Item 5: Resolution on MWMC Borrowing Authority

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In 2005, the MWMC was given authority by the governing bodies to borrow up to $100 million to pay for the CIP program. The cities of Springfield and Eugene, and Lane County authorized this borrowing through various resolutions and orders. The Eugene Resolution number was 4837. In November 2006, the MWMC issued its first revenue bond in the amount of $47,270,000. In November 2008, the MWMC completed its second successful bond sale in the amount of $50,730,000. In addition, during 2008 the MWMC borrowed $2,000,000 in the form of State Revolving Fund (SRF) loan administered by the Department of Environmental Quality (DEQ) specifically for wastewater treatment plant improvements. As per the Intergovernmental Agreement (IGA), the MWMC has maintained a bond rating of A or higher. For the 2008 series bond, MWMC’s rating was upgraded to AA- by Standard and Poors, which resulted in favorable interest rates. The commission is requesting authorization to borrow up to an additional $100 million to provide the flexibility to generate future revenue necessary to complete the 2004 Facilities Plan over the 20-year implementation period. It is currently anticipated that an additional $31 million in borrowing will be needed in the near-term to complete the remaining CIP projects necessary to ensure compliance with current regulatory requirements. Subsequent borrowing in varying amounts will occur as necessary in amounts not to exceed the total borrowing authority. Delays in the construction schedule due to funding shortfalls will result in any or all of the following consequences: 1) increased frequency of wastewater overflows and related threats to public health and environment; 2) increased likelihood of enforcement actions taken by DEQ or the Environmental Protection Agency (EPA) or both; 3) increased probability of third party law suits; 4) the potential denial of new sanitary sewer connections based on inadequate wastewater treatment capacity within regulatory guidelines; 5) establishment of a potential requirement that significant industrial users reduce or curtail their wastewater discharges during times of peak flows at the treatment plant; and 6) increased long- term costs of construction. Timely approval for this borrowing authority is also important because of the availability of federal economic stimulus funding that will be channeled through the DEQ’s State Revolving Loan Fund, which MWMC is in a very good position to receive. An award of stimulus dollars would provide loan funding at significantly reduced interest rates and buy forgiveness of a portion of the principal to be repaid. These funds would offset some of the need to issue revenue bonds at a higher interest rate, which in turn will reduce the long-term costs to the rate payers and new development. Without expanded borrowing authority, the MWMC cannot accept federal stimulus funding that requires payback with interest. RELATED CITY POLICIES Funding for completion of the approved capital improvement projects at the regional wastewater treatment facility is important for improving the quality of wastewater treatment and preventing wet weather related wastewater overflows, thereby ensuring continued protection of public health and the environment consistent with the following City resolutions: Z:\CMO\2009 Council Agendas\M090420\S0904205.doc