State Revolving Fund Loans

Finance/Administration Committee

June 28, 2016

Funding the Capital Improvement Program

• Four funding mechanisms

– PAYGO (Revenue Funded)

– Municipal Bonds

– Grants

– State Loans

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• Federal Government, through the States, offers low-interest loans to fund water and wastewater infrastructure projects

– Clean Water State Revolving Fund (CWSRF) for wastewater and recycled water projects

– Drinking Water State Revolving Fund (DWSRF) for potable water projects

State Revolving Fund Programs

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• Rate: Loans are made at

approximately half the State’s

general obligation bond rate.

• Limit: No upper limit on loan

amounts

• Term: CWSRF loans are 30 years;

DWSRF loans are 20 years

Pros and Cons of SRF Loans vs Conventional Bonds

Pros • Lower interest rate Cons • Water Loans for shorter term – 20 years • Higher administrative burden for application

and administration (e.g. NEPA review) • Project specific; bond proceeds can be used

more flexibly • Possible American Iron and Steel (AIS)

requirements; can increase project costs 4

Costs and Savings of SRF Loans

• For CWSRF (wastewater and recycled water), 30 year SRF loan is lowest cost financing

• For DWSRF (water), every $10M of capital projects:

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Per $10 Million of Capital20 year

SRF30 year

Revenue Bond* Loans Compared to Bonds

Average Annual Debt Service $588K $548K $40,000 more per year for 20 years

Total Debt Service $11.76M $16.44M Long-Term Savings of $4.67M

Rate ** 1.60% 3.57% 2% less* Rates as of 5/10/16

** Al l -in-TIC

Annual Debt Service and Total Debt Service (per $10M of capital projects)

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SRF Funding as part of District’s Long-Range Financing Plan

• SRF funding decreases total debt service over time, and in some cases decreases annual debt service

• Most Capital Improvement Projects qualify for loans

• Project selection criteria

• Finance, Engineering, and Operations and Maintenance for both Water and Wastewater are working together to identify appropriate projects

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Current Loans

• Upper San Leandro Hypolimnetic Oxygenation System (DWSRF) – $2.2M original principal

– $1.1M currently outstanding

– Payments began in 2003

– Final payment in 2023

• East Bayshore Phase 1A (CWSRF) – $20.1M original principal

– $13.9M currently outstanding

– Payments began in 2008

– Final payment in 2028 8

The District has had several prior SRF Loans

•North Richmond Water Reclamation Plant (CWSRF) – $22.3M

– Payments began in 1993

– Balance paid in full in 2012

•Wet Weather Facilities (various loans) (CWSRF) – $78.8M

– Payments began from 1989-2000

– Balance paid in full in 2012 9

South Reservoir Replacement Project

• $17.7 million replacement of an existing reservoir

• Reduce size of reservoir to remove water quality concerns

• Loan application was submitted on March 1, 2016

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Macarthur Davenport Pipeline Replacement Project

• $11.3 million replacement of an existing pipeline

• 90 year old potable water transmission pipeline

• Pipeline crosses the Hayward fault

• Loan application was submitted on April 25, 2016

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Schedule / Next Steps

• Track applications

• Advocate for 30 year DWSRF loans

• Submit additional applications as appropriate

• Board would approve financing agreements if loans go forward

•Ongoing updates to Board

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