HomeMy WebLinkAbout18. Adopt resolutions re funding eligibility from Clean Water State Revolving Fund (SRF) Page 1 of 20 Item 18. CENTRAL SAN CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: DECEMBER 6, 2018 SUBJECT: ADOPT RESOLUTION NOS. 2018-049 TO 2018-051 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- ASSISTANT I I I PDS-PLANNI NG AND APPLI ED RESEARCH REVIEWED BY: DAN FROST, SENIOR ENGINEER DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER JEAN-MARC PETIT, DIRECTOR OF ENGINEERINGAND TECHNICAL SERVICES PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION Roger S. Bailey General Manager 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 qualify for funding eligibility from the State Revolving Fund (SRF). December 6, 2018 Regular Board Meeting Agenda Packet- Page 99 of 202 Page 2 of 20 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 • 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(July 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 Improvements Project. CEQA 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. December 6, 2018 Regular Board Meeting Agenda Packet- Page 100 of 202 Page 3 of 20 ALTERNATIVES/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 SRF loans. Neither is optimal. Funding directly from rate revenues would (1) require rate increases beyond the levels previously 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 for staff and an additional $30,000 for technical consultant services in support of the application preparation). These up-front costs and other SRF associated project costs are significantly lower than the potential long-term savings from the reduced SRF interest rate when compared to that of revenue bonds. Interest and other costs over the assumed 30-year term are significantly lower in a SRF 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 SRF loans. Comparing the present value of total interest and principal payments of a 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 applyfor and complywith 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 matter was discussed with the Finance Committee on November 20, 2018. Member Pilecki was comfortable recommending Board approval; Chair Nejedly was not. Because the Committee was split on this matter, it is being presented to the full Board with no Committee recommendation. 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 101 of 202 Page 4 of 20 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 re-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 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 102 of 202 Page 5 of 20 DETAIL AREA a Martinez ♦` 4 "♦ ;242 Concord ` "•,�c'` Pleasant Hill ; ♦ 0 , I_ d 7� r, fl� IT M CO _O o � o� y J COCO M o i 0 Project �O Location o �ofC a Q� 4 E N a 0 800 District-Owned Property Feet c� N Solids Handling Facility Improvements Project Attachment 6 CENTRALSAN g Y p 1 � DP 7348 Location Z December 6, 2018 Regular Board Meeting Agenda Packet- Page 103 of 202 Page 6 of 20 ATTACHMENT 2 RESOLUTION NO. 2018-049 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. December 6, 2018 Regular Board Meeting Agenda Packet- Page 104 of 202 Page 7 of 20 Central Contra Costa Sanitary District Resolution No. 2018-049 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 105 of 202 Page 8 of 20 ATTACHMENT 3 RESOLUTION NO. 2018-050 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. December 6, 2018 Regular Board Meeting Agenda Packet- Page 106 of 202 Page 9 of 20 Central Contra Costa Sanitary District Resolution No. 2018-050 Page 2of3 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"). 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 107 of 202 Page 10 of 20 Central Contra Costa Sanitary District Resolution No. 2018-050 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 108 of 202 Page 11 of 20 ATTACHMENT 4 RESOLUTION NO. 2018-051 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 $89,600,000; 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 109 of 202 Page 12 of 20 Central Contra Costa Sanitary District Resolution No. 2018-051 Page 2of2 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 day 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 December 6, 2018 Regular Board Meeting Agenda Packet- Page 110 of 202 AMC ATTACHMENTS SOLIDS HANDLING FACILITY IMPROVEMENTS PROJECT APPROVAL FOR CEQA PURPOSES AND FUNDING ELIGIBILITY Board Meeting December 6 , 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 1%h2m PROJECT LOCATION DETAIL AREA L_ ;Martinez 3 4 4 CUfICOrd ^�+r Pleasant Hill 1 �z- c n� r � O / •p Project 00 Location d s o E i � 0 800 E omml===Emm= j District-Owned Properly Feet / Attachment g .41MICENTRALSAN Solids Handling Facility Improvements Project � DP 7348 Location 3 z R ■ a 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. AM ' 4 .' _ - ta�egaiei eeeie ieieeniig�geiiee i eei.e� i ege i iye�se� Wates 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% • Savings of $20 million over life of loan vs. revenue bonds 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 ` 5 M-8 .,; ■ . 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 18 - - 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. r6,`218 CENTRALSAN 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. • Adopt a pledge revenue and funds resolution. • Adopt a reimbursement resolution.