CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
8/8/2022
1 SUBJECT:
A Resolution of the City Council of the City of Pacifica to Authorize Submission Of An Application To The California Infrastructure And Economic Development Bank ("iBank") For Financing The Lower Linda Mar Sewer System Rehabilitation And Repair Project And The Ultraviolet Disinfection Replacement Project (“Projects”) As Part Of The Wastewater Capital Improvement Plan.
RECOMMENDED ACTION:
Move to Adopt a Resolution of the City Council Authorizing Submission of an Application to the California Infrastructure and Economic Development Bank ("iBank") for Financing the Lower Linda Mar Sewer System Rehabilitation and Repair Project and the Ultraviolet Disinfection Replacement Project ("Projects") as Part of the Wastewater Capital Improvement Program.
STAFF CONTACT:
Nelson Schlater, Engineering Manager - Wastewater
(650) 738-3767
[email protected]
Lisa Petersen, Director of Public Works
(650) 738-3767
[email protected]
Yulia Carter, Assistant City Manager
(650) 501-6004
[email protected]
BACKGROUND:
The purpose of this report is to request the Council adopt a Resolution authorizing the submittal of an application to the California Infrastructure and Economic Development Bank ("iBank") for financing the Lower Linda Mar Sewer System Rehabilitation and Repair Project and the Ultraviolet Disinfection Replacement Project. These projects were factored in the recently completed Sewer Rate study and included in the Wastewater Capital Improvement Program as approved by the City Council on June 27, 2022, as part of the budget.
This application approval is a procedural requirement by iBank as part of the financing process.
Once the final terms and conditions are provided by iBank following the submittal of the application, staff will review the terms and come back to Council at a later date to request authorization to execute the iBank loan.
DISCUSSION
At the May 9, 2022 City Council Meeting, Council adopted a resolution approving New Wastewater Service Charges (Rates) to finance the upcoming 5-year Wastewater Capital Improvement Program (CIP). As documented in the Sewer Rate Study conducted by Bartle & Pacifica City Council 2
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Wells and discussed with Council during the rate adoption, proposed borrowing for the 5-year CIP included financing of approximately $31.5M in FY 22-23.
Staff has been working with Luhdorff & Scalmanini Consulting Engineers (LSCE), sewer infrastructure financing experts, on developing the best funding strategies to finance these upcoming Projects needed for both the Collections System and the Plant during the 5-year rate increase period. The consultant has evaluated the balance loan closure time, securing the best overall interest rates and payback periods. Based on work with LSCE, staff recommends proceeding with borrowing $21M from the California Infrastructure and Economic Development Bank (iBank) in FY 22-23 and borrowing the remaining amount needed for the 5-year CIP funding period in FY 23-24 from the Environmental Protection Agency Water Infrastructure and Innovation Act Program (WIFIA).
IBank was created in 1994 by the State of California to finance public infrastructure and private development and is operated out of the Governor's Office of Business and Economic Development.
Funding from iBank is expected to provide the quickest and most cost-effective method of financing the necessary infrastructure loan and will allow the City to quickly start on the needed Wastewater repair and replacement work. WIFIA financing is expected to provide low-interest rates and repayment flexibility. However, WIFIA financing is also time-consuming (18 to 24 months) to apply for and secure. Using iBank for the first funding tranche will allow for an expedited start to complete the necessary capital repair/replacement work.
Increasing interest rates make the loan closing period time sensitive for locking in the lowest interest rate. Therefore, staff is recommending that the City Council directs staff to submit an application with iBank for the first needed $21M of funding. As noted earlier in the report, submitting an application does not commit the City to using iBank for the financing of the loan.
However, based on iBank's standard operating procedures, the City has to submit an application to receive the required terms of the loan (i.e. interest rate). Should acceptable terms and conditions be offered by iBank, staff will return to Council at a later date to request authorization to execute the iBank loan.
The City Manager recommends the Council adopt a Resolution authorizing the submission of an application to iBank.
