ITEM 10: APPROVAL OF A STATE REVOLVING FUND (SRF) LOAN FOR THE CAPISTRANO BEACH WATER DISTRICT (CBWD), CAPACITY PURCHASE AT THE SOUTH EAST REGIONAL RECLAMATION AUTHORITY, AND PUMPING IMPROVEMENTS AT THE VICTORIA WASTEWATER TREATMENT PLANT, SRF LOAN PROJECT NO. C-06-4064-110

DISCUSSION: In accordance with the State Water Resources Control Board's (SWRCB Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities (Policy), adopted on February 16, 1995, and amended on June 18, 1998, projects on the adopted priority list need SWRCB approval to receive a SRF loan. Loans can be approved by the SWRCB after the Division of Clean Water Programs (Division) has approved the facilities plan, including (1) the project report; (2) environmental documents; (3) the draft revenue program; and (4) the water conservation plan.

On October 1, 1998, the Division issued Facilities Plan Approval to the CBWD for the purchase of treatment capacity at the South East Regional Reclamation Authority (SERRA) plant and construction of a pumping plant at the Victoria Wastewater Treatment Plant (Victoria Plant) to convey wastewater to the SERRA plant, and the CBWD agreed in writing with the approval on October 5, 1998.

The CBWD is located within the City of Dana Point in southern Orange County. The CBWD provides wastewater treatment and disposal for the Capistrano Beach community, and areas of the Cities of San Clemente and San Juan Capistrano.

The CBWD owns and operates the Victoria Plant. The plant utilizes a trickling filter to provide secondary treatment of the liquid wastewater stream. Effluent is conveyed to the SERRA plant effluent pump station and biosolids are conveyed by a separate pipeline to SERRA for processing and disposal.

On August 15, 1996, the SWRCB adopted Resolution No. 96-054, approving a SRF loan of $4.43 million to the CBWD for the Victoria Wastewater Treatment Plant Improvement Project. The plant needed upgrading and expansion to reliably meet discharge requirements. There were four alternatives evaluated for the project. Alternative I was the Victoria Plant upgrade to include full liquids and solids treatment. Alternatives II and IIA were to purchase solids capacity at SERRA and upgrade the liquids processes at the Victoria Plant. Alternative IIA included a new sludge pipeline. Alternative III was to purchase capacity at the SERRA plant and upgrade the influent pumping station at the Victoria Plant.

While Alternative III had the highest capital cost, its total annualized cost (the basis used for comparing alternatives) was the lowest of the four alternatives evaluated. Alternative I was selected, however, because Alternative III could not be implemented due to lack of available liquids and solids capacity at SERRA.

The CBWD submitted plans and specifications in July 1997 for the upgrade project. During preparation and review of the plans and specifications process, the CBWD was still negotiating with SERRA and its various member agencies, and the Moulton Niguel Water District (MNWD), to free capacity in the SERRA plant by exchanging it with available capacity in the MNWD Plant 3A. Eventually, three SERRA member agencies, the Dana Point Sanitary District (DPSD), the City of San Juan Capistrano (CSJC), and the Santa Margarita Water District (SMWD) drafted agreements for the collective exchange of 1.50 million gallons per day (MGD) of treatment capacity at SERRA for capacity at the MNWD Plant 3A. Connection of the CBWD to the MNWD Plant 3A was not a viable option because of the proximity of its service area and treatment plant in relation to the MNWD Plant 3A.

The current recommended alternative consists of abandoning the Victoria Plant and purchasing 1.50 MGD of liquids and solids capacity at the SERRA plant. The purchases will be executed through three agreements which assign capacity in the SERRA plant from three member agencies: DPSD, CSJC, and SMWD, who will vacate a specified capacity ownership. These three agencies will then buy into the MNWD Plant 3A. The project also consists of an upgrade to the existing influent pump station at the Victoria Plant and construction of a force main connector to the siphon crossing the channel to the SERRA plant. Construction will be in two phases. The biddable Plans and Specifications for Phase 1 have been submitted and construction is scheduled to begin November 30, 1998. Construction on Phase 2 is scheduled to begin January 11, 1999.

Because the project's scope has changed significantly from that described in the SWRCB's 1996 preliminary loan commitment agenda item and resolution, Division staff are presenting this project again and requesting reapproval of a preliminary loan commitment for the CBWD. The current estimated SRF loan eligible project cost is $7.61 million. The capacity purchase in SERRA is about $6.32 million and the construction of the pump station including engineering and administration is $1.29 million. As before, the capital cost of Alternative III is the highest of the alternatives evaluated but its annualized cost is the lowest. It is therefore considered the cost-effective project because it can now be implemented. Because the estimated eligible project costs have increased by more than 50 percent, the project must be reapproved by the SWRCB in accordance with Policy Section XV.D.

The domestic water supply for the area is provided by the Metropolitan Water District (MWD) of Southern California City from the California State Water Project under contract and the MWD's own Colorado River Aqueduct. These sources provide sufficient water for the CBWD to meet its current and projected water demand. The CBWD also obtains minimal amounts of groundwater as needed, and is pursuing a program which could provide 2,000 acre-feet per year of local groundwater in the future. The MWD has adopted long term plans designed to ensure the adequacy and reliability of water supplies to their service areas beyond the next twenty years. Regarding water conservation, the CBWD is a signatory to the State Water Coalition's Memorandum of Understanding Regarding Urban Water Conservation in California.

