Committee delay could cost city tens of millions

Guest Editorial

Committee delay could cost city tens of millionsBy STAN RAJTORA

The wastewater fee increase for the new wastewater treatment plant occurred in June 2013. The preliminary wastewater treatment plant design report was released in October 2015. Since 2015 the only progress has been the environmental certification of two sites for the new facility, one on Navy property and one on city property.

California has a highly subsidized low interest State Revolving Fund loan designed for wastewater treatment plant construction. The major roadblock to getting in the queue for a SRF wastewater loan for the Navy site is resolving longstanding legal and financial issues with the Navy. Getting in the queue is critical because the highly prized low-interest-loan waiting period can be a year or more.

This April Mayor Breeden formed an ad hoc committee including herself, Councilman Mower and the public works director to expedite getting the Navy issues resolved. The plan was to first resolve the disputed legal issues and then resolve the many financial issues. The plan to finalize the city’s legal position by the end of July has been pushed out two weeks by unplanned events caused by the city’s bond counsel. The Navy will then review the city position. In the past, the financial concerns have been a troublesome issue because of Navy resistance to paying its proportionate share of the operational cost. We currently have no useful schedule. The SRF loan application has been initiated but is assumed to be on indefinite hold.

Key to this whole issue is whether the Navy is willing and able to give the city adequate protection for our 50- to 60-million-dollar investment. The local Navy is supportive, but federal laws and bureaucracy create multiple challenges. All loan agencies demand that the city have sufficient control of the property to guarantee loan repayment. Also, the city needs to have adequate long-term control of the property to protect the public’s financial investment. Until the Navy gives adequate protections, the Navy site cannot happen. That is the bottom line.

The city-owned site provides the option to partner with the Navy or not depending on the desires of the Navy. Since the land is city owned, we could finalize a SRF loan application rapidly. This option has always been available, and it is made easier with the addition of a tertiary treatment capability caused by eliminating the need for Navy evaporation ponds. If we had pursued the city- owned site option early, we would now be close to having a loan in hand.

The July 19 City Council meeting revealed a new and alarming turn of events. The three ad hoc committee members, Breeden, Mower and the public works director, made repeated reference to a bond counsel and bond rates rather than a SRF loan. Their discussion also addressed needing higher reserves to encourage reduced bond interest rate. The 2013 Wastewater Rate Study assumed a 7- percent interest rate for a sewer bond. The SRF loan interest rate over the last few years has been about 1.8 percent. The difference in total repayment cost is tens of millions of dollars.

The purpose of the ad hoc committee should have been to finalize the SRF loan application and get into the queue for the city or the Navy site. The committee was never authorized to make longterm funding decisions for the city. The simple fact that the ad hoc committee is even talking about bonding for the wastewater plant debt is a sign that the committee is floundering. The fact that this happened behind closed doors is troubling. The ad hoc committee needs to get back on track or be abolished.

Story First Published: 2017-08-11