CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
8/25/2025
1 SUBJECT:
Approval of the Water Infrastructure Finance and Innovation Act (WIFIA) application for the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project (C0050) as part of the Wastewater Capital Improvement Plan
RECOMMENDED ACTION:
Adopt a Resolution of the City Council to approve the $250,000 Water Infrastructure Finance and Innovation Act (WIFIA) Application (Attachment 1) for the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project (Vallemar R&R Project C0050).
STAFF CONTACT:
Daniel Patten, P.E., Engineering Manager - Wastewater
(650) 922-7248
[email protected]
Louis Sun, P.E., Deputy Director of Public Works
650-738-4662
[email protected]
Melissa Tigbao, P.E., Director of Public Works
(650) 501-6016
[email protected]
BACKGROUND/DISCUSSION:
The purpose of this report is to request the Council to adopt a resolution to authorize the City Manager to apply for WIFIA funding for up to $20,000,000 to finance the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project (C0050). This project will increase the reliability of the City’s overall sewer collection system by replacing over 30,000 feet of sewer conveyance pipelines in two areas of the system with level 5 defects and associated laterals and manholes. The replacement pipes are expected to have a useful life of approximately 50 to 80 years. The project will replace older pipes with HDPE pipes that have a longer useful life, are more durable, and not susceptible to tree root damage. The project will reduce wastewater conveyance system Inflow and Infiltration (I&I) flows and long-term operations and maintenance (O&M) costs.
Collection System improvements in the Vallemar and Rockaway Beach Boulevard neighborhoods were identified in the City’s Collection System Master Plan Update 2021. The City also conducted a funding option evaluation to identify the best combination of funding sources to utilize in funding the City’s $41M wastewater improvement projects which is attached to the staff report. On June 24, 2024, during the FY 2024-25 Capital Improvements Program (CIP) budget approval process, the Council approved design funding for the Vallemar and Pacifica City Council 2
August 25, 2025
Rockaway Beach Blvd Sewer Rehabilitation and Repair Project (C0050). This project will include replacing existing sewer mains with new pipes and rehabilitating manholes to improve system reliability and reduce the risks of overflows as well as inflow and infiltration (I&I). A design agreement with Freyer and Laureta was awarded on August 26, 2024, and design is anticipated to be completed in the Fall of 2025. Bidding is anticipated to begin once the WIFIA loan agreement has been executed. It is expected that the loan agreement will be finalized by the end of 2025, and bidding will begin soon after. When planning for the current Capital Improvements Program in 2022, the City identified $41 million in wastewater CIP funding needs for the:
• UV Disinfection System Replacement Project (construction scheduled for substantial completion Fall 2025)
• Lower Linda Mar Rehabilitation and Repair Project (construction scheduled for substantial completion Fall 2025)
• Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project (C0050) (currently at the 65% design milestone)
The City entered into an agreement with IBank for funding May 9, 2023, and this Installment Sales Agreement (ISA) is being used to finance the ongoing Lower Linda Mar Rehabilitation and Repair Project and the UV Disinfection System Replacement Project in the amount of $21M. At the same time, the City also identified the U.S. Environmental Protection Agency’s (WIFIA) Program for the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project. If the project is selected, WIFIA will fund a significant portion of the design and construction costs for the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project. The City submitted a Letter of Interest (LOI) to the WIFIA Program on June 27, 2024, and was invited to apply to the program on July 22, 2024. A WIFIA loan provides a minimum of $20,000,000 but not to exceed 49 percent of total eligible project costs which includes the IBank ISA ($21M) and WIFIA loan ($20M) for a total project cost of $41M. Per the terms of the WIFIA Program, these costs may be used as eligible planning, design, and construction costs, to determine the final loan amount to be included in the City WIFIA funding application.
During the wastewater CIP planning process, the City conducted a thorough financial analysis and determined that the City would prefer the capitalized interest WIFIA loan option which would delay the beginning of loan repayments for up to five (5) years before regular loan payments (including principal and interest) would commence.
The City evaluated several other funding mechanisms, including the State Revolving Fund (SRF), I-Bank, Revenue Bonds, and WIFIA Programs. While the SRF program typically provides relatively low interest rates, it typically takes years to complete the application process and enter into a funding agreement. SRF funding has significantly higher application, agreement, and program administrative costs for loan servicing than the I-Bank and WIFIA funding programs. Additionally, I-Bank funds can be revisited for future projects that do not meet the limited criteria of the WIFIA loan program. The City can structure the WIFIA loan repayments after 2033 when the following wastewater enterprise debts are paid off:
• Wastewater Revenue Refunding Bonds
• 2019 Taxable Pension Obligation Refunding Bonds
• Loan and Installment Agreement
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The delayed payment structure coincides well with the completion of debt service payments for the 2014 WW Revenue Refunding bonds in FY 2026-27, allowing the usual annual payment of $1.5 - 1.7 million to be available for future debt service payments such as the WIFIA loan.
The estimated annual payments on the WIFIA loan will be determined by the interest rate established at the time the WIFIA funding agreement is executed. Annual loan payments on a 35-year term are anticipated to be approximately $1.2M based on current interest rates. Annual fees on the loan are expected to be in the $15,000 - $25,000 range.
The WIFIA program provides flexibility and the ability to negotiate repayment terms, and reimbursements will be received at least monthly during the project implementation period which is favorable to the City’s cash flow. Construction cost estimates, interest rates, Wastewater Enterprise funding and other factors will be considered when negotiating the terms of the WIFIA loan. If interest rates or other terms are not favorable to the City during the loan agreement execution phase (anticipated for late 2025 / early 2026), the City may choose not to enter into a WIFIA funding agreement at their discretion.
