Local Leaders Celebrate Money From Low Interest Loans

Woodland City Councilman Jim Hilliard, Woodland Mayor Pro Tem Bill Marble, Senator Lois Wolk, Davis Mayor Dan Wolk, Davis Councilman Brett Lee receive checks from state for low interest loans – photo courtesy WDCWA.

(from press release) Elation. That’s how Woodland City Manager Paul Navazio described his feelings upon receiving, hand-carrying and then depositing into the city’s bank an $18.5 million check from the State Water Resources Control Board. According to Navazio, the check is the first installment of approximately $143 million in low-interest state revolving fund loans to help fund the city’s share of the Davis-Woodland Water Supply Project (regional surface water project) and related improvements to the city’s water distribution system. The check was received by WDCWA on behalf of the city.

“The State meant ‘the check is in the mail’ quite literally,” said Navazio, pointing out that it’s rare to receive hard-copy checks for large sums in today’s age of technology. “Hand-delivering the check for deposit felt celebratory given the challenges we faced in securing such favorable financing for this project.” Navazio, the former chief finance officer for the City of Davis, has been involved with the project since its inception and was on the front end of both cities’ efforts to make the project affordable for local ratepayers.

Recently, the WDCWA, on behalf of the City of Davis, also received the first installment of a similar low-interest loan from the state’s Clean Water State Revolving Fund loan – a check for just more than $10 million – to fund Davis’ share of the project.

“These low-interest loans will cover approximately 98 percent of the regional water project costs for Woodland, Davis and UC Davis,” said Dan Wolk, Mayor of Davis and WDCWA Director. “Collectively, they will save Woodland and Davis ratepayers approximately $133.5 million over the next 20 to 30 years, when compared to conventional municipal financing. That’s great for ratepayers.”

The revolving fund programs – Safe Drinking Water (SDWSRF) and Clean Water (CWSRF) – are funded primarily by the federal government through the Environmental Protection Agency and administered by the state.  The state also contributes funds to the program. The funds are considered “revolving” because local government agencies repay loans with interest to the program and the money is re-used to fund new projects in qualifying communities.

“Securing these loans was absolutely critical to the affordability of this project for our ratepayers, both present and future. It was a team effort and we could not have been successful without the efforts of many, including our board, staff members and state officials Senator Lois Wolk and former Assembly Representative Mariko Yamada. They have been steadfast advocates for the municipal, agricultural and environmental benefits of this project and we particularly acknowledge their efforts,” said Bill Marble, WDCWA Chair and Mayor Pro Tem for the City of Woodland.

“This low interest loan will reduce the costs for ratepayers and ensure that their money is spent wisely.  The project will provide high quality drinking water for residents, improve the ecosystem health of the Delta where the water ultimately ends up, and advances our statewide water policy goals,” said Senator Lois Wolk in a statement last October, when the funds were authorized by the State Water Resources Control Board.

Woodland has two separate low-interest loans from the Safe Drinking Water State Revolving Fund (SDWSRF), the largest in the amount of $111.4 million to fund its share of the regional water project facilities. That funding agreement provides for a 20-year repayment period and a 1.7875 percent per year fixed interest rate. Woodland also received a separate $31.5 million SRF loan at the same interest rate to fund the capital costs of local water system improvements. Collective savings when compared to conventional financing are $75.7 million.

The State Water Resources Control Board (SWRCB) authorized a $95.5 Million CWSRF loan for Davis’ and UC Davis’ shares of the regional water project. With a 1.7 percent interest rate and 30-year term, the loan provides a savings of $42.1 million for the City of Davis when compared to conventional municipal financing.  Additionally, the City of Davis has a separately pending application for a $35.5 million SRF loan with similar terms to fund needed improvements to the city’s existing water distribution system.  When approved, this loan will save the city $15.7M when compared to conventional municipal financing.

The Woodland-Davis Clean Water Agency is a joint powers authority representing the cities of Woodland and Davis, and UC Davis. The Agency is responsible for planning, financing and constructing a surface water supply project to provide high-quality surface water from the Sacramento River to Woodland, Davis and UC Davis by 2016. The primary objectives of the project are to improve water supply reliability, water quality, and help the cities comply with increasingly strict water quality regulations. Learn more at www.wdcwa.com.

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  1. Barack Palin

    So how are all these savings going to affect our water bill?

    We’ve known about the savings for many months now but still no word from the city on how this will filter down to us.

    Are we getting a new rate schedule?

    1. Highbeam

      And at least one apartment complex owner that I know of has increased rents across the board for September, citing the increased water rates, which of course they do not want to pay for…and I thought multi-family units were still getting a better deal than single-family units. Does anyone remember? Matt?

      1. Tia Will

        Hi Highbeam

        Please do not take anything that I am about to write as a reflection on your post. I just think that you summed up one aspect of our current economic /social outlook perfectly.

        which of course they do not want to pay for”

        This sums up much of what I object to in our current society. It seems to me that the predominant view in our society is indeed ” I don’t want to pay for it”. The obvious next statement is, then “who can get to pay for it for my benefit”.

        We have done this for years on the city, county, state and national level. We see it in our streets which need repair.We see it in deferred infrastructure maintenance at all levels. We see it in anti tax statements, We see it in arguments against comprehensive universal health care. We see it in arguments against environmental regulation.

        From my point of view, if we benefit from an action or a policy or a piece of infrastructure, we should just plain grow up and be willing to pay for our share of it ourselves and be willing for those of us to can pay to help subsidize the shares of those who truly cannot.

        As a society we seem to have become very, very invested in personal rights and very reluctant to accept personal responsibility for our common well being.


        1. SODA

          although I agree with you Tia in general, I also wonder, as BP has wondered, how this story will affect the water rates. After all the angst our community has experienced over this entire project, it would appear that this story should have a pretty big impact?  David?

        2. South of Davis

          Tia wrote:

          > This sums up much of what I object to in our current

          > society. It seems to me that the predominant view in

          > our society is indeed ” I don’t want to pay for it”. 

          Since Tia is not selling her homes and cars and moving in to a studio apartment that says to me that  “Tia does not want to pay for it”…

    2. hpierce

      I doubt there will be a new rate structure in the short term.  In answer to how this will affect rates in the future, it probably means a combination of slowing the rate of the planned increase of rates, and reduce the maximum rate currently envisioned.

          1. Matt Williams

            No. It is actually easier to reduce rates than increase them. Under Prop 218 there is no “floor” for rates that have been “noticed” and “approved” by the ratepayers. There definitely is a “ceiling” though.

            With that said, if rates are well below the “ceiling” value at any time, moving up and moving down are equally easy. All they require in either case is fiscal evidence that the churrent rates are either too high or too low. In either case, the rates times the actual (or projected) volume produces the revenue and the revenue needs to exceed the cost by a margin that is neither too low nor too high.

  2. Barack Palin

    David, as Soda has just asked, how about a story on how this $57.8 million windfall for Davis will come back to the citizens in the form of lower water rates, or whatever the city might have in mind?  That comes out to @ $1000 per citizen or over $3000 per residence over the term of the bonds (just quick math, don’t call me stupid if I miscalculated).

    The City needs to address this, if they already have I sure have missed it.

    1. hpierce

      Your “back of the envelope” figures are probably in the ballpark.  Not sure.  If it is, that’s $3000, over the 30 year life of the bonds (as I recall), or $100/year, or ~ 8-9 dollars a month.  That figure is a reduction of what the rates/bills would otherwise have been.  Understand that the loan only deals with the capital costs, not O&M, where energy costs, HR costs would be expected to rise at least the same as inflation.

    2. Matt Williams

      BP, the savings is highly affected by time because it is a savings on annual interest expense. Until the first interest payment is due there is no actual savings. No interest is due until th year after the money is borrowed, which is staged throughout the construction period. As a result, during the time period of the current rates there will be very little savings. The next five year rate setting period is when the savings will begin in earnest. The URAC deliberations between now and then will give us all insight into what the savings will be in the next Prop 218 rate process.

  3. sisterhood

    Gee it’s nice the city has rec’d low interest rate loans. Maybe they can find one to re-pay the DACHA members the down payments they took when they bought the DACHA houses for a very low cost. Wonder where, in the city budget, they are hiding their profits.

      1. sisterhood

        It may have sailed and the city council may be able to sleep well at night knowing they won the legal battle. But being right, legally, and being right, ethically, are two entirely different matters. (Not even 100% sure they are in the right, legally. )

      2. South of Davis

        Anon wrote:

        > I would hope that an experiment like that will never be tried again in Davis.

