ITEM 8: APPROVAL OF A STATE REVOLVING FUND (SRF) LOAN FOR THE CITY OF SAN DIEGO, SOUTH BAY WATER RECLAMATION PLANT, SRF LOAN PROJECT NO. C-06-4119

DISCUSSION: In accordance with the State Water Resources Control Board's (SWRCB) Policy for Implementing the State Revolving Fund (SRF) for Construction of Wastewater Treatment Facilities (Policy), adopted on February 16, 1995, and amended on January 18, 1996, projects on the adopted priority list need SWRCB approval to receive a SRF loan. Loans can be approved by the SWRCB after the Division of Clean Water Programs (Division) has approved the facilities plan, including (1) the project report; (2) environmental documents; (3) the draft revenue program; and (4) the water conservation plan.

On September 24, 1997, the Division issued Facilities Plan Approval to the City of San Diego (City) for the construction of the South Bay Water Reclamation Plant, and the City agreed in writing with the approval on October 6, 1997.

The City of San Diego is located in southern California. The City's Metropolitan Wastewater Department (MWWD) is responsible for the upgrade and expansion of the Metropolitan Sewerage System (Metro). The Metro treats approximately 190 million gallons per day of wastewater generated by a service area population of about 1.9 million.

In 1989, the MWWD prepared a framework report which studied alternatives for upgrades to the Metro system. The selected alternative project produced by this study included a new treatment plant in the South Bay. At the time, the City was applying for a waiver from the secondary treatment requirement at the Point Loma Wastewater Treatment Plant under Section 301(h) of the Federal Clean Water Act. The framework report assumed that the Point Loma Plant might be required to upgrade to secondary treatment thereby reducing treatment capacity and requiring construction of several treatment plants in other locations throughout the Metro service area including the South Bay.

In 1992, under the direction of the City Council, the MWWD suspended work on this plan and developed the "Consumers' Alternative" which assumed that Point Loma would be retained at advanced primary treatment.

However, with the uncertainty of the Section 301(h) waiver status and the need to accommodate inevitable growth in the southern portion of the service area, the MWWD conducted a detailed capacity analysis of the South Metro Interceptor (SMI) which conveys wastewater to Point Loma. The analysis determined that the SMI would require improvements to increase conveyance capacity and that it was more cost-effective to construct the new plant in the South Bay and divert flow than to construct improvements to the SMI.

The South Bay Water Reclamation Plant will be located at the intersection of Dairy Mart Road and Monument Road adjacent to the New International Plant at the International Border. This loan eligible project consists of a seven million gallon per day secondary treatment system for compliance with the proposed NPDES permit requirements for ocean discharge. The estimated SRF loan eligible cost is $67.636 million.

The City meets about 75 percent of its water needs through purchases of imported water from the San Diego County Water Authority (Water Authority). The remainder of the domestic water supply demand is provided by local surface water supplies amd recycled water. The Water Authority is a member agency of the Metropolitan Water District of Southern California, which imports water from the State Water Project and the Colorado River. Both the Water Authority and the Metropolitan Water District have adopted long term plans designed to ensure the adequacy and reliability of water supplies to their service areas beyond the next twenty years. In accordance with the SRF Policy requirements for water conservation, the City is a signatory to the "Memorandum of Understanding Regarding Urban Water Conservation in California".

The City has provided the Division with a schedule of submittal dates for 100 percent plans and specifications and other milestones on the South Bay Water Reclamation Plant. There are three construction contract packages proposed for this project. These submittal dates are contained in the milestone schedule in the Division's facility plan approval letter. The plans and specifications for Package #1 have been submitted. The scheduled submittal date for both Packages #2 and #3 is November 12, 1997. In accordance with Section VIII(J) of the SRF Policy, the Division will add eight (8) weeks to each submittal date for completing the review and approval process. The Division may approve up to a ninety (90) day extension on any plans and specifications submittal for a good cause.

The City, in conjunction with the U.S. Department of the Interior Bureau of Reclamation, and the U.S. Department of Transportation Federal Highway Administration, prepared an Environmental Impact Report/Environmental Assessment (EIR/EA), which was distributed to the public and circulated through the State Clearinghouse (SCH# 95121027) for a 45 day review beginning December 24, 1996. During the review period the City received comments from five agencies, four organizations, and one interested party.

The City provided adequate responses to all comments received during the review period and made revisions to the EIR. On May 13, 1997, the City Council certified the EIR. On May 15, 1997, the City filed a Notice of Determination with the San Diego County Clerk and the Governor's Office of Planning and Research.

The City requests the SWRCB approve a loan of $67.636 million for this project and agrees to pay back the loan in accordance with the SRF Policy. The estimated SRF loan funding needed in FFY 1998 is about $13.201 million according to the City's schedule for construction.

