DISCUSSION: The Napa County Flood Control and Water Conservation District (District) applied for a State Revolving Fund (SRF) loan for the Napa River/Napa Creek Flood Protection and Estuary Restoration Project (Project). The goal of the Project is to implement an innovative alternative to traditional flood protection that will include water quality and estuary enhancement benefits. The Project will replace the existing system of levees, floodwalls, and riprap with a meandering river and estuary with tidal marshes and wetlands.

The Project will encompass approximately seven miles of river valley from Trancas Street north of the City of Napa (City) to Highway 29 to the south. The Project will also focus on Napa Creek which drains into the Napa River (River) near the oxbow in the City. From this point downstream to San Pablo Bay is the River estuary. Upstream from this point, the River is fresh water.

The District proposes to buy out and remove homes and businesses in the floodplain to allow the River to widen or meander during high flows, thus creating a more natural riverine system. Most of the City's levees will be removed or set back. The District intends to own all of the land within the Project boundaries. These lands will be preserved as is or converted into wetlands, tidal or tiered marshes, and riparian habitat.

The River has been classified as an impaired water body due to excessive sedimentation, nutrients, and bacteria. The Project will enhance water quality by returning the River, Napa Creek, and the estuary to a more natural state. This will increase the quantity and quality of wetlands and improve the riparian vegetation. The wetlands will create a more efficient system of nutrient removal, and the riparian vegetation will help stabilize the river banks. In addition, dry weather runoff and the first flush from storm events from the urban area will be filtered through wetlands or tiered marshes, thus removing significant concentrations of pollutants before reaching the River. The estuary will be enhanced and expanded by removing the existing system of levees that separate the River channel from its floodplains and marshlands and managing the estuary for habitat development. Staff has determined that the water quality and estuary enhancement portions of the Project qualify for SRF loan funding as nonpoint source and estuary enhancement projects.

The Project is consistent with the Comprehensive Conservation and Management Plan (CCMP) of the San Francisco Estuary Project. Actions called for in the CCMP that are supported by the Project include:

• Providing flood protection in a manner that is consistent with geomorphic principles and protective of the aquatic and riparian habitats;
• Restoring adjacent riverine wetlands;
• Restoring and enhancing riparian habitat;
• Improving habitat for endangered, threatened, or special status species (splittail, steelhead, salt marsh harvest mouse, possibly clapper rail, and others are found in the project area);
• Reconnecting portions of the floodplain with the River;
• Improving regional monitoring by developing adaptive monitoring; and
• Developing a management program for the post-construction phase of the project.
• The management program for the estuarine, riparian, and wetland habitats will be implemented by the Department of Fish and Game (DFG) and the District through a Project Cooperation Agreement with the U.S. Army Corps of Engineers (USACOE). After purchase of the land, the District will convey most of the acreage to DFG to assure that it is maintained as open space and habitat in perpetuity. Lands that are not conveyed to DFG will be monitored and maintained by the District in accordance with the Project Cooperation Agreement.
• The Project will address soil contamination from petroleum products in the vicinity of Oil Company Road. Oil Company Road is a historic road accessing the City's heating fuel storage area and more recently was used to transport gasoline and diesel fuel. Heating fuel, gasoline, and diesel fuel were transported by barges up the River to bulk storage facilities on Oil Company Road. The soils were contaminated when the petroleum products were spilled during transfer from the barges to the storage facilities or to trucks. The District will purchase the properties on Oil Company Road and convert them into marshland. The oil companies operating in the area have settled with the District on a parcel by parcel case. The oil companies will either remove or pay the District to remove these contaminated soils. A condition of the SRF loan agreement will be that the District indemnify the State Water Resources Control Board (SWRCB) from any liability resulting from contaminated soils.
• The total cost of the Project will be approximately $200 million. The USACOE will provide $80 million. The District's share of the cost is approximately $78 million. The remaining cost will be funded through grants and other sources. Approximately $38 million of the District's share is for land acquisition. The requested loan amount of $34 million would be used to purchase approximately 720 acres of land that will directly benefit water quality and estuary enhancement. The purchased lands will consist of the following:
• Emergent tidal marsh: 422 acres
• Open water/tidal mudflats: 16 acres
• Seasonal wetlands: 136 acres
• High value woodlands: 122 acres
• Riparian forest and scrub-shrub: 21 acres
• Shaded riverine aquatic cover: 3 acres
• The $4 million for land acquisitions unrelated to water quality or estuary enhancement and $40 million of other costs will come from the sale of revenue bonds. Repayment of the SRF and retirement of the revenue bonds will come from a one-half percent increase in sales tax passed by the required two-thirds majority of voters in Napa County.
• The District requests SRF loans for the following amounts in these Fiscal Years (FY):
• FY 1998-99: $7 million
• FY 1999-00: $10 million
• FY 2000-01: $7 million
• FY 2001-02: $5 million
• FY 2002-03: $5 million
• There currently are not enough funds in the Repayment Account for FY 1999-00. For this reason, it is requested that approval of $10 million for the Project in FY 1999-00 is subject to SWRCB receiving a Federal Capitalization Grant or that another source of funds become available for that fiscal year.

