DATE: MARCH 7, 2023
DEPARTMENT: PUBLIC WORKS
FROM: DAVID JACOBS, DIRECTOR
BY: BRIAN FRUS, SENIOR ENGINEER
TITLE: SUBMISSION OF AN APPLICATION TO THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FOR FINANCING THE INDUSTRIAL WASTEWATER TREATMENT SYSTEM IMPROVEMENTS PROJECT RECOMMENDED MOTION:
A motion to approve a Resolution for submission of an application to the California Infrastructure and Economic Development Bank for financing the Industrial Wastewater Treatment System Improvements Project and declaration of official intent to reimburse certain expenditures from the proceeds of an obligation.
EXECUTIVE SUMMARY:
The City of Salinas has initiated the application process for a loan from the California Infrastructure and Economic Development Bank’s (IBank) Infrastructure State Revolving Fund Program (ISRF) to fund its Industrial Wastewater Treatment Facility Improvements Project (Project). IBank was created in 1994 to finance public infrastructure and private development that promote a healthy climate for jobs, contribute to a strong economy and improve the quality of life in California communities. Through the Infrastructure State Revolving Fund (ISRF) program, IBank is authorized to directly provide low-cost public financing to state and local government entities. The City reviewed several potential funding mechanisms including state and federal grants. The IBank loan will allow the City to begin its Project on schedule while continuing to seek grants. As part of the loan application process, a Resolution from the Salinas City Council approving the loan application and potential obligation is required. The Resolution must include a maximum loan request, stated as $40 million in the Resolution, but the City is not obligated to request the maximum when the loan is finalized if budgeted construction costs are lowered. Adoption of the resolution at this stage of the project will enable the City to recuperate planning and design expenditures with the IBank loan upon execution (anticipated in summer 2023).
BACKGROUND:
The City of Salinas is improving to its industrial wastewater treatment system, which treats wastewater from 22 local agriculture‐based industries. The system is comprised of a network of piping, and pump station, which covey wastewater to the Industrial Waste Treatment Facility (IWTF) for treatment and disposal. The City’s Industrial Wastewater Collection and Conveyance System (IWCCS) and IWTF are approximately 80 years old and in need of updates to increase reliability and redundancy of treatment and conveyance facilities, improve automation and control, and add energy and operational efficiency. The Project will also provide source of water for regional recycled water programs.
The Project is comprised of improvements at the IWTF south of the City of Salinas in unincorporated Monterey County and the Airport Lift Station (Airport LS) at the south end of Airport Boulevard near Hansen Street in the City. Capital improvements include:
Aeration Lagoon expansion and addition of aerators
Pond automation and flow distribution
Pond 3 Pumpstation expansion
Pond aeration motor efficiency upgrades
Influent Pump Station flow metering
Electrical equipment relocation
Backup power
Airport Lift Station upgrades
Carollo Engineers supported the City in researching available State and Federal funding mechanisms, including low interest loans, grants, and Congressionally Directed Spending requests. Staff worked with State Water Resources Control Board (SWRCB) to determine if the City could receive low-interest loans and recycled water grant funding through the Clean Water State Revolving Fund (CWSRF). SWRCB determined that the City’s project was not eligible for recycled water grant funds as the project did not meet the State’s requirements as a recycled water project. In addition, due to the oversubscription of the SWRCB’s CWSRF projects must be scored and ranked for selection. A preliminary scoring of the Project and discussions with SWRCB staff indicated that the Project would likely not be selected for financing. Several other grant funding opportunities were evaluated and rejected due to length of application process, award amounts and level of effort, award timelines and other factors.
The City also identified the State Ibank program as a potential funding mechanism for the Project. The Legislature created IBank in 1994 to finance public infrastructure and private development that promote a healthy climate for jobs, contribute to a strong economy and improve the quality of life in California communities. Specifically, IBank’s ISRF Program is authorized to directly provide low-cost public financing to state and local government entities. ISRF financing is available in amounts ranging from $1 million to $65 million with loan terms for the useful life of the project up to a maximum of 30 years. The program has funded multiple water and wastewater projects across the state, including the City of Pittsburg’s 32 million gallon-per-day water treatment plant; replacement, rehabilitation and upgrading of the City of Santa Cruz’s water system; and rehabilitation and replacement of deteriorated and over-capacity sewer mains and pipelines for the City of Laguna Beach.
