REPORT TO THE CITY COUNCIL
September 10, 2015
FROM: THOMAS C. ESQUEDA, Director
Department of Public Utilities
THROUGH: MICHAEL CARBAJAL, Division Manager
Department of Public Utilities - Water Division
BY: GLENN A. KNAPP, PE, Professional Engineer
Department of Public Utilities - Water Division
SUBJECT
Title
Acceptance of a $195,489,000 State Revolving Fund Low Interest Loan through the State Water Resources Control Board for construction of the City of Fresno’s Southeast Surface Water Treatment Facility and authorize the Director of Public Utilities, or designee, to sign on behalf of the City of Fresno (Citywide).
Body
RECOMMENDATIONS
Staff recommends that City Council:
1. Accept a State Revolving Fund Low-Interest Loan through the State Water Resources Control Board in the amount of $195,489,000 for construction of the City of Fresno’s Southeast Surface Water Treatment Facility.
2. Authorize the Director of Public Utilities, or designee, to sign all contract documents on behalf of the City of Fresno.
EXECUTIVE SUMMARY
The State Water Resources Control Board (SWRCB) has extended a thirty (30) year State Revolving Fund (SRF) Low Interest Loan construction funding offer to the City of Fresno (City) in the amount of $195,489,000 at an interest rate of 1.663% for the City’s Southeast Surface Water Treatment Facility (SESWTF).
Construction of the SESWTF is an essential component in meeting the City’s long-term goals for recovery of its overdrafted aquifer and attainment of a balanced water resource portfolio by 2025 as noted in the City’s Metropolitan Water Resource and Urban Water Management Plans, while providing an avenue for significant rate-payer savings. The City’s Department of Public Utilities/Water Division requests Council to accept the funding offer for construction of the SESWTF.
BACKGROUND
The Federal Safe Drinking Water Act (SDWA) Amendments of 1996 authorized the creation of a drinking water state revolving fund program. The Safe Drinking Water State Revolving Fund (SDWSRF) program provides financial assistance in the form of federal capitalization grants to states that in turn provide low interest loans and other assistance to a public water system. Program goals include both federal and state legislative intent to provide funding for the construction of technically sound drinking water infrastructure projects which encourage energy efficiency and water conservation measures. In May 2013, pre-applications for the Fall State Fiscal Year 2013-2014 SDWSRF funding cycle became available.
On January 1, 2015, SRF policy changes by the SWRCB were implemented and now provide for potential funding of additional water infrastructure projects which include surface water treatment facilities and water transmission and supply pipelines. Additional changes in annual application processes include opportunities to submit water infrastructure construction funding applications on an ongoing (rolling) basis throughout the year.
The noted funding amount for this project is $195,489,000. Compared to an average standard bond interest rate of 5.5%, the noted SRF interest rate of 1.663% would result in a rate payer savings of approximately $115,162,960 over 30 years. The rate plan was adjusted in February 2015 to reflect these savings for the rate payers.
The Funding Agreement for this project will be subject to approval as to form by the City Attorney’s Office. Finalized acceptance of this SRF Loan is necessary to proceed with construction of the project.
ENVIRONMENTAL FINDINGS
Authorization to accept an agreement for an SRF loan is not a “project” for the purposes of California Environmental Quality Act (CEQA), as it is a funding mechanism or other government fiscal activity, and does not involve commitment to any specific project which may result in a potentially significant physical impact on the environment as contemplated by CEQA Guidelines Section 15378(b).
LOCAL PREFERENCE
The local preference was not implemented because this is not a competitive bid award.
FISCAL IMPACT
There is no impact to the General Fund. The debt service costs for the construction of the SESWTF have been anticipated and are included in the water rate model used to create the five-year utility rate plan approved by City Council on February 26, 2015. All future fiscal year budgets will be developed and proposed to ensure that adequate debt coverage ratios and reserve funds are maintained for all existing and additional debt that is incurred. SRF interest rates are typically at or near 2% with an assumed loan term of 30 years. This would result in considerable savings in debt costs compared to bond financing which is currently estimated at 5% to 6% over 30 years.
Attachment:
SRF Installment Sales Agreement for the SESWTF
Financial Checklist
Funding Offer