POLICY ISSUE: Should the SWRCB approve SRF loan funding for the proposed project, including a twenty (20) year repayment period, with the first repayment due one (1) year after completion of construction. The City has provided plans and specifications submittal dates which are contained in the facilities plan approval letter. Should the SWRCB, in accordance with Section VIII(J) of the February 16, 1995 SRF Policy, condition this approval by requiring expiration of the preliminary loan commitment if the Final Plans and Specifications Approvals are not issued by January 12, 1998, for Construction Packages #2 and #3.

RWQCB IMPACT: None

FISCAL IMPACT: According to SWRCB Resolution No. 97-001 (Approval of a Staff Proposal to Better Manage the SRF Repayment Account), the SWRCB may approve preliminary loan commitments against the current FFY account and against 125 percent of future repayment funds based on scheduled loan dates.

The SRF account balances, anticipated repayment amounts, and project approvals under consideration by the SWRCB in November 1997 are as follows:

	Loan No.	1998	1999	2000
		SRF Account	Repayment	Repayment
FFY 97 Carryover:		$30,067,202
Est. FFY 98 Cap. Funds:		$92,500,000
Repayments:		$69,915,181	$67,186,299	$68,475,875
125% Repayments:			$83,982,874	$85,594,844
Previous Commitments:		-$77,602,000	-$61,300,000	-$50,000,000
1996 Bond Funds:		___________	$67,520,976	$315,156
Subtotal:		$114,880,383	$90,203,850	$35,910,000
San Luis Obispo County	4014-110	$47,000,000	-$22,000,000	-$25,000,000
City of San Jose	4220-xxx	-$40,000,000
City of San Diego	4119-xxx	-$13,201,000	-$43,525,000	-$10,910,000
City of San Diego	4542-110	-$7,342,470	-$678,850
City of Sacramento	4441-xxx	-$28,000,000	-$24,000,000	___________
Balance after Approval:		$73,336,913	-0-	-0-

STAFF RECOMMENDATION: That the SWRCB adopt a resolution approving a SRF loan for the proposed project, with a repayment period of twenty (20) years, and with the first repayment due one (1) year after completion of construction of the respective construction contracts. In accordance with the February 16, 1995, revisions to the Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities, the proposed resolution includes expiration dates for this preliminary loan commitment if the Final Plans and Specifications Approvals for each contract are not met.

October 27, 1997 DRAFT

WHEREAS:

1. The State Water Resources Control Board, on February 16, 1995, adopted the "Policy for Implementing the State Revolving Fund (SRF) for Construction of Wastewater Treatment Facilities," and revised it on January 18, 1996;

2. The State Water Resources Control Board, on September 18, 1997, adopted the FFY 1998 SRF Loan Program Priority List which included the South Bay Water Reclamation Plant for the City of San Diego in priority Class B;

3. The Division of Clean Water Programs (Division) has approved the project report, environmental documents, and draft revenue program for the City's project;

4. The water purveyors for the service area are signatories to the "Memorandum of Understanding Regarding Urban Water Conservation in California"; and

5. The City of San Diego certified an EIR and Addendum (State Clearinghouse # 95121027) which have been reviewed and considered, and it has been determined that:

(a) Changes or alterations have been required in, or incorporated into the proposed project which avoid or reduce to less than significant levels potentially significant environmental effects identified in the EIR with respect to erosion impacts which will be mitigated by construction control measures such as avoiding construction during the rainy season or any heavy precipitation event; using temporary plant cover, mulching, or structures; and keeping emergency erosion control equipment available.

(b) With respect to other potentially significant environmental impacts identified in the environmental documents, appropriate changes or alterations are not within the responsibility and jurisdiction of the SWRCB. Such other changes or alterations have been adopted or should be adopted by other agencies.

THEREFORE BE IT RESOLVED THAT:

The State Water Resources Control Board:

1. Approves a SRF loan of $67.636 million to the City of San Diego for the construction of the South Bay Water Reclamation Plant with an anticipated loan outlay of $13.201 million in FFY 1998, $43.525 million in FFY 1999, and $10.910 in FFY 2000. The repayment period shall be twenty (20) years, and the first repayment due one (1) year after completion of construction; and

2. Will withdraw this preliminary SRF loan commitment if biddable plans and specifications for construction packages #2 and #3 are not submitted as scheduled and approved by the Division of Clean Water Programs by January 12, 1998. The Division may approve up to a ninety (90) day extension for either contract for good cause.

The undersigned, Administrative Assistant to the Board, does hereby certify that the foregoing is a full, true, and correct copy of a resolution duly and regularly adopted at a meeting of the State Water Resources Control Board held on November 18, 1997.

Maureen Marché

Administrative Assistant to the Board