of issuance and expressed as
a percentage of the refunded bonds’ par amount. The pricing of the 2026 Revenue
Refunding Bonds is expected to occur in September 2026. Working with its Municipal
Advisor and Underwriter, the Authority would only ente r the market and sell the 2026
Revenue Refunding Bonds if it was certain that the 3% NPV savings threshold could be
achieved. Final debt service savings will be secured on the pricing day of the 2026
Revenue Refunding Bonds in September.
The table below allocates the estimated debt service savings from the 2026 Revenue
Refunding Bonds per the Nacimiento Capital Projects Installment Debt Service Allocation
by Participating Agency. Because Atascadero Mutual Water Company is only responsible
for a share of the 2007B Bonds (Taxable) debt service, which are not being refunded, the
estimated savings generated by the 2026 Revenue Refunding Bonds will be shared only
by those Participating Agencies that are responsible for a portion of the debt service on
the 2015A Bonds.
Table 3. Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A
SLO County Financing Authority Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A
(Estimated as of the week of June 29, 2026; Preliminary subject to change)45.03%52.28%2.69%
2026 Refunding Revenue Bonds Estimated Savings Estimated Savings Allocation by Participant
Fiscal Year
Ending
Prior 2015
Bonds
Annual Debt
Service
2026 Bonds
Annual Debt
Service
(Preliminary)
Annual
Savings
City of Paso
Robles
City of San
Luis Obispo
Templeton
Community
Services
District
Total Annual
Savings
A B C=A-B D=45.03%*C E=52.28%*C F=2.69%*C G=C=D+E+F
6/30/27 $1,649,491 $1,363,465 $286,025 $128,797 $149,534 $7,694 $286,025
6/30/28 8,096,606 7,610,375 486,231 218,950 254,202 13,080 486,231
6/30/29 8,095,669 7,605,750 489,919 220,610 256,130 13,179 489,919
6/30/30 8,095,500 7,605,000 490,500 220,872 256,433 13,194 490,500
6/30/31 8,101,522 7,612,250 489,272 220,319 255,791 13,161 489,272
6/30/32 8,090,400 7,602,125 488,275 219,870 255,270 13,135 488,275
6/30/33 8,095,338 7,604,125 491,213 221,193 256,806 13,214 491,213
6/30/34 8,097,463 7,607,250 490,213 220,743 256,283 13,187 490,213
6/30/35 8,090,650 7,601,000 489,650 220,489 255,989 13,172 489,650
6/30/36 8,098,175 7,609,500 488,675 220,050 255,479 13,145 488,675
6/30/37 8,096,400 7,606,875 489,525 220,433 255,924 13,168 489,525
6/30/38 8,094,625 7,607,500 487,125 219,352 254,669 13,104 487,125
6/30/39 8,093,700 7,605,500 488,200 219,836 255,231 13,133 488,200$0
Total $98,795,538 $92,640,715 $6,154,822 $2,771,516 $3,217,741 $165,565 $6,154,822
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Item 7a
Good Faith Borrowing Estimates
As detailed in Exhibit A to the Resolution (Attachment A), the following information is
provided in accordance with California Government Code Section 5852.1 to provide
certain public disclosures related to the estimated borrowing costs of the 2026 Revenue
Refunding Bonds. All figures represented below, as provided by the Municipal Advisor,
are good faith estimates as of the week of June 29, 2026, and are subject to change
based on the interest rate environment and other market and structuring factors on the
day of sale:
1) True Interest Cost 2) Cost of
Issuance1
3) Proceeds
Amount
4) Total Debt
Service
3.13 percent $873,000 $75,819,062 $92,640,715
1Includes costs of issuance (legal, municipal advisor, rating agency, etc.), underwriter’s
discount, and estimated cost of bond insurance.
Documents for Consideration and Approval
In order for the Authority to proceed with the sale and issuance of the 2026 Revenue
Refunding Bonds, the City Council must first approve and adopt the Resolution
(Attachment A) that, among other things, incorporates and approves the documents
below, all of which are attached to this report.
Appendix A to the Preliminary Official Statement and Official Statement
(Attachment B) includes certain disclosures of the City of San Luis Obispo related
to Litigation (related to water revenues and any pending claims that could
materially affect its finances) and certain financial and other information in
Appendix A to the Preliminary Official Statement.
Continuing Disclosure Agreement (Attachment C) is an agreement between
the City of San Luis obispo and the District, whereby the City of San Luis Obispo
covenants and agrees to provide annual disclosures in the form of an Annual
Disclosure Report and event notices to be distributed by the Dissemination Agent
to bondholders.
What if the Market Changes?
The proposed bond sale is expected to occur after Council approval and will remain
subject to changes in interest rates and other market conditions. The resolution
(Attachment A) delegates authority to designated City representatives (City Manager,
Finance Director, or a designee thereof) to execute related documents and take actions
reasonably necessary or advisable to support the refunding. The Authority, District, City
representatives, and financing team will use this delegated authority to finalize the timing
and structure of the transaction based on available savings and applicable debt -
management policies. If market conditions deteriorate such that the refunding no longer
meets those standards, the parties may pause, restructure, or cancel the sale rather than
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Item 7a
proceed with an uneconomic transaction. The final interest rates and savings will not be
known until the bonds are priced and sold.
Previous Council or Advisory Body Action
In June 2004, the City Council approved by Resolution 9586 an agreement with the San
Luis Obispo County Flood Control and Water Conservation District for the design,
construction and operation of facilities required for the delivery water to the City from the
Nacimiento Water Supply Project and appointed a member of the Council to serve on the
Nacimiento Project Commission. Subsequent amendments to the Agreement have been
approved by the City Council.
In August 2007, the City Council approved by Resolution 9922 the disclosure of financial
and other related information related to refinancing the Nacimiento Water Project. In
September 2007, the County Authority issued $157,845,000 Nacimiento Water Project
Revenue Bonds, 2007 Series A and $38,565,000 Nacimiento Water Project Revenue
Bonds, 2007 Series B (Taxable) in order to finance and refinance the Project .
In June 2015, the City Council approved by Resolution 10634 certain disclosures and
authorized certain actions in connection with the refunding of the Nacimiento water project
revenue bonds. In August 2015, the Authority issued $107,115,000 Nacimiento Water
Project Revenue Refunding Bonds, 2015 Series A (the “2015A Bonds”) in order to refund
a portion of the 2007A Bonds.
At a special meeting on July 9, 2026, the Nacimiento Project Commission recommended
approval of the proposed refunding of the Nacimiento W ater Project 2015 Series A
Revenue Refunding Bonds.
CONCURRENCE
The City’s Finance Department concurs with recommended actions and associated
documentation. The City Attorney’s Office has reviewed the draft Resolution and
associated Exhibits and approved to form.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended
action in this report, because it is limited to administrative and fiscal activities which would
not result in a physical impact on the environment, and therefore does not constitute a
“Project” under CEQA Guidelines Section 15378. In addition, In 2004, the City Council
reviewed and approved the Nacimiento Water Project Environmental Impact Report and
associated mitigation and monitoring program, and adopted required CEQA Findings for
the Project (Resolution 9585).
FISCAL IMPACT
Budgeted: Yes Budget Year: 2026-27
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Item 7a
Funding Identified: Yes
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ $ $ $
State
Federal
Fees
Other:
Total $ N/A $ N/A $ N/A $ N/A
Fiscal Impact
The proposed issuance of the 2026 Revenue Refunding Bonds is expected to achieve
annual and total debt service savings relative to the outstanding 2015A Bonds. The table
below summarizes the estimated total and annual debt service savings for the benefit of
the Participating Agencies.
Total
City of El
Paso de
Robles
@ 45.03%
City of San Luis
Obispo
@ 52.28%
Templeton
CSD
@ 2.69%
2015A Bonds Total Debt Service (“D/S”) $98,795,538 $44,487,631 $51,650,307 $2,657,600
2026 Revenue Refunding Bonds Total D/S1 92,640,715 41,716,114 48,432,566 2,492,035
Total Savings: $6,154,822 $2,771,516 $3,217,741 $165,565
2015A Bonds Avg. Annual DS $8,095,504 $3,645,405 $4,232,329 $217,769
2026 Revenue Refunding Bonds Avg. Annual D/S1 7,606,438 3,425,179 3,976,646 204,613
Average Annual Savings: $489,066 $220,227 $255,684 $13,156
1.Estimated based on market conditions as of the week of June 29, 2026.
ALTERNATIVES
1. Do not approve the Resolution or other recommended actions to authorize the
bond refunding. The City Council could choose not to approve the Resolution and
forego the opportunity to achieve debt service savings. Because participation in the
refunding requires unanimous approval by all participating agencies, declining to
approve the Resolution would prevent the refunding from proceeding and the existing
bonds and associated debt service obligations would remain unchanged for all
participating agencies.
2. Continue the business item hearing to a date certain and instruct staff to obtain
additional information or modify the documents. The City Council could direct staff
to obtain additional information or make revisions to the proposed documents before
returning for further consideration and action. Under this Alternative, staff request
continuance of the business item hearing to a date certain. This alternative would
delay authorization of the refunding and could require coordination with the Financing
Authority, other participating agencies, bond counsel, and the financing team before
the transaction could proceed.
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Item 7a
3. Authorize the bond refinancing and instruct staff to obtain additional
information and/or modify the documents. The City Council could take action and
request staff provide a supplemental informational memorandum with the additional
requested information and/or modified documentation inclusive of Council's
amendments. Under this alternative, staff request that Council provide specific
direction within the motion (if action is taken to authorize the bond refinancing
documentation, as amended by Council).
ATTACHMENTS
A - Draft Resolution titled “Resolution of the City Council of the City of San Luis Obispo,
California, in Connection with the Refunding of the 2015 Nacimiento Water Project
Revenue Refunding Bonds, Approving Certain Disclosures Regarding the City and
Authorizing Certain Actions in Connection with Such Refunding”
B - Preliminary Official Statement and Appendix A
C - Continuing Disclosure Agreement
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RESOLUTION NO. _____ (2026 Series)
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, IN CONNECTION WITH THE REFUNDING OF THE
2015 NACIMIENTO WATER PROJECT REVENUE REFUNDING BONDS,
APPROVING CERTAIN DISCLOSURES REGARDING THE CITY AN D
AUTHORIZING CERTAIN ACTIONS IN CONNECTION WITH SUCH
REFUNDING
WHEREAS, the City of San Luis Obispo (the “City”) has heretofore entered into a
Nacimiento Project Water Delivery Entitlement Contract, as amended (the “Delivery
Contract”), with the San Luis Obispo County Flood Control and Water Conservation District
(the “District”), in connection with the Nacimiento Water Project (the “Project”) for the supply
of additional water for the use and benefit of the lands and inhabitants served by the City; and
WHEREAS, on September 26, 2007, the SLO County Financing Authority (the
“Authority”) issued $157,845,000 Nacimiento Water Project Revenue Bonds, 2007 Series A
(the “2007A Bonds”) and $38,565,000 Nacimiento Water Project Revenue Bonds, 2007
Series B (Taxable) in order to finance and refinance the Project; and
WHEREAS, on August 19, 2015, the Authority issued $107,115,000 Nacimiento Water
Project Revenue Refunding Bonds, 2015 Series A (the “2015A Bonds”) in order to refund a
portion of the 2007A Bonds; and
WHEREAS, the District and the Authority have determined that it is necessary and
desirable to proceed with the refunding of all or a portion of the 2015A Bonds for debt service
savings through the issuance and sale of Municipal Obligations (as defined in t he Delivery
Contract), consisting of one or more series of the SLO County Financing Authority (County of
San Luis Obispo, California) Nacimiento Water Project Revenue Refunding Bonds, 2026
Series A (the “Bonds”); and
WHEREAS, in connection with such refunding, this Council (the “Council”) has been
presented with a form of Preliminary Official Statement , together with an appendix containing
statistical and other descriptive information regarding the City (the captions containing such
information being referred to herein as the “Appendix”), based upon information provided and
to be provided by the City, and a form of Continuing Disclosure Agreement (the “Continuing
Disclosure Agreement”); and
WHEREAS, Section 5852.1 of the Government Code of the State of California (the
“Government Code”) requires that the Council obtain from an underwriter, municipal advisor
or private lender and disclose, prior to authorization of the issuance of bonds with a term of
greater than 13 months, good faith estimates of the following information in a meeting open to
the public: (a) the true interest cost of the bonds, (b) the sum of all fees and charges paid to
third parties with respect to the bonds, (c) the amount of proceeds of the bonds expected to
be received net of the fees and charges paid to third parties and any reserves or capitalized
interest paid or funded with proceeds of the bonds, and (d) the sum total of all debt service
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payments on the bonds calculated to the final maturity of the bonds plus the fees and
charges paid to third parties not paid with the proceeds of the bonds; and
WHEREAS, in compliance with Section 5852.1 of the Government Code, the Council
has obtained from KNN Public Finance, LLC, as municipal advisor (the “Municipal Advisor”),
based on interest rate estimates provided by Loop Capital Markets LLC, as underwriter (the
“Underwriter”) of the Bonds, the required good faith estimates and such estimates are
disclosed and set forth on Exhibit A attached hereto.
NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of San Luis
Obispo as follows:
SECTION 1. The foregoing recitals are true and correct.
SECTION 2. The form of the Appendix presented to and reviewed by this meeting of
the Council, with such changes as the City Manager, Finance Director, o r a designee thereof
(each, an “Authorized Representative”) may determine to be in the best interests of the City,
is hereby approved. The Authority is authorized to include the Appendix in the Preliminary
Official Statement and Official Statement relating to the Bonds, and the Underwriter is
authorized to use the Appendix in the marketing and sale of the Bonds. From the date hereof
until the closing date of the Bonds (unless such date is extended in writing by the Authority),
the Authorized Representatives shall notify the Authority and the Underwriter immediately
upon the occurrence of any material change to information regarding the City in the
Appendix.
SECTION 3. The form of Continuing Disclosure Agreement presented to and reviewed
by this meeting of the Council is hereby approved, and the Authorized Representative of the
City is hereby authorized and directed to execute and deliver a Continuing Disclosure
Agreement, substantially in the form presented to and approved at this meeting of the
Council, with such changes therein as the Authorized Representative and the District may
approve, such approval to be evidenced by the signature of said Authorized Representative.
SECTION 4. In accordance with Section 5852.1 of the Government Code , good faith
estimates of the following have been obtained from the Municipal Advisor based on interest
rate estimates provided by the Underwriter and are set forth on Exhibit A attached hereto: (a)
the true interest cost of the Bonds, (b) the sum of all fees and charges paid to third parties
with respect to the Bonds, (c) the amount of proceeds of the Bonds expected to be received
net of the fees and charges paid to third parties and any reserves or capitalized interest paid
or funded with proceeds of the Bonds, and (d) the sum total of all debt service payments on
the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third
parties not paid with the proceeds of the Bonds.
SECTION 5. The Authorized Representatives of the City are hereby authorized and
directed, for and in the name and on behalf of the City, to do or cause to be done any and all
things and take any and all other actions in support of the issuance of the Bonds, including,
without limitation, the execution of certificates and a ncillary documents and the delivery of
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opinions on behalf of the City as may be reasonably required by the District, which they, or
any of them, deem necessary or advisable in order to consummate the purposes described
herein.
SECTION 6. This resolution shall take effect immediately upon its adoption.
Upon motion of Council Member ___________, seconded by Council Member
__________, and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this ____ day of ____________, 2026.
Mayor Erica A. Stewart
ATTEST:
________________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
________________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City
of San Luis Obispo, California, this _____ day of ___________, 2026.
________________________________
Teresa Purrington
City Clerk
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A-1
EXHIBIT A
GOOD FAITH ESTIMATES
The following information was obtained from KNN Public Finance, LLC based on
interest rate estimates provided by Loop Capital Markets LLC, as the underwriter of the
SLO County Financing Authority (County of San Luis Obispo, California) Nacimiento
Water Project Revenue Refunding Bonds, 2026 Series A (the “Bonds”), and is provided
in compliance with Section 5852.1 of the Government Code with respect to the Bonds :
It should be noted that the following information constitutes good faith estimates
only as of June 29, 2026. The actual interest cost, finance charges, amount of proceeds
and total payment amount may vary from the estimates below due to the timing of Bond
sale, the amount of Bonds sold, the amortization of the Bonds sold, and prevailing
market interest rates at the time of each sale. The date of sale and the amount of Bonds
sold will be determined by the Authority and the District based on achieving net present
value debt service savings and other factors related to refinancing outstanding debt .
The actual interest rates at which the Bonds will be sold will depend on the bond market
on the date and at the time of the sale. The actual amortization of the Bonds will also
depend, in part, on market interest rates on the date and at the time of the sale. Market
interest rates are affected by economic, national, international, and other factors beyond
the control of the Municipal Advisor, the Underwriter, the Authority, or the District.
1. True Interest Cost of the Bonds. Assuming the maximum aggregate
principal amount of the Bonds authorized ($80,000,000) are sold and based on market
interest rates prevailing at the time of preparation of this information, a good faith
estimate of the true interest cost of the Bonds, which means the rate necessary to
discount the amounts payable on the respective principal and interest payment dates to
the purchase price received for the Bonds, is 3.13%
2. Finance Charge of the Bonds. Assuming the maximum aggregate
principal amount of the Bonds authorized ($80,000,000) are sold and based on market
interest rates prevailing at the time of preparation of this information, a good faith
estimate of the finance charge of the Bonds, which means the sum of all fees and
charges paid to third parties (or costs associated with the Bonds), is $873,000.
3. Amount of Proceeds to be Received. Assuming the maximum aggregate
principal amount of the Bonds authorized ($80,000,000) are sold and based on market
interest rates prevailing at the time of preparation of this information, a good faith
estimate of the amount of proceeds expected to be received by the Authority for sale of
the Bonds less the finance charge of the Bonds described in 2 above and any reserves
or capitalized interest paid or funded with proceeds of the Bonds, is $75,819,062.
4. Total Payment Amount. Assuming the maximum aggregate principal
amount of the Bonds authorized ($80,000,000) are sold and based on market interest
rates prevailing at the time of preparation of this information, a good faith estimate of the
total payment amount, which means the sum total of all paym ents the Authority will
make to pay debt service on the Bonds plus the finance charge of the Bonds described
in paragraph 2 above not paid with the proceeds of the Bonds, calculated to the final
maturity of the Bonds, is $92,640,715.
Page 180 of 357
NRF Draft 7/23/26
APPENDIX A
THE PARTICIPANTS
Information contained in this Appendix A is presented as general background data. The 2026
Bonds are payable solely from and secured by certain Revenues and any other amounts pledged therefor
pursuant to the Indenture. The taxing power of the State of California, the County of San Luis Obispo or
any political subdivision thereof is not pledged to the payment of the 2026 Bonds. For additional
information regarding security for the 2026 Bonds, see “SECURITY AND SOURCES OF PAYMENT FOR
THE BONDS.” Audited financial information for each Participant can be found under the heading
“AUDITED FINANCIAL STATEMENTS” within the Appendix for each Participant. Capitalized terms not
otherwise defined in this Appendix A shall have the meanings ascribed to them in the body of this Official
Statement.
Atascadero Mutual Water Company ....................................................................................................... A1-1
City of El Paso de Robles ...................................................................................................................... A2-1
City of San Luis Obispo .......................................................................................................................... A3-1
Templeton Community Services District ................................................................................................ A4-1
Page 181 of 357
A1-i
APPENDIX A1
ATASCADERO MUTUAL WATER COMPANY
TABLE OF CONTENTS
Page Page
ATASCADERO MUTUAL WATER
COMPANY.................................................. A1-1
General .....................................................A1-1
Governance and Management ..................A1-1
Water Rights ............................................A1-1
No Litigation Related to the 2026 Bonds .A1-1
The Water System ....................................A1-2
Water Supply ...........................................A1-3
Drought and Conservation Measures .......A1-3
Water Connections ...................................A1-4
Water Deliveries ......................................A1-4
Water Sales Revenues ..............................A1-5
Largest Customers ...................................A1-5
Water System Rates and Charges ............A1-5
Future Water System Improvements ........A1-8
Cybersecurity ...........................................A1-9
FINANCIAL INFORMATION OF
ATASCADERO MUTUAL WATER
COMPANY ................................................. A1-9
Budgetary Process ................................... A1-9
Financial Statements .............................. A1-10
Operating Results .................................. A1-10
Management’s Discussion and Analysis A1-11
Outstanding Long-Term Indebtedness .. A1-12
Capital Improvement Program .............. A1-12
Investment Policy .................................. A1-12
Insurance ................................................ A1-12
Employees ............................................. A1-12
Pension................................................... A1-12
AUDITED FINANCIAL STATEMENTS A1-13
Tables
Table A1-1–AMWC Water Connections ................................................................................................ A1-4
Table A1-2–AMWC Water Deliveries in Millions of Gallons Per Year ................................................ A1-4
Table A1-3–AMWC Water Sales Revenues ........................................................................................... A1-5
Table A1-4–AMWC Largest Water Customers ...................................................................................... A1-5
Table A1-5A–AMWC Ready-to-Serve Charges .................................................................................... A1-6
Table A1-5B–AMWC Commodity Charges .......................................................................................... A1-7
Table A1-6–AMWC Rate Comparison ................................................................................................... A1-8
Table A1-7–AMWC Operating Results ................................................................................................ A1-11
Page 182 of 357
A1-1
ATASCADERO MUTUAL WATER COMPANY
General
Atascadero Mutual Water Company (“AMWC”), a California corporation, was incorporated under
the laws of the State of California (the “State”) in 1913 to acquire and hold water and water rights and
construct and maintain waterworks and distribution facilities to furnish and distribute water for domestic
and irrigation to its shareholders at cost. Pursuant to its bylaws, AMWC is permitted to sell, distribute,
supply, or deliver water only to owners of property within the AMWC service area (the “AMWC
Shareholders”), except as otherwise required by applicable laws or regulations. AMWC is one of the largest
mutual water companies in the State and is responsible for meeting the water requirements of more than
31,000 residents.
AMWC entered into a Delivery Contract (the “Delivery Contract”) with the San Luis Obispo
County Flood Control and Water Conservation District (the “Flood Control District”), pursuant to which
AMWC covenanted, inter alia, to pay its pro rata share of various capital expenses relating to the funding
of design costs, engineering, planning, environmental mitigation, equipping new facilities and/or
construction efforts, accounting services, project administration and management, installation, grading,
razing and building the Nacimiento Project.
Currently, AMWC’s fiscal year ends on April 30 of each year. As used herein, “FYE” means the
fiscal year ended or ending on April 30 of the year referenced. For additional financial information
regarding AMWC, see the financial statements submitted by AMWC under the heading “AUDITED
FINANCIAL STATEMENTS.”
Governance and Management
A five-person Board of Directors (the “AMWC Board”) elected annually by the AMWC
Shareholders has authority to set rates, incur debt and make decisions relative to the operations of AMWC.
Certain actions are subject to a vote of the shareholders. A General Manager, appoi nted by the AMWC
Board, is responsible for the day-to-day administration of the organization and is responsible for the
supervision of all staff.
Water Rights
AMWC has significant water rights in both the Salinas River (considered to be riparian water) and
the Atascadero Area Groundwater Sub-basin of the Salinas Valley Basin, identified as Basin No. 3004.11
in the Department of Water Resources Bulletin 118 (together, the “Atascadero Basin”). AMWC has pre-
appropriative (i.e. established prior to 1914) riparian rights to the waters of the Salinas River and has an
appropriative license for these waters. In addition, AMWC has “overlying” water rights to the groundwater
in the Atascadero Basin.
No Litigation Related to the 2026 Bonds
There is no litigation pending or, to AMWC’s knowledge, threatened in any way to restrain or
enjoin the delivery of the 2026 Bonds, to contest the validity of the 2026 Bonds, or any proceeding with
respect thereto.
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A1-2
The Water System
Service Area. AMWC’s service area includes approximately 38 square miles covering the City of
Atascadero and part of the unincorporated area of the County of San Luis Obispo (the “County”). The City
of Atascadero covers approximately 26 square miles and is situated just north of the City of San Luis
Obispo, along Highway 101, approximately 218 miles north of Los Angeles and 215 miles south of San
Francisco. The portion of the County served by AMWC covers approximately 12 square miles. The greatest
water demand is for single-family residential homes and associated landscaping, with relatively small
industrial and commercial water demand. Water rates are the same for all classes of customers. Customer
classifications and certain information per classification as of FYE [2025] are summarized below:
Customer Classification
Number of
Customers
Percentage of
Water Use*
Percentage of
Revenue*
Single-Family Residential 9,736 73.7 73.7
Multi-Family Residential 351 9.2 9.2
Commercial 746 8.4 8.4
Landscape 223 8.5 8.5
Industrial 27 0.1 0.1
Other 0 0.0 0.0
TOTAL 11,083 100.0% 100.0%
*Totals may not add due to rounding.
Water Permits, Licenses and Other Regulations. AMWC has a water supply permit from the State
of California Department of Water Resources (“DWR”). Under this permit, AMWC files annual reports on
the quality of its water and is subject to annual inspections by the DWR. Regulations regarding water quality
standards have become more stringent, increasing the costs of delivering water. It is anticipated that this
regulatory trend will continue, and AMWC is unable to evaluate the future impact on the operating and
capital expenditures of AMWC.
The Atascadero Basin Groundwater Sustainability Agency (“GSA”) was formed in April 2017
under a Memorandum of Agreement between the City of Atascadero, City of El Paso de Robles, County of
San Luis Obispo, Templeton Community Services District, AMWC, and other small water systems. The
purpose of the GSA is to manage groundwater in the Atascadero Basin under the requirements of the
Sustainable Groundwater Management Act. The DWR has determined that the Atascadero Basin is a “Very
Low Priority” basin.
The DWR approved a Groundwater Sustainability Plan (“GSP”) prepared by the GSA for the
Atascadero Basin on April 14, 2025. The GSP and an annual report for water year ending September 30,
2025, are available for review on the Atascadero Basin communication portal
(https://portal.atascaderobasin.com/). There are currently no pumping restrictions in the Atascadero Basin,
and none are anticipated. The annual report indicates that the basin is being sustainably managed.
AMWC Water System. The AMWC water system (the “AMWC Water System”) consists of a water
production system and a water distribution system. The water distribution system consists of approximately
250 miles of pipeline ranging in size from four to 24 inches, nine storage tanks ranging in size from 120,000
to 4.8 million gallons, eight booster stations, 20 pressure-reducing stations, 1,900 valves, 1,700 fire
hydrants and nearly 11,000 service connections. The water production system consists of 17 active
groundwater wells, one standby groundwater well, five water treatment buildings, and a groundwater
recharge basin for water from the Nacimiento Project. The current pumping capacity of all active wells at
the end of the peak summer irrigation season is approximately 11.8 million gallons per day (gpd). Each of
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A1-3
AMWC’s active wells, treatment buildings, booster stations, and storage tanks are equipped with a radio-
controlled computer system for supervisory control and data acquisition (SCADA). All wells, treatment
facilities, and booster stations are housed in secure buildings and have special valves, waste flushing
systems, sand separators and other features.
In 2007, AMWC purchased a 60-acre ranch that overlies the Atascadero Basin for the purpose of
developing new water supply wells. The ranch is currently leased to a private party and is being used for
cattle and hay production.
In FYE 2026, AMWC delivered 1.49 billion gallons of water to its shareholders. Lower annual
water use over the past several years is a result of above average winter rains, higher water rate s, and
AMWC’s voluntary water conservation measures. See also “CERTAIN RISKS TO BOND OWNERS–
Drought” in the front of this Official Statement.
Treatment System. Thirteen of AMWC’s fifteen production wells have been found to have levels
of per- and poly-fluoroalkyl substances (“PFAS”) above the required notification level. AMWC has not
identified any specific source of these PFAS.
AMWC is in the process of designing and constructing a treatment plant to remove PFAS. The
plant is expected to come online in late 2028. The plant will use activated carbon to adsorb the PFAS.
Other than PFAS removal, the groundwater requires no treatment other than chlorination and the “natural
filtration” that occurs when the water passes through sand and gravel formations. AMWC regularly takes
samples and maintains chlorine residuals at the wells and throughout the distribution system to maintain
disinfection levels. AMWC monitors the samples for all containments as required by the United States
Environmental Protection Act, the Safe Drinking Water Act, and primary drinking water standards, and
follows all guidelines according to national primary drinking water regulations. See “CERTAIN RISKS
TO BOND OWNERS – Water Quality and PFAS” in the forepart of this Official Statement for a discussion
on PFAS regulations and requirements.
A group of property owners in the Paso Robles Basin previously filed a quiet title action seeking
an adjudication of water rights among AMWC, the City of El Paso de Robles, the Templeton Community
Services District and other water purveyors and users. See “LITIGATION– Steinbeck Vineyards and
Eidemiller” in the forepart of this Official Statement. The court determined that AMWC has overlying
rights to the groundwater in the Atascadero Basin.
Water Supply
AMWC obtains its water by wells pumping water from two distinct yet interrelated groundwater
sources, the Salinas River underflow and the Atascadero Basin. These existing groundwater supplies,
together with water from the Nacimiento Project, are expected to meet all future water demands through
2045. AMWC is in the process of preparing a 5-year update of its Urban Water Management Plan that will
project water demands through 2050. The completion of the Nacimiento Project augmented the AMWC
groundwater supply.
Drought and Conservation Measures
AMWC has had a tiered rate structure in place since the mid-1970s to encourage water conservation
by its shareholders.
Since 1992, AMWC has implemented a majority of the “Best Management Practices” for water
conservation suggested by the California Urban Water Conservation Council, including among other
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A1-4
things: rebates for toilet retrofit, sprinkler head retrofits, irrigation controller upgrades, turf conversions,
high-efficiency clothes washers, and rainwater harvesting; outreach and education, including classroom
presentations; annual water conserving landscape awards program; annual water conserving landscape tour;
and tiered water rates.
AMWC’s conservation program has been very effective and has reduced per capit a water use in
the AMWC service area from 239 gallons/day/person in 1988 to 146 gallons/day/person for FYE 2025,
assuming a population of 30,618. Total annual water production has been reduced from 6,241 acre-feet/year
in 1988 to 5,200 acre-feet/year for FYE 2025. Overall, the reductions in water use achieved by AMWC’s
conservation program have more than offset a 32% population increase in its service area from 1988 through
2025.
Water Connections
The following table shows the number of water connections to the AMWC Water System for FYE
2021 through FYE 2025 expressed in equivalent dwelling units (“EDUs”). One EDU is equivalent to a 3/4”
water meter.
Table A1-1
AMWC
Water Connections
For FYE 2021 through FYE 2025
FYE Connections (in EDUs) % Increase/(Decrease)
2021 14,611 --
2022 14,667 0.42%
2023 14,682 0.10
2024 14,717 0.24
2025 14,755 0.26
Source: AMWC.
Water Deliveries
The following table presents a summary of water deliveries (based on production records) for the
AMWC Water System in millions of gallons per year for FYE 2021 through FYE 2025.
Table A1-2
AMWC
Water Deliveries in Millions of Gallons Per Year
FYE 2021 through FYE 2025
FYE Total % Increase/(Decrease)
2021 1,637 --
2022 1,646 0.55%
2023 1,451 (11.85)
2024 1,383 (4.69)
2025 1,468 6.15
Source: AMWC.
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A1-5
Water Sales Revenues
The following table shows annual revenues from water sales for FYE 2021 through FYE 2025.
Table A1-3
AMWC
Water Sales Revenues
FYE 2021 through FYE 2025
FYE Sales Revenues % Increase/(Decrease)
2021 $8,650,478 --
2022 8,679,640 0.34%
2023 9,264,817 6.74
2024 10,892,621 17.57
2025 12,213,903 12.13
Source: AMWC.
Largest Customers
The following table sets forth the ten largest customers connected to the AMWC Water System as
of April 30, 2025, as determined by total usage in 1,000 gallons. In the aggregate, the ten largest customers
accounted for approximately 4.1% of water usage from the AMWC Water System.
Table A1-4
AMWC
10 Largest Water Customers
FYE 2025
Customer User Class* Use (in 1,000 gal)
CITY OF ATASCADERO L 10,347
ATASCADERO UNIFIED SCHOOL DIST L 7,906
ATASCADERO DISTRICT CEMETERY L 7,361
ATASCADERO UNIFIED SCHOOL DIST L 5,957
RANCHO DEL BORDO ESTATES LLC M 5,197
RANCHO DEL BORDO ESTATES LLC M 5,048
ATASCADERO UNIFIED SCHOOL DIST L 4,768
HIDDEN OAKS APARTMENTS INC M 4,482
VILLA MARGARITA MOBILE HOME PARK LLC M 4,447
ATASCADERO UNIFIED SCHOOL DIST L 4,382
TOTAL 10 LARGEST USERS
* L=landscape; M=multi-family
Source: AMWC.
Water System Rates and Charges
AMWC water rates are comprised of a monthly minimum charge and a commodity charge based
on the units of water used. AMWC also charges for disconnections and reconnections to the AMWC Water
System and for construction meter rentals. AMWC currently charges connection fees for new connections
to the AMWC Water System. AMWC increased water rates and charges in June 2024 and June 2025 to
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A1-6
offset reductions in water sales resulting from shareholder’s conservation practices water and in anticipation
of the funding needs to construct a water treatment facility to remove PFAS from the drinking water .
AMWC adopted an approximately 13% water rate increase with the approval of its budget for FYE
2027. The new rates became effective June 15, 2026.
Ready-to-Serve Charges. The table below shows AMWC’s monthly ready-to-serve charge that is
based on meter size or number of units, whichever is greater. In addition, there is a monthly surcharge for
Nacimiento Project (NWP) expenses.
Table A1-5A
AMWC
Ready-to-Serve Charges
(Effective June 15, 2026) [to be updated/confirmed]
Meter Size
(in inches)
Quantity
(as of April 30, 2026) Monthly Minimum Charge
Standby 202 $10.00
5/8 5,082 35.00
3/4 4,079 35.00
1 700 44.00
1-1/2 78 51.00
2 62 85.00
3 4 261.00
4 8 329.00
6 1 512.00
8 2 512.00
Fireline 203 27.00
MFR (per unit) 3,787 21.10
Motel (per unit) 744 7.90
NWP Surcharge 11,038 5.00
Source: AMWC.
Water Use Charges. The table below shows AMWC’s commodity charge per 1,000-gallon (kgal)
unit of water used. AMWC adopted a surcharge to fund treating water for the removal of PFAS.
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A1-7
Table A1-5B
AMWC
Commodity Charges
(Effective June 15, 2026) [to be updated/confirmed]
Tier Use Single Family Residential
Commercial, Multi-family,
Landscape
Tier 1 1,000 to 10,000 gallons $3.70 $3.70
Tier 2 11,000 to 25,000 gallons 5.40 5.40
Tier 3 26,000 to 50,000 gallons 7.40 7.40
Tier 4 51,000 to 75,000 gallons 8.30 8.30
Tier 5 > 75,000 gallons 11.10 n/a
n/a PFAS Surcharge 0.25 0.25
Source: AMWC.
Nacimiento Project Surcharge. All accounts (except fire lines and accounts on standby) are
charged $[5.00] per month to pay their pro rata share of capital costs associated with the Nacimiento
Project. [confirm/update]
Water Service Charges. AMWC conducts and prepares an annual rate comparison survey of water
purveyors located on the central coast of the State. The table below summarizes that data, based upon an
assumed standard metered usage as of July 1, 2025:
Page 189 of 357
A1-8
Table A1-6
AMWC
Rate Comparison
(Based on 8,500 gallons Per Month)
As of July 1, 2025
CENTRAL COAST SERVICE AREAS [to be updated]
Community
Total Monthly
Charge(1)(2)
AMWC (6/15/25 rates)(3) $73.58
AMWC (6/15/26 rates)(3)
Arroyo Grande 88.25
Grover Beach(4) 64.11
Heritage Ranch 99.02
Morro Bay 136.50
Nipomo 134.51
Paso Robles 95.56
Pismo Beach 89.35
Santa Margarita 118.65
San Luis Obispo(5) 146.20
Templeton 46.54
(1) Total charge is calculated based on 8,500 gallons per month of metered water based on average single-family use. Where
several rates exist based on elevation or zone, the lowest rate is assumed.
(2) Total monthly charge is the sum of monthly residential service charge and monthly commodity charge. Total monthly
charges calculated using the inside city rate. Applicable base charges, service charges and surcharges are included in the
calculation. The charges and taxes of the State Public Utilities Commission are not included.
(3) Includes a $5.00 monthly surcharge for Nacimiento Project and $0.25/1,000 gal surcharge for PFAS.
(4) Includes a 1% utility tax applied to water portion of the bill.
(5) Includes a 5% utility users tax applied to the water portion of the bill.
Source: AMWC.
Collection Procedures. AMWC is on a monthly billing cycle for water service. Payment is due by
the 30th day after the billing date and is considered delinquent if not paid by that date. If payment is not
received, a delinquency message appears on the next monthly water bill for accounts with unpaid balances
greater than $50. After 60 days, delinquent customers are billed a late fee and have 30 days to bring the
delinquent account current. Water deliveries to accounts not paid in full within 90 days of the billing date
are discontinued until all delinquent amounts are paid. Historically, revenue loss from uncollected accounts
has been immaterial.
Connection Fees. AMWC charges connection fees for development of new water resources to meet
the requirements of community growth. Current connection fees for single family residential, commercial
and industrial units vary depending on the size of the water meter provided and range in cost from $19,600
for a 3/4-inch meter to $588,000 for a 4-inch meter.
Future Water System Improvements
Each year, AMWC prepares a five-year capital improvement plan. The current five-year capital
improvement plan covers FYE 2027 through FYE 2031. In addition, AMWC annually adopts a capital
budget for projects to be completed during each fiscal year. For FYE 2027, the capital budget is
approximately $7.4 million and includes design and initial phases of construction of a water treatment plant
to remove PFAS, upgrading the supervisory control and data acquisition (SCADA) software and radios,
replacing defective water main valves, replacing aging water service laterals and meters, installing new
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A1-9
water service laterals and meters, upgrading fire hydrants, installing new fire hydrants, and numerous other
projects. Many of these projects are expected to be undertaken in conjunction with and ahead of City of
Atascadero and County road improvement projects. The cost of the capital projects for FYE 2027 are in
addition to the ongoing expenses associated with the operation and maintenance of AMWC’s wells, booster
stations, tanks, the distribution system, and the Nacimiento Water Project.
Annual expenditures for capital projects for FYE 2027 through FYE 2031 are expected to average
$10.5 million and include: construction of a water treatment plant to remove PFAS; replacing the Pine
Mountain Tank; recoating the Rojo Tank; upgrading well pumps and motors on nine wells; upgrading the
well field electrical system; replacing aging vehicles; pressure reducing station upgrades; water main valve
replacements; and numerous other projects. AMWC expects to issue debt to fund its capital investment
program over the next five fiscal years.
The capital improvement plan described above does not include costs for a planned replacement of
the spillway at San Antonio Dam. The spillway replacement is proposed to be undertaken by the Monterey
County Water Resources Agency. The Flood Control District may be required to contribute up to
approximately 32.3%, or about $25.2 million (estimated as of 2025), of the costs of the spillway
replacement. The Flood Control District would charge through such costs, if any, proportionally to the
Participants under the Delivery Contracts, including the Delivery Contract with AMWC. Spillway
replacement project costs are expected to be incurred beginning in 2028. If AMWC is required to
contribute, it currently expects to fund its share of such costs from its Water Resource Developer Reserve
fund. Currently, whether and how much the Flood Control District and, correspondingly, the Participants,
including AMWC, will pay, and the funding sources for such payments, have not been determined and may
change as the foregoing parties deliberate on proposals for the spillway replacement project at San Antonio
Dam.
Cybersecurity
AMWC relies on a complex technology environment to conduct its daily operations. As a recipient
and provider of personal, confidential, and sensitive information AMWC and its departments experience
multiple cybersecurity threats which include but are not limited to, social engineering, malware, denial-of-
service and other attacks on endpoints.
AMWC has put several preventive measures in place to safeguard against cybersecurity threats.
These measures include cybersecurity awareness training, firewalls, email filtering, web content filtering,
endpoint protection, and ensuring that operating systems, network equipment, and endpoint devices are up-
to-date with the latest patches.
AMWC has not had any material cybersecurity incidents in the past five years.
AMWC currently maintains insurance coverage with respect to certain information security and
privacy liability claims. However, AMWC is not required to maintain cybersecurity insurance. Future
cybersecurity attacks could affect the operations and finances of AMWC, including its ability to meet
payment obligations under its Delivery Contract.
FINANCIAL INFORMATION OF ATASCADERO MUTUAL WATER COMPANY
Budgetary Process
The AMWC Board establishes and approves an annual budget prior to the beginning of each fiscal
year. The five-year capital improvement plan is updated annually as part of the budget process. The AMWC
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A1-10
Board reviews financial statements and investments monthly. All rates and charges are reviewed annually
and any changes are subject to the approval of the AMWC Board. The AMWC Board also conducts an
annual review and assessment of the levels of its two reserve funds.
Financial Statements
The most recent audited financial statements of AMWC prepared by Caliber Audit & Attest, LLP,
independent certified public accountants, are included as an attachment hereto. The independent auditor’s
letter concludes that the audited financial statements present fairly, in all material respects, the financial
position of the business-type activities of AMWC as of FYE 2025, and the respective changes in financial
position and cash flows for the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
The summary operating results contained under the caption “–Operating Results” are derived from
these financial statements (excluding certain non-cash items and after certain other adjustments) and are
qualified in their entirety by reference to such statements, including the notes thereto.
Operating Results
The following table is a summary of operating results of the AMWC, for the last five fiscal years.
These results have been derived from the financial statements of AMWC but exclude certain receipts which
are not included as Revenues under the Delivery Contract and certain non-cash items and include certain
other adjustments.
