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Note 15.
Commitments and Contingencies |
Commitments
The Company leases office facilities and two water systems from cities,
and has long-term commitments to purchase water from water wholesalers.
The commitments are noted in the table below. |
|
Office Leases |
System Leases |
Water Contracts |
2006 |
$662 |
$961 |
$12,731 |
2007 |
486 |
961 |
12,731 |
2008 |
358 |
961 |
13,940 |
2009 |
184 |
961 |
13,940 |
2010 |
125 |
961 |
13,940 |
Thereafter |
65 |
6,427 |
335,842 |
|
The Company leases office
facilities in many of its operating districts. The total paid and
charged to operations for such leases was $682 in 2005, $632 in 2004,
and $577 in 2003.
The Company leases the City of Hawthorne water system, which in addition
to the upfront lease payment, includes an annual payment. The 15-year
lease expires in 2011. The annual payments in 2005, 2004, and 2003 were
$116, $116, and $111, respectively. In July 2003, the Company negotiated
a 15-year lease of the City of Commerce water system. At this time, the
lease has not been formally executed by the parties. The lease includes
an annual lease payment of $845 per year plus a cost-savings sharing
arrangement.
The Company has a long-term contract with Santa Clara Water District
that requires the Company to purchase minimum annual water quantities.
Purchases are priced at the District’s then-current wholesale water
rate. The Company operates to purchase sufficient water to equal or
exceed the minimum quantities under the contract. The total paid under
the contract was $4,763 in 2005,
$4,610 in 2004, and $4,452 in 2003.
The Company also has a water supply contract with Stockton East Water
District (SEWD) that requires a fixed, annual payment and does not vary
during the year with the quantity of water delivered by the district.
Because of the fixed price arrangement, the Company operates to receive
as much water as possible from SEWD in order to minimize the cost of
operating Company-owned wells used to supplement SEWD deliveries. The
total paid under the contract was $4,300 in 2005, $4,392 in 2004, and
$3,779 in 2003. Pricing under the contract varies annually. Estimated
annual contractual obligations in the table above are based on the same
payment levels as 2005. Future increased costs by SEWD are expected to
be offset by a decline in the allocation of costs to the Company, as
other customers of SEWD are expected to receive a larger allocation
based upon growth of their service areas.
On September 21, 2005, the Company entered into an agreement with Kern
County Water Agency (Agency) to obtain treated water for the Company’s
operations. The term of the agreement is to January 1, 2035, or until
the repayment of the Agency’s bonds (described hereafter) occurs. Under
the terms of the agreement, the Company is obligated to purchase 20,500
acre-feet of treated water per year. The Company is obligated to pay the
Capital Facilities Charge and the Treated Water Charge regardless of
whether it can use the water in its operation, and is obligated for
these charges even if the Agency cannot produce an adequate amount to
supply the 20,500 acre-feet in the year. (This agreement supersedes a
prior agreement with Kern County Water Agency for the supply of 11,500
acre-feet of water per year. The total paid under the prior agreement
was $3,288 in 2005, $3,308 in 2004, and $2,691 in 2003.)
Three other parties, including the City of Bakersfield, are also
obligated to purchase a total of 32,500 acre-feet per year under
separate agreements with the Agency. Furthermore, the Agency has the
right to proportionally reduce the water supply provided to all of the
participants if it cannot produce adequate supplies. The participation
of all parties in the transaction for expansion of the Agency’s
facilities, including the Water Purification Plant, purchase of the
water, and payment of interest and principal on the bonds being issued
by the Agency to finance the transaction, is required as a condition to
the obligation of the Agency to proceed with expansion of the Agency’s
facilities. If any of the other parties does not use its allocation,
that party is obligated to pay its contracted amount. |
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