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HomeMy WebLinkAbout13. Authorize the General Manager to proceed with the execution of SRF Loan Agreement documents for Solids Handling Facility Improvements Page 1 of 11 Item 13. CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: OCTOBER 21, 2021 SUBJECT: AUTHORIZE THE GENERAL MANAGER TO PROCEED WITH THE EXECUTION OF STATE REVOLVING FUND (SRF) LOAN DOCUMENTS FOR THE SOLIDS HANDLING FACILITY IMPROVEMENTS PROJECTAND ADOPT RESOLUTION NO. 2021-077 APPROVING THE FINANCING AGREEMENT FOR THE PROJECT SUBMITTED BY: INITIATING DEPARTMENT: DANEA GEMMELL, PLANNING AND ENG-PDS-DIVISION MANAGER DEVELOPMENT SERVICES DIVISION MANAGER REVIEWED BY: EDGAR J. LOPEZ, CAPITAL PROJECTS DIVISION MANAGER JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES C - Roger S. Bailey Kenton L. Alm General Manager District Counsel ISSUE Board of Directors (Board) approval of a proposed 2021 financing transaction for up to $173,105,000 through a State of California's State Water Resources Control Board's (SWRCB) SRF Loan Agreement is required. BACKGROUND The Comprehensive Wastewater Master Plan (CWMP)finalized in 2017 identified many improvements to the solids and energy processes associated with the treatment plant (plant) and recommended a phased October 21, 2021 Regular Board Meeting Agenda Packet- Page 137 of 382 Page 2 of 11 program approach for the necessary improvements required for current and future operations. The following projects were outlined in the CWMP: Current needs in the Fiscal Year(FY) 2021-22 Ten-Year Capital Improvement Plan (CI P) includes: • Solids Handling Facility Improvements, Phase 1, District Project(DP) 7348 (Solids Project); • Steam Aeration & Blower Systems Renovations, DP 7349; • Multiple Hearth Furnaces (MHFs) Replacement, DP 100009; • Cogeneration (Co-Gen) Replacement (starting FY 2023-24); and • Other Solids Handling Facility Improvements — Dissolved Air Flotation Thickener(DAFT) Tanks (starting FY 2028-29). Future and Long-term Planning Improvements (20-year+) includes: • Solids Handling Facility Improvements, Phase 2 (Phase 2 Solids Project)which adds two anaerobic digesters, considers conversion to biogas Co-Gen, and also considers adding high strength waste to increase "green" gas production. • Solids Handling Facility Improvements, Phase 3 which adds two additional anaerobic digesters and replaces the MHFs with fluidized bed incinerator. Central San staff initiated the design of the Solids Project in 2018.Additionally, staff applied for a SWRCB SRF loan to fund the construction phase of the project. On September 2, 2021, staff recommended that all bids be rejected due to the project costs were significantly higher than anticipated or budgeted for the work. The total estimated project costs including the construction contract amount would have totaled $261 million (M), which was approximately$78 M more than the budget. The Board concurred with staff and rejected all bids. It is expected that the existing MHFs will continue to be used for solids handling and disposal for at least the next decade. Therefore, some elements of the project are required for reliability and to meet air permit regulations. Therefore, staff is repackaging some of the key elements and rebid a reduced project. The following elements will be included in the revised Solids Project: • Replacement of the two wet scrubber systems with new air pollution control equipment to meet air regulations, including a new Venturi scrubber capable of handling waste heat bypass events. • Modify the mixing system on the existing sludge blending tank. • Replacement of the centrifuges and cake pumps. • Incinerator burner upgrades. • Replacement of electrical, instrumentation, and controls (EI&C) associated with the new systems and integrate with the remaining systems. Some of the elements of the Solids Project have already been constructed and completed: • Demolition of the abandoned digester tank near the Solids Conditioning Building (SCB). • Construction of the SCB emergency stairway for the third-floor control room for safety egress. • Construction modifications to the Emergency Sludge