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«CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY BOND FINANCING PROGRAM Meeting Date: June 19, 2007 Executive Summary Request for Initial Resolution ...»

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Agenda Item – 4.A.1.

CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY

BOND FINANCING PROGRAM

Meeting Date: June 19, 2007

Executive Summary

Request for Initial Resolution

Prepared by: Deanna Hamelin

Applicant: Mottra Corporation and/or its Amount Requested: $11,700,000

Affiliates Application No.: 798 (SB)

Project Paramount, Montebello, & Initial Resolution No.: 07-06 Location: Downey (Los Angeles County), Irvine, San Juan Capistrano (Orange County) Type of Business: Mottra Corporation and/or its Affiliates (the “Company”) provides refuse collection and disposal services for the cities of Downey, Pico Rivera, Cerritos, Bellflower, Paramount, Lomita, Commerce, Seal Beach, Bell Gardens, Montebello, Long Beach, Los Angeles, and unincorporated areas of Los Angeles County.

Project Description: Bond proceeds will be used to finance the construction of a new building and renovation of an existing structure at Paramount Resource Recycling, an existing material recovery facility (MRF), to allow for more efficient operations. The Company also must update and expand its fleet and retrofit a majority of its existing waste collection vehicles with cleaner burning fuel consumption equipment. The Company also plans to acquire additional containers to be used throughout its service areas. In addition, the Company intends to acquire construction and demolition (C&D) processing equipment to enhance its recycling capacity (the “Project”).

The new and retrofitted waste collection vehicles and mobile C&D processing equipment may be housed from time to time at any one of the Company’s operating locations in Montebello, Downey, Irvine, San Juan Capistrano, and Paramount.

Public Benefits: The Company represents that the Project is designed to generate the public benefits described below.

Waste Diversion. The new containers that the Company plans to purchase will encourage consumer participation with the separation of recyclables and, thereby, will assist in diverting or minimizing the amount of material destined for the landfills.

Ratepayer Benefits. The availability of tax exempt financing has allowed the Company to minimize rate increases that would otherwise have been necessary to pay for the capital improvements required to meet Assembly Bill (AB) 939 goals.

Pollution Control: The Company represents that the Project will generate the following pollution control benefits described below.

Air Quality. The Company intends to purchase new waste collection vehicles that are California Air Resources Board (CARB) compliant and will meet mandates set forth by the South Coast Air Quality Management District. The new vehicles will provide a reduction in nitrogen oxides and other particulate matter as compared with the diesel trucks that are currently used.

–  –  –

Water Quality. The proposed recycling facilities will be operating on concrete surfaces and will not operate on exposed ground areas. This will prevent any seepage of contaminants into the ground water.

Energy Efficiency. The new waste collection vehicles are more fuel efficient and, therefore, reduce consumption of fossil fuels.

Permits: The Company has provided the Authority with copies of all required discretionary permits.

Financing Details: The Company anticipates the issuance of a negotiated, tax-exempt, variable rate bond issue with a term not to exceed 30 years. The Company plans to secure the bonds with a direct pay Letter of Credit from a bank that is rated at least “A-” or better from Fitch rating agency.

Financing Team:

Underwriter: Westhoff, Cone & Holmstedt Bond Counsel: Orrick, Herrington & Sutcliffe Financial Advisor: Andrew S. Rose Legal Questionnaire: The Staff has reviewed the Company’s responses to the questions contained in the Legal Status portion of the Application. No information was disclosed that raises questions concerning the financial viability or legal integrity of this applicant.

Staff Recommendation: Staff recommends approval of Initial Resolution No. 07-06 for Mottra Corporation and/or its affiliates for an amount not to exceed $11,700,000.

Note: An Initial Resolution approval is not a commitment that the Board will approve a Final Resolution and bond financing of the proposed Project.