ALTERNATIVE ACTION:
The Council may choose not to adopt the Resolution approving the application. However, this would delay securing a loan for the Wastewater Division repair/replacement work, possibly resulting in higher interest rates and delays in addressing the critical repair/replacement needs.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
Adoption of the Resolution is consistent the these adopted City Goals:
· Stewardship of City Infrastructure and Maintaining a Safe Community: Adoption of the Resolution is the first step to ensuring sufficient funding to begin implementing the 5-year Wastewater CIP.
· Fiscal Sustainability: The adoption of the Resolution will allow for securing the lowest interest rate possible from iBank, as interest rates continue to rise.
FISCAL IMPACT:
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There is no fiscal impact associated with the adoption of this Resolution. Staff will bring forward the financing terms for approval at a future meeting.
ORIGINATED BY:
Public Works - Wastewater Division
Public Works - Wastewater Division
ATTACHMENT LIST:
Pacifica City Council 4
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RESOLUTION NO._______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA AUTHORIZING THE
SUBMISSION OF AN APPLICATION TO THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (“IBANK”) FOR FINANCING THE LOWER LINDA MAR
SEWER SYSTEM REHABILITATION AND REPAIR PROJECT AND THE ULTRAVIOLET
DISINFECTION REPLACEMENT PROJECT AS PART OF THE WASTEWATER CAPITAL IMPROVEMENT PLAN; AUTHORIZING THE INCURRING OF AN OBLIGATION PAYABLE
TO IBANK FOR THE FINANCING OF A CAPITAL IMPROVEMENT PROJECT IF IBANK
APPROVES SAID APPLICATION AND CONTINGENT UPON THE CITY COUNCIL SUBSEQUENTLY APPROVING THE FINANCING AGREEMENT; APPROVING THE
DECLARATION OF OFFICIAL INTENT TO REIMBURSE CERTAIN EXPENDITURES FROM THE PROCEEDS OF AN OBLIGATION; AND APPROVING CERTAIN OTHER MATTERS IN
CONNECTION THEREWITH
WHEREAS, the California Infrastructure and Economic Development Bank (“IBank”) administers a financing program to assist local governments with the financing of eligible projects in accordance with Section 63000 et seq. of the California Government Code (the “Act”); and
WHEREAS, IBank created the Infrastructure State Revolving Fund Program (“ISRF Program”) pursuant to the provision of the Act; and
WHEREAS, IBank has instituted an application process for financing under its ISRF Program; and
WHEREAS, IBank’s Criteria, Priorities and Guidelines for the Selection of Projects for Financing under the ISRF Program, dated February 23, 2016, and as may thereafter be amended from time to time (the “Criteria”), establishes requirements for the financing of projects under the ISRF Program; and
WHEREAS, the City of Pacifica (“Applicant”) desires to submit an application (“Financing Application”) to IBank under the ISRF Program for financing the costs of the Lower Linda Mar Sewer System Rehabilitation and Repair and Ultraviolet Disinfection Replacement Projects (“Project”) in an amount not to exceed $21,000,000.00; and WHEREAS, the Act and the Criteria require the Applicant to make, by resolution of its governing body, certain findings prior to a project being selected for financing by IBank; and
WHEREAS, the Applicant expects to incur or pay certain expenditures in connection with the Project from its Wastewater Enterprise Fund that are reimbursable with the proceeds of tax exempt bonds or other tax exempt securities under Federal Tax Law (defined below) prior to incurring indebtedness for the purpose of financing costs associated with the Project on a long-term basis (the “Reimbursement Expenditures”); and WHEREAS, contingent upon City Council approval, the Applicant reasonably expects that a financing arrangement (“Obligation”) in an amount not expected to exceed Pacifica City Council 5
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$21,000,000 will be entered into under and memorialized by one or more financing agreements and related documents (collectively, the “Financing Agreement”) and that certain proceeds of such Obligation will be used to reimburse the Applicant for Reimbursement Expenditures incurred or paid prior to incurring the Obligation; and WHEREAS, the Applicant acknowledges that IBank funds the ISRF Program, in part, with the proceeds of tax exempt bonds and, as such, has certain compliance obligations that may require it to have the Applicant enter into one or more new financing agreements to replace the Financing Agreement (collectively, the “Replacement Agreement”) on terms and conditions substantially identical to the original Financing Agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PACIFICA THAT:
