Small town,big heart! ~ ¡Pueblo chico, corazóngrande!
147 Fourth St. · PO Box 647 Gonzales, CA 93926· Phone: (831) 675–5000· Fax: (831) 675-2644 https://gonzalesca.gov/
City of Gonzales
Council Member Scott Funk, Council Member Lorraine Worthy, Council MemberMaria Orozco Mayor Jose L. Rios, Mayor Pro Tem Liz Silva, City Manager Carmen Gil March 11, 2025
Sunny Kals, Water Recycling Funding Program Manager via email Division of Financial Assistance
State Water Resources Control Board
P.O. Box 944212
Sacramento, CA 94244-2120
Subject: City of Gonzales Industrial Wastewater System SRF Loan Amendment Request Agreement No. D2301008, Project No. C-06-8574-110
The Salinas Valley is known as the “Salad Bowl of the World,” due to the many crops grown and harvested locally. The City of Gonzales is a net importer of jobs due to the agriculture processing facilities in the City’s Industrial Business Park which contribute 80 percent of the flow to the City’s Municipal Wastewater Treatment Plant (MWWTP). The MWWTP is permitted for an average daily flow of 1.3 million gallons per day (MGD). With current wastewater flows averaging 1.2 MGD, the MWWTP is at capacity. Additionally, the Regional Water Quality Control Board (RWQCB) issued new permit requirements in 2023, which the MWWTP is unable to meet.
As the vast majority of flow is from industrial dischargers, a separate Industrial Wastewater System was determined to be the best step forward toward regulatory compliance. The City worked closely with the RWQCB and the Division of Financial Assistance (DFA) on this project, ultimately securing a $28,884,000 State Revolving Fund (SRF) Loan Agreement (Agreement No. D2301008) on July 12, 2024, for installment of the City’s Industrial Wastewater System (Project No. C-06-8574-11).
On June 27, 2024, City staff issued the IW Conveyance Project (first portion of the IW System) for public bid, and opened the following bids on August 6, 2024:
1 Sierra Construction and Excavation $7,461,840
<low bidder>
2 Ranger Pipeline $7,597,350
3 Specialty Construction $7,691,956
4 Anderson Pacific $8,766,000
5 Monterey Peninsula Engineering $14,335,000
On September 3, 2024, the Gonzales City Council awarded the IW Conveyance Project to Sierra Construction and Excavation, with construction beginning in November 2024, and anticipated completion in May 2025. In order to bridge the cash flow gap between the required contractor payments within 30 days and SRF reimbursements, the City also obtained a $10,000,000 construction loan from Banner Bank.
With the IW Conveyance Project progressing well, on January 15, 2025, City staff issued the IW Treatment Facility (IWTF) for bid. On February 26, 2025, the City opened the following bids:
1 Gateway Pacific $21,938,000
<low bidder>
2 Specialty Construction $22,219,663
3 Clark Brothers $22,447,500
4 SCEI $22,813,420
5 Don Cascade $24,640,726
6 Anderson Pacific $27,968,100
The project team updated the anticipated project costs based on the status of the Collection System project and the IWTF low bid of $21,938,000. The following table provides a breakdown of anticipated costs. As shown, the City anticipates a funding gap of approximately $6,000,000 to complete the project.
Table 1 – Anticipated Project Costs
Construction
Collection System $7,991,000 (1)
IWTF $23,584,000 (2)
Other Ancillary Work $175,000
Subtotal Construction $31,750,000
Consultant Costs
Planning/Design Phase
Pretreatment Program $20,000
Finalize Design $60,000
Engineering Services During Bid $220,000
Easements $260,000
Construction Phase
Engineering Services During Construction $1,472,000
Program Management $400,000
Construction Management $2,860,000
Environmental $350,000
Subtotal Consultants $5,642,000
City Costs
Legal and Financial $200,000
TOTAL $37,592,000
SRF Loan $28,884,000
Sewer Impact Fees $2,750,000
Deficit = $5,958,000
(1) Includes 5.0% Contingency
(2) Includes 7.5% Contingency
The City’s rate consultant, Lechowicz & Tseng Consultants, was consulted as well. Based on the new sewer rates effective on January 1, 2024, the City’s net operating revenue will be sufficient to cover the required 1.20 debt service ratio, assuming the City is able to extend the SRF loan by an additional $6,000,000, as demonstrated by Table 2:
Table 2. Gap Funding Scenario
FY2026
Net Revenue
FY2027
Net Revenue
Net Operating Revenue $1,976,166 $2,113,166
$28.884M SRF Loan at 1.7% interest $1,233,000 $1,233,000 Coverage 1.60 1.71
Additional Loan ($6M, 30 yrs at 1.7%) Debt $256,976 $256,976 TOTAL DEBT $1,489,976 $1,489,976
Coverage 1.33 1.42
The City hereby requests consideration for a SRF loan amendment of $6,000,000, bringing the total loan amount to $34,884,000. As the City is anticipating issuance of a Time Schedule Ordinance from the RWQCB to reach discharge compliance, and the IWTF bids expire as of May 26, 2025, an expedited response would be appreciated. We appreciate your time and consideration on this matter.
We look forward to working with SRF staff on this amendment, and please contact Patrick Dobbins at (831) 675-5000 with any questions or to arrange a meeting to discuss this matter.
Sincerely,
Carmen Gil
City Manager
Copies: Patrick Dobbins, Public Works Director/City Engineer Mike Howard, Finance Director
Megan Panofsky, MNS Engineers
Project File