–  –  –

STAFF SUMMARY – CPCFA

Prepared by: Deanna Hamelin

ISSUE:

Mottra Corporation and/or its Affiliates (the “Company”) requests approval of Initial Resolution No. 07-06 for an amount not to exceed $11,700,000 to construct a new building and renovate an existing structure at Paramount Resource Recycling, the Company’s MRF. Bond proceeds will also be used to acquire new waste collection vehicles, retrofit existing waste collection vehicles, purchase additional containers, and acquire mobile construction and demolition equipment.

CDLAC Allocation. The Company has applied for CDLAC allocation which will be considered at the July 25, 2007 meeting.

BORROWER:

Mottra Corporation was incorporated in California in 1992. The Company provides refuse collection and disposal services to the cities of Downey, Pico Rivera, Cerritos, Bellflower, Paramount, Lomita, Commerce, Seal Beach, Bell Gardens, Montebello, Long Beach, Los Angeles, and unincorporated areas of Los Angeles County.





The principal stockholders of the Company are as follows:

Mottra Corporation is the owner of Calmet Services, Inc. and is affiliated with the following

Companies:

–  –  –

Some of the owners of the Company own some interest and common ownership in other enterprises, including the companies listed below, but there is no majority control of those entities.

• Big Bear Disposal - owned 33.33% by Tom Blackman, 33.33% by Art Kazarian, and 33.34% by Gino Scopesi.

–  –  –

• OSO Grande, LLC – owned 30% by Tom Blackman, 30% by Gino Scopesi, and 40% by Kris & Gary Kazarian.

Legal Questionnaire. The Staff has reviewed the Company’s responses to the questions contained in the Legal Status portion of the Application. No information was disclosed that raises questions concerning the financial viability or legal integrity of this applicant.

Prior Actions and Financings.

–  –  –

PROJECT INFORMATION:

The Company provides refuse collection and waste disposal services to the cities of Downey, Pico Rivera, Cerritos, Bellflower, Paramount, Lomita, Commerce, Seal Beach, Bell Gardens, Montebello, Long Beach, Los Angeles, and unincorporated areas of Los Angeles County. Bond proceeds will be used to finance the construction of a new building and renovation of an existing structure at Paramount Resource Recycling, an existing material recovery facility (MRF), to allow for more efficient operations. The Company also must update and expand its fleet and retrofit a majority of its existing waste collection vehicles with cleaner burning fuel consumption equipment. The Company also plans to acquire additional containers to be used throughout its service areas. In addition, the Company intends to acquire construction and demolition (C&D) processing equipment to enhance its recycling capacity (the “Project”). The new and retrofitted waste collection vehicles and mobile C&D processing equipment may be housed from time to time at any one of the Company’s operating locations in Montebello, Downey, Irvine, San Juan Capistrano, and Paramount.

The anticipated Project and issuance costs are listed below:

–  –  –

Note: The Project costs reported in the Borrower’s application and shown here in staff’s report are estimated costs. At the time this financing closes, the estimated Project costs will be finalized and stated in the Tax Certificate. Variations from the costs shown in the application and in this report may occur prior to the closing due to increased costs of certain components of the Project from original estimates, and other reasons. In addition, such costs may vary after closing due also to increased costs, as well as common design and equipment modifications during construction, differences in equipment due to future changes in law or regulation, or for other reasons. However, the Borrower confirms, through submission of a signed application and will confirm through covenants and representations in various bond documents, that all assets purchased with bond proceeds will qualify for tax exempt financing, that they will be used to complete the Project as described, and that the average life tests required by federal law and described in the Tax Certificate will continue to be met. Tax-exempt financing may be only one source out of multiple sources of financing for a given project.

PUBLIC BENEFITS:

The Company represents that the Project is designed to generate the public benefits described below.

Waste Diversion. The new containers that the Company plans to purchase will encourage consumer participation with the separation of recyclables and, thereby, will assist in diverting and/or minimizing the amount of material destined for the landfills.

