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HomeMy WebLinkAboutStaff Report 124-07City City of Palo Alto Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: PUBLIC WORKS DATE:FEBRUARY 12, 2007 CMR:124:07 SUBJECT:ADOPTION OF RESOLUTIONS RELATED TO THE APPLICATION FOR A STATE REVOLVING FUND LOAN FROM THE STATE WATER RESOURCES CONTROL BOARD FOR THE CONSTRUCTION OF THE MOUNTAIN VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT, CAPITAL IMPROVEMENT PROGRAM PROJECT WQ-04010 RECOMMENDATION Staff recommends that Council adopt the three attached resolutions (Attachment A) related to the application of a State Revolving Fund (SRF) loan from the State Water Resources Control Board (SWRCB) for the construction of the Mountain View/Moffett Area Reclaimed Water Pipeline project (project). BACKGROUND On November 6, 2006, Council adopted Resolution 8661 authorizing the City Manager to file an application for a SRF loan for the project, CMR:404:06 (Attachment B). Mountain View City Council has also adopted a companion resolution to partially fund the project through a SRF loan (Attachment C). Subsequently, staff submitted the application, which initiated the SRF loan process. DISCUSSION The first step in the loan process is the submittal of the adopted resolutions in Attachment A to the SWRCB. These resolutions are required by the SWRCB as part of the SRF loan application. If, in the next few months, Council decides to award a construction contract to construct the MV/Moffett Area Reclaimed Water Pipeline Project, and to fund part of the project with the SRF loan from the SWRCB, these adopted resolutions would commit the City to the following: Establish an acceptable dedicated source of revenue to repay the.SRF loan; Provide matching funds equal to 20% of the project costs (known as State Match Fund to be paid by Palo Alto and Mountain View) in order to receive the maximum $19 million SRF loan at zero interest rate necessary to complete the project; Authorize payment of an administrative fee of up to 0.575% of project costs (may be waived); and Specify the amount of pre-development project costs (such as design fees) that could be reimbursed by the SRF loan. The adopted resolutions are required by the SWRCB for a zero interest SRF loan. Submittal ofthese resolutions does not complete the loan process. There are several remaining steps in the loan process and Council will be asked for direction and authority on the remaining steps before the SRF loan is CMR:124:07 Page 1 of 3 6 secured. Positive decisions on all of the following items, by both Mountain View and Palo Alto Councils in the future steps, will secure the SRF loan and activate the commitments of the adopted resolutions: Decision on specific project funding strategy, including each city’s share of cash contribution and loan amount; Amendment of the existing agreement between the two cities to include each city’s obligations, repayments of loan, and contribution/maintenance of the capital reserve fund; Decision on the project and the bids; and Decision on the specific amount from each funding source. The SWRCB will not execute any loan contract until the above steps are completed, and until Council awards and executes a construction contract with a contractor for the project. Staff is working with Mountain View staff on the details of the funding strategy, revisions to the operations and institutional agreement, and finalizing the re-bid package. Staff plans to obtain a preliminary loan commitment from the SWRCB, and re-bid in February 2007. Submittal of the resolutions is required in order to obtain a preliminary commitment. Staffwill return to Council with the detailed funding strategy and an amendment to the existing agreement to include each city’s obligations, and will return to Council with further recommendations prior to the bid opening date. PROJECT SCHEDULE Preliminary loan commitment from SWRCB Issue for rend Council decision on funding strategy and revised agreement Bid opening Loan commitment from SWRCB Mountain View Council decision on project Palo Alto Council decision on project SRF contract with SWRCB if project is awarded February 2007 February 2007 March 2007 March/April 2007 April 2007 May 2007 May 2007 May - Aug 2007 RESOURCE IMPACT The project has been awarded a $4 million grant from the SWRCB. Under the existing agreement between City of Palo Alto and Mountain View, Palo Alto Water Utilities will contribute $1 million, the RWQCP will contribute $3 million, and Mountain View will contribute $8.1 million to the project. The total contributions from the two cities are more than sufficient to cover the 20% matching fund required for the project. Palo Alto and the RWQCP contributions under the existing agreement have been appropriated in the Wastewater Treatment Fund. POLICY IMPLICATIONS The recommendation of this staff report is consistent with City policies. ENVIRONMENTAL REVIEW Council adopted a mitigated negative declaration for the project in January 2004. ATTACHMENTS Attachment A: Resolutions (3) CMR:124:07 Page 2 of 3 Attachment B: Attachment C PREPARED BY: DEPARTMENT HEAD: CMR:404:06 