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Los Osos Water Recycling Facility

Loan Modification Addresses Affordability in Los Osos

Author: Public Works
Date: 6/26/2019 5:04:02 PM

On June 18, 2019, the State Water Resources Control Board (SWB) voted unanimously to support a loan modification package to cover the final construction costs of the Los Osos Wastewater System.

In 2018, the County of San Luis Obispo (County) settled a claim from ARB, Inc., one of the two companies contracted to construct wastewater pipelines for $9.95 million.  This settlement completed the last construction contract for the $187 million sewer system.

The County funded this payment with a short-term loan from the County’s general fund, and county staff immediately sought permanent low-interest financing from state and federal funding agencies.  The SWB had previously provided major funding for the project, with a $76 million loan and $11.5 million in grants.

Over the last year, county staff worked with the SWB’s Division of Financial Assistance to structure a loan that could be paid without raising wastewater rates.  According to John Diodati, Interim Director of Public Works, “It was a collaborative effort to address affordability during project development, and I was pleased the State Water Board recognized the importance of not raising rates for this community at this time. Their willingness to continue to be a partner in the project’s success was demonstrated by the loan modification package they approved.“

Specifically, the SWB increased their existing loan by $11,135,000, to cover the ARB, Inc. payment and repay another short-term internal loan of $1,185,000.  The SWB also allowed the County to cancel a third internal loan that had created a debt service reserve. Elimination of payments on the internal loans provided the County the cash flow needed to pay the new loan under existing wastewater rates.

County Supervisor Bruce Gibson said, “I greatly appreciate the diligent efforts of county staff and the support of State Water Board members and staff for this important and creative financing package. Our county team has worked tirelessly to address the affordability of this huge project and this action protects project ratepayers from further expense.”