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SR 12-06-2016 11A Ci ty Council Report City Council Meeting : December 6, 2016 A genda Item: 11.A 1 of 4 To: Mayor and City Council From: Susan Cline, Director , Public Works, Water Resources Subject: Adoption of Reimbursement Resolution and Pledged Revenue and Fund(s) Resolution for the Sustainable Water Infrastructure Project Recommended Action Staff reco mmends that the City Council adopt the Reimbursement Resolution and Pledged Revenue and Fund(s) Resolution for the City of Santa Monica’s proposed Sustainable Water Infrastructure Project (SWIP). Executive Summary On January 26, 2016, the City Council ado pted a resolution (Attachment A) authorizing City staff to file applications with the California State Water Resources Control Board (State Water Board) requesting funding from a combination of various State programs including Proposition 1 grant programs and the Clean Water State Revolving Fund (CWSRF), and to negotiate funding for the proposed SWIP with the State Water Board. The State Water Board is currently reviewing the financial section of the City’s CWSRF application for low interest financing. Befo re the State Water Board provides a funding proposal for review, City Council adoption of the attached Reimbursement Resolution (Attachment B) and Pledged Revenue and Fund(s) Resolution (Attachment C) is required. The preliminary estimated cost of the proj ect is approximately $57,0 50,000 . Staff has determined that the Wastewater Fund has the financial capacity to pledge future revenues towards payment of any and all CWSRF financing for the SWIP, thereby completing an important step in the funding applicatio n process for the SWIP. Adoption of the subject resolutions has no fiscal impact. Staff will return to City Council for review and approval for any project funding agreement. Background The State Water Board is committed to assisting its stakeholders buil d resiliency to drought and climate change. Similarly, the City has established among its sustainability goals the objective of reaching water self -sufficiency by the year 2020, concurrent with addressing the water conservation requirements made necessary by the on -going drought. The City’s proposed SWIP would align with these objectives, while simultaneously helping to improve drought resiliency, increase water supply for reuse, and enhance flexibility in the management of the City’s water resources, by al lowing for 2 of 4 the treatment and reuse of brackish/saline groundw ater, municipal wastewater, and stormwater. City Council previously approved staff applying for State Water Board grant and low interest financing on January 26, 2016. City Council adopted the SW IP environmental documents on September 27, 2016. Currently, the City’s water supply is a combination of imported water and local groundwater. Long term, the City seeks to become sustainably independent from imported water through continued conservation a nd increasing reliance on its groundwater resources. The SWIP takes a forward thinking approach to help secure the City’s water future by leveraging use of existing City infrastructure and by linking together three distributed water reuse elements into a single cohesive and comprehensive project to harvest, treat, and reuse non -conventional water resources . Advanced treated water produced from the SWIP would be used to meet existing permitted non -potable reuse demands. When properly permitted, a significan t portion of the advanced treated water would be utilized for indirect potable reuse via aquifer recharge. Combined, these three elements would produce approximately 1,680 acre - feet per year (AFY) of new water. The SWIP has three basic elements (Attachme nt D) all designed to function as a cohesive and integrated system for the harvesting, treatment and conjunctive reuse of all nonconventional water resources that are available to the City (i.e. stormwater, brackish/saline impaired groundwater, and municip al wastewater). SWIP Element 1, a shallow brackish/saline impaired groundwater supply well, would be installed to replenish a City stormwater harvest tank near the Santa Monica Pier during dry weather. The City recently received a $3.7M Clean Beaches Initiative (CBI) grant to construct this 1.6 million gallon tank. Runoff and impaired groundwater from the CBI tank would be piped to the City’s existing Santa Monica Urban Runoff Recycling Facility (SMURRF). As part of Element 1, the SMURRF would also b e upgraded with the installation of a containerized reverse osmosis (RO) unit capable of treating both captured stormwater and brackish/saline impaired groundwater for permitted non -potable distribution and future permitted indirect reuse (aquifer recharge ). SWIP Element 2 would provide a source of recycled water for permitted conjunctive reuse via the construction of a new below ground Advanced Water Treatment 3 of 4 Facility (AWTF) to treat up to 1 million gallons per day (MGD) of municipal wastewater. Trea tment would include, among other things, membrane bioreactors, membrane filtration, reverse osmosis, and advanced oxidation. SWIP Element 3 would include added infrastructure to further improve stormwater harvesting and reuse. Two below -grade runoff h arvest tanks totaling 4.5 million gallons would reduce ocean discharges and divert the harvested runoff to the new AWTF. One