City of Mountain View resolution DAISY STARK ’GLENN S. ROBERTS Director ~ Works CITY MANAGER APPROVAL: HARRISON Assistant City Manager CMR: 124:07 Page 3 of 3 ATTACHMENT A NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO APPROVING A LOCAL MATCH LOAN STATE REVOLVING FUND (SRF) FOR MOUNTAIN VIEW/MOFFET AREA RECLAIMED WATER PIPELINE PROJECT WHEREAS, the CITY OF PALO ALTO. (the "Agency") desires to finance the costs of constructing and!or reconstructing certain public facilities and improvements relating to its water and wastewater system, including certain treatment facilities, pipelines and other infrastructure (the "Project"); and WHEREAS, the Agency intends to finance the construction and/or reconstruction of the Project or portions of the Project with moneys ("Project Funds") provided by the State of California, acting by and through the State Water Resources Control Board (the "Water Board"); and WHEREAS, the CITY OF PALO ALTO (the "Agency") desires to obtain a zero interest State Revolving Fund (SRF) loan. follows: NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as SECTION 1. To contribute to the State match share equal to 16.667 percent of the eligible project costs. SECTION 2. To pay an administrative fee of up to 0.575% of the eligible project cost for the administrative match amount, if requested by the State Water Resources Control Board (SWRCB), prior to the issuance of the local match SRF loan contract, provided that the ¯ fee shall be waived by the SWRCB if sufficient monies to fund the administrative match are available from other sources. SECTION 3. To establish a state match account for the project, and deposit sufficient funds, as necessary, to make the state match payments to the contractor(s). SECTION 4. To provide the SWRCB, Division of Financial Assistance (Division) a certification with each progress payment request stating that the appropriate state match amount for the requested payment has been paid to the contractor(s). // // 070207 jb 0130040 NOT YET APPROVED shall remain in effect until such loan or loans are fully discharged unless modification or change of such dedication is approved in writing by the State Water Resources Control Board. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Public Works Director of Administrative Services Department 070130jb 0130042 NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO DESIGNATING EXPENDITURES TO BE REIMBURSED BY PROCEEDS FROM STATE REVOLVING FUND LOAN WHEREAS, the CITY OF PALO ALTO (the "Agency") desires to finance the costs of constructing and/or reconstructing certain public facilities and improvements relating to its water and wastewater system, including certain treatment facilities, pipelines and other infrastructure (the "Project"); and WHEREAS, the Agency intends to finance the construction and/or reconstruction of the Project or portions of the Project with moneys ("Project Funds") provided by the State of California, acting by and through the State Water Resources Control Board (the "Water Board"); and WHEREAS, the Water Board may fund the Project Funds with proceeds from the sale of obligations the interest upon which is excluded from gross income for federal income tax purposes (the "Obligations"); and ’ WHEREAS, prior to either the issuance of the Obligations or the approval by the Water Board of the Project Funds the Agency desires to incur certain capital expenditures (the "Expenditures") with respect to the Project from available moneys of the Agency; and WHEREAS, the Agency has determined that those moneys to be advanced on and after the date hereof to pay the Expenditures are available only for a temporary period and it is necessary to reimburse the Agency for the Expenditures from the proceeds of the Obligations. follows: NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as SECTION 1. The Agency hereby states its intention and reasonably expects to reimburse Expenditures paid prior to the issuance of the Obligations or the approval by the Water Board of the Project Funds. SECTION 2. The reasonably expected maximum principal amount of the Project Funds is $19,000,000. SECTION 3. This resolution is being adopted no later than 60 days after the date on which the Agency will expend moneys for the portion of the Project costs to be reimbursed with Project Funds. 070130 jb 0130039 3_ NOT YET APPROVED SECTION 5. To provide the Division with copies documenting payment of the state match amount, on a quarterly basis. of the INTRODUCED AND PASSED: AYES: NOES: ABSENT: AB S TENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Public Works Director of Administrative Services Department cancelled checks 070207 jb 0130040 NOT YET APPROVED RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO ESTABLISHING ONE OR MORE DEDICATED SOURCES OF REVENUE FOR REPAYMENT OF THE LOAN PURSUANT TO THE FEDERAL CLEAN WATER ACT AMENDMENTS WHEREAS, the CITY OF PALO ALTO (the "Agency") desires to finance the costs of constructing and/or reconstructing certain public facilities and improvements relating to its water and wastewater system, including certain treatment facilities, pipelines and other infrastructure (the "Project"); and WHEREAS, the Agency intends to finance the construction and/or reconstruction of the Project or portions of the Project with moneys ("Project Funds") provided by the State of California, acting by and through the State Water Resources Control Board (the "Water Board"); and WHEREAS, Section 603(d)(1)(C) of the Federal Clean Water Act Amendments require each loan recipient to establish one or more dedicated sources of revenue for payment of the loan; and WHEREAS, Revenue will be considered dedicated when the municipality passes a resolution committing a source of funds for repayment. