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rate-setting and budget ratification process was reviewed in the May 9 work session, and clarification was provided on the governing bodies' approval authority over the annual regional wastewater budget and associated user rates (with the exception under the proposed amendments to the IGA of that portion of the user rates necessary to meet bond covenants and to achieve and maintain an unenhanced credit rating of A for the Commission's Bonds from at least one nationally recognized rating agency). During the May 9 work session, modifications to the amended IGA were suggested to address interests in ensuring funding equity between existing and new users of the wastewater system, as well as between the various user classes. These modifications have been incorporated into the proposed IGA, specifically in sections 3.f. 1, 3.f. 4, and 3.f. 5. Financial and/or Resource Considerations The regional wastewater program is supported by user fees, which are established annually by the MWMC and reviewed and ratified by the city councils of Eugene and Springfield, and the Lane County Board of Commissioners. Capital projects are also supported by revenue from systems development charges (SDCs). The proposed changes to the IGA do not directly affect these rates, but they improve and strengthen the agreement for the bond market and give the MWMC the ability to offer revenue bonds that will be competitive in the market. The most cost-effective financing for the regional wastewater projects is a combination of user fees, SDCs, and bond proceeds. Without the ability to obtain competitive bond rates, the commission would have to consider raising user rates in the next fiscal year, possibly by as much as 65%, to generate the necessary revenues. The 2004 Facilities Plan outlines a schedule for construction of the capital improvements necessary to maintain the needed wastewater treatment capacity and capability. This schedule, if followed, allows MWMC to maintain compliance with the current discharge permit and anticipated future needs of the Eugene/Springfield communities. Adhering to the Facilities Plan construction schedule for the next five years is crucial if the MWMC is to comply with a deadline of 2010 set by the Oregon Department of Environmental Quality (DEQ) to prevent wastewater overflows during specified storm events. Delays in the construction schedule will result in any or all of the following consequences: 1. Increased costs of construction 2. Increased costs due to enforcement actions taken by the DEQ or the Environmental Protection Agency (EPA) or both 3. Increased costs from defending MWMC and the partner agencies from regulatory enforcement actions and/or third party law suits 4. Threats to public health and safety caused by sewer overflows, which are projected in the next few years but will be controlled by constructing the planned improvements according to the Plan schedule 5. The establishment of a potential requirement that significant industrial users reduce or curtail their discharges during times of peak flows at the plant 6. The potential denial of new connections based on inadequate wastewater treatment capacity within regulatory guidelines Timing The timing of required capital improvements to the regional wastewater facilities is set forth in the 2004 Facilities Plan. The CIP schedule starts in 2005 and includes an extensive list of projects and activities that must be undertaken to meet the objectives for regulatory compliance. A draft resolution has been prepared (Attachment D) authorizing MWMC to issue bonds so that, if approved, a total amount not to exceed $100,000,000 in revenue bonds could be issued by the commission. This would be L:\CMO\2005 Council Agendas\M050523\S0505234.doc