AgdaPkt 2019-06-24 Joint SA PFA - Laserfiche WebLink

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6.U. - Page 25 of 47 1.6 Financial Challenges The City's sewer enterprise is facing a number of financial challenges that can be addressed via relatively small, gradual sewer rate increases in upcoming years. Key drivers of future sewer rate increases are summarized below. 1.6.1 Reconstruction & Upgrade of Regional Wastewater Treatment Facilities SVCW is in the process of completing a $850 million capital improvement program to rebuild and upgrade its regional wastewater treatment plant and conveyance system which includes pump stations and a 9 -mile influent force -main pipeline that conveys wastewater from Redwood City and other SVCW member agencies to SVCW's regional treatment plant. SVCW's facilities were originally constructed almost 40 years ago and have reached the end their useful lives. The capital improvements will enable SVCW to replace and upgrade its outdated facilities, meet stringent environmental regulatory requirements, and provide reliable service in future years. Redwood City is contractually responsible for funding approximately 48.57% of SVCW's capital improvement program costs equating to over $410 million. SVCW has been pursuing a combination of low -rate financing from the State Revolving Fund (SRF) and the Water Infrastructure Financing and Innovation Act (WIFIA) financing programs supplemented by bond financing. SVCW is roughly one-third of the way through completing its capital program. The City's share of debt service for SVCW's capital program is projected to ramp up from the level of $11.1 million in the current fiscal year 2018/19 to about $21.7 million per year over the next 8 years. The following table summarizes Redwood City's total projected annual payments to SVCW for operating and maintenance expenses, debt service, and other non-operating costs. Operating and maintenance expenses and non-operating expenses other than debt service are based on the latest update of SVCW's Long Term Financial Plan dated January 2019. SVCW debt service projections are based on subsequent projections developed in March 2019 that account for more recent developments regarding anticipated project financing. SVCW now anticipates securing additional low-cost project funding from WIFIA which also results in a corresponding decrease in bond financing. Additionally, SVCW determined that debt repayment for a projected SRF loan would be delayed by one year due to updated estimates of project completion. BARTLE WELLS ASSOCIATES 8 Sewer Financial Plan & Rate Update 704