Because of the pressing need to begin the project by summer 2023, City staff recommends applying for an IBank loan while continuing to seek complementary grant funding mechanisms. The City is currently completing a new rate study for its industrial customers. The new rates are expected to go into effect July 1, 2023 and will serve as the basis of repayment for the IBank loan.
IBank’s loan application process requires a Board Resolution from applicants authorizing the application and, if awarded, debt obligation. The Resolution requires applicants to declare a loan amount, stated as $40 million in the attached Resolution, but the amount is not binding if construction costs are budgeted as lower prior to the closing of the loan. A new Resolution would be required, however, if the loan request exceeds the stated amount. All costs incurred for the project are eligible for reimbursement through loan funds as long as they are purchased within 60 days prior to the adoption of the Resolution. Because of this, early adoption of the Resolution will enable more of the costs incurred on the Project may be funded through the loan.
CEQA CONSIDERATION:
The environmental impacts of the project have been analyzed in accordance with the California Environmental Quality Act (CEQA). An Initial Study was prepared to evaluate the potential impacts associated with the project. Based upon review of the Initial Study, the proposed project will not have a significant effect on the environment because the mitigation measures outlined in the proposed Mitigation Monitoring and Reporting Program have been included in the project. The Initial Study and Mitigated Negative Declaration were routed to responsible agencies, posted on the City’s website, and made available for review at the Community Development Department, the Public Works Department and the Steinbeck Library. The Initial Study and Mitigated Negative Declaration were received by the State Clearinghouse (SCH# 2022100457) and staff received no comments during the public review period from October 20, 2022, to November 21, 2022. City Council adopted the Mitigated Negative Declaration for the Project committed to implementing all mitigation measures and mitigation monitoring procedures included in the Mitigation, Monitoring, and Reporting Program on December 13, 2022 (Resolution No. 22538).
STRATEGIC PLAN INITIATIVE:
The IBank loan and Project it funds meet the City Council’s Strategic Plan Initiative of Economic Development. The low-interest loan is a fiscally responsible funding mechanism for the Project, which will encourage development that benefits Salinas residents and businesses and contributes to the community’s economic health.
DEPARTMENTAL COORDINATION:
This project has and will continue to rely on coordination between the Water, Waste and Energy (WWE) division in Public Works, Finance, Legal and the City Manager’s office. WWE will oversee the overall execution of the Project, while coordinating with the City Manager on overall strategy, and with Finance and Legal for review of documents for consistency with established procedures, policy and statues.
FISCAL AND SUSTAINABILITY IMPACT:
The proposed loan amount for the Project is $40 million, which is so stated in the Required Resolution to accompany the loan. If it is determined that the required funds for construction costs are lower prior to finalization of the loan agreement, the City has the option of requesting less than the stated loan amount. Estimated payments on the loan given expected interest rate of 5% and a 30-year term are $219,000 monthly or $2.63 million annually. Staff is currently completing a new rate study which includes repayment of up to $29.1 million at the same interest rate and loan term. The new rates are projected to go into effect July 1, 2023. All loan payments for the Proposed Project will be expended from the Industrial Waste Enterprise Fund and will not rely on the General Fund. Staff will continue to research grant funding possibilities to reduce the total loan funding required for the Proposed Project.
FINDINGS:
Council may adopt Resolution to approve application and, if approved, obligation of an IBank loan.
ATTACHMENTS:
Resolution
California Infrastructure and Economic Development Bank Required Resolution Page | 3
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CITY OF SALINASFINANCE COMMITTEE REPORTCITY OF SALINASFINANCE COMMITTEE REPORT
CITY OF SALINAS
FINANCE COMMITTEE REPORT
CITY OF SALINAS
FINANCE COMMITTEE REPORT