HomeMy WebLinkAbout04.c. Review draft Position Paper to consider adopting Resolution Nos. 2018-__ to 2018-__ regarding funding eligibility from the California State Water Resources Control Board (SWRCB) Clean Water State Revolving Fund (SRF) for the Solids Handling Facilit Page 1 of 20
Item 4.c.
CENTRAL SAN BOARD OF DIRECTORS
POSITION PAPER
DRAFT
MEETING DATE: NOVEMBER 20, 2018
SUBJECT: REVIEW DRAFT POSITION PAPER TO CONSIDER ADOPTING
RESOLUTION NOS. 2018- TO 2018- REGARDING FUNDING
ELIGIBILITY FROM THE CALIFORNIA STATE WATER RESOURCES
CONTROL BOARD (SWRCB) CLEAN WATER STATE REVOLVING FUND
(SRF) FOR THE SOLIDS HANDLING FACILITY IMPROVEMENTS
PROJECT, DISTRICT PROJECT 7348
SUBMITTED BY: INITIATING DEPARTMENT:
RUSSELL LEAVITT, ENGINEERING ENGINEERING AND TECHNICAL SERVICES-
ASS I STANT I I I PDS-PLANNING AND APPLIED RESEARCH
REVIEWED BY: DAN FROST, SENIOR ENGINEER
DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION
MANAGER
JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL
SERVICES
PHILIP LEI BER, DIRECTOR OF FINANCE AND ADMI NI STRATI ON
ISSUE
The Board of Directors (Board) approval of the Solids Handling Facility Improvements Project (DP 7348)
is required prior to the filing of a Notice of Exemption under Central San's California Environmental Quality
Act (CEQA) Guidelines and to submit an application to q ualify for f und ing eligibilityfrom the State
Revolving Fund (SRF).
BACKGROUND
The Solids Handling Facility Improvements Project is intended to address aging infrastructure,
sustainability, and regulatory issues. Results from the pre-design effort confirmed that the two, existing
multiple hearth furnaces (MHFs) have more than 20 years of service life remaining; that the MHFs are not
capacity constrained; and that related solids handling systems require replacement or improvement. This
work will ensure the reliable operation of the solids handling equipment and air emissions in compliance
with all regulatory requirements. These improvements include:
• Sludge Blending and Mixing
• Dewatering and Cake Pumping
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 108 of 159
Page 2 of 20
• Ash Handling Equipment
• Air Emissions Control Equipment
• MHF Improvements
• Seismic Improvements for both the building and MHFs
• Electrical and Control Systems Improvements
The location of the project area is shown on Attachment 1. Construction work will include demolition of
existing lime storage, polymer storage, and sludge mixing tanks. New lime and polymer tanks will be
installed. New sludge blending tanks will also be installed.Additional exterior work will include demolition of
existing ash conveyance equipment and installation of new ash storage and conveyance facilities near the
Solids Conditioning Building (SCB).
Construction work inside the SCB will primarily include the replacement of existing equipment, including
the replacement of associated electrical power and controls infrastructure. Seismic reinforcing of the SCB
and MHFs involve significant modifications to each structure, includes filling in a number of open bay
floors, placement of shear walls throughout the SCB, and isolation of the MHFs from the SCB structure.
This approval would not include the award of a construction contract. Such an approval will be considered
at a later time once project bidding has been completed. Meanwhile, staff would proceed with an
application for funding eligibility with the SRF, which offers low cost financing for a wide variety of water
quality projects. Completing the CEQA compliance process at this time with the filing of a Notice of
Exemption would improve Central San's funding eligibility.
The SRF funding application, which is required to be filed by December 31, 2018 for funding eligibility
commencing on the start of the next fiscal year(J my 1, 2019), also requires the inclusion of certain Board
resolutions related to the financing and authorization to submit an SRF application (Attachment 2).Another
resolution pledges revenues and funds to support repayment of the SRF loan (Attachment 3). This puts
the SRF loan repayment on parity with Central San's outstanding 2018 Revenue Bonds. The resolution
has been reviewed by Central San's bond counsel (Jones Hall), and District counsel (Meyers Nave).
Additionally, a reimbursement resolution (Attachment 4) provides Central San with the potential to
ultimately fund project expenditures from SRF loan proceeds prior to the approval by the State Water
Board of the Project Funds, or the issuance of debt issued by State Water Board used to fund the SRF
loan to Central San. Such reimbursement resolutions are typical in the use of tax-exempt financing and will
allow for maximum flexibility and extent of low-cost financing for the Solids Handling Facility I mprovements
Project.