Due to the voluminous nature of the application process, staff attached only the application with the signature page (Attachment 1) and the 65% draft plans and specifications to the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project (C0050) to this staff report.
When the loan application is approved by the United States Environmental Protection Agency (USEPA), staff will bring the full agreement to City Council for approval. The WIFIA loan payback will be supported from the sewer rate study for Fiscal Year 2027-2032, which is currently underway.
The City Manager recommends the Council adopt a Resolution approving this WIFIA application (Attachment 1) to fund the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project. WIFIA funding is the recommended and most optimal Project funding source for the City with deferred payment and 35-year amortization features that provide the City with financial flexibility and lower wastewater rates versus other funding options.
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 to 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 construction of the Vallemar R&R Project. This project will improve sewer infrastructure in the Vallemar and Rockaway Beach Boulevard, protecting the residents and the Calera Creek Watershed from pollution.
· Fiscal Sustainability: The adoption of the Resolution will allow for securing funding through WIFIA which will enable the City to keep wastewater rates as low as possible.
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CEQA:
Approval of the proposed Resolution relating to financing is not subject to CEQA review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21000, et seq. and the CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et. seq.), including without limitation, Public Resources Code section 21065 and California Code of Regulations 15378 as approval of financing is not a “project” that may cause a direct, or reasonably foreseeable indirect, physical change in the environment and if a “project,” is exempt under the “common sense” exception (14 Cal. Code Regs. § 15061(b)(3)) because it can be seen with certainty that there is no possibility that this action may have a significant effect on the environment.
The Project has been determined to be categorically exempt per Class 1 and Class 2, Section 15301 and 15302. Notice of Exemption (Receipt Number 41-11162023-0001) was filed with San Mateo County Clerk on November 16, 2023, and State Clearinghouse thereafter. The City is using the pipe bursting replacement method for its sewer R&R Project which has the lowest environmental impacts of any pipe replacement options.
FISCAL IMPACT:
Adoption of this Resolution will only authorize staff to submit the WIFIA application at this time.
If the application is approved, Staff will negotiate the best possible terms the program can provide and bring the WIFIA loan agreement back to Council for direction.
The WIFIA loan application fee will be a maximum of $250,000 but could be less than that amount depending on the time and effort required for WIFIA to process the City’s funding application. Most actual WIFIA loan application fees are less than maximum amount specified in the loan application criteria. WIFIA is a federal program and may be subject to changes in policy on the federal level. If the program were to be canceled or significantly altered, the application funds already paid would not be refundable. As a mitigation strategy, the City will consider structuring the financing to include the application fee in the overall loan proceeds, allowing reimbursement of that cost at the outset of the loan disbursement and reducing potential risk.
There is no additional fiscal impact for this project as the application fee will be covered by the allocated CIP project budget as shown below:
WIFIA Loan Application Fee $250,000
Account No 518452-51206-C0050 Design Consultant $940,300 Total Use of Funds $1,190,300
Project Fund Source
Enterprise Fund (Fund 518) Account No 518452-51206-C0050 $4,215,000 Total Use of Project Fund Source $1,190,300
Estimated Project Fund End Balance $3,024,700
Use of Funds
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ORIGINATED BY:
Public Works - Wastewater Division
ATTACHMENT LIST:
Attachment 1 - wifia_application (PDF)
2025.06.13 Vallemar_Rockaway SS Project - 65% Plans (PDF) 2025.06.13 Vallemar Rockaway SS Project - 65% Specifications (PDF) 2025.06.13 Vallemar Rockaway SS Project - 65% Opinion of Probable Cost (PDF) Executive Summary - City of Pacifica WW Funding Strategy (PDF) Pacifica City Council 6
August 25, 2025
RESOLUTION NO._______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA AUTHORIZING THE $250,000 WATER INFRASTRUCTURE FINANCE AND
INNOVATION ACT (WIFIA) APPLICATION FOR THE VALLEMAR AND
ROCKAWAY BEACH BOULEVARD SEWER REHABILITATION AND REPAIR
PROJECT (VALLEMAR R&R PROJECT)
WHEREAS, during the FY 2023-24 Capital Improvements Program (CIP) budget approval process, the City Council approved funding for the Vallemar and Rockaway Beach Boulevard Areas Sewer Rehabilitation and Repair Project; and
WHEREAS, improvements to the collection system in the Vallemar and Rockaway Beach Boulevard areas were identified in the City’s Collection System Master Plan Update 2021 and City Wastewater Rate Study Update of 2022. The Project will include replacing existing sewer mains with new pipe and rehabilitating manholes to improve system reliability and reduce the risks of overflows, lower inflow and infiltration (I&I), and reduce long term wastewater system O&M costs.; and
WHEREAS, the City submitted a Letter of Intent to the United States Environmental Protection Agency on June 27, 2024, and was invited to prepare and submit a full application to the WIFIA program on July 22, 2024; and
WHEREAS, the WIFA Application fee is a maximum of $250,000 and may be less depending on the efficiency of the City WIFIA Application approval process; WHEREAS, the WIFIA loan will fund up to $20,000,000 (49% of the total $41M in eligible project costs, which includes $21 million in funding for the ongoing Lower Linda Mar Rehabilitation and Repair and UV Disinfection System Replacement Projects) to cover the costs of the Vallemar and Rockaway Beach Blvd Sewer Rehabilitation and Repair Project; and WHEREAS, if the application is approved, staff will bring the WIFIA loan agreement back to Council at a later date for authorization
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of Pacifica that the City Manager is directed to apply for WIFIA funding for the Vallemar and Rockaway Beach Boulevard Sewer Rehabilitation and Repair Project including transmittal of the one-time application fee not to exceed $250,000.
• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 25th day of August 2025, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
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_________________________________
Sue Beckmeyer, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney