Title
Approval of Recommendation to Council to incur the debt obligation as outlined in the attached draft Ordinance No. 720 authorizing the Incorporated County of Los Alamos (“borrower”) to enter into a loan agreement with the New Mexico Environment Department (“NMED”) for the purpose of obtaining project loan funds in the principal amount of up to $25,000,000 plus accrued interest; designating the use of the funds for the purpose defined in the most current project description form as approved by NMED; declaring the necessity for the loan; providing that the loan will be payable and collectible solely from the borrower’s pledged revenues defined below; prescribing other details concerning the loan and the security for that purpose.
Recommended Action
I move that the Board of Public Utilities recommend Council incur the debt obligation as outlined in the attached draft Ordinance No. 720, in a form acceptable to the County Attorney’s Office.
Utilities Manager Recommendation
The Utilities Manager recommends that the board approve the motion as presented.
Body
The Clean Water State Revolving Loan CWSRF #110 will be replacing Loan CWSRF #083. NMED has agreed to reduce the original 2.38% interest rate down to 0.01%, resulting in significant savings.
The Clean Water State Revolving Loan CWSRF #083 was executed on April 12, 2019, through Ordinance No. 687, approved on October 30, 2018, amended by Ordinance No. 689, approved on February 19, 2019, and amended by Ordinance No. 712, approved on November 9, 2021. Loan CWSRF #083 funds the design and construction of a replacement wastewater treatment plant in White Rock, New Mexico. The existing plant is an antiquated trickling filter plant that was constructed in 1966 and is at the end of its useful life. The loan amount is a maximum of $30 million, plus accrued interest.
Loan CWSRF #083 will be closed out with a projected balance of $6.5 million. Approval of Ordinance No. 720 is the first step to finance the balance of project expenses at a lower interest rate of 0.01%. Loan CWSRF #110 will be entered into with a maximum of $25 million, plus accrued interest, to complete the project. The annual interest rate on that principal amount shall not exceed 0.01% percent per annum. Joint Utility System Revenues will be pledged, and the term of CWSRF #110 will remain at 20 years.
Loan CWSRF #110 includes the addition of $1.5 million to fund the Bayo Lift Station Elimination Pipeline Project. The Bayo Lift Station pumps sewage from all of Barranca Mesa to the Los Alamos Wastewater Treatment Plant. This represents approximately 20% of the sewage treated at the Los Alamos Wastewater Treatment Plant. The lift station is due for some major upgrades and rather than reinvest in the lift station, funds will used to build a gravity sewer line to replace the lift station and eliminate the cost and risk associated with pumping the sewage. This project was approved in the FY2023 CIP budget, and staff proposed financing through the CWSRF program at that time.
Issuance of the loan agreement and promissory notes for CWSRF Loan #110 are needed to enter into the agreement for funding. Resolution 22-13 for signatory authorization on loan documents will also be presented to Council.
Alternatives
If debt is not incurred as outlined in CWSRF Loan #110, the Bayo Lift Station Elimination project will be delayed. The existing project funding through CWSRF Loan #083 for the Wastewater Treatment Facility will remain with the 2.38% interest rate.
Fiscal and Staff Impact/Planned Item
The reduced annual interest rate of 0.01% will result in significant savings to the Wastewater fund. A $6.2 million savings is expected over the life of the loans if the refinance of CWSRF Loan #083 is not available for the lower interest rate. Savings with both loans with the 0.01% interest rate is projected to be $8 million over the 20 years if the refinance of CWSRF Loan #083 is available.
Attachments
A - Proposed Draft CWSRF Loan 110 Loan Agreement (Pending NMED and County Attorney’s Office Approval)
B - Proposed Draft CWSRF Loan 110 Promissory Note (Pending NMED and County Attorney’s Office Approval)
C - Proposed Draft Incorporated County of Los Alamos Ordinance No. 720 (Pending NMED and County Attorney’s Office Approval)
D - Credit and Debt Analysis