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A1-11
Table A1-7
AMWC
Operating Results(1)
FYE 2021 through FYE 2025
2021 2022 2023 2024 2025
Revenues
Water sales $8,650,478 $8,679,640 $9,264,817 $10,892,621 $12,213,903
Other revenue 3,355,362 2,308,562 1,593,654 1,593,654 2,296,753
12,005,840 10,998,202 10,858,471 12,972,828 14,510,656
Operating
Expenses(2) 11,100,844 11,051,534 11,689,479 11,340,488 12,437,188
Operating income
(loss) 904,996 (63,332) (831,008) 1,632,340 2,073,468
Non-operating
Revenue (expense) 583,616 262,402 225,069 401,833 164,765
Net income (loss)
before income taxes 1,488,612 199,070 (605,939) 2,034,173 2,238,233
Income Tax
Expense 14,704 14,240 17,414 24,914 29,463
Net Income (loss) 1,473,908 184,830 (623,353) 2,009,259 2,208,770
(1) See also discussion under “–Management’s Discussion and Analysis.”
(2) Includes depreciation and payments made to the Flood Control District pursuant to the AMWC Delivery Contract. See
“Security and Sources of Payment for the Bonds–The Delivery Contracts” in the forepart of this Official Statement.
Source: AMWC.
Management’s Discussion and Analysis
The following discussion relates to certain items in the table above.
Total Revenues. Total revenues increased by approximately [11.85]% in FYE 2024 compared to
FYE 2025, primarily due to increased water sales and rates. Water sales revenues for FYE 2025 were
approximately 12.13% more than for FYE 2024, which is primarily attributed to the water rate increase
adopted in June 2024 and increased water sales.
Operating Expenses. Operating expenses, including depreciation and excluding Nacimiento
Project debt service, increased approximately [11]% in FYE 2025 compared to FYE 2024 primarily due to
higher energy, labor, and insurance costs.
Projected Operating Results. The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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Outstanding Long-Term Indebtedness
Other than the Bonds, AMWC has no other outstanding long-term indebtedness payable from the
revenues of the AMWC Water System. [confirm]
Capital Improvement Program
AMWC currently plans to engage in numerous capital improvement projects, including
construction of a water treatment facility and other AMWC Water System facility and infrastructure
upgrades, over the next five fiscal years. See also “— Future Water System Improvements” herein for
AMWC’s expected capital projects for FYE 2027 through FYE 2031.
Investment Policy
AMWC investment policy requires AMWC to invest in insured and other secure investments, such
as Treasury bills, notes and certificates of deposit. Such securities are stated in the audited financial
statements at cost, adjusted for amortization of premiums and accretion of discounts over their remaining
lives.
Insurance
AMWC is covered under various insurance policies, including general liability, property damage,
workers’ compensation, automobile and excess liability policies.
Employees
For FYE 2026, AMWC has budgeted 22.8 full-time equivalent employees.
Pension
AMWC adopted a defined contribution pension plan in January 1, 1974. The pension plan is a
qualified defined plan contribution pension trust under Section 401 of the Internal Revenue Code. AMWC
reserves the right to terminate the trust at its discretion. Trustees of the pension trust are the AMWC Board
of Directors. All full-time employees, with the exception of leased employees, with six months of service
and who are at least 18 years or older are eligible to join. Each participant may contribute up to the
maximum annual contribution limitation established under Internal Revenue Service Regulations.
Participants who are over age 50 may contribute additional amounts.
AMWC makes a 3% safe harbor contribution, as well as a 4% matching contribution of the eligible
employee’s annual compensation. Employer contributions to the plan for FYE 2025 and FYE 2024 were
$165,688 and $155,289, respectively.
Vesting of contributions is as follows:
Years of Service Vested
1 year 25%
2 years 50
3 years 75
4 years or more 100
Source: AMWC Financial Statements April 30, 2025 and 2024.
Page 194 of 357
A1-13
AUDITED FINANCIAL STATEMENTS
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A2-i
APPENDIX A2
CITY OF EL PASO DE ROBLES
TABLE OF CONTENTS
Page
THE CITY OF EL PASO DE ROBLES ................................................................................................. A2-1
General ................................................................................................................................................ A2-1
Governance and Management ............................................................................................................. A2-1
Land and Land Use ............................................................................................................................. A2-1
Water Rights ....................................................................................................................................... A2-2
No Litigation Related to the 2026 Bonds ............................................................................................ A2-3
THE WATER SYSTEM OF THE CITY OF EL PASO DE ROBLES .................................................. A2-3
Service Area ........................................................................................................................................ A2-3
Water and Wastewater Facilities ......................................................................................................... A2-3
Water Permits, Licenses and Other Regulations ................................................................................. A2-3
Water System and Water Supply ........................................................................................................ A2-4
Drought and Conservation Measures .................................................................................................. A2-5
Water Connections .............................................................................................................................. A2-5
Water Deliveries ................................................................................................................................. A2-5
Water Sales Revenues ......................................................................................................................... A2-5
Largest Customers .............................................................................................................................. A2-6
Water System Rates and Charges ....................................................................................................... A2-6
Future Water System Improvements ................................................................................................... A2-7
Cybersecurity ...................................................................................................................................... A2-8
FINANCIAL INFORMATION OF PASO ROBLES ............................................................................ A2-9
Budgetary Process ............................................................................................................................... A2-9
Financial Statements ........................................................................................................................... A2-9
Operating Results .............................................................................................................................. A2-10
Management’s Discussion and Analysis ........................................................................................... A2-10
Outstanding Long-Term Indebtedness .............................................................................................. A2-10
Investment Policy.............................................................................................................................. A2-10
Insurance ........................................................................................................................................... A2-11
Pension Benefits................................................................................................................................ A2-11
Post-Employment Benefits ............................................................................................................... A2-12
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ........................... A2-13
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Article XIII B .................................................................................................................................... A2-13
Proposition 218 ................................................................................................................................. A2-13
AUDITED FINANCIAL STATEMENTS ........................................................................................... A2-13
Tables
Table A2-1–Paso Robles Water Connections ........................................................................................ A2-5
Table A2-2–Paso Robles Water Deliveries ........................................................................................... A2-5
Table A2-3–Paso Robles Water Sales Revenues ................................................................................... A2-6
Table A2-4–Paso Robles Connection Fees ............................................................................................ A2-6
Table A2-5–Paso Robles Water Rates ................................................................................................... A2-7
Table A2-6–Paso Robles Water System Operating Results ................................................................ A2-10
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A2-1
THE CITY OF EL PASO DE ROBLES
General
The City of Paso Robles (“Paso Robles), officially El Paso de Robles, is a municipal corporation
incorporated in 1889. Paso Robles is located in the Central Coast region of the State of California (the
“State”), just off of U.S. Highway 101 and within easy reach of beaches, rolling hills, and outdoor
recreation. Paso Robles’s strategic location, supportive business climate, and thriving tourism economy
make it an appealing place to live, work, and grow. Paso Robles continues to be one of the fastest growing
cities within the County of San Luis Obispo and has become its second largest city with a population of
31,525 according to the State Department of Finance (a population gain of 374 year-over-year). Paso Robles
anticipates accommodating a population of up to approximately 42,800 residents by 2045.
Paso Robles has previously entered into a Delivery Contract (the “Delivery Contract”) with the San
Luis Obispo County Flood Control and Water Conservation District (the “Flood Control District”), pursuant
to which Paso Robles covenanted, inter alia, to pay its pro rata share of various capital expenses relating
to the funding of design costs, engineering, planning, environmental mitigation, equipping new facilities
and/or construction efforts, accounting services, project administration and management, installation,
grading, razing and building the Nacimiento Project.
For additional financial information regarding Paso Robles, see the financial statements submitted
by Paso Robles under the heading “AUDITED FINANCIAL STATEMENTS.”
Governance and Management
Paso Robles is organized as a “general law” city with a city council/manager form of government.
The five-member City Council (the “City Council”), including an at-large, elected Mayor and four district
Councilmembers, sets policy direction, adopts ordinances and resolutions, makes land use decisions, and
approves Paso Robles’s budget. The voters also elect one City Treasurer at-large. All six elected position
are nonpartisan. The city manager is appointed by the City Council to enforce city laws, direct the
operations of the city government, prepare and manage the budget and implement the programs initiated
by the City Council. Paso Robles is a full-service city as the organization directly provides a wide range of
essential public services that enhance community safety, quality of life, and sustainable growth including
police and fire and emergency medical services; library, parks, and recreation services; landfill maintenance
and operations; water, wastewater, and stormwater utility services; municipal airport; streets, s idewalks,
trails, and traffic safety infrastructure; building inspections; licenses and permits; and private development
review, approval, and inspection services.
Land and Land Use
Paso Robles is located in the northern portion of the County of San Luis Obispo in the upper Salinas
River Valley. The Salinas River itself flows through the center of Paso Robles from south to north. The
community is bounded by steep hills and canyons on the west, open rolling hills to the east, and relatively
flat river valley topography to the north and south. Paso Robles is located in a rich agricultural area where
ranchlands are transitioning to vineyards to support a growing wine industry.
Paso Robles is centered on an identifiable downtown and surrounded by residential neighborhoods.
The development pattern of Paso Robles is different on the east side of the Salinas River than on the west
side. The older part of the community lies west of the Salinas River and Highway 101. This area includes
many prominent buildings of architectural interest, which are developed along a traditional grid network of
streets and alleys. However, the steep hills on the west side have limited growth in this area, and much of
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Paso Robles’s growth over the past 20 years has occurred on the east side of the Salinas River. The eastern
portion of Paso Robles includes many newer developments and is primarily residential in character.
The total area within the corporate limits of Paso Robles is approximately 20.0 square miles,
comprising a total of 12,739 acres. In 2003, Paso Robles established the maximum potential geographical
boundaries to which Paso Robles could grow in the foreseeable future.
The existing sphere of influence (areas outside of Paso Robles current boundaries where growth
may occur in the future) comprise approximately 1,026 acres of developable land.
Water Rights
Paso Robles has significant water rights in the Salinas River and pumps groundwater from its wells
at this location. Paso Robles also has groundwater wells outside of the Salinas River as well as annual
allocations from the Nacimiento Lake surface water.
Two separate lawsuits were filed against Atascadero Mutual Water Company, Paso Robles, County
of San Luis Obispo, San Luis Obispo County Flood Control and Water Conservation Di strict, San Miguel
Community Services District and Templeton Community Services District. The first lawsuit, titled
Steinbeck Vineyards #1, LLC, et al. v. County of San Luis Obispo, et al., Santa Clara County Superior
Court Case No. 1-14-CV-265039 (“Steinbeck Litigation”), was initiated on November 25, 2013 by a
number of landowners who own property within San Luis Obispo and Monterey Counties and claim that
their rights to use groundwater are superior to those of the defendant water suppliers and public agencies.
In addition to the Steinbeck Litigation, another landowner, alleging similar claims, initiated a
separate lawsuit against the same public agencies and water suppliers on May 5, 2014. That landowner is
not actively pursuing his claims against the defendants. As such, the discussion below focuses on the
proceedings in the Steinbeck Litigation.
It should be noted that both lawsuits are limited in nature—they are quiet title actions involving a
limited number of pumpers and/or landowners as opposed to comprehensive basin-wide adjudications.
In the Steinbeck Litigation, the Court scheduled several phases of trial. The first trial commenced
on January 5, 2016 and involved presentation of evidence from the plaintiff landowners as to their claims
that the parties pump from a common groundwater supply. The Court issued its ruling on April 11, 2016,
holding that plaintiffs have met their prima facie case and the burden of proof is now shifted to the
defendants to prove their affirmative defenses.
The second phase of trial involved certain defendants’ claim that the Atascadero area should be a
separate groundwater basin. The Court held that the area is not a separate and distinct basin for purposes of
the quiet title action. Thereafter, the parties stipulated to the basin boundary as the outermost exterior
boundary line for the Combined Subbasins as identified by the California Department of Water Resources
(“DWR”) in DWR’s 2016 Bulletin 118 Interim Update.
The third phase of trial commenced on August 28, 2018 to determine Paso Robles, County of San
Luis Obispo, San Miguel Community Services District and Templeton Community Services District’s
affirmative defense that they have acquired prescriptive water rights. After a four-week trial, the jury found
that those defendants acquired such water rights through their pumping of groundwater from 1981 to 1990.
The Court subsequently quantified those prescriptive water rights.
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Trial on plaintiffs’ “self-help” defense against the defendants’ prescriptive water rights commenced
on November 1, 2021. The Court issued its ruling on March 4, 2024, finding th at only certain plaintiff
landowners established self-help pumping during the prescriptive period, while others did not.
Trial on the San Miguel Community Services District’s pueblo and treaty rights are scheduled to
commence on August 17, 2026. This is the last phase of trial before the Court issues a judgment. Paso
Robles intends to participate in the trial and subsequent proceedings to protect its rights.
No Litigation Related to the 2026 Bonds
There is no litigation pending or, to Paso Robles’s knowledge, threatened in any way to restrain or
enjoin the delivery of the 2026 Bonds, to contest the validity of the 2026 Bonds, or any proceeding of Paso
Robles with respect thereto.
THE WATER SYSTEM OF THE CITY OF EL PASO DE ROBLES
Service Area
Paso Robles’s service area is limited to its incorporated city limits, serving a population of
approximately 31,525 as of January 2026, with a combined 11,115 residential and commercial/industrial
utility accounts, and 370 irrigation customers as of June 30, 2025. The service area served is approximately
20 square miles and topography varies from 660 feet above sea level at the Salinas River to more than
980 feet on the hillsides east of Golden Hill storage tanks.
Water and Wastewater Facilities
The Paso Robles water system (the “Paso Robles Water System”) is composed of 17 active
groundwater wells (eight relatively shallow wells, including three Ronconi Wells that required treatment
by an auxiliary micro-filtration trailer, located along the Salinas River Corridor and nine deeper basin wells
located throughout Paso Robles); two arsenic removal treatment systems; two micro-filtration systems: one
2.4 million gallons per day (“mgd”) and one [___] mgd micro-filtration water treatment plants; six booster
stations (used to pump water to higher elevations), plus one east-west booster station at 13th Street; and
four storage reservoirs with a total capacity of over 12 million gallons. The storage reservoirs include: two
4-million gallon welded steel tanks; one 4-million gallon reinforced concrete reservoir; and a 150,000
gallon welded steel tank. The Paso Robles Water System also includes approximately 185 miles of
distribution mains.
Water Permits, Licenses and Other Regulations
The Paso Robles Water System is permitted and regulated by the State Water Resources Control
Board, Division of Drinking Water (System No. 401-0007). The California Division of Drinking Water
(“DDW”) inspected the Paso Robles Water System most recently in March 2024. The report describes the
system as generally well-operated and compliant, with no DDW enforcement actions. It identified several
follow-up items, but it did not describe an immediate threat to drinking-water safety. The 2025 Annual
Water Quality Report confirms that Paso Robles water met all applicable state and federal drinking-water
standards during 2025.
River-well production was 2,642 acre-feet (“AF”) in 2025 and averaged approximately 3,124 acre-
feet per year (“AFY”) from 2020 through 2025. Paso Robles’s surface-water permit allows a maximum
diversion of 4,600 AFY, sufficient to meet projected river -well demand through buildout.
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Paso Robles is a Groundwater Sustainability Agency for the portion of the Paso Robles Subbasin
within its jurisdiction. Paso Robles is also a member of the Paso Robles Area Groundwater Authority
(PRAGA), formed in 2025 to coordinate and fund basin-wide monitoring, reporting, projects, management
actions, and Sustainable Groundwater Management Act compliance. Paso Robles participates in
groundwater-level and water-quality monitoring, annual reporting, five-year plan evaluations,
supplemental-supply development, conservation, recycled-water planning, and potential projects intended
to reduce reliance on basin groundwater.
Water System and Water Supply
As of June 30, 2025, there were 11,115 active consumer connections compared to 10,999 as of
June 30, 2024. Paso Robles has no affiliation with other existing water agencies except for its affiliation
with the Flood Control District for the delivery of water from the Nacimiento Project.
Historically, Paso Robles met the service-area customer needs using wells that pump groundwater
and Salinas River water. Additionally, Paso Robles produced 939 AF of treated Nacimiento water at the
Water Treatment Plant and recovered another 67 AF through the dedicated recovery well, for a total of
1,006 AF. From 2020 through 2025, these two sources averaged approximately 1,416 AF annually. Paso
Robles holds a contractual NWP entitlement of 6,488 AFY (sufficient to meet projected demand through
buildout). The Water Treatment Plant is currently capable of producing 2,688 AFY (2.4 mgd).
The 2025 Annual Water Quality Report lists the average total dissolved solids at 424 parts per
million (ppm), with a reported range of 180–760 ppm. The secondary maximum contaminant level shown
in the report is 1,000 ppm, and no violation was reported.
Recycled Water. In 2017, Paso Robles entered into an installment sale agreement with the State
Water Resources Control Board for the construction of Tertiary Treatment Facilities at the Wastewater
Treatment Plant in the amount of $14.4 million. This project, by way of producing recycled wate r, was
eligible for a loan forgiveness grant in the amount of $4.0 million. It is anticipated that the debt will be paid
by Fiscal Year 2048-49. The total debt amount outstanding on June 30, 2025, was $8,624,051. In 2023,
Paso Robles entered into an installment sale agreement with the State Water Resources Control Board for
the construction of the Paso Robles Recycled Water Distribution System in the amount of $22.1 million.
Approximately $1.5 million has been withdrawn to reimburse for design services incu rred-to-date.
Unfortunately, the project is currently on hold and is not likely to be constructed as initially planned. As a
result, Paso Robles is required to repay the $1.5 million loan over the next five years beginning on February
28, 2027. All funding is through the Paso Robles Sewer Enterprise Fund and not from Water System
Revenues.
Paso Robles has been named as a defendant in two lawsuits filed by landowners who claim superior
overlying water rights as against Paso Robles and other water supplier defendants. For a description of
these actions, see “— Water Rights” herein and see also “LITIGATION–Steinbeck Vineyards and
Eidemiller” in the forepart of this Official Statement.
PFAS Monitoring. Paso Robles routinely monitors for PFAS in its water supply and has
periodically detected low levels of certain PFAS. Paso Robles has not identified any specific source of
these PFAS that have reached its water supplies, and the occasional PFAS detections remain below the
State’s required response levels. See “CERTAIN RISKS TO BOND OWNERS – Water Quality and PFAS”
in the forepart of this Official Statement for a discussion on PFAS regulations and requirements.
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A2-5
Drought and Conservation Measures
Paso Robles adopted its current Water Shortage Contingency Plan in June 2026. Conservation
measures include reducing landscape irrigation and incentivizing leak repair. Paso Robles continues to
implement water conservation through public education and outreach, customer assistance, rebates and
incentives, water-waste enforcement, irrigation requirements, and permanent prohibitions against wasteful
water use.
Water Connections
The following table shows the growth in the number of water connections to the Paso Robles Water
System for Fiscal Years 2020-21 through 2024-25.
Table A2-1
Paso Robles
Water Connections
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended (June 30) Connections % Increase/(Decrease)
2021 10,874 --
2022 10,899 0.23%
2023 10,951 0.48
2024 10,999 0.44
2025 11,115 1.05
Source: Paso Robles.
Water Deliveries
The following table presents a summary of water deliveries for the Paso Robles Water System in
cubic feet per year for the Fiscal Years 2020-21 through 2024-25.
Table A2-2
Paso Robles
Water Deliveries
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended (June 30)
Total Gallons
(in hundreds) % Increase/(Decrease)
2021 1,871,939 --
2022 1,814,957 (3.04)%
2023 1,635,733 (9.87)
2024 1,656,053 1.24
2025 1,672,355 0.98
Source: Paso Robles.
Water Sales Revenues
The following table shows annual water sales revenues from water sales for Fiscal Years 2020-21
through 2024-25.
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Table A2-3
Paso Robles
Water Sales Revenues
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended (June 30) Sales Revenues % Increase/(Decrease)
2021 $16,553,214 --
2022 16,608,091 0.33%
2023 15,889,796 (4.32)
2024 16,737,235 5.33
2025 19,039,492 13.76
Source: Paso Robles.
Largest Customers
For the Fiscal Year ended June 30, 2026, no customer’s total billings represent 10% or more of the
gross revenues of the Paso Robles Water System.
Water System Rates and Charges
Paso Robles’s water rates are comprised of a monthly unit (consumption) charge based on the
amount of water used. Paso Robles also charges for connections to the Paso Robles Water System, and for
metered construction water consumption.
Connection Fee. Paso Robles charges connection fees for improvement or expansion of water
treatment and distribution facilities to meet the requirements of community growth. As of January 1, 2026,
connection fees for single family residences and commercial and industrial units range from $19,066 to
$1,461,788 depending upon the meter size installed. Paso Robles assesses a connection fee based on
customer class and meter size. The fee is as follows:
Table A2-4
Paso Robles
Connection Fees
As of January 1, 2026
Meter Size (in inches) Connection Fee
3/4” $19,066
1” 31,840
1.5” 63,490
2” 101,622
3” 190,660
4” 317,830
6” 635,470
8” 1,016,790
10” 1,461,788
Source: Paso Robles.
User Rates and Charges. Paso Robles charges rates (base fee plus consumption fee) for all
customers, which have increased or will increase each year from April 1, 2023 through January 1, 2027.
Pursuant to Resolution No. 22-167, adopted on December 20, 2022, Paso Robles established five-year rate
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increases concluding on January 1, 2027. The historic, current and approved rates through calendar
year 2027 for all customers are set forth in the following table:
Table A2-5
Paso Robles
Water Rates
Effective Date
April 1, January 1, January 1, January 1, January 1,
2023 2024 2025 2026 2027
Monthly Fixed Charges
Monthly charge billed based on meter size
Single Family 3/4 & 1-
inch
$13.00 $16.00 $19.00 $22.00 $25.00
3/4-inch Other $13.00 $16.00 $19.00 $22.00 $25.00
1-inch Other $16.33 $22.67 $29.00 $35.34 $41.67
1.5-inch $24.67 $39.33 $54.00 $68.66 $83.33
2-inch $34.67 $59.33 $84.00 $108.66 $133.33
3-inch $58.00 $106.00 $154.00 $202.00 $250.00
4-inch $91.33 $172.67 $254.00 $335.34 $416.67
6-inch & larger $174.67 $339.33 $504.00 $668.66 $833.33
Usage Charges
Billed based on metered water use in each billing period
Rate per unit ($/hcf) $6.68 $6.81 $6.96 $7.13 $7.32
* HCF = hundred cubic feet, or 748 gallons
Source: Paso Robles.
If it is determined that water rate increases will be required in the future to meet coverage
requirements, Paso Robles will implement those increases through the required public hearing process. See
also “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS.”
Collection Procedures. Paso Robles is on a monthly billing cycle for water service. Payment is due
by the fifth day of the following month and is considered delinquent if not paid by that date. If not paid by
end of such day, the account is deemed delinquent, and customers are assessed a 10% penalty. If the amount
due is not paid within 10 days of the penalty date, water service is terminated. Prior to termination of
service, Paso Robles provides a 48-hour notification on the door where service is to be terminated until
paid. Termination notices are delivered to each such delinquent account two days prior to the
discontinuance date. Customers receiving termination notices are currently assessed a $50 penalty fee. If
service is discontinued, the customer must pay an additional $61 non-payment/restoration fee (this fee is
subject to the provisions of Senate Bill 998). Both fees are increased by the annual percentage increase of
the CPI on July 1 of each year.
Future Water System Improvements
In 2022, Paso Robles developed a water system Master Plan (the “Master Plan”) which assessed
the ability of the existing water system to reliably meet the needs of current customers, as well as city-wide
needs at buildout. The Master Plan identifies improvements to the water distribution system that are
necessary to meet existing and projected demands. The Master Plan was included in Paso Robles’s recent
water rate study.
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The major findings of the Master Plan are that approximately 5 miles of transmission and pipeline
improvements, estimated to cost $12.1 million, are recommended to reliably meet existing demands, in
particular to reliably sustain fire flows. Recommended improvements to meet current needs are focused in
the west side of the system to improve fire flow for multiple land uses. Storage on each side of Paso Robles
and existing river crossings provide adequate redundancy and reliability for existing conditions and
distribution of supply from the Phase 1 Nacimiento Water Treatment Plant.
Increasing water demand coupled with the anticipated locations of potable water customers at
buildout point to the need for an additional 3.2 miles of transmission and pipeline improvements estimated
to cost $12.6 million. Transmission and pipeline improvements include installations to serve future single-
family and multi-family residential developments at the eastern and southeastern areas of the system and
the installation of a 16-inch main river crossing near the Thunderbird well field area to provide redundancy
and reliability for distribution of Nacimiento water. An additional $4.5 million in storage tank
improvements are also recommended to meet needs at buildout. These pipeline and storage improvements
are within the Paso Robles’s existing water distribution system and do not include new pipelines and
facilities within planned developments necessary for providing service within those developments.
In addition to the recommended capital improvements to address current or future capacity
deficiencies, Paso Robles is proactively planning for the repair or replacement of the Paso Robles Water
System assets as they reach the end of their useful lives. An anticipated replacement schedule for
distribution system pipelines has been developed based on an analysis of pipeline age and useful life.
Rehabilitation and replacement projects were developed for both the booster pump stations and storage
tanks, as well. The total budget for these projects over the next 30 years is $1.8 million for the booster pump
station projects and $1.8 million for tank projects. Paso Robles plans to inspect wells regularly, perform
efficiency test annually, and rehabilitate up to two wells per year. Based on age of the wells and
rehabilitating two wells per year, Paso Robles’s budget includes a total of $13.4 million over the next 30
years.
The capital improvement plan described above does not include costs for a planned replacement of
the spillway at San Antonio Dam. The spillway replacement is proposed to be undertaken by the Monterey
County Water Resources Agency. The Flood Control District may be required to contribute up to
approximately 32.3%, or about $25.2 million (estimated as of 2025), of the costs of the spillway
replacement. The Flood Control District would charge through such costs, if any, proportionally to the
Participants under the Delivery Contracts, including the Delivery Contract with Paso Robles. Spillway
replacement project costs are expected to be incurred beginning in 2028. If Paso Robles is required to
contribute, it currently expects to fund its share of such costs from water revenues, which may require
increases in water rates. Currently, whether and how much the Flood Control District and, correspondingly,
the Participants, including Paso Robles, will pay, and the funding sources for such payments, have not been
determined and may change as the foregoing parties deliberate on proposals for the spillway replacement
project at San Antonio Dam.
Cybersecurity
Paso Robles, like other public and private entities, relies on a large and complex technology
environment to conduct its operations, and consequently faces the threat of cybersecurity incidents. Such
incidents can result from unintentional events, or from deliberate attacks by unauthorized entities or
individuals attempting to gain access to Paso Robles’s information technology systems to misappropriate
assets or information or to cause operational disruption and damage. Paso Robles and its departments face
cyber threats from time to time, including but not limited to hacking, viruses, malware, phishing, distributed
denial-of-service, and other attacks on computers, networks, and systems. Paso Robles maintains cyber
liability insurance through its insurance carrier.
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No assurances can be given that Paso Robles’s security and operational control measures will
ensure against any and all cybersecurity threats and attacks. A cybersecurity incident or breach could
damage Paso Robles’s information technology systems and cause disruption to city services and operations.
Although Paso Robles carries cyber liability insurance, the cost of any such disruption or remedying
damage caused by future attacks could be substantial. Paso Robles will continue to assess cyber threats and
protect its data and systems.
Paso Robles is also reliant on other entities and service providers in connection with its operations
and finances. No assurance can be given that Paso Robles and these other entities will not be affected by
cyber threats and attacks in a manner that may affect the operations and finances of Paso Robles, including
its ability to meet payment obligations under its Delivery Contract.
FINANCIAL INFORMATION OF PASO ROBLES
Budgetary Process
Paso Robles’s budget development framework is guided by four primary priorities: (1) the long-
term well-being and economic strength of the community; (2) the long-term fiscal stability of Paso Robles;
(3) the nature and scope of municipal services provided; and (4) the overall well -being of the organization
and its employees. As a service based organization, Paso Robles relies heavily on its workforce to deliver
essential services, making organizational health a critical component of financial planning. The budget
process is therefore centered on balancing these priorities in a manner that ensures they work collectively
to support both current service levels and long-term sustainability.
The operating budget is prepared in the context of a five-year financial plan with operating
expenditures and revenues being balanced over the term of the five-year financial plan. Paso Robles
typically adopts a two-year budget, except in special situations (as in the case of the COVID -19 pandemic),
which may call for a one-year budget. The budget development process begins with a review of current
appropriations, with adjustments made only as needed to maintain existing service levels. This “baseline”
approach accounts for known cost changes, such as contractual salary increases, updated employee benefit
costs, or the elimination of services that are no longer required. Next, finance staff compiles budgetary
requests for new and/or expanded services, as well as requests for operating capital not already provided
for on various pre-authorized replacement schedules. These schedules are distributed to all executive
managers for affirmation and/or completion. Upon affirmation and return of new request forms, the finance
department compiles and publishes the draft budget. Executive managers meet to review the draft budget
and prepare specific recommendations to balance the budget should resources not cover budgetary requests.
The draft budget and executive manager recommendations are then reviewed by the City Council and then
formally adopted in June. The budget preparation, review, and approval process take place in the context
of and with the objective of addressing the goals established by the City Council during a goal setting
workshop held just prior to the process noted above.
Financial Statements
The most recent comprehensive annual financial report of Paso Robles prepared by Moss, Levy &
Hartzheim L.L.P., independent certified public accountants, is attached hereto. The independent auditor’s
letter concludes that the comprehensive annual financial report presents fairly, in all material respects, the
financial position of the business-type activities of Paso Robles as of June 30, 2025, and the respective
changes in financial position and cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
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The summary operating results contained under the caption “–Operating Results” are derived from
these financial statements (excluding certain non-cash items and after certain other adjustments) and are
qualified in their entirety by reference to such statements, including the notes thereto.
Operating Results
The following table is a summary of operating results of Paso Robles Water System, for Fiscal
Years 2020-21 through 2024-25. These results have been derived from the financial statements of Paso
Robles, and excludes certain receipts which are not included as Revenues under the Delivery Contract and
certain non-cash items and includes certain other adjustments.
Table A2-6
Paso Robles Water System
Operating Results
Fiscal Years Ended June 30
2021 2022 2023 2024 2025
Revenues
Charges for Current
Services $16,553,214 $16,608,091 $15,889,796 $16,737,235 $19,039,492
Interest Revenues 34,150 122,062 190,545 458,687 502,289
Connection Fees 495,527 1,008,013 1,844,929 1,027,794 3,013,923
Other Revenue 20,725 23,455 34,944 16,918 45,654
Total Revenues 17,103,616 17,761,621 17,960,214 18,240,634 22,601,358
Maintenance,
Operations, and
Administration(1)
12,417,131 12,133,925 11,959,228 13,075,391 13,763,864
Net Revenues 4,686,485 5,627,696 6,000,986 5,165,243 8,837,494
(1) Excludes depreciation and amortization.
Source: Paso Robles.
Management’s Discussion and Analysis
For the Fiscal Year ended June 30, 2025, the Water Fund’s change in net position was $7.0 million,
representing a 13.7% increase when compared to the prior year. The growth, in large part, is attributable to
the utility rate increase enacted by City Council approximately five years ago while operating expenses
have been stable over the past two fiscal years. The Water Fund’s expenses for the [current] fiscal year
were $15.9 million, representing an increase of $698,000, or 4.6%.
Outstanding Long-Term Indebtedness
On March 1, 2019, Paso Robles issued $8,118,000 Water Revenue Bonds for the purpose of
providing funds for the replacement of the 21st Street Reservoir, an approximately four -million-gallon
water storage tank. As of June 30, 2025, $5,266,712 of such Water Revenue Bonds was outstanding.
Investment Policy
Cash balances from all funds are combined and invested pursuant to the City Council’s adopted
Investment Policy and California Government Code. Authorized investments include securities of the
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United States or its agencies, certificates of deposit, the State of California Local Agency Investment Fund,
bakers’ acceptances, negotiable certificates of deposit and repurchase agreements. The earnings from these
investments are allocated monthly to each fund based upon the closing balance of each fund at month end.
All enterprise fund investments are considered to be liquid investments for cash flow and reporting
purposes. Funds held by outside fiscal agents under the provisions of bond indentures are maintained
separately and interest income earned on such funds are credited directly to the bond fund or reported as if
the interest was credited directly to said funds.
Insurance
Paso Robles is a member of the California Joint Powers Insurance Authority, a risk sharing self-
funded joint powers authority composed of 126 California public agencies. The California Joint Powers
Insurance Authority arranges and administers programs for providing self-insured losses, purchases excess
insurance or reinsurance, and arranges for group purchased insurance for property and other lines of
coverage. For additional information regarding Paso Robles’s insurance programs and related coverage,
see Note 18 of the financial statements attached hereto.
Pension Benefits
Plan Description. Paso Robles includes two separate types of employer plans where all qualified
permanent and probationary employees are eligible to participate, depending on the employee classification
(i) Miscellaneous Employee Pension Plan (the “Miscellaneous Plan”), an agent multiple-employer defined
benefit pension plan, and (ii) Safety Employee Pension Plan (includes police and fire), a cost-sharing
multiple employer defined benefit pension plan. Eligible employees of the Paso Robles Water System
participate only in the Miscellaneous Plan. Both types of pension plans are administered by the California
Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative
agent for its participating member employees. Benefit provisions under the plans are established by State
statute and Paso Robles City Council resolution. CalPERS issues publicly available reports that include a
full description of the pension plans regarding benefit provisions, assumptions and membership information
that can be found on the CalPERS website (https://www.calpers.ca.gov/).
Benefits Provided. For both plans, CalPERS provides service retirement and disability benefits,
annual cost of living adjustments and death benefits to plan members, who must be public employees and
beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment.
Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All
members are eligible for nonduty disability benefits after 10 years of service. The death benefit is one of
the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death
Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’
Retirement Law.
The provisions and benefits in effect at June 30, 2025 for the Miscellaneous Plan, are summarized
as follows:
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Miscellaneous Plan
Tier Tier II(1) Tier III (PEPRA)
Prior to On or after On or after
Hire date May 27, 2012 May 27, 2012 January 1, 2013
Benefit formula 2.5% @ 55 2.0% @ 60 2.0% @ 62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payment Monthly for life Monthly for life Monthly for life
Retirement age 50-55 50-63 52-67
Monthly benefits, as a % of
eligible compensation 2.00% to 2.70% 1.43% to 2.42% 1.00% to 2.50%
Final average compensation
period One year Three year Three year
Required employee
contribution rate 8.000% 7.000% 7.750%
Required employer normal
cost rate 10.450% 10.450% 10.450%
Required employer payment of
UAL(2) |-----------------------------$2,478,940---------------------------|
(1) Second tier will only apply to employees transferring from another CalPERS’ agency or one with reciprocity on or after
May 27, 2012.
(2) The Miscellaneous Plan’s required employer payment of the Unfunded Actuarial/Accrued Liability (UAL) was calculated
for the entire plan and is not allocated by Tier.
Source: City of El Paso de Robles Annual Comprehensive Financial Report, Fiscal Year Ended June 30, 2025.
Contributions. Section 20814(c) of the California Public Employees’ Retirement Law requires that
the employer contribution rates for all public employers be determined on an annual basis by the actuary
and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the
plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined
rate is the estimated amount necessary to finance the costs of benefits earned by employees during the fiscal
year, with an additional amount to finance any unfunded accrued liability. Paso Robles is required to
contribute the difference between the actuarially determined rate and the contribution rate of employees.
For additional information regarding the plans, including actuarial methods and assumptions,
discount rate, pension liability and expense, see Notes 10 and 11 of the financial statements.
Post-Employment Benefits
Plan Description. In addition to pension benefits, the Paso Robles provides other post-employment
benefits (OPEB), a single employer contribution plan, in accordance with State statutes, to all employees
retiring from Paso Robles and enrolled in an insurance program under the California Public Employees’
Medical and Hospital Care Act (PEMHCA). Providing healthcare benefits under the Paso Robles’s group
health plan may provide benefits at a substantially lower cost than if the retirees purchased their own
individual benefits.
Benefits Provided. Paso Robles is required to contribute the PEMHCA minimum to CalPERS on
behalf of annuitants eligible for, and participating in, CalPERS’ health insurance. In addition to
contributions under PEMHCA, Paso Robles provides the following retiree medical reimbursement:
(i) Management, Police, Fire and Service Employees International Union (SEIU) employees hired before
January 1, 2012, and who have a minimum of 10 years of service with Paso Robles, are eligible to receive
up to $500 per month in medical reimbursements with no age limitation and (ii) Management, Police, Fire
and SEIU employees hired on or after January 1, 2012, and who have a minimum of 20 years of service
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with Paso Robles, are eligible to receive up to $500 per month in medical reimbursements until age 65 .
Paso Robles’s contributions may be used to defray premium cost for either Paso Robles provided plan(s)
or other plans(s) secured by the retiree. Each retiree choosing to receive Paso Robles provided health care
insurance pays CalPERS the full premium cost that exceeded Paso Robles’s contribution as detailed above
directly.
For additional information regarding post-employment benefits including the annual contributions,
expense, and obligation, see Note 12 of the financial statements.
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES
Article XIII B
Article XIII B of the State Constitution limits the annual appropriations of the State and of any city,
county, school district, authority or other political subdivision of the State to the level of appropriations of
the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and
population. Paso Robles is of the opinion that charges for Water Service do not exceed the costs it
reasonably bears in providing such services and therefore are not subject to the limits of Article XIII B.
Paso Robles has covenanted in the Delivery Contract that it will establish, fix and collect rates and charges
from the customers of the Paso Robles Water System at levels sufficient to produce revenue from the Paso
Robles Water System which are at least equal to: the costs of operating and maintaining the Paso Robles
Water System; plus the Contract Payments (as defined in the Delivery Contract). Paso Robles is of the
opinion that the water rates and use charges imposed by Paso Robles do not exceed the costs that Paso
Robles reasonably bears in providing such service.
Proposition 218
Article XIII D requires that any agency imposing or increasing any property-related fee or charge
must provide written notice thereof to the record owner of each identified parcel upon which such fee or
charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge
may not be imposed or increased if a majority of owners of the identified parcels file written protests against
it. As a result, if and to the extent that a fee or charge imposed by a local government for water or wastewater
service is ultimately determined to be a “fee” or “charge” as defined in Article XIII D, the local
government’s ability to increase such fee or charge may be limited by a majority protest. See the discussion
under “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS–Articles XIII C and XIII D of the California Constitution” in the forepart of this
Official Statement.
AUDITED FINANCIAL STATEMENTS
The following is the complete comprehensive annual financial report of Paso Robles for the
Fiscal Year ended June 30, 2025. Only the gross revenues of the Paso Robles Water System is pledged
to pay the obligations of Paso Robles under its Delivery Contract. The inclusion of the complete
comprehensive annual financial report of Paso Robles does not imply that any revenues of Paso Robles
other than those of the Paso Robles Water System are pledged or available to make any payments under
the Delivery Contract.
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i
APPENDIX A3
CITY OF SAN LUIS OBISPO
TABLE OF CONTENTS
Page
THE CITY OF SAN LUIS OBISPO ...................................................................................................... A3-1
General ................................................................................................................................................ A3-1
Governance and Management ............................................................................................................. A3-1
Land and Land Use ............................................................................................................................. A3-1
Water Rights ....................................................................................................................................... A3-2
No Litigation Related to the 2026 Bonds ............................................................................................ A3-3
THE WATER SYSTEM OF THE CITY OF SAN LUIS OBISPO ........................................................ A3-3
Service Area ........................................................................................................................................ A3-3
Water Facilities ................................................................................................................................... A3-3
Water Permits, Licenses and Other Regulations ................................................................................. A3-4
Water System and Water Supply ........................................................................................................ A3-4
Drought and Conservation Measures .................................................................................................. A3-4
Water Connections .............................................................................................................................. A3-5
Water Deliveries ................................................................................................................................. A3-5
Water Sales Revenues ......................................................................................................................... A3-6
Largest Customers .............................................................................................................................. A3-6
Water System Rates and Charges ....................................................................................................... A3-7
Future Water System Improvements ................................................................................................... A3-9
Cybersecurity ...................................................................................................................................... A3-9
FINANCIAL INFORMATION OF THE CITY OF SAN LUIS OBISPO ........................................... A3-10
Budgetary Process ............................................................................................................................. A3-10
Investment Management Plan ........................................................................................................... A3-11
Financial Statements ......................................................................................................................... A3-12
Operating Results .............................................................................................................................. A3-12
Outstanding Long-Term SLO Water System Indebtedness .............................................................. A3-13
Insurance ........................................................................................................................................... A3-13
Pension and Post-Retirement Benefits .............................................................................................. A3-14
CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ........................... A3-15
Article XIII B .................................................................................................................................... A3-15
Proposition 218 ................................................................................................................................. A3-15
AUDITED FINANCIAL STATEMENTS ........................................................................................... A3-15
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Tables
Table A3-1–SLO Water System Estimated Active Accounts by Type of Customer .............................. A3-3
Table A3-2–SLO Water System Water Connections.............................................................................. A3-5
Table A3-3–SLO Water System Water Deliveries in Acre-Feet Per Year ............................................ A3-6
Table A3-4–SLO Water System Water Sales Revenues ........................................................................ A3-6
Table A3-5–SLO Water System Largest Customers by Water Use ...................................................... A3-7
Table A3-6–SLO Water System Water Rates ........................................................................................ A3-9
Table A3-7–SLO Water System Operating Results ............................................................................. A3-12
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1
THE CITY OF SAN LUIS OBISPO
General
The City of San Luis Obispo (“SLO”) is a charter city and municipal corporation of the State of
California (the “State”). SLO was first incorporated in 1856 as a General Law City and became a Charter
City in 1876. SLO operates as a full-service city that provides police, fire, water, sewer, streets, transit,
parking, planning, building, engineering and parks and recreation services to the community. SLO operates
under the Council-Mayor-City Manager form of government. Council members are elected at- large and
serve overlapping, four-year terms. The Mayor is also elected at-large for a two-year term and serves as an
equal member of the Council. The Council appoints the City Manager and City Attorney. All other
department heads are appointed by the City Manager.