The Project represents a consortium of the District, the USACOE, the City, and the Community Coalition for Napa Flood Management. There is widespread support and interest in this project. Project planning involved 27 local stakeholder organizations, 23 governmental agencies, and hundreds of local citizens.
• A Final Environmental Impact Report to satisfy the California Environmental Quality Act (CEQA) is scheduled to be certified by the applicant in April 1999. The District has applied to the San Francisco Bay Regional Water Quality Control Board for CWA section 401 Water Quality Certification and anticipates certification in May 1999.
• The Project is expected to proceed in the spring of 1999. For this reason, the Project Priority List for FY 1998-99 needs to be updated to include the Project.
• POLICY ISSUE: Should the SWRCB:
• 1. Approve updating the statewide SRF Project Priority List for the FY 1998-99 to include the Project and
• 2. Approve an SRF loan of $34 million over five FYs for the Project with approval of $10 million in FY 1999-00 subject to SWRCB receiving a Federal Capitalization Grant or another source of funds becoming available for that fiscal year?
• Should the approvals be contingent upon:
• 1. The District entering into an SRF loan agreement with the SWRCB by April 2000;
• 2. The District adopting and certifying the CEQA documentation prior to loan agreement;
• 3. The SRF loan agreement containing a condition that the District indemnifies the SWRCB from any liability resulting from contaminated soils on any parcels purchased with SRF funds; and
• 4. The District providing an annual report to the SWRCB evaluating the effectiveness of the Project in removing sediments, nutrients, and other nonpoint source pollutants caused by urban runoff and upstream agricultural activities?
• This report shall meet the following criteria:
• The first report shall be submitted one year after Project completion with subsequent reports submitted annually thereafter for five years.
• The reports will be prepared by an independent, third party consultant selected by the District subject to approval by the SWRCB Contract Manager.

The SRF account balances, anticipated repayment amounts, and project approvals under consideration by the SWRCB in April 1999 are as follows:
 

	FFY	FFY	FFY	FFY	FFY	FFY
	1998-99	1999-00	2000-01	2001-02	2002-03	2003-04
	SRF Account	Repayment	Repayment	Repayment	Repayment	Repayment
Repayments per Res. 99-011:	$67,037,595	$76,374,255	$85,349,780	$85,351,354	$85,351,354	$85,351,354
125% Repayments:		95,467,819	106,687,225	106,689,193	106,689,193	106,689,193
FFY 98 Carryover:	28,133,901
FFY 98 Fed. Cap. Grant:	22,146,937
FFY 99 Fed. Cap. Grant:	92,461,850
CWG funds trans. per Res. 99-011:	8,161,062
WQCF funds trans. per Res. 99-011	1,632,212
1996 Bond Funds:	39,825,821
SMIF Interest (Estimated)	12,000,000
Local Match equivalent:	15,837,226
Previous Commitments:	255,337,180	93,280,341	74,135,205	65,810,000	48,036,000	0
Subtotal:	$31,899,423	2,187,478	32,552,020	40,879,193	58,653,193	106,689,193
Santa Ana River W. P. A. 4452-110	$5,000,000	$01	$10,000,000	$6,700,000
Adopt-a-Watershed 6059-110	$600,000
Napa River F.C. & W.C.D. 6061-110	$7,000,000	$02	17,000,000	$5,000,000	$5,000,000
Balance:	$19,299,423	$2,187,478	$5,552,020	$29,179,193	$53,653,193	106,689,193

1.Construction schedule for Reaches I, II, III, and V will require a commitment of funds during FFY 1999-00. Adequate funds are not currently available from projected repayments during that FFY. However, the Division is working on a plan to make funding needed for construction available during this time. The amount needed in FFY 1999-00 will be funded either from these additional funds if they become available, or, from the Capitalization Grant expected to be received from the USEPA. An equal amount will be deducted from the FFY 2000-01 and 2001-02 repayment commitments shown in this schedule.

2. The construction schedule for this project will require a commitment of $10 million during FFY 1999-00. Adequate funds are not currently available from projected repayments during that FFY. The amount needed in FFY 1999-00 will be funded from the Capitalization Grant expected to be received from the USEPA and an equal amount will be deducted from the FFY 2000-01 repayment commitments shown in this schedule.

RWQCB IMPACT: Yes, San Francisco Regional Water Quality Control Board.

STAFF RECOMMENDATION: That the SWRCB:

1. Approve updating the statewide SRF Project Priority List for the: FY 1998-99 to include the Project and

2. Approve an SRF loan of $34 million over five FYs for the Project with approval of $10 million in FY 1999-00 subject to SWRCB receiving a Federal Capitalization Grant or another source of funds becoming available for that fiscal year.

That the approvals should be contingent upon:

1. The District entering into an SRF loan agreement with the SWRCB by April 2000;
2. The District adopting and certifying the CEQA documentation prior to loan agreement; and
3. The SRF loan agreement containing a condition that the District indemnifies the SWRCB from any liability resulting from contaminated soils on any parcels purchased with SRF funds.
4. The District providing an annual report to the SWRCB evaluating the effectiveness of the Project in removing sediments, nutrients, and other nonpoint source pollutants caused by urban runoff and upstream agricultural activities.

• The first report shall be submitted one year after Project completion with subsequent reports submitted annually thereafter for five years.
• The reports will be prepared by an independent, third party consultant selected by the District subject to approval by the SWRCB Contract Manager.

1. The Napa County Flood Control and Water Conservation District (District) has requested a State Revolving Fund (SRF) loan of $34 million over five fiscal years (FYs) for the Napa River/Napa Creek Flood Protection and Estuary Restoration Project (Project).

2. The Project will enhance water quality by improving sediment transport and nutrient removal in the Napa River system.

3. The Project will create over 700 acres of habitat for a variety of aquatic plants, animals, and waterfowl.

4. The District is scheduled to complete a Final Environmental Impact Report to comply with the California Environmental Quality Act (CEQA) in April 1999.

5. The Project qualifies for an SRF loan under both sections 319 and 320 of the Federal Clean Water Act.

6. The Project is not currently on the SRF Project Priority List for FY 1998-99.

7. There may be soil contamination on some parcels purchased through the SRF.

THEREFORE, BE IT RESOLVED THAT:

The State Water Resources Control Board (SWRCB):

1. Approves updating the statewide SRF Project Priority List for the FY 1998-99 to include the Project and

The approvals are contingent upon:

1. The District entering into an SRF loan agreement with the SWRCB by April 2000;

2. The District adopting and certifying the CEQA documentation prior to loan agreement; and

1. The SRF loan agreement containing a condition that the District indemnifies the SWRCB from any liability resulting from contaminated soils on any parcels purchased with SRF funds.
2. The District providing an annual report to the SWRCB evaluating the effectiveness of the Project in removing sediments, nutrients, and other nonpoint source pollutants caused by urban runoff and upstream agricultural activities.

• The first report shall be submitted one year after Project completion with subsequent reports submitted annually thereafter for five years.
• The reports will be prepared by an independent, third party consultant selected by the District subject to approval by the SWRCB Contract Manager.

Maureen Marché

Administrative Assistant to the Board