Receive presentation on the North Davis Meadows Water Consolidation Project; adopt resolution approving documents and actions for approval of the State Water Resources Control Board State Revolving Fund Loan program financing for the North Davis Meadows County Service Area Water System Consolidation Project financing, including authorizing the execution and delivery of an Installment Sale Agreement for up to $8,135,600; and adopt resolution updating the authorizing resolution delegating authority to the County Administrator, the Director of Community Services and other designated officers to execute the financing agreement, amendments and funding certifications for the Project. (No general fund impact) (Lindbo/Villa) (Est. Time: 5 min)

Since 2009, the North Davis Meadows County Service Area (CSA) has been working toward a permanent solution for mitigation of water quality concerns in the community's public water system, most notably nitrate, hexavalent chromium, aluminum and iron in excess of maximum contaminant levels (MCLs). Absent progress toward a viable solution, the community is at risk for $1,000 fines per day, per constituent over the MCL (currently $3,000 per day absent an MCL for hexavalent chromium). After assessing a variety of options for providing a potable water supply that meets all drinking water standards, including treatment at the well-head and drilling deep wells, the North Davis Meadows CSA Advisory Committee and the community concluded that consolidating with the City of Davis public water system was the most reliable and cost-effective method to comply with California drinking water regulations and to ensure the health and safety, including fire protection, for the residents of North Davis Meadows. On September 27, 2016, the Board of Supervisors approved an agreement for the North Davis Meadows CSA Water System Consolidation Project ("the Project") design work related to extending City of Davis water to the North Davis Meadows CSA, following the adoption of the Initial Study/Negative Declaration. An addendum to the Negative Declaration was later adopted by the Board of Supervisors on March 20, 2018, and a second addendum was adopted on November 22, 2022, to address minor Project changes.  

Project Financing - Approval of the State of California Clean Water State Revolving Fund Loan
On March 20, 2018, the Board of Supervisors approved water rate increases to pay for the Project and approved various resolutions required by the State Water Resources Control Board (SWRCB) to secure favorable Project financing through the Drinking Water State Revolving Fund (SRF) program.  The SWRCB provides financial assistance to municipalities for water and wastewater projects, including loan and grant funding for construction of municipal drinking water facilities. The County received commitments from the SWRCB for both a grant in the amount of $7.6 Million for the Project ($80,000 per parcel) to cover the majority of the costs of the Project, with the remainder represented by a loan made by the SWRCB under its State Revolving Fund Loan program (the “SRF Loan”).  The SRF Loan will be evidenced by an installment sale agreement (the “Installment Sale Agreement”) between the County and the SWRCB, under which the SWRCB agrees to sell the Project to the County in return for annual installment payments (the “Installment Payments”) to be made by the County as the purchase price of the Project.  The Installment Payments are sized to repay the SRF Loan, and are payable by the County solely from the water fees and charges adopted by the North Davis Meadows CSA on March 20, 2018, to cover the anticipated annual repayment of the SRF Loan. 

The attached resolution (Attachment A) approves the financing plan for the Project and authorizes the execution and delivery of the Installment Sale Agreement by the County, confirms the appointment of professionals in connection with the financing, and designates certain County officers to execute the Installment Sale Agreement and take other actions necessary to implement the financing plan.  The Installment Sale Agreement (Attachment B) will be finalized and executed when the SWRCB returns the execution copy with the numbers inserted but the form of the Installment Sale Agreement has been finalized with SWRCB's legal department. In addition, the resolution and attachments thereto contain the public disclosures required by Government Code section 5852.1.  Section 5852.1 requires the Board of Supervisors to make certain public disclosures regarding the proposed financing by obtaining a good faith estimate from a financial adviser that includes the principal amount of the loan, the true interest cost, and the total payment amount, among other disclosures.  The good faith estimate for the Project's SRF financing was prepared by KNN Public Finance, LLC based upon a total estimated Project construction cost of $8,135,600 and an interest rate of 2.1%, and also includes two scenarios, one with the anticipated $7.6 million in grant proceeds and the other without the grant proceeds, to ensure we have reviewed both scenarios pending receipt of a final Installment Sale Agreement with the grant financing from the SWRCB.  The good faith estimate is included as Appendix A to the resolution. 

The Installment Sale Agreement is anticipated to be in substantially the form provided in Attachment B, which has been approved by SWRCB's assigned legal counsel and is anticipated to be finalized in the next two months per the latest update from the SWRCB.  Adopting the attached resolution will ensure there is no further delay in executing the Installment Sale Agreement and proceeding with the Project once the final financing documents are submitted by the SWRCB for signature.

Authorizing Resolution
Staff are also requesting adoption of the resolution identifying the "authorized representative" on behalf of the County who may sign the SRF financing agreement and other Project documents on behalf of the County, as required by the SWRCB (Attachment C).  The initial authorizing resolution identified the County Administrator as the "authorized representative" (Resolution No. 18-30).  On November 22, 2022, the Board approved an updated resolution (Resolution No. 22-146) updating the prior authorization to designate the Director of Community Services as the County's "authorized representative" in order to streamline the signature process once the SRF financing agreement review process is completed.  To be consistent with the resolution approving the financing plan and per direction from the SWRCB, the attached resolution further updates the "authorized representative" for the County to be the County Administrator, the Assistant County Administrator, Director of Community Services, or the Chief Financial Officer to sign the Installment Sale Agreement and other documents necessary to complete and implement the financing for the Project.

County Counsel, Dept. of Financial Services, SWRCB, Jones Hall, KNN Public Finance LLC

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