2003 AGN JUN 03 I22 - Laserfiche WebLink

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CITY OF COLTON Item #22 AGENDA REPORT For City Council Meeting of June 3, 2003 TO: HONORABLE MAYOR AND COUNCIL MEMBERS FROM: ERIC FRASER, DIRECTOR OF WATER AND WASTEWATER OPERATIONS SUBJECT: APPROVE AND ADOPT A RESOLUTION ESTABLISHING A WASTEWATER CAPITAL RESERVE FUND IN ACCORDANCE WITH OUR STATE REVOLVING FUND LOAN CONTRACT DATE: MAY 28, 2003 BACKGROUND On March 24, 1998, the City signed a loan contract agreement with the State Water Resources Control Board of California to repay $8,114,108 with a loan term of 20 years at an interest rate of 2.5 percent. The standard conditions of the SRF loan require the agency to develop a dedicated Wastewater Capital Reserve Fund and an acceptable Revenue Program to repay the SRF loan. DISCUSSION/ANALYSIS The State Water Resources Control Board required as a condition of approval of the loan the establishment of a Wastewater Capital Reserve Fund for future expansion, major repair or replacement costs. The capital reserve fund requirements state that a minimum of one-half of one percent (0.5) of what the total State Revolving Fund loan amount is (approximately $40,570) be deposited into this fund annually for a period of ten years. All deposits, including interest shall remain in the fund for the life of the loan contract. At the end of the loan contract, disposition of funds shall be at the City's discretion. ALTERNATIVES Borrow money from other City Funds to cover the capital improvements, major repairs, or replacement of the Wastewater Treatment Facilities or be in default with the conditions of the State Revolving Fund Loan. If this were to occur the city will have to pay back the $8.1 M SRF Loan plus interest. FINANCIAL IMPACT If the proposed Wastewater Capital Reserve Fund of $40,570 annually is not implemented the agency will be in violation with the State Water Resources Control Board loan conditions, which could result in repayment of all SRF loan funds plus interest and penalty assessment fees as stated in Article 16 of the loan contract. Without the WCRF the Wastewater Department will not have sufficient funds for capital improvements, future expansion, major repair, or replacement of the Wastewater Treatment Facilities. ENVIRONMENTAL IMPACT If the city does not have adequate revenue to maintain the collection and treatment systems, there would be an increased probability of sewage spills or discharge requirement violations. These violations are typically enforced by the Regional Water Quality Control Board in the form of substantial monetary penalties.