Letter to Underwriters |
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February 22, 2011
First Southwest Company
325 N. St. Paul St., Suite 800
Dallas, Texas 75201
RE: City of El Paso, Texas Water and Sewer Revenue Bonds CUSIP PREFIX: 283822
Gentlemen,
At the opening ceremony for the Kay Bailey Hutchison Desalination Plant, Senator Hutchison said "the big question is - can El Paso produce the water that is needed for a major infusion at Fort Bliss?"1
Holders of El Paso Water Utilities Public Service Board (PSB) revenue bonds had no idea that they were expected to underwrite the water that is needed for a major infusion at Fort Bliss. That was a carefully guarded secret until the Texas Water Development Board released The 2011 Far West Texas Water Plan (FWTWP).
The FWTWP shows that Fort Bliss will need an additional 483,7202Acre Feet (AF) of water for the "major infusion" and that the $90 Million desalination plant does not increase the annual water supply. Therefore, PSB plans to sell 483,720 AF of water to Fort Bliss that otherwise would have gone to El Paso Customers. Fort Bliss will pay $341 Million for the water.
The cost to process 483,720 AF of water thru the desalination plant is around $403 Million. PSB will then pay around $885 Million to acquire 483,720 AF of replacement water for El Paso Citizens. The net cost to "provide water for a major infusion at Fort Bliss" is around $1 Billion ($90 Million plant+$403 Million processing + $885 Million replacement - $341 Million Revenue). PSB has not disclosed this secret in any offering material and they have refused to answer any questions asked by this bond holder.3,4,5
The PSB plan to "produce water that is needed for a major infusion at Fort Bliss" violates bond covenants contained in Article 8 Section 8.02, Article X Section 10.03 (b) and Article X Section 10.03 (i) Of El Paso City Ordinance 9598.
On May 27, 2004 PSB promised the Base Realignment and Closure (BRAC) Commission that PSB would build the world's largest inland desalination plant on Fort Bliss property to allow Fort Bliss to keep its' existing wells in reserve as a strategic buffer.6
On July 1, 2007, PSB instructed its' President/CEO to delay improvements to the El Paso Water and Sewer System so that he could spend that money on Fort Bliss and economic development.7
On September 23, 2007, the PSB Water Resource Manager described the purpose of the desalination plant as follows: "Brackish groundwater has been migrating from the Northeast and East into where we pump fresh water. As you lower those underground fresh-water levels, brackish water moves in. And that's what was causing the degradation of the water quality of the wells in the airport area........The idea is to intercept the brackish water, use it, treat it - but don't increase the overall pumping. "8
PSB has violated three of their loan covenants and fourteen of their own Rules and Regulations in order to "provide the water that is needed for a major infusion at Fort Bliss." Please provide answers to the questions asked at the PSB open meetings on November 15, 2010 and December 8, 2010 and the appeal filed on August 2, 2010.
Sincerely,
Jimmy W. Janacek
Bond Holder
CC: El Paso City representative Beto O'Rourke
El Paso Public Service Board
El Paso City Manager
EL Paso city Attorney
_________________________________________________
1 Attachments:
The Fort Bliss Monitor, August 16. 2007, P. 5
2 Spread sheet
3 Questions presented at PSB Meeting on November 15, 2010 and Letter from PSB Chairman, November 18, 2010
4 Attachments:
Questions presented at PSB Meeting on December 8, 20120
5 Appeal filed August 2, 2010
6 Team Bliss BRAC Commission Familiarization Briefing 27 May 05, Slide 51
7 Performance Plan for Edmund G. Archuleta, P.E. President/CEO July 1, 2007 - June 30, 2011.
8 El Paso Inc.