SLO is located eight miles from the Pacific Ocean and is midway between San Francisco and Los
Angeles at the junction of Highway 101 and Highway 1. A number of federal and state regional offices and
facilities are located in SLO, which also serves as the County of San Luis Obispo (the “County”) seat,
including, the Regional Water Quality Control Board and Caltrans District offices. California Polytechnic
State University, San Luis Obispo and Cuesta Community College are located in the County, not far outside
of SLO’s city limits. The State Department of Finance estimated that SLO’s population as of January 1,
2026 was approximately 50,165.
SLO is a party to a Delivery Contract (the “Delivery Contract”) with the San Luis Obispo County
Flood Control and Water Conservation District (the “Flood Control District”), pursuant to which SLO
covenanted, inter alia, to pay its pro rata share of various capital expenses relating to the funding of design
costs, engineering, planning, environmental mitigation, equipping new facilities and/or construction efforts,
accounting services, project administration and management, installation, grading, razing, and building the
Nacimiento Project.
For additional financial information regarding SLO, see the excerpts of the financial statements
submitted by SLO under the heading “AUDITED FINANCIAL STATEMENTS.”
Governance and Management
SLO has provided water service to its residents for over 100 years. During this time SLO has
developed its water sources and treatment facilities (the “SLO Water System”) to satisfy SLO’s growing
water needs. The operation of the SLO Water System is administe red and managed by the Public Works
and Utilities Department, which includes a Water Division and a Wastewater Division as separate enterprise
funds. The SLO Water System’s operation is aided by the use of computers, automated controls, and
telemetry systems.
Land and Land Use
SLO’s existing water treatment plant is located on Stenner Creek Road, northwest of the California
Polytechnic State University, San Luis Obispo campus. This facility was originally constructed in 1964 to
provide treatment of surface water from Salinas and Whale Rock Reservoirs. Since 2011, this plant (the
“SLO Water Plant”) also treats water from Nacimiento Reservoir. The SLO Water Plant was originally
designed to treat up to 8 million gallons per day (mgd). The SLO Water Plant has been upgraded three times
and is permitted to treat up to 16.0 mgd, a level capable of serving existing and future build-out consistent
with SLO’s General Plan.
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2
Water Rights
The existing city water system is made up of raw water supply from Nacimiento, Whale Rock, and
Salinas Reservoirs, and the SLO Water Plant. The City is also in the process of constructing two new
groundwater production wells. Brief descriptions of the water sources are as follows:
Nacimiento Reservoir. Since 1959, the Flood Control District has had an entitlement to
17,500 acre-feet per year (“AFY”) of water from the Nacimiento Reservoir for use in the County. The
Nacimiento Reservoir provides flood protection and is a source of supply for groundwater recharge for the
Salinas Valley. The Nacimiento Reservoir is owned and operated by the Monterey County Water Resources
Agency. Approximately 1,750 AFY have been designated for uses around the lake, leaving 15,750 acre feet
for allocation to other areas within the County. SLO has a contractual entitlement to 5,482 AFY.
Construction of the Nacimiento Project was substantially completed in December 2010 and water deliveries
to SLO began in January 2011. In 2025, due to necessary pipeline repairs, the Nacimiento Reservoir
supplied a reduced volume of 1,230 acre feet of water to SLO, constituting 23% of the total supply for that
year.
Whale Rock Reservoir. The Whale Rock Reservoir, owned and operated by a joint exercise of
powers agency formed by SLO and the State, is a 38,967 acre feet reservoir created by the construction of
an earthen dam on Old Creek near the town of Cayucos. The State Department of Water Resources designed
and completed the dam in 1961 to provide water to SLO, California Polytechnic State University, and the
California Men’s Colony. The Whale Rock Dam captures water from a 20.3-square mile watershed and
water is delivered to the three agencies through 17.6 miles of shared 30-inch pipeline and two pumping
stations. The Whale Rock Reservoir is considered a backup supply and provides water during off-peak
operations, when Salinas Reservoir has excessive turbidity problems following storm events, or to
supplement supply when water demand exceeds delivery capacity from Salinas Reservoir. In 20 25, the
Whale Rock Reservoir supplied 1,774 acre feet of water, constituting 33% of the total supply for that year.
Salinas Reservoir. The Salinas Dam was built in 1941 by the War Department to supply water to
Camp San Luis Obispo and, secondarily, to meet the water needs of SLO. The Salinas Reservoir (Santa
Margarita Lake) captures water from a 112-square mile watershed and can currently store up to 22,508 acre-
feet. In 1947, the Salinas Dam and delivery system was transferred from the regular Army to the U.S. Army
Corps of Engineers. Since 1965, the Flood Control District has operated this water supply for the exclusive
use of SLO under a lease from the U.S. Army Corps of Engineers. Water from this reservoir is pumped
through the Cuesta Tunnel (a one-mile long tunnel through the mountains of the Cuesta Ridge) and then
flows by gravity to the SLO Water Plant. SLO has water rights to store up to 45,000 acre feet in the Salinas
Reservoir. The original design of the dam included a gate in the spillway to increase the storage capacity.
In 2025, the Salinas Reservoir supplied 2,379 acre feet of water, constituting 44% of the total supply for
that year.
Recycled Water. Recycled water is highly-treated wastewater approved for reuse by the California
Department of Public Health for a variety of applications, including landscape irrigation and construction
dust control. Completed in 2006, the SLO Water Reuse Project created the first new source of water for
SLO since 1961 following construction of Whale Rock Dam. The project resulted in improvements at the
SLO Water Resource Recovery Facility and an initial eight miles of distribution pipeline. The first delivery
of recycled water to SLO took place in 2006. Current demand exists for approximately 400 acre feet of
recycled water for landscape irrigation and other approved uses within SLO limits. In 2025, SLO delivered
261 acre feet for irrigation to construction projects, parks, the school district, and private development
landscape areas.
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Groundwater. SLO overlies the San Luis Obispo Valley Groundwater Basin, which is subject to
the Sustainable Groundwater Management Act (“SGMA”). SLO and the County formed Groundwater
Sustainability Agencies for their respective jurisdictions within the basin, and a Groundwater Sustainability
Plan has been prepared to guide long-term sustainable management of the basin. SLO does not currently
rely on groundwater as an active potable source, but groundwater is expected to be used as a source of
supply starting in 2027 when SLO completes a groundwater cleanup project that is designed to restore
SLO’s ability to pump and treat local groundwater supplies. SLO anticipates that any future municipal
groundwater extraction would be operated consistent with SGMA, the adopted Groundwater Sustainability
Plan, applicable water quality and treatment requirements, and any future basin management actions. SLO
does not anticipate that groundwater supplies will be needed to meet customer demands in the future.
Rather, groundwater will be utilized as it is available to reduce ongoing operating costs and to improve
water quality within SLO’s drinking water system.
No Litigation Related to the 2026 Bonds
SLO is presently involved in certain matters of litigation that have arisen in the normal course of
its city business. SLO management believes, based upon consultation of the SLO City Attorney, that these
cases, in the aggregate, are adequately covered by insurance and not expected to result in a material adverse
financial impact on SLO.
THE WATER SYSTEM OF THE CITY OF SAN LUIS OBISPO
Service Area
The SLO Water System currently provides water within a service area which consists primarily of
the incorporated boundaries of SLO, serving a population of approximately 50,165 as of January 1, 2026,
as estimated by the State Department of Finance. In addition, the SLO Water System serves several users
located outside city limits, including the California Polytechnic State University and San Luis Obispo
Regional Airport, under separate agreements. The following table shows active accounts in SLO by type of
customer as of June 30, 2025.
Table A3-1
SLO Water System
Estimated Active Accounts by Type of Customer
Fiscal Year Ended June 30, 2025
Type of Customer
Active
Accounts Percent
Single Family 13,702 80%
Multi-Family 1,121 6%
Non-Residential 1,677 10%
Dedicated Irrigation 627 4%
Total 17,127 100%
________________
Source: SLO.
Water Facilities
SLO’s existing water distribution facilities include 10 reservoirs/tanks, 8 booster pumping stations,
11 pressure zones, and a total of approximately 191 miles of water mains. SLO’s existing water storage
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4
facilities have a total nominal capacity of approximately 25 million gallons. SLO operates the SLO Water
Plant which is located approximately one mile north of Highway 1 along Stenner Creek Road. SLO’s
current drinking water permit allows the SLO Water Plant to treat up to 16 mgd from its three surface water
sources - Nacimiento Reservoir, Whale Rock Reservoir, and Salinas Reservoir. The SLO Water Plant was
upgraded in 2008 to provide full-conventional treatment for the entire 16 mgd rated flow. The water is first
oxidized and disinfected using ozone, then flows to rapid mixers where alum and polymer are added for
coagulation and then to a ballasted flocculation process (Actiflo) which uses micro-sand to enhance removal
of floc particles from the water. The water is then finally filtered, chlorinated and fluoride is added before
the treated water is stored for use in the SLO water distribution system. From 2017-2023 SLO completed a
major upgrade to the SLO Water Plant, replacing its original ozone system with a state-of-the-art ozone
system, installing a battery system to reduce energy costs, and installing a diesel generator for emergency
backup power.
PFAS Monitoring. SLO monitors for per- and poly-fluoroalkyl substances (“PFAS”) in
accordance with State and federal regulations and to date has not identified PFAS in its drinking water
reservoirs. Groundwater supplies have been determined to have low levels of PFAS contamination, which
is expected to be reduced to meet State and federal water quality requirements through the treatment systems
that will be installed with SLO’s two new groundwater pumping wells. PFAS contamination is not believed
to be caused by SLO-related operations and SLO does not expect to be liable for PFAS-related groundwater
cleanup efforts. See “CERTAIN RISKS TO BOND OWNERS – Water Quality and PFAS” in the forepart
of this Official Statement for a discussion on PFAS regulations and requirements.
Water Permits, Licenses and Other Regulations
SLO’s water production and distribution system is permitted and regulated by the California State
Water Resources Control Board (the “SWRCB”) pursuant to amended Water Permit No. 04-06-94P-000,
System No. 4010009. The SWRCB Division of Water Rights regulates the appropriation and use of water
from Salinas and Whale Rock Reservoirs pursuant to permit numbers 5882 and 11390, respectively. Permit
No. 11390 (Whale Rock) limits annual diversion to storage to 22,040 acre feet per year and the amount
allowed for direct diversion to 16 cubic feet per second. Permit No. 5882 (Salinas) limits annual diversion
to storage to 45,000 acre feet per year and the amount allowed for direct diversion to 12.4 cubic feet per
second.
Water System and Water Supply
As of June 30, 2025, there were 17,133 consumer connections compared with 17,015 as of June 30,
2024. The SLO Water System consists of raw water supply from Nacimiento, Whale Rock, and Salinas
Reservoirs, and the SLO Water Plant. For additional water supply information, see “–Water Rights.”
Historically, SLO has met its water supply demand primarily from surface water supplies and a
small amount of groundwater. These water supplies are expected to meet all future water demands through
2050.
Drought and Conservation Measures
California is not currently under statewide emergency drought conservation restrictions, but urban
water suppliers remain subject to permanent water-use efficiency requirements and annual reporting. The
State’s “Making Conservation a California Way of Life” framework establishes supplier -specific urban
water use objectives and gives each supplier flexibility to meet those objectives through locally appropriate
programs, rather than imposing identical customer-by-customer requirements statewide. The SWRCB also
notes that there are currently no statewide emergency water conservation regulations in effect, though local
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5
agencies may adopt and enforce local conservation measures as needed. SLO does not currently have any
drought-related regulations in effect.
SLO remains compliant with applicable conservation and water-use efficiency requirements
through its ongoing conservation program, water waste prevention rules, metering and billing practices,
recycled water use, public education and customer support, water loss management, landscape efficiency
efforts, and demand management measures. These programs have helped keep community water use low;
current potable demand remains well below SLO’s conservative long-term planning value of 117 gallons
per capita per day. SLO’s conservation ethic, recycled water program, and demand management measures
reduce pressure on potable supplies and support long-term water supply reliability.
As a result, SLO is not relying on short-term emergency restrictions to achieve conservation.
Instead, conservation is built into normal operations through ongoing programs, customer outreach,
efficient development standards, recycled water use, water loss tracking, and compliance with State
reporting requirements. These efforts help maintain low demand, support drought preparedness, and
demonstrate that SLO is meeting applicable conservation regulations while retaining the ability to
implement additional Water Shortage Contingency Plan measures if future conditions require them.
Water Connections
The following table shows the growth in the number of water connections, excluding recycled water
connections, to the SLO Water System for Fiscal Years ended June 30, 2021 through June 30, 2025.
Table A3-2
SLO Water System
Water Connections
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended
(June 30) Connections % Increase/(Decrease)
2021 15,958 --
2022 16,256 1.87%
2023 16,703 2.75
2024 17,015 1.87
2025 17,127 0.66
________________
Source: SLO Annual Comprehensive Financial Report, Fiscal Year 2024-25.
Water Deliveries
The following table presents a summary of historic water deliveries, excluding recycled water
deliveries, for the SLO Water System in acre-feet per year for Fiscal Years ended June 30, 2021 through
June 30, 2025.
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Table A3-3
SLO Water System
Water Deliveries in Acre-Feet Per Year
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended
(June 30) Deliveries % Increase/(Decrease)
2021 5,602 --
2022 5,732 2%
2023 5,130 (11)
2024 4,678 (9)
2025 5,029 8
________________
Source: SLO Annual Comprehensive Financial Report, Fiscal Year 2024-25.
Water Sales Revenues
The following table shows annual water sales revenues from water sales, including recycled water
sales, for Fiscal Years ended June 30, 2021 through June 30, 2025.
Table A3-4
SLO Water System
Water Sales Revenues
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended
(June 30) Sales Revenues % Increase/(Decrease)
2021 $22,757,325 --
2022 24,129,231 6.03%
2023 23,297,077 (3.45)
2024 26,088,324 11.98
2025 28,958,623 11.00
________________
Source: SLO Annual Comprehensive Financial Report, Fiscal Year 2024-25.
Largest Customers
The following table sets forth the 10 largest customers of the SLO Water System as of June 30,
2025 as determined by water use.
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7
Table A3-5
SLO Water System
Largest Water Customers by Water Use
(Fiscal Year Ended June 30, 2025)
Customers Service Type
Water Use
(acre-feet)
City of San Luis Obispo Parks & Golf Landscape 57.85
Silver City Mobile Home Park Mobile Homes 56.86
ELL-CAP 97-Laguna Lake Mobile Homes 56.44
Adventist Health System/West Care Facilities 42.86
CAP VIII - Mustang Village LLC Apartments 40.34
Creekside Community Mobile Homes 32.65
Dignity Health #366 Care Facilities 31.43
SLO Coastal Unified School 24.41
Embassy Suites Hotel 22.02
State of California Landscape 18.31
Source: SLO Annual Comprehensive Financial Report, Fiscal Year 2024-25.
SLO serves several customers located outside its city limits, including California Polytechnic State
University (the “University”), the largest customer of the SLO Water System. Under the agreement with
the University, SLO charges rates based on the actual consumption of water, in accordance with a formula
established by SLO which is based on rates charged to commercial users generally as modified to reflect
the part of the rate structure which is applicable to the University. For the Fiscal Year ended June 30, 2025,
the University used 572 acre feet of water supplied by the SLO Water System, for which it paid
$1,078,647 which was approximately 3.7% of total revenues derived from water sales in that year.
Water System Rates and Charges
The SLO Water System receives revenues from three primary sources: (i) monthly water rates and
service charges, (ii) development impact fees and (iii) miscellaneous sources including interest income.
SLO’s current rate structure imposes charges based on consumption, and fixed components in form of a
base fee.
SLO water rates apply a flat (base) fee plus a volumetric charge based on a unit fee for the amount
of water used. SLO also charges for disconnections and reconnections to the SLO Water System. In
addition, SLO charges impact fees for new connections to the SLO Water System. SLO ’s unit charge is
based on the number of 100 cubic feet (“hcf”) used and calculated at the rate shown on the following
schedule (as of June 30, 2025).
Quantity
Cost/hcf
Inside City
Cost/hcf
Outside City
Base Fee $30.25 $60.50
Volumetric Charge
0-5 hcf 8.54 17.07
6-12 hcf 9.84 19.68
13+ 16.97 33.95
Source: SLO.
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Rate Increases. The SLO City Council reviews its water rate schedule on an annual basis and
adjusts water rates by resolution at a public meeting pursuant to Proposition 218. In June 2025, the SLO
City Council adopted updated water rates for Fiscal Years 2025-26 and 2026-27, which rates take effect on
July 1 of each fiscal year. The following tables reflect the updated volumetric water rates and monthly base
fees.
Volumetric Water Rates
Usage (per unit(1) cost) Effective July 1, 2025 Effective July 1, 2026
Single Family Residential
Tier 1: 0 to 5 units $9.01 $9.51
Tier 2: 6 to 12 units 10.38 10.95
Tier 3: 13+ units 17.90 18.88
Multi Family, Non-Residential, Landscape Irrigation
Multi-Family — all use $10.11 $10.67
Non-Residential — all use 10.70 11.29
Landscape Irrigation — all use(2) 10.92 11.52
(1) One unit of water = 100 cubic feet.
(2) Recycled water is set at 90% of the landscape irrigation rate.
Note: A 5% Utility Users Tax is applied to the entire water portion of the bill, including the base fee and all surcharges.
Source: SLO.
Monthly Water Base Fees
Base Fees Effective July 1, 2025 Effective July 1, 2026
Single Family Residential
Monthly Base Fee $31.91 $33.67
Multi Family, Non-Residential, and Landscape Irrigation Monthly Base Fee by Water Meter Size
0.75 inch meter or less $31.91 $33.67
1 inch meter 53.28 56.21
1.5 inch meter 106.34 112.19
2 inch meter 170.17 179.53
3 inch meter 319.24 336.80
4 inch meter 532.19 561.46
6 inch meter 1,064.07 1,122.59
8 inch meter 1,702.61 1,796.25
Water System Access Charge(1) 114.47 120.76
(1) Water System Access Charge applies where SLO provides fire protection only to accounts that utilize a private well for
domestic purposes.
Note: A 5% Utility Users Tax is applied to the entire water portion of the bill, including the base fee and all surcharges.
Source: SLO.
The following table reflects historic water rates for Fiscal Years 2020-21 through 2024-25.
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Table A3-6
SLO Water System
Water Rates
Fiscal Years
Monthly
Base Fee
Monthly
Consumption
1-5 hcf
Monthly
Consumption
6-12 hcf
Monthly
Consumption
13+ hcf
2020-21* $22.52 $6.44 $7.51 $13.76
2021-22 23.31 6.67 7.77 14.24
2022-23 24.12 6.90 8.04 14.74
2023-24 28.15 7.94 9.16 15.79
2024-25 30.25 8.54 9.84 16.97
* Rate increase was deferred to February 1, 2021 due to COVID-19.
Notes:
1. Rates are for services inside SLO, outside SLO rates are double.
2. Third tier applies only to single-family residential customers.
Source: SLO Annual Comprehensive Financial Report, Fiscal Year 2024-25.
Development Impact Fees. SLO charges development impact fees for improvement or expansion
of water treatment and distribution facilities to meet the requirements of community growth. The 2026 -27
Fiscal Year development impact fee for single family residences are determined by square footage between
$5,555.37 (for <450 sq. ft. per unit) and $18,410.19 (for >1201 sq. ft. per unit). Non-residential projects are
charged based on meter size and range between $18,517.82 (for a 3/4” meter) to $614,900.19 (for a 6”
meter).
Future Water System Improvements
SLO is planning several significant water system improvements for the upcoming ten year period.
Major upgrades include a rehabilitation of the raw water distribution pump stations at Whale Rock
Reservoir, a replacement of SLO’s largest treated water storage tank (Reservoir #2), and replacement of
major water distribution transmission lines from the SLO Water Plant into the city limits. These projects,
and others captured in SLO’s most recent financial plan, are accounted for in SLO’s long-term fiscal
planning documents and supported by current water rates.
The capital improvement plan described above includes costs for a planned replacement of the
spillway at San Antonio Dam. The spillway replacement is proposed to be undertaken by the Monterey
County Water Resources Agency. The Flood Control District may be required to contribute up to
approximately 32.3%, or about $25.2 million (estimated as of 2025), of the costs of the spillway
replacement. The Flood Control District would charge through such costs, if any, proportionally to the
Participants under the Delivery Contracts, including the Delivery Contract with SLO. Spillway replacement
project costs are expected to be incurred beginning in 2028. If SLO is required to contribute, it currentl y
expects to fund its share of such costs from water rates. Currently, whether and how much the Flood Control
District and, correspondingly, the Participants, including SLO, will pay, and the funding sources for such
payments, have not been determined and may change as the foregoing parties deliberate on proposals for
the spillway replacement project at San Antonio Dam.
Cybersecurity
SLO relies on a complex technology environment to conduct its daily operations. As a recipient
and provider of personal, confidential, and sensitive information SLO and its departments experience
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multiple cybersecurity threats which include but are not limited to, social engineering, malware, denial-of-
service and other attacks on endpoints.
SLO has put several preventive measures in place to safeguard against cybersecurity threats. These
measures include cybersecurity awareness training, firewalls, email filtering, web content filtering,
endpoint protection, and ensuring that operating systems, network equipment, and endpoint devices are up-
to-date with the latest patches. Additionally, advanced segmentation and monitoring techniques are
employed to detect and respond to potential threats within the network, while real-time endpoint detection
and response systems help identify and mitigate any malicious activity on devices.
SLO currently maintains insurance coverage with respect to certain information security and
privacy liability claims. However, SLO is not required to maintain cybersecurity insurance. Future
cybersecurity attacks could affect the operations and finances of SLO, including its ability to meet payment
obligations under its Delivery Contract.
FINANCIAL INFORMATION OF THE CITY OF SAN LUIS OBISPO
Budgetary Process
SLO has received national recognition for its use of a two-year financial plan (a “Financial Plan”)
and budgetary process that emphasizes long-range planning and effective program management. Significant
features of SLO’s two-year Financial Plan include the integration of SLO City Council goalsetting into the
budgetary process and the extensive use of formal policies and measurable objectives. The Financial Plan
includes operating budgets for two years and a Capital Improvement Plan (the “CIP”) covering five years.
Under this multi-year approach, appropriations continue to be made annually; however, the
Financial Plan is the foundation for preparing the budget for the second year. Additionally, unexpended
operating appropriations from the first year may be carried over for specific purposes into the second year
with the approval of the City Manager.
Management Policies. The overall goal of SLO’s Financial Plan is to establish and maintain
effective management of SLO’s financial resources. Formal statements of budgetary policies and major
objectives provide the foundation for achieving this goal. Key budget principles include: continuing basic
services at current levels and adequately funding them; maintaining fund balances at levels which will
protect SLO from future uncertainties; estimating revenues at realistic levels; making all current
expenditures with current revenues; finding solutions to SLO’s financial challenges which maintain and
promote a quality community; maintaining a traditional commitment to a strong General Fund ; and
complying with provisions of the State Constitution, SLO City Charter, municipal code and sound fiscal
policy. Key revenue policies include: maintaining a diversified and stable revenue base; setting enterprise
fund rates at levels that fully recover the total cost of providing services; charging fees for General Fund
programs in accordance with adopted user fee cost recovery goals; and ensuring that new development pays
its fair share of the cost of constructing necessary community facilities.
Budget Process. The City Manager is responsible for preparing the budget and submitting it to the
SLO City Council for approval. Although specific steps will vary from year to year, the following is an
overview of the general approach used under SLO’s two-year budgetary process:
First Year. The Financial Plan process begins with a SLO City Council goal-setting session
to determine major objectives to be accomplished over the next two years. These are incorporated
into the budget instructions issued to the operating departments, that are responsible for submitting
initial budget proposals. After these proposals are comprehensively reviewed and a detailed
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financial forecast is prepared, the City Manager issues the Preliminary Financial Plan for public
comment. A series of study sessions and public hearings are then held leading to SLO City Council
adoption of the budget by July 1.
Second Year. Before the beginning of the second year of the two-year cycle, the SLO City
Council reviews the progress made during the first year and approves appropriations for the
second fiscal year.
Mid-Year Reviews. The SLO City Council formally reviews SLO’s financial condition and
amends appropriations, if necessary, in February of each year, based on the first six months of
operations.
Status Reports. Online access to “up-to-date” financial information is provided to staff
throughout the organization. Additionally, financial reports are prepared monthly to monitor SLO’s
fiscal condition; more formal reports are issued to the SLO City Council on a quarterly basis. The
status of major program objectives, including CIP projects, is formally reported to the SLO City
Council on an ongoing basis.
Accounting. Budgets are prepared for each fund in accordance with its respective basis of
accounting.
All governmental funds have legally adopted budgets including capital project funds. While
budgets are prepared for SLO’s capital project funds, the CIP projects generally span more than one year
and are effectively controlled at the project level; accordingly, budgetary comparisons are not presented in
the accompanying basic financial statements.
Administration. As provided under the SLO City Charter, the SLO City Council may amend or
supplement the budget at any time after its adoption by majority vote of the SLO City Council. The SLO
City Manager has the authority to make or approve administrative adjustments to the budget as long as
those changes will not have a significant policy impact nor affect the budgeted year-end fund balances. The
level for which expenditures are not to exceed appropriations is at the fund level.
Investment Management Plan
SLO’s investment management plan addresses a wide variety of investment practices, including
primary investment objectives, investment authority, allowable invest vehicles, investment maturity terms
eligible financial institutions, capital preservation and cash flow management. Under SLO’s policies,
investments in its portfolio are intended to be held until maturity. Accordingly, investment terms are
selected for consistency with SLO’s cash flow needs. SLO is authorized by its investment policy and the
California Government Code to invest in securities issued or guaranteed by the federal government or its
agencies, repurchase agreements, bankers’ acceptances, commercial paper, corporate notes and mutual
funds, negotiable certificates of deposit, and the State Local Agency Investment Fund.
Reports are issued quarterly to the Investment Oversight Committee by the SLO City Treasurer,
providing detailed information regarding SLO’s investments and compliance with SLO policy. The
Investment Oversight Committee, comprised of one SLO Council Member, the SLO City Manager, the
SLO Assistant City Manager, the SLO Director of Finance/City Treasurer, the SLO Accounting Manager,
and an appointed member from the SLO public at large meet quarterly to review SLO’s investment
activities. At these meetings, the SLO City Treasurer reports to the committee on compliance with the
Investment Management Plan. Under SLO’s investment policies, its primary investment objective is to
achieve a reasonable rate of return on public funds while minimizing risk and preserving capital. In
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evaluating the performance of SLO’s portfolio in achieving this objective, it is expected that yields on
SLO’s investments will regularly meet or exceed the average return on three -month U.S. Treasury Bills,
and that the portfolio managed by the investment advisor will meet or exceed the BofA Merrill Lynch 0 to
5-year U.S. Treasury Bond Index.
Financial Statements
The most recent annual comprehensive financial report of SLO prepared by Badawi & Associates,
certified public accountants, is included under the heading “AUDITED FINANCIAL STATEMENTS.”
The independent auditor’s letter concludes that the Annual Comprehensive Financial Report presents fairly,
in all material respects, the financial position of the business -type activities of SLO as of June 30, 2025,
and the respective changes in financial position and cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
The summary operating results contained under the caption “–Operating Results” are derived from
these financial statements (excluding certain non-cash items and after certain other adjustments) and are
qualified in their entirety by reference to such statements, including the notes thereto.
Operating Results
The following table is a summary of operating results of the SLO Water System, for Fiscal Years
ended June 30, 2021 through June 30, 2025. These results have been derived from the financial statements
of SLO but exclude certain receipts which are not included as Revenues under the Delivery Contract and
certain non-cash items and include certain other adjustments.
Table A3-7
SLO Water System
Operating Results
Fiscal Years Ended June 30
Operating Revenues 2021 2022 2023 2024 2025
Charges for sales and services $23,387,564 $24,511,658 $23,856,235 $26,454,326 $29,285,188
Development impact fees(1) 4,744,361 5,160,020 3,616,307 4,686,719 4,843,919
Other revenue 208,150 222,451 248,134 253,917 227,320
Total Revenues $28,340,075 $29,894,129 $27,720,676 $31,394,962 $34,356,427
Operating Expenses(2) $20,666,702 $20,160,343 $21,475,685 $25,043,587 $27,485,998
Net Revenues $7,673,373 $9,733,786 $6,244,991 $6,351,375 $6,870,429
(1) Includes development impact fees but excludes the value of physical facilities dedicated to SLO by developers.
(2) Includes payments made to the Flood Control District pursuant to the SLO Delivery Contract. See “Security and Sources of
Payment for the Bonds–The Delivery Contracts” in the forepart of this Official Statement. Excludes depreciation/amortization and
loss on disposal of assets.
Source: SLO; SLO Annual Comprehensive Financial Reports, Fiscal Years 2020-21 through 2024-25.
Gross Revenues. Revenues are recorded when earned and expenses are recorded when a liability
is incurred, regardless of the timing of related cash flows. Governmental fund financial statements are
reported using the current financial resources measurement focus and the mo dified accrual basis of
accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are
considered available when they are collectible within the current period or soon enough thereafter to pay
liabilities of the current period. For this purpose, the government considers revenues to be available if they
are collected within 60 days of the end of the current fiscal period.
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Operations and Maintenance Costs. The water fund accounts for the provision of water services
to the residents of SLO as well as some customers in the County of San Luis Obispo. All activities necessary
to provide such services are accounted for in this fund, including, but not limited to, administration,
operations, maintenance, improvements and debt service.
Outstanding Long-Term SLO Water System Indebtedness
As of June 30, 2025, SLO had outstanding obligations payable to the California Infrastructure and
Economic Development Bank (CIEDB) of $10,484,882. Additionally, SLO had outstanding obligations for
its 2018 Water Revenue Refunding Bonds of $6,845,000. The aggregate outstanding amount of the
obligations as of June 30, 2025 was $17,329,882.
The term “net revenues” is defined in the State loan agreements and the bond indentures as all gross
income and revenues received or receivable by SLO from the ownership or operation of the SLO Water
System less operations and maintenance costs. As presented in Table A3-7, payments made to the Flood
Control District pursuant to the SLO Delivery Contract are included as operations and maintenance costs
of the Water System.
Insurance
General Liability and Workers’ Compensation. SLO is a member of the California Joint Powers
Insurance Authority (“CJPIA”), which provides joint protection programs and group purchased insurance
for public entities covering liability, errors and omission losses, auto liability, employment practices
liability, crime, pollution, workers’ compensation injuries and coverage for city-owned property. SLO has
a retained limit of $500,000 per occurrence for liability and no retained limit for workers’ compensation.
Liabilities of SLO are reported when it is probable that a loss has occurred, and the amount of the
loss can be reasonable estimated. Liabilities include an amount for claims that have be en incurred but not
reported (IBNR). The result of the process to estimate the claims liability is not an exact amount as it
depends on many complex factors, such as inflation, changes in legal doctrines and damage awards.
Accordingly, claims are reevaluated periodically to consider the effects of economic and social factors. The
estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to
specific claims and other claim adjustment expenses regardless of whether or not they are attributable to
specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of
the claims liability estimate.
During the past three fiscal years, none of the protection programs experienced settlements or
judgments that exceeded pooled or insured coverage. There were also no significant reductions in pooled
or insured coverage in Fiscal Year 2024-25.
CJPIA covers workers’ compensation claims up to a pooled limit of $1 million per occurrence and
provides excess coverage to statutory limits with a group purchased commercial insurance policy. SLO
pays an annual contribution to CJPIA and may share in any member refunds in the event that pooled funding
exceeds the cost of pooled claims and claim-related expenses, or SLO may be required to pay additional
contributions based upon CJPIA’s operating results. Financial statements of CJPIA may be obtained from
its administrative office located at 8081 Moody Street, La Palma, California 90623, or by calling (562) 467-
8700.
Additional claims and lawsuits have been filed against SLO in the normal course of business. It is
reasonably possible that SLO may be liable for claims not to exceed $500,000. In the opinion of
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management, the resolution of these matters will not have a material adverse effect on the financial
condition of SLO.
Pension and Post-Retirement Benefits
SLO contributes to the California Public Employees’ Retirement System (“CalPERS”) pension
plans to provide retirement and disability benefits, annual cost-of-living adjustments and death benefits to
plan members and beneficiaries. Eligible employees of the SLO Water System participate in the
Miscellaneous Plan administered by CalPERS. Benefit provisions and all other requirements are established
by State statute and city ordinance. The amount of SLO’s required annual contribution is determined
actuarially. It is the policy of SLO to fund the annual contribution to ensure that the plan will be able to
fully meet its obligation to retired employees on a timely basis. For the Fiscal Year ended June 30, 2025,
SLO’s annual CalPERS pension cost for the SLO Water System was $1,452,663 for miscellaneous
employees, which was equal to SLO’s annual required contribution and actual contributions. The unfunded
actuarial accrued liability in the Fiscal Year ended June 30, 2025 was $13,703,752 million based on the
Water Fund’s pro rata share of total payroll.
The primary OPEB cost obligation of SLO is for retiree health benefits under its election to
participate in the California Public Employees’ Retirement System (CalPERS) Health Benefit Program, an
agent multiple-employer defined benefit OPEB plan, under the “unequal contribution option.” SLO entered
the CalPERS medical insurance program in 1993 under the Public Employees’ Medical and Hospital Care
Act (PEMHCA). During the Fiscal Year ended June 30, 2009, SLO entered into an agreement to participate
in an irrevocable trust to provide a funding mechanism for retiree health benefits. The Trust, California
Employers’ Retiree Benefit Trust (CERBT), is administered by CalPERS and managed by a separately
appointed board, which is not under control of the SLO City Council. This Trust is not considered a
component unit of SLO. For each retiree enrolled in a CalPERS medical plan, the employer will pay the
required statutory PEMHCA minimum, which was $157 per month per retiree in calendar year 2024 and
$158 per month per retiree in calendar year 2025. Retirees pay the differential monthly amount of the
premium, which varies depending on the health benefits they select.
Additionally, SLO has established certain post-retirement health care benefits available to
executive management employees appointed prior to August 2000.
The OPEB contribution requirements of the plan members and SLO are established and may be
amended by SLO. SLO prefunds the plan through CERBT by contributing at least 100% of the annual
required contribution. For the measurement period, SLO’s contributions totaled $740,550.
Annual OPEB Expense and Net OPEB Obligation. For the Fiscal Year ended June 30, 2025, the
annual OPEB expense was $258,685. The actual contributions totaled $1,975,082. Of the total actual
contributions amount, the Water Fund was responsible for $225,159 (11.4%).
For additional information regarding the pension plans and other post-employment benefits, see
notes 8 and 9 to the financial statements appearing under “AUDITED FINANCIAL STATEMENTS.”
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CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES
Article XIII B
Article XIII B of the California State Constitution limits the annual appropriations of the State and
of any city, county, school district, authority or other political subdivision of the State to the level of
appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the
cost of living and population. SLO is of the opinion that charges for water service do not exceed the costs
it reasonably bears in providing such services and therefore are not subject to the limits of Article XIII B.
SLO has covenanted in the Delivery Contract that it will establish, fix and collect rates and charges from
the customers of the SLO Water System at levels sufficient to produce revenue from the SLO Water System
which are at least equal to: the costs of operating and maintaining the SLO Water System; plus the Contract
Payments (as defined in the Delivery Contract). SLO is of the opinion that the water rates and use charges
imposed by SLO do not exceed the costs SLO reasonably bears in providing such service.
Proposition 218
Article XIII D requires that any agency imposing or increasing any property-related fee or charge
must provide written notice thereof to the record owner of each identified parcel upon which such fee or
charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge
may not be imposed or increased if a majority of owners of the identified parcels file written protests against
it. As a result, if and to the extent that a fee or charge imposed by a local government for water or wastewater
service is ultimately determined to be a “fee” or “charge” as defined in Article XIII D, the local
government’s ability to increase such fee or charge may be limited by a majority protest. See the discussion
under “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS–Articles XIII C and XIII D of the California Constitution” in the forepart of this
Official Statement.
AUDITED FINANCIAL STATEMENTS
The following is the complete annual comprehensive financial report of SLO for the Fiscal Year
ended June 30, 2025. Only the gross revenues of the SLO Water System is pledged to pay the obligations
of SLO under its Delivery Contract. The inclusion of the complete annual comprehensive financial
report of SLO does not imply that any revenues of SLO other than those of the SLO Water System are
pledged or available to make any payments under the Delivery Contract.
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APPENDIX A4
TEMPLETON COMMUNITY SERVICES DISTRICT
TABLE OF CONTENTS
Page
TEMPLETON COMMUNITY SERVICES DISTRICT ........................................................................ A4-1
THE WATER SYSTEM OF TEMPLETON COMMUNITY SERVICES DISTRICT ......................... A4-2
Service Area ........................................................................................................................................ A4-2
Water System and Facilities ................................................................................................................ A4-2
Water Permits, Licenses and Other Regulations ................................................................................. A4-2
Water Supply ...................................................................................................................................... A4-2
Drought and Conservation Measures .................................................................................................. A4-3
Water Connections .............................................................................................................................. A4-4
Water Deliveries ................................................................................................................................. A4-4
Water Sales Revenues ......................................................................................................................... A4-4
Largest Customers .............................................................................................................................. A4-5
Water System Rates and Charges ....................................................................................................... A4-5
Future Water System Improvements ................................................................................................... A4-7
Cybersecurity ...................................................................................................................................... A4-7
FINANCIAL INFORMATION OF TEMPLETON COMMUNITY SERVICES DISTRICT ............... A4-8
Budgetary Process ............................................................................................................................... A4-8
Financial Statements ........................................................................................................................... A4-8
Operating Results ................................................................................................................................ A4-8
Management’s Discussion and Analysis ........................................................................................... A4-10
No Outstanding Long-Term Templeton CSD Water System Indebtedness ..................................... A4-10
Investment Policy.............................................................................................................................. A4-10
Insurance ........................................................................................................................................... A4-10
Employees and Employee Benefits................................................................................................... A4-10
Pension Benefits................................................................................................................................ A4-10
Other Postemployment Benefits ....................................................................................................... A4-11
AUDITED FINANCIAL STATEMENTS ........................................................................................... A4-12
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Tables
Table A-4-1–Templeton CSD Water Connections ............................................................................... A-4-4
Table A-4-2–Templeton CSD Water Deliveries in Acre-Feet Per Year ............................................... A-4-4
Table A-4-3–Templeton CSD Water Sales Revenues .......................................................................... A-4-5
Table A-4-4–Templeton CSD Water Monthly Minimum Charge ......................................................... A-4-5
Table A-4-5–Templeton CSD Water Sales Rates .................................................................................. A-4-6
Table A-4-6–Templeton CSD Water System Operating Results .......................................................... A-4-9
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TEMPLETON COMMUNITY SERVICES DISTRICT
General
Templeton Community Services District (“Templeton CSD”) operates a public water supply
system, and is a party to a Delivery Contract (the “Delivery Contract”) with the San Luis Obispo County
Flood Control and Water Conservation District (the “Flood Control District”) pursuant to which, inter alia,
Templeton CSD has covenanted to pay its pro rata share (the “Templeton Share”) of various capital
expenses relating to the funding of design costs, engineering, planning, environmental mitigation,
equipping new facilities and/or construction efforts, accounting services, project administration and
management, installation, grading, raising and building the Nacimiento Project.
As of June 30, 2026, Templeton CSD provided water services to approximately 8,036 people.
Templeton CSD also provides wastewater disposal services, storm water drainage, fire protection, street
lighting, park and recreation services and a community center within its boundaries.
For additional financial information regarding Templeton CSD, see the financial statements
submitted by Templeton CSD under “AUDITED FINANCIAL STATEMENTS.”
Governance and Management
Templeton CSD was organized on December 29, 1976 under the authorization of the California
Government Code for the purpose of providing all permissible services of a community services district,
and is governed by a five-member elected Board of Directors.
Land and Land Use
Templeton CSD serves an approximately 5.5 square mile service area with water service, which
included approximately 40 miles of water lines and 3,034 water connections for the Fiscal Year ended
June 30, 2026.
Water Rights
Since 1959, the Flood Control District has held the rights to 17,500 acre-feet per year of water from
Lake Nacimiento. The Board of Directors of Templeton CSD requested and received 406 acre-feet from
this amount, which is equivalent to supplying water to 500 residential units. Templeton CSD has its own
surface water and groundwater rights which are more fully described under “THE WATER SYSTEM OF
TEMPLETON COMMUNITY SERVICES DISTRICT.”
No Litigation Related to the 2026 Bonds
There are pending lawsuits in which Templeton CSD is involved. The management and legal
counsel for Templeton CSD estimate that the potential claims against Templeton CSD, not covered by
insurance, resulting from such litigation would not materially affect the operations or financial condition of
Templeton CSD.
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THE WATER SYSTEM OF TEMPLETON COMMUNITY SERVICES DISTRICT
Service Area
Templeton CSD service area is located in the central coast area of the State. As of June 30, 2026,
there were 3,034 active consumer connections, compared with 3,027 as of June 30, 2025. The average
monthly water bill for residential, commercial and industrial customers for the Fiscal Year ended June 30,
2025 was $65.17.
