CITY OF GONZALES
CONSTRUCTION LOAN FOR INDUSTRIAL WASTEWATER SYSTEM
NOVEMBER 18, 2024
2 Background
The City secured $29M in funding from the State Water
Resources Control Board (SWRCB) for construction of the Industrial Wastewater System
The City must submit reimbursement claims for costs incurred The reimbursement claim occurs after construction and consultant costs has been incurred and is due and payable by the City
It is anticipated that a reimbursement check from SWRCB will generally take 3 - 5 months
Due to the delay in reimbursement, interim funding will bridge the gap between timely payment of project costs and receiving reimbursement from SWRCB
3 Interim Funding Plan
A revolving bank loan was determined to be best option for City’s interim funding
Allows the City to only have an amount outstanding at any given time that is needed to bridge the cashflow gap, like a line of credit
Structure limits the City’s interest cost
Proposals were requested from many banks; City received five proposals
Banner Bank offering the lowest and only fixed interest rate option at fixed rate of 4.34%
4 Interim Loan Interest Cost & Costs of Issuance
Based on the estimated Industrial Wastewater Treatment Project construction schedule, assuming a 4-month reimbursement from SWRCB, estimated total interest cost could be $328,215 during the Project timeline
Estimates assume that the City’s largest principal balance outstanding amount on the Wastewater Interim Loan reaches $7,704,799
Repayment of such principal amount together with estimated interest cost could be $8,033,014
The actual amount of the outstanding and total interest may be more or less, depending on the construction schedule and SWRCB reimbursement timing
Issuance costs associated with the 2024 Wastewater
Construction Loan are expected to be approximately $132,000 5 Documents Being Approved Tonight
Authorizing Resolution:
Authorize the City to enter into a Conveyance Agreement and Installment Purchase Contract to secure interim funding in an amount not to exceed $10,000,000 and authorizes certain other actions.
Conveyance Agreement:
The Conveyance Agreement will be entered into between the City and Banner Bank. City conveys the project to the Bank in exchange for payment of up to $10,000,000. The Bank immediately resells the Property to the City pursuant to the Installment Purchase Contract.
Installment Purchase Contract:
This agreement is between the City and Banner Bank establishing that the City will finance certain improvements to and provide working capital for the City’s industrial wastewater system.
The City will pay the Installment Payments to the Bank to purchase such improvements. This agreement also contains covenants for the benefit of Lender, including a covenant to set rates and charges in the future at levels that are sufficient to repay the Loan, if necessary.
Hilltop Securities Placement Agent Agreement:
Hilltop Securities Agreement with the City, which sets forth Hilltop Securities’ work to be performed for the 2024 Wastewater Interim Loan. Such fees set forth therein were previously approved by City Council.
6 Finance Team Professionals
Project Oversight: City of Gonzales
Financial Advisor: NHA Advisors
Bond and Disclosure Counsel: Kutak Rock
Placement Agent: Hilltop Securities
Lender: Banner Bank
7 Timeline
November 18,
2024
• City Council
Approval
November 19-
22, 2024
• Finalize and
execute closing
documents
November 26,
2024
• Close the Interim
Loan; City draws
funds, as necessary