CE A
Staff has concluded that this project is exempt from CEQA under Central San's CEQA Guidelines
Section 15301, since it involves minor alterations to existing public facilities involving no expansion of use,
and CEQA Guidelines Section 15302, since it involves replacement of existing public facilities at the
same location and with the same purpose.Approval of this project will establish the Board's independent
finding that this project is exempt from CEQA.
ALT ERNAT IVES/CONSIDERATIONS
The Board may delay or decline to approve the project. If these renovations are not constructed, the
conditions of this equipment will continue to decline, resulting in multiple maintenance issues and permit
violations.Additionally, the project could miss the chance to be eligible for SRF funding. The CEQA
process must be completed for funding eligibility from the SRF.
Alternative funding sources are also possible for the project, including funding directly through Central San
rate revenues, or through the issuance of revenue bonds instead of S RF loans. Neither is optimal.
Funding directly from rate revenues would (1) require rate increases beyond the levels previously
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 109 of 159
Page 3 of 20
conveyed to the Board in Central San's financial plan; and, (2) not optimally balance the funding of a long
lived asset with the asset's useful life, raising concerns about intergenerational equity. Funding the project
in part with revenue bond proceeds is the baseline expectation in Central San financial plan, however SRF
loans carry interest costs at roughly one-half the anticipated cost of revenue bonds. SRF loans are
optimal, if available, and Central San has strong incentives to compete for such funding, which the
adoption of the resolutions associated with this position paper will permit.
FINANCIAL IMPACTS
This position paper only approves the project for CEQA and funding eligibility request purposes, it does
not award a construction contract.
SRF funding eligibility could ultimately financially benefit Central San to a significant degree despite some
up-front and ongoing costs.
Costs to prepare a SRF application for the Solids project are estimated at up to $60,000 ($30,000 from
staff and an additional $30,000 for technical consultant services in support of the application preparation).
These up-front costs and other S RF associated project costs are significantly below the potential long-
term savings from the reduced SRF interest rate when compared to that of revenue bonds. I nterest and
other costs over the assumed 30-year term are significantly lower in an S RF issuance at 39% of the
borrowed amount versus 89% of the borrowed amount for Revenue Bonds based on reasonable
assumptions for the projected all-in cost of revenue bonds versus S RF loans. Comparing the present
value of total interest and principal payments of an SRF loan versus a revenue bond shows savings of
$19.6 million for SRF. This represents savings of 25% of the maximum borrowed amount assuming
revenue bonds (project cost and costs of issuance of$77.8 million). These significant savings exist even
assuming the following estimated incremental costs with SRF funding versus revenue bonds:
• Additional staff and consultant costs to apply for and comply with SRF loan requirements of an
additional $100,000 above those of a Revenue Bond issuance.
• Potentially higher bid costs for Davis Bacon and Buy-American material requirements; assumed at
3% of the presently assumed cost of the project.
COMMITTEE RECOMMENDATION
This Finance Committee reviewed this item at its November 20, 2018 meeting and...
RECOMMENDED BOARD ACTION
Staff recommends the Board of Directors adopt the three attached proposed resolutions (Attachments 2-
4), finding the Solids Handling Facility Improvements Project(DP 7348) is exempt from CEQA, directing
staff to file a Notice of Exemption with the Contra Costa County Clerk and the State of California,
authorizing the General Manager or his designee to be Central San's Authorized Representative in the
SRF funding eligibility process and any future financing agreement, adopting a pledge revenue and funds
resolution, and adopting a reimbursement resolution.
Strategic Plan Tie-In
GOAL TWO: Strive to Meet Regulatory Requirements
Strategy 1 - Strive to achieve 100%permit compliance in air, water, land, and other regulations
GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility
Strategy 2- Manage costs
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 110 of 159
Page 4 of 20
GOAL FIVE:Maintain a Reliable Infrastructure
Strategy 2- Facilitate long-term capital renewal and replacement
ATTACHMENTS:
1. Project Location
2. Proposed Resolution for CEQA and Authorization to Submit Application
3. Proposed Resolution to Pledge Revenues
4. Proposed Reimbursement Resolution
5. Presentation
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 111 of 159
Page 5 of 20
DETAIL*O-
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November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 112 of 159
Page 6 of 20
Attachment 2
RESOLUTION NO. 2018-
A RESOLUTION APPROVING THE SOLIDS HANDLING FACILITY
IMPROVEMENTS PROJECT (DISTRICT PROJECT 7348) FOR CEQA PURPOSES
AND FUNDING ELIGIBILITY FROM THE STATE REVOLVING FUND
WHEREAS, Central Contra Costa Sanitary District (the "Entity") will be seeking funding
for the Solids Handling Facility Improvements Project, District Project 7348 by applying
to the State of California's State Water Resources Control Board's (SWRCB) Clean
Water State Revolving Fund; and
WHEREAS, completion of the California Environmental Quality Act (CEQA)
documentation process would expedite State consideration of funding; and
WHEREAS, the Entity's staff has concluded that the project is exempt from CEQA
under the Entity's CEQA Guidelines Section 15301, since it involves minor alterations to
existing public facilities involving no expansion of use, and CEQA Guidelines Section
15302, since it involves replacement of existing public facilities at the same location and
with the same purpose.