Loadout Facility to reliably operate and load sludge for extended durations. • Hearth Replacement, DP 100009 (ongoing). Funds will be needed to complete these necessary elements going forward; therefore, it is recommended to execute the SRF loan agreement, which has been received and reviewed for execution. October 21, 2021 Regular Board Meeting Agenda Packet- Page 138 of 382 Page 3 of 11 Staff met with the SW RCB to request amending the scope to include the potential Phase 2 Solids Project scope and to include installation and funding of digesters with the reduced Solids Project. The request was informally denied and staff was encouraged to submit a new SRF application for Phase 2 by the deadline of December 31, 2021. The Loan Agreement, which is awaiting execution, was also discussed. The state representatives advised to sign the loan in the full amount and then request an updated or reduced amount once the project is repackaged and bid for the revised total project costs are known. It should be noted that about$16 M of the $20 M expended to date on the Solids Project, could be reimbursed for previous planning and design costs on the Solids Project, via the SRF loan on top of the total costs of the repackage effort. Staff plans to submit a separate application for a SRF loan for Phase 2 if this project moves forward. Prior Board Actions regarding the SRF Loan Application At its December 6, 2018, the Board took the following actions regarding the Solids Project and associated SRF Loan: 1. Adopted a resolution: • Finding the project exempt from California Environmental Quality Act (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. 2. Adopted a pledge revenue and funds resolution. 3. Adopted a reimbursement resolution. CEQA At its December 6, 2018 meeting, the Board independently found that the Solids 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. ALTERNATIVES/CONSIDERATIONS The Board could decline to execute the Loan Agreement. This alternative is not recommended as Central San still needs funds to finance any version of the Solids Project. The Board could direct staff to finance the project with another form of debt such as certificates of participation or revenue bonds, although this action would increase the financing costs as these mechanisms would likely result in higher interest rates. FINANCIAL IMPACTS The current budget for the Solids Project is shown on page 236 in the FY 2021-22 Central San Budget at $183,894,000. A new estimate for the reduced project has not been finalized, but will likely be in the range of$80-$90 M. A revised cash flow projection will be updated once the project has been finalized. Staff is requesting the Board to adopt a closing resolution and confirm that the General Manager is authorized to execute the Initial Agreement. After the initial agreement is executed, the final project amount and supporting documents need to be submitted and will provide an opportunity for the Water Board to request the proper level of funding. The not to exceed SRF loan amount for the Solids Project, including associated planning and design and construction costs, is one hundred seventy-three million one hundred five thousand dollars and no cents October 21, 2021 Regular Board Meeting Agenda Packet- Page 139 of 382 Page 4 of 11 ($173,105,000.00). However, the reduced Solids Project will not use the full amount as stated before. Also, staff anticipates reimbursement of approximately$16 M in planning and design costs, which can be requested after the Loan Agreement is fully executed. In accordance with Government Code Section 5852.1, the following information has been obtained and disclosed to the Board prior to the entrance into the Agreement: (i)the estimated true interest cost of the Agreement (being the rate necessary to discount the amounts payable on the respective principal and interest payment dates) is 0.9%, (ii)the estimated finance charge of the Agreement (being the sum of all fees and charges paid to third parties) is $25,227,630, (iii)the estimated proceeds of the Agreement expected to be received, net of proceeds for finance charges in (ii) above to paid from the principal