ITEM 5: CONSIDERATION OF APPROVAL OF A RESOLUTION TO PROVIDE AN AGRICULTURAL DRAINAGE MANAGEMENT PROGRAM LOAN TO
MERCED COUNTY FOR THE ANIMAL CONFINEMENT DRAINAGE IMPROVEMENTS PROJECT

DISCUSSION: Merced County (County) submitted an application for an Agricultural Drainage Management Program (ADMP) Loan for the Merced County Animal Confinement Drainage Improvements Project (Project). The ADMP was created by Proposition 204 to address agricultural drainage problems. The amount of the loan request is $5 million.

The proposed Project will create a mini-loan program to be administered by the County. The County will enter into loan agreements with dairy and other confined animal facility operators to design and construct source control facilities to manage animal waste. Each dairy and other confined animal facility will be evaluated for a specific design. Examples would include lagoon construction, corral drainage control, and off-site drainage facilities.

The County would charge the same rate on the mini-loans as the ADMP rate plus whatever additional points the County determines it needs to administer the Project (the ADMP rate is one half the rate on the last sale of State General Obligation Bonds). The County will be required to secure the mini-loans against default. Since the ADMP requires loans to be paid back in 20 years, the County could not extend a mini-loan beyond the term of the ADMP loan.

The water quality problems associated with dairies are documented in studies by the Central Valley Regional Water Quality Control Board (CVRWQCB). These studies indicate that dairies are responsible contributors to nitrate levels exceeding 250 mg/l (the drinking water standard is 45 mg/l) and salinity levels exceeding 4,100 mg/l (the drinking water standard is 1,000 mg/l) in Merced County. Merced County has approximately 364 dairies that generate five million tons of wet manure, 21,250 tons of nitrogen, and 13,000 acre feet of wastewater annually.

The proposed Project has received the endorsement of the Merced County Farm Bureau, Western United Dairymen's Association, the CVRWQCB, University of California Davis Cooperative Extension, Natural Resources Conservation Service, Department of Health Services Drinking Water Field Operations Branch, the Merced County Agricultural Commissioner, and the U.S. Environmental Protection Agency.

The County expects to adopt a Negative Declaration in October 1997 to comply with the California Environmental Quality Act requirements.

To fund the Project, the State Water Resources Control Board (SWRCB) will need to establish that the State Bonds sold for this Project and other privatization purposes do not exceed 5 percent of the bond sale. If more than 5 percent of a tax free bond sale is used for privatization, the State would be in violation of Federal tax laws.

POLICY ISSUE: Should the SWRCB approve a resolution to provide an ADMP loan of $5 million to the County for the Project?

FISCAL IMPACT: Proposition 204 continuously appropriates $27.5 million to the Drainage management subaccount for funding ADMP projects. This is the first loan application for ADMP funds. Approval of the Project will leave an uncommitted balance of $22.5 million.

RWQCB IMPACT: Central Valley Regional Water Quality Control Board

STAFF RECOMMENDATION: That the SWRCB approves a resolution to provide an ADMP loan of $5 million to the County for the Project.

SEPTEMBER 29, 1997 DRAFT

WHEREAS:

1. The County of Merced (County) has requested an Agricultural Drainage Management Program (ADMP) loan of $5 million for the Animal Confinement Drainage Improvements Project (Project).

2. The Project will address ground water problems associated with dairies and other confined animal facilities, including high nitrates and salinity.

3. The Project received the support of the Merced County Farm Bureau, Western United Dairymen's Association, Central Valley Regional Water Quality Control Board, University of California Davis Cooperative Extension, Natural Resources Conservation Service, Department of Health Services Drinking Water Field Operations Branch, the Merced County Agricultural Commissioner, and the U.S. Environmental Protection Agency.

THEREFORE BE IT RESOLVED THAT:

The SWRCB approves an ADMP loan for $5 million to the County for the Project. This approval is contingent upon the County complying with the California Environmental Quality Act.

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 October 23, 1997.

Maureen Marché

Administrative Assistant to the Board