AgdaPkt 2015-10-12 Closed and Joint SA and PFA

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8.B. - Page 17 capital projects were ranked in the highest priority categories (1 and 2). This means that the flow model projected potential overflows under existing conditions. Despite this information, the City has not experienced any overflows as projected by the model in those locations. The City has been proactively conducting closed-circuit television inspections of the wastewater collection system to assess the conditions to identify sources of infiltration and inflow into the City's sewer system. Reductions in infiltration and inflow could reduce the potential overflow conditions and may also reduce the need for the capital improvements identified in the updated master plan. The City currently anticipates funding its collection system capital needs on a pay-as-you- go, cash basis, and has increased its sewer rates accordingly. However, the City might consider the future use of debt financing if such financing was either needed to fund high-priority projects or if it made economic sense to construct a number of improvements in a given year rather than spread the capital improvement expenditures over a longer timeframe. Additionally, the City could be liable for funding some additional expenditures related to the monitoring or clean-up of soil with perchloroethylene ("PCE") contamination located under Sequoia Station, a retail shopping center located next to a Caltrain station. Through mediation, the City has received approximately $650,000 from the prior owner of a dry-cleaning business that used to be located near the site and was the source of the PCE. These funds are designated towards remedying the situation. The San Francisco Bay Area Regional Water Quality Control Board ("RWQCB") has jurisdiction over determining what actions need to be taken to remedy or monitor the situation. The RWQCB has determined that the City was partially responsible for the PCE contamination due to overflow/leaks from the City's sewer pipelines. In July 2014, the City contracted with an outside consultant to create a work plan that will propose steps to monitor the groundwater pollutant plume and develop a remedial action plan. In October 2014, the RWQCB approved the remedial action plan and required the City to submit quarterly groundwater monitoring reports. As of May 2015, the City has submitted 2 groundwater monitoring reports and is waiting for direction from the RWQCB regarding whether the proposed strategies (as outlined within the remedial action plan) can begin. The remedial action plan contains 3 strategies and if completed, the total estimated cost is $1.4 million. In addition, the City anticipates financing most of its allocable share of costs for the Authority's CIP, equal to approximately $253 million over the next five years, after taking into account proceeds from the 2015 Bonds, the 2014 Bonds, outstanding SRF Loans, an anticipated $10 million cash contribution from the City, and accounting for a projected 3% annual construction cost inflation. The City anticipates financing these costs through long-term debt issued by the Authority and/or the City. Sewer Utility System Finances The City's water and sewer utilities are accounted for as separate enterprise funds. Sewer enterprise operations and capital improvements are funded predominantly by sewer service charges supplemented by interest earnings, capacity fees, and other miscellaneous revenues.