        I would hope that the city would sell the DACHA homes so the state, city and schools would start getting property tax and parcel tax revenue from them (city, state and UC owned property does not pay property taxes or parcel taxes)…

  4. Anon

    1.  I hope people remember what public figures and private citizens insisted the city could never obtain state revolving loan funds and all the misinformation they gave as reasons why!  To them, I give a figurative raspberry!  LOL  Sorry, but I just had to say that for my own poor soul!

    2. Because the new water rate is heavily weighted in favor of the variable component (87%) and we are in the middle of a drought, it remains to be seen if the new water rate will generate sufficient revenue (the low cost loans notwithstanding) so that a drought surcharge will not be necessary – as everyone is directed to conserve more and more water.  Currently we are under a state mandated 20% rule (someone correct me if that is not right.)

    3. No customer class is getting a “better deal” than another customer class.  Each has to pay their proportionate share under Prop 218 rules.  To what extent landlords will pass on the cost of increased water rates to renters is up to the individual landlord, period.

    4. The URAC will be assessing the effectiveness of the new water rates, and make recommendations accordingly.  It is early in the game to make meaningful assessments because there has been little time to collect data or to know how the current drought and the new water rate structure is going to effect revenue generation.  As time goes on, tweaks in the water rates may or may not be recommended depending on many, many factors.

    5. The Prop 218 process gave a ceiling on water rates, not a floor.  (Any attempt to raise rates above this ceiling requires another Prop 218 process.)  Thus water rate charges on the Prop 218 notice are the maximum ceiling that can be charged, but the city can charge less depending on many factors, not the least of which is the continuing drought and the necessity for extreme water conservation and whether the current water rates can generate sufficient revenue in light of all the known and unknown factors.

    1. Don Shor

      1. I hope people remember what public figures and private citizens insisted the city could never obtain state revolving loan funds and all the misinformation they gave as reasons why! To them, I give a figurative raspberry! LOL Sorry, but I just had to say that for my own poor soul!

      Don’t worry, we won’t forget. 🙂

  5. sisterhood

    I was at the auction in West Sac when the homes were sold. I would have loved to buy one of those homes, even with the lien on it, at the price the city paid. Wish I was able to get together the entire cash purchase price or convince a bank it was a safe loan…

    So any amount over the mortgage loan payment that the City is charging those tenants is pretty much profit. The tenants take very good care of those homes. The only big expense,  in the future, might be new roofs. (If roof lasts approx.20 years, all will need a new one in 2025, same with water heaters, other appliances.) Not even sure why the city has a management company. Most of the stuff the management co. does could be done by a high school/college student for minimum wage.
    IMHO the city did make a profit on those homes.

    1. South of Davis

      sisterhood wrote:

      > So any amount over the mortgage loan payment that the City is

      > charging those tenants is pretty much profit.

      The average rental home expenses (not including taxes and a mortgage) are around $4,000 a year (if you are using union labor the number will probably be twice as high)…

      > Most of the stuff the management co. does could be done

      > by a high school/college student for minimum wage.

      Not in California where you need to be a licensed real estate broker (not just a salesperson) to manage real estate for money…

      1. sisterhood

        I disagree, unless you add in all the unnecessary legal fees. How does the city pay its attorneys, anyway? That must be a huge amount in the city’s budget.

        1. hpierce

          “How does the city pay its attorneys, anyway?” Well, with money.  But perhaps you mean that the City shouldn’t have attorneys representing it at all, or you might mean that there are attorneys, versed in all aspects of law, who should work ‘pro-bono’ for the city’s needs.  Another answer is that the City’s attorney costs, like all costs of staff, are apportioned to “projects” (like developer projects), programs (water, sewer, etc.) or none of the above (amicus briefs, etc.)  The latter comes out of the General fund, I believe.

    1. Don Shor

      [moderator] Maybe they can use the money they’re saving on the water project to fix up the DACHA homes and make them more water-efficient!
      There, I tied this back to the topic thread for you guys. Carry on.

      1. Barack Palin

        Thanks,  this was a test.  I could care less about DACHA, but this thread has been going off topic about DACHA and I bet my wife lunch that as soon as I posted the moderator would step in.  I win.

        1. Don Shor

          [moderator] This is true: I was scrolling up through the posts that I hadn’t yet reviewed, saw the discussion about DACHA and thought ‘what the heck? DACHA?’ and then came to your post which made me burst out laughing. So, you win. Always happy to help.

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