BE IT RESOLVED by the Board of Directors of the Entity as follows:
THAT the Entity does hereby approve the Solids Handling Facility Improvements
Project, District Project 7348.
THAT the Entity does hereby independently find that this project is exempt from CEQA
for the reasons stated herein and directs staff to file a Notice of Exemption with the
Contra Costa County Clerk and the State of California under the Entity's CEQA
Guidelines.
THAT the General Manager (the "Authorized Representative") or his designee is hereby
authorized and directed to sign and file, for and on behalf of the Entity a Financial
Assistance Application for a financing agreement from the State Water Resources
Control Board for the planning, design, and construction of the Solids Handling Facility
Improvement Project (the "Project").
THAT this Authorized Representative, or his designee, is designated to provide the
assurances, certifications, and commitments required for the financial assistance
application, including executing a financial assistance agreement from the State Water
Resources Control Board and any amendments or changes thereto.
THAT the Authorized Representative, or his designee, is designated to represent the
Entity in carrying out the Entity's responsibilities under the financing agreement,
including certifying disbursement requests on behalf of the Entity and compliance with
applicable state and federal laws.
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 113 of 159
Page 7 of 20
Central Contra Costa Sanitary District
Resolution No. 2018-
Page 2 of 2
PASSED AND ADOPTED this 6th day of December, 2018, by the Board of Directors of
the Central Contra Costa Sanitary District by the following vote:
AYES: Members:
NOES: Members:
ABSENT: Members:
James A. Nejedly
President of the Board of Directors
Central Contra Costa Sanitary District
County of Contra Costa, State of California
COUNTERSIGNED:
Katie Young
Secretary of the District
Central Contra Costa Sanitary District
County of Contra Costa, State of California
Approved as to form:
Kenton L. Alm, Esq.
Counsel for the District
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 114 of 159
Page 8 of 20
Attachment 3
RESOLUTION NO. 2018-
A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT
FOR THE SOLIDS HANDLING FACILITY
IMPROVEMENTS PROJECT (DISTRICT PROJECT 7348)
PLEDGED REVENUES AND FUND(S)
WHEREAS, the Central Contra Costa Sanitary District (the "Entity") is a special district
duly organized and validly existing under the Sanitary District Act of 1923 (Health and
Safety Code 6400 et sec) and the laws of the State of California; and
WHEREAS, in September 2018, the Entity issued $15,250,000 in 2018 Wastewater
Revenue Refunding Bonds, Series A and $4,315,000 in 2018 Wastewater Revenue
Refunding Bonds, Series B (together, the "Bonds"); and
WHEREAS, the Bonds are secured by a pledge of, and payable from, (i) Tax Revenues,
consisting of the ad valorem property taxes received by the Entity, and (ii) Net
Revenues, consisting generally of gross revenues derived by the Entity in each Fiscal
Year from the ownership and operation of its wastewater collection and treatment
enterprise (the "Wastewater System") less the costs of operating and maintaining the
Wastewater System during each Fiscal Year, all as more specifically detailed in the
Indenture of Trust between the Entity and U.S. Bank National Association, as trustee,
dated September 1, 2018 (the "Indenture"), pursuant to which the Bonds were issued;
and
WHEREAS, the Entity has the right under the Indenture to incur additional obligations
that are secured by a pledge of and payable from Net Revenues and Tax Revenues on
a parity basis with the Bonds so long as, among other things, the Tax Revenues and
Net Revenues (excluding capacity fees) are at least equal to 125% of Maximum Annual
Debt Service on the Bonds and all parity obligations (including the parity obligations
proposed to be issued); and
WHEREAS, the Entity has the authority and power to finance the purchase of capital
improvements to the Wastewater System over time, and intends to finance the Project
(defined below) over time by entering into a financing agreement with the State Water
Resources Control Board; and
WHEREAS, the Entity desires to pledge the Tax Revenues and Net Revenues to
repayment of amounts due under the financing agreement with the State Water
Resources Control Board, which pledge is on a parity basis with the Entity's pledge in
favor of the Bonds under the Indenture.