The CBWD prepared a Mitigated Negative Declaration (MND) and supporting Initial Study that it distributed to the public and circulated through the State Clearinghouse (SCH#95081029) for review in August 1995. The CBWD Board of Directors approved Alternative II and adopted the MND in October 1995.

In December 1995, the CBWD decided to pursue Alternative I and prepared a second MND and supporting Initial Study that it distributed to the public and circu-lated through the State Clearinghouse (SCH#9603102) for review from March 11, to April 10, 1996. The CBWD responded to all comments received during the review period and added information to the environmental documentation regarding discretionary approval for hazardous materials. On May 15, 1996, the CBWD Board of Directors adopted the MND. On May 23, 1996, the CBWD filed a Notice of Determination with the Orange County Clerk and the State Office of Planning and Research.

The CBWD is now proposing to pursue Alternative III and has made a finding pursuant to California Environmental Quality Act Guidelines Section 15162(b) that no further environmental documentation is required to implement this alternative. This conclusion was based on the fact that Alternative III was addressed in both MNDs and recognized as the environmentally superior alternative.

The CBWD requests the SWRCB approve a total loan of $7.61 million for this project and agrees to pay back the loan in accordance with the SRF Policy. This is an increase in SRF funding of $3.18 million over the commitment in prior Resolution No. 96-054.

POLICY ISSUE: Should the SWRCB approve SRF loan funding for the proposed project, including a 20 year repayment period, with the first repayment due one year after completion of construction? Should the SWRCB, in accordance with Section IX.I. of the February 1995 SRF Policy as amended on June 18, 1998, condition this approval requiring expiration of the preliminary loan commitment if Phase 2 construction is not initiated by January 11, 1999?

RWQCB IMPACT: San Diego RWQCB. Approval of this funding will allow the CBWD to abandon the Victoria Treatment Plant and treatment at theSERRA plant can continue to meet requirements.

FISCAL IMPACT: According to SWRCB Resolution No. 97-001 (Approval of a Staff Proposal to Better Manage the SRF Repayment Account), the SWRCB may approve preliminary loan commitments against the current FFY account and against 125 percent of future repayment funds based on scheduled loan dates.

The SRF account balances, anticipated repayment amounts, and project approvals under consideration by the SWRCB in November 1998 are as follows:

* Minimum Cap. Grant expected for FFY 98-99, based on anticipated Federal Budget.

STAFF RECOMMENDATION: That the SWRCB adopt a resolution approving a SRF loan for the proposed project, with a repayment period of 20 years, and with the first repayment due one year after completion of construction. In accordance with the February 1995 SRF policy as amended on June 18, 1998, the proposed resolution includes an expiration date for this preliminary loan commitment if construction on Phase 2 is not initiated by January 11, 1999.

DRAFT 26 October 1998

WHEREAS:

1. The State Water Resources Control Board (SWRCB), on February 16, 1995, adopted the "Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities," (Policy) and revised it on June 18, 1998;

2. The SWRCB, on June 18, 1998, adopted the FFY 1999 SRF Loan Program Priority List which included the Treatment Plant Improvements for the CBWD in priority Class C;

3. The SWRCB adopted Resolution No. 96-054 on August 15, 1996, approving a preliminary loan commitment for the CBWD's Victoria Treatment Plant Improvement project. This alternative was recommended despite a higher annualized (life cycle) cost because capacity at the nearby South East Regional Reclamation Authority (SERRA) plant was not available for purchase;

4. The CBWD has now completed negotiations to purchase treatment capacity at the SERRA plant and upgrade its pump station at the Victoria Plant. This proposal is the most cost effective and implementable alternative because its annualized cost is the lowest and capacity now exists at the SERRA plant as three SERRA member agencies have agreed to transfer their capacity ownership to the Moulton Niguel Plant 3A;

5. The capital cost of the purchase capacity alternative is more than 50 percent higher than the Victoria Plant Improvement project approved two years ago. Because the estimated eligible project costs have increased by more than fifty percent, the project must be reapproved by the SWRCB in accordance with SRF Policy Section XV.D. Division of Clean Water Programs (Division) staff concur with the CBWD and its engineer that the purchase capacity alternative is the best project and recommend approval;

6. The Division has approved the facilities plan;

7. The CBWD is signatory to the State Water Coalition's Memorandum of Understanding Regarding Urban Water Conservation in California; and

8. The CBWD adopted two Mitigated Negative Declarations (State Clearinghouse Nos. 95081029 and 9603102) prepared for the project, which have been reviewed and considered and it has been determined that the project will not result in any significant environmental impacts.

THEREFORE BE IT RESOLVED THAT:

The State Water Resources Control Board:

1. Approves a SRF loan of $7.61 million (an increase of $3.18 million over the SWRCB's previous commitment) to the Capistrano Beach Water District for capacity purchase at the South East Regional Reclamation Authority treatment plant and the construction of a pump station at the Victoria Plant site. The repayment period shall be 20 years, and the first repayment due one year after completion of construction, and

2. Will withdraw this $7.61 preliminary SRF loan commitment if the CBWD does not initiate Phase 2 of construction by January 11, 1999. The Division of Clean Water Programs my approve up to a ninety (90) day extension for good cause.

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 November 19, 1998.

Maureen Marché

Administrative Assistant to the Board