RWQCP INTERIM
FINANCING
Line of Credit (LOC)
Borrowing Authorization
Presented by:
Christine Paras, ASD Asst. Director
AUGUST 10, 2026 www.paloalto.gov
2 BACKGROUND
Comprehensive List of Funding Strategies
Reviewed by Finance Committee, Nov. 2025:
• State Revolving Fund Loans (SRF)
• Water Infrastructure Finance & Innovation Act
Loans (WIFIA)
• Utility revenue bonds
• Line of Credit (LOC)
• Capital budget, “pay-go”
• Council authorized staff to obtain a
$31M Line Of Credit (LOC) in June 2024
• Advancing more than $0.5B in essential
capital improvements at the Regional
Water Quality Control Plant (RWQCP)
• Staff initiated a comprehensive update
to the Long-Range Facilities Plan (LRFP)
in 2024. Anticipated completion in
2027.
3 3
LINE OF CREDIT
Purpose & Benefits
• Short-term liquidity
• Maintains funding flexibility
Next Steps
Approval of Partner Agency Amendments by respective City Councils and by Palo Alto Council to enable the RWQCP to charge partners for LOC shared cost.
RFP Was Issued
Feb 13
Proposals
Mar 6
Selection
Mar 9-13
LOC Council
Action
August 10
Initial Draw
August
Partner
Agreements
Partner amendments needed
Partners Update (Late June)
4 Key Financing Assumptions
• Total of $31M over 5-Year Term Line of Credit with U.S. Bank • LOC has flexibility for taxable or tax-exempt draws
• Rate Covenant: 125% of max. annual debt service (City already subject to via State Revolving Loan Funds)
• Partner amendments will enable the RWQCP to charge partners for LOC shared costs. • Scheduled for Palo Alto City Council in the fall
LINE OF CREDIT (LOC)
5-Year Pricing
• Tax-Exempt Rate: 80% 1M SOFR + 1.19%
• Taxable Rate: 1M SOFR + 1.19%
• Undrawn Fee: 0.25% of unutilized amount
Annual Cost
• Annual partner cost is approximately $0.8-$1M
• Lower than $1.3-$1.5M communicated to
Council in fall 2025.
5 RECOMMENDATION & COUNCIL ACTION
1. Adopt resolution authorizing interim borrowing for RWQCP improvements.
2. Approve execution and delivery of a revolving credit agreement and note, not to exceed $31 million for five
years and fee letter.
CHRISTINE PARAS
ASD, Assistant Director
[email protected]
LAUREN LAI
Chief Financial Officer
[email protected]