The Financing Authority For Resource Efficiency of California (FARECal) is a joint exercise of powers agency formed on July 1, 1993 under the Government Code of the State of California. FARECals members include the Cities of Anaheim, Azusa, Colton, Compton, Healdsburg, Los Angeles, Palo Alto, Pasadena, Redding, Riverside, Santa Cruz, the North Marin Water District, the Northern California Power Agency (NCPA), Sacramento Municipal Utility District, Trinity Public Utilities District, Turlock Irrigation District, and the City of Victorville as members.

FARECal has any and all powers authorized by law to two or more of its members relating to the planning, development, undertaking, purchase, lease, acquisition, construction, financing, disposition, use, operation, repair, replacement or maintenance of facilities for the generation, production, transmission, conservation, reuse, recycling, storage, treatment or distribution of electrical or other energy or capacity, natural gas, water, waste water or recycled water, and resource efficiency projects and facilities.

FARECal also was established to, among other things, assist electric, gas, steam, water and wastewater utilities in the development and implementation of resource efficiency programs.  In furtherance of this objective, FARECal may undertake joint studies, analyses and marketing of resource efficiency programs and projects, as well as joint development and implementation of such projects and programs. FARECal also is authorized to facilitate joint purchasing, contracting, planning and training. Finally, FARECal may provide a means for its members to capitalize and finance demand-side management, conservation and recycled water projects.

FARECals resource efficiency projects and facilities include: (i) activities, programs and equipment which are designed to conserve, change usage patterns of or reduce the demand for electrical or other energy or capacity, natural gas or water; (ii) activities, programs and equipment which are designed to utilize electrical or other energy or capacity, natural gas or water facilities more efficiently; (iii) programs, equipment or facilities which are designed to transport, distribute or treat water, waste water or recycled water for purposes of reuse; and (iv) any other programs, equipment or facilities which meet resource efficiency or management needs or requirements, established or approved from time to time by the Board of Directors.

FARECal has the authority to issue, on behalf of participating members, tax-exempt debt for the financing of capital improvements and resource efficiency projects.  It has completed two financings on behalf of its members, with a total aggregate principal amount of approximately $66,000,000.

FARECal is governed by a Board of Directors which is chosen from a combination of the charter member, agencies with outstanding financing and members at large. The Board is given responsibility for the general management of the affairs, property and business of FARECal and is vested with all powers of FARECal. Any action taken by the Board with respect to a project requires an affirmative vote of the participants in such project.

Agency Formed FARECal was established in 1993 with thirteen consumer-owned utilities as members.  A five-member board of directors represented charter members; directors representing members with the most significant financial involvement and the membership at large were added later.

First Financing By mid-1994 FARECal was ready to go to market with its first financing, a $19.5 million revenue bond issue to fund water and energy programs for the cities of Anaheim, Pasadena and Riverside. The 23-year issue was purchased by Bear, Stearns & Co., Inc. The sale culminated two and a half years of organization and preparation by FARECal to give publicly owned utilities another option for funding water and energy conservation programs.

Legislation The task force that organized FARECal had concluded legislation was needed in order for the joint powers authority to fully pursue its goals.  AB 1828, passed both houses of the Legislature without a dissenting vote and was signed into law by Gov. Pete Wilson in July, 1993.

Membership Publicly owned electric, water, natural gas, reclaimed water and steam utilities that are eligible for membership in the California Municipal Utilities Association may join FARECal. Government of FARECal is by a Board of Directors representing founding members, members with the most significant financial involvement and the membership at large.

Funding Flexibility FARECal offers joint financing flexibility. A FARECal financing may include multiple types of projects or programs, and may involve multiple utility participants. Each financing may be structured to meet the needs of the participants. Financing through FARECal will permit small projects to be combined in a single financing thereby reducing costs of issuance per project.

Liability
The cost responsibility and liability of each utility participant in a financing will be spelled out in underlying agreements. These agreements will be prepared to meet the needs of the participants in the financing. Members which do not execute agreements to participate in a FARECal financing will not be liable for any payments related to such financing.
 

Advantages of FARECal

• Programs that would otherwise be expensed during the year of expenditure can be capitalized and financed to spread the costs over the life of the program.
• For the first time, energy and water conservation expenditures can be funded with borrowed capital and amortized over their useful life.
• Projects that would have been too small to finance independently can be financed as part of a group and costs of issuance can be minimized, in certain cases.
• Debt amortization can be included in operation & maintenance expenses, thereby minimizing burdensome debt service coverage requirements.
• Financial market acceptance of funding these resource efficiency activities under this approach can be increased through joint education and joint action.

Issues dealing with tax-exemption, equipment on the customer side of the meter, private use, and other legal considerations can be dealt with jointly to establish financing criteria which protect the tax exempt status of the agency's debt.

• FARECal's Second Financing Completed