Ratepayer Benefits. The availability of tax exempt financing has allowed the Company to minimize rate increases that would otherwise have been necessary to pay for the capital improvements required to meet Assembly Bill (AB) 939 goals.

POLLUTION CONTROL:

The Company represents that the Project will generate the pollution control benefits described below.

Air Quality. The Company intends to purchase new waste collection vehicles that are CARB compliant and will meet mandates set forth by the South Coast Air Quality Management District.

The new vehicles will provide a reduction in nitrogen oxides and other particulate matter as compared with the diesel trucks that are currently used.

Water Quality. The proposed recycling facilities will be operating on concrete surfaces and will not operate on exposed ground areas. This will prevent any seepage of contaminants into the ground water.

Energy Efficiency. The new waste collection vehicles are more fuel efficient and, therefore, reduce consumption of fossil fuels.

PERMITTING & ENVIRONMENTAL APPROVALS:

The Company has provided the Authority with copies of all required discretionary permits.

–  –  –

ANTICIPATED TIMELINE:

The Company anticipates starting the equipment purchases in July 2007. Project completion is anticipated by July 2009.

FINANCING DETAILS:

The Company anticipates the issuance of a negotiated, tax-exempt, variable rate bond issue with a term not to exceed 30 years. The Company plans to secure the bonds with a direct pay Letter of Credit from a bank that is rated at least “A-” or better from Fitch rating agency.

FINANCING TEAM:

Underwriter: Westhoff, Cone & Holmstedt Bond Counsel: Orrick, Herrington & Sutcliffe Financial Advisor: Andrew S. Rose

RECOMMENDATION:

Staff recommends approval of Initial Resolution No. 07-06 for Mottra Corporation and/or its affiliates for an amount not to exceed $11,700,000.

–  –  –

WHEREAS, the California Pollution Control Financing Authority ("Authority"), a public instrumentality, is authorized and empowered by the provisions of the California Pollution Control Financing Authority Act ("Act") to issue bonds for the purpose of defraying the cost of facilities for the disposal of solid and liquid waste products, including resource recovery and energy conversion facilities; and WHEREAS, Mottra Corporation, a California corporation, and/or its affiliates (the "Company") has submitted an application (the “Application”) requesting that the Authority assist in financing the expansion and renovation of existing buildings and facilities, construction of new buildings and facilities and the acquisition and installation of equipment for solid waste processing facilities and facilities to support solid waste collection, and acquisition of solid waste collection vehicles and carts, as more fully described in the Application (collectively, the "Project") to be owned and operated by the Company, and have presented an estimate of the maximum cost of such Project as shown in Exhibit "A" attached hereto; and WHEREAS, the Authority desires to encourage the Company to provide solid waste disposal facilities and equipment which will serve the public of the State; and WHEREAS, the Authority deems it necessary and advisable to further the purposes of the Act that the Project be acquired at the earliest practicable date, but the Company requires satisfactory assurances from the Authority that the proceeds of the sale of bonds of the Authority will be made available to finance such Project; and WHEREAS, the Company expects to incur or pay from its own funds certain expenditures in connection with the Project prior to the issuance of indebtedness for the purpose of financing costs associated with the Project on a long-term basis; and WHEREAS, subject to meeting all the conditions set forth in this resolution the Authority reasonably expects that debt obligations in an amount not expected to exceed $11,700,000 will be issued and that certain of the proceeds of such debt obligations will be used to reimburse the Company for its prior expenditures for the Project; and WHEREAS, Section 1.103-8(a)(5) and Section 1.150-2 of the Treasury Regulations require the Authority to declare its reasonable official intent to reimburse prior expenditures for the Project with proceeds of a subsequent borrowing;

NOW, THEREFORE, BE IT RESOLVED by the California Pollution Control Financing

Authority as follows:

–  –  –

Section 1. The Authority finds and determines that the foregoing recitals are true and correct.



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