M e m o r a n d u m 10/1/2014 TO: Infrastructure Finance Authority Board FROM: Melissa Murphy, REgional Coordinator

Jim Breithaupt & Ed Tabor, Finance Officers Lynn Schoessler, Director

SUBJ: Request for board approval of $1,200,000 in forgivable loan as part of Shangri-La Water District's $2,000,000 award from Safe Drinking Water Revolving Loan Fund for Water System Upgrades and New Storage Tank Installation

Issue The Shangri-La Water District’s drinking water infrastructure is old and rapidly deteriorating. The system has been tested for E.coli and is suspected of being contaminated with surface water. In addition, the district often has insufficient capacity during summer months to meet its community’s drinking water needs. To address these issues the district needs to install a new water storage tank, upgrade the existing distribution lines and complete additional improvements as described below. Background The Shangri-La Water District is located in Lane County near Walterville and serves a population of 230. In 2013 the district submitted two Letters of Interest to the Oregon Health Authority for Safe Drinking Revolving Loan Funding. Two separate projects, one for a water system master plan and one for a new storage tank with upgrades to the existing system, were rated, ranked and recommended for funding through the IFA. The district completed the water master plan in 2013. The district is now moving forward with the needed system upgrades to deal with potential compliance and water efficiency issues. The district, with the assistance of a licensed engineer, will implement the following to address the current issues with the system:

1. Add water filtration to existing well; 2. Full distribution pipe replacement; 3. New 15,000 gallon storage tank and booster pump facilities; 4. New operations building.

Business Oregon, Infrastructure Finance Authority Page 2 of 2

Discussion The Shangri-La Water District’s Water Master Plan identified the problem issues with the current system and made recommendations that align with the application for funding. The Oregon Health Authority has ranked and rated this project high and supports funding from the Safe Drinking Water Revolving Loan Fund to rectify the drinking water system issues. The district applied for Green Project Reserve Funds and was awarded the full forgivable loan amounts by the Oregon Health Authority. The district also qualifies as a Disadvantaged Community, which triggers additional forgivable loan, a lower interest rate and a longer-term loan. Funding Summary Recommended SDWRLF Financing: Under current IFA-SDWRLF policy 10% of the total award amount qualifies as principal forgiveness (up to $250,000) for all applicants. Additional forgiveness may be awarded for communities classified as disadvantaged (up to 50% or a maximum of $500,000) and for Green Project Reserve aspects of the project, with approval from Oregon Health Authority (up to 40% not to exceed $500,000). Based on the most recent American Community Survey data, the 2012 MHI for Shangri-La Water District is $50,357. The district’s MHI is over the Statewide MHI of $50,036 indicating an affordability rate of $78.69. The district has 92 connections and its current water user charge, $50.00 per month and property tax revenue of $40.66 per EDU per month, together equals a monthly fee-equivalent rate of $90.66 per EDU. The district is projecting its monthly fee-equivalent rate to be at $120.63 at the start of the loan repayment. Both before and after the monthly fee-equivalent rate increases, the district is and will be above the indicated affordability rate of $78.68. Therefore, the district does qualify for disadvantaged community status. Based on the current Safe Drinking Water Revolving Loan Fund criteria, the district is eligible for a $500,000 disadvantaged community forgivable loan and a 1%, 30-year term loan of $800,000. The district will receive $200,000 of forgivable loan that is established in current policy (10%). The district also has applied for and received approval for Green Project Reserve, which would be an additional $500,000 in forgivable loan. The breakdown of funding for this award is as follow:

• SDWRLF—Loan $800,000 • SDWRLF—10% Forgivable Loan by Policy $200,000 • SDWRLF—Green Project Reserve Forgivable Loan $500,000 • SDWRLF—Disadvantaged Community Forgivable Loan $500,000

Total $2,000,000 Requested Action:

Informational Only For Board Input/Discussion For Board Action Staff requests approval for a $2,000,000 award with $1,200,000 of forgivable loan and $800,000 term loan from the Safe Drinking Water Revolving Loan Fund for the drinking water system upgrades in the Shangri-La Water District.