Water System and Facilities
The Templeton CSD water system (the “Templeton CSD Water System”) consists of 40 miles of
distribution pipelines, eight groundwater wells, and three underflow wells (which are considered surface
water sources under California law). No sewers or sewage disposal facilities are located within 100 feet of
the well sites. Templeton CSD well water complies with primary and most secondary drinking water
standards.
PFAS Monitoring. Templeton CSD monitors for per- and poly-fluoroalkyl substances (“PFAS”)
in its water supply in accomplishing necessary compliance with regulatory requirements issued by Federal
and State agencies and has detected low levels of two PFAS compounds at two well sites. Templeton CSD
has not identified any specific source of these PFAS that have reached its water supplies, and the PFAS
results remain below the State’s required response levels. See “CERTAIN RISKS TO BOND OWNERS
– Water Quality and PFAS” in the forepart of this Official Statement for a discussion on PFAS regulations
and requirements.
Water Permits, Licenses and Other Regulations
Templeton CSD possesses two permits and one license, which have been issued by the State Water
Resources Control Board to pump water from the Salinas River underflow. Permit 8964 authorizes
Templeton CSD to directly divert from the Salinas River at a rate of 1.5 cubic feet per second (“cfs”) from
October 1 to April 1 with a maximum diversion of 500 acre-feet per year. Permit 20785 authorizes
Templeton CSD to directly divert from the Salinas River at a rate of 1.5 cfs from April 1 to May 15 with a
maximum diversion of 133.7 acre-feet, but the total combined diversion under both permits cannot exceed
500 acre-feet per year. Templeton CSD holds one license (License 4829) that authorizes it to divert from
the Salinas River underflow at a rate of 0.26 cfs from April 1 to October 15.
Templeton CSD is located within the Atascadero Area Subbasin (the “Atascadero Basin”). In May
2018, the California Department of Water Resources designated the Atascadero Basin as a very low priority
basin under the Sustainable Groundwater Management Act. The adopted Groundwater Sustainability Plan
for the Atascadero Basin does not constrain Templeton CSD’s use of groundwater.
Water Supply
The current water supply for Templeton CSD is from local groundwater wells and 406 -acre feet
from the Nacimiento Project.
Groundwater Basin. Templeton CSD has traditionally met its service area customer needs during
the summer months from groundwater through the primary water wells of Templeton CSD. These wells
pump from the Atascadero Basin. During winter months, the customer water needs are primarily met with
water pumped from Salinas River underflow wells under its permits and license.
Page 231 of 357
3
Templeton CSD currently has eight active groundwater wells, and four storage tanks with a
combined capacity of 2.7 million gallons all of which are available for use. Templeton CSD’s current
pumping capacity is 1,875 gallons per minute (gpm) (does not include river underflow wells). In calendar
year 2025, 1,377 acre-feet were delivered to Templeton CSD customers from groundwater wells.
Based upon monitoring for the period January 1 through December 31, 2025, the quality of the
currently pumped groundwater meets existing State and federal regulatory requirements.
A group of property owners in the Paso Robles and Atascadero Basins has filed a quiet title action
seeking quiet title judgments concerning their claimed groundwater rights against the County, AMWC, the
City of El Paso de Robles, Templeton CSD and other water purveyors and users. For the status of this action
see “LITIGATION–Steinbeck Vineyards and Eidemiller” in the forepart of this Official Statement. The
water rights of individual water users within the Paso Robles and Atascadero Basins have not been
adjudicated. No other water rights are at issue in this litigation. The litigation is still pending. The last phase
of trial is set to begin on August 17, 2026. This phase of trial is limited to San Miguel CSD’s pueblo right
defense to Plaintiffs’ claims. Once that trial is complete, the case will be submitted to the court for a final
order.
Drought and Conservation Measures
Templeton CSD adopted Ordinance 2014-1 in March 2014 which comprehensively overhauled
water conservation requirements. Also in March 2014, Templeton CSD entered into Stage 1 Conservation
Requirements of the Ordinance. From April through the end of 2014, the District saw a reduction in water
demand of about 15% as compared to 2013. On May 19, 2015, Templeton CSD adopted Ordinance
No. 2015-2 amending its water conservation standards and requirements to authorize the board of directors
to implement any water conservation measures mandated or necessitated by applicable State regulatory
requirements by resolution.
The revenue forecast of Templeton CSD for Fiscal Years 2025-26 and 2026-27 anticipate small
increases in revenue due to a few additional connections with water usage by existing customers remaining
the same.
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4
Water Connections
The following table shows the growth in the number of water connections, excluding recycled water
connections, to the Templeton CSD Water System for the five most recent fiscal years.
Table A4-1
Templeton CSD
Water Connections
For Fiscal Years Ended June 30, 2022 through 2026
Fiscal Year Ended (June 30) Connections % Increase/(Decrease)(1)
2022 2,967 --
2023 3,000 1.11%
2024 3,003 0.10
2025 3,027 0.80
2026 3,034 0.23
(1) Percentage changes are manually calculated.
Source: Templeton CSD.
Water Deliveries
The following table presents a summary of water deliveries, excluding recycled water deliveries,
for the Templeton CSD Water System in acre-feet per year for the five most recent fiscal years.
Table A4-2
Templeton CSD
Water Deliveries in Acre-Feet Per Year
For Fiscal Years Ended June 30, 2022 through 2026
Fiscal Year Ended (June 30) Total % Increase/(Decrease)(1)
2022 1,315.23 --
2023 1,159.76 (11.82)%
2024 1,172.28 1.08
2025 1,244.43 6.15
2026 1,254.96 0.85
(1) Percentage changes are manually calculated.
Source: Templeton CSD.
Water Sales Revenues
The following table shows annual water sales revenues from water sales, excluding recycled water
sales, for the five most recent fiscal years for which data is available.
Page 233 of 357
5
Table A4-3
Templeton CSD
Water Sales Revenues
For Fiscal Years Ended June 30, 2021 through 2025
Fiscal Year Ended (June 30) Sales Revenues % Increase/(Decrease)(1)
2021 $3,045,641 --
2022 3,072,180 0.87%
2023 2,983,474 (2.89)
2024 3,040,226 1.90
2025 3,141,226 3.32
(1) Percentage changes are manually calculated.
Source: Templeton CSD.
Largest Customers
The 10 largest customers of the Templeton CSD Water System accounted for approximately 7.3%
of water sales from the Templeton CSD Water System, and less than 2.3% of total Templeton CSD revenues
in the Fiscal Year ended June 30, 2025. The annual payments by these customers for Fiscal Year 2024-25
ranged from $11,724 to $41,907.
Water System Rates and Charges
Templeton CSD water rates are comprised of a monthly minimum charge and a unit charge based
on the amount of water used. Templeton CSD also charges for disconnections and reconnections to the
Templeton CSD Water System, and for construction meter rentals. Templeton CSD currently charges
connection fees for new connections to the Templeton CSD Water System.
Monthly Minimum Charge. Templeton CSD’s monthly minimum charge is paid by all customer
classes and, with the exception of multiple unit customers, is based on meter size. The monthly minimum
charge, as of June 30, 2026 is as follows:
Table A4-4
Templeton CSD
Water Monthly Minimum Charge
Meter Size
(in inches) Monthly Service Minimum Charge†
5/8 or 3/4 $29.68
1 41.89
1 ½ 72.43
2 & Hydrant 109.07
3 206.77
4 316.69
6 622.03
Private Fire 316.69
† Multiple unit customers pay a monthly minimum charge for each additional unit.
Source: Templeton CSD.
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6
Unit Charge. Templeton CSD charges a monthly charge based on the number of hundred cubic
feet (HCF) used and calculated at the rate as of June 30, 2026 shown on the following schedule.
Quantity in HCF Charge (per 100 CF)
0-10 $1.41
11-14 2.76
15-20 3.45
21+ 4.28
Source: Templeton CSD.
Rate Increases. The rate increases for residential customers for the last five years are set forth in
the following table.
Table A4-5
Templeton CSD
Water Sales Rates
For Fiscal Years Ended June 30, 2022 through 2026
Fiscal Year Ended (June 30)
Water Monthly
Base Rate* Increase
2022 $29.68 $0.97
2023 29.68 0.00
2024 29.68 0.00
2025 29.68 0.00
2026 29.68 0.00
* Does not include usage 5/8 or ¾” meter.
Source: Templeton CSD.
Collection Procedures. Templeton CSD is on a monthly billing cycle for water service. Payment
is due by the 19th of the month following the billing cycle, and is considered delinquent if not paid by that
date. If payment is not received, a late notice is mailed to the customer and a one -time basic 10% penalty
of the charge, rate, or fee due (collectively, the “charges”) is assessed. Thereafter, an additional 1% penalty
per month is added to all delinquent amounts and basic penalties until such time as the delinquent charges
and penalties are paid. Any account that is more than 60 days overdue is subject to shut-off. No less than
(7) business days before discontinuation of water service for nonpayment, Templeton CSD shall contact
the customer on the account by telephone or written notice. At l east 5 business days before the scheduled
shut-off of residential service, Templeton CSD is required to make a reasonable attempt to contact an adult
residing at the premises, and if that cannot be accomplished, by giving notice by mail, in person, or by
posting in a conspicuous location a notice of discontinuation of service. Customers that are still delinquent
as of noon on the shut-off day will have their meters locked, and a $50.00 reconnection fee is added to the
balance due. In order to restore service, the balance of the account, including past due amounts, the current
due amount, and all fees must be paid in full. As of June 30, 2025, delinquent payments account for less
than 1/2% of total revenues of the Templeton CSD Water System.
Connection Fees. Templeton CSD charges connection fees for improvement or expansion of water
treatment and distribution facilities to meet the requirements of community growth. The current connection
fee for single family residences and commercial and industrial units are $46,527 per water unit of use.
Page 235 of 357
7
Future Water System Improvements
Templeton CSD projects making various capital improvements to the Templeton CSD Water
System of approximately $23,269,800 starting in 2018 to 2038. These projects will be funded through
connection fees, grants, loans and revenues.
The capital improvement plan described above does not include costs for a planned replacement of
the spillway at San Antonio Dam. The spillway replacement is proposed to be undertaken by the Monterey
County Water Resources Agency. The Flood Control District may be required to contribute up to
approximately 32.3%, or about $25.2 million (estimated as of 2025), of the costs of the spillway
replacement. The Flood Control District would charge through such costs, if any, proportionally to the
Participants under the Delivery Contracts, including the Delivery Contract with Templeton CSD. Spillway
replacement project costs are expected to be incurred beginning in 2028. If Templeton CSD is required to
contribute, it currently expects to fund its share of such costs from the Water Operating Fund (which is
primarily funded by water rates) assuming the costs of the spillway improvements are financed and
subsequently billed by the Flood Control District over a period of 20 or more years. Currently, whether
and how much the Flood Control District and, correspondingly, the Participants, including Templeton CSD,
will pay, and the funding sources for such payments, have not been determined and may change as the
foregoing parties deliberate on proposals for the spillway replacement project at San Antonio Dam.
Cybersecurity
Templeton CSD relies on a complex technology environment to conduct its daily operations. As a
recipient and provider of personal, confidential, and sensitive information Templeton CSD and its
departments experience multiple cybersecurity threats which include but are not limited to, social
engineering, malware, denial-of-service and other attacks on endpoints.
Templeton CSD has put several preventive measures in place to safeguard against cybersecurity
threats. These measures include cybersecurity awareness training, firewalls, email filtering, web content
filtering, endpoint protection, and ensuring that operating systems, network equipment, and endpoint
devices are up-to-date with the latest patches. Additionally, advanced segmentation and monitoring
techniques are employed to detect and respond to potential threats within the network, while real-time
endpoint detection and response systems help identify and mitigate any malicious activity on devices.
There have been no material cybersecurity incidents in the past five years.
Templeton CSD currently maintains insurance coverage with respect to certain information security
and privacy liability claims. However, Templeton CSD is not required to maintain cybersecurity insurance.
Future cybersecurity attacks could affect the operations and finances of Templeton CSD, including its
ability to meet payment obligations under its Delivery Contract.
Page 236 of 357
8
FINANCIAL INFORMATION OF TEMPLETON COMMUNITY SERVICES DISTRICT
Budgetary Process
Templeton CSD utilizes accounting principles appropriate for an Enterprise Fund to record its
activities. Accordingly, revenues and expenses are recognized on an accrual basis of accounting. Templeton
CSD’s books and records include a water fund, sewer fund, drainage fund, solid waste fund, fire fund, a
parks and recreation fund, a street lighting fund, and an administrative fund.
Financial Statements
The most recent audited financial statements of Templeton CSD, prepared by Nigro & Nigro, PC,
independent certified public accountants are included under the heading “AUDITED FINANCIAL
STATEMENTS.” The independent auditor’s letter concludes that the Financial Statements present fairly,
in all material respects, the financial position of the business-type activities of Templeton CSD as of
June 30, 2025, and the respective changes in financial position, where applicable, and cash flows thereof
for the year then ended, in accordance with accounting principles generally accepted in the United States
of America.
The summary operating results contained under the caption “–Operating Results” are derived from
the audited financial statements (excluding certain non-cash items and after certain other adjustments) and
are qualified in their entirety by reference to such statements, including the notes thereto.
Operating Results
The following table is a summary of operating results of the Templeton CSD Water System for
Fiscal Years ended June 30, 2021 through June 30, 2025. These results have been derived from the
Templeton CSD financial statements but exclude certain receipts which are not included as Revenues under
the Delivery Contract and certain non-cash items and include certain other adjustments.
Page 237 of 357
9
Table A4-6
Templeton CSD Water System
Operating Results
For Fiscal Years Ended June 30, 2021 through 2025
2020-21 2021-22 2022-23 2023-24 2024-25
Water Sales $3,045,641.00 $3,072,180.00 $2,983,474.00 $3,040,226.00 $3,141,226.00
Non-Operating
Revenue 50,983.00 (179,054.00) 104,487.00 739,594.00 884,027.00
Plant Operating
Expenses(1) (1,610,175.00) (1,543,067.00) (1,861,218.00) (1,452,388.00) (1,461,653.00)
Treated water
sales (228,193.00) (211,034.00) (267,186.00) (268,605.00) (225,361.00)
Transfer out-
Administration (581,793.00) (532,181.00) (583,766.00) (415,905.00) (436,827.00)
Depreciation
Expense - - - $(319,370.00) $(323,265.00)
Net Revenue $ 676,463.00 $606,844.00 $375,791.00 $1,323,552.00 $1,578,147.00
(1) Includes payments made to the Flood Control District pursuant to the Templeton Delivery Contract. See
“Security and Sources of Payment for the Bonds–The Delivery Contracts” in the forepart of this Official Statement.
Source: Templeton CSD.
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10
Management’s Discussion and Analysis
The following discussion relates to certain items in the table above.
Gross Revenues. Templeton CSD recognizes revenue from user fees, service charges, program fees
and rental fees as they are earned. Taxes and assessments are recognized as revenue based upon amounts
collected on behalf of Templeton CSD by the County.
Operations and Maintenance Costs. As part of the operation and maintenance of its water system,
Templeton CSD routinely repairs line breaks, installs new services, monitors and records: tank levels, line
pressures, chlorine levels and water demand flows. In addition, Templeton CSD routinely maintains and
repairs: natural gas engines and electric motors for well pumps, five vehicles, one dump truck, backhoe,
and other assorted equipment and machinery.
No Outstanding Long-Term Templeton CSD Water System Indebtedness
Other than the Bonds, there is no outstanding long-term debt payable from revenues of the
Templeton CSD Water System.
Investment Policy
Templeton CSD is authorized to make investments authorized by Section 53652 of the California
Government Code to invest in obligations of the United States Treasury, and its agencies and
instrumentalities. The investment policy of Templeton CSD is more restrictive than the Cal ifornia
Government Code. The policy only allows Templeton CSD to invest in the California Local Agency
Investment Fund (LAIF), California Cooperative Liquid Assets Securities System (CLASS), FDIC insured
accounts, National Credit Union Administration insured accounts, United States Treasury Bills, Notes,
Certificates of Indebtedness, United States Federal Agency or Unites States government -sponsored
enterprise obligations and investments collateralized pursuant to Section 53652 of the California
Government Code.
Insurance
Templeton CSD is a member of the Special District Risk Management Authority (SDRMA), a risk-
pooling self-insurance authority, created under provisions of Sections 6500 et seq. of the California
Government Code, to arrange and administer programs of insurance for pooling of self-insured loses and
to purchase excess insurance coverage. Templeton CSD participates in the general and auto liability
programs and public officials’ and employees’ errors and omissions, maintaining liability coverage at the
total risk financing limit of $10 million with a combined single limit at $10 million per occurrence.
Employees and Employee Benefits
As of June 30, 2026, Templeton CSD employed 24 full-time equivalent employees and had an
average head count of 60 employees per month including part-time/temporary employees.
Pension Benefits
Plan Descriptions. Qualified employees are covered under a multiple-employer defined benefit
pension plan maintained by agencies of the State known as the California Public Employees’ Retirement
System (CalPERS). Templeton CSD has engaged with CalPERS to administer the following pension plans
for its employees: the Miscellaneous Plans and Safety Plans. Eligible Templeton CSD Water System
Page 239 of 357
11
employees participate in the Miscellaneous Plans. CalPERS issues publicly available reports that include a
full description of the pension plan, benefit provisions, assumptions and membership information that can
be found on the CalPERS website.
Benefits Provided. CalPERS provides retirement and disability benefits, annual cost-of-living
adjustments, and death benefits to plan members and beneficiaries. Benefits are based on years of credited
service, equal to one year of full time employment. The provisions and cost of the Templeton CSD
Miscellaneous Plans and benefits in effect for the measurement period ended June 30, 2025, are summarized
as follows:
Miscellaneous Plans
Hire Date Prior to January 1, 2013
With Prior Service
On or After
January 1, 2013
Without Prior Service
On or After
January 1, 2013
Benefit formula 3.0% @ 60 2.5% @ 55 2.0% @ 62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments Monthly for life Monthly for life Monthly for life
Retirement Age 50 - 67 & up 50 - 67 & up 52 - 67 & up
Monthly benefits, as a % of eligible
compensation
2.0% to 3.0% 2.0% to 2.5% 1.0% to 2.5%
Required member contribution rates 8.000% 8.000% 6.750%
Required employer contribution
rates
17.330% 13.410% 7.870%
Source: Templeton CSD Financial Statements June 30, 2025.
Contribution Description. Section 20814(c) of the California Public Employees’ Retirement Law
(the “PERL”) requires that the employer contribution rates for all public employers are determined on an
annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The
total plan contributions are determined through the CalPERS annual actuarial process. The actuarially
determined rate is the estimated amount necessary to finance the costs of benefits earned by employees
during the year, with an additional amount to finance any unfunded accrued liability. The employer is
required to contribute the difference between the actuarially determined rate and the contribution rate of
employees. Employer contribution rates may change if plan contracts are amended. Payments made by the
employer to satisfy contribution requirements that are identified by the pension plan terms as plan member
contribution requirements are classified as plan member contributions. For the year ended June 30, 2025,
total employer contributions to the Miscellaneous Plans were $187,043 and total member contributions
were $118,965.
For additional information regarding the plans, including, actuarial methods and assumptions,
discount rate, pension liability and expense, see Note 10 of the financial statements.
Other Postemployment Benefits
Templeton CSD’s defined benefit other postemployment benefits (OPEB) plan, Templeton
Community Services District Other Postemployment Benefits Plan (the “OPEB Plan”), provides OPEB for
all permanent full-time general and public safety employees of Templeton CSD. The OPEB Plan is a single-
employer defined benefit OPEB plan administered by the California Employers’ Retiree Benefit Trust
(CERBT). The contribution requirements of Templeton CSD are established and may be amended annually
by the Board of Directors. Templeton CSD’s Board of Directors had previously established a policy of
funding the Annual Required Contribution (ARC) on a pay as you go basis, under which contributions to
Page 240 of 357
12
the OPEB plan are generally made at the same time and in the same amount as retiree benefits and expenses
become due. However, Templeton CSD has made discretionary contributions to CERBT in the past and is
currently withdrawing funds from the CERBT program to pay for annual retiree health benefits. No
discretionary contributions were made for the year ended June 30, 2025. For additional information
regarding OPEB, see Note 9 of the financial statements.
AUDITED FINANCIAL STATEMENTS
The following are the complete financial statements of Templeton CSD for the Fiscal Year ended
June 30, 2025. Only the gross revenues of the Templeton CSD Water System are pledged to pay the
obligations of Templeton CSD under its Delivery Contract. The inclusion of the complete financial
statements of Templeton CSD does not imply that any revenues of Templeton CSD other than those of
the Templeton CSD Water System are pledged or available to make any payments under the Delivery
Contract.
Page 241 of 357
Page 242 of 357
NRF Draft 7/23/26
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. PRELIMINARY OFFICIAL STATEMENT DATED AS OF _________, 2026
NEW ISSUE – BOOK ENTRY ONLY RATINGS: S&P: [“___” (Insured)]; “___” (Underlying)
[DAC LOGO] (See “RATINGS” herein.)
In the opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel, under existing law, and subject to the matters
described in “TAX MATTERS” herein, interest on the 2026 Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 from
the gross income of the owners thereof for federal income tax purposes and is not included in the federal alternative minimum tax on the owners
thereof who are individuals. It is also the opinion of Bond Counsel that under existing law, interest on the 2026 Bonds is exempt from personal
income taxes of the State of California. See “TAX MATTERS” herein.
$[PAR]*
SLO COUNTY FINANCING AUTHORITY
(COUNTY OF SAN LUIS OBISPO, CALIFORNIA)
NACIMIENTO WATER PROJECT
REVENUE REFUNDING BONDS,
2026 SERIES A
Dated: Date of Issuance Due: September 1, as shown on inside cover page
The SLO County Financing Authority (the “Authority”), a joint exercise of powers authority established pursuant to an agreement betwe en
the County of San Luis Obispo, California (the “County”) and the San Luis Obispo County Flood Control and Water Conservation District (the
“Flood Control District”), is issuing $[PAR] principal amount of SLO County Financing Authority (County of San Luis Obispo, California)
Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A (the “2026 Bonds”) to: (i) provide funds to refund all of the SLO County
Financing Authority Nacimiento Water Project Revenue Refunding Bonds, 2015 Series A (the “2015 Bonds”) outstanding on the date of issuance
of the 2026 Bonds; [(ii) purchase a municipal bond insurance policy for the 2026 Bonds;] and (iii) pay certain costs associated with the issuance of
the 2026 Bonds, all as more fully described herein. See “PLAN OF REFUNDING” and “ESTIMATED SOURCES AND USES OF FUNDS.” The
2015 Bonds were issued to advance refund a portion of the Authority’s then outstanding Nacimiento Water Project Revenue Bonds, 2007 Series
A, thereby refinancing the costs of the acquisition, construction and equipping of certain public capital improvements within the County, generally
comprising the Nacimiento Water Project (the “Nacimiento Project”).
The 2026 Bonds will be issued and secured pursuant to the terms of an Indenture of Trust, dated as of September 1, 2007 (the “Original
Indenture”), previously supplemented and amended, and as further supplemented and amended by t he Third Supplemental Indenture of Trust dated
as of [October 1], 2026 (the “Third Supplemental Indenture” and together with the Original Indenture, as previously supplemented and amended,
the “Indenture”), each by and between the Authority and U.S. Bank Trust Company, National Association, as successor trustee (the “Trustee”).
The 2026 Bonds are obligations of the Authority payable solely from and secured by Revenues (as defined in the Indenture) The Revenues consist
primarily of gross water sales revenues of the Water Enterprises of the Participants (each as defined herein) payable to the Flood Control District
pursuant to individual Water Delivery Entitlement Contracts, as amended (each, a “Delivery Contract”), between the Flood Cont rol District and
the respective Participant, and pledged by the Flood Control District pursuant to the terms and conditions of a Pledge Agreement, dated as of
September 1, 2007 (the “Pledge Agreement”), by and between the Flood Control District and the Authority. Pursuant to each Delivery Contract,
each Participant pledges the gross water sales revenues of its Water Enterprise (as defined herein) to pay the obligations under its Delivery Contract,
including its pro rata share of the costs of the Nacimiento Project, Additional Capital Project Costs, Capital Projects Installment Debt Service,
Master Water Contract Costs, Capital Reserve Costs, Operation and Maintenance Variable Energy Costs (each as defined herein) and other costs
associated with the Nacimiento Project, and each Participant is obligated to make its respective payments under its Delivery Contract to the Flood
Control District regardless of the failure of the Flood Control District to deliver water to the respective Participant. See “SECURITY AND
SOURCES OF PAYMENT FOR THE BONDS–Pledge Agreement” and “–The Delivery Contracts.”
In addition to the 2015 Bonds, the Authority previously issued 2007 Taxable Bonds and 2018 Bonds (each as defined herein) and may issue
Additional Bonds secured on a parity with the 2007 Taxable Bonds, the 2018 Bonds and the 2026 Bonds. The 2007 Taxable Bonds, the 2018 Bonds,
the 2026 Bonds and any Additional Bonds are referred to as the “Bonds.”
The 2026 Bonds will be issued in book-entry form only, in authorized denominations of $5,000 and integral multiples thereof and will be
initially issued and registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“D TC”), which
will act as securities depository for the 2026 Bonds. Purchasers will not receive certificates representing their interests in the 2026 Bonds. Payments
of principal of and interest on the 2026 Bonds will be made by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit
such payments to the beneficial owners of the 2026 Bonds. See APPENDIX F– “DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
The principal of the 2026 Bonds is payable on September 1 of each year as set forth on the inside cover page hereof. Interest on the 2026
Bonds is payable semiannually on each March 1 and September 1, commencing March, 1 2027.
The 2026 Bonds are subject to optional redemption as more fully described herein.* See “The 2026 Bonds–Redemption Provisions.”
[The scheduled payment of principal of and interest on the 2026 Bonds when due will be guaranteed under a municipal bond insurance policy
to be issued concurrently with the delivery of the 2026 Bonds by [Insurer]. See “BOND INSURANCE” and APPENDIX G–“SPECIMEN
MUNICIPAL BOND INSURANCE POLICY.”]
* Preliminary; subject to change.
Page 243 of 357
[Insurer Logo]
_______________________
MATURITY SCHEDULE
On Inside Cover Page
_______________________
THE 2026 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES OF THE
AUTHORITY CONSISTING PRIMARILY OF PAYMENTS MADE BY THE PARTICIPANTS TO THE FLOOD CONTROL
DISTRICT UNDER THE DELIVERY CONTRACTS AND RECEIVED BY THE AUTHORITY PURSUANT TO THE PLEDGE
AGREEMENT. THE 2026 BONDS ARE NOT A DEBT OF THE AUTHORITY, THE FLOOD CONTROL DISTRICT, THE
PARTICIPANTS, THE COUNTY, OR THE STATE OF CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMITATION. THE AUTHORITY SHALL NOT BE OBLIGATED TO PAY THE PRINCIPAL OF, OR
INTEREST ON THE 2026 BONDS, EXCEPT FROM THE FUNDS PROVIDED UNDER THE INDENTURE AND THE PLEDGE
AGREEMENT. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR
ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE AUTHORITY, IS PLEDGED TO THE PAYMENT OF THE
PRINCIPAL OF OR INTEREST ON THE 2026 BONDS. THE AUTHORITY HAS NO TAXING POWER.
This cover page contains information for quick reference only. It is not a summary of this issue. Potential investors are advised to read the
entire Official Statement to obtain information essential to making an informed investment decision with respect to the 20 26 Bonds. For a discussion
of certain risk factors associated with investment in the 2026 Bonds, see “CERTAIN RISKS TO BOND OWNERS” as well as other factors
discussed throughout this Official Statement.
The 2026 Bonds will be offered when, as and if executed, delivered, and received by the Underwriter, subject to the approval as to the ir
legality by Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel, and certain other conditions. Norton Rose Fulbright US LLP,
Los Angeles, California is also acting as Disclosure Counsel for the Authority. Certain legal matters will be passed upon for the County by County
Counsel and for the Underwriter by Anzel Galvan LLP, San Francisco, California, Underwriter’s Counsel. It is anticipated that the 2026 Bonds in
book-entry only form will be available through the facilities of DTC in New York, New York, on o r about ________, 2026.
Loop Capital Markets
Dated: __________, 2026
Page 244 of 357
MATURITY SCHEDULE
$[PAR]*
SLO COUNTY FINANCING AUTHORITY
(COUNTY OF SAN LUIS OBISPO, CALIFORNIA)
NACIMIENTO WATER PROJECT
REVENUE REFUNDING BONDS,
2026 SERIES A
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price CUSIP No.†
2027 $ % %
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038 C
* Preliminary; subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by
FactSet Research Systems Inc. on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in
any way as a substitute for the CUSIP Services. None of the County, the Underwriter, their agents, or counsel is responsible for the selection or
uses of the CUSIP numbers, and no representation is made as to their correctness on the applicable Bonds or as included herein. The CUSIP numbers
of specific maturities is subject to change following the issuance of the 2026 Bonds as a result of various actions, including, but not limited to, a
refunding in whole or in part or as the result of the procurement of a secondary market portfolio insurance or other similar enhancement by investors
that is applicable to all or a portion of certain maturities of the 2026 Bonds.
C Priced at par call on September 1, 20___.
Page 245 of 357
No dealer, broker, salesperson or other person has been authorized by the County or the Authority to give
any information or to make any representation other than those contained herein and, if given or made, such other
information or representation must not be relied upon as having been authorized by any of the foregoing. This Official
Statement does not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of the
2026 Bonds by a person in any jurisdiction in which it is unla wful for such person to make such an offer, solicitation
or sale.
This Official Statement is not to be construed as a contract with the purchasers of the 2026 Bonds. Statements
contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly
so described herein, are intended solely as such and are not to be construed as a representation of facts.
Information contained in APPENDIX A–“THE PARTICIPANTS” has been obtained from the respective
Participant. All other information set forth herein has been obtained from the County or the Authority and from other
sources and is believed to be reliable but is not guaranteed as to accuracy or completeness. The in formation and
expressions of opinions herein are subject to change without notice and neither the delivery of this Official Statement
nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in
the affairs of the County, the Authority or the Participants since the date hereof. This Official Statement is submitted
in connection with the sale of the 2026 Bonds referred to herein and may not be reproduced or used, in whole or in
part, for any other purpose, unless authorized in writing by the County. All summaries of the documents and laws are
made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. All
capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Indenture and the
Pledge Agreement. This Official Statement, including any supplement or amendment hereto, is intended to be
deposited with the Electronic Municipal Market Access site maintained by t he Municipal Securities Rulemaking
Board.
Any statement made in this Official Statement involving any forecast or matter of estimates or opinion,
whether or not expressly stated, is intended solely as such and not as a representation of fact. Certain state ments
included or incorporated by reference in this Official Statement constitute “forward -looking statements” within the
meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States
Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as
amended (the “Securities Act”). Such forward-looking statements are generally identified by use of the words “plan,”
“project,” “expect,” “estimate,” “budget” or other similar words. Such forward-looking statements include, but are
not limited to, statements contained under the caption “PLAN OF REFUNDING” and in APPENDIX A–“THE
PARTICIPANTS.” Such forward-looking statements refer to the achievement of certain results or other expectations
or performance which involve known and unknown risks, uncertainties and other factors. These risks, uncertainties
and other factors may cause actual results, performance or achievements to be materially different from any projected
results, performance or achievements described or implied by such forward looking statements. Neither the County
nor the Authority plans to issue updates or revisions to such forward -looking statements if or when the expectations,
events, conditions or circumstances on which such statements are based, occur, or if actual results, performance or
achievements are materially different from any results, performance or achievements described or implied by such
forward-looking statements.
The 2026 Bonds have not been registered with the Securities and Exchange Commission by reason of the
provisions of Section 3(a)(2) of the Securities Act of 1933, as amended. The registration or qualification of the 2026
Bonds in accordance with applicable provisions of Securities Laws of the states in which these Bonds have been
registered or qualified, and the exemption from registration or qualification in other states, shall not be regarded as a
recommendation thereof. Neither these states nor any of their agencies have passed upon t he merits of the securities
or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal
offense.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The
Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, their
responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
Page 246 of 357
The Underwriter may offer and sell the 2026 Bonds to certain dealers, institutional investors and others at
prices lower than the public offering prices stated on the inside cover page hereof, and said public offering prices may
be changed from time to time by the Underwriter.
The County, the Flood Control District and each Participant maintains a website. Unless specifically
indicated otherwise, the information presented on those websites is not incorporated by reference as part of this
Official Statement and should not be relied upon in making investment decisions with respect to the 2026 Bonds.
[[INSURER] (the “2026 Insurer”) makes no representation regarding the 2026 Bonds or the advisability of
investing in the 2026 Bonds. In addition, the 2026 Insurer has not independently verified, makes no representation
regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any
information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the
information regarding the 2026 Insurer, supplied by the 2026 Insurer and presented under the heading “BOND
INSURANCE” and APPENDIX G–”SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”]
Page 247 of 357
SLO COUNTY FINANCING AUTHORITY
James W. Hamilton, CPA, County Auditor-Controller-Treasurer-Tax Collector, Chair
Matthew P. Pontes, County Chief Executive Officer, Secretary
Katie Girardi, San Luis Obispo County Pension Trust Executive Director, Member
PARTICIPANTS
Atascadero Mutual Water Company
City of El Paso de Robles
City of San Luis Obispo
Templeton Community Services District
SPECIAL SERVICES
Norton Rose Fulbright US LLP
Los Angeles, California
Bond Counsel and Disclosure Counsel
KNN Public Finance, LLC
Berkeley, California
Municipal Advisor
U.S. Bank Trust Company, National Association
Los Angeles, California
Trustee
Page 248 of 357
i
TABLE OF CONTENTS
Page Page
INTRODUCTION .......................................................... 1
General; Purpose; Authority for Issuance............... 1
The Nacimiento Project .......................................... 2
The Authority ......................................................... 2
The Flood Control District ..................................... 2
The Participants ...................................................... 2
Security and Sources of Payment ........................... 3
Additional Bonds ................................................... 4
Certain Risk Factors ............................................... 5
Continuing Disclosure ............................................ 5
Reference to Documents ........................................ 5
THE FLOOD CONTROL DISTRICT ............................ 6
General ................................................................... 6
Nacimiento Dam .................................................... 6
PLAN OF REFUNDING ................................................ 8
ESTIMATED SOURCES AND USES OF FUNDS .... 10
THE 2026 BONDS ....................................................... 12
General ................................................................. 12
Redemption Provisions ........................................ 12
Redemption Procedures........................................ 12
SECURITY AND SOURCES OF PAYMENT FOR
THE BONDS ................................................................ 13
General ................................................................. 13
Flow of Funds ...................................................... 13
Pledge Agreement ................................................ 14
The Delivery Contracts ........................................ 15
Covenants Under the Delivery Contracts ............. 19
Reserve Fund ........................................................ 27
Investments of Amounts on Deposit Under the
Indenture ......................................................... 28
Existing Obligations of the Participants ............... 28
Additional Bonds ................................................. 28
Indenture Events of Default and Remedies .......... 29
Limited Obligations ............................................. 30
[BOND INSURANCE .................................................. 31
Bond Insurance Policy ......................................... 31
CERTAIN RISKS TO BOND OWNERS .................... 32
General ................................................................. 32
Statutory and Regulatory Impact .......................... 32
No Obligation to Tax ............................................ 32
Drought ................................................................ 32
Climate Change ................................................... 35
Earthquakes, Floods, and Other Disasters ........... 35
Wildfires .............................................................. 36
Water Quality and PFAS ...................................... 36
[Risks Associated with Bond Insurance ............... 37
Investment of Funds............................................. 38
Limitations on Remedies and Bankruptcy ........... 38
Cybersecurity ....................................................... 38
Limited Liability of Authority to the Owners ...... 39
Changes in Law ................................................... 39
CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND
APPROPRIATIONS .................................................... 39
Article XIII A of the California Constitution ....... 39
Article XIII B of the California Constitution ....... 40
Article XIII C and Article XIII D of the California
Constitution .................................................... 41
Future Initiatives .................................................. 43
FINANCIAL STATEMENTS...................................... 43
CONTINUING DISCLOSURE ................................... 43
Flood Control District .......................................... 43
The Participants ................................................... 44
TAX MATTERS .......................................................... 44
LITIGATION ............................................................... 46
Steinbeck Vineyards and Eidemiller .................... 46
Authority and Flood Control District ................... 47
Participants .......................................................... 47
LEGAL MATTERS ..................................................... 47
MUNICIPAL ADVISOR ............................................. 48
RATINGS..................................................................... 48
UNDERWRITING ....................................................... 48
MISCELLANEOUS ..................................................... 48
Page 249 of 357
ii
INDEX OF MAPS AND TABLES
Page
Table 1 – 2015 Bonds to be Refunded ........................................................................................................................... 9
Table 2 – Estimated Sources and Uses of Funds ......................................................................................................... 10
Table 3 – Debt Service Schedule ................................................................................................................................. 11
Table 4 – Nacimiento Capital Installment Debt Service Allocation ............................................................................ 18
Table 5 – Delivery Contract Payments ........................................................................................................................ 21
Table 6 – Delivery Entitlement Share.......................................................................................................................... 22
Table 7 – Capital Reserve and Operation and Maintenance Costs .............................................................................. 23
Table 8 – Nacimiento Project and Bond Legal Structure ............................................................................................ 26
APPENDICES
APPENDIX A-THE PARTICIPANTS ...................................................................................................................... A-1
Appendix A1-Atascadero Mutual Water Company ..................................................... A1-1
Appendix A2-City of El Paso De Robles ..................................................................... A2-1
Appendix A3-City of San Luis Obispo ........................................................................ A3-1
Appendix A4-Templeton Community Services District .............................................. A4-1
APPENDIX B-THE DELIVERY CONTRACTS ...................................................................................................... B-1
APPENDIX C-FORMS OF PRINCIPAL LEGAL DOCUMENTS ........................................................................... C-1
APPENDIX D-FORMS OF CONTINUING DISCLOSURE AGREEMENTS ......................................................... D-1
APPENDIX E-PROPOSED FORM OF BOND COUNSEL OPINION .................................................................... E-1
APPENDIX F-DTC AND THE BOOK-ENTRY ONLY SYSTEM .......................................................................... F-1
[APPENDIX G-SPECIMEN MUNICIPAL BOND INSURANCE POLICY .......................................................... G-1]
Page 250 of 357
iii
Unit Map for Nacimiento Water Project
Page 251 of 357
1
OFFICIAL STATEMENT
$[PAR]*
SLO COUNTY FINANCING AUTHORITY
(COUNTY OF SAN LUIS OBISPO, CALIFORNIA)
NACIMIENTO WATER PROJECT
REVENUE REFUNDING BONDS,
2026 SERIES A
INTRODUCTION
This Introduction contains only a brief summary of the terms of the 20 26 Bonds being offered and a brief
description of this Official Statement. A full review should be made of the entire Official Statement, including the
inside cover through the Appendices. All statements contained in this Introduction are qualified in their entirety by
reference to the entire Official Statement. All capitalized terms used in this Official Statement and not otherwise
defined herein have the meanings given to such terms as set forth in the Indenture (defined below). See APPENDIX
C–“FORMS OF PRINCIPAL LEGAL DOCUMENTS.”
General; Purpose; Authority for Issuance
This Official Statement, which includes the cover page through the Appendices hereto (the “Official
Statement”), provides certain information concerning the issuance by the SLO County Financing Authority (the
“Authority”) of $[PAR]* principal amount of SLO County Financing Authority (County of San Luis Obispo,
California) Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A (the “2026 Bonds”).
The proceeds from the issuance of the 20 26 Bonds will be used to: (i) provide funds to effect a current
refunding of all of the SLO County Financing Authority Nacimiento Water Project Revenue Refunding Bonds, 2015
Series A (the “2015 Bonds”) outstanding on the date of issuance of the 2026 Bonds; [(ii) purchase a municipal bond
insurance policy for the 2026 Bonds;] and (iii) pay certain costs associated with the issuance of the 20 26 Bonds, all
as more fully described herein. See “PLAN OF REFUNDING” and “ESTIMATED SOURCES AND USES OF
FUNDS.”
The 2015 Bonds were issued to advance refund a portion of the Authority’s then outstanding Nacimiento
Water Project Revenue Bonds, 2007 Series A, thereby refinancing the costs of the acquisition, construction and
equipping of certain public capital improvements within the County of San Luis Obispo, California (the “County”),
generally comprising the Nacimiento Water Project (the “Nacimiento Project”).
The 2026 Bonds will be issued and secured pursuant to the terms of an Indenture of Trust, dated as of
September 1, 2007 (the “Original Indenture”), previously supplemented and amended, and as further supplemented
and amended by the Third Supplemental Indenture of Trust, dated as of [October 1], 2026 (the “Third Supplemental
Indenture” and together with the Original Indenture, as previously supplemented and amended, the “Indenture”), each
by and between the Authority and U.S. Bank Trust Company, National Association, as successor trustee (the
“Trustee”). The Authority is a joint exercise of powers authority establishe d pursuant to an agreement between the
County and the San Luis Obispo County Flood Control and Water Conservation District (the “Flood Control District”).
The 2026 Bonds are obligations of the Authority payable solely from and secured by Revenues (as defined in the
Indenture). The Revenues consist primarily of gross water sales revenues of the Water Enterprises of the Participants
(each as defined herein) payable to the Flood Control District pursuant to individual Water Delivery Entitlement
Contracts, as amended (each, a “Delivery Contract”), between the Flood Control District and the respective
Participant. Pursuant to each Delivery Contract, each Participant has covenanted to pay its pro rata share of various
capital expenses relating to the funding of design costs, engineering, planning, mapping, acquiring easements and
right-of-way, and construction in connection with the Nacimiento Project, including Additional Capital Project Costs,
Capital Projects Installment Debt Service, Master Water Contract Costs, Capital Reserve Costs, Operation and
* Preliminary; subject to change.
