STATE WATER RESOURCES CONTROL BOARD MEETING
SACRAMENTO, CALIFORNIA
MARCH 20, 1997
ITEM: 10
SUBJECT: FUTURE LOCAL DEBT, REQUEST FOR WAIVER OF SECTION XV.E., OF THE POLICY FOR IMPLEMENTING THE STATE REVOLVING FUND FOR CONSTRUCTION OF WASTEWATER TREATMENT FACILITIES
DISCUSSION: Officials from the City of San Diego (City) met with staff of the State Water Resources Control Board (SWRCB) on December 16, 1996 to discuss proposed changes to the Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities (SRF Policy) that would enhance the City's opportunity to secure State Revolving Fund (SRF) loans.
The City followed up the meeting with a letter dated December 20, 1996 which contained a number of recommended changes to the SRF Policy. Exhibit A contains correspondence relating to this matter.
The Division of Clean Water Programs (DCWP) discussed the recommended changes and resolved all but one issue. The remaining issue is the SWRCB requirement that the sale of future local debt be on parity, or subordinate to, the SRF debt.
The City objects to this requirement because it increases the cost of future debt and the City has already made plans to sell additional bonds that are on parity with its existing local debt. The City, therefore, is requesting a waiver to Section XV.E. of the SRF Policy allowing the City to sell future debt that is senior to any SRF debt it may acquire.
At the request of the City of San Francisco, this issue was brought before the SWRCB on
September 23, 1993 and the SWRCB elected to require future local debt to be on parity with, or subordinate to, SRF debt. The SWRCB based its decision on its responsibility to insure that loans issued by the SWRCB are adequately protected from default.
The City of San Diego has offered to dedicate a percentage of its sewer revenue equal to
110 percent of the annual SRF debt payment to protect against default (1.1 coverage). The 1.1 coverage offered by the City of San Diego, and the fact that it must submit a revised revenue program to the DCWP whenever it sells future local debt, provides an acceptable level of assurance that the SWRCB's responsibility to assure repayment is not compromised.
POLICY ISSUE:Should the SWRCB approve a waiver to Section XV.E. of the SRF Policy allowing the City of San Diego to sell future debt which is senior to any SRF debt it may acquire? Approval of this request may result in waiver requests from other SRF loan recipients expecting to sell future local debt.
REGIONAL BOARD IMPACT: None.
FISCAL IMPACT:There is no direct program impact. There is a remote possibility that, in the event of a default, the SRF may not receive all of the repayment monies due on a loan.
STAFF RECOMMENDATION: That the SWRCB adopt a resolution approving a - waiver to Section XV.E. of the SRF Policy allowing the City of San Diego to issue future debt that is senior to any SRF debt issued by the SWRCB.
(Exhibit not available electronically but can be obtained by calling Eric Torguson (916) 227-4449.)
STATE WATER RESOURCES CONTROL BOARD
RESOLUTION NO. 97-
FUTURE LOCAL DEBT, WAIVER OF SECTION XV.E., OF THE POLICY FOR IMPLEMENTING THE STATE REVOLVING FUND FOR CONSTRUCTION OF WASTEWATER TREATMENT FACILITIES
WHEREAS:
1. Section XV.E. of the Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities, (SRF Policy) prohibits the sale of future local debt that is senior to any State Revolving Fund (SRF) debt;
2. The City of San Diego, by letter dated December 20, 1996, requested a waiver to Section XV.E. of the SRF Policy;
3. The City offered the following enhancements to offset its request for subordinate status of its SRF Loans:
a.An "A" or higher rating by at least two nationally known rating agencies;
b.A coverage ratio of 1.1 times current year SRF debt service;
c.Payment of the state match share for all SRF loans with a subordinate status; and
4. The Division of Clean Water Programs has reviewed the request and finds the provisions offered by the City of San Diego to be adequate to assure reasonable protection against default on their SRF loans.
THEREFORE BE IT RESOLVED THAT:
The State Water Resources Control Board approves a waiver to Section XV.E. of the SRF Policy allowing the City of San Diego to sell future local debt that is senior to any SRF debt it may acquire.
CERTIFICATION
The undersigned, Administrative Assistant to the Board, does hereby certify that the foregoing is a full, true, and correct copy of a resolution duly and regularly adopted at a meeting of the State Water Resources Control Board held on March 20, 1997.
__________________________
Maureen Marché
Administrative Assistant to the Board