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Morro Bay Applies for Federal Funding

By Neil Farrell

Though its future is still in some dispute, the City of Morro Bay is pushing forward with its quest to get a low interest federal loan to pay for its new sewer treatment plant and water recycling system.

And the City picked up a key endorsement from the local Congressman, who pledged his support for the “innovative” solution to the City’s regulatory problem.

The City recently announced that it had formally submitted its application for a loan from the “Water Infrastructure Finance and Innovation Act” or WIFIA, a program under the Environmental Protection Agency (EPA). Based on a $126 million estimated total cost for the City’s “Water Reclamation Facility Project” (WRF), the City’s asking the EPA for some $62 million or 49%, the maximum amount the EPA program will fund. That loan is at 3.5% interest and repaid over 35 years.

“Securing the EPA WIFIA low-interest loan will save the Morro Bay residents nearly $20 million,” the City claimed in a news release. “The pursuit of the WIFIA loan is an example of the City’s continued efforts to minimize any proposed rate increases.”

The City’s current proposed rate increase is $41 surcharge per month to $191 for a home using five units of water a month (a unit is 748 gallons). That surcharge would be on top of existing water and sewer bills.

Local Congressman Salud Carbajal (D-Santa Barbara) has come out supporting the City’s WIFIA loan, one of just a dozen projects granted funding through the program. That’s out of some 43 projects across the nation that applied.

Carbajal said he supports the City’s pursuit of the WIFIA loan, because, “helping offset the cost of Morro Bay’s water reclamation facility is vital to pass along those savings to the community. I fully support Morro Bay’s application for a WIFIA low-interest loan, as one way to help strategically reduce the overall financial impact of the project and increase water security in the area.” 

The City Manager, Scott Collins was grateful for the Congressman’s vote of confidence.

“We greatly appreciate Congressman Carbajal’s support for the WIFIA application,” Collins said. “We continue to pursue State and Federal funding to reduce the financial impact of the WRF project on rate payers.” 

The WIFIA loan will cover nearly half but that leaves the City to find money for the other 51% and it’s off to a pretty good start. 

The City previously got a $10.3 million State Revolving Fund planning loan from the State Water Resources Control Board. But the City’s been able to pay those costs (topping $5 million since 2013 — so far) using regular monies collected through a 2015 rate hike that has one more increase planned for July 2019, so the SRF loan hasn’t yet been tapped.

The plan to raise the remaining monies includes $22.78 million in cash collected through the sewer bills, and $4.84 million in water fund cash; and then selling some $24.7 million worth of municipal bonds at 4%-5% interest for 30 years. 

Selling municipal bonds would be the most expensive way to finance the project and the City hopes to get additional SRF monies (at about 2%) to reduce the need for bond financing. 

The SRF loan program has about $1 billion to spend, but about $6 billion in requests for funding, according to the City’s rate setting consultant, Alex Handlers of Bartle & Wells Associates, who calculated the proposed new rates.

As to the bond financing, the City said it has also recently received a credit rating of “A” with “a stable financial outlook.”

But that might not do it much good. The new rate structure is under scrutiny right now, as ratepayers are in the midst of a Proposition 218 protest vote, with the deadline to vote against the new rates set for Tuesday, Sept. 11. 

Notices about the voting including usable ballots were initially mailed out Friday, Aug. 13 and that coupled with the Sept. 11 deadline gives the whole process a superstitious feel. 

However, even in the face of a determined and organized opposition, the task at hand, to get more than 50% of the voters to protest, is daunting.

And as the days tick down to the end of the voting period, the discourse in town heats up, in particular with campaign yard signs that have sprung up all over town.

The City admitted to taking down dozens of signs that had been placed in right of ways and other public properties but denies being the ones who have gone around town and stolen signs from people’s yards. 

And opponents are having second thoughts about a slogan on those signs that have a catchy slogan, “Don’t Move the Sewer” placing duct tape over that portion of the sign.

And on the online gossip site, “Morro Bay Neighbors,” much nastiness has crept into the numerous threads that have been posted over the past several weeks, as the war over the sewer is waged online and amongst neighbors.

And the project continues to move forward after several citizens have filed claims that the City has violated the Brown Act in its handling of the multi-faceted project.

The City through a letter signed by the Mayor has rejected all of the claims made by Attorney Cynthia Hawley, and citizens Marla Jo Sadowski and Linda Stedjee.

Those letters have threatened legal ramifications should any of the claims be pressed and the complainants lose their cases.

Meanwhile, the City is trying hard to accommodate the voters in the 218 process, having produced and distributed notices in English and Spanish; provided a protest ballot; and when it was discovered that not all the potential voters had received their mailed packet of information, the City pushed back the official public hearing from Aug. 28 to Sept. 11. 

That means the normal 45-day voting period under Prop. 218 will be more like 60 days.

And because the loans and bonds will be repaid entirely through monthly bills and not directly attached to property taxes, the City must allow whomever’s name appears on the water/sewer bills to vote, and not just actual property owners. 

That gives those who rent and also pay the water-sewer bills have a vote in this process.

More information about the WRF project is available online at: morrobaywrf.com.

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