(insert appropriate findings regarding intent, authority, and procedure)
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 115 of 159
Page 9 of 20
Central Contra Costa Sanitary District
Resolution No. 2018-
Page 2 of 3
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra
Costa Sanitary District (the "Entity") that:
1. The Entity dedicates and pledges (i) Tax Revenues consisting of the ad valorem
property taxes received by the District, and (ii) Net Revenues of the District and
(iii) all of the moneys held by the District in the Wastewater System Funds
(excluding the Debt Service Fund which is available only to Bondholders), in
each case, on a parity basis with the Bonds (as all such capitalized terms are
defined in the Indenture) to payment of any and all Clean Water State Revolving
Fund and/or Water Recycling Funding Program financing for the Solids Handling
Facility Improvements Project (the "Project") (insert 4-digit CWSRF Project
number)
2. The Entity commits to collecting such revenues and maintaining such fund(s)
throughout the term of such financing and until the Entity has satisfied its
repayment obligation thereunder unless modification or change is approved in
writing by the State Water Resources Control Board. So long as the financing
agreement(s) are outstanding, the Entity's pledge hereunder shall constitute a
lien in favor of the State Water Resources Control Board on the foregoing fund(s)
and revenue(s) without any further action necessary. So long as the financing
agreement(s) are outstanding, the Entity commits to maintaining the fund(s) and
revenue(s) at levels sufficient to meet its obligations under the financing
agreement(s).
PASSED AND ADOPTED this 6t" day of December 2018, by the Board of Directors of
the Central Contra Costa Sanitary District by the following vote:
AYES: Members:
NOES: Members:
ABSENT: Members:
James A. Nejedly
President of the Board of Directors
Central Contra Costa Sanitary District
County of Contra Costa, State of California
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 116 of 159
Page 10 of 20
Central Contra Costa Sanitary District
Resolution No. 2018-
Page 3 of 3
COUNTERSIGNED:
Katie Young
Secretary of the District
Central Contra Costa Sanitary District
County of Contra Costa, State of California
Approved as to form:
Kenton L. Alm, Esq.
Counsel for the District
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 117 of 159
Page 11 of 20
Attachment 4
RESOLUTION NO. 2018-
A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT
FOR THE SOLIDS HANDLING FACILITY
IMPROVEMENTS PROJECT (DISTRICT PROJECT 7348)
STATE REVOLVING FUND REIMBURSEMENT
WHEREAS, the Central Contra Costa Sanitary District (the "Agency") desires to finance
the costs of constructing and/or reconstructing certain public facilities and improvements
relating to its water and wastewater system, including certain treatment facilities,
pipelines and other infrastructure (the "Project"); and
WHEREAS, the Agency intends to finance the construction and/or reconstruction of the
Project or portions of the Project with moneys ("Project Funds") provided by the State of
California, acting by and through the State Water Resources Control Board (State
Water Board); and
WHEREAS, the State Water Board may fund the Project Funds with proceeds from the
sale of obligations the interest upon which is excluded from gross income for federal
income tax purposes (the "Obligations"), and
WHEREAS, prior to either the issuance of the Obligations or the approval by the State
Water Board of the Project Funds the Agency desires to incur certain capital
expenditures (the "Expenditures") with respect to the Project from available moneys of
the Agency; and
WHEREAS, the Agency has determined that those moneys to be advanced on and after
the date hereof to pay the Expenditures are available only for a temporary period and it
is necessary to reimburse the Agency for the Expenditures from the proceeds of the
Obligations.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra
Costa Sanitary District (the "Agency") that:
1. The Agency hereby states its intention and reasonably expects to reimburse
Expenditures paid prior to the issuance of the Obligations or the approval by the
State Water Board of the Project Funds; and
2. The reasonably expected maximum principal amount of the Project Funds is
$76,200,000; and
3. This resolution is being adopted no later than 60 days after the date on which the
Agency will expend moneys for the construction portion of the Project costs to be
reimbursed with Project Funds; and
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 118 of 159
Page 12 of 20
Central Contra Costa Sanitary District
Resolution No. 2018-
Page 2 of 2
4. Each Agency expenditure will be of a type properly chargeable to a capital
account under general federal income tax principles; and
5. To the best of our knowledge, this Agency is not aware of the previous adoption
of official intents by the Agency that have been made as a matter of course for
the purpose of reimbursing expenditures and for which tax-exempt obligations
have not been issued; and
6. This resolution is adopted as official intent of the Agency in order to comply with
Treasury Regulation §1.150-2 and any other regulations of the Internal Revenue
Service relating to the qualification for reimbursement of Project costs; and
7. All the recitals in this Resolution are true and correct and this Agency so finds,
determines and represents.