Page 252 of 357
2
Maintenance Costs, Variable Energy Costs (each as defined herein) and other costs associated with the Nacimiento
Project.
Pursuant to a Pledge Agreement dated as of September 1, 2007 (the “Pledge Agreement”), by and between
the Flood Control District and the Authority, the Flood Control District pledges the Capital Projects Installment Debt
Service from each Participant, the Flood Control District’s Net Revenues, and all amounts in the Water Fund (each as
defined in the Pledge Agreement) to the Authority. See “SECURITY AND SOURCES OF PAYMENT FOR THE
BONDS–Pledge Agreement” and “–The Delivery Contracts.”
The Nacimiento Project
The Nacimiento Project consists of a multi -port sloping intake facility at Lake Nacimiento with a pump
station, two intermediate pump stations, three storage tanks, a control system, and approximately 45 miles of
transmission pipeline ranging from 36-inches to 12-inches in diameter, with the ability to deliver 15,750 acre -feet of
raw water each year to communities within the County, including the Participants (defined below). The Nacimiento
Project became operational on January 7, 2011.
The Authority
The Authority is a joint exercise of powers authority established pursuant to an agreement between t he
County and the Flood Control District. See “THE AUTHORITY.”
The Flood Control District
The Flood Control District was formed in 1945 through the enactment of the San Luis Obispo County Flood
Control and Water Conservation District Act. See “THE FLOOD CONTROL DISTRICT.”
The Participants
The Participants to the Delivery Contracts are: (i) Atascadero Mutual Water Company (“AMWC”), (ii) City
of El Paso de Robles (“Paso Robles”), (iii) City of San Luis Obispo (“SLO”), and (iv) Templeton Community Services
District (“Templeton”).
The County of San Luis Obispo Service Area 10, Zone A (“CSA 10”), Bella Vista MHP, LLC (“Bella Vista”),
and SMR Mutual Water Company (“SMR”) have also entered into Water Delivery Entitlement Contracts with the
Flood Control District, however, those contracts do not provide payments or security for the 20 26 Bonds, and none of
CSA 10, Bella Vista, or SMR are Participants.
The Flood Control District entered into a Water Delivery Entitlement Contract, dated as of August 17, 2004,
as amended, with AMWC (the “AMWC Delivery Contract”); a Water Delivery Entitlement Contract, dated as of
August 17, 2004, as amended, with Paso Robles (the “Paso Robles Delivery Contract”); a Water Delivery Entitlement
Contract, dated as of August 17, 2004, as amended, with SLO (the “SLO Delivery Contract”); and a Water Delivery
Entitlement Contract, dated as of August 17, 2004, as amended, with Templeton (the “Templeton Delivery Contract”
and collectively with the AMWC Delivery Contract, the Paso Robles Delivery Contract, the SLO Delivery Contract
and the Templeton Delivery Contract, the “Original Water Delivery Entitlement Contracts”). Each Original Water
Delivery Entitlement Contract was amended by the Memorandum of Understanding (First Amendment to Nacimiento
Project Water Delivery Entitlement Contract), the Second Amendment to the Nacimiento Project Water Delivery
Entitlement Contract, and the Third Amendment (Full Allocation) to the Nacimiento Project Water Delivery
Entitlement Contract (the “Third Amendment,” and as so amended, collectively, the “Existing Water Delivery
Entitlement Contracts”), pursuant to which each Participant, CSA 10, Bella Vista, and SMR agreed to pay its share of
various capital expenses relating to the funding of design costs, engineerin g, planning, environmental mitigation,
equipping new facilities and/or construction efforts, accounting services, project administration and management,
installation, grading, razing and building the Nacimiento Project. See “SECURITY AND SOURCES OF PAYMENT
FOR THE BONDS–The Delivery Contracts” and APPENDIX A–“THE PARTICIPANTS.”
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3
The Flood Control District also entered into a Water Delivery Entitlement Contract, dated as of October 24,
2006, as amended (the “CSA 10 Delivery Contract”), by and between the Floo d Control District and the County,
acting on behalf of CSA 10; a Water Delivery Entitlement Contract, dated as of April 2016 with Bella Vista (the
“Bella Vista Delivery Contract”); and a Water Delivery Contract, dated as of April 2016 with SMR (the “SMR
Delivery Contract,” and collectively with the Existing Water Delivery Entitlement Contracts, the CSA 10 Delivery
Contract, the Bella Vista Delivery Contract, the “Delivery Contracts”). CSA 10, Bella Vista, and SMR have no
obligation with respect to the Bonds, and the CSA 10 Delivery Contract, the Bella Vista Delivery Contract, and the
SMR Delivery Contract do not provide payments or security for the 20 26 Bonds.
Security and Sources of Payment
The 2026 Bonds will be obligations of the Authority payable solely from and secured by the Revenues and
any other amounts held in the funds and accounts established pursuant to the Indenture (excepting the Rebate Fund);
provided, however, that amounts on deposit in the Tax-Exempt Reserve Account are available to pay debt service
solely on Bonds issued pursuant to the Indenture, the interest upon which is excluded from gross income for purposes
of federal income taxation, including the 2018 Bonds and the 2026 Bonds (collectively, the “Tax-Exempt Bonds”).
As defined in the Indenture, the term “Revenues” means: (i) all amounts derived from the Pledge Agreement, and
(ii) investment income with respect to the funds and accounts established under the Indenture, except for investment
earnings on the Rebate Fund. Pursuant to the Pledge Agreement, the Flood Control District has pledged the Water
Revenues (defined herein) pursuant to the respective Delivery Contract s to the Authority under the terms and
conditions of the Pledge Agreement.
As used herein, the term “Water Revenues” means, collectively, the Capital Projects Installment Debt Service
due from each Participant, including Delinquent Debt Service Payments and the interest thereon, together with the
Net Revenues of the Flood Control District. As provided in the Delivery Contrac ts, and in order to carry out and
effectuate the pledge and lien contained therein, the Flood Control District has covenanted that all Water Revenues
will be received by the Flood Control District in trust and deposited when and as received into the Nacimi ento Water
Fund, which fund the Flood Control District maintains and holds in trust separate and apart from other funds so long
as any Bonds remain unpaid. During the term of the Pledge Agreement, the Flood Control District is required to
withdraw amounts from the Nacimiento Water Fund on each Payment Date for deposit into the Revenue Fund to be
applied by the Trustee to pay interest then coming due and maturing or called principal of the 20 26 Bonds. Revenues
of each Participant consist principally of gross water sales revenues of the Participant’s Water Enterprise (as defined
herein). See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS–The Delivery Contracts.”
To date, there have been no Delinquent Debt Service Payments by the Participants.
Under its Delivery Contract, the respective Participant has: (i) covenanted, inter alia, to pay its share of
various capital expenses relating to the funding of design costs, engineering, planning, environmental mitigation,
equipping new facilities and/or construction efforts, accounting services, project administration and management,
installation, grading, razing and building of the Nacimiento Project; (ii) severally and not jointly, pledged certain
revenues (collectively, the “Capital Projects Installmen t Debt Service,” as more particularly defined in the Pledge
Agreement) to be collected by their respective water enterprises (collectively, the “Water Enterprises”); (iii) pledged
the gross water sales revenues of its respective Water Enterprise to the payment of total Nacimiento Project
Construction Costs; (iv) established rates and charges sufficient to pay its obligations under its Delivery Contract; and
(v) made certain other covenants with respect thereto. See “SECURITY AND SOURCES OF PAYMENT FOR THE
BONDS–The Delivery Contracts–Gross Pledge and Covenants of Participants” and APPENDIX B–“THE
DELIVERY CONTRACTS.”
Subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms
and conditions set forth in the Indenture, all of the Revenues and any other amounts (including proceeds of the sale of
the Bonds) held in the funds and accounts established pursuant to the Indenture (excepting the Rebate Fund) are
pledged by the Authority to secure the full and timely payment of the principal of and interest and premium, if any,
of the Bonds, and amounts owing to the respective Insurer of the 2007 Taxable Bonds and the 2018 Bonds (each
defined below), in accordance with their terms and the provisions of the Indenture. S uch pledge constitutes a lien on
and security interest in such assets.
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4
The obligation of the Flood Control District to make payments to the Authority under the Pledge Agreement
is a special obligation of the Flood Control District payable solely from Water Revenues, the Nacimiento Water Fund
and other funds described in the Pledge Agreement, and does not constitute a debt of the Flood Control District or of
the State of California or of any political subdivision thereof in contravention of any constitutiona l or statutory debt
limitation or restriction.
THE 2026 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM
REVENUES OF THE AUTHORITY CONSISTING PRIMARILY OF PAYMENTS MADE BY THE
PARTICIPANTS TO THE FLOOD CONTROL DISTRICT UNDER THE DELIVERY CONTRACTS AND
RECEIVED BY THE AUTHORITY PURSUANT TO THE PLEDGE AGREEMENT. THE 2026 BONDS ARE NOT
A DEBT OF THE AUTHORITY, THE FLOOD CONTROL DISTRICT, THE PARTICIPANTS, THE COUNTY
OR THE STATE OF CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATU TORY
DEBT LIMITATION. THE AUTHORITY SHALL NOT BE OBLIGATED TO PAY THE PRINCIPAL OF, OR
INTEREST ON THE 2026 BONDS, EXCEPT FROM THE FUNDS PROVIDED UNDER THE INDENTURE AND
THE PLEDGE AGREEMENT. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF
THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE
AUTHORITY, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2026
BONDS. THE AUTHORITY HAS NO TAXING POWER.
Outstanding Parity Bonds. The Authority has previously issued under the Indenture, and there will be
outstanding following the refunding of the 2015 Bonds, the SLO County Financing Authority Nacimiento Water
Project Revenue Bonds, 2007 Series B (Taxable) (the “2007 Taxable Bonds”), in the principal amount of $25,660,000
and the SLO County Financing Authority Nacimiento Water Project Revenue Refunding Bonds, 201 8 Series A (the
“2018 Bonds”), in the principal amount of $21,745,000. The 2007 Taxable Bonds and the 2018 Bonds are secured by
Revenues on a parity with the 2026 Bonds.
The scheduled payment of the principal of and interest on the 2007 Taxable Bonds is insured by a financial
guaranty insurance policy issued by National Public Finance Guarantee Corporation, successor to MBIA Insurance
Corporation (the “2007 Insurer”). The scheduled payment of principal of and interest on the 2018 Bonds is guaranteed
under a separate municipal bond insurance policy issued concurrently with the delivery of the 2018 Bonds by Build
America Mutual Assurance Company (the “2018 Insurer”). See “PLAN OF REFUNDING.”
Reserve Fund. Pursuant to the Indenture a reserve fund, which includes a Tax-Exempt Reserve Account and
a Taxable Reserve Account (each a “Reserve Account” and together, the “Reserve Fund”) was established as security
for the Tax-Exempt Bonds and the Taxable Bonds, within each Reserve Account funded in an amount equal to the
applicable Reserve Requirement (as defined herein). Amounts on deposit in the Tax-Exempt Reserve Account are
available to pay debt service solely on the 2018 Bonds and the 2026 Bonds. Amounts on deposit in the Taxable
Reserve Account are available to pay debt service solely on the 2007 Taxable Bonds. See “SECURITY AND
SOURCES OF PAYMENT FOR THE BONDS–Reserve Fund.”
[Bond Insurance. Concurrently with the issuance of the 2026 Bonds, [INSURER] (the “2026 Insurer”) will
issue its Municipal Bond Insurance Policy for the 20 26 Bonds (the “Policy”). The Policy guarantees the scheduled
payment of principal of and interest on the 2026 Bonds when due as set forth in the form of the Policy included as an
exhibit to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York, California,
Connecticut or Florida insurance law.]
Additional Bonds
The Authority may issue one or more additional series of Bonds secured by a pledge of Revenues on a parity
with the 2026 Bonds. The Indenture does not require satisfaction of any debt service coverage ratio condition to issue
Additional Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS–Additional Bonds.”
Page 255 of 357
5
Certain Risk Factors
An investment in the 2026 Bonds involves risk. For a discussion of certain risk factors associated with
investment in the 2026 Bonds, see “CERTAIN RISKS TO BOND OWNERS” as well as other factors discussed
throughout this Official Statement.
Continuing Disclosure
Flood Control District. The Flood Control District has covenanted for the benefit of the beneficial owners
of the 2026 Bonds to provide certain financial information and operating data relating to the Flood Control District by
no later than March 31 of each year commencing with the report due on March 31, 2027 for the Fiscal Year ended
June 30, 2026 (each a “Flood Control District Annual Report”), and to provide notices of the occur rence of certain
specified events. The Annual Report and notices of specified events will be filed by the Flood Control District or
Digital Assurance Certification, L.L.C., as dissemination agent to the Flood Control District with the Municipal
Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access (“EMMA”) site. See
“CONTINUING DISCLOSURE” and APPENDIX D–“FORMS OF CONTINUING DISCLOSURE
AGREEMENTS–SAN LUIS OBISPO COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT
CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the Underwriter
in complying with Securities and Exchange Commission Rule 15c2-12.
Participants. Each Participant has covenanted to provide certain financial and operating data relating to such
Participant by no later than nine months following the end of the fiscal year of each Participant commencing with the
report due in 2027 for the respective fiscal year ended in 2026 (each a “Participant Annual Report”). Each Participant
Annual Report will be filed by the Participant or the Flood Control District, as dissemination agent to each Participant,
with the MSRB through its EMMA site.
The fiscal year-end for AMWC is April 30 and the fiscal year -end for Paso Robles, SLO, and Templeton is
June 30. See “CONTINUING DISCLOSURE” and APPENDIX D–“FORMS OF CONTINUING DISCLOSURE
AGREEMENTS–PARTICIPANTS CONTINUING DISCLOSURE AGREEMENTS.”
Reference to Documents
The summaries and descriptions in this Official Statement of the Indenture, the 20 26 Bonds, the Pledge
Agreement, the Delivery Contracts, the Continuing Disclosure Agreements, and other agreements relating to the 2026
Bonds are qualified in their entirety by reference to such documents, and the descriptions herein of the 2026 Bonds
are qualified in their entirety by the form thereof and the information with respect thereto included in such documents.
All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Indenture and the
Pledge Agreement. See APPENDIX C–“FORMS OF PRINCIPAL LEGAL DOCUMENTS.”
THE AUTHORITY
General
The Authority was created pursuant to a Joint Exercise of Powers Agreement, dated as of August 15 , 2000
(the “Joint Powers Agreement”), between the County and the Flood Control District. The Joint Powers Agreement
was entered into pursuant to the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of
Division 7 of Title I of the California Government Code. The Authority was created to issue bonds for the purpose of
financing all or a portion of the costs of the purchase, construction, expansion, improvement , or rehabilitation of any
real or other tangible property for the County and the Flood Control District and to borrow money for the purpose of
financing the acquisition of bonds, notes and other obligations to provide financing and refinancing for such capital
improvements of the County and the Flood Control District. The Joint Powers Agreement may be amended at any
time, or from time to time, except as limited by contract with the holders of bonds issued by the Authority or
certificates of participation in payments to be made by the Authority or its members or by applicable regulations or
laws of any jurisdiction having authority, including to provide for the addit ion of new parties.
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Governance and Management
Pursuant to the Joint Powers Agreement, the Authority is administered by a three -member Board of
Commissioners, two of whom are appointed by the County and one who is appointed by the Flood Control District.
The current Commissioners of the Authority are:
Member Title
James W. Hamilton, CPA, County Auditor- Controller-Treasurer-Tax Collector Chair
Matthew P. Pontes, County Chief Executive Officer Secretary
Katie Girardi, SLO Pension Trust Executive Director Member
County Counsel serves as the Legal Advisor to the Authority. The Chief Executive Officer of the County
currently serves as the Authority’s Secretary.
THE FLOOD CONTROL DISTRICT
General
The Flood Control District was formed in 1945 pursuant to State Legislation through the enactment of the
San Luis Obispo County Flood Control and Water Conservation District Act. The Flood Control District is County -
wide and has as its governing body the Board of Supervisors. Other key staff include: the Director of Public Works,
Public Works Finance Division Manager, Utilities Division Manager, and Nacimiento Water Project Supervising
Engineer. The purposes of the Flood Control District are:
to provide for the control, disposition, and distribution of the flood and storm waters of the Flood
Control District and the flood and storm waters of the streams that flow into the Flood Control
District;
to prevent the waste or diminution of the water supply to the Flood Control District;
to conserve flood and storm waters by spreading, storing, retaining, and causing these waters to
percolate into Flood Control District soils;
to retain these waters for beneficial use, such as the purchase and sale thereof within the Flood
Control District;
to protect watercourses, watersheds, public highways, life and property from damage or destruction
from these waters; and
to provide for recreation activities incidental to and in connection with said purposes.
The County Public Works Department manages and operates the Nacimiento Project on behalf of the Flood
Control District. In addition, the Public Works Department manages over 50 separate facilities and special districts,
including two dams, four wholesale water systems, three retail water systems, two w ater treatment plants, and three
sewer treatment plants.
Nacimiento Dam
Overview. Nacimiento Dam and Reservoir (“Nacimiento”) is located in the northern part of the County and
owned and operated by the Monterey County Water Resources Agency (the “MCWRA”), as successor-in-interest to
the Monterey County Flood Control and Water Conservation District for the combined goals of flood protection, water
conservation, operation of the Salinas Valley Water Project, and recreation, with safety being the primary
consideration.
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Nacimiento, completed in 1957, is an earthfill dam with a height of 215 feet above the streambed and a crest
length of 1,650 feet. When Nacimiento is full (elevation 800 feet) it has a maximum storage capacity of 377,900 acre -
feet, is 18 miles long, and has about 165 miles of shoreline, making it the largest reservoir in the County. The maximum
elevation during flood stage is 825 feet, with a maximum temporary capacity of 538,000 acre feet and a temporary
surface area of 7,149 acres.
Master Water Contract. The Flood Control District and MCWRA entered into an agreement, dated
October 19, 1959, as amended (collectively, the “Master Water Contract”), pursuant to which MCWRA agrees, among
other things, to provide up to 17,500 acre feet of water per yea r from Nacimiento to the Flood Control District.
Pursuant to the Master Water Contract, none of the Authority, the County, or the Flood Control District is liable for
any maintenance costs for Nacimiento.
Extensive repairs and upgrades were made to the Nacimiento spillway in the 1970s, and additional upgrades
were completed in the early 2000s that included: a new gate system; raising and strengthening spillway chute walls;
anchoring the chute walls with “sister” walls; strengthening and anchoring approach channel walls; modifying the
High-Level Gate Operations System with an upgraded mechanical system; and strengthening the bridge pier with steel
reinforced concrete.
[DSOD Review. In light of the lessons learned from the March 2017 failure of the Lake Oroville spillways
incident, in September 2017, the State Division of Safety of Dams (the “DSOD”) released updated information on the
1,249 dams under its jurisdiction, including Nacimiento. The updated DSOD information (the “2017 DSOD Update”)
for each dam included: (i) downstream hazard classifications; (ii) condition assessment; and (iii) reservoir restriction
status, reflecting the most recent physical inspections and comprehensive re-evaluations by DSOD engineers and
engineering geologists, and technical analyses performed by dam owners at that time.
Downstream Hazard Classification. The downstream hazard classification identified
for a dam is based solely on the size of the dam’s reservoir and population that would be impacted by
a dam failure; it does not reflect the condition of the dam or its structures.
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The hazard classification is used in part to prioritize development of inundation maps and
emergency action plans. Dams are classified as high hazard if at least one person is at risk downstream in the
event of a dam failure, and extremely high hazard if the loss of human life is considerable. Using this standard,
the Nacimiento downstream hazard wa s classified as extremely high hazard.
Condition Assessments. DSOD dam condition assessments are based on fi ve condition
ratings from the U.S. Army Corps of Engineers National Inventory of Dams, with some minor modifications.
The ratings include satisfactory, fair, poor, unsatisfactory, and not rated. Dams rated as satisfactory have no
identified deficiencies. Dams rated as fair, poor or unsatisfactory have at least one identified deficiency.
Nacimiento was rated satisfactory, meaning it had no identified deficiencies. Dam condition
assessments may change from year to year as repair work is completed or new defic iencies are identified.
Reservoir Restrictions. The 2017 DSOD Update for Nacimiento did not contain any
reservoir restrictions at the time.
Following the 2017 DSOD review, MCWRA, with oversight from the DSDOD, completed necessary repair
work for the Nacimiento and Lake San Antonio spillways. The repairs that were completed permitted full operations
of Nacimiento and water storage.
Assembly Bill No. 1270 (“AB 1270”), signed by the Governor on February 26, 2018, requires the DSOD to,
among other things, annually inspect each fiscal year all dams, groins, abutments, spillways, outlet works, and toe
areas, other than those classified as low hazard potential.
Based on the information shared with the County in July 2025, Nacimiento co ntinues to hold a satisfactory
rating from the DSOD, meaning no deficiencies were identified that would alter the dam’s regulatory condition or
operational status. As part of ongoing DSOD oversight, Monterey County has identified a series of required dam -
safety projects necessary to maintain compliance with current dam-safety standards. These projects include spillway
rehabilitation, spillway evaluation and repairs, plunge -pool erosion control, low-level outlet improvements,
embankment seismic stability evaluation and implementation, spillway bridge maintenance, and related structural and
operational upgrades.
The list of Nacimiento dam-safety subprojects provided in July 2025 includes eleven components with a
combined estimated cost of approximately $83.8 million (2023 dollars) and an associated unfunded need of roughly
$73 million after accounting for identified grant funding. These dam-safety and spillway projects are under the
responsibility and jurisdiction of the MCWRA, which continues coordination with DSOD on required assessments
and compliance actions.
Because Nacimiento is owned and operated by the MCWRA, none of the Authority, the County, or the Flood
Control District has conducted an independent assessment of Nacimiento, nor do any of them have an obligation to
so. None of the Authority, the County, or the Flood Control District can make any prediction as to the safety or
condition of Nacimiento, nor can any assurances be given regarding the accuracy of updates from the DSOD or the
conclusions contained therein, or the effect AB 1270 will have on future operations of Nacimiento.][to be confirmed]
PLAN OF REFUNDING
The proceeds of the 2026 Bonds will be used by the Authority to provide funds to (i) refund all of the 2015
Bonds outstanding on the date of issuance of the 2026 Bonds; [(ii) purchase a municipal bond insurance policy for the
2026 Bonds; and (iii) pay certain costs associated with the issuance of the 2026 Bonds. See also “ESTIMATED
SOURCES AND USES OF FUNDS.”
The Authority issued $107,115,000 original principal amount of the 2015 Bonds pursuant to the Original
Indenture, of which $80,160,000 aggregate principal amount is currently outstanding. The 2015 Bonds maturing on
September 1, 2026 in the principal amount of $4,680,000 will be maturing before the issuance of the 2026 Bonds. A
portion of the proceeds from the issuance of the 20 26 Bonds will be deposited with the Trustee which, together with
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certain moneys on deposit under the Indenture, will be sufficient and will be used to pay on [___], 2026, the date of
issuance of the 2026 Bonds, the redemption price equal to 100% of the principal amount of the 20 15 Bonds to be
refunded, plus accrued and unpaid interest thereon to such date.
The following table details the maturity dates and principal amounts of the 2015 Bonds expected to be
refunded by the 2026 Bonds. The particular maturities and principal amounts of such maturities of the 2015 Bonds
to be refunded will be determined by the Authority in its sole discretion at the time of sa le of the 2026 Bonds.
Table 1
2015 Bonds to be Refunded
$75,480,000*
SLO County Financing Authority
Nacimiento Water Project Revenue Refunding Bonds
2015 Series A
Dated Date: August 19, 2015
Redemption Date: [___], 2026
Redemption Price: 100%
Maturity
(September 1) Principal Amount Interest Rate CUSIP†
2027 $ 2,395,000 5.000% 798693DJ3
2027 2,500,000 3.000 798693DT1
2028 3,605,000 5.000 798693DK0
2028 1,500,000 3.125 798693DU8
2029 1,170,000 5.000 798693DL8
2029 4,145,000 3.250 798693DV6
2030 5,370,000 5.000 798693DM6
2030 185,000 3.375 798693DW4
2031 2,300,000 5.000 798693DN4
2031 3,500,000 3.500 798693DX2
2032 4,565,000 5.000 798693DP9
2032 1,500,000 3.625 798693DY0
2033 3,850,000 5.000 798693DQ7
2033 2,500,000 3.625 798693DZ7
2034 4,135,000 5.000 798693DR5
2034 2,500,000 3.750 798693EA1
2037T 11,500,000 5.000 798693EB9
2038T 18,260,000 4.000 798693DS3
* Preliminary; subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by
FactSet Research Systems Inc. on behalf of the American Bankers Association. This data is not intended to create a da tabase and does not serve in
any way as a substitute for the CUSIP Services.
T Term Bonds.
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ESTIMATED SOURCES AND USES OF FUNDS
The proceeds to be received from the sale of the 2026 Bonds are estimated to be applied as set forth in the
following table:
Table 2
Estimated Sources and Uses of Funds
Sources of Funds:
Par Amount of 2026 Bonds $
[Net] Original Issue Premium
Funds held under the Indenture
Total Sources
Uses of Funds:
Redemption of Refunded 2015 Bonds(1) $
Costs of Issuance(2)
Underwriter’s Discount
Total Uses $
(1) See “PLAN OF REFUNDING.”
(2) Includes fees of the County, Bond and Disclosure Counsel, the Municipal Advisor, the Trustee, [the premium for the municipal bond insurance
policy,] fees relating to the credit ratings, printing, accounting and other costs associated with the issuance of the 20 26 Bonds.
[Remainder of page intentionally left blank.]
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DEBT SERVICE SCHEDULE
The following table presents the semi-annual and Fiscal Year debt service for Outstanding Bonds following the issuance of the 2026 Bonds, excluding the 2015 Bonds. See
“PLAN OF REFUNDING.”
Table 3
Debt Service Schedule*
2007 Taxable Bonds 2018 Bonds 2026 Bonds Total
Fiscal Year Debt
Service
Date Principal Interest Total Principal Interest Total Principal Interest Total
9/1/2026 $1,180,000 $747,628 $1,927,628 $260,000 $408,463 $668,463
3/1/2027 — 714,759 714,759 — 401,963 401,963
9/1/2027 1,245,000 714,759 1,959,759 275,000 401,963 676,963
3/1/2028 — 680,080 680,080 — 395,088 395,088
9/1/2028 1,315,000 680,080 1,995,080 290,000 395,088 685,088
3/1/2029 — 643,451 643,451 — 387,838 387,838
9/1/2029 1,390,000 643,451 2,033,451 300,000 387,838 687,838
3/1/2030 — 604,732 604,732 — 383,338 383,338
9/1/2030 1,470,000 604,732 2,074,732 305,000 383,338 688,338
3/1/2031 — 563,785 563,785 — 378,763 378,763
9/1/2031 1,555,000 563,785 2,118,785 325,000 378,763 703,763
3/1/2032 — 520,471 520,471 — 373,888 373,888
9/1/2032 1,645,000 520,471 2,165,471 330,000 373,888 703,888
3/1/2033 — 474,649 474,649 — 368,731 368,731
9/1/2033 1,740,000 474,649 2,214,649 335,000 368,731 703,731
3/1/2034 — 426,182 426,182 — 363,288 363,288
9/1/2034 1,840,000 426,182 2,266,182 355,000 363,288 718,288
3/1/2035 — 374,928 374,928 — 357,519 357,519
9/1/2035 1,945,000 374,928 2,319,928 360,000 357,519 717,519
3/1/2036 — 320,750 320,750 — 351,444 351,444
9/1/2036 2,055,000 320,750 2,375,750 375,000 351,444 726,444
3/1/2037 — 263,508 263,508 — 345,116 345,116
9/1/2037 2,170,000 263,508 2,433,508 395,000 345,116 740,116
3/1/2038 — 203,063 203,063 — 338,450 338,450
9/1/2038 2,295,000 203,063 2,498,063 405,000 338,450 743,450
3/1/2039 — 139,136 139,136 — 331,363 331,363
9/1/2039 2,430,000 139,136 2,569,136 8,680,000 331,363 9,011,363
3/1/2040 — 71,448 71,448 — 157,763 157,763
9/1/2040 2,565,000 71,448 2,636,448 9,015,000 157,763 9,172,763
3/1/2041 — — — — — —
TOTAL** $26,840,000 $12,749,512 $39,589,512 $22,005,000 $10,277,567 $32,282,567
* Excludes the 2015 Bonds to be refunded with the 2026 Bonds.
** Row does not total due to independent rounding.
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THE 2026 BONDS
General
The 2026 Bonds will be dated their date of original delivery, will be issued in fully registered form, in
denominations of $5,000 and any integral multiple thereof and will mature on the dates and in the principal amounts
and bear interest at the rates as set forth on the inside cover of this Official Statement.
Interest on the 2026 Bonds shall be payable semiannually on March 1 and September 1 of each year
commencing March 1, 2027 (each, an “Interest Payment Date”). The 2026 Bonds, when issued, will be registered in
the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will
act as securities depository of the 2026 Bonds. Ownership interests in the 2026 Bonds may be purchased in book-
entry only form. Purchasers will not receive securities certificates representing their interests in the 20 26 Bonds
purchased. Payments of principal of and interest on the 2026 Bonds will be paid by the Trustee to DTC, which is
obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the
beneficial owners of the 2026 Bonds. See APPENDIX F–“DTC AND THE BOOK-ENTRY ONLY SYSTEM.”
Interest on the 2026 Bonds will be paid on each Interest Payment Date to the persons in whose name the
ownership of the 2026 Bonds is registered on the registration books maintained by the Trustee for the registration of
ownership and registration of transfer of the 2026 Bonds as of the close of business on the immediately preceding
Record Date, such interest to be paid by check of the Trustee mailed by first class mail, postage prepaid, on each
Interest Payment Date to the Owners at their respective addresses shown on the Registration Books as of the close of
business on the preceding Record Date; or by wire transfer mad e on such Interest Payment Date to any Owner of
$1,000,000 or more in aggregate principal amount of 2026 Bonds who has requested such transfer pursuant to written
notice filed with the Trustee on or before the preceding Record Date.
So long as the 2026 Bonds are registered in the name of the Cede & Co., all payments with respect to principal
of, and interest on, the 2026 Bonds and all notices with respect to such 2026 Bonds will be made and given,
respectively, to DTC.
Redemption Provisions
Optional Redemption for 2026 Bonds.* The 2026 Bonds maturing before September 1, 20[___] are not
subject to optional redemption by the Flood Control District.
The 2026 Bonds maturing on and after September 1, 20[___] are subject, at the option of the Authority at the
direction of the Flood Control District, to call and redemption from any available source of funds prior to their stated
maturity on any date on or after September 1, 20[___], as a whole or in part in the order directed by the Authority,
from any source of available funds, at a redemption price equal to the principal amount of the 2026 Bonds to be
redeemed, without premium, plus accrued interest thereon to the date fixed for redemption.
Redemption Procedures
Notice of Redemption. Notice of redemption of the 2026 Bonds is required to be mailed by the Trustee, by
first-class mail, postage prepaid, to the respective Owners of any 2026 Bonds designated for redemption at their
addresses appearing on the Registration Books and to the Securities Depositories and the Information Services at least
30 days but not more than 60 days prior to the redemption date. Each notice of redemption is required to state the
redemption date, the place or places of redemption, the CUSIP numbers and numbers of the 2026 Bonds to be
redeemed, and in the case of 2026 Bonds to be redeemed in part only, the respective Authorized Denominations of
the principal amount thereof to be redeemed. Each such notice is also required to state that on said date there will
become due and payable on each of said 2026 Bonds the principal amount relating thereto or of said specified portion
of the principal thereof in the case of a 2026 Bond to be redeemed in part only, plus accrued interest, if any, and
through which date such interest will accrue, and that from and after such date interest thereon shall cease to accrue
and shall require that such 2026 Bonds be then surrendered at the Principal Office of the Trustee.
* Preliminary; subject to change.
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Neither the failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of
the proceedings for redemption of such 2026 Bonds or the cessation of accrual of interest as of the redemption d ate.
Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority shall
execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new
Bond or Bonds of Authorized Denominations equal in aggregate principal amount or maturity amount, as applicable,
representing the unredeemed portion of the Bonds so surrendered.
Selection of 2026 Bonds for Partial Redemption. Whenever provision is made in the Indenture for the
redemption of less than all of the 2026 Bonds of a maturity, the Trustee shall select the 2026 Bonds to be redeemed
from all 2026 Bonds of such maturity not previously called for redemption, as directed by the Authority, at the request
of the Flood Control District, or, in the absence of such direction, by lot in any manner which the Authority in its sole
discretion shall deem appropriate and fair. For purposes of such selection, all 2026 Bonds shall be deemed to be
comprised of separate Authorized Denominations and such separate Authorized Denominations shall be treated as
separate 2026 Bonds which may be separately redeemed.
Effect of Notice of Redemption. If notice of redemption has been duly given as specified in the Indenture
and moneys for the redemption (including the interest to the applicable date of redemption and including any
applicable premium) have been set aside in the Redemption Account or any of the accounts therein, the 2026 Bonds
will become due and payable on said date of redemption, and upon presentation and surrender thereof at the Principal
Office of the Trustee, said 2026 Bonds will be paid at the redemption price thereof, together with interest accrued and
unpaid to said date of redemption and premium, if any.
If on said date of redemption, moneys for the redemption of the 2026 Bonds to be redeemed together with
interest to said date of redemption shall be held by the Trustee so as to be available therefor on such date of redemption,
and if notice of redemption thereof shall have been given as aforesaid and not cancelled, then from and after said date
of redemption interest represented by such 2026 Bonds shall cease to accrue and become payable
Purchase in Lieu of Redemption. In lieu of redemption of any 2026 Bond, amounts on deposit in the
Principal Account or Redemption Account may also be used and withdrawn by the Trustee at any time, upon the
Written Request of the Authorized Representative, for the purchase of such 2026 Bond at public or private sale when
and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the
Interest Account) as the Authority may in its discretion determine, in accordance with all applicable laws, so long as
such prices do not exceed par.
SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
General
The Bonds are obligations of the Authority payable solely from and secured by the Revenues and any other
amounts held in the funds and accounts established pursuant to the Indenture (except the Rebate Fund), which amounts
are pledged by the Authority to secure the full and timely payment of the principal of and interest and premium, if
any, of the 2026 Bonds; provided, however, that amounts on deposit in the Tax-Exempt Reserve Account are available
to pay debt service solely on Tax-Exempt Bonds and amounts on deposit in the Taxable Reserve Account are available
to pay debt service solely on Taxable Bonds. As defined in the Indenture, the term “Revenues” means: (i) all amounts
derived from the Pledge Agreement, and (ii) investment income with respect to the funds and accounts established
under the Indenture except for investment earnings on the Rebate Fund. Pursuant to the Pledge Agreement, the Flood
Control District has pledged the Water Revenues received from Participants under the Delivery Contracts to the
Authority for payment of the Bonds. See “–Pledge Agreement” and “–The Delivery Contracts.”
Flow of Funds
Pursuant to the Indenture, the Authority has established with the Trustee a special fund designated the
“Revenue Fund” which the Trustee maintains and holds in trust. Within the Revenue Fund, the Trustee will establish
special accounts designated as the “Principal Account” and the “Interest Account” each of which are required to be
held and maintained as separate and distinct funds and accounts. The Revenues, except for investment earnings on the
Reserve Fund, are required to be promptly transferred to the Trustee by the Authority and deposited by the Trustee
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upon receipt thereof into the “Revenue Fund” and held, disbursed, allocated and applied by the Tr ustee only as
provided in the Indenture. On each Interest Payment Date, the Trustee is required to transfer the Revenues then in the
Revenue Fund into the following funds and accounts the following amounts in the following order of priority, the
requirements of each such account (including the making up of any deficiencies in any such account resulting from
lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any
deposit is made to any account subsequent in priority:
First: The Trustee shall deposit into the Interest Account an amount which, together with the
amounts then on deposit therein including, with respect to amounts, if any, transferred by the Trustee from
the Reserve Fund, is sufficient to cause the aggregate amount on deposit in the Interest Account to equal the
amount of interest coming due and payable on the Bonds on such Interest Payment Date and any amount of
interest previously due and unpaid.
Second: The Trustee shall deposit into the Principal Account, if necessary, an amount which,
together with the amounts then on deposit therein, including amounts, if any, transferred from the Reserve
Fund, shall be sufficient to cause the aggregate amount on deposit in the Principal Account to equ al the
amount of principal or mandatory sinking account payment coming due and payable on the Bonds within the
Bond Year and any amount of principal previously due and unpaid.
THE 2026 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY
FROM REVENUES OF THE AUTHORITY CONSISTING PRIMARILY OF PAYMENTS MADE BY THE
PARTICIPANTS TO THE FLOOD CONTROL DISTRICT UNDER THE DELIVERY CONTRACTS AND
RECEIVED BY THE AUTHORITY PURSUANT TO THE PLEDGE AGREEMENT. THE 2026 BONDS ARE
NOT A DEBT OF THE AUTHORITY, THE FLOOD CONTROL DISTRICT, THE PARTICIPANTS, THE
COUNTY OR THE STATE OF CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL
OR STATUTORY DEBT LIMITATION. THE AUTHORITY SHALL NOT BE OBLIGATED TO PAY THE
PRINCIPAL OF, OR INTEREST ON THE 2026 BONDS, EXCEPT FROM THE FUNDS PROVIDED
UNDER THE INDENTURE AND THE PLEDGE AGREEMENT. NEITHER THE FULL FAITH AND
CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR ANY POLITICAL
SUBDIVISION THEREOF, INCLUDING THE AUTHORITY, IS PLEDGED TO THE PAYMENT OF THE
PRINCIPAL OF OR INTEREST ON THE 2026 BONDS. THE AUTHORITY HAS NO TAXING POWER.
Pledge Agreement
Capitalized terms used in this section “–Pledge Agreement” and not otherwise defined shall have the
meanings given to such terms as set forth in the Pledge Agreement. See also APPENDIX C–“FORMS OF PRINCIPAL
LEGAL DOCUMENTS–PLEDGE AGREEMENT.”
Allocation of Water Revenues. Under the Pledge Agreement, the Flood Control District has irrevocably
pledged to the Authority: (i) the Capital Projects Installment Debt Service due from each Participant, including
Delinquent Debt Service Payments and interest thereon received by the Flood Control District pursuant to each
Delivery Contract; (ii) Net Revenues collected from the operation of the Nacimiento Project; and (iii) all amounts on
deposit in the Nacimiento Water Fund (collectively, the “Water Revenues”) to the payment of Municipal Obligations.
To date, there have been no Delinquent Debt Service Payments by the Participants. See also “–The Delivery
Contracts.”
“Capital Projects Installment Debt Service” is defined in the Pledge Agreement to mean payments
on debt or similar obligations incurred by the Flood Control District for the Nacimiento Project consisting
of, in the aggregate, (i) principal and interest (or mandatory sinking fund payments, installments or lease or
similar payments due) with respect to all Bonds at the time Outstanding in accordance with their terms,
provided that capitalized interest funded from the proceeds of the Bonds need not be taken into account,
(ii) annual costs of administering the Bonds, including the annual fees of the Trustee, and (iii) the costs, if
any, of annual credit enhancement for the Bonds, whether or not based on a derivative structure as p rovided
in Section 5922(a) of the Government Code.
“Municipal Obligations” is defined in the Pledge Agreement to mean the amounts due with respect
to the Bonds (including the 2026 Bonds), including any amounts due to the provider of a municipal bond
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insurance policy, an investment agreement, or any reserve surety. The Flood Control District has agreed and
covenanted to maintain and hold in trust the Water Revenues separate and apart from other funds so long as
any Bonds remain unpaid.
“Net Revenues” is defined in the Pledge Agreement to mean the sum of (i) the proceeds of sale by
the Flood Control District of Surplus Water, (ii) revenues received by the Flood Control District from
Wheeling Customers, and (iii) revenues received by the Flood Control District from the sale of Reserve
Water, less the costs of making such sales and collecting said revenues.
Pursuant to the Pledge Agreement, the Flood Control District is required to withdraw amounts from the
Nacimiento Water Fund five Business Days prior to each Interest Payment Date and each maturity date for the Bonds
(each a “Payment Date”) for deposit into the Debt Service Fund held by the Trustee.
Any moneys on deposit in the Nacimiento Water Fund not necessary to make any of the payments required
above may be expended by the Flood Control District at any time for any purpose permitted by law.
Covenants Under the Pledge Agreement. The Flood Control District covenants, among other things, to:
(i) faithfully observe and perform all agreements, conditions covenants and terms contained in the Tax Certificate in
connection with the issuance of the Tax-Exempt Bonds; (ii) to preserve and protect the security and rights of the
Authority to the payments due under the Delivery Contracts and defend such rights against all claims and demands of
all persons; (iii) comply with and carry out all provisions of continuing disclosure agreements; and (iv) enforce its
rights under each Delivery Contract in accordance with the terms thereof and use its best efforts to collect Capital
Projects Installment Debt Service and Net Revenues in such time and amounts to permit payment of debt service on
the Bonds in accordance with their terms.
Net Contract. The Pledge Agreement is deemed and construed to be a net contract, and the Flood Contr ol
District is required during the term of the Pledge Agreement to make the payments due, free of any deductions and
without abatement, diminution or set-off whatsoever.
Limited Liability of Flood Control District. The Flood Control District is not required to pay or advance any
moneys derived from any source of income other than Water Revenues, the Nacimiento Water Fund and the other
funds provided in the Pledge Agreement for the payment of amounts due on the Bonds, or for the performance of any
agreements or covenants required to be performed by it contained in the Pledge Agreement. The Flood Control District
may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally
available for such purpose and may be legally used by the Flood Control District for such purpose.