tank would be constructed upgradient beneath Memorial Park and the other below ground at a location on the Civic Center Parking Lot . The subject tanks also provide for compliance with new State Enhanced Watershed Management Plan (EWMP) for Jurisdictional Group 2 and 3 and Municipal Separate Storm Sewer System (MS4) permit requirements for nonpoint source pollution control, and would h elp improve beach water quality. Discussion The preliminary estimated cost of the project is approximately $57,0 50,000 . The City is pursuing a combination of grants and low interest financing from the State Water Board to fund the proposed SWIP. In additi on to applying for Proposition 1 grant funding, City staff submitted an application seeking CWSRF low interest financing. The current CWSRF interest rate is approximately 1.7% per annum. If the entire project were funded via the CWSRF, debt service costs t o the Wastewater Fund may be as much as $2.5 million per year. Grant funding or principal forgiveness by the State would lower repayment costs. Staff has determined that the Wastewater Fund has the financial capacity to pledge future revenues toward paymen t of any and all CWSRF financing for the SWIP and still maintain adequate reserves. This new debt service cost would be almost entirely offset after one year, when the existing Wastewater Revenue Bonds reach maturity and no longer require debt payments. Th e CWSRF application consists of four packages: General, Environmental, Financial, and Technical. The State Water Board has completed the review of the General and Environmental Packages for the SWIP and is currently completing its review of the Technical a nd Financial Packages. In order to complete the Financial Package review and provide a funding proposal, City Council adoption of the Reimbursement Resolution and Pledged Revenue and Fund(s) Resolution is required. Financial Impacts and Budget Actions T here is no immediate financial impact or budget action necessary as a result of the recommended action. Staff will return to City Council for review and approval for any 4 of 4 project funding agreement. Prepared By: Thomas Watson, Water Resources Protection Pr ograms Coordinator Approved Forwarded to Council Attachments: A. January 26, 2016 Staff Report - City Council Resolu tion B. Reimbursement Resolution C. Pledged Revenue and Fund(s) Resolution D. SWIP Project Elements City Council Meeting: December 6, 2016 Santa Monica, California RESOLUTION NUMBER ___ (CCS} (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MQNICA APPROVING PLEDGED REVENUES AND FUND(S) FOR THE SUSTAINABLE WATER INFRASTRUCTURE PROJECT WHEREAS, the City of Santa Monica ("City"} desires to finance the costs of constructing and/or reconstructing certain public facilities and improvements relating to its water and wastewater system, including certain treatment facilities, pipelines and other infrastructure as part of its proposed Sustainable Water Infrastructure Project (the "Project"); and WHEREAS, the City intends to finance some or all of the construction and/or reconstruction of the Project with moneys ("Project Funds") provided by the State of California, acting by and through the State Water Resources Control Board (State Water Board); and WHEREAS, the State Water Board may fund the Project Funds with proceeds from the sale of obligations the interest upon which is excluded from gross income for federal income tax purposes (the "Obligations"), and WHEREAS, prior to either the issuance of the Obligations or the approval by the State Water Board of the Project Funds the City may desire to incur certain capital 1 expenditures (the "Expenditures") with respect to the Project from available moneys of the City; and WHEREAS, the City has determined that those moneys to be advanced on and after the date hereof to pay the Expenditures are available only for a temporary period and it may be necessary to reimburse the City for the Expenditures from the proceeds of the Obligations; and WHEREAS, the City has the authority to enter into contracts with the State Water Resources Control Board for construction and repayment of the Sustainable Water Infrastructure Project. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The City hereby dedicates and pledges the Wastewater Fund (Fund 31) to payment of any and all Clean Water State Revolving Fund and/or Water Recycling Funding Program financing for the Project (State Water Board No. 8211-110). The City commits to collecting such revenues and maintaining such fund(s) throughout the term of such financing and until the City has satisfied its repayment obligation thereunder unless modification or change is approved in writing by the State Water Resources Control Board. So long as the financing agreement(s) are outstanding, the City's pledge hereunder shall constitute a lien in favor of the State Water Resources Control Board on the foregoing fund(s) and revenue(s) without any further action necessary. So long as the financing agreement(s) are outstanding, the City commits to maintaining the fund(s) and revenue(s) at levels sufficient to meet its obligations under the financing agreement(s). 2 SECTION 2. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: 3 SWIP Project Elements SWIP Element 1 SWIP Element 3 SWIP Element 2 Pico -Kenter Outfall Reference:    Resolution  No. 11011    (CCS)  &   Resolution  No. 11012   (CCS)