Feeling their hands tied due to government regulations and realizing timing is critical to avoid possible fines, Ramona Municipal Water District Board voted to move forward with Phase 1 improvements to Santa Maria Sewer Service Area (SMSSA) facilities, despite lack of funding.
RMWD District Engineer Tim Stanton and Chief Financial Officer David Barnum made a presentation to the board at its Dec. 22 meeting, giving an overview of the SMSSA facilities, explaining the need to expand as required by the Regional Water Quality Control Board (RWQCB), and suggesting possible financing options.
Improvements to the facility become complicated with various regulatory agencies involved, an August 2011 permit deadline looming, environmental studies imposed and financing in question.
“Financing is a critical part of this project,” said Barnum. “It takes anywhere from six months to a year.”
Barnum said the mechanism to borrow money can depend on the marketplace. In 2011 or 2012, he said, the water district might do a public offering or a private offering.
Barnum said he and his staff receive calls two to three times a week from financial advisers offering to help on financing different projects. He said staff can find the best deal for the district and then bring it back to the board. The board, he added, will have the ultimate authority to direct staff on what type of money to borrow.
As far as timing, Barnum said they have until late 2011 to mid-2012. Between now and then, he anticipates workshops to look at the financing climate and the rates.
With Phase 1 improvements estimated to cost $13 million, Barnum said debt service will add to that cost, approximately $.9 to $1.2 million per year. If the district borrows $13 million, that amount could look more like $17 million with debt service added, Barnum noted. He said he won’t know the exact number for a while.
“Because of the size of this financing, there will most likely be a requirement for us to pledge with property tax revenues and rate increases,” Barnum said. “In 2012 we are in a more enviable position than we are now.”
In 2012, he said, the district will have the majority of water debt paid off, so it will have approximately an additional $1 million in property tax revenues available. Barnum said staff will continue to bring forward solutions to include funding debt service for Santa Maria with a combination of rates and property tax.
He added that the board wisely set a precedent in the last budget by putting aside some money for the rate stabilization fund. The board approved an 8 percent increase in Santa Maria sewer rates as part of the fiscal year 2009-2010 operating budget in anticipation of the construction of Phase 1.
“It’s really difficult for me to ask people to pay more money for services but seems to me like we’re faced with a considerable amount of unfunded mandates that we don’t get paid for here,” said Director Darrell Beck.
The district has to meet all the CEQA (California Environmental Quality Act) laws, which add considerable cost to its projects, said Beck.
“We have no control over it,” Beck continued. “We have to keep up with the water quality control board. They keep us pinned down if we don’t expand the plant to meet the current amount of people that are on it. So I don’t see any other choice. I think we’re going to have to come up with some creative ideas on how to finance it, and how to shift these funds around.”
The SMSSA plant has been at its current site since 1973, when it was run by the County of San Diego and was approved for .5 million gallons per day (MGD) by the RWQCB. In 1981, RMWD began operating the Santa Maria plant and was required by RWQCB to upgrade the plant, first to .60 MGD and then to 1.0 MGD.
With the number of equivalent dwelling units (EDUs) serviced by SMSSA estimated to be 4,087, there have been instances when the plant has exceeded its treatment capacity. At those times, the RWQCB could have fined the RMWD.
RMWD Board President Jim Robinson said if the plant exceeds 1 million gallons a day, the RWQCB can issue a “cease and desist” order, which would cause a moratorium on building in the service area and could subject the water district to fines.
Robinson said the wet weather storage reservoirs also have to be increased from the current 262 acre-feet to about 437 acre-feet, so the district needs to build a couple of more ponds at Santa Maria.
If it rains a lot, the water doesn’t evaporate on the sprayfields and must be stored in ponds, Robinson explained.
Beck said that the district could face a cease and desist from RWQCB if it rains a lot and there is not enough storage.
To do these improvements, the RMWD needed land. RMWD had leased approximately 300 acres east of Rangeland Road and around the airport for sprayfields. In December 2005, the owner of the property sold it to The Nature Conservancy (TNC) and RMWD started eminent domain proceedings. Robinson said the water district was able to settle with TNC and acquired the land in August 2008. The purchase agreement with TNC required that environmental permitting be completed within a three-year window that will expire Aug. 27, 2011. With those permits, there may be restrictions, once the studies are completed, Robinson added.
The CEQA process was initiated in November 2007. Robinson said the studies include biologists and archeologists going over the land. Some of the environmental issues that have been raised include the endangered arroyo toad and the Stephens’ Kangaroo rat, said Robinson. Because the end of a runway at Ramona Airport goes over a portion of the land, Robinson said the district had to pay a company to study bird strikes. Already, he said, the district has spent about $300,000 for the studies.
“We look to have the CEQA in hand by next March or April,” Robinson said.
Besides CEQA, the district is required to have permits from RWQCB, possibly the Air Pollution Control District, California Division of Safety of Dams (for the ponds) and possibly other permits. Stanton said the permits will require work to start within one year of issuance.
Because of the TNC permit condition that expires Aug. 27, 2011, Stanton said, “By 2012 we’ve got to start construction. You’ve got to start construction by a certain amount of time or you lose your permits.”
To begin the improvement project, Stanton presented the project in three phases, suggesting the district start on Phase 1, as recommended by staff and an ad hoc committee. Phase 1 is deferred maintenance, Stanton said, “which is basically the first phase of getting the project where it meets the 2005 criteria.”
Phase 2 is the expansion phase, bringing the plant to 1.28 MGD and Phase 3 would expand the plant to 1.47 MGD.
“The CEQA and design address all three phases,” Stanton said.
Stanton said the plant was designed for 1.0 MGD but in 2005 the 30-day moving average was 1.14 MGD, which “is what we’re trying to match in Phase 1,” he said.
Included in the board’s approval of implementing Phase 1 was the implementation of the “early schedule,” as recommended by staff, which includes CEQA certification in April 2010; design approval in October 2010; permit approval in April 2011; bid project in May 2011; and obtaining financing and starting construction in March 2012. Also included was approving staff to develop financial alternatives to be presented during the FY2010-11 budget process using rate increases and property taxes to provide debt service coverage.