amount of the Agreement and any reserves or capitalized interest paid or funded with Agreement is $173,105,000, and (iv)the estimated total payment amount of the Agreement (being the sum of debt service plus finance to be paid to final maturity, plus any financing costs not paid from proceeds of the Agreement) is $198,332,630. COMMITTEE RECOMMENDATION The Engineering & Operations Committee received an update on the SRF Loan Agreement at its meeting on October 12, 2021 and were informed that the recommended resolution would be brought to the Board. In the essence of time and the need to respond within timeframes provided by SWRCB, the resolution was not reviewed by the Committee. RECOMMENDED BOARD ACTION Authorize the General Manager to proceed with the execution of State Revolving Fund (SRF) Loan Agreement in the maximum principal amount of$173,105,000 to finance the Solids Handling Facility I mprovements, District Project 7348, also referenced as State Project No. 8489-110 and adopt the proposed resolution approving the financing agreement for the project. Strategic Plan Tie-In GOAL TWO:Environmental Stewardship Strategy 1—Achieve 100%compliance in all regulations GOAL THREE:Fiscal Responsibility Strategy 1—Maintain financial stability and sustainability, Strategy 2—Ensure integrity and transparency in financial management GOAL FIVE:Infrastructure Reliability Strategy 1—Manage assets optimally to prolong their useful life, Strategy 2—Execute long-term capital renewal and replacement program ATTACHMENTS: 1. Proposed Resolution 2. Presentation October 21, 2021 Regular Board Meeting Agenda Packet- Page 140 of 382 Page 5 of 11 ATTACHMENT 1 RESOLUTION NO. 2021-077 A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT APPROVING THE CLEAN WATER STATE REVOLVING FUND FINANCING AGREEMENT FOR THE SOLIDS HANDLING FACILITY IMPROVEMENTS PROJECT (STATE PROJECT NO. 8489-110) 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 wastewater system, including certain treatment facilities and other related infrastructure; and WHEREAS, the Agency applied to the State of California's State Water Resources Control Board's (SWRCB) Clean Water State Revolving Fund (CWSRF) for funding of the Solids Handling Facility Improvements, District Project 7348 (Project) and also referenced as State Project No. 8489-110; and WHEREAS, the reasonably expected maximum principal amount of the Project Funds requested by the Agency is $173,105,000; and WHEREAS, the SWRCB has provided the financing terms for the Loan Agreement (Agreement) for the Project; and WHEREAS, the information required to be obtained and disclosed by the Agency's Board of Directors with respect to the Agreement pursuant to Government Code Section 5852.1 is set forth in the staff report accompanying this Resolution; and WHEREAS, the Agency's General Counsel and Bond Counsel have reviewed these financing terms and rendered legal opinions for the Agreement that it is acceptable. NOW, THEREFORE BE IT RESOLVED by the Board of Directors of the Central Contra Costa Sanitary District as follows: 1. THAT the Agency does hereby approve the Loan Agreement. 2. THAT, the General Manager, Director of Finance and Administration, Planning and Development Services Manager, the Board of Directors and its District officers are each authorized and directed in the name and on behalf of the District to execute and deliver such additional documents, that they or any of them might deem necessary or appropriate, in order to effectuate the purpose and intent of this Resolution. Whenever in this Resolution any officer of the District is authorized to execute and deliver any document or take any action, such execution, delivery or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. October 21, 2021 Regular Board Meeting Agenda Packet- Page 141 of 382 Page 6 of 11 Central Contra Costa Sanitary District Resolution No. 2021-077 Page 2 of 2 3. THAT the Agreement is valid and enforceable in accordance with its terms, in compliance with all applicable debt management policies and prior resolutions, and should any conflicts arise with them and the Agreement then, they will be resolved in favor of the language of the agreement. 