AgdaPkt 2020-11-23 Joint SA PFA - Laserfiche WebLink

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8.A. - Page 32 of 51 service on the 2020 Bonds. See "THE AUTHORITY AND THE WASTEWATER SYSTEM — Capacity Fees for New Development" in the forepart of this Official Statement. Future Capital Needs The City budgets funds annually for capital improvements to its sewer collection system including repairs, replacements, upgrades, and expansions. The City budgeted $4.2 million for sewer system capital funding in fiscal year 2020-21 and projects to budget approximately $9 million annually through fiscal year 2024-25. The City anticipates fully funding its sewer collection system capital improvements on a pay-as- you-go basis using a combination of fund balances available for capital expenditures and surplus annual revenues. The City's 2013 update to its Sanitary Sewer Master Plan identified approximately $45,300,000 of recommended capital improvements to the City's wastewater collection system. As of Fiscal Year 2019-20 approximately $40 million has been funded through the City's Capital Improvement Program. The City conducts closed-circuit television inspections of the wastewater collection system to identify sources of infiltration and inflow and in general assess the condition of the system. Recommended capital improvements are adjusted periodically in light of real estate development and the physical condition of the collection system. 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 were 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. Any such debt, if issued, would likely be issued on a parity basis with the obligation of the City to pay its allocable share of the 2020 Bonds. 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 remediating the contamination. 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 October 2014, the City contracted with an outside consultant to create a work plan that would propose steps to monitor the groundwater pollutant plume and develop a remedial action plan. In November 2016, the RWQCB approved the remedial action plan and required the City to submit quarterly groundwater monitoring reports. The City completed a small-scale remediation study at the shopping center site in 2018. The full-scale remedial action plan contains 3 strategies and is anticipated to cost close to $2 million. The City anticipates financing most of its remaining allocable share of costs for the Authority's capital improvement plan, equal to approximately $218.6 million from Fiscal Year 2020-21 through Fiscal Year 2025-26. The City anticipates financing these costs through WIFIA Notes, the WIFIA Loan and other long- term debt issued by the Authority. 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. ATTY/AGR/2020.264/PRELIMINARY OFFICIAL STATEMENT — WASTEWATER REV: 11-18-2020 EI Page 10 of 29