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. The City of Palo Alto hereby dedicates the following source of revenue (Region~al Water Quality Control Plant Operating Fund) to repayment of any and all State Revolving Fund loans on Project No. C-06-4132-110. This dedicated source of revenue // // // // // // // // 070130 jb 0130042 NOT YET APPROVED SECTION 4. Each Expenditure by the Agency will be of a type properly chargeable to a capital account under general federal income tax principles. SECTION 5. This resolution is adopted as official intent of the Agency in order to comply with Treasury Regulation §1.150-2 and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of Project costs. SECTION 6. All the recitals in this resolution are true and correct and this Agency so finds, determines and represents. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Public Works Director of Administrative Services Department 070130 jb 0130039 TO: FROM: ATTACHMENT B C ty Alt Manager’s Report HONORABLE CITY COUNCIL CITY MANAGER 4 DEPARTMENT: PUBLIC WORKS DATE: SUBJECT: NOVEMBER 6, 2006 CMR:404:06 ADOPTION OF A RESOLUTION AUTHORIZING THE CITY MANAGER TO FILE AN APPLICATION FOR A STATE REVOLVING FUND LOAN IN AN AMOUNT NOT TO EXCEED $19 MILLION FROM THE STATE WATER RESOURCES CONTROL BOARD FOR THE CONSTRUCTION OF THE MOUNTAIN VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT RECOMMENDATION Staffrecommends that Council adopt the attached resolution authorizing the City Manager or designee to apply for a State Revolving Fund (SRF) loan in an amount not to exceed $19 million from the State Water Resources Control Board (SWRCB) on behalf of the Palo Alto Regional Water Quality Control Plant (PARWQCP) for the construction of the Mountain View/Moffett Area Reclaimed Water Pipeline project (Attachment A), and to negotiate an agreement for that loan following Council decisions regarding funding strategy sources and approval of a construction contract. BACKGROUND The Mountain View/Moffett Area Reclaimed Water Pipeline Project (Project) is a joint project between the Cities of Palo Alto and Mountain View. In July 2005, the SWRCB awarded a $3.8 million grant for the project design and construction. The City of Palo Alto, City of Mountain View, and the PARWQCP agree,~ 5rod the balance of the Project. The terms and funding arrangements w~, ~: ..... ~-,. ~.,~~ ~.~ ~ ~, ~greement entitled "Institutional and C ,:rational Agreement between the Cities of Palo Alto and Mountain View - Mountain Views ~offett Area Recycled Water Facility." Council of both Cities approved the agreement in Ja~, ~y 2005. The projectwas issued for bid on June 6, 2006. On September 11, 2006, staffprcwided a progress repo~ on the project, CMR:350:06 (Attachment B), describing the rejection of bids because of insufficient funds. The progress report also discussed potential outside funding sources including the SRF loan program. Since the progresS report, the SWRCB has granted a one-year extension for the sunset date of the grant and increased the grant amount to $4 million for the project. In addition to the grant, the SWRCB also agreed to process a SRF loan for the project if the Cities desire it. The City of Mountain View has asked that staff requests that the PARWQCP apply for the SFR loan. CMR:404:06 Page 1 of 3 DISCUSSION The PARWQCP is listed on the SRF priority list as the sponsor of the project and is qualified to apply for a zero interest SRF loan for the project. The SRF program has a fixed amount of funds for each fiscal year and provides loans to agencies on a first-come-first-serve basis. Based on the number of applicants and the current loan amounts, the SWRCB advised that the available funds would be exhausted before the end of the year. There is sufficient funding available in the SRF program at the present time to fund the project if the City expedites the application. Council authorization is a required part of the loan application and must be submitted to the SWRCB before the application can be processed. Once the application is submitted, there are several steps in the loan process that need to be completed, and Council will be making final decisions in these subsequent steps on the loan including the actual amount of the loan, before final loan approval by the SWRCB. Staff will return to Council as the loan process progresses. Staff plans to prepare the necessary documents to pursue the zero interest SRF loan. Upon submittal of the loan application, both cities