What Are Water main extension Contracts?
How Refund Contracts Are Created
In California, real estate developers must pay the water company for the cost to extend water services to their projects. These costs may include the water pipes lying in the streets called water mains, and wells, holding tanks and pumps in larger projects.
There are 9 large Class A water companies operating in the State of California. These 9 water companies are regulated by the California Public Utilities Commission "CPUC" and serve approximately 15% of the State of California.
CPUC Rule 15 requires that the water company refund the costs paid by the developer for water mains and special facilities by making annual payments for 40 years until the total cost is refunded.
A Refund Contract is entered into between the water company and the developer that specifies the scope of the work, the cost, and requires that the refundable amount of the cost is repaid according to Rule 15.
Most real estate developers elect to sell their water main extension refund contracts to Neptune Investment Company. The reason is simple: Developers can make better returns with an up front cash payment rather than collecting payments over 40 years.
How Neptune Investment Purchases Refund Contracts
Neptune Investment has long term relationships with most real estate developers in California that actively build projects in areas with Refund Contracts. We conduct research concerning new projects, then track the progress of the Refund Contracts construction until it becomes finalized and eventually ready to be purchased.
When the Refund Contracts status allows their sale from the developer to Neptune Investment, we send the developer our offer and if accepted proceed to purchase through an escrow established for the transaction.
To learn how Investors purchase Refund Contracts, see Investor tab.