PASSED AND ADOPTED this 6th of December 2018, by the Board of Directors of
Central Contra Costa Sanitary District by the following vote:
AYES: Members:
NOES: Members:
ABSENT: Members:
James A. Nejedly
President of the Board of Directors
Central Contra Costa Sanitary District
County of Contra Costa, State of California
COUNTERSIGNED:
Katie Young
Secretary of the District
Central Contra Costa Sanitary District
County of Contra Costa, State of California
Approved as to form:
Kenton L. Alm, Esq.
Counsel for the District
November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 119 of 159
ter;
SOLIDS HANDLING FACILITY
IMPROVEMENTS PROJECT
APPROVAL FOR CEQA PURPOSES
AND FUNDING ELIGIBILITY
Finance Committee
November 20 , 2018
..... .....
Danea Gemmell
CIA
Planning and Development Services
Division Manager
PROJECT DESCRIPTION
Pre-design studies have identified the need to replace or improve
existing Treatment Plant solids handling systems to ensure
reliable operation of equipment and air emissions compliance
with regulatory requirements. These facilities include:
• Sludge Blending and Mixing
• Dewatering and Cake Pumping
• Ash Handling Equipment
• Air Emissions Control Equipment
• Multiple Hearth Furnaces (MHFs)
• Seismic Improvements for both the buildings and MHFs
• Electrical and Control Systems
CENTRALSAN
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PROJECT LOCATION
DETAIL
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DP 7348 Location 'j-0-MR 11 3
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CALIFORNIA ENVIRONMENTAL QUALITY ACT
(CEQA) COMPLIANCE
Staff has concluded this project is exempt under the
following CEQA Guidelines Sections:
• 15301 — Project involves minor alterations to existing public
facilities involving no expansion of use; and
• 15302 — Project involves replacement of existing public facilities
at the same location and with the same purpose.
aL4
Wat`� STATE REVOLVING FUND (SRF
HIGHLIGHTS
1 . Interest Rate - 50% of most recent General Obligation (GO)
Bond Rate at time of funding approval
• 1 .8% - 2%
2. Green Project Reserve (GPR) principle forgiveness program
up to $4 million; 50% of actual GPR costs and 75% for GPR
planning
3. Financing Term - up to 30 years or the useful life of the
project
4. Financing Amount - $10-$100 million typically
5. Repayment - Begins one year after completion of
construction
6. New Criteria implemented for SRF program
7. Applications due December 31 for consideration the following
year
CENTRALSAN
` 5
Roadmap • SRF Funding
Debt #1 Debt #2
$77 million $77 million
CY 2018 CY 2019 CY 2020 CY 20221
DFA publishes Solids Project Filter Plant DFA publishes Steam Aeration-
Adopt Climate Final Priority/ certified to start Project certified Final Priority/ Blower Project
Change Policy Fundability List in bidding after to start bidding Fundability List in certified to bid
June March after March June after March
Resolution to DFA originates DFA publishes Steam Aeration- DFA originates
Submit SRF Loan for Solids Final Priority/ Blower Project Loan for Steam
Application Project starts Fundability List in Loan Application Aeration-Blower
December June by December 31 Project December
Filter Plant DFA originates
CEQA Project Loan Loan for Filter
Determination Application by Plant Project
for Solids Project December 31 starts December
Solids Project
Loan Application Solids Project $80-$90 million
by December 31
0 Filter Plant Project $22 - $25 million
Steam Aeration-Blower System
Renovation Project $80 million
` 6
now CENTRALSAN
PROJECT FUNDING
• One possible source of funding is the California State Water
Resources Control Board SRF, which offers low-interest financing.
• Staff has begun preparing an application for funding eligibility with
SRF, but needs Board approval of:
• Submittal of the application
• Pledge of Revenues for Loan Repayment
• Reimbursement Resolution
• Completing the CEQA compliance process now will improve Central
San's funding eligibility.
• Requested approvals would not include the award of a construction
contract.
STAFF RECOMMENDATIONS
Adopt a resolution :
• finding the project exempt from CEQA;
• approving the Solids Handling Facility Improvements Project;
• directing staff to file a Notice of Exemption with the County
Clerk and the State; and
• authorizing the General Manager or his designee to be Central
San's Authorized Representative in the SRF funding eligibility
process and any future financing agreement.
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CENTRALSAN