SAN FRANCISCO - A little more than seven years after taking the Reno, Nev., area's water system public, local government officials are considering leasing it out in an attempt to get upfront cash for budgetary relief.
The Truckee Meadows Water Authority acquired the water system in 2001, paying $350 million to buy it from Sierra Pacific Resources after the company announced plans to sell the regional water system and focus on its electric power business.
The TMWA is a joint-powers authority formed by Washoe County and the cities of Renoand Sparks.
Now the potential exists to lease the water system to private operators in return for upfront cash that could help all three governments deal with their tight budgets, according to a staff report prepared for the authority's board by Andy Green, Reno's finance director.
The board, which consists of elected officials and appointees of the three member governments, voted last week to retain Goldman, Sachs & Co. and NSB Public Finance as financial advisers to analyze the potential for a lease or concession of the water system.
The idea of exploring a possible concession came from Goldman Sachs, which approached the city, Green said in his staff report. In 2001, Goldman was the lead manager of the $452 million revenue bond sale that financed the purchase of the water utility and the creation of the authority.
According to the staff report, the proposal would allow the water authority to lease its assets for 50 years in return for an upfront cash payment.
"The opportunity has only become available over the last couple of years due to an increase in the demand of pension funds wanting to invest in essential assets, such as water assets," Green wrote in the staff report. "There is, however, a limited window of opportunity to maximize the amount of cash that could be received through this prospect."
Green did not return a phone call Friday.
The two financial advisers are working on contingency - only getting paid if a deal gets done. Goldman would get 90%.
The concession proposal did not sit well with at least one person - the TMWA's general manager, Lori Williams.
Immediately after the board voted Wednesday to hire the financial advisers, she announced her resignation, saying that her decision was in part because her heart was not in the authority's new direction, according to the Reno Gazette-Journal.
The TMWA had $477 million in long-term debt outstanding as of June 30, 2007, according to its most recent financial statement. It carries underlying bond ratings of A1 from Moody's Investors Service, A-plus from Standard & Poor's, and A from Fitch Ratings.