ITEM 5: APPROVAL OF A STATE REVOLVING FUND LOAN FOR THE CITY OF SAN JOSE, SOUTH BAY WATER RECYCLING PROGRAM, PHASE 1, STATE REVOLVING FUND LOAN PROJECT NOS. C-06-4220-110 THROUGH -190, -310, AND -320
DISCUSSION: This item is a request for approval of additional State Revolving Fund (SRF) loan funds for the City of San Jose. The State Water Resources Control Board (SWRCB) has approved $55 million in SRF loan funds from federal fiscal year (FFY) 1996 and FFY 1997 accounts for the construction of projects in the South Bay Water Recycling Program in Resolution Nos. 96-031 and 97-010. The construction cost for this program is estimated at $130 million and the loan eligible cost estimated at $95 million. The City is requesting a loan for the remaining $40 million.
The San Jose/Santa Clara Water Pollution Control Plant discharges treated effluent into the South San Francisco Bay. Both the San Francisco Regional Water Quality Control Board (SFRWQCB) and the United States Environmental Protection Agency (USEPA) determined that the effluent discharged from the plant reduces the salinity in the nearby salt marsh and threated the habitat of two endangered species: the salt marsh harvest mouse and the California clapper rail. The SFRWQCB and USEPA limited the plant's effluent to 120 mgd during the summer. The City proposed an "Action Plan" to recycle the nonpotable effluent as scheduled (21.1 mgd by November 1997 and 45.4 mgd by Year 2000). This "Action Plan" has been accepted by the SFRWQCB and the SWRCB to fulfill the intent of the 120 mgd flow cap requirement. This program enables the Cities of San Jose, Santa Clara, and Milpitas to reuse 21.1 mgd of the nonpotable effluent instead of discharging it into the South San Francisco Bay.
The South Bay Water Recycling Program was originally assigned the project number C-06-4220-110. It was later broken down into 11 projects based on construction contracts as follows:
C-06-4220-110 Diversion Structure and Transmission Pump Station
C-06-4220-120 Transmission Pipeline
C-06-4220-130 Santa Clara Pipeline
C-06-4220-140 Golden Triangle Segment
C-06-4220-150 Coyote/Old Oakland Road Segment
C-06-4220-160 12th Street Segment
C-06-4220-170 Senter Road Segment
C-06-4220-180 Yerba Buena/Sylvandale
C-06-4220-190 Evergreen Segment
C-06-4220-310 Booster Pump Station, Reservoir, and SCADA
C-06-4220-320 Milpitas Pipeline
The funding committed to the South Bay Water Recycling Program, No. C-06-4220-110 will be reallocated, as needed, to any of the projects within the South Bay Water Recycling Program as listed above.
Among the projects listed above, four have started construction prior to plans and specifications (P&S) approval. According to Section VI(B) of the Policy for Implementing the SRF for Construction of Wastewater Treatment Facilities (Policy), construction costs incurred prior to P&S approval are not eligible for SRF loan funding. The City could not wait for the P&S approval because it needed to meet the Action Plan schedule approved by the SFRWQCB and SWRCB. Also, due to the funding cap ($5 million per agency per year) and the large amount of funds needed for these projects, the City was not looking to the SRF program for funds for all of their projects. In September 1996, the SWRCB raised the cap to $50 million and the SRF loan became attractive to the City. On September 20, 1996, they submitted plans and specifications to the Division. The City is requesting that the SWRCB approve funding for costs incurred prior to P&S approval for the Santa Clara Pipeline, Pump Stations/Reservoir, and Milpitas Pipeline projects, Nos. C-06-4220-130, 310, and 320. The estimated costs incurred for these three projects are $8.5 million.
The City has also requested approval to sell future debt that is on parity with, or senior to, any SRF loan debt. On March 20, 1997, the SWRCB approved a request by the City of San Diego to sell future debt that is on parity with, or senior to, the SRF loan debt based on the enhancements offered by the City of San Diego to offset the subordinate status of the SRF loans as follows:
1. An "A" or higher rating by at least two nationally known rating agencies;
2. A coverage ratio of 1.1 times current year SRF debt service; and
3. Payment of the State match share for all SRF loans with a subordinate status.
The City of San Jose is offering the same enhancements except that Enhancement No. 3 will be met through the provisions of a zero-percent interest SRF loan.
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? Should the SWRCB fund costs incurred prior to P&S approval for the Santa Clara Pipeline, Pump Stations/Reservoir, and Milpitas Pipeline projects (Nos. C-06-4220-130, 310, and 320)? Should the SWRCB approve the City's request to sell future debt that is on parity with, or senior to, any SRF loan debt?
RWQCB IMPACT: None
FISCAL MPACT: 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 funding for costs incurred prior to P&S approval, allowing the City to sell future debt that is on parity with, or senior to, any SRF loan debt, and approving additional SRF loan funds 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.
OCTOBER 27, 1997 - DRAFT
WHEREAS:
1. The State Water Resources Control Board (SWRCB), 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 SWRCB has approved the South Bay Water Recycling Program for the City of San Jose (City) that has an estimated cost of $130 million and provided $55 in loan funds from the SRF loan account;
3. The South Bay Water Recycling Program has 11 separate projects which have been assigned project numbers C-06-4220-110 through -190, -310, and -320;
4. The City requests funding for costs incurred prior to plans and specifications (P&S) approval for the Santa Clara Pipeline, Pump Stations/Reservoir, and Milpitas Pipeline projects (Nos. C-06-4220-130, 310, and 320) because it needed to proceed with construction after submitting the P&S in order to meet the compliance schedule stated in the "Action Plan" issued by the SFRWQCB and accepted by the SWRCB;
5. The City requests approval to sell future debt which is on parity with, or senior to, any SRF loan debt, and offers the following enhancements to offset its request for subordinate status of its SRF loans:
a. An "A" or higher rating by at least two nationally known rating agencies, and
b. A coverage ratio of 1.1 times current year SRF debt service; and
6. Approval was given to the City of San Diego on March 20, 1997, to sell future debt which is on parity with, or senior to, any SRF loan debt, based on same conditions as mentioned above.
THEREFORE BE IT RESOLVED THAT:
The State Water Resources Control Board
1. Approves an additional $40 million in SRF loan funds to the City of San Jose for construction for the South Bay Water Recycling Program projects, with a repayment period of twenty (20) years, and the first repayment due one (1) year after completion of construction;
2. Approves the reallocation of funding committed to the South Bay Water Recycling Program, Project No C-06-4220-110 to any of the projects, as needed, within the South Bay Water Recycling Program, project numbers C-06-4220-110, -120, -130, -140, -150, -160, -170, -180 -190, -310, and -320;
3. Approves SRF funding for construction costs incurred prior to plans and specification approval for Santa Clara Pipeline, Pump Stations/Reservoir, and Milpitas Pipeline projects Nos. C-06-4220-130, 310, and 320; and
4. Approves the request of the City of San Jose to sell future local debt that is on parity with, or senior to, any SRF debt it may acquire.
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