Section 1. The City of Pacifica hereby approves confirms, ratifies, and affirms all actions of the Applicant’s representatives, employees and officers heretofore taken in connection with, or with respect to, submitting the Financing Application, and the consideration and approval of the Obligation and the Financing Agreement, if IBank approves the Financing Application and the Obligation and contingent upon the City Council approval of the Financing Agreement, and in connection therewith the City of Pacifica finds and certifies:
a. The Project facilitates the effective and efficient use of existing and future public resources so as to promote both economic development and conservation of natural resources;
b. The Project develops and enhances public infrastructure in a manner that will attract, create, and sustain long-term employment opportunities; c. That the Project is consistent with the City of Pacifica’s General Plan and the General Plan of the County of San Mateo;
d. The proposed financing is appropriate for the Project; e. The Project is consistent with the Criteria; and
f. It has considered (i) the impact of the Project on California’s land resources and the need to preserve such resources; (ii) whether the Project is economically or socially desirable; and (iii) whether the project is consistent with, and in furtherance of the State Environmental Goals and Policy Report (as defined in the Criteria).
Section 2. The Applicant hereby declares its official intent to use proceeds of the Obligation to reimburse itself for the Reimbursement Expenditures with the proceeds of taxexempt bonds or other tax-exempt securities issued under the provisions of the Internal Revenue Code of 1986, as amended, and those Treasury Regulations implementing such provisions (collectively, “Federal Tax Law”). This declaration is made solely for purposes of establishing compliance with applicable requirements of Federal Tax Law and its date is controlling for purposes of reimbursement under Federal Tax Law. This declaration does not bind the Applicant to make any expenditure, incur any indebtedness, or proceed with the Project.
Section 3. All of the Reimbursement Expenditures were made no earlier than 60 days prior to the date of this Resolution. The Applicant will allocate proceeds of the Obligation to pay Reimbursement Expenditures within eighteen (18) months of the later of the date the original expenditure was paid or the date the Project was placed in service or Pacifica City Council 6
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abandoned, but in no event more than three (3) years after the original expenditure was paid.
Section 4. The City Manager and his or her designee is hereby authorized and directed to act on behalf of the Applicant in all matters pertaining to the Financing Application, and if IBank approves the Financing Application and the Obligation and if the City Council subsequently approves the Financing Agreement, the execution of related financial documents, including but not limited to, the authority to: (i) pledge the revenues of the City’s wastewater enterprise fund and all legally available amounts in the wastewater enterprise fund on a parity basis with the Applicant’s obligations in connection with the existing debts, to the repayment of the Obligation, (ii) provide covenants relating to, among other things, maintaining the debt service coverage ratio required by IBank, rates and charges to be pledged, and as to any other security or collateral securing the Obligation, and (iii) take any other action necessary or desirable to enable the Applicant to enter into the Financing Agreement and incur the Obligation and with the authority to make payments from the wastewater enterprise fund revenues and other legally available sources of funds for the repayment of the Obligation and to provide covenants relating to the Obligation and as to any security or collateral securing the Obligation.
Section 5. If the Financing Application and the Obligation is approved by IBank and subsequently approved by the City Council, the City Manager and his or her designee is authorized to negotiate, enter into and sign financing documents and any amendments thereto, including, but not limited to the Financing Agreement and the Replacement Agreement, with IBank for the purposes of financing the Obligation.
Section 6. This Resolution shall become effective immediately upon adoption. • • • • •
I, the undersigned, hereby certify that the foregoing Resolution was duly and regularly adopted and passed by the City Council of the City of Pacifica in a regular meeting assembled on the 8th day of August 2022, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
Mary Bier, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ ______________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney