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HomeMy WebLinkAbout04.a. Review draft to approve three Resolutions regarding UV Project for SRF funding eligibility and CEQA purposesPage 1 of 15 Item 4.a. DCENTRALSAN BOARD OF DIRECTORS POSITION PAPER DRAFT MEETING DATE: DECEMBER 7, 2022 SUBJECT: REVIEW DRAFT POSITION PAPER TO CONSIDER ADOPTING THREE RESOLUTIONS TO • APPROVE FUNDING ELIGIBILITY FROM THE CALIFORNIASTATE WATER RESOURCES CONTROL BOARD (SWRCB) CLEAN WATER STATE REVOLVING FUND (SRF) FOR THE ULTRAVIOLET DISINFECTION REPLACEMENT PROJECT, DISTRICT PROJECT 100012; • APPROVE REIMBURSEMENT FROM THE SRF LOAN; AND • FIND THE PROJECT IS EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITYACT (CEQA)AND FILE A NOTICE OF EXEMPTION ACCORDINGLY SUBMITTED BY: INITIATING DEPARTMENT: AMANDA CAUBLE, ASSOCIATE ENGINEER ENGINEERING AND TECHNICAL SERVICES - HEATHER RAMAMURTHY, MANAGEMENT PDS-PLANNI NG AND APPLI ED RESEARCH ANALYST REVIEWED BY: RUSS LEAVITT, ENGINEERING ASSISTANT III DAN FROST, SENIOR ENGINEER DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER ISSUE The Board of Directors (Board) approval of the Ultraviolet (UV) Disinfection Replacement Project, District Project 100012 (UV Project) is required prior to the filing of a Notice of Exemption under the CEQA Guidelines, and submit an application to qualify for funding eligibility from the SRF. BACKGROUND Central San has been successful in competing for SRF loans with the completed execution of a $173.1 million agreement in 2021 for the Solids Handling Facility Improvement Project. Loan terms provide 0.9% financing for 30 years with debt service starting one-year after construction is completed. Central San submitted an application in December 2018 and was selected to receive funding through this competitive process, administered by the SWRCB. There is a strict point system for award of SRF loans, and SWRCB values projects that will either correct or prevent Water Quality Control Plan or Permit violations. December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 4 of 72 Page 2 of 15 Additionally, two of sixteen total points available are for project readiness. Applications are due by December 31 each year for award in the following fiscal year. The UV Project will replace the aging UV disinfection system at Central San. Most of the existing UV system has been in service for 26 years and requires substantial maintenance, lamp replacement, and frequent chemical cleaning of UV banks. The UV disinfection system is mainly electrical and electronic - based equipment, most of which has outdated components and technologies. The power of the existing UV lamps cannot be modulated and leads to frequent lamp replacements. For wet weather operation, the UV system only has a capacity of between approximately 90 to 100 million gallons per day (MGD), and it has been established through hydraulic modeling that a capacity of 127 MGD is needed in wet weather. This creates a hydraulic bottleneck in the secondary treatment plant, limiting the discharge of disinfected final effluent during peak wet weather events. Staff believes this project scope will score well for the SRF loan process. The UV Project evaluated alternative state-of-the-art disinfection technologies such as LED UV, ozone, peracetic acid, and sodium hypochlorite disinfection to determine the optimal disinfection system for Central San. Based on a comprehensive evaluation, continuing with UV disinfection technology was determined as the best path forward. The location of the project area is shown in Attachment 1. Siting the new 127 MGD UV disinfection system adjacent to the south clarifiers provides multiple benefits. First, it frees the existing UV areas for future secondary capacity needs that may arise due to future potential nutrient regulations. Second, it alleviates the existing hydraulic bottleneck in the secondary treatment plant, which currently limits the discharge of disinfected final effluent during the peak wet weather events. Final design will be based around the equipment manufacturer selected in December 2022, included as a concurrent approval on this agenda. Final design will start in early 2023 with completion by mid-2024. If this project is not selected for an SRF loan in 2023, there is still time to resubmit for the following year. Construction would start after the SWRCB project review process is completed, and a loan agreement is executed, likely in 2025. This approval does 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 (Attachment 2) would improve Central San's funding eligibility. The SRF funding application requires the inclusion of certain Board resolutions related to the financing and authorization to submit an SRF application (Attachment 3). Another resolution pledges revenues and funds to support the repayment of the SRF loan (Attachment 4). The resolution has been reviewed by District Counsel. CEQA Staff has concluded that this project is exempt from CEQA under Central San's CEQA Guidelines Section 15302 since it involves replacement of existing public facilities at substantially the same location and with the same purpose as the public facilities being replaced. The projects are also exempt under Central San's CEQA Guidelines Section 15061(b)(3) since it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. This certainty is based on Central San's past experience with the construction of numerous treatment plant improvement projects of this nature, its long familiarity with the project site, Central San's impact -limiting construction specifications, and the impact -limiting components of the project description. Central San's specifications are standardized general and special conditions that are made part of the project to address environmental considerations, as well as compliance with applicable federal, state, county, district, municipal and local laws, ordinances, orders, and regulations. Approval of this project will establish the Board's independent finding that this project is exempt from