ITEM 15: CONSIDERATION OF STATE REVOLVING FUND (SRF) LOAN ELIGIBILITY FOR REPLACEMENT OF PREVIOUSLY GRANT FUNDED FACILITIES; TRANCAS WASTEWATER TREATMENT PLANT IMPROVEMENT PROJECT; LOS ANGELES COUNTY DEPARTMENT OF PUBLIC WORKS, SRF LOAN PROJECT NO. C-06-4499-110

DISCUSSION: The Trancas Wastewater Treatment Plant is located in the City of Malibu and is owned and operated by Los Angeles County (County). The plant is a tertiary facility with a treatment system consisting of primary clarification, rotating biological contactors (RBC's), secondary clarification, filtration, and disposal of effluent to leachfields. The solids train consists of aerobic digestion with the digested biosolids hauled to a disposal point in the City of Los Angeles sewer system.

The Trancas plant is designed to treat a maximum flow of 100,000 gallons per day (GPD). Flows typically average about 65,000 GPD. The plant is a "previously grant funded" facility as it was upgraded and improved with an Environmental Protection Agency (EPA)/State construction grant of $1.25 million awarded in August 1977.

According to an engineering report prepared for the County in 1995, the plant is in need of repair. The proposed improvements include in general: (1) cleaning and recoating of corroded surfaces and mechanical fittings, (2) replacement of the comminutor, tertiary sand filters, RBC unit drive system, broken air diffusers, (3) installation of a second redundant RBC, and (4) installation of other improvements such as a ferric-chloride station and operation and security features.

The County Department of Public Works is responsible for operating and maintaining the plant. The County has requested a SRF loan on behalf of the Trancas service area for the proposed improvements at the Trancas plant.

There are two issues regarding eligibility of this proposed project. The County (see April 1, 1997, and May 22, 1997, letters), and two homeowners associations, the Winter Canyon Condominium Council (see June 30, 1997, letter), and the Malibu West Board of Directors (see January 21, 1997, letter) are citing unique circumstances and request special consideration from the SWRCB for eligibility.

The first issue is replacement and repair of previously grant funded facilities. Section IX.E.2.k. of the Policy For Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities adopted in February 1995 and amended on January 16, 1996 (SRF Policy) states that the replacement of previously grant funded facilities is ineligible. The SWRCB may consider granting an exception in the event that, after examining the circumstances, a finding is made that the petitioner suffers a severe hardship or unique circumstances. The County and the Homeowners Association(s) are claiming financial hardship and unique circumstances because they cannot afford to repair the plant. A sufficient replacement fund was not established at the time of the EPA grant award in 1977 nor any time thereafter. An eventual shortage of maintenance funds resulted, and hence the current problems with the plant.

Federal law and grant regulations required a recipient of a grant to adopt and maintain a user charge system which would collect sufficient funds to pay for the costs of operation and maintenance of any wastewater treatment services. These funds include necessary expenditures for replacement of equipment, accessories, or appurtenances which were needed during the service life of treatment works to maintain the capacity and the performance for which the treatment works were designed and constructed.

The County deemed a replacement fund unwarranted at the time the EPA grant was awarded because a regional treatment system was expected to be in place and operational before the end of the Trancas plant's useful life. The regional treatment system plans were pursued by the County during the 1980's but abandoned due to opposition by the local residents. It was never constructed.

The second issue is the eligibility of the RBC's. In accordance with 40 CFR Part 35.2035, agencies with grant funded RBC facilities were offered Modification and Replacement Grants by the EPA in the late 1980's. At that time RBC's had experienced performance problems. Problems with RBC's included lack of mechanical reliability (broken shafts, discs, chains, and driving gears), inability to meet design performance specifications, and significantly increased operating and maintenance costs.

RBC technology has improved significantly, however, and EPA is now approving RBC based systems provided they are cost-effective when compared to other methods of secondary treatment. The EPA recommends a 20 year warranty, supplemental aeration for improved dissolved oxygen content, and a self-monitoring "load cell" system which can determine if the biomass load on the discs is too great. The system can automatically correct itself by increasing rotational speed and/or reversing disc rotation.

The repair and maintenance items on the existing grant funded Trancas RBC unit would not be eligible for SRF funding. For example, the wearing out of the drive motor, bearings, and drive unit is normal wear and is considered maintenance and therefore is the responsibility of the grant recipient.

There may be project components that were not previously grant funded which may be eligible for SRF loans, although more review is required before eligibility can be determined. The estimated updated construction cost of the proposed improvements is $590,000. The total project cost is estimated at $767,000. The estimated loan eligible cost for the second RBC and other possibly eligible improvements is $368,000.

Approving the previously grant funded components of the project would set a precedent for the SWRCB in that SRF applicants may request funding for previously grant funded facilities with broken down equipment even where an account was not established for the anticipated normal replacement of equipment, and/or when appropriate maintenance was not conducted.

POLICY ISSUE: Should the SWRCB: (1) qualify this previously grant funded project for SRF loan eligibility due to severe financial hardship and unique circumstances exceptions under Section IX.E.2.k. of the SRF Policy, and (2) consider SRF funding for the existing RBC maintenance and for the addition of a second RBC.

RWQCB IMPACT:

FISCAL IMPACT: None at this time. If the project eventually receives preliminary SRF loan commitment for the anticipated eligible project components, the estimated cost impact would be $368,000.

STAFF RECOMMENDATION: That the SWRCB limit SRF loan eligibility to: (1) a second RBC if it is cost-effective, necessary to meet discharge requirements, and if the EPA's recommendations for RBC's are met, and (2) other necessary components of the proposed project that were not previously grant funded. With the SRF eligibility limited thusly, the user charge would be about $73 per month. The median household income (MHI) in the service area is $77,903 according to the 1990 census, Los Angeles County Department of Regional Planning. The MHI for the State is $35,798. A monthly user charge of $73 appears to be affordable to this community.

(Note: The letters referred to above are not available electronically)

October 27, 1997 DRAFT

WHEREAS:

1. The County of Los Angeles (County) owns and operates the Trancas Wastewater Treatment Plant in the City of Malibu, and the County Department of Public Works is acting on behalf of the Trancas service area in its application for a SRF loan;

2. The Trancas Wastewater Treatment Plant is in need of repairs and was previously grant funded in 1977 with an EPA construction grant;

3. A sufficient replacement fund was not established for the Trancas plant resulting in a lack of adequate maintenance;

4. In accordance with the Policy For Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities (SRF Policy), previously grant funded facilities are ineligible for SRF loan assistance unless a severe financial hardship or unique circumstance exists;

5. The County has not demonstrated that a severe financial hardship or unique circumstance exists;

6. The County is requesting repair of an existing Rotating Biological Contactor (RBC) and installation of a second RBC for redundancy;

7. Early RBC's had a poor mechanical performance record and grant recipients were offered Modification and Replacement Grants in the late 1980's by EPA pursuant to 40 CFR 35.2035;

8. Current RBC technology is improved and EPA is now approving SRF loans for new RBC's. EPA recommends a 20 year warranty for certain mechanical parts, supplemental aeration, and a disc load monitoring system; and

9. If the previously grant funded project components are approved for SRF loan eligibility, a potentially costly precedent would be established for previously grant funded facilities where a replacement fund was not established or where sufficient funds were not set aside for the replacement of worn out equipment, and where adequate maintenance was not conducted.

THEREFORE BE IT RESOLVED THAT:

The State Water Resources Control Board finds that the eligibility of this project is limited to components determined to be cost-effective and which were not previously grant funded.

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