Discussion and possible action to adopt RES. 2023-98 authorizing a Water Infrastructure Financing Authority loan in an amount not to exceed $35,075,000, with $1,012,500 forgivable principal, to construct a new city wellfield.

Water Infrastructure Financing Authority (WIFA) is the state's "bond bank" and administers the Arizona State Revolving Funds (SRFs). WIFA can issue bonds for water and wastewater infrastructure at low costs and pass the savings on to municipal borrowers. WIFA also offers principle forgiveness for certain loans (ie the borrower does not have to repay the principle forgiveness amount on certain loans if all federal requirements are met).

The city utilizes WIFA loans from time to time to minimize financing costs and take advantage of the principal forgiveness program to reduce costs on major water and wastewater projects.

The city applied for a WIFA loan in October to finance the CAP/LPP Intersection Wellfield.  The project will construct five new potable water wells and approximately 13,500 linear feet of waterline.  These wells are crucial to providing system redundancy in the event of surface water curtailment or outages.  The wellfield project was approved by Council in the city's FY2023-2032 Capital Improvement Program.  

Council is asked to consider the attached Resolution which will authorize the city to enter into a WIFA loan to finance the reclaimed water project. The Resolution authorizes the following loan terms and conditions contained in the attached loan agreement:

The loan will be a 20 year loan not to exceed $35,500,000 with a $1,012,500 loan principal forgiveness. The interest rate on the loan will be based on the 20 year Municipal Market Data (MMD) rate or WIFA's borrowing cost to be determined at loan closing. The interest rate will not exceed 7%.

The loan is secured by a pledge of the net revenues of the complete sewer and waterworks plant and system of the city.

 Similar to other WIFA loans, the proposed WIFA loan requires compliance with Federal grant funding requirements such as Davis Bacon Wage and American Iron and Steel requirements. The city is familiar with these requirements and has processes in place to ensure compliance.

The Resolution authorizes the Chief Financial Officer to take all the necessary actions to carry out and consummate the transaction contemplated by the loan agreement.

A: Approve the attached Resolution authorizing the execution and delivery of a loan agreement with WIFA from its Clean Water Revolving Fund Program for the CAP/LLP Intersection Wellfield project, delegating the determination of loan terms and other matters relating to this loan to the Chief Financial Officer, making certain covenants and authorizing all other actions necessary to the consummation of the loan transaction.

B: Not approve the attached Resolution as presented. Not approving the Resolution will void the loan agreement with WIFA and another funding source will need to be identified for the project.

Approve the attached Resolution as presented.

The proposed loan with WIFA provides for a $1,012,500 principal forgiveness upon compliance with all loan provisions and federal funding requirements. The loan principal forgiveness is a substantial benefit for the city as it provides a $1,012,500 (2.5%) reduction in the total cost of the project.

The loan will have a 20 year term and the annual debt service will be approximately $2.4 million.  The debt service has been anticipated in the water system rate models.