THE OBLIGATION OF THE FLOOD CONTROL DISTRICT TO MAKE PAYMENTS TO THE
AUTHORITY UNDER THE PLEDGE AGREEMENT IS A SPECIAL OBLIGATION OF THE FLOOD CONTROL
DISTRICT PAYABLE SOLELY FROM WATER REVENUES, THE NACIMIENTO WATER FUND AND
OTHER FUNDS DESCRIBED IN THE PLEDGE AGREEMENT, AND DOES NOT CONSTITUTE A DEBT OF
THE FLOOD CONTROL DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL
SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT
LIMITATION OR RESTRICTION.
The Delivery Contracts
Capitalized terms used in this Section “–The Delivery Contracts” and not otherwise defined shall have the
meanings given to such terms as set forth in the Delivery Contracts. See also APPENDIX B–“THE DELIVERY
CONTRACTS.”
General. In order to carry out and effectuate the pledge and lien contained in the Pledge Agreement, the
Flood Control District agreed and covenanted that all payments made pursuant to the Delivery Contracts received by
the Flood Control District are in trust and are required to be deposited when and as received into the Nacimiento Water
Fund. The Flood Control District agrees and covenants to maintain and hold the Nacimiento Water Fund in trust ,
separate and apart from other funds so long as any Bonds remain unpaid. The Nacimiento Water Fund is maintained
by the Flood Control District within the Treasury Combined Investment Pool of the County, into which the Flood
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Control District deposits all of its Net Revenues and all payments received by the Flood Control District under each
Delivery Contract from the Participants.
Pursuant to each Delivery Contract, the Participants, severally and not jointly, pledge the Capital Projects
Installment Debt Service to be collected by their respective Water Enterprise and have made certain covenants with
respect thereto. See APPENDIX B–“THE DELIVERY CONTRACTS.”
For purposes of the Delivery Contracts, the 2026 Bonds constitute “Municipal Obligations.” The parties to
each Delivery Contract respectively acknowledged that the total Nacimiento Project construction costs were $173.3
million. Each Delivery Contract is substantially similar in its material terms. For a summary of the Delivery Contracts,
see APPENDIX B–“THE DELIVERY CONTRACTS.”
Each Participant covenants and agrees not to create or allow any lien or payment from the respective
revenues of their Water Enterprise that is superior to the obligations of the Participant payable under the
respective Water Delivery Contract. See “–Covenants Under the Delivery Contracts.” The Delivery Contracts
permit Participants to create liens on or payments from its Water Enterprise subordinate to its obligations payable
under its Delivery Contract. [Outstanding subordinate obligations to be confirmed/updated.] Accordingly, SLO
and Templeton have each executed loans with the State Water Resources Control Board (“SWRCB”) that are payable
from “net revenues” of their respective Water Systems. Payments of Capital Projects Installment Debt Service made
by SLO and Templeton, and the other Participants, pursuant to their respective Delivery Contracts are payable from
and secured by a pledge of gross water sales revenues. See “–Gross Pledge and Covenants of Participants.”
Term of Delivery Contracts. Each Delivery Contract remains in effect throughout the term provided by the
Master Water Contract; provided, that if and when, through no fault of the Flood Control District, one or more
provisions of the Master Water Contract is terminated or suspended in the manner and for a caus e specified in the
Master Water Contract, the obligations of Flood Control District to the Participants and to the Other Participants under
the Delivery Contracts and under Like-Contracts will likewise be terminated or suspended; provided, however, that
the Delivery Contracts may not be terminated, suspended or rescinded so long as there remain outstanding any
Municipal Obligations incurred by the Flood Control District for the Nacimiento Project, including the 2026 Bonds.
Obligation to “Take or Pay.” Neither the failure or refusal of any Participant to accept delivery of water
from the Nacimiento Project to which such Participant is entitled under the Delivery Contract or the failure of the
Flood Control District to deliver such water will in any way relieve any Participant of its obligations to make payments
to the Flood Control District pursuant to its Delivery Contract. Each Participant is obligated to pay all amounts due
under its Delivery Contract without reduction or offset of any kind, whether or not the Nacimiento Project or any part
thereof is then operating or operable or its service is suspended, interfered with, reduced or curtailed or terminated in
whole or in part for any reason, and the Contract Payments of such Participant are not conditional upon the
performance or nonperformance by any party to the Delivery Contract, or the Like –Contracts, for any reason
whatsoever, provided, however, that any savings from non-operation of the Nacimiento Project is required to be
apportioned among the Participants in accordance with the respective Unit Percentage Share of the Participants.
The obligation of each Participant to make Delivery Contract Payments and other payments required to be
made under the Delivery Contracts is incurred by each Participant for the benefit of holders of Municipal Obligations
and is absolute and unconditional. Such payments are absolutely net, free of any deductions, and are not subject to
any reduction, whether by offset, recoupment, counterclaim or others. Each Participant is required to make all such
payments notwithstanding the occurrence of any act or circumstances that may constitute failure of consideration,
destruction of or damage to the Nacimiento Project, commercial frustration of purpose, any change in the tax or other
laws of the United States or the State, or any political subdivision thereof.
Participant’s “Step-Up” Obligations. If for any reason a Participant or any Other Participant fails to pay its
share of Capital Projects Installment Debt Service under its Delivery Contract or under its Like-Contract, the amount
of the resulting Debt Service Shortfall will be paid, collectively, by all Non-Delinquent Participants. If there is more
than one Delinquent Participant, the amount of the Debt Service Shortfall will be the sum of the unpaid amounts for
each Delinquent Participant. When such a Debt Service Shortfall occurs, the Participant will be required to increase
its Contract Payments for the particular Water Year by an amount equal to its pro rata share of the Debt Service
Shortfall; provided, however, that each Other Participant who is not a Delinquent Participant will be required by the
Other Participant’s Like-Contract to also contribute to the Debt Service Shortfall so that the Participant, and all of the
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Other Participants who are not Delinquent Participants, shall each contribute to the Debt Service Shortfall in a
proportion determined by dividing each said Non-Delinquent Participant’s Capital Projects Installment Debt Service
share (under Article 16(C)(3) of the Delivery Contract and the Like-Contracts) by the aggregate of all the Participant’s
Installment Debt Service shares of all Non-Delinquent Participants, including the Participant; and provided further,
that the Participant in no event will be required under this paragraph to contribute to the Debt Service Shortfall by an
amount in any Water Year exceeding the amount which is 25% of the share of Capital Projects Installment Debt
Service allocated to the Participant pursuant to its Delivery Contract. See Table 4 below for the share of Capital
Projects Installment Debt Service allocated to each Participant.
“Step-Up” to Be Exhausted Before Recourse to Debt Service Reserve Fund/Surety Bond . Shortfalls in
Total Participant Contract Payments are required to be remedied under the Delivery Contracts prior to any withdrawal
from the Reserve Fund or under the reserve surety bond posted for the Municipal Obligations. Drawings on or under
the debt service reserve fund or reserve surety bond will be delayed until and unless insufficient moneys are available
from Non-Defaulting Participants.
Participant Payments Due Under the Delivery Contracts. On or before April 1 of each Calendar Year, the
Flood Control District is required to estimate the new or additional Nacimie nto Project Costs for the Fiscal Year
commencing on the immediately following July 1 and the result comprises the Total Participant Contract Payments
due, collectively, from each Participant under its Delivery Contract and from the Other Participants under their
respective Like-Contracts for the said Fiscal Year. Nacimiento Project Costs include:
Nacimiento Project Construction Costs – Includes the costs of constructing any portion of the
Nacimiento Project, including design, engineering, planning, environm ental mitigation, equipping
new facilities and/or construction efforts, accounting services, project administration and
management, installation, grading, razing and building the Nacimiento Project, and includes the
costs attributable to environmental mitigation requirements, the costs attributable to the Reserved
Capacity, and costs attributable to all other construction costs.
Additional Capital Project Costs – Costs expended or incurred by the Flood Control District for
Capital Projects related to the Nacimiento Project, improvements or repairs thereto undertaken by
the Flood Control District in addition to the Nacimiento Project, which is an Approved Additional
Project, an Emergency Project or a Required Additional Project.
Capital Projects Installment Debt Service – See “–Capital Projects Installment Debt Service.”
Master Water Contract Costs incurred following the first date upon which an allocation of ad
valorem property taxes as described under the caption APPENDIX B– “THE DELIVERY
CONTRACTS.”
Capital Reserve Costs – See “–Capital Reserve Costs, and Operating and Maintenance Costs.”
Operation and Maintenance Costs – The reasonable and necessary current expenses of maintaining,
repairing and operating the Nacimiento Facilities, including District admini strative expenses
directly attributable to the Nacimiento Facilities, but excluding the Capital Reserve Costs and the
Capital Projects Installment Debt Service, all computed in accordance with generally accepted
accounting principles applicable to enterprise funds of government agencies.
Variable Energy Costs – The actual energy costs incurred by the Flood Control District in conveying
and delivering: (i) the Delivery Entitlement and Surplus Water to the Participants and (ii) the
respective Other Delivery Entitlements and surplus water to the Other Participants as defined under
their respective Like-Contracts and as set forth in the Delivery Contracts.
Other Costs – Other annual or incidental costs associated with the Nacimiento Facilities.
Nacimiento Project Costs are allocated by the Flood Control District among the Participants as described
below:
Capital Projects Installment Debt Service. The Flood Control District allocates Capital Projects Installment
Debt Service among all Participants, according to the proportion of Nacimiento Project Construction Costs paid by
the Participant and the Other Participants, as they may be adjusted for cash contributions (see APPENDIX B–“THE
DELIVERY CONTRACTS”); provided, however, that the Capital Projects Installment Deb t Service is required to
further be allocated into a component representing principal of and interest on the 2018 Bonds, the 2026 Bonds and
other Tax-Exempt Bonds (collectively, the “Tax-Exempt Debt Service”) and a component representing the principal
of and interest on the 2007 Taxable Bonds and other Taxable Bonds (collectively, the “Taxable Debt Service”).
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Table 4
Nacimiento Capital Projects Installment Debt Service Allocation
Percentage
of Total Capital
Projects
Installment
Participant Tax-Exempt Bonds* Taxable Bonds** Debt Service
Atascadero Mutual Water Company 0.00% 98.74% 20.08%
City of Paso Robles 45.03 0.57 35.99
City of San Luis Obispo 52.28 0.69 41.79
Templeton Community Services District 2.69 0.00 2.14
Total 100.00% 100.00% 100.00%
* Outstanding in the principal amount of $102,165,000, immediately prior to the issuance of the 2026 Bonds.
** Outstanding in the principal amount of $26,840,000, immediately prior to the issuance of the 2026 Bonds.
Source: Flood Control District.
[Remainder of page intentionally left blank.]
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Covenants Under the Delivery Contracts
Pledge of Gross Water Sales Revenues. Unless a Participant has paid cash as its portion of the total
Nacimiento Project Construction Costs, each Participant pledges the gross water sales revenues of its respective Water
Enterprise to the Participant’s obligations under the respective Delivery Contract, and covenants and agrees to
establish, fix and collect rates and charges from the customers of its respective Water Enterprise at levels sufficient to
produce revenues from the Participant’s Water Enterprise which are at least equal to: (i) the costs of operating and
maintaining its respective Water Enterprise; plus (ii) the Contract Payments, calculated in accordance with the
respective Delivery Contract, including the amounts allocated to the Participant as the Participant’s share of Capital
Projects Installment Debt Service; plus (iii) the Coverage Factor (defined as 125% of each Participant’s pro rata share
of the Capital Projects Installment Debt Service, calculated for each Fiscal Year) for the amounts allocated to the
Participant as the Participant’s share of Capital Project Installment Debt; and (iv) under certain circumstances, the
imposition of a surcharge following the occurrence of any payment default by the Participant.
Water Enterprise Operation and Maintenance
No Sale, Lease or Disposing of Participant’s Water Enterprise . Each Participant covenants and agrees not to
sell, lease or otherwise dispose of its Water Enterprise or any part thereof essential to the proper operation thereof or
to the earning or collection of the gross revenues of the Participant’s Water Enterprise, nor to enter into any agreement
or lease which would impair the operation of the Participant’s Water Enterprise, or any part thereof necessary in order
to secure adequate revenues for the payment of amounts due under the respective Delivery Contract; provided,
however, that any real or personal property which has become nonfunctional or obsolete or which is not needed for
the efficient operation of such Participant’s Water Enterprise may be sold or disposed of if such disposition will not
have the effect of reducing revenues of the Participant’s Water Enterprise below the levels re quired under the
respective Delivery Contract.
Participant to Maintain Participant’s Water Enterprise. Each Participant covenants and agrees to maintain
and preserve its Water Enterprise in good repair and working order at all times, to operate the same in an efficient and
economical manner and to pay all operation and maintenance costs of the Participant’s Water Enterprise as they
become due, all in accordance with the best business judgment of the Participant.
Participant’s Budgets. Each Participant covenants and agrees to adopt and deliver a budget to the Flood
Control District approved by the Participant’s governing body setting forth the amounts budgeted to be paid under the
respective Delivery Contract no later than the first day of each fiscal ye ar ending June 30.
Participant’s Covenants. Each Participant covenants and agrees to comply with, keep, observe and perform
all agreements, conditions, covenants and terms, express or implied, required to be performed by the Participant
contained in all contracts for the use of the Participant’s Water Enterprise and all contracts affecting or involving the
Participant’s Water Enterprise to the extent that the Participant is a party thereto.
No Superior Liens or Payments. Each Participant covenants and agrees not to create or allow any lien on or
payment from the revenues of the Participant’s Water Enterprise or any part thereof prior to, or superior to, the
Participant’s obligations to amounts payable under the respective Delivery Contract.
Participant to Insure Water Enterprise. Each Participant covenants and agrees to procure and maintain
insurance relating to the Participant’s Water Enterprise which the Participant deems advisable or necessary to protect
its interests. Such insurance shall afford protection in such amounts and against such risks as are usually covered in
connection with similar water enterprises in the State; provided, that the Participant is not required to procure or
maintain any such insurance unless such insurance is commercially available at reasonable cost; and provided further,
that any such insurance may be maintained under a self-insurance program, so long as such self-insurance program is
maintained in accordance with standards and in such amounts as are then usually maintained for similar water
enterprises in the State.
Participant to Pay Obligations; Observe Laws . Each Participant covenants and agrees to pay and discharge
all taxes, assessments and other governmental charges which may be lawfully imposed upon the Participant’s Wat er
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Enterprise or any part thereof when the same becomes due and to duly observe and conform to all valid regulations
and requirements of any governmental authority relative to the operation of the Participant’s Water Enterprise that are
not being contested by the Participant in good faith.
Eminent Domain. Each Participant covenants and agrees that if all or any material part of the Participant’s
Water Enterprise is taken by eminent domain proceedings, or if the Participant receives any insurance proceeds
resulting from a casualty loss to any material portion of the Participant’s Water Enterprise, the proceeds are required
to be used by the Participant to construct or install replacements for the condemned or destroyed components of the
Participant’s Water Enterprise or to prepay the Participant’s share of Capital Projects Installment Debt Service as
described in the respective Delivery Contract.
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Table 5 presents the Fiscal Year Capital Projects Debt Service Payments to be paid by each Participant for the Taxable 2007 Bonds, the 2015 Bonds and
the 2018 Bonds. See “PLAN OF REFUNDING.”
Table 5
Delivery Contract Payments
Total
Participants
Payments†
Fiscal Year Debt Service
Date AMWC Paso Robles SLO Templeton
Taxable
2007 Bonds 2015 Bonds* 2018 Bonds Total
6/30/2027 $2,371,435 $4,249,511 $4,934,717 $253,131 $11,808,794 $2,642,388 $8,095,981 $1,070,425 $11,808,794
6/30/2028 2,371,375 4,249,404 4,934,592 253,124 11,808,495 2,639,839 8,096,606 1,072,050 11,808,495
6/30/2029 2,371,100 4,248,910 4,934,019 253,095 11,807,124 2,638,530 8,095,669 1,072,925 11,807,124
6/30/2030 2,370,645 4,248,095 4,933,072 253,046 11,804,858 2,638,183 8,095,500 1,071,175 11,804,858
6/30/2031 2,371,103 4,248,915 4,934,025 253,095 11,807,139 2,638,517 8,101,522 1,067,100 11,807,139
6/30/2032 2,371,136 4,248,976 4,934,095 253,099 11,807,306 2,639,256 8,090,400 1,077,650 11,807,306
6/30/2033 2,371,291 4,249,253 4,934,417 253,115 11,808,077 2,640,120 8,095,338 1,072,619 11,808,077
6/30/2034 2,370,736 4,248,258 4,933,262 253,056 11,805,313 2,640,831 8,097,463 1,067,019 11,805,313
6/30/2035 2,371,189 4,249,069 4,934,204 253,104 11,807,566 2,641,110 8,090,650 1,075,806 11,807,566
6/30/2036 2,371,239 4,249,159 4,934,309 253,110 11,807,817 2,640,679 8,098,175 1,068,963 11,807,817
6/30/2037 2,371,119 4,248,944 4,934,058 253,097 11,807,218 2,639,259 8,096,400 1,071,559 11,807,218
6/30/2038 2,371,630 4,249,859 4,935,121 253,151 11,809,762 2,636,571 8,094,625 1,078,566 11,809,762
6/30/2039 2,370,816 4,248,402 4,933,429 253,065 11,805,712 2,637,199 8,093,700 1,074,813 11,805,712
6/30/2040 2,371,619 4,249,840 4,935,099 253,150 11,809,709 2,640,584 -- 9,169,125 11,809,709
6/30/2041 2,371,519 4,249,661 4,934,891 253,140 11,809,211 2,636,448 -- 9,172,763 11,809,211
TOTAL $35,567,952 $63,736,256 $74,013,312 $3,796,579 $177,114,100 $39,589,514 $105,242,028 $32,282,558 $177,114,100
* Expected to be refunded with the 2026 Bonds.
† Includes credits from the levy of ad valorem property taxes, special assessments or special taxes. Each Delivery Contract permits any Participant to issue obligations to fund all or a portion of its
Capital Projects Installment Debt Service by levying an ad valorem tax, special assessment or special tax. See APPENDIX B-” THE DELIVERY CONTRACTS.”
Source: Municipal Advisor.
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All other costs of operating and maintaining the Nacimiento Project, including Master Water Contract Costs,
and any Additional Capital Projects are allocated among the Participants pro rata based on their Delivery Entitlement
Share. These allocations are calculated by the Flood Control District each Fiscal Year for the Participants , and the
calculations of said allocations are made available to each Participant. The obligations of the Participants for any
Approved Additional Project are established at the time of and by the agreement for each such Approved Additional
Project.
Table 6
Delivery Entitlement Share
As of Fiscal Year 2025-26
Participant Acre Feet Percentage
Atascadero Mutual Water Company 3,244 20.597%
City of Paso Robles 6,488 41.194
City of San Luis Obispo 5,482 34.806
Templeton Community Services District 406 2.578
County Service Area 10, Zone A 40 0.254
Bella Vista MHP, LLC 10 0.063
SMR Mutual Water Company 80 0.508
TOTAL 15,750 100.000%
Source: Flood Control District.
During the term of the Delivery Contracts, the Flood Control District is also required to proceed with due
diligence to collect Total Participant Contract Payments as and when due, and deposit amounts collected into the
Nacimiento Water Fund promptly upon receipt, and apply all other amounts comprising Total Participant Contract
Payments in the following order of priority:
First: To the payment of Master Water Contract Costs;
Second: To the payment of Operation and Maintenance Costs;
Third: To the payment of Variable Energy Costs;
Fourth: To the payment of Additional Capital Project Costs; and
Fifth: To the replenishment of Capital Reserves for the Nacimiento Project.
Capital Reserve Costs, and Operating and Maintenance Costs. Each Water Year, the Floo d Control District
is required to determine the amount of Capital Reserves necessary for the Nacimiento Project and allocate Capital
Reserve Costs and Operation and Maintenance Costs to each Participant and to CSA 10, Bella Vista, and SMR on the
basis of the Unit Percentage Share attributable to the Units used by the Flood Control District to deliver the Delivery
Entitlement to the Participants, and to CSA 10, Bella Vista, and SMR. Based upon the Flood Control District’s Fiscal
Year 2025-26 budget, there was apportioned to each Participant, and to CSA 10, Bella Vista, and SMR the following
proportional share of the said costs (expressed as a percentage) for each of the Units used to deliver water to such
Participant and to CSA 10, Bella Vista, and SMR:
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Table 7
Capital Reserve and Operation and Maintenance Costs
For Fiscal Year 2025-26(1)
Participant Amount(2) Percent(3)
Atascadero Mutual Water Company $ 917,231 17.59%
City of Paso Robles 1,608,473 30.84
City of San Luis Obispo(4) 2,476,545 47.49
Templeton Community Services District 140,441 2.69
County Service Area 10, Zone A(5) 14,465 0.28
Bella Vista MHP, LLC(5) 3,598 0.07
SMR Mutual Water Company(5) 54,058 1.04
Total $5,214,811 100.00%
(1) Based upon the Fiscal Year 2025-26 budget.
(2) Excludes Variable Energy Costs that are billed quarterly based upon actual use, and debt service.
(3) Column does not total due to rounding.
(4) The amount for the City of San Luis Obispo includes a one-time payment of $494,188 to replenish capital reserves drawn on in a previous
budget year.
(5) Payments made pursuant to the CSA 10, Bella Vista, and SMR Delivery Contracts do not provide payments or security for the 20 26 Bonds.
See “INTRODUCTION–The Participants.”
Source: Flood Control District.
Time and Amount of Delivery Contract Payments. Except as established in the Delivery Contracts as to
Capital Projects Installment Debt Service, the Delivery Contract Payments made by the Participants to the Flood
Control District commenced the first Fiscal Year during which the Delivery Entitlement became available to the
Participants under the respective Delivery Contracts, and in any event, promptly following receipt by the Participants
of an invoice from the Flood Control District. The Delivery Contract Payments are determined by the Flood Control
District as provided in each Delivery Contract and are paid by each Participant to the Flood Control District in
accordance with the respective Delivery Contract, except and to the extent each Participant is entitled to an offsetting
credit as further described in the Delivery Contracts. See APPENDIX B – “THE DELIVERY CONTRACTS.”
(i) On or before July 1 of each Fiscal Year, each Participant is required to pay a sum equal to
60% of the Participant’s allocation of Capital Reserve Costs, and Operation and Maintenance Costs as
calculated and allocated as provided in the Delivery Contracts; and
(ii) On the immediately following January 1 within each Fiscal Year, each Participant is
required to pay a sum equal to 40% of the Participant’s allocation of Capital Reserve Costs and Operation
and Maintenance Costs as calculated and allocated as provided in the Delivery Contracts; and
(iii) On or before the 30th day following its receipt of an invoice from the Flood Control District
as provided in the Delivery Contracts, each Participant is required to pay Variable Energy Costs as calculated
and allocated as provided in the Delivery Contracts, for the Calendar Quarter most recently concluded; and
(iv) On or before July 1 of each Fiscal Year, each Participant is required to pay a sum
equal to the Participant’s allocation of Capital Projects Installment Debt Service for that Fiscal Year
as calculated and allocated as provided in the Delivery Contracts; and
(v) On or before July 1 of each Fiscal Year, each Participant shall pay a sum equal to the
Participant’s allocation of remaining Nacimiento Project Costs, including Additional Capital Project Costs
and Master Water Contract Costs as calculated and allocated as provided in the Delivery Contracts.
Gross Pledge and Covenants of Participants. Each Participant pledges under each Delivery Contract,
respectively, the gross water sales revenues of the Participant’s Water Enterprise to secure the Participant’s obligations
under the Delivery Contract, and covenants and agrees to establish, fix and collect rates and charges from the
customers of the Participant’s Water Enterprise at levels sufficient to produce revenues from the Participant’s Water
Enterprise which are at least equal to:
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(i) The costs of operating and maintaining the Participant’s Water Enterprise; plus
(ii) The Contract Payments, calculated in accordance with the Delivery Contract, including the
amounts allocated to the Participant as the Participant’s share of Capital Projects Installment Debt Service;
plus
(iii) The Coverage Factor (defined as 125% of each Participant’s pro rata share of the Capital
Projects Installment Debt Service, calculated for each Fiscal Year) for the amounts allocated to the Participant
as the Participant’s share of Capital Projects Installment Debt Service, provided, however, that there will be
credited towards compliance with the Coverage Factor requirement all Available Capital Reserves of the
Participant.
Under certain circumstances, the Participant may be required to pay a surcharge following the occurrence of
any payment default by the Participant as provided in its Delivery Contract.
Notwithstanding the provisions of paragraph (iii) above, each Participant will be permitted to withdraw and
apply Available Capital Reserves for its operational and capital needs from time to time during any water year. As
defined in each Delivery Contract, the term “Available Capital Reserves” means amounts maintained by the
Participant for its Water Enterprise for capital reserves, including unreserved, unrestricted working capital balances
in the funds established for the Water Enterprise, including allowances for contingencies, as of each Calculation Date.
Financial Covenants under the Delivery Contract
Punctual Payment; Compliance with Documents. The Flood Control District is required to
punctually pay or cause to be paid the interest and principal to become due with respect to all of the Municipal
Obligations (including the Bonds), but solely from amounts paid to the Flood Control District under the
Delivery Contracts, and each Participant shall punctually pay or cause to be paid the Capital Projects
Installment Debt Service, in strict conformity with the terms of the Municipal Obligations (including the
Bonds), the Delivery Contracts and the Legal Documents and will faithfully observe and perform all of the
conditions, covenants and requirements of the Delivery Contract s and the Legal Documents including any
and all supplements thereto.
Extension of Payment of Municipal Obligations. None of the Flood Control District or any
Participant will directly or indirectly extend or assent to the extension of the maturity of any of the Municipal
Obligations (including the Bonds) or the time of payment of any claims for interest by the purchaser or owner
of such Municipal Obligations (including the Bonds) or by any other arrangement, and in case the maturity
of any of the Municipal Obligations (including the Bonds) or the time of payment of any such claims for
interest shall be extended, such Municipal Obligations (including the Bonds) or claims for interest shall not
be entitled, in case of any default under the Legal Documents, to the benefits of the Delivery Contract s,
except subject to the prior payment in full of the principal of all of the Municipal Obligations (including the
Bonds) then outstanding and of all claims for interest thereon which shall not have been so extended. The
Flood Control District may issue obligations or cause obligations to be issued for the purpose of refunding
any outstanding Municipal Obligations (including the Bonds), and such issuance shall not be deemed to
constitute an extension of maturity of the affected Municipal Obligations (including the Bonds).
Against Encumbrances. None of the Flood Control District or any Participant will create, or permit
the creation of, any pledge, lien, charge or other encumbrance upon the revenues and other assets pledged
under a Delivery Contract while any of the Municipal Obligations (including the Bonds) are outstanding,
except the pledge created by the Legal Documents and the Delivery Contracts, any Additional Debt and any
pledge, lien, charge, or other encumbrance which is subordinate to the obligations under the Delivery
Contracts. Subject to this limitation and the terms of the Indenture, the Flood Control District expressly
reserves the right to enter into one or more indentures or trust agreements, and reserves the right to issue
other obligations or cause them to be issued for such purposes.
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Covenants to Maintain Tax-Exempt Status of Tax-Exempt Bonds. In the event that any Tax-Exempt
Bonds attributable in whole or in part to a Participant are issued and Outstanding, such Participant covenants
and agrees not to use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property,
the acquisition, construction or improve ment of which is to be financed directly or indirectly with Gross
Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any of the Tax -
Exempt Bonds to become includable in the gross income, as defined in Section 61 of the Code, of the Owner
thereof for federal income tax purposes.
Nacimiento Project Shortages. In any year in which there is a shortage or interruption in water deliveries to
the Participants due to drought or other temporary cause; or if there is a reduction in the supply of water from the
Water Project under the Master Water Contract that threatens or causes a permanent shortage in the amount of water
available for delivery to the Participants under the respective Delivery Contracts, the Flood Control District is
authorized to make reductions in the Delivery Entitlement Share for each Participant.
The Flood Control District, its officers, agent or employees are not liable for any damage, direct or indirect,
arising from shortages in the amount of water from the Water Project available to any Participant pursuant to its
Delivery Contract caused by drought, the non-availability of water under the Master Water Contract, operation of the
Water Project, operation of laws or any cause beyond the control of the Flood Control District. However, such
reduction in water delivery does not entitle a Participant to make any reductions in its Capital Projects
Installment Debt Service, see “–Obligation to “Take or Pay.”
[Remainder of page intentionally left blank.]
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26
Table 8
Nacimiento Project and Bond Legal Structure
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Reserve Fund
The Reserve Fund is comprised of the Tax-Exempt Reserve Account and the Taxable Reserve Account. The
Tax-Exempt Reserve Account secures the payment of Tax-Exempt Bonds only, including the 2018 Bonds and the
2026 Bonds, and is not available to pay debt service on any Taxable Bonds. The Taxable Reserve Account secures
the payment of the 2007 Taxable Bonds only, and is not available to pay debt service on any Tax-Exempt Bonds.
The Tax-Exempt Reserve Account and the Taxable Reserve Account are funded in amounts equal to the
applicable Reserve Requirement, as described below.
To date, there have been no delinquencies by any Participant in the payment of Capital Projects Installment
Debt Service, and the Trustee has not drawn on the Reserve Fund as a result of any debt service delinquency.
Investment earnings on amounts in the Reserve Fund and Delinquent Debt Service Payments shall be
deposited to the following funds and accounts and transferred in the following order:
First: Reimbursement to the provider of any Reserve Surety for any drawings
thereunder;
Second: The Reserve Fund to the level of the Reserve Requirement;
Third: The Interest Account, up to an amount sufficient to make payment on the Bonds
on Tax-Exempt Bonds or Taxable Bonds, as applicable, on the next Interest
Payment Date; and
Fourth: The Principal Account.
All or any portion of the applicable Reserve Requirement may be satisfied by the provision of a qualified
surety bond, being a surety bond issued by an insurance company rated in one of the two highest categories (without
regard to numerical or other modifiers) of any Rating Agency at the time such surety bond is obtained (a “Reserve
Surety”), that, together with moneys on deposit in the applicable Reserve Account of the Reserve Fund, provides an
aggregate amount equal to the applicable Reserve Requirement. In the event of replacement of cash and investments
in the Tax-Exempt Reserve Account with a Reserve Surety, the Trustee is required to transfer any excess amounts
then on deposit in the Tax-Exempt Reserve Account into a segregated account of the Revenue Fund, which monies
are required to be applied either (i) to the payment within one year of the date of transfer of capital expenditures of
the Authority or the Flood Control District permitted by law, or (ii) to the redemption of Tax-Exempt Bonds on the
earliest succeeding date on which such redemption is permitted hereby, and pending such application shall be held
either not invested in investment property (as defined in section 148(b) of the Code), or invested in such property to
produce a yield that is not in excess of the yield on the Tax-Exempt Bonds; provided, however, that the Authority may
by written direction to the Trustee cause an alternative use of such amounts if the Authority will first have obtained a
written opinion of nationally recognized bond counsel substantially to the effect that such alter native use will not
adversely affect the exclusion pursuant to section 103 of the Code of interest on the Tax-Exempt Bonds from the gross
income of the owners thereof for federal income tax purposes. If the credit rating of the provider of any Reserve Sure ty
is subsequently downgraded by any Rating Agency, the Authority is not required to replace such Reserve Surety.
So long as either the Tax-Exempt Reserve Account or the Taxable Reserve Account includes both
cash/investments and a Reserve Surety, the Trustee shall, in the event of a Delinquent Debt Service Payment under
the Pledge Agreement, apply all cash or the proceeds of investments to the payment of principal of and interest on the
Bonds hereunder, prior to making a drawing against the Reserve Surety. Upon a draw on such Reserve Account of the
Reserve Fund, the Trustee is required to accept Delinquent Debt Service Payments received from the Flood Control
District for purposes of replenishing the applicable Reserve Account of the Reserve Fund or rei mbursing the provider
of the Reserve Surety.
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Tax-Exempt Reserve Account. In the event that on any Interest Payment Date, the full amount of the interest
of or principal or redemption price of the Tax-Exempt Bonds required to be deposited on such Interest Payment Date,
in the Interest Account, Principal Account or Redemption Account, as applicable, is not then on deposit therein, the
Trustee is required on such Interest Payment Date to withdraw from the Tax-Exempt Reserve Account an amount
equal to any such deficiency and notify the Authority and the Flood Control District of any such withdrawal. All
money in or available under the Tax-Exempt Reserve Account is required to be used and withdrawn by the Trustee
solely for the purpose of making transfers to the Interest Account and the Principal Account, in such order of priority,
in the event of any deficiency at any time in any of such Account to pay debt service on the Tax -Exempt Bonds then
Outstanding, except that so long as the Authority is not in default under the Indenture, any amount in the Tax-Exempt
Reserve Account in excess of the Reserve Requirement (Tax-Exempt Bonds) is required to be withdrawn from the
Tax-Exempt Reserve Account semiannually at least two Business Days prior to each Interest Payment D ate and be
deposited in the Interest Account and credited to the obligations of the Flood Control District under the Pledge
Agreement relating to the Tax-Exempt Bonds.
The term “Reserve Requirement (Tax-Exempt Bonds)” is defined in the Indenture to mean, as of any date of
calculation, an amount equal to the least of (i) 125% of the average annual debt service on the Tax-Exempt Bonds for
that and any subsequent Bond Year, (ii) 100% of the maximum annual debt service on the Tax-Exempt Bonds for that
or any subsequent Bond Year, or (iii) 10% of the issue price of the Tax-Exempt Bonds. Upon the issuance of the 2026
Bonds, the Reserve Requirement (Tax-Exempt Bonds) is estimated to be $9,172,762.50 which is equal to 100% of the
maximum annual debt service on the Tax-Exempt Bonds.
The Tax-Exempt Reserve Account is currently invested in a Forward Delivery Agreement dated September
26, 2007, as amended by the Amendment No. 1 to Forward Delivery Agreement for the Reserve Fund, dated
August 19, 2015, and the Amendment No. 2 to Forward Delivery Agreement for the Reserve Fund, dated April 9,
2018, and as further amended by the Amendment No. 3 to Forward Delivery Agreement for the Reserve Fund, dated
the closing date of the 2026 Bonds, each between the Authority and Truist Securities Inc., as successor in interest to
SunTrust Bank. This agreement provides for payment of a guaranteed rate per annum to the Authority in an amount
equal to 5.015%. The Authority has and will continue to rebate earnings in ex cess of the Arbitrage Yield on the Tax-
Exempt Bonds.
Investments of Amounts on Deposit Under the Indenture
Except as otherwise provided in the Indenture, all moneys in any of the funds or accounts established pursuant
to the Indenture are required be invested solely in Permitted Investments, or, if any fund or account is held by the
Trustee solely in Permitted Investments, as directed in writing by an Authorized Representative of the Flood Control
District two Business Days prior to the making of such investment. Moneys in any funds and accounts are required to
be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will
be required for the purposes specified in the Indenture.
Permitted Investments acquired as an investment of moneys in any fund established under the Indenture are
required to be credited to such fund. For the purpose of determining the amount in any fund, all Permitted Investments
credited to such fund will be valued at the lesser of cost or market value exclusive of accrued interest, if any, paid as
part of the purchase price thereof. See APPENDIX C–“FORMS OF PRINCIPAL LEGAL DOCUMENTS–THE
INDENTURE.”
Existing Obligations of the Participants
For a discussion of existing indebtedness of each Participant, see APPENDIX A–“THE PARTICIPANTS”
and the discussion under the subheadings “–Outstanding Long-Term Indebtedness” therein.
Additional Bonds
In addition to the 2026 Bonds, the Trustee shall, upon Written Request of the Authority, by a supplement to
the Indenture, establish one or more other Series of Bonds secured by the pledge made under the Indenture equally
and ratably with any Bonds previously issued and delivered, in such principal amount as shall be determined by the
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Authority, but only upon compliance with the provisions of the Indenture and any additional requirements set forth in
the applicable Supplemental Indenture. The Supplemental Indenture providing for the execution and delivery of such
Additional Bonds shall specify the purposes for which such Additional Bonds are then proposed to be delivered, which
shall be one or more of the following: (i) to provide moneys needed to provide for the Project Costs by depositing into
the Project Fund the proceeds of such Additional Bonds to be so applied; (ii) to provide for the payment or redemption
of Bonds theretofore Outstanding under the Indenture, by depositing with the Trustee moneys and/or investments
required for such purpose under the defeasance provisions of the Indenture; or (iii) to provide moneys needed to refund
or refinance all or part of any other current or future obligations of the Authority with respect to the funding of the
Nacimiento Project. See APPENDIX C–“FORMS OF PRINCIPAL LEGAL DOCUMENTS.”
The Indenture does not require satisfaction of any debt service coverage ratio condition to issue Additional
Bonds.
Indenture Events of Default and Remedies
Events of Default. The Indenture provides the following Events of Default:
(i) if default by the Authority shall be made in the due and punctual payment of the principal of any
Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings
for sinking fund redemption, by acceleration, or otherwise;
(ii) if default shall be made in the due and punctual payment of any installment of interest on any Bonds
when and as the same shall become due and payable;
(iii) if default shall be made by the Authority in the observance of any of the other covenants, agreements
or conditions on its part in the Indenture or in the Bonds contained, if such default shall have continued for a period
of 30 days after written notice thereof, which grace period shall not be extended beyond 60 days, Trustee or the Owners
of not less than 25% in aggregate principal amount of the Bonds at the time Outstanding; provided, however, if the
failure stated in the notice can be corrected, but not within the applicable period, the Authority, the Trustee and such
Owners shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by
the Authority within the applicable period and diligently pursued until the default is corrected;
(iv) the occurrence of an Event of Bankruptcy with respect to the Authority; and
(v) the occurrence of a default under the Pledge Agreement.
Remedies Upon Default. The Bonds are subject to acceleration prior to their maturity. If an Event of
Default occurs, then, and in each and every such case during the continuance of such Event of Default, the Trustee or
the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding shall be
entitled, upon notice in writing to the Authority, to declare the principal of all of the Bonds then Outstanding, and the
interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become
and shall be immediately due and payable, anything in the Indenture or in the Bonds contained to the contrary
notwithstanding.
Any such declaration, however, is subject to the condition that if, at any time after such declaration and before
any judgment or decree for the payment of moneys due shall have been obtained or entered, the Authority shall deposit
with the Trustee a sum sufficient to pay all the princi pal or redemption price of and installments of interest on the
Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective Bonds,
and the reasonable charges and expenses of the Trustee, and any and all other defaults known to the Trustee (other
than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration)
shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate
shall have been made therefor, then, and in every such case, the Owners of not less than a majority in aggregate
principal amount of the Bonds then Outstanding, by written notice to the Authority and the Trustee, or the Trustee if
such declaration was made by the Trustee other than upon direction of the Bond Owners, may, on behalf of the Owners
of all of the Bonds rescind and annul such declaration and its consequences and waive such default; but no such
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rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or
power consequent thereon.
The payments of Capital Projects Installment Debt Service due from the Participants are not subject to
acceleration.
Subject to the terms of the Indenture regarding certain limitation on the Owners’ right to sue, any Owner
shall have the right, for the equal benefit and protection of all Owners similarly situated:
(i) by mandamus, suit, action or proceeding, to compel the Authority and its members, officers, agents
or employees to perform each and every term, provision and covenant contained in the Indenture and in the Bonds,
and to require the carrying out of any or all such covenants and agreements of the Authority and the fulfillment of all
duties imposed upon it by the Bond Law;
(ii) by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the
violation of any of the Owners’ rights; or
(iii) upon the occurrence of any Event of Default, by suit, action or proceeding in any court of competent
jurisdiction, to require the Authority and its members and employees to account as if it and they were the trustees of
an express trust.
As provided in the Pledge Agreement, the Flood Control District covenants and agrees that it will enforce its
rights under each of the Delivery Contracts, in accordance with the terms thereof, and, in particular, that it shall use
its best efforts to collect Capital Projects Installment Debt Service and Net Revenues in such time and amoun ts as
shall permit the payment of principal of and interest on the Bonds in accordance with their terms. In the event of a
Debt Service Shortfall, the Flood Control District covenants and agrees to enforce its right to collect each Delinquent
Debt Service Payment under the Delivery Contract with the Delinquent Participant and use its best efforts to remedy
such Debt Service Shortfall by enforcing the step -up provisions of the Delivery Contracts with the Participants that
are then not delinquent. As defined in the Pledge Agreement, the term “Delinquent Debt Service Payment” shall mean
those payments of Capital Projects Installment Debt Service due under any Delivery Contract that are not, in fact, paid
on the date upon which each payment of Capital Projects Installment Debt Service is required to be made by a
Participant under a Delivery Contract (the “Due Date”). The term “Debt Service Shortfall” shall mean the aggregate
amount of Delinquent Debt Service Payments due from Delinquent Participants on the Due Date in question. The term
“Delinquent Participant” shall mean any Participant which fails to meet its obligation for payment for Nacimiento
Project Water under any Delivery Contract, as further described in the respective Delivery Contract s. To date, there
have been no Delinquent Debt Service Payments by any Participant that resulted in a Debt Service Shortfall.
The Authority has no security interest in or mortgage on any Water Enterprise operated and to be operated
by a Participant or any real property of the Flood Control District or any Participant and no default under the Pledge
Agreement shall result in the loss of the respective Water Enterprise or any other property of the Flood Control District
or the Participants. This limitation on remedies of the Authority shall be binding on successors in interest to the
Authority’s rights under the Pledge Agreement.
