AgdaPkt 2007-06-04 - Laserfiche WebLink

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F~~P4F~T To tMe Honorable Mayor ancf pity Cs~u~cif ~rQ;n tfie ~# ~!a9~r June 4, 2007 SuB,rac~r Inter-Fund Loan Agreement for the Transfer of $2.5 Million from Water Fund to Sewer Fund RECOMMENDATION Approve by resolution an Inter-Fund Loan Agreement and the transfer of $2,500,000 from the Redwood City Special Water Fund to the Redwood City Special Sewer Fund BACKGROUND City Council authorization is needed for an Inter-Fund Loan Agreement that will transfer the sum of $2,500,000.00 from the Water Fund to the Sewer Fund. This transfer of funds is temporary to cover the unanticipated increase in the capital replacement fund needs of the Sauth Bayside System Authority (SBSA), which treats and disposes of the City's sewage. 6.2A Page 1 At its Apri126, 2006 meeting the City Council Utilities Committee directed staff to assess the future revenue demand on sewer rates based on the 10-Year Financial Plan issued by SBSA in December 2005. Each fiscal year, SBSA treatment, disposal, and capital replacement costs and the City's anticipated operation, maintenance, and capital improvements costs for the sewer collection system provide the basis for sewer rate adjustments. At the time of the Utilities Committee meeting, the SBSA Commission was ~. re-evaluating its 10-Year Financial Plan. It became clear that Commission ac#ion would result in increased casts to Redwood City for its share of the capital replacement reserve fund. The Commission's action came after the City had started the 45-day public noticing process. Therefore in June 2006, the full City Council would consider a sewer rate adjustment that would not meet the funding needs of the SBSA capital replacement fund. On June 26, 2006, concurrent with the approval of the annual sewer service charge adjustment, the City Council approved, in concept, a loan of funds from the Water Fund to the Sewer Fund. The loan would ensure that the City would have sufficient cash to meet its obligations to the SBSA capital replacement fund. The SBSA Commission had not determined its funding needs for its capi#al replacement program when the City initiated the public notification process (Proposition 218 for the sewer rate increase. A delay to the public process would have jeopardized the City's ability to meet its own obligations for the operation, maintenance and capital replacement needs of the City's sewer collection system in the coming year. The proposed inter-fund borrowing agreement contains provisions to pay back the $2,500,000 on a three year repayment schedule in quarterly increments of $416,666.67 each, beginning on January 31, 2008. Interest will be charged an the declining balance of the loan based on a variable rate, recalculated quarterly according to the published State of California Treasurer's Local Agency Investment Fund Quarterly Apportionment