ITEM 2

SUBJECT

WATER RECLAMATION LOAN PROGRAM, REQUEST OF SANTA MARGARITA WATER DISTRICT FOR LOAN APPROVAL OF NONDOMESTIC WATER PROGRAM EXPANSION – GROUP 1 (ORANGE COUNTY)

DISCUSSION

The Clean Water Bond Law of 1984 established the Water Reclamation Account and provided $25 million for low interest rate loans to local agencies for design and construction of wastewater reclamation projects with a $10 million statutory cap per project. The 1984 Bond Law included a revolving fund which allowed loan repayments to be available for new loans. About $26.7 million in interest and repayments have been received. An additional $30 million was authorized for loans in the Clean Water and Water Reclamation Bond Law of 1988. At the July 19, 1990 meeting, the State Water Resources Control Board (SWRCB) authorized the use of $10 million from the Clean Water Bond Guarantee Fund for reclamation projects. The Safe, Clean, Reliable Water Supply Act (1996 Bond Law) provided another $60 million for water recycling projects, including a revolving fund, and redirected loan repayments from the 1988 Bond Law into the Water Recycling Subaccount of the 1996 Bond Law. A total of $74.9 million has been obligated for water recycling loan and grant commitments, leaving $79.8 million available for new loans.

In April 1997, the SWRCB approved the revised guidelines for the Water Recycling Loan Program (WRLP), under which the reclamation account of the 1984, 1988, and the 1996 Bond Laws are administered. Projects are approved on a first ready basis and loan contracts will be issued after award of construction contract for the actual bid amount plus an allowance of 15 percent for engineering, legal, and administrative costs. Under SWRCB policy, no single project may receive more than $15.0 million for design and construction for loans made from 1996 Bond Law funds.

The Santa Margarita Water District (SMWD) has applied for a WRLP loan to construct the Nondomestic Water Program Expansion–Group 1 project, consisting of tertiary treatment, operational storage, pump stations, and recycled water pipelines. This project will deliver 1,451 acre-feet of recycled water to irrigate a golf course, various parks, schools, and other landscaped areas in several new areas currently under development. Most of the Group 1 Project will be constructed in 2000-2001. The District has a mandatory use ordinance for recycled water and requires new developments to have dual plumbing to receive recycled water when its available. This segment of the Project will cost $18.6 million and the SMWD has requested a loan for $14.6 million. The loan application has been reviewed by the Division of Clean Water Programs (DCWP). The DCWP has determined that the proposed project complies with the legal and policy requirements.

The Water Recycling Funding (WRF) Guidelines provide that facilities for undocumented future demands are not eligible. The ultimate SMWD water recycling project will include two future additional construction groups that will expand the recycled water distribution system into areas which will be developed in the next three to five years. The District has requested that we reserve eligibility in the treatment, pumping, and storage facilities to accommodate the future users in the next two construction groups. The DCWP staff has concluded that reserving eligible capacity for this project is a reasonable request and proposes to amend the WRF Guidelines to allow reservation of capacity for eligible facilities for up to five years where construction is on going. In the meantime, DCWP staff requests the SWRCB to approve reserving eligible capacity for this project.

The SMWD prepared an Initial Study/Negative Declaration which was distributed to the public and

circulated through the State Clearinghouse (SCH# 99091002) for review from September 1, 1999

through September 30, 1999. The District held a public hearing on October 15, 1999. During the

review period, the District received four comment letters regarding potential impacts to federally listed

species, other biological resources, undiscovered cultural resources, wetlands, surface waters and

recreational facilities. The District considered the comments and the District’s Board of Directors

approved the project and adopted the Negative Declaration on October 15, 1999. A Notice of

Determination was filed with the Orange County Clerk and the Governor’s Office of Planning and

Research on October 19, 1999.

SWRCB staff proposes that the preliminary loan commitment will expire if final Plans and Specifications submittal has not been received by January 26, 2001 for the last contract of the Group 1 facilities. In accordance with the WRF Guidelines, the Office of Water Recycling (OWR) may approve up to a 90-day extension for good cause.

POLICY ISSUE

Should the SWRCB offer a WRLP loan to the Santa MargaritaWater District? Should the SWRCB reserve eligible capacity for the future phases of this project for a five-year period? Should the SWRCB, in accordance with the WRF Guidelines, condition this approval by requiring expiration of the preliminary loan commitment if final Plans and Specifications submittal has not been received by January 26, 2001?