Limited Obligations
THE 2026 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY
FROM REVENUES OF THE AUTHORITY CONSISTING PRIMARILY OF PAYMENTS MADE BY THE
PARTICIPANTS TO THE FLOOD CONTROL DISTRICT UNDER THE DELIVERY CONTRACTS AND
RECEIVED BY THE AUTHORITY PURSUANT TO THE PLEDGE AGREEMENT. THE 2026 BONDS ARE
NOT A DEBT OF THE AUTHORITY, THE FLOOD CONTROL DISTRICT, THE PARTICIPANTS, THE
COUNTY OR THE STATE OF CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL
OR STATUTORY DEBT LIMITATION. THE AUTHORITY SHALL NOT BE OBLIGATED TO PAY THE
PRINCIPAL OF, OR INTEREST ON THE 2026 BONDS, EXCEPT FROM THE FUNDS PROVIDED
UNDER THE INDENTURE AND THE PLEDGE AGREEMENT. NEITHER THE FULL FAITH AND
CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR ANY POLITICAL
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SUBDIVISION THEREOF, INCLUDING THE AUTHORITY, IS PLEDGED TO THE PAYMENT OF THE
PRINCIPAL OF OR INTEREST ON THE 2026 BONDS. THE AUTHORITY HAS NO TAXING POWER.
The obligation of the Flood Control District to make payments to the Authority under the Pledge Agreement
is a special obligation of the Flood Control District payable solely from Water Revenues and the funds described in
the Pledge Agreement and does not constitute a debt of the Flood Control District or of the State of California or of
any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction.
[BOND INSURANCE
Bond Insurance Policy
Concurrently with the issuance of the 2026 Bonds, [INSURER] (the “2026 Insurer”) will issue its Municipal
Bond Insurance Policy for t he 2026 Bonds (the “Policy”). The Policy guarantees the scheduled payment of principal
of and interest on the 2026 Bonds when due as set forth in the form of the Policy included as an exhibit to this Official
Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York, California,
Connecticut or Florida insurance law.
[TO COME]]
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CERTAIN RISKS TO BOND OWNERS
The following information should be considered by potential investors in evaluating the credit quality of the
2026 Bonds. However, it does not purport to be an exhaustive list of the risks or other considerations which may be
relevant to an investment in the 2026 Bonds. In addition, the order in which the following information is presented is
not intended to reflect the relative importance of any such risks.
General
The payment of principal of and interest on the 2026 Bonds is secured solely by a pledge of the Revenues
and certain funds under the Indenture. The realization of the Water Revenues sufficient to enable the Flood Control
District to make the payments under the Pledge Agreement is subject to, among other things, the capabilities of
management of the Flood Control District and the Participants, the ability of the Participants to provide water services
to their users, and the ability of the Participants to establish and maintain water fees and charges sufficient to provide
the required debt service coverage as well as pay for Operation and Maintenance Costs.
Among other matters, drought, general and local economic conditions and changes in law and government
regulations (including initiatives and moratoriums on growth) could adversely affect the amount of revenues realized
by the Participants and ultimately the ability of the Participants to pay their Proportionate Shares to the Flood Control
District.
Statutory and Regulatory Impact
Laws and regulations governing conservation, transmission, treatment and delivery of water are enacted and
promulgated by government agencies on the federal, State and local levels. Compliance with these laws and
regulations may be costly, and, as more stringent standards are developed, these costs will likely increase. In addition,
claims against any Participant for violations of regulations with respect to its facilities and services could be
significant. Such claims would be payable from the water revenues of such Participant or from other legally available
sources of such Participant.
No Obligation to Tax
The obligation of each Participant to make payments under the applicable Delivery Contract does not
constitute an obligation of such Participant for which it is obligated to levy or pledge any form of taxation, or for
which such Participant has levied or pledged any form of taxation. The obligation of each Participant to make
payments under the applicable Delivery Contract does not constitute a debt or indebtedness of the Participants, the
Authority, the State or any of its political subdivisions, within the meaning of any constitut ional or statutory debt
limitation.
Drought
Background. California periodically experiences droughts prompting state and local responses. For
example, the water years 2020 through 2022 combined ranked as the three driest years in California’s statewide
precipitation record. (A water year begins on October 1 and ends on the following September 30.) Beginning in April
2021, the Governor issued a series of drought emergency proclamations affecting various counties throughout the
State, culminating in an October 19, 2021 proclamation declaring a drought state of emergency to be in effect statewide
and directing all local water suppliers to implement water shortage contingency plans at a level appropriate to local
conditions. On May 24, 2023, Governor Newsom issued an executive order easing water restrictions that wer e no
longer necessary following a series of storms that ended the drought. As of June 16, 2026, according to the U.S.
Drought Monitor, certain areas of the State are in the “abnormally dry” or “moderate drought” categories, while other
areas, including the County, are identified as experiencing no drought conditions.
In 2018, responding to earlier drought periods, the California Governor signed Senate Bill 606 and Assembly
Bill 1668 into law. These bills relate to water conservation and drought planning a nd empower the State Department
of Water Resources and the State of California Water Resources Control Board to adopt long -term standards for the
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following: (i) indoor residential water use; (ii) outdoor residential water use; (iii) commercial, industrial and
institutional water use for landscape irrigation; and (iv) water loss. The indoor water use standard has been defined
as 55 gallons per person per day (“GPCD”) until January 2025; the standard will decrease over time to 50 GPCD in
January 2030. Standards for outdoor residential water use and commercial, industrial and institutional water use for
landscape irrigation are still being developed. Urban water suppliers will be required to stay within annual water
budgets, based on these standards, for their service areas.
There can be no assurance that existing or future federal or State legislation and actions will not impose
mandatory water supply or use restrictions, which could require the Flood Control District and the Participants to
impose water use restrictions on customers of the respective Water Enterprises and thereby negatively impact Water
Revenues. See also, “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS–The Delivery Contracts–
Obligation to “Take or Pay.”
Flood Control District. The storage capacity of the Nacimiento Reservoir is 377,900 acre feet (“AF”), with
storage levels at approximately 52% or 195,985 AF as of July 10, 2026 .
The Nacimiento River Watershed, which feeds the Nacimiento Reservoir, has been a reliable watershed
during periods of drought. Data dating to 1958 indicate that inflows to the Nacimiento Reservoir have exceeded the
17,500 acre-feet per year (“AFY”) entitlement of the Flood Control District in every year except 1976, when just
15,041 AF of inflow was recorded. However, available storage in 1976 equal to 57,200 AF was sufficient to make up
the difference.
The Flood Control District expects that it will be able to deliver the total entitlement of 15,750 AFY to the
Participants. The Master Water Contract requires that downstream releases from the Nacimiento Reservoir
cease when storage capacity reaches 22,300 AF (which effectively reserves that water for delivery to the Flood
Control District). Since 1958, the capacity of the Nacimiento Reservoir has only declined to 22,300 AF six times,
most recently in Fiscal Year 1989-90. The graph below illustrates the historic storage levels in AF of Nacimiento
Reservoir since 1958.
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See also, “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS–The Delivery Contracts–
Obligation to “Take or Pay.”
Participants. For a description of each Participant’s drought and conservation measures, see the subheading
“–Drought and Conservation Measures” for each Participant in APPENDIX A–“THE PARTICIPANTS.”
Climate Change
The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas
emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is exp ected to
intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges,
drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the
Flood Control District or the Participants is difficult to predict, but it could be significant, and it could have a material
adverse effect on the Flood Control District’s or Participants’ finances by requiring greater expenditures to counteract
the effects of climate change, by changing the business and activities of the customers of the Participants’ Water
Enterprises or by increasing the cost or decreasing the availability of water supplies.
Earthquakes, Floods, and Other Disasters
From time to time, the Participants are subject to natural calamities that may adversely affect economic
activity in the service areas of the Participants which therefore may have a negative impact on one or more
Participant’s finances. There can be no assurance that the occurrence of any nat ural calamity would not cause
substantial interference to the Nacimiento Dam or to the Water Enterprises of the Participants, or that any Participant
would have insurance or other resources available to make repairs to its Water Enterprises, possibly impac ting
Revenues.
Earthquake. The casualty and liability insurance of the Participants may not cover losses due to earthquake.
If there were to be an occurrence of severe seismic activity in the service areas of the Participants, there could be
substantial damage to and interference with one or more Participant’s Water Enterprises, which could impact the
receipt of Revenues.
Small earthquakes, in the range of magnitude 2.0 to 2.7 and smaller, occur quite often throughout and near
the County. Larger earthquakes do occur occasionally, as evidenced by a magnitude 6.5 earthquake in December 2003
in the San Simeon-Hosgri fault zone approximately six miles from the community of San Simeon and the magnitude
6.0 earthquake in September 2004 on the San Andreas Fault jus t north of the Monterey County line. The Shoreline
Fault zone, discovered in 2008, which is believed to be capable of producing a substantial earthquake, is located less
than one mile off-shore from the Diablo Canyon Power Plant (the “DCPP”), a two reactor nuclear power plant operated
by the Pacific Gas & Electric Company (“PG&E”) constructed in 1975.
The Los Osos Fault, which is generally adjacent to the service areas of the Participants, is identified under
the State of California Alquist-Priolo Fault Hazards Act as being capable of causing surface rupture damage in the
service areas of the Participants. This fault’s main strand lies near the intersection of Los Osos Valley Road and
Foothill Boulevard. It is considered to present a high to very high fault rupture hazard to development and facilities in
the Los Osos Valley, which lies west of the service areas of the Participants. Other faults identified as being capable
of causing surface rupture damage in the vicinity of the service areas of the Participants are the West Huasna, Oceanic,
and Edna Faults. These faults are considered potentially active and present a moderate fault rupture hazard.
Liquefaction. Liquefaction occurs when ground shaking causes the mechanical properties of some fine
grained, saturated soils to liquefy and act as a fluid (liquefaction). In order for liquefaction to occur, three general
geotechnical characteristics must be present: (i) ground water within the potentially liquefiable zone, (ii) the
potentially liquefiable zone is granular and meets a specific range in grain-size distribution, and (iii) the potentially
liquefiable zone is of low relative density. If those criteria are present and strong ground motion occurs, then those
soils could liquefy, depending upon the intensity and duration of the strong ground motion. The larger the earthquake
magnitude, and the longer the duration of strong ground shaking, the greater the potential there is for liquefaction to
occur.
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Portions of the coastal areas within the County are underlaid by sediments that may be vulnerable to
liquefaction, and the majority of the pipeline and facilities of Nacimiento are located in a moderate liquefaction
potential zone, and the remainder is divided between low and high moderate potential zones.
Flooding. In accordance with the National Flood Insurance Reform Act, the Federal Emergency
Management Agency (“FEMA”) assesses its flood hazard map inventory at least once every five years. Portions of
the County are located within zones that correspond to the boundaries of a 100-year floodplain. A 100-year floodplain
is an area expected to be inundated during a flood event of the magnitude for which there is a 1% (or 1 -in-100)
probability of occurrence in any year.
A Flood Insurance Study[, most recently revised by FEMA for the County in June 2024,] noted that runoff
in the streams is small, with appreciable flows occurring only during and immediately after precipitation. However,
during large storms, streamflow increases rapidly, and flood waters can contain hig h amounts of debris, causing major
flood damage. For many of the watercourses that are located in the service areas of the Participants, areas that may be
inundated in response to 100-year storm events are located adjacent to or near the stream or river channel. Since many
of the watercourses are located in mountainous or remote areas with little or no development, flooding events along
these rivers and streams generally result in minimal impacts. Other watercourses that are located in the service areas
of the Participants, however, have floodplains that extend well beyond the defined stream or river channel. When a
flood occurs along one of these watercourses, and it is located in or near an area that is urbanized, damage to property
and infrastructure can be widespread. [confirm/update]
In the southern portion of the County, Arroyo Grande Creek, San Luis Obispo Creek, and their respective
tributaries, are watercourses that pass through urbanized areas and that have caused major floods. The north coast area
of the County also contains a number of short, steep-gradient creeks that can experience rapid increases in water flows
in response to storm events in Cambria. Santa Rosa Creek is such a watercourse that has caused significant flooding
events. The largest watercourse in the inland portion of the County is the Salinas River, which is located adjacent to
numerous incorporated and unincorporated communities. Although the floodplain of Salinas River can be extensive,
it is generally contained within the river channel. Other major inland watercourses include the Estrella River and San
Juan Creek. Due to the generally remote locations of these watercourses, flooding impacts are generally not significant.
Wildfires
In recent years, wildfires have caused extensive d amage throughout the State. Certain of these fires have
burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances, entire
neighborhoods have been destroyed. Wildfires can also significantly impact vegetatio n and soils, which can adversely
impact water quality within the water sources and regulating reservoirs. Areas in the County have experienced similar
large and damaging wildfires in recent years.
The areas in the County face ongoing wildfire risks, with some land within the County and the Participants’
jurisdictions being categorized into the moderate, high and very high California Department of Forestry and Fire
Protection (CALFIRE) Fire Hazard Severity Zones. If wildfires were to substantially damage or destroy land within
the County, including facilities and systems maintained by the Flood Control District and the Participants, Water
Revenues could be negatively affected.
Water Quality and PFAS
In recent years, State and federal agencies have enacted regulations concerning per- and poly-fluoroalkyl
substances (“PFAS”) in drinking water. PFAS are commonly used in various consumer and industrial products such
as fabrics, carpets, firefighting foams, food packaging and nonstick cookware and are known for their nonstick,
waterproof, and heat and stain-resistant properties. There are over 15,000 types of individual PFAS compounds.
Perfluorooctane sulfonate (“PFOS”), perfluorooctanoic acid (“PFOA”), perfluorobutane sulfonic acid (“PFBS”), and
perfluorohexane sulfonic acid (“PFHxS”) are among the synthetic organic chemicals in the group of compounds
referred to as PFAS.
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The State of California Water Resources Board’s Division of Drinking Water (the “Division”) has established
and modified from time to time Notification Levels (the “NLs”) for PFOA, PFOS, PFBS, and PFHxS,
respectively. NLs are non-regulatory, precautionary health-based measures for concentrations of chemicals in
drinking water that warrant notification and further monitoring and assessment. Response Levels (the “RLs”) are non-
regulatory, precautionary health-based measures that are set at higher levels than NLs and represent thresholds at
which the Division recommends that water systems remove a water source from use or treat it if the option is available
to them. Legislation that took effect on January 1, 2020 requires that water systems that receive a monitoring order
from the Division and detect levels of PFAS that exceed their respective RL must either take a drinking water source
out of use, treat the water or provide specific public notification they continue to supply water above the RL.
In April 2024, the U.S. Environmental Protection Agency announced final regulations establishing the first
national drinking water standards for six PFAS: PFOA, PFOS, PFBS, PFHxS, perfluorononanoic acid (“PFNA”), and
hexafluoropropylene oxide dimer acid (“HFPO -DA” or “GenX”). The regulations require public water systems to
monitor for the regulated PFAS, notify the public if monitoring detects such PFAS at levels that exceed the regulatory
standards, and reduce the levels of such PFAS in drinking water if they exceed the standards. Regulated public water
systems will have until April 2027 to complete their initial monitoring for these PFAS and must include information
about the results of their monitoring in their annual water quality reports to customers. Public water systems that
detect PFAS above the new standards will have until April 2029 to implement solutions to reduce the PFAS to meet
the standards.
In accordance with Order DW 2025-0002-DDW, issued by the California State Water Resources Control
Board Division of Drinking Water on December 12, 2025, community water systems are required to monitor all active
sources for PFAS to comply with the U.S. Environmental Protection Agency National Primary Drinking Water
Regulations (89 Federal Register 32532; amended June 11, 2024, 89 Federal Register 49101)(U.S. EPA PFAS Rule).
Because the Nacimiento Project serves a population requiring quarte rly monitoring, PFAS samples were required to
be collected for four consecutive quarters, with all initial monitoring to be completed by March 31, 2027. In
accordance with these requirements, the Nacimiento Project completed all required quarterly PFAS sam pling during
the 2026 monitoring period, with the final sampling event completed in January 2026, well in advance of the regulatory
deadline. All results came back negative for all regulated PFAS compounds. The system ’s initial PFAS monitoring
requirements under Order DW 2025-0002-DDW are now complete. The Participants are responsible for complying
with PFAS regulations when providing drinking water to each of their customers. The Participants may be subject to
increases in water treatment or other Water Enterprise operating costs to meet State or federal regulations relating to
PFAS, which may impact their abilities to meet payment obligations under their respective Delivery Contracts . See
APPENDIX A – “THE PARTICIPANTS” for any impacts to the Participants as a result of compliance with PFAS
regulations.
[Risks Associated with Bond Insurance
In the event of default of the payment of principal or interest with respect to the 20 26 Bonds when all or
some becomes due, any owner of the 2026 Bonds shall have a claim under the Policy for such payments. See “BOND
INSURANCE” and APPENDIX G–“SPECIMEN MUNICIPAL BOND INSURANCE POLICY.” However, in the
event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory
sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have
been due had there not been any such acceleration. The Policy does not insure against redemption premium, if any.
The payment of principal and interest in connection with mandatory or optional prepayment of the 2026 Bonds by the
Authority which is recovered by the Authority from the bond owner as a voidable preference under applicable
bankruptcy law is covered by the insurance policy, however, such payments will be made by the 2026 Insurer at such
time and in such amounts as would have been due absence such prepayment by the Authority unless the 2026 Insurer
chooses to pay such amounts at an earlier date.
Under most circumstances, default of payment of principal and interest does not obligate acceleration of the
obligations of the 2026 Insurer without appropriate consent. The 2026 Insurer may direct and must consent to any
remedies and the consent of the 2026 Insurer may be required in connection with amendments to any applicable bond
documents.
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In the event the 2026 Insurer is unable to make payment of principal and interest as such payments become
due under the Policy, the 2026 Bonds are payable solely from the moneys received pursuant to the applicable bond
documents. In the event the 2026 Insurer becomes obligated to make payments with respect to the 2026 Bonds, no
assurance is given that such event will not adversely affect the market price of the 2026 Bonds or the marketability
(liquidity) for the 2026 Bonds.
The long-term insured rating on the 2026 Bonds is dependent in part on the financial strength of the 2026
Insurer and its claim paying ability. The financial strength and claims paying ability of the 2026 Insurer are predicated
upon a number of factors which could change over time. No assurance is given that the long-term ratings of the 2026
Insurer and of the ratings on the 2026 Bonds insured by the 2026 Insurer will not be subject to downgrade and such
event could adversely affect the market price of the 2026 Bonds or the marketability (liquidity) for the 2026 Bonds.
See “RATINGS.”
The obligations of the 2026 Insurer are contractual obligations and in an event of default by the 2026 Insurer,
the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance
companies.
Neither the Authority nor the Underwriter have made independent investigation into the claims paying ability
of the 2026 Insurer and no assurance or representation regarding the financial stren gth or projected financial strength
of the 2026 Insurer is given. Thus, when making an investment decision, potential investors should carefully consider
the ability of the Authority to pay principal and interest on the 2026 Bonds and the claims paying ability of the 2026
Insurer, particularly over the life of the investment. See “BOND INSURANCE” for further information provided by
the 2026 Insurer and APPENDIX G–“SPECIMEN MUNICIPAL BOND INSURANCE POLICY” for the Policy,
which includes further instructions for obtaining current financial information concerning the 2026 Insurer.]
Investment of Funds
All funds and accounts held under the Indenture are required to be invested in Permitted Investments as
provided under the Indenture. See APPENDIX C–“FORMS OF PRINCIPAL LEGAL DOCUMENTS–THE
INDENTURE” attached hereto for a summary of the definition of Permitted Investments. All investments, including
the Permitted Investments and those authorized by law from time to time for investments by public agencies, contain
a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, loss of market
value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the
Indenture or by the Participants could have a material adverse effect on the security of the 20 26 Bonds.
Limitations on Remedies and Bankruptcy
In addition to the specific limitations on remedies contained in the applicable documents, the rights,
obligations and remedies provided in the Indenture, the Pledge Agreement, and the Delivery Contracts are subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’
rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial
discretion in appropriate cases and to limitations on legal remedies against public agencies in the State.
The enforcement of the remedies provided in the Indenture, the Pledge Agreement , and the Delivery
Contracts could prove both expensive and time consuming. In addition, the rights and remedies provided in the
Indenture, the Pledge Agreement, and the Delivery Contracts may be limited by and are subject to provisions of the
federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect
creditors’ rights. The various opinions of counsel to be delivered with respect to such documents, including the opinion
of Bond Counsel (the form of which is attached as APPENDIX E), will be similarly qualified.
Cybersecurity
The Flood Control District and the Participants rely on a complex technology environment to conduct their
daily operations. As a recipient and provider of personal, confidential, and se nsitive information the Flood Control
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District, the Participants, and their respective departments experience multiple cybersecurity threats which include but
are not limited to, social engineering, malware, denial -of-service and other attacks on endpoints.
The Flood Control District has put several preventive measures in place to safeguard against cybersecurity
threats. These measures include cybersecurity awareness training, firewalls, email filtering, web content filtering,
endpoint protection, and ensuring that operating systems, network equipment, and endpoint devices are up -to-date
with the latest patches. Additionally, advanced segmentation and monitoring techniques are employed to detect and
respond to potential threats within the network, while real -time endpoint detection and response systems help identify
and mitigate any malicious activity on devices.
The Flood Control District relies in part on information technology infrastructure and cybersecurity services
administered by the County, and a cybersecurity incident affecting County systems could also affect the Flood Control
District’s operations. The Flood Control District currently maintains insurance coverage with respect to certain
information security and privacy liability claims through the County’s insurance program. Nonetheless, future
cybersecurity attacks could affect the operation and finances of the Flood Control District.
Each of the Participants also relies on complex digital networks and systems to conduct their operations,
which are potentially subject to cybersecurity threats that may affect their operations and finances, including their
ability to meet payment obligations under their respective Delivery Contracts. See the subheading “ –Cybersecurity”
for each Participant in APPENDIX A–“THE PARTICIPANTS.”
Limited Liability of Authority to the Owners
Except as expressly provided in the Indenture, the Authority will not have any obligation or liability to the
Owners of the 2026 Bonds with respect to the payments when due by the Flood Control District pursuant to the Pledge
Agreement, or with respect to the performance by the Flood Control District of other agreements and covenants
required to be performed by it contained in the Pledge Agreement, or with respect to the performance by the Trustee
of any right or obligation required to be performed by it co ntained in the Indenture.
Changes in Law
There can be no assurance that the State Legislature will not at some future time enact legislation, or that the
State electorate will not adopt initiatives or approve legislation amending the State Constitution, that could amend or
create laws resulting in a reduction of moneys securing or available to pay the 2026 Bonds. Additionally, future
initiative measures or other legislative actions may place further limitations on the ability of the State, the Participants
or local districts to increase revenues or appropriations, which could affect the ability of the Participants to implement
rate increases, reduce their ability to make payments under the respective Delivery Contracts and adversely affect the
security for the 2026 Bonds.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS
Described below are certain measures which have impacted or may in the future impact the Participants’
Capital Projects Installment Debt Service payments.
Article XIII A of the California Constitution
On June 6, 1978, California voters approved an amendment (commonly known as both Proposition 13 and
the Jarvis-Gann Initiative) to the California Constitution. This amendment, which added Article XIII A to the
California Constitution, among other things affects the valuation of real property for the purpose of taxation in that it
defines the full cash property value to mean “the county assessor’s valuation of real property as shown on the 1975/76
tax bill under “full cash value,” or thereafter, the appraised value of real property newly constructed, or when a change
in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a rate not
to exceed 2% per year, or reduced in the event of declining property value caused by damage, destruction or other
factors including a general economic downturn. The amendment further limits the amount of any ad valorem tax on
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real property to 1% of the full cash value except that additional taxes may be levied to pay debt service on indebtedness
approved by the voters prior to July 1, 1978, on bonded indebtedness for the acquisition or improvement of real
property approved on or after July 1, 1978 by two -thirds of the votes cast by the voters voting on the proposition, and
on bonded indebtedness for school facilities approved by 55% of the votes cast.
Legislation enacted by the California Legislature to implement Article XIII A provides that all taxable
property is shown at full assessed value as described above. In conformity with this procedure, all taxable property
value included in this Official Statement (except as noted) is shown at 100% of assessed value and all general tax rates
reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness and pension liabilities are
also applied to 100% of assessed value.
Future assessed valuation growth allowed under Article XIII A (new construction, change of ownership, 2%
annual value growth) will be allocated on the basis of “sites” among the jurisdictions that serve the tax rate area within
which the growth occurs. Local agencies and school districts will share the growth of “base” revenue from the tax rate
area. Each year’s growth allocation becomes part of each agency’s allocation the following year. The County is unable
to predict the nature or magnitude of future revenue sources which may be provided by the Sta te to replace lost
property tax revenues. Article XIII A effectively prohibits the levying of any other ad valorem property tax above the
1% limit except for taxes to support indebtedness approved by the voters as described above.
Article XIII A has been amended to permit reduction of the base year value in the event of declining property
values caused by damage, destruction or other factors, and to provide that there would be no increase in the “base year
value” in the event of reconstruction of property d amaged or destroyed in a disaster if certain conditions are met, or
in the event of certain transfers between parents and children, between grandparents and grandchildren, between
spouses, or in certain situations where the elderly or disabled acquire new residences. If property values decline due
to recessionary or other factors, the County may review the assessed values of properties . The State Revenue and
Taxation Code permits county assessors who have reduced the assessed valuation of a property as a re sult of natural
disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of
the property) at an annual rate higher or lower than 2%, depending on the assessor’s measure of the restoration of
value of the damaged property. The California courts have upheld the constitutionality of this procedure.
Article XIII B of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which added Article
XIII B to the California Constitution. In June 1990, Article XIII B was amended by the voters through their approval
of Proposition 111. Article XIII B of the California Constitution limits the annual appropriations of the State and any
city, county, school district, authority or other political subdivision of the State to the level of appropriations for the
prior fiscal year, as adjusted annually for changes in the cost of living, population and services rendered by the
governmental entity. The “base year” for establishing such appropriation limit is the 1978-79 fiscal year. Increases in
appropriations by a governmental entity are also permitted (i) if financial responsibility for providing services is
transferred to the governmental entity, or (ii) for emergencies so long as the appropriations limits for the three years
following the emergency are reduced to prevent any aggregate increase above the Constitutional limit. Decreases are
required where responsibility for providing services is transferred from the gov ernment entity.
Appropriations subject to Article XIII B include generally any authorization to expend during the fiscal year
the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions,
refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds.
Appropriations subject to limitation pursuant to Article XIII B do not include debt service on indebtedness existing or
legally authorized as of January l, 1979, on bonded indebtedness thereafter approved according to law by a vote of the
electors of the issuing entity voting in an election for such purpose, appropriations required to comply with mandates
of courts or the Federal government, appropriations for qualified outlay projects, and appropriations by the State of
revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January l, 1990 levels.
“Proceeds of taxes” include, but are not limited to, all tax revenues and the proce eds to any entity of government from
(i) regulatory licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service
or regulation, (ii) the investment of tax revenues and (iii) certain State subventions received by local governments. As
amended by Proposition 111, the appropriations limit is tested over consecutive two -year periods. Any excess of the
aggregate “proceeds of taxes” received by the County over such two -year period above the combined appropriations
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limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent
two years.
As amended in June 1990, the appropriations limit for the County in each year is based on the limit for the
prior year, adjusted annually for changes in the costs of living and changes in population, and adjusted, where
applicable, for transfer of financial responsibility of providing services to or from another unit of government. The
change in the cost of living is, at the County’s option, either (i) the percentage change in California per capita personal
income, or (ii) the percentage change in the local assessment roll for the jurisdiction due to the addition of
nonresidential new construction. The measurement of change in pop ulation is a blended average of statewide overall
population growth, and change in attendance at local school and community college (“K -14”) districts.
Article XIII B permits any government entity to change the appropriations limit by vote of the electorat e in
conformity with statutory and Constitutional voting requirements, but any such voter -approved change can only be
effective for a maximum of four years.
Each Participant has advised that it is of the opinion that its charges for water service are not subject to the
limits of Article XIII B. Each Participant covenants in its Delivery Contract that it will prescribe rates and charges
sufficient to provide payment of its Capital Projects Installment Debt Service in each year. See APPENDIX A–”THE
PARTICIPANTS.”
Article XIII C and Article XIII D of the California Constitution
General. On November 5, 1996, the voters of the State approved Proposition 218, known as the “Right to
Vote on Taxes Act.” Proposition 218 added Articles XIII C and XIII D to the California Constitution, which contain
a number of provisions affecting the ability of cities and counties to levy and collect both existing and future taxes,
assessments, fees and charges.
Article XIII C. Article XIII C provides that the initiative power shall not be prohibited or otherwise limited
in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect
local taxes, assessments, fees and charges shall be applicable to all local governments. Article XIII C does not define
the terms “local tax,” “assessment,” “fee” or “charge.” On July 24, 2006, the Supreme Court held in Bighorn-Desert
View Water Agency v. Verjil that the provisions of Article XIII C applied to rates and fees charged for domestic water
use. In that decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges
could override statutory rate setting obligations. In any event, the County and the Flood Control District do not believe
that Article XIII C grants to the voters within the County the power to repeal or reduce r ates and charges in a manner
that would be inconsistent with the contractual obligations of the County. No assurance can be given that the voters
of the County will not, in the future, approve initiatives which seek to repeal, reduce or prohibit the future imposition
or increase of assessments, fees or charges, including the fees and charges.
The interpretation and application of Proposition 218 will likely be subject to further judicial determinations,
and it is not possible at this time to predict with certainty the outcome of such determinations.
Article XIII D. Article XIII D established procedural requirements for the imposition of assessments, defined
to mean any levy or charge upon real property for a special benefit conferred upon real property, incl uding standby
charges. The procedural requirements include the conducting of a public hearing and an election, by mailed ballot,
with notice to the record owner of each parcel subject to the assessment. If a majority of the ballots returned oppose
the assessment, it may not be imposed.
Article XIII D conditions the imposition or increase of any “fee” or “charge” upon there being no written
majority protest after a required public hearing and, for fees and charges other than for sewer, water, refuse collection
services or storm water, voter approval. Article XIII D defines “fee” or “charge” to mean levies (other than ad valorem
or special taxes or assessments) imposed by a local government upon a parcel or upon a person as an incident of the
ownership or tenancy of real property, including a user fee or charge for a “property-related service.” One of the
requirements of Article XIII D is that before a property related fee or charge may be imposed or increased, a public
hearing upon the proposed fee or charge must be held and mailed notice sent to the record owner of each identified
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parcel of land upon which the fee or charge is proposed for imposition. In the public hearing, if written protests of the
proposed fee or charge are presented by a majority of the owners of affected identified parcel(s), an agency may not
impose the fee or charge.
Article XIII D provides that nothing in Proposition 218 shall be construed to affect existing laws relating to
the imposition of fees or charges as a condition of property d evelopment.
In Howard Jarvis Taxpayers Association v. City of Los Angeles, the Court of Appeal held that fees for water
that are based upon metered amounts used are charges for a commodity and not related to property ownership and,
consequently, Article XIII D does not apply to such fees. However, in a decision rendered in Febr uary 2004, the
California Supreme Court in Richmond et al. v. Shasta Community Services District, 32 Cal. 4th 409, upheld a Court
of Appeals decision that water connection fees were not property related fees or charges subject to Article XIII D,
while at the same time stating in dicta that fees for ongoing water service through an existing connection were property
related fees and charges. In October 2004, the California Supreme Court granted review of the decision of the Fourth
District Court of Appeal in Bighorn-Desert View Water Agency v. Beringson, 120 Cal. App. 4th 891 (2004), in which
the appellate court had relied on Howard Jarvis Taxpayers Association v. City of Los Angeles and rejected the Supreme
Court’s dicta in Richmond et al. v. Shasta Community Services District. On March 23, 2005, the California Fifth
District Court of Appeal published Howard Jarvis Taxpayers Association v. City of Fresno, 127 Cal.App.4th 914 (5th
Dist. 2005), holding that an “in lieu” fee which is payable to the general fund o f the City of Fresno from its water
utility and which is included in the water rate structure of the city was invalid. In reaching its decision, the court
concluded that the city’s water rates were “property related” fees, governed by the limitations of Ar ticle XIII D. The
City of Fresno requested a review of this decision by the California Supreme Court, which denied review. On July 24,
2006, the Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil. In dicta, the Supreme Court repeated
its previous dicta in Richmond et al. v. Shasta Community Services District that fees and charges for ongoing water
service through an existing connection were property related fees and charges under Article XIII D.
In addition to the procedural requirements of Article XIII D, under Article XIII D all property related fees
and charges, including those which were in existence prior to the passage of Proposition 218 in November 1996, must
meet the following substantive standards: (i) the revenues derived from the fee or charge cannot exceed the funds
required to provide the property-related service; (ii) the revenues derived from the fee or charge must not be used for
any purpose other than that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon
any parcel or person as an incident of property ownership must not exceed the proportional cost of the service
attributable to the parcel; (iv) no fee or charge may be imposed for a service unless that service is actually used by, or
immediately available to, the owner of the property in question, fees or charges based on potential or future use of a
service are not permitted, and standby charges, whether characterized as charges or assessments, must be classified as
assessments and cannot be imposed without compliance with Section 4 of Article XIII D (relating to assessments);
and (v) no fee or charge may be imposed for general governmental services including, but not limited to, police, fire,
ambulance or library services where the service is available to the public at large in substantially the same manner as
it is to property owners.
On April 20, 2015, the California Fourth District Court of Appeal issued a decision in Capistrano Taxpayers
Association, Inc. v. City of San Juan Capistrano , 235 Cal.App.4th 1493 (2015), holding that the City of San Juan
Capistrano’s tiered water rates (or inclining block rates) that were in effect from February 1, 2010 through June 30,
2014 violated the requirement of Proposition 218 that a fee or charge for property-related services, such as water
delivery, must be proportional to the cost of providing service. In interpreting Proposition 218, the Court of Appeal
emphasized that tiered water rates, or inclining block rates, that go up progressively in relation to usage are compatible
with Proposition 218. However, the court concluded that Article XIIID requires that each tier must reflect the actual
costs of service for property owners falling in each of the tiers. The court further concluded that the city ha d the burden
of proof to demonstrate compliance with Proposition 218 and that the city failed to meet its burden of proof in
demonstrating that its tiered water rates corresponded to the actual costs of providing service to each tier.
In June 2021, a San Diego Superior Court ruled that Otay Water District failed to demonstrate that its tiered
water rates were proportional to the cost of service attributable to each customer’s parcel, as required by
Proposition 218. The Court specifically found that the rates were based on “non-cost objectives such as conservation”
and that the record did not contain sufficient support for the peaking factors utilized to calculate demand and allocate
costs to different tiers of usage. On appeal to the 4th District, the Cour t of Appeal affirmed the finding that the rates
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do not comply with Proposition 218. Specifically, the Court of Appeal determined that (1) the tiered pricing structure
was based on generalized assumptions and industry standards, rather than customer -specific data; (2) Otay improperly
set certain rate components based on conservation concerns, rather than cost; and (3) the rate structure
disproportionately burdened single family residential customers with a tiered rate structure, while allowing
commercial and irrigation customers to utilize uniform rates.
The Authority and the Flood Control District are unable to predict the impact of a successful repeal or
reduction of water rates and charges charged by any Participant on the financial condition of such Pa rticipant or the
ability of such Participant to perform its obligations under its Delivery Contract. Further, the Authority and the Flood
Control District are unable to predict whether the repeal or reduction of the rates and charges of any Participant would
be detrimental to or inconsistent with the contractual obligations of the respective Participant. One might assert that
Article XIII C cannot grant the voters within the Participants’ service area the power to repeal or reduce rates and
charges in a manner which would be inconsistent with the contractual obligations of the respective Participants, giving
rise to an unconstitutional impairment of contract under the U.S. Constitution and the California Constitution.
However, there can be no assurance of the availability of particular remedies adequate to protect the beneficial owners
of the Bonds. Remedies available to beneficial owners of the Bonds in the event of a default by the Participants are
dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and
time-consuming to obtain. In addition to the specific limitations on remedies contained in the applicable documents
themselves, the rights and obligations of the Flood Control District and the Participants, respectively, under the
Delivery Contracts are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought,
to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies
in the State of California. The various opinions of counsel to be delivered with respect to such documents, including
the opinion of Bond Counsel, the form of which is attached as Appendix E hereto, will be similarly qualified.
The foregoing discussion of Proposition 218 should not be considered an exhaustive or authoritative
treatment of the issues.
Future Initiatives
Article XIII A, Article XIII B, Article XIII C and Article XIII D were adopted as measures that qualified for
the ballot through California’s initiative process. From time to time, other initiative measures could be adopted, which
may place further limitations on the ability of the State, the County or local districts to increase revenues or to increase
appropriations which may affect the County’s revenues or its ability to expend its revenues.
FINANCIAL STATEMENTS
Each of Paso Robles, SLO, and Templeton has provided its audited financial statements as of the fiscal year
ended June 30, 2025, and for the fiscal year ended April 30, 2025 in the case of the Atascadero Mutual Water
Company. See APPENDIX A–“THE PARTICIPANTS.” No auditor has reviewed or audited this Official Statement,
or undertaken procedures to consent to the inclusion of its report with respect to any of the financial statements.
CONTINUING DISCLOSURE
The Authority has determined that no financial or operating data concerning the Authority is material to any
decision to purchase, hold, or sell the 2026 Bonds and the Authority will not provide such information.
Flood Control District
The Flood Control District will enter into a Continuing Disclosure Agreement with Digital Assurance
Certification, L.L.C., as dissemination agent to the Flood Control District, to be dated the date of delivery of the 2026
Bonds. The Flood Control District, covenants for the benefit of the beneficial owners of the 2026 Bonds to provide
certain financial information and operating data relating to the Flood Control District by no later than March 31 each
year commencing with the report due on March 31, 2027 for the Fiscal Year ended June 30, 2026 (each a “Flood
Control District Annual Report”), and to provide notices of the occurrence of certain specified events. The Flood
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Control District Annual Report and notices of specified events will be filed by the Flood Control District or the
dissemination agent to the Flood Control District, through the EMMA site which is maintained by the MSRB. Copies
of the Flood Control District Annual Reports and notices of specified events since June 1, 2009 are available on the
EMMA site. These covenants have been made in order to assist the Underwriter in complying with Securities and
Exchange Commission Rule 15c2-12(b)(5) promulgated under the Securities Exchange Act of 1934 (the “Rule”). The
specific nature of the financial information and operating data and the notices of specified events is set forth in
APPENDIX D – “FORMS OF CONTINUING DISCLOSURE AGREEMENTS–SAN LUIS OBISPO COUNTY
FLOOD CONTROL AND WATER CONSERVATION DISTRICT CONTINUING DISCLOSURE AGREEMENT.”
During the past five years, due to an administrative error, the County’s Annual Comprehensive Financial
Report for the Fiscal Year ended June 30, 2023, which was referenced in the 2023 Flood Control District Annual
Report, was not correctly posted, notwithstanding its timely filing. The County also failed to include certain required
information in its annual report for the Fiscal Year ended June 30, 2022 and failed to timely file a notice of incurrence
of a financial obligation. All such filings have since been remedied.
The Participants
Each Participant has covenanted to provide certain financial and operating data relating to such Participant
by no later than nine months following the end of the respective fiscal year of each Participant commencing with the
report due in 2027 for its respective fiscal year ended in 2026 (each a “Participant Annual Report”). Each Participant
Annual Report will be filed by the Participant or the Flood Control District, as dissemination agent to each Participant,
through EMMA. The fiscal year-end for AMWC is April 30, and the fiscal year-end for Paso Robles, SLO and
Templeton is June 30. The specific nature of the financial and operating data to be provided is set forth in APPENDIX
D– “FORMS OF CONTINUING DISCLOSURE AGREEMENTS–PARTICIPANTS CONTINUING
DISCLOSURE AGREEMENTS.”
AMWC. During the past five years, AMWC has not failed to comply in all material respects with its prior
continuing disclosure obligations entered into in connection with the Rule .
Paso Robles. During the past five years, Paso Robles has not failed to comply in all material respects with
its prior continuing disclosure obligations entered into in connection with the Rule .
SLO. During the past five years, SLO has from time to time failed to link certain CUSIP numbers to its timely
filed audited financial statements. Such errors have been corrected.
Templeton. During the past five years, Templeton has not failed to comply in all material respects with its
prior continuing disclosure obligations entered into in connection with the Rule.
TAX MATTERS
General. The delivery of the 2026 Bonds is subject to delivery of the opinion of Bond Counsel, to the effect
that interest on the 2026 Bonds for federal income tax purposes under existing statutes, regulations, published rulings,
and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue
Code of 1986, as amended to the date of initial delivery of the 2026 Bonds (the “Code”), of the owners thereof pursuant
to section 103 of the Code, and (2) will not be included in computing the alternative minimum taxable income of the
owners thereof who are individuals. The delivery of the 2026 Bonds are also subject to the delivery of the opinion of
Bond Counsel, based upon existing provisions of the laws of the State of California that interest on the 2026 Bonds is
exempt from personal income taxes of the State of California. The form of Bond Counsel’s anticipated opinion
regarding the 2026 Bonds is included as Appendix E. The statutes, regulations, rulings, and court decisions on which
such opinions will be based are subject to change.
