849.4
. (a) A security interest in water supply property is valid,
is enforceable against the pledgor and third parties, is subject to
the rights of any third party holding a security interest in the
water supply property perfected in the manner described in this
section, and attaches when all of the following occur:
(1) The commission has issued the financing order authorizing the
water supply charges included in the water supply property.
(2) Value has been given by the pledgees of the water supply
property.
(3) The pledgor has signed a security agreement that includes an
indenture or financing agreement relating to the issuance of the
water rater relief bonds covering the water supply property.
(b) A valid and enforceable security interest in water supply
property is perfected when it has attached and when a financing
statement has been filed in accordance with Chapter 5 (commencing
with Section 9501) of Division 9 of the Commercial Code, naming the
pledgor of the water supply property as "debtor" and identifying the
water supply property. Any description of the water supply property
shall be sufficient if it refers to the financing order creating the
water supply property. A copy of the financing statement shall be
filed with the commission by the qualifying water utility that is the
pledgor or transferor of the water supply property, and the
commission may require the qualifying water utility to make other
filings with respect to the security interest in accordance with
procedures it may establish, provided that the filings do not affect
the perfection of the security interest.
(c) A perfected security interest in water supply property is a
continuously perfected security interest in all revenues and proceeds
arising with respect to the water supply property, whether or not
the revenues or proceeds have accrued. Conflicting security interests
shall rank according to priority in time of perfection. Water supply
property shall constitute property for all purposes, including for
contracts securing water rate relief bonds, whether or not the
revenues and proceeds arising with respect to the water supply
property have accrued.
(d) Subject to the terms of the security agreement covering the
water supply property and the rights of any third party holding a
security interest in the water supply property perfected in the
manner described in this section, the validity and relative priority
of a security interest created under this section is not defeated or
adversely affected by the commingling of revenues arising with
respect to the water supply property with other funds of the
qualifying water utility that is the pledgor or transferor of the
water supply property, or by any security interest in a deposit
account of that qualifying water utility perfected under Division 9
(commencing with Section 9101) of the Commercial Code into which the
revenues are deposited. Subject to the terms of the security
agreement, upon compliance with the requirements of subdivision (b)
of Section 9312 of the Commercial Code, the pledgees of the water
supply property shall have a perfected security interest in all cash
and deposit accounts of the qualifying water utility in which
revenues arising with respect to the water supply property have been
commingled with other funds, but the perfected security interest
shall be limited to an amount not greater than the amount of the
revenues with respect to the water supply property received by the
qualifying water utility within 12 months before either of the
following:
(1) A default under the security agreement.
(2) The institution of insolvency proceedings by or against the
qualifying water utility, less payments from the revenues to the
pledgees during that 12-month period.
(e) If a default occurs under the security agreement covering the
water supply property, the pledgees of the water supply property,
subject to the terms of the security agreement, shall have all rights
and remedies of a secured party upon default under Division 9
(commencing with Section 9101) of the Commercial Code, and shall be
entitled to foreclose or otherwise enforce their security interest in
the water supply property, subject to the rights of any third party
holding a prior security interest in the water supply property
perfected in the manner provided in this section. In addition, the
commission may require, in the financing order creating the water
supply property, that in the event of default by the qualifying water
utility in payment of revenues arising with respect to the water
supply property, the commission and any successor to the commission,
upon the application by the pledgees or transferees, including
transferees under Section 849.5, of the water supply property, and
without limiting any other remedies available to the pledgees or
transferees by reason of the default, shall order the sequestration
and payment to the pledgees or transferees of revenues arising with
respect to the water supply property. Any order shall remain in full
force and effect notwithstanding bankruptcy, reorganization, or other
insolvency proceedings with respect to the debtor, pledgor, or
transferor of the water supply property. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest on the
water rate relief bonds, and other financing costs arising under the
security agreement, shall be remitted to the debtor or to the pledgor
or transferor.
(f) Sections 9204 and 9205 of the Commercial Code shall apply to a
pledge of water supply property by a qualifying water utility, an
affiliate of a qualifying water utility, or a financing entity, other
than a public financing entity.
(g) (1) This section sets forth the terms by which a consensual
security interest shall be created and perfected in the water supply
property. Unless otherwise ordered by the commission with respect to
any series of water rate relief bonds on or before the issuance of
the series, there shall exist a statutory lien as provided in this
subdivision.
(2) Upon the effective date of the financing order, there shall
exist a first priority lien on all water supply property then
existing or thereafter arising pursuant to the terms of the financing
order. This lien shall automatically arise pursuant to this section
without any action on the part of the qualifying water utility, any
affiliate of the qualifying water utility, the issuing entity, or any
other person. This lien shall secure all obligations, then existing
and subsequently arising, to the holders of the water rate relief
bonds issued pursuant to the financing order, the trustee or
representative for the holders, and any other entity specified in the
financing order. The persons for whose benefit this lien is
established shall, upon occurrence of any defaults specified in the
financing order, have all rights and remedies of a secured party upon
default under Chapter 1 (commencing with Section 9101) of Division 9
of the Commercial Code, and shall be entitled to foreclose or
otherwise enforce this statutory lien in the water supply property.
This lien shall attach to the water supply property regardless of who
shall own, or shall subsequently be determined to own, the water
supply property, including any qualifying water utility, affiliate of
the qualifying water utility, financing entity, or any other person.
This lien shall be valid, perfected, and enforceable against the
owner of the water supply property and all third parties upon the
effectiveness of the financing order without any further public
notice, provided, however, that any person may, but shall not be
required to, file a financing statement in accordance with
subdivision (b). These financing statements may be protective filings
and shall not be evidence of the ownership of the water supply
property.
(h) Notwithstanding any other provision of law, Section 5451 of
the Government Code shall apply to any pledge by the public financing
entity of water supply property or other security for any water rate
relief bonds issued by a public financing entity.