4. THAT the General Manager (the "Authorized Representative") or his designee is hereby authorized and designated to represent the Agency in carrying out the Agency's responsibilities under the financing agreement, including certifying disbursement requests on behalf of the Entity and compliance with applicable state and federal laws. 5. THAT this Agency so finds, determines, and represents all the recitals in this Resolution are true and correct. PASSED AND ADOPTED this 21St day of October 2021, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: Tad J. Pilecki 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 October 21, 2021 Regular Board Meeting Agenda Packet- Page 142 of 382 Page 7 of 11 ATTACHMENT 2 1 � STATE REVOLVING FUND (SRF) LOAN AGREEMENT FOR SOLIDS HANDLING FACILITY IMPROVEMENTS Board Meeting (' October 21, 2021 ?1 Edgar J. Lopez, Capital Projects Division Manager Danea Gemmell, Planning and Development Division Manager Jean-Marc Petit, Director of Engineering and Technical Services JIM= I SOLIDS HANDLING FACILITY IMPROVEMENTS SCOPE FOR REDUCED SOLIDS PROJECT 1 2 4 3 6 5&7 O MODIFY MULTIPLE AIR POLLUTION NEW ASH ELECTRICAL CENTRIFUGE SOLIDS CONDITIONING SLUDGE HEARTH CONTROL HANDLING SYSTEMS DEWATERING BUILDING RETROFIT BLENDING/ FURNACES (NEW WET AND LOADOUT (LIMITED) SYSTEM (LIMITED) STORAGE (SOME HEARTH SCRUBBERS) (LIMITED REPLACEMENT) X J X X X 2 1 October 21, 2021 Regular Board Meeting Agenda Packet- Page 143 of 382 Page 8 of 11 INSTALLATION OF NEW WET SCRUBBERS FOR REGULATORY COMPLIANCE ll 00 ' - r ■ G a Ig RE-EVALUATE LONG-TERM PATH FOR SOLIDS HANDLING AT CENTRAL SAN Implement Phase 1: Proceeding with some key Implement Phase 2: Re- elements of the Solids Evaluate Long-Term Solids Project Handling • Wet Scrubbers Hiring Consultants • Centrifuges and to Evaluate long- and Cake term Biosolids, Pumps including Adding • Refurbish Multiple Hearth Anaerobic Digestion Furnaces and Biogas Co-Gen Hearth and Burner Controls CENTRALSAN 2 October 21, 2021 Regular Board Meeting Agenda Packet- Page 144 of 382 Page 9 of 11 FISCAL YEAR (FY) 2021 -22 CAPITAL IMPROVEMENT BUDGET Solids Handling Facility Improvements Budget & Budget-to- FY 2021-22 FY 2022-23 Future FYs Total Date $1,000,000 $- $- $- $1,000,000 12,090,000 - - - 12,090,000 Construction 6,894,000 21,000,000 45,000,000 98,000,000 170,894,000 $19,984,000 $21,000,000 $45,000,000 $98,000,000 $183,894,000 The budget will need to be rebalanced to reflect reduced project spending. ACV i s CENTRALSAN CENTRAL SAN SRF LOAN SEQUENCE Sign Initial SRF Reduced Award to Contractor 173.1 Million) Scope 3 October 21, 2021 Regular Board Meeting Agenda Packet- Page 145 of 382 Page 10 of 11 PRIOR BOARD ACTIONS FOR SRF LOAN At its December 6, 2018, the Board took the following actions regarding the Solids Project and associated SRF Loan: •Adopted a resolution: • finding the project exempt from California Environmental Quality Act; • 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. •Adopted a pledge revenue and funds resolution. •Adopted a reimbursement resolution. -� CENTRALSAN ADDITIONAL SRF LOAN APPROVAL RESOLUTION REQUIRED • Notifications to the public in compliance with Government Code 5852.1. •A declaration of the applicant's authority to enter into the agreement. •A broad-based blessing of the agreement as being valid and enforceable in accordance with its terms. •Authorization and direction to the authorized representative and other relevant officials to enter into the agreement and perform all acts necessary and proper for executing the agreement and carrying out its terms. 8 - CENTRALSAN - 4 October 21, 2021 Regular Board Meeting Agenda Packet- Page 146 of 382 Page 11 of 11 RECOMMENDED BOARD ACTION • Authorize the General Manager to proceed with the execution of State Revolving Fund Loan Agreement in the maximum principal amount of$173,105,000 to finance the Solids Handling Facility Improvements, District Project 7348, also referenced as State Project No. 8489-110 and adopt Resolution 2021-077. F MIR 9 -f ho- CENTRALSAN QUESTIONS? CENTRALSAN Io 5 October 21, 2021 Regular Board Meeting Agenda Packet- Page 147 of 382