CEQA. December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 5 of 72 Page 3 of 15 ALTERNATIVES/CONSIDERATIONS The Board may delay or decline to approve the UV Project. This project involves a critical step in the treatment process (disinfection), which is needed to achieve permit compliance and needs to be reliable. This alternative would impact future replacement of the UV system and would likely increase the overall cost to Central San with more maintenance and potential risk with deteriorated equipment. Additionally, the Project could miss the chance to be eligible for SRF funding and other Community Project funding opportunities. The CEQA process must be completed for funding eligibility from the SRF. Alternative funding sources are also possible for the UV 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, in addition to raising concerns about intergenerational equity. Funding the UV Project in part with revenue bond proceeds is the baseline expectation in Central San's 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 benefit Central San financially to a significant degree despite some up -front and ongoing costs. Costs to prepare a SRF application for the UV Project are estimated at up to $30,000 for staff time. These up -front costs and other SRF associated project costs are significantly below the potential long- term savings from the reduced SRF interest rate when compared to that of revenue bonds. As of October 2022, interest and other costs over the assumed 30 year term are significantly lower in an SRF issuance at 34% of the borrowed amount versus 63% 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 an SRF loan versus a revenue bond shows savings of $18.7 million for SRF. This represents savings of 29% of the maximum borrowed amount assuming revenue bonds (project cost and costs of issuance of $65 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 Engineering and Operations Committee reviewed this item at its December 7, 2022 meeting and recommended December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 6 of 72 Page 4 of 15 RECOMMENDED BOARD ACTION Staff recommends the Board adopt the three proposed Resolutions (Attachments 2-4) to: Approve funding eligibility from the California State Water Resources Control Board (SWRCB) Clean Water State Revolving Fund (SRF) for the Ultraviolet Disinfection Replacement Project, District Project 100012; and direct staff to file a Notice of Exemption with the Contra Costa County Clerk -Recorders office; and find the Project is exempt from the California Environmental Quality Act (CEQA) and file a Notice of Exemption accordingly; 2. Authorize the General Manager or his designee to be Central San's authorized Representative in the SRF funding eligibility process, and any future financing agreement; 3. Approve reimbursement from the SRF Loan. Strategic Plan Tie -In GOAL TWO: Environmental Stewardship Strategy 1 - Achieve compliance in all regulations GOAL FOUR: Governance and Fiscal Responsibility Strategy 3 - Maintain financial stability and sustainability GOAL SIX: Infrastructure Reliability Strategy 2 - Execute long-term capital renewal and replacement program ATTACHMENTS: 1. Vicinity Map 2. Proposed Resolution -Authorizing UV Disinfection Project 3. Proposed Resolution -Authorizing Financial Assistance 4. Proposed Resolution -Authorizing Reimbursement 5. Presentation December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 7 of 72 Page 5 of 15 Ultraviolet (UV) Disinfection Replacement Project District Project 100012 Location Map Date: 10/11/2022 Martinezetail Area Concord X \ Pleasant H d n W� I n 1 c J. Y oc Project jam Location m AA Q District -Owned Property Q Project Location and Number Note: 0 400 800 Map Displayed in North American Datum of 1983 Attachment Central San data as of October 2022. H Feet California State Plane, Zone III FIPS O403, US Feet 1 December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 8 of 72 Page 6 of 15 ATTACHMENT 2 RESOLUTION NO. 2022-XXX A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT APPROVING THE ULTRAVIOLET DISINFECTION REPLACEMENT PROJECT, DISTRICT PROJECT 100012 FOR CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) PURPOSES WHEREAS, Central Contra Costa Sanitary District (the "Entity") will be seeking funding for the UV Project by applying to the State of California's State Water Resources Control Board's (SWRCB) Clean Water State Revolving Fund (SRF); and WHEREAS, completion of the CEQA documentation process would expedite the States consideration of funding; and WHEREAS, the Entity's staff has concluded that this project is exempt from CEQA under Central San's CEQA Guidelines, Section 15302 since it involves replacement of existing public facilities at substantially the same location and with the same purpose as the public facilities being replaced. The projects are also exempt under Central San's CEQA Guidelines Section 15061(b)(3), since it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. This certainty is based on the Central San's past experience with construction of numerous treatment plant improvement projects of this nature, its long familiarity with the project site, Central San's impact -limiting construction specifications, and the impact -limiting components of the project description. Central San's specifications are standardized general and special conditions that are made part of the project to address environmental considerations, as well as compliance with applicable federal, state, county, district, municipal and local laws, ordinances, orders, and regulations. BE IT RESOLVED by the Board of Directors of the Entity as follows: THAT the Entity does hereby approve the Ultraviolet Disinfection Replacement Project, District Project 100012. 