will need to proceed with the following steps. The loan application is simply the first step in this process. Both Councils will need to make final decisions on each of these subsequent steps before a loan is secured: Decision on project funding strategy, including each city’s share of cash contribution and loan amount; Amendment of the existing agreement with the City of Mountain View to include each city’s obligations and repayments of the loan; o Decision on the project and the bids; Decision on funding source(s) The SWRCB will not execute any loan contract until the above steps are completed, and until Council awards and executes a construction contract with a contractor for the project. Staff is currently working with Mountain View staff on the funding strategy, revisions to the operations and institutional agreement, and there-structuring of the project for a re-bid in January 2007. Staff will return to Council with the details and recommendations in the subsequent steps for the loan within the next couple months. RESOURCE IMPACT Under the existing agreement, Palo Alto Water Utilities will contribute $1 million, and the RWQCP will contribute $3 million to the project. Palo Alto and the RWQCP contributions under the existing agreement have been appropriated in the Wastewater Treatment Enterprise fund. Staff is working with Mountain View staff on the funding strategy and an amendment to the existing agreement to include each city’s obligations and repayments of the loan, and will return to Council with further recommendations. POLICY IMPLICATIONS The recommendation of this staff report is consistent with City policies. CMR:404:06 Page 2 of 3 ENVIRONMENTAL REVIEW Council adopted the mitigated negative declaration for the project in January 2004. ATTACHMENTS Attachment A: Resolution of Council for the State Water Resources Control Board Attachment B: CMR:350:06 PREPARED BY: DEPARTMENT HEAD: CITY MANAGER APPROVAL: Daisy Stark, Senior Engineer RWQCP William D. Miks, Manager RWQCP GLENN S. ROBERTS Dire~,~ of Public Norks Assdstant~..City Manager CMR:404:06 Page 3 of 3 ***NOT YET APPROVEI)*~ ATTACHMENT A RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO AUTHORIZING THE CITY MANAGER TO SIGN AND FILE A FINANCIAL ASSISTANCE APPLICATION AND EXECUTE A LOAN AGREEMENT FOR A STATE REVOLVING FUND LOAN IN AN AMOUNT NOT TO EXCEED NINETEEN MILLION DOLLARS FROM THE STATE WATER RESOURCES CONTROL BOARD ON BEHALF OF THE PALO ALTO REGIONAL WATER QUALITY CONTROL PLANT FOR THE DESIGN AND CONSTRUCTION OF T~HE MOUNTAIN VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT WHEREAS, the- State Water Resources Control Board provides ~ low-interest loan funding through the State Water Pollution Control Revolving Fund for construction of publicly- owned wastewater treatment facilities, local sewers, sewer interceptors, water reclamation facilities, as well as, expanded use projects such as implementation of nonpoint source (NPS) projects or programs, development and implementation of estuary Comprehensive Conservation and~Management Plans, and storm water treatment; and WHEREAS, the Palo Alto Regional Water Quality Control Plant (PARWQCP) staff has reviewed the application for loan funding and other supporting information for the water recycling project and has determined that the project complies with the Water Resource Fund Guidelines; and WHEREAS, the PARWQCP operates a reclaimed water facility and delivers reclaimed water to various reuse sites. The existing pipeline from the PARWQCP to Shoreline has deteriorated and is scheduled for replacement. In anticipation of future reuse opportunities in Mountain View, such as the future Moffett facilities, the replacement pipe will be .upsized; and WHEREAS, the State Water Resources Control Board presently has loan funding available in the Stste Water Pollution Control Revolving Fund to provide low-interest loan funding for construction to assist in funding the costs of the reclaimed water facilities construction project. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION I. The Council hereby authorizes and directs the City Manager to sign and file, for and on behalf of the City of Palo Alto, a Financial Assistance Application for a loan from 061024 cjs 8260342 ] ***.NOT YET APPROVED*** the State Water Resources Control Board in an amount not to exceed nineteen million dollars ($19,000,000.00) for the design and construction of the Mountain View/Moffett Area Reclaimed Water Pipeline Project (the "Project"). SECTION 2. The city of Palo Alto hereby agrees and authorizes the City Manager or his designee to certify that the City has and will comply with all applicable state and federal statutory and regulatory requirements related to any federal and state loans received. SECTION 3. The City Manager or his designee is hereby authorized to negotiate and, following Council approval of a funding strategy and final construction contract for the Project, execute a loan contract and any amendments or change orders thereto, and to certify loan disbursement on behalf of the PAWQCPo SECTION 4. That a mitigated negative declaration (MND) was prepared in accordance with CEQA for the Project and adopted by the City Council, Resolution Number 8391 on January 12, 2004. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: City Attorney City Manager Director of Public Works Director of Administrative Services 061024 cjs 8260342 2 ATTACHMENT B City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: PUBLIC WORKS DATE:SEPTEMBER 11, 2006 CMR: 350:06 SUBJECT:PROGRESS REPORT ON MILESTONE ACTIVITIES OF THE MOUNTAIN VIEW / MOFFETT AREA RECLAIMED WATER PIPELINE CONSTRUCTION PROJECT - CAPITAL IMPROVEMENT PROGRAM PROJECT WQ-04010 This is an informational report and no Council action is required. This report provides the progress report on the Mountain View/Moffett Area Reclaimed Water Project (Attachment A) to Council. DISCUSSION Staff has been working with the City of Mountain View on the design and implementation of the Mountain View / Moffett Area Reclaimed Water Pipeline project, which is partially funded by a State grant. The sunset date of the State grant is September 13, 2006. The project was issued for bid in June 2006 so a contract could be secured before the State grant expires on its sunset date. However, the rapidly escalating costs of goods and resources in recent years have created an extremely wild and inflationary bidding atmosphere, resulting in very high bids for the project ($26+ million, $6 million over the fmal estimate). The unexpected high bids illustrate the inflationary spiral of the construction market. Assuming the trend continues, the project will not be affordable in the future. It is therefore critical to pursue all avenues to construct the project as soon as possible so that future water, supply options are maximized. Staff has consulted the State Water Resources Control Board staff and requested an extension of the grant sunset date in order to strategize and seek additional funding. The State project manager clearly believes that theproject..is a very good project and has proceeded to recommend an extension, plus other accommodations, for the project. The State project manager’s recommendations to the State Board are noted in his letter (Attachment B). Staff from the cities of Mountain View and Palo Alto agreed to reject all bids. Palo Alto’s Purchasing Division rejected all of the bids on August 17, 2006 in accordance with Palo Alto Municipal Code 2.30.470 (b) - excessive cost over City budget. The. attached project report provides a detailed discussion of the bidding process and the status of the State grant. The project report also examines the strategy to move forward with the project from two perspectives: Possibility of restructuring the project to reduce construction cost and to re-bid at a more favorable time of year. Potential grants and funding options, including the State Revolving Fund and funding from regional water retailers. CMR:350:06 Page 1 of 2 City of Mountain View staff will forward the attached project report to its Colincit on September 12, 2006. Staffwill continue to work with City of Mountain View to pursue funding options and will return to Council with updates on the status of grants and ftmdirig oppoiXii~ties. ATTAINT Attachment A: Mountain View-Moffett Area Reclaimed Water Pipeline Project Report Attachment B: State Water Resources Control. Board letter of recommendations PREPARED BY:Daisy Stark, Senior Engineer William D: Miks, Manager RWQCP . DEPARTMENT HEAD:"~~._ ~. ~3LI~NN S. ROBERTS Director of Public Works CITY MANAGER APPROVAL: Assistant City Manager CMte350:06 Page 2of2 .ATTACHMENT A Mountain View/Moffett Area Reclaimed Water Pipeline Project Report August 2006 The Mountain ViewiMoffett Area Reclaimed Water Pipeline Project (Project) is a joint project between the cities of Palo Alto and Mountain View. This report documents the progress of the Project milestone activities to date, and the strategy tO move forward. Background In July 2005, the State Water Resources Control Board (SWRCB) awarded a $3.8 miliion grant under the Water Recycling Funding Program (Prop 50, Chapter 7) for the Project design and construction. When the grant application was submitted in March 2004, the cost 0fthe Project Was estimated at $16.1 million in 2006 dollars. The City of Palo Alto, City of Mountain View, and the Palo Alto Regional Water Quality ControlPlant (RWQCP) agreed to jointly .fund the balance of the Project. The terms and funding arrangements were documented in an agreement entitled "Institutional and Operational Agreement between the cities of Palo Alto and Mountain View - Mountain View/Moffett Area Recycled Water Facility". Council of both cities approved the agreement in January 2005. Design Since the grant award, Palo Alto and Mountain View staff worked with RMC Water and Environment to perform the Project design. The State grant requires that a construction contract for the Project be awarded by the sunset date, otherwise the grant award will expire. The original sunset date of the State grant was June 15, 2006, but was extended Project Report- Progress ofrnilestone activities ] C:hDocuments and SettingskkdaviskLocal Settings\Temporary Internet Files\OLK1 