RWQCB IMPACT

Region 9, San Diego

FISCAL IMPACT

The proposed Group 1 water recycling project will be funded with $10 million from the 1984 Bond Law and $4.6 million from either the 1996 Bond Law or the proposed 2000 Bond Law, should it pass in March. A total of $15.8 million is available from the 1984 Bond Law and $69.8 million is uncommitted from the 1996 Bond Law. SWRCB approval of the $14.6 million loan will leave a balance of $5.8 million available from the 1984 Bond funds and $58.2 from the 1996 Bond funds for additional recycling loans.

STAFF RECOMMENDATION

The SWRCB adopt a resolution (1) approving the proposed project, including reservation of eligible capacity for five years for the future phases associated with this project, (2) authorizing a loan to the Santa Margarita Water District with a repayment period of 20 years and the first repayment due two (2) years after the date of the loan contract, and (3) approving an expiration date for the preliminary loan commitment if the milestone date for the Plans and Specifications submittal are not met.

_______________________________________________________________________________________

DRAFT January 21, 2000

STATE WATER RESOURCES CONTROL BOARD

RESOLUTION NO. 2000-__

APPROVAL OF A WATER RECLAMATION LOAN PROGRAM LOAN TO

SANTA MARGARITA WATER DISTRICT FOR CONSTRUCTION OF NONDOMESTIC WATER PROGRAM EXPANSION-GROUP 1

(ORANGE COUNTY)

WHEREAS:

1. The Clean Water Bond Law of 1984 (1984 Bond Law), the Clean Water and Water Reclamation Bond Law of 1988

(1988 Bond Law), and the Safe, Clean, Reliable Water Supply Act (1996 Bond Law) established the Water Recycling Loan Program (WRLP) to provide financial assistance for the design and construction of cost-effective water recycling projects;

2. The 1984 Bond Law established the revolving Water Reclamation Account and approved $25 million for loans with a $10 million statutory cap per project. The repayments from these loans are returned to the revolving account and are available for new loans;

3. The 1988 Bond Law provides $30 million for loans for water reclamation projects. An additional $10 million from the Clean Water Bond Guarantee Fund was authorized for reclamation project loans. The repayments of these loans were initially returned to the State General Fund;

4. The 1996 Bond Law established a Water Recycling Subaccount for low interest loans for design and construction of water recycling projects and amended the 1988 Bond Law funds to redirect loan repayments to the 1996 Subaccount;

5. A loan application was submitted by the Santa Margarita Water District (SMWD) requesting funding for construction of the first segment of their Nondomestic Water Program Expansion project (Group 1). The Division of Clean Water Programs staff has reviewed the application, planning documents and other supporting information for the project and has determined that the submitted documents comply with the WRLP Guidelines;

6. The construction for this project spans six years with Group 1 facilities covering the first two years. The SMWD has requested reservation of eligible capacity in the treatment, pumping and operational storage for the future phases. Reserve capacity is currently not provided for in the Water Recycling Loan Program, however, staff are proposing to amend the policy to allow this change; and

7. The Santa Margarita Water District has adopted a Mitigated Negative Declaration (State Clearinghouse No. 99091002) prepared for the project, which has been reviewed and considered and it has been determined that the project will not result in any significant environmental impacts.

THEREFORE BE IT RESOLVED THAT:

The State Water Resources Control Board:

1. Approves a WRLP loan of $14.6 million to the Santa Margarita Water District for construction of their Nondomestic Water Program Expansion-Group 1 project. Ten million dollars of this loan will come from the 1984 Bond Law funds and $4.6 million will come from either the 1996 Bond Law or the proposed 2000 Bond Law. The WRLP loan contract will have a repayment period of twenty (20) years, and the first loan repayment will be due two (2) years after the date of the loan contract.

2. Approves reservation of eligible capacity for five years for treatment, pumping, and operational storage for future phases of this project.

3. Will withdraw this preliminary WRLP loan if the final Plans and Specifications submittal has not been received by January 26, 2001. The Division of Clean Water Programs may approve up to a 90-day 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 February 17, 2000.

Maureen Marché

Administrative Assistant to the Board