In rendering the foregoing opinions, Bond Counsel will rely upon the representations and certifications of
the Authority and the Flood Control District made in a certificate of even date with the initial delivery of the 2026
Bonds pertaining to the use, expenditure, and investment of the proceeds of the 2026 Bonds (the “Tax Certificate”)
and will assume continuing compliance with the provisions of the Indenture by the Authority and the Flood Control
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District subsequent to the issuance of the 2026 Bonds. The Indenture and the Tax Certificate contain covenants by
the Authority and the Flood Control District with respect to, among other matters, the use of the proceeds of the 2026
Bonds and the facilities and equipment financed or refinanced therewith by persons other than state or local
governmental units, the manner in which the proceeds of the 2026 Bonds a re to be invested, the calculation and
payment to the United States Treasury of any “arbitrage profits” and the reporting of certain information to the United
States Treasury. Failure to comply with any of these covenants may cause interest on the 2026 Bo nds to be includable
in the gross income of the owners thereof from the date of the issuance of the 2026 Bonds.
Except as described above, Bond Counsel will express no other opinion with respect to any other federal,
State or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of
interest on, or the acquisition or disposition of, the 2026 Bonds. Prospective purchasers of the 2026 Bonds should be
aware that the ownership of tax-exempt obligations such as the 2026 Bonds may result in collateral federal tax
consequences to, among others, financial institutions, life insurance companies, property and casualty insurance
companies, S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the
United States, individual recipients of Social Security or Railroad Retirement benefits, corporations subject to the
alternative minimum tax on adjusted financial statement income, individuals otherwise qualifying for the earned
income tax credit, owners of an interest in a financial asset securitization investment trust (“FASIT”), and taxpayers
who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred
certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors
as to the applicability of these consequences to their particular circumstances.
Bond Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review
of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the
Authority and the Flood Control District described above. No ruling has been sought from the Internal Revenue
Service (the “IRS”) or the State of California with respect to the matters addressed in the opinion of Bond Counsel,
and Bond Counsel’s opinion is not binding on the IRS or the State of California. The IRS has an ongoing program of
auditing the tax-exempt status of the interest on municipal obligations. If an audit of the 2026 Bonds is commenced,
under current procedures, the IRS is likely to treat the Authority as the “taxpayer,” and the owners of the 2026 Bonds
would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status
of the interest on the 2026 Bonds, the Authority may have different or conflicting interests from the owners of the
2026 Bonds. Public awareness of any future audit of the 2026 Bonds could adversely affect the value and liquidity of
the 2026 Bonds during the pendency of the audit, regardless of its ultimate outcome.
For taxable years beginning after 2022, the Code imposes a minimum tax of 15 percent of the adjusted
financial statement income of certain large corporations, generally consisting of corporations (other than
S corporations, regulated investment companies and real estate investment trusts) with more than $1 billion in average
annual adjusted financial statement inco me, determined over a three-year period. For this purpose, adjusted financial
statement income generally consists of the net income or loss of the taxpayer set forth on the taxpayer’s applicable
financial statement for the taxable year, subject to various adjustments, but is not reduced for interest earned on tax-
exempt obligations, such as the 2026 Bonds. Prospective purchasers that could be subject to this minimum tax should
consult with their own tax advisors regarding the potential impact of owning the 2026 Bonds.
Existing law may change to reduce or eliminate the benefit to bond or note holders of the exclusion of interest
on the 2026 Bonds from gross income for federal income tax purposes. Any proposed legislation or administrative
action, whether or not taken, could also affect the value and marketability of the 2026 Bonds. Prospective purchasers
of the 2026 Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax
law.
Tax Accounting Treatment of Discount and Premium on Certain 2026 Bonds.
The initial public offering price of certain 2026 Bonds (the “Discount 2026 Bonds”) may be less than the
amount payable on such 2026 Bonds at maturity. An amount equal to the difference between the initial public offering
price of a Discount 2026 Bond (assuming that a substantial amount of the Discount 2026 Bonds of that maturity are
sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial
purchaser of such Discount 2026 Bond. A portion of such original issue discount allocable to the holding period of
such Discount 2026 Bond by the initial purchaser will, upon the disposition of such Discount 2026 Bond (including
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by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain,
for federal income tax purposes, on the same terms and conditions as those for other interest on the 2026 Bonds
described above. Such interest is considered to be accrued actuarially in accordance with the constant interest method
over the life of a Discount 2026 Bond, taking into account the semiannual compounding of accrued interest, at the
yield to maturity on such Discount 2026 Bond and generally will be allocated to an initial purchaser in a different
amount from the amount of the payment denominated as interest actually received by the initial purchaser during the
tax year.
However, such interest may be required to be taken into account in determining the amount of the branch
profits tax applicable to certain foreign corporations doing business in the United States, even though there will not
be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal
income tax consequences to, among others, financial institutions, life insurance companies, property and casualty
insurance companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security
or Railroad Retirement benefits, corporations subject to the alternative minimum tax on adjusted financial statement
income, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and
taxpayers who may be deemed to have incurred or continued indebt edness to purchase or carry, or who have paid or
incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other
taxable disposition of a Discount 2026 Bond by the initial owner prior to maturity, the amount realized by such owner
in excess of the basis of such Discount 2026 Bond in the hands of such owner (adjusted upward by the portion of the
original issue discount allocable to the period for which such Discount 2026 Bond was held) is includable in gross
income.
Owners of Discount 2026 Bonds should consult with their own tax advisors with respect to the determination
of accrued original issue discount on Discount 2026 Bonds for federal income tax purposes and with respect to the
state and local tax consequences of owning and disposing of Discount 2026 Bonds. It is possible that, under applicable
provisions governing determination of state and local income taxes, accrued interest on Discount 2026 Bonds may be
deemed to be received in the year of accrual even though there will not be a corresponding cash payment.
The purchase price of certain 2026 Bonds (the “Premium 2026 Bonds”) paid by an owner may be greater
than the amount payable on such 2026 Bonds at maturity. An amount equal to the excess of a purchaser’s tax basis
in a Premium 2026 Bond and the amount payable at maturity constitutes premium to such purchaser. The basis for
federal income tax purposes of a Premium 2026 Bond in the hands of such initial purchaser must be reduced each year
by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction
in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the
amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a
Premium 2026 Bond. The amount of premium which is amortizable each year by a purchaser is determined by using
such purchaser’s yield to maturity (or, in some cases with r espect to a callable 2026 Bond, the yield based on a call
date that results in the lowest yield on the 2026 Bond).
Purchasers of the Premium 2026 Bonds should consult with their own tax advisors with respect to the
determination of amortizable bond premium with respect to the Premium 2026 Bonds for federal income purposes
and with respect to the state and local tax consequences of owning and disposing of Premium 2026 Bonds.
LITIGATION
Steinbeck Vineyards and Eidemiller
The County, the Flood Control District, CSA-16-1, Paso Robles, AMWC, San Miguel Community Services
District (“SMCSD”), and Templeton were named as a defendants in two lawsuits: Steinbeck et al v. County of San
Luis Obispo et al (Santa Clara Superior Court Case No. 1-14-cv-265039) and Eidemiller v. County of San Luis Obispo
(Santa Clara Superior Court Case No. 1-14-cv-269212) filed by landowners who claim superior overlying
groundwater water rights as against the water supplier defendants. As of the date of this Official Statement, the two
cases have been consolidated and the Court has divided the case into six phases. Phase 1 concerned plaintiffs’ prima
facie case for quiet title, and the Court ruled that plaintiffs met their prima facie burden by proving that they each
owned land within the watershed, thereby shifting the burden to defendants to prove their affirmative defenses (e.g.
basin boundaries, prescription, treaty rights and pueblo rights). Phase 2 concerned basin boundaries, including AMWC
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and Templeton’s affirmative defense that they are located within a separate groundwater basin and a determination of
the relevant exterior boundary of the basin. In this Phase, the Court ruled that AMWC and Templeton failed to prove
that they pump groundwater from a basin separate from the main basin (i.e. the basin identified by the Department of
Water Resources (DWR) in Bulletin 118 as the Paso Robles Area Subbasin (3-004.06)), and signed an order approving
a stipulation by the parties that the boundary of the basin at issue is the outermost exterior boundary line as identified
by DWR in Bulletin 118, i.e. the outermost exterior boundary line for the Paso Robles Area Subbasin (3 -004.06) and
the Atascadero Area Subbasin (3-004.11), recently recognized as a separate subbasin by DWR. Phase 3 concerned
defendants’ (excluding AMWC who claims to be an overlying user and the Flood Control District who does not pump
groundwater) affirmative defense of prescription (i.e. that they possess prescriptive water rights as against plaintiffs
within the basin). In this Phase, a jury found that each of the defendants perfected their respective prescriptive
groundwater rights during the years from 1981 to 1990 (the prescriptive period). Phase 4 concerned quantification of
defendants’ prescriptive rights during the prescriptive period. In this Phase, the Court entered an order quantifying
defendants’ prescriptive groundwater rights as follows: 1,267.70 acre -feet per year (AFY) for Paso Robles, 310 AFY
for the County, 177.03 AFY for San Miguel and 308.9 AFY for Templeton. Phase 5 concerned defendants’ claim
that they exercised self-help pumping during the prescriptive period. In this Phase, while the court did find that many
plaintiffs met their burden of proving self-help pumping (on or around 425 parcels out of the total 754 plaintiff parcels),
the Court also stressed the limitations of the ruling —e.g. the current action is not one to quantify rights or allocate
pumping rights or to create a physical solution. The anticipated last phase (Phase 6) concerns SMCSD’s pueblo and
treaty rights (Paso Robles recently withdrew these affirmative defenses), and trial is scheduled to commence on August
17, 2026, assuming plaintiffs’ motion for summary judgment (scheduled for hearing on July 15, 2026) is unsuccessful.
The Flood Control District does not believe that the resolution of this litigation will have a material adverse
effect on the payments to be received from the affected Participants pursuant to the Delivery Contracts or the ability
of the Authority to make payments, when due, on the 2026 Bonds.
Authority and Flood Control District
At the time of delivery of the 20 26 Bonds, County Counsel, as Counsel to the Authority and to the Flood
Control District will deliver opinions to the initial Underwriter that there is no controversy or litigation now pending
against the Authority or the Flood Control District or, to the knowledge of their officers, threatened, concerning the
validity of the 2026 Bonds, the Master Water Contract, the pledge of Revenues, the Indenture, the Pledge Agreement,
the Delivery Contracts or any other document relating to the 2026 Bonds to which the Authority, the Flood Control
District, or any Participant is or will become a party, or the performance by any of the Auth ority, the Flood Control
District, or any Participant of its respective obligations thereunder; or to restrain or enjoin the execution and delivery
of the Indenture, or the Continuing Disclosure Agreement; or in any way contesting or affecting the validity of the
2026 Bonds.
Participants
At the time of delivery of the 2026 Bonds, each Participant will deliver a certificate that there is no
controversy or litigation now pending against such Participant, or to the knowledge of their officers, threatened,
concerning the validity of the 2026 Bonds, the pledge of Water Revenues, the Pledge Agreement, the Delivery
Contracts or any other document relating to the 2026 Bonds to which such Participant is or will become a party, or
the performance by the Participant of its respective obligations thereunder; or to restrain or enjoin the execution and
delivery of its Continuing Disclosure Agreement.
LEGAL MATTERS
Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel, will render an opinion with respect
to the validity of the 2026 Bonds. The form of the legal opinion proposed to be delivered by Bond Counsel is included
as APPENDIX E to this Official Statement. Bond Counsel undertakes no responsibility for the accuracy,
completeness, or fairness of this Official Statement. Certain legal matters will be passed upon for the Authority and
the Flood Control District by County Counsel, for the Underwriter by Anzel Galvan LLP, San Francisco, California,
Underwriter’s Counsel, for AMWC by [_____], [_____], California, for Paso Robles by [the Paso Robles City
Attorney], for the City of San Luis Obispo by the [San Luis Obispo City Attorney], and for the Templeton Community
Services District by [District Counsel].
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Compensation paid to Bond Counsel and Underwriter’s Counsel is contingent on the delivery of the 2026
Bonds.
MUNICIPAL ADVISOR
The Authority has retained KNN Public Finance LLC, Berkeley, California, as Municipal Advisor, in
connection with the authorization and delivery of the 2026 Bonds. The Municipal Advisor is not obligated to
undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy,
completeness or fairness of the information contained in this Official Statement. The Municipal Advisor is an
independent advisory service and is not engaged in underwriting or trading of securities. The Municipal Advisor will
receive compensation that is contingent upon the sale, issuance and delivery of the 2026 Bonds.
RATINGS
S&P Global Ratings (“S&P”) has assigned an [underlying rating of “[_____]” and an insured rating of
“[_____]” to the 2026 Bonds with the understanding that the Bond Insurance Policy will be issued by the 2026 Insurer
concurrently with the delivery of the 2026 Bonds]. [See “BOND INSURANCE” and APPENDIX G–”SPECIMEN
MUNICIPAL BOND INSURANCE POLICY.”]
Any explanation of the significance of such ratings may only be obtained from the rating agency furnishing
the same. The Authority furnished to S&P certain information and materials concerning the 2026 Bonds and the Flood
Control District. Generally, rating agencies base their ratings on such information and materials and on investigations,
studies and assumptions made by the rating agencies themselves. There is no assurance that any rating assigned to the
2026 Bonds by a rating agency will be maintained for any given period of time or that it will not be lowered or
withdrawn entirely by such rating agency if in its judgment circumstances so warrant. Any downward revision or
withdrawal of such rating may have a n adverse effect on the market price or marketability of the 2026 Bonds.
UNDERWRITING
Loop Capital Markets LLC (the “Underwriter”), has agreed, subject to certain conditions precedent, to
purchase the 2026 Bonds from the Authority pursuant to the terms and condition of a bond purchase agreement
between the Authority and the Underwriter.
The 2026 Bonds may be offered and sold to certain dealers and others at prices lower than the offering prices
stated on the inside cover hereof. The offering prices may be changed from time to time.
The Underwriter has agreed to purchase the 2026 Bonds at a purchase price equal to $_____, which represents
the par amount of the 2026 Bonds, plus a [net] original issue premium in the amount of $_____, less an Underwriter’s
discount in the amount of $_____. The bond purchase agreement relating to the 2026 Bonds provides that the
Underwriter will purchase all of the 2026 Bonds if any are purchased, the obligation to make such purchase being
subject to certain terms and conditions set forth in said bond purchase agreement, the approval of certain legal matters
by counsel and certain other conditions.
MISCELLANEOUS
The foregoing and subsequent summaries or descriptions of provisions of the 2026 Bonds and the Indenture
and all references to other materials not purporting to be quoted in full, are only brief outlines of some of the provisions
thereof. Reference is made to said documents for full and complete statements of the provisions of such documents.
The appendices attached hereto are a part of this Official Statement.
Copies, in reasonable quantity, of the Indenture, the Pledge Agreement, and the Delivery Contracts may be
obtained upon request to the principal corporate trust office of the Trustee.
The execution and delivery of this Official Statement has been duly authorized by the County.
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SLO COUNTY FINANCING AUTHORITY
By:
Chair of the Board of Commissioners
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APPENDIX A
THE PARTICIPANTS
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APPENDIX B
THE DELIVERY CONTRACTS
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APPENDIX C
FORMS OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX D
FORMS OF CONTINUING DISCLOSURE AGREEMENTS
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APPENDIX E
PROPOSED FORM OF BOND COUNSEL OPINION
[Closing Date]
SLO County Financing Authority
County Government Center
1055 Monterey Street
San Luis Obispo, California 93408
Re: $[PAR] SLO County Financing Authority (County of San Luis Obispo, California) Nacimiento Water Project
Revenue Refunding Bonds, 2026 Series A
Ladies and Gentlemen:
We have acted as Bond Counsel to the SLO County Financing Authority (the “Authority”) in connection with the
issuance by the Authority of its $[PAR] SLO County Financing Authority (County of San Luis Obispo, California)
Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A (the “2026 Bonds”). The 2026 Bonds are being
issued under the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5
of Division 7 of Title 1 (commencing with Section 6584) of the California Government Code and other applicab le law
(the “Bond Law”), and pursuant to an Indenture of Trust, dated as of September 1, 2007 (the “Original Indenture”),
as supplemented by the First Supplemental Indenture, dated as of August 1, 2015 (the “First Supplemental Indenture”),
the Second Supplemental Indenture, dated as of April 1, 2018 (the “Second Supplemental Indenture”) and the Third
Supplemental Indenture, dated as of [October 1], 2026 (the “Third Supplemental Indenture” and, collectively with the
Original Indenture, the First Supplemental Indenture and the Second Supplemental Indenture, the “Indenture”), each
by and between the Authority and U.S. Bank Trust Company, National Association, as successor trustee (the
“Trustee”).
The 2026 Bonds are limited obligations of the Authority secured under the Indenture by a pledge of Revenues and
certain other moneys held under the Indenture. The Revenues consist of (a) all amounts derived from the Pledge
Agreement, dated as of September 1, 2007 (the “Pledge Agreement”), by and between the San Luis Ob ispo County
Flood Control and Water Conservation District (the “Flood Control District”) and the Authority, and (b) investment
income with respect to the funds and accounts established under the Indenture, except for investment earnings on the
Rebate Fund.
As Bond Counsel, we have reviewed and rely upon the Indenture and certifications of the Authority, the Flood Control
District, the Trustee and others, opinions of counsel to the Authority, the Flood Control District and the Trustee, and
such other documents, opinions and instruments as we deemed necessary to render the opinions s et forth herein.
Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.
Based upon the foregoing, we are of the opinion that:
1. The 2026 Bonds constitute valid and binding limited obligations of the Authority as provided in the Indenture,
and are entitled to the benefits of the Indenture.
2. The Indenture has been duly and validly authorized, executed and delivered by the Authority and, assuming
the enforceability thereof against the Trustee, constitutes the legally valid and binding obligation of the Authority,
enforceable against the Authority in accordance with its terms. The Indenture creates a valid pledge, to secure the
payment of principal of and interest on the 2026 Bonds, of the Revenues and certain other amounts held by the Trustee
in certain funds and accounts established pursuant to the Indenture, subject to the provisions of the Indenture
permitting the application thereof for other purposes and on the terms and conditions set forth t herein.
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3. It is further our opinion, based upon the foregoing, that pursuant to section 103 of the Internal Revenue Code
of 1986, as amended and in effect on the date hereof (the “Code”), and existing regulations, published rulings, and
court decisions thereunder, and assuming continuing compliance with the provisions of the Indenture and the Tax
Certificate and in reliance upon the representations and certifications of the Authority and the Flood Control District
made in the Tax Certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds
of the 2026 Bonds, when the 2026 Bonds are delivered to and paid for by the initial purchasers thereof, interest on the
2026 Bonds for federal income tax purposes (1) will be excludable from the gross income, as defined in section 61 of
the Code, of the owners thereof, and (2) will not be included in computing the alternative minimum taxable income
of the owners thereof who are individuals.
In our opinion, under existing law, interest on the 2026 Bonds is exempt from personal income taxes of the State of
California.
We express no other opinion with respect to any other federal, state, or local tax consequences under present law or
any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the
2026 Bonds. Ownership of tax-exempt obligations such as the 2026 Bonds may result in collateral federal tax
consequences to, among others, financial institutions, life insurance companies, property and casualty insurance
companies, certain S corporations with subchapter C earnings and profits, certain foreign corporations doing business
in the United States, corporations subject to the alternative minimum tax on adjusted financial statement income,
owners of an interest in a financial asset securitization investment trust, individuals otherwise qualifying for the earned
income tax credit, individual recipients of Social Security or Railroad Retirement benefits, and taxpayers who may be
deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses
allocable to, tax-exempt obligations.
The opinions expressed in paragraphs 1 and 2 above are qualified to the extent the enforceability of the 2026 Bonds
and the Indenture may be limited by applicable bankruptcy, insolvency, debt adjustment, reorganization, moratorium
or similar laws or equitable principles relating to or limiting creditors’ rights generally or as to the availability of any
particular remedy. The enforceability of the 2026 Bonds and the Indenture is subject to the effect of general principles
of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the
possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding
in equity or at law, and to the limitations on legal remedies against governmental entities in California. No opinion is
expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating
to the 2026 Bonds.
Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge
of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or
circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur
or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue
Service or the State of California; rather, such opinions represent our legal judgment based upon our review of existing
law that we deem relevant to such opinions and in reliance upon the repres entations and covenants referenced above.
Respectfully submitted,
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APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The information in this Appendix F concerning The Depository Trust Company, New York, New York
(“DTC”), and DTC’s book-entry system has been obtained from DTC and the Authority and the Flood Control District
take no responsibility for the completeness or accuracy thereof. The Authority and the Flood Control District cannot
and do not give any assurances that DTC, Direct Participants (as defined below) or Indirect Participants (as defined
below) will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to
the 2026 Bonds, (b) certificates representing ownership interest in or other confirmation of ownership interest in the
2026 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of
the Bonds, or that they will do so on a timely basis, or that DTC, Direct Participants or Indirect Participants will act
in the manner described in this Appendix F. The Authority and the Flood Control District are not responsible or liable
for the failure of DTC or any DTC Direct or Indirect Participant to make any payment or give any notice to a
Beneficial Owner with respect to the 2026 Bonds or an error or delay relating thereto. The current “Rules” applicable
to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed
in dealing with DTC’s Direct and Indirect Participants are on file with DTC.
The Depository Trust Company (“DTC”) will act as securities depository for the 2026 Bonds. The 2026
Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee)
or such other name as may be requested by an authorized representative of DTC. One fully -registered 2026 Bond
certificate will be issued in the aggregate principal amount of each maturity of the 2026 Bonds, and will be deposited
with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New
York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code,
and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934,
as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues,
corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants
(“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of
sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers
and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation (“DTCC”). DTCC is the holding company of DTC, National Securities Clearing Corporation
and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users
of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or main tain a
custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a
Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and
Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of 2026 Bonds under the DTC system must be made by or through Direct Participants, which will
receive a credit for the 2026 Bonds on DTC’s records. The ownership interest of each act ual purchaser of each 2026
Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial
Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected
to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the 2026 Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
beneficial ownership interests in the 2026 Bonds, except in the event that use of the book-entry system for the 2026
Bonds is discontinued.
To facilitate subsequent transfers, all 2026 Bonds deposited by Direct Participants with DTC are registered
in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized
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F-2
representative of DTC. The deposit of 2026 Bonds with DTC and their registration in the name of Cede & Co. or
such other DTC nominee do not effect any change in beneficial ownership. DTC has n o knowledge of the actual
Beneficial Owners of the 2026 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose
accounts such 2026 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of 2026 Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the 2026 Bonds, such as redemptions, defaults, and proposed amendments to the
2026 Bond documents. For example, Beneficial Owners of 2026 Bonds may wish to ascertain that the nominee
holding the 2026 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the
alternative, Beneficial Owners may wish to provide their names and addresses to the Trustee and request that copies
of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the 2026 Bonds within a maturity are being
redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in each issue to
be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2026
Bonds unless authorized by a Direct Participant in accordance with DTC’s Money Market Instrument Procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts
2026 Bonds are credited on the record date (identified in a listing att ached to the Omnibus Proxy).
Principal, premium, redemption proceeds, and interest payments on the 2026 Bonds will be made to Cede &
Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit
Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority
or the Trustee, on a payment date in accordance with their respective holdings shown on DTC’s records. Payments
by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the
responsibility of such Participants and not of DTC nor of its nominee, the Trustee or the Authority, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, redemption
proceeds, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of
DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will
be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the re sponsibility
of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the 2026 Bonds at any time by
giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, 2026 Bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a
successor securities depository). In that event, 2026 Bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been provided by DTC,
and neither the Authority, the Flood Control District nor the Trustee take any responsibility for the accuracy thereof.
The Authority, the Flood Control District and the Underwriter cannot and do not give any assurances
that DTC will distribute to Participants or that Participants or others will distribute to the Beneficial Owners
payments of principal of, premium, if any, and interest on the 2026 Bonds paid or any redemption or other
notices or that they will do so on a timely basis or will serve and act in the manner described in this Official
Statement. The Authority and the Flood Control District are not responsible or liable for the failure of DTC
or any Direct Participant or Indirect Participant to make any payments or give any notice to a Beneficial Owner
with respect to the 2026 Bonds or any error or delay relating thereto.
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F-3
None of the Authority, the Flood Control District, the Underwriter or the Trustee will have any
responsibility or obligation to Direct Participants, to Indirect Participants or to any Beneficial Owner with
respect to (i) the accuracy of any records maintained by DTC, any Direct Participant, or any Indirect
Participant; (ii) the payment by DTC or any Direct Par ticipant or Indirect Participant of any amount with
respect to the principal of or premium, if any, or interest on the 2026 Bonds; (iii) any notice that is permitted
or required to be given to Holders under the Indenture; (iv) the selection by DTC, any Dir ect Participant or
any Indirect Participant of any person to receive payment in the event of a partial redemption of the 2026
Bonds; (v) any consent given or other action taken by DTC as Bondholder; or (vi) any other procedures or
obligations of DTC, Direct Participants or Indirect Participants under the book-entry system.
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G-1
[APPENDIX G
SPECIMEN MUNICIPAL BOND INSURANCE POLICY]
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1
CITY OF SAN LUIS OBISPO
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated [_________], 2026,
is executed and delivered by the City of San Luis Obispo (the “Obligated Person”) and the San Luis Obispo
County Flood Control and Water Conservation District (the “Flood Control District”) in connection with
the execution and delivery of $[PAR] principal amount of SLO County Financing Authority (County of
San Luis Obispo, California) Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A (the
“2026 Bonds”). The 2026 Bonds will be issued and secured pursuant to the terms of an Indenture of Trust,
dated as of September 1, 2007 (the “Original Indenture”), previously supplemented and amended, and as
further supplemented and amended by the Third Supplemental Indenture of Trust dated as of [October 1],
2026 (the “Third Supplemental Indenture” and together with the Original Indenture, as previously
supplemented and amended, the “Indenture”), each by and between the SLO County Financing Authority
(the “Authority”) and U.S. Bank Trust Company, National Association, as successor trustee (the “Trustee”).
The Obligated Person covenants and agrees on behalf of the Authority as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the Obligated Person for the benefit of the Beneficial Owners of the 2026 Bonds
and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to
any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
“Annual Disclosure Report” shall mean any Annual Disclosure Report provided by the Obligated
Person pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for
federal income tax purposes.
“Disclosure Representative” shall mean the Public Works and Utilities Department Administrator
of the Obligated Person or such other official as may be designated in writing to the Dissemination Agent
(if other than the Obligated Person) from time to time.
“Dissemination Agent” shall mean the Flood Control District, acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the
Obligated Person and which has filed with the Obligated Person a written acceptance of such designation.
“Filing Date” shall mean March 31 of the Fiscal Year of the Obligated Person (or the next
succeeding business day if such day is not a business day), commencing March 31, 2027.
“Fiscal Year” shall mean the period beginning on July 1 of each year and ending on the next
succeeding June 30, or any other twelve-month period hereafter selected and designated as the official fiscal
year period of the Obligated Person and certified to the Trustee in writing by an Authorized Representative
of the Obligated Person.
“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or
authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until
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2
otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB
are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently
located at http://emma.msrb.org.
“Official Statement” means the Official Statement dated [_________], 2026 relating to the 2026
Bonds.
“Participating Underwriter” shall mean the original underwriter of the 2026 Bonds required to
comply with the Rule in connection with offering of the 2026 Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Disclosure Reports.
(a) The Obligated Person shall provide, or shall cause the Dissemination Agent to provide, not
later than the Filing Date, to the MSRB an Annual Disclosure Report which is consistent with the
requirements of Section 4 of this Disclosure Agreement. The Annual Disclosure Report shall be submitted
in electronic format, accompanied by such identifying information as is prescribed by the MSRB, and may
be submitted as a single document or as separate documents comprising a package and may cross-reference
other information as provided in the Disclosure Agreement. If the Fiscal Year of the Obligated Person
changes, it shall give notice of such change to the Dissemination Agent not later than ten (10) business days
after the occurrence of the event.
(b) Not later than fifteen (15) days prior to each Filing Date, commencing March 15, 2027, the
Obligated Person shall provide the Annual Disclosure Report to the Dissemination Agent (of other than the
Obligated Person). The Obligated Person shall provide, or cause the preparer of the Annual Disclosure
Report to provide, a written certificate with each Annual Disclosure Report furnished to the Dissemination
Agent to the effect that such Annual Disclosure Report constitutes the Annual Disclosure Report required
to be furnished under the Disclosure Agreement. The Dissemination Agent may conclusively rely upon
such certification and shall have no duty or obligation to review such Annual Disclosure Report.
(c) The Flood Control District shall use its best efforts to assist the Obligated Person in
preparing the Annual Disclosure Report for delivery to the Dissemination Agent no later than March 15 of
each year.
(d) Not later than the Filing Date, the Dissemination Agent shall provide written notice
confirming whether or not such Annual Disclosure Report has been furnished by the Obligated Person.
(e) If the Obligated Person is unable to provide the Annual Disclosure Report to the
Dissemination Agent by the Filing Date of each year commencing March 31, 2027, the Dissemination
Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A.
(f) The Dissemination Agent shall:
(i) If not previously filed by the Obligated Person, send a notice to the MSRB if the
Obligated Person is unable to provide the Annual Disclosure Report to the MSRB
by the date required in subsection (a); and
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3
(ii) to the extent information is known to it, file a report with the Obligated Person
certifying that the Annual Disclosure Report has been provided pursuant to this
Disclosure Agreement, stating the date it was provided.
SECTION 4. Content of Annual Disclosure Reports. The Annual Disclosure Report shall
contain or include by reference the following:
(a) The audited financial statements of the Obligated Person prepared in accordance with
generally accepted accounting principles in effect from time to time. If any of such audited financial
statements are not available by the time the Annual Disclosure Report is required to be filed pursuant to
Section 3(a), the Annual Disclosure Report shall contain unaudited financial statements in a format similar
to the financial statements contained in the Official Statement, and the audited financial statements shall be
filed in the same manner as the Annual Disclosure Report when they become available.
(b) Unless otherwise provided in the audited financial statements filed on or prior to the Filing
Date, financial and operating data with respect to the Obligated Person for the preceding Fiscal Year,
substantially similar to the financial and operating data in the Official Statement as follows:
(i) Principal and interest payment delinquencies;
(ii) Table A3-2 Water Connections;
(iii) Table A3-3 Water Deliveries;
(iv) Table A3-4 Water Sales Revenues;
(v) Secured assessed valuation†;
(vi) Table A3-7 Operating Results;
(vii) Information concerning any revisions to the adopted rates and charges which are
generally imposed by the Obligated Person upon users within the service area of
its Water Enterprise; and
(viii) For any customer whose total billings in the preceding Fiscal Year represent 10%
or more of Gross Revenues of the Water Enterprise: (A) the total amount of Gross
Revenues derived from such customer; and (B) the percent of Gross Revenues
represented by such customer for such Fiscal Year.
(c) In addition to any of the information expressly required to be provided under Sections 4(a)
and 4(b), the Obligated Person shall provide such other information, if any, as may be necessary to make
the required statements, in light of the circumstances under which they were made, not misleading.
(d) The presentation and format of the Annual Disclosure Reports may be modified from time
to time as determined in the judgment of the Obligated Person to conform to changes in accounting or
disclosure principles or practices and legal requirements followed by or applicable to the Obligated Person
† This data is provided for informational purposes only. The Obligated Person is a party to a Nacimiento Project Water Delivery
Entitlement Contract (the “Delivery Contract”) with the Flood Control District that permits the Obligated Person to issue
additional “Municipal Obligations” to fund all or a portion of the Delivery Contract Payments with the levy of ad valorem
property taxes, special assessments or special taxes. As of the date of this Disclosure Agreement, the Obligated Person had
not levied any ad valorem property taxes, special assessments or special taxes to fund any of its Delivery Contract Payments.
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4
to reflect changes in the business, structure, operations, legal form of the Obligated Person or any mergers,
consolidations, acquisitions or dispositions made by or affecting the Obliga ted Person; provided that any
such modifications shall comply with the requirements of the Rule.
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the Obligated Person or related public entities, which have
been made available to the public on the MSRB website. The Obligated Person shall clearly identify each
such other document so included by reference.
SECTION 5. Termination of Reporting Obligation. The obligations of the Obligated Person
under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment
in full of all of the 2026 Bonds. If such termination occurs prior to the final maturity of the 2026 Bonds,
the Obligated Person shall, promptly not later than ten (10) business days after the termination, give notice
of such termination to the MSRB.
SECTION 6. Dissemination Agent. The Obligated Person may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement,
and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination
Agent. The Dissemination Agent may resign by providing thirty (30) days written notice to the Obligated
Person.
The initial Dissemination Agent shall be the Flood Control District.
SECTION 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the Obligated Person may amend this Disclosure Agreement, and any provision of this
Disclosure Agreement may be waived, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), or 4, it may only be
made in connection with a change in circumstances that arises from a change in legal requirements, change
in law, or change in the identity, nature or status of an obligated person with respect to the 2026 Bonds, or
the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of
nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the
original execution and delivery of the 2026 Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances;
(c) The amendment or waiver either (i) is approved by the Holders of the 2026 Bonds in the
same manner as provided in the Indenture for amendments to the Indenture with the consent of Holders, or
(ii) does not, in the opinion of a nationally recognized bond counsel, materially impair the interests of the
Holders or Beneficial Owners of the 2026 Bonds; and
(d) Any amendment that modifies or increases the duties or obligations of the Dissemination
Agent shall be agreed to in writing by the Dissemination Agent.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Obligated
Person shall describe such amendment in the next Annual Disclosure Report, and shall include, as
applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type
(or, in the case of a change of accounting principles, on the presentation) of financial informa tion or
operating data being presented by the Obligated Person. In addition, if the amendment relates to the
accounting principles to be followed in preparing financial statements, (i) notice of such change shall be
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5
given to the Dissemination Agent not later than ten (10) business days after the occurrence of the even t,
and (ii) the Annual Disclosure Report for the year in which the change is made shall present a comparison
(in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared
on the basis of the new accounting principles and those prepared on the basis of the former accounting
principles.
SECTION 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the Obligated Person from disseminating any other information, using the means of dissemination
set forth in this Disclosure Agreement or any other means of communication, or including any other
information in any Annual Disclosure Report, in addition to that which is required by thi s Disclosure
Agreement. If the Obligated Person chooses to include any information in any Annual Disclosure Report
in addition to that which is specifically required by this Disclosure Agreement, the Obligated Person shall
have no obligation under this Agreement to update such information or include it in any future Annual
Disclosure Report.
SECTION 9. Default. This Disclosure Agreement shall be solely for the benefit of the holders
and beneficial owners from time to time of the 2026 Bonds. In the event of a failure of the Obligated Person
to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the request of the
Participating Underwriter or the Holders of at least twenty-five percent (25%) aggregate principal amount
of Outstanding Bonds and upon receipt of indemnity satisfactory to the Trustee, shall), or any Holder or
Beneficial Owner of the 2026 Bonds may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by order of a court of competent jurisdiction in San Luis Obispo
County, California, to cause the Obligated Person to comply with its obligations under this Disclosure
Agreement, provided that any holder or beneficial owner seeking to require the Obligated Person to comply
with this Disclosure Agreement shall first provide at least thirty (30) days prior written notice to the
Obligated Person of the failure of the Obligated Person, giving reasonable detail of such failure. Failure by
the Obligated Person to comply with any provision of this Disclosure Agreement shall not be deemed an
Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of
any failure of the Obligated Person to comply with the terms of this Disclosure Agreement shall be an
action to compel performance. No person or entity shall be entitled to recover monetary damages under this
Disclosure Agreement.
SECTION 10. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the
Obligated Person agrees to indemnify and save the Dissemination Agent, its officers, directors, employees
and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses (including
attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination
Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the
Obligated Person for its services provided hereunder in accordance with its schedule of fees as amended
from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent
in the performance of its duties hereunder. The obligations of the Obligated Person under this Section 10
shall survive resignation or removal of the Dissemination Agent and payment of the 2026 Bonds.
SECTION 11. Notices. Any notices or communications to the Obligated Person or the
Dissemination Agent may be given as follows:
Obligated Person:
City of San Luis Obispo
Public Works and Utilities Department
879 Morro Street
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6
San Luis Obispo, CA 93401
Attention: Public Works and Utilities Director
Phone: 805-781-7205
Dissemination Agent:
San Luis Obispo Flood Control and Water Conservation District
County Government Center
1055 Monterey Street
San Luis Obispo, CA 93408
Attention: Auditor-Controller
Phone: 805-781-5043
Any person may, by written notice to the other persons listed above, designate a different address or
telephone number(s) to which subsequent notices or communications should be sent.
SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
Authority, the Flood Control District, the Trustee, the Dissemination Agent, the Participating Underwriter
and Holders and Beneficial Owners from time to time of the 2026 Bonds, and shall create no rights in any
other person or entity.
SECTION 13. Record Keeping. The Obligated Person shall maintain records of Annual
Disclosure Reports, including the content of such disclosure, the name of the entities with which such
disclosure was filed and the date of filing of such disclosure.
SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same instrument.
CITY OF SAN LUIS OBISPO
By:
Authorized Officer
Accepted:
SAN LUIS OBISPO COUNTY FLOOD CONTROL
AND WATER CONSERVATION DISTRICT, as
Dissemination Agent
By:
Chairman
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7
EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL DISCLOSURE REPORT
Name of Obligated Person: City of San Luis Obispo
Name of Bonds: SLO County Financing Authority (County of San Luis Obispo, California)
Nacimiento Water Project Revenue Refunding Bonds, 2026 Series A
Date of Delivery: [_________], 2026
NOTICE IS HEREBY GIVEN that the Obligated Person has not provided an Annual Disclosure
Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated
as of [_________], 2026, with respect to the 2026 Bonds. [The Obligated Person anticipates that the Annual
Disclosure Report will be filed by.]
SAN LUIS OBISPO COUNTY FLOOD CONTROL
AND WATER CONSERVATION DISTRICT
By:
[cc: Obligated Person]
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Page 318 of 357
Background | Purpose | Financial Impact | Questions | Recommendation
Approval of Participation in the Nacimiento Water
Project 2026 Revenue Refunding Bonds
Tuesday, August 18, 2026
1
2
2004 – Project
Agreement
City enters into the
Nacimiento Project
Water Delivery
Entitlement
Contract.
Background: The Nacimiento Project was bond-financed in 2007 and partially
refinanced in 2015 and 2018. The proposed action would refinance the
remaining 2015A Bonds.
Background | Purpose | Financial Impact | Questions | Recommendation
2018 – Remaining
Refunding
Authority
refinances the
remaining
outstanding 2007A
Bonds.
2007 – Original
Financing
Financing Authority
issues bonds to
fund construction
of the project.
2015 – Partial
Refunding
Authority
refinances a portion
of the outstanding
2007A Bonds.
3
Purpose: The debt financed the Nacimiento Water Project, which has supplied
approximately 48% of the City’s source water over the past ten years.
8.18
billion gallons
Total source water
over 10 years
48%
Percent of all source
water over 10 years
72%76%68%69%
28%
45%
81%
41%
5%15%16%
42%
25%
12%
18%
24%
44%
28%19%
17%
16%30%30%
7%
41%
76%
56%
1.62 1.64
1.80
1.65 1.69 1.77 1.80 1.68 1.72 1.79
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Water Source Strategy in Billion Gallons
2015-16 to 2024-25
Nacimiento Salinas Whale Rock
Background | Purpose | Financial Impact | Questions | Recommendation
4
GC 5850-5854, GC
53630-53686
Separate business item
Borrowing of $100,000 or more must be discussed and deliberated
separately.
Public financing disclosure
Council must receive good-faith estimates of interest costs, issuance
costs, proceeds, and total repayment before authorizing the bonds.
Government Code §§ 53635.7 and 5852.1
Purpose: State law requires this financing decision to be considered as a separate
business item and requires public disclosure of estimated borrowing costs.
Background | Purpose | Financial Impact | Questions | Recommendation
5
Financial Impact: Estimated NPV savings are 4.76% ($3.6 million), above the
City’s 3% minimum threshold. Actual savings may change with market conditions
through pricing.
$5.1M
Estimated NPV Savings
As of June 29, 20266.82%
4.76%
3.00%
5.00%
As of June 29, 2026 As of July 30, 2026
Net Present Value (NPV) Savings as %
Preliminary Estimates versus Policy Thresholds
Estimated NPV Savings Minimum General Policy Target
$3.6M
Estimated NPV Savings
As of July 30, 2026
Background | Purpose | Financial Impact | Questions | Recommendation
6
$2.3M
Estimated savings
over the bond term
$175K
Estimated savings
annually
Financial Impact: The refunding is estimated to save the City $2.3 million, or
about $175,000 annually.
Preliminary estimates based on current market conditions.
$0.0M
$1.0M
$2.0M
$3.0M
$4.0M
$5.0M
Estimated Nacimiento Debt after Refunding - City
Share
Includes estimated debt service for the 2026A, 2018A, and 2007B Bonds
Estimated Debt After Refunding Estimated Savings
Background | Purpose | Financial Impact | Questions | Recommendation
7
Financial Impact: The refunding may be adjusted, delayed, or cancelled if
projected savings no longer meet policy thresholds.
Final interest rates and savings will not be known until the bonds are priced and sold.
Refunding Decision Process
Delegated
Authority
Designated City
representatives may
coordinate with the
Authority, District,
and financing team
to respond to
market changes
before issuance.
Background | Purpose | Financial Impact | Questions | Recommendation
8
Questions & Comments
Background | Purpose | Financial Impact | Questions | Recommendation
9
Recommendation: Adopt the resolution authorizing the City’s participation in
the proposed refunding.
•Adopt the resolution authorizing the City’s participation in the 2026 refunding of the
2015A Bonds
•Approve City disclosures included in the bond offering documents
•Approve the Continuing Disclosure Agreement
•Authorize designated City representatives to complete the City’s remaining actions
Estimated City benefit: $2.3 million in total debt-service savings, or approximately
$175,000 annually, subject to market conditions.
Background | Purpose | Financial Impact | Questions | Recommendation
10Background | Purpose | Financial Impact | Questions | Recommendation