State Revolving Fund Loans Finance/Administration Committee June - PowerPoint PPT Presentation

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 2

State Revolving Fund Programs • 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 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 3

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: 20 year 30 year Per $10 Million of Capital SRF Revenue Bond* Loans Compared to Bonds $588K $548K $40,000 more per year for 20 years Average Annual Debt Service $11.76M $16.44M Long-Term Savings of $4.67M Total Debt Service 1.60% 3.57% 2% less Rate ** * Rates as of 5/10/16 ** All-in-TIC 5

Annual Debt Service and Total Debt Service (per $10M of capital projects) 6

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 7

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 10

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 11

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 12