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 -Recorder's office and the State of California under the Entity's CEQA Guidelines. December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 9 of 72 Page 7 of 15 Central Contra Costa Sanitary District Resolution No. 2022-XXX Page 2of2 PASSED AND ADOPTED this 15T" day of December 2022, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: 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 David R. Williams President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 10 of 72 Page 8 of 15 ATTACHMENT 3 RESOLUTION NO. 2022-XXX A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT APPROVING FUNDING ELIGIBILITY FROM THE STATE REVOLVING FUND FOR THE ULTRAVIOLET DISINFECTION REPLACEMENT PROJECT, DISTRICT PROJECT 100012 WHEREAS, Central Contra Costa Sanitary District (the "Entity") will be seeking funding for the Ultraviolet Disinfection Replacement Project, District Project 100012 by applying to the State of California's State Water Resources Control Board's (SWRCB) Clean Water State Revolving Fund (SRF); and BE IT RESOLVED by the Board of Directors of the Entity as follows: 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 SWRCB for the planning, design, and construction of the Ultraviolet Disinfection Replacement Project (the "Project"). THAT this Authorized Representative or his/her designee is designated to provide the assurances, certifications, and commitments required for the financial assistance application, including executing a financial assistance agreement from the SWRCB and any amendments or changes thereto. THAT the Authorized Representative or his/her 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. PASSED AND ADOPTED this 15th day of December 2022 by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: David R. Williams President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 11 of 72 Page 9 of 15 Central Contra Costa Sanitary District Resolution No. 2022-XXX Page 2 of 2 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 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 12 of 72 Page 10 of 15 ATTACHMENT 4 RESOLUTION NO. 2022-XXX A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT APPROVING REIMBURSEMENT FROM THE STATE REVOLVING FUND FOR THE ULTRAVIOLET DISINFECTION REPLACEMENT PROJECT, DISTRICT PROJECT 100012 WHEREAS, 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 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, THE AGENCY DOES HEREBY RESOLVE, ORDER AND DETERMINE AS FOLLOWS: SECTION 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. SECTION 2. The reasonably expected maximum principal amount of the Project Funds is $65, 000, 000. SECTION 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. SECTION 4. Each Agency expenditure will be of a type properly chargeable to a capital December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 13 of 72 Page 11 of 15 Central Contra Costa Sanitary District Resolution No. 2022-xxx Page 2 of 2 account under general federal income tax principles. SECTION 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. SECTION 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. SECTION 7. All the recitals in this Resolution are true and correct and this Agency so finds, determines and represents. PASSED AND ADOPTED this 15th day of December 2022 by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members ABSENT: Members: 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 David R. Williams President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 14 of 72 Attachment 5 December 7, 2022 Ultraviolet Disinfection Replacement Project, DP 100012 Approval for CEQA Purposes and Funding Eligibility Danea Gemmell Planning and Development Services Division Manager 1 UV Disinfection Replacement Project In 1994, Central San installed 18 banks of UV lamps under the UV Facilities (District Project 7100) in 6 channels. Fischer -Porter was the original manufacturer and patent holder. The rights sold several times and now belong to Ironbrook UV in Canada. Project included an evaluation of disinfection systems and concluded that UV was the optimum disinfection method. The Project will replace the existing UV system with state-of- the-art equipment in a new location to eliminate hydraulic bottlenecks and increase capacity to better accommodate wet weather events. 2 December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 15 of 72 1 Page 13 of 15 �,,_ �., Ultraviolet (UV) Disinfection Replacement Project Project District Project 100012 Location M Detail Area Location % M: � ab ,r .a M 3 California Environmental Quality Act (CEQA) Compliance Staff have concluded this project is exempt under the following CEQA Guidelines Sections: 15302 — Project involves replacement of existing public facilities at substantially the same location and with the same purpose as the public facilities being replaced. 15061(b)(3) - Project can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. 4 December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 16 of 72 2 Page 14 of 15 State Revolving Fund (SRF) Highlights Interest Rate — Approximately 50% of the most recent General Obligation (GO) Bond Rate at the time of funding approval October GO Bonds 3.5% vs. 2% SRF 9 Savings of $19 million over the life of loan vs. revenue bonds L10/0,111 , Financing Term - up to 30 years or the useful life of the project Requested Financing Amount - $65 million Repayment - Begins one year after completion of construction Applications due December 31 for consideration the following year 5 Project Funding One possible source of funding is the California State Water Resources Control Board SRF, which offers low -interest financing. ho 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. G". December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 17 of 72 3 Page 15 of 15 Staff Recommendation Adopt a resolution: finding the project exempt from CEQA; approving the Ultraviolet Disinfection , Replacement Project; and directing staff to file a Notice of Exemption with the County Clerk and the State - J Adopt a resolution 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 reimbursement resolution. I� 7 IP December 7, 2022 EOPS Regular Committee Meeting Agenda Packet - Page 18 of 72 4