ITEM 14

SUBJECT

APPROVAL OF A STATE REVOLVING FUND (SRF) LOAN FOR THE CITY OF ESCONDIDO (CITY) FOR CONSTRUCTION OF TERTIARY TREATMENT IMPROVEMENTS AT THE HALE AVENUE RESOURCE RECOVERY FACILITY, SRF LOAN PROJECT

NO. C-06-4156-310

DISCUSSION

In accordance with the State Water Resources Control Board's (SWRCB) Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities (Policy), adopted on February 16, 1995, and amended on June 18, 1998, projects on the adopted Statewide priority list need SWRCB approval to receive a SRF loan. Pursuant to SRF Policy Section IV.E.3, the Statewide priority list may be adjusted or amended by the SWRCB at any time for good cause subject to approval by Environmental Protection Agency. 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 August 17, 1999, the Division issued Facilities Plan Approval to the City for construction of the tertiary treatment improvements at the Hale Avenue Resource Recovery Facility (HARRF) and the City agreed in writing with the approval on August 26, 1999.

The City is located in southern California north of San Diego. Escondido and the City of San Diego jointly own and operate the HARRF, an 18 million gallon per day (MGD) secondary wastewater treatment plant. The HARRF treats an average daily flow of about 15.5 MGD originating from the City and Rancho Bernardo area of San Diego County, and discharges its effluent to the Pacific Ocean through a 16 mile land and ocean outfall.

The existing HARRF outfall system has adequate capacity for conveying treated wastewater during dry months and periods of moderate precipitation. The outfall system consists of a 14 mile land section from the HARRF to a pressure regulating station just upstream of a connection with the San Elijo Joint Powers Authority (JPA) land and ocean outfall. The purpose of the pressure regulating station is to attenuate flows in the San Elijo JPA outfall during peak flow periods, so that hydraulic pressure does not exceed the outfall design pressure in the sections downstream of the station. Due to the pre-set pressure, Escondido’s flow is limited to 19.2 MGD. When effluent flow exceeds 19.2 MGD, the HARRF is forced to discharge secondary effluent to Escondido Creek in violation of the current Waste Discharge Requirements.

As a result, unpermitted discharges of secondary effluent occurred in the early 1990’s during heavy rainfall periods. The City undertook a Sewer System Evaluation Survey and implemented an Infiltration and Inflow (I/I) correction program in the mid 1990’s which helped attenuate peak flows during storm events. However, while peaks have been attenuated since the I/I correction, it is impossible to completely eliminate I/I cost effectively. Unpermitted discharges to Escondido Creek will occur because of continuing population growth coupled with peak wet weather flows.

The City’s design engineer determined that the cost effective solution to this problem is to build tertiary treatment facilities at the HARRF. The tertiary plant would be capable of providing 9 MGD of Title 22 filtered and disinfected water for discharge to Escondido Creek. The City may only discharge when flow exceeds the capacity of the outfall and all storage capability has been utilized. On September 9, 1998, the San Diego Regional Water Quality Control Board (SDRWQCB) adopted Order No. 98-10, which permits intermittent wet weather discharge to Escondido Creek. The discharge requirements describe the conditions which must be met before the City can discharge. The proposed tertiary facilities consist mainly of filters, ultraviolet radiation disinfection, and various improvements to the secondary plant which would enable the production of Title 22 effluent.

The City has provided the Division with a milestone schedule containing a construction start date (Notice to Proceed) of October 18, 1999. In accordance with the SRF Policy Section IX.(I), the sunset date for beginning construction is hereby established as October 18, 1999. The Division may approve up to a 90 day time extension of this date for good cause.

The City meets about 70 percent of its water needs through purchases of imported water from the San Diego County Water Authority (Water Authority). 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. The remaining 30 percent of the domestic water supply demand is provided by local surface water and/or watershed reservoirs. The water sources are secured through contracts and agreements and City water right ownership. Additionally, the City is planning to implement a water recycling program which will initially provide about 3,200 acre-feet per year. 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 20 years. The City is a signatory to the “Memorandum of Understanding Regarding Urban Water Conservation in California”, and therefore meets the SRF Policy requirements for water conservation.

The City prepared a Draft Environmental Impact Report (EIR) for the proposed project which was distributed for public review and circulated through the State Clearinghouse (SCH# 98031083) from March 16, 1998, through May 4, 1998. The City held two public meetings: one in the City of Encinitas on April 20, 1998, and the other in the City of Escondido on April 27, 1998. During the review period, the City received eight oral comments and 18 comment letters from individuals and local, state and federal agencies. In July 1998, the City prepared a Final EIR which included comments, responses, and text revisions based on comments received. The City Council certified the Final EIR on July 22, 1998, and filed a Notice of Determination with the San Diego County Clerk and the Governor’s Office of Planning and Research on July 28, 1998.

The estimated SRF loan eligible project cost is $26.8 million. The City requests the SWRCB approve a loan of $26.8 million for this project and agrees to pay back the loan in accordance with the SRF Policy.

POLICY ISSUE

1. Should the SWRCB place the City’s Tertiary Treatment Plant Improvement Project at the Hale Avenue Resource Recovery Facility on the fundable portion of the FY 1999/2000 Statewide Project Priority List?

2. Should the SWRCB approve SRF loan funding for the proposed project, including a 20 year period for repayment, with the first repayment due one year after completion of construction?

3. Should the SWRCB condition this approval by requiring expiration of the preliminary loan commitment if Notice to Proceed for the start of construction is not issued by October 18, 1999?

RWQCB IMPACT

SDRWQCB. The project will enable the City to meet the SDRWQCB discharge requirements by eliminating unpermitted discharges of secondary effluent during wet weather periods. The discharge of Title 22 effluent when necessary meets the Basin Plan requirements for discharge of treated wastewater to surface waters.

FISCAL IMPACT

The SWRCB adopted Resolution No. 99-40 on May 20, 1999, which changed the method for determining the amount of funding available for new loans to a system based on the availability of cash to make disbursements to the project under consideration by the SWRCB. A minimum cash balance of $25,000,000 will be maintained. The SRF account balances, anticipated repayment amounts, and project approvals under consideration by the SWRCB in October 1999 are as follows:

	SFY	SFY	SFY	SFY	SFY
	1999-00	2000-01	2001-02	2002-03	2003-04
	___________	__________	__________	_________	_________
Beginning Balance:	$527,645,913	$273,799,338	$88,764,928	$30,297,438	$83,190,774
Est. Repayments:[1]	74,275,604	92,681,564	102,745,219	116,211,062	139,765,070
Cap Grants:[2]	55,000,000	0	0	0	0
Est. SMIF Interest:	10,000,000	6,000,000	1,000,000	1,000,000	1,000,000
Est. Disbursements:[3]	-379,722,179	-254,015,974	-142,112,709	-64,317,726	-0
Subtotal:	$287,199,338	$118,464,928	$50,397,438	$82,690,774	$223,455,844
City of Escondido 4156-310	-5,400,000	-10,800,000	-10,600,000
City of Patterson 4508-110	0
Bodega Bay PUD 4615-110		-1,900,000
Elsinore Valley MWD 4686-110	-8,000,000	-17,000,000	-8,500,000
Glenn Co. Res. Con. Dist. 6063-110			-1,000,000

Balance:	$273,799,338	$88,764,928	$30,297,438[4]	$83,190,774	$223,955,844

STAFF RECOMMENDATION

That the SWRCB place the City’s Tertiary Treatment Plant Improvement Project at the Hale Avenue Resource Recovery Facility on the FY 1999/2000 Statewide project Priority List, and that the SWRCB adopt a resolution approving a SRF loan of $26.8 million for the proposed project, with a period of 20 years, and with the first repayment due one year after completion of construction. In accordance with Section IX.(I) the February 16, 1995, SRF Policy amended on June 18, 1998, the proposed resolution includes an expiration date for this preliminary loan commitment if Notice to Proceed for construction is not issued by October 18, 1999.

_______________________________________________________________________

DRAFT September 27, 1999

STATE WATER RESOURCES CONTROL BOARD

RESOLUTION NO. 99-__

APPROVAL OF A STATE REVOLVING FUND (SRF) LOAN FOR THE CITY OF ESCONDIDO

(CITY) FOR CONSTRUCTION OF TERTIARY IMPROVEMENTS AT THE HALE AVENUE RESOURCE RECOVERY FACILITY, SRF LOAN PROJECT NO. C-06-4156-310

WHEREAS:

1. The State Water Resources Control Board (SWRCB), on February 16, 1995, adopted the “Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities,” and revised it on June 18, 1998;

2. The SWRCB, on June 2, 1999, adopted the Federal Fiscal Year (FFY) 1999/2000 SRF Loan Program Priority List, and also may adjust or amend its Statewide Project Priority List at any time to include new projects;

3. The Division of Clean Water Programs (Division) has approved the facilities plan;

4. The City is signatory to the “Memorandum of Understanding Regarding Urban Water Conservation in California”; and

5. The City certified an EIR (State Clearinghouse No. 98031083) which has 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 (i) water quality impacts which will be mitigated by opening the San Elijo lagoon mouth to provide tidal flushing if discharges occur when the lagoon mouth is closed, and (ii) impacts to identified historic properties which will be avoided by fully delineating the archaeological site boundary, creating a buffer zone between the archaeological site and the graded staging area, and using orange construction fencing to definitively and noticeably mark the archaeological site boundary and buffer zone.

b) With respect to other potentially significant environmental impacts identified in the environmental document, 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:

1. The State Water Resources Control Board places the City of Escondido’s Tertiary Treatment Plant Improvement Project at the Hale Avenue Resource Recovery Facility on the FY 1999/2000 Statewide Project Priority List, and

2. Approves a SRF loan of $26.8 million to the City of Escondido for the construction of the tertiary treatment improvements at the Hale Avenue Resource Recovery Facility. The repayment period shall be 20 years, and the first repayment due one year after completion of construction.

3. Will withdraw this preliminary SRF loan commitment if Notice to Proceed for construction is not given by October 18, 1999. The Division may approve up to a 90 day time extension for good cause.

CERTIFICATION

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 21, 1999.

Maureen Marché

Administrative Assistant to the Board

[1] Est. repayments include repayments from existing loans and from loans expected to be executed in the next few years for projects with existing commitments.

[2] An EPA Capitalization Grant of $55,000,000 for SFY 2000 is anticipated. However, the federal budget is not approved at this time.

[3] Estimated disbursements includes disbursements remaining on existing loans as well as disbursements anticipated on loans executed for projects with existing commitments (including FY2000 commitments). The Division will revise the estimated disbursements total each month as cash draw forecasts are updated.

[4] The cash balance on June 30, 2002, is estimated to be $5,297,438 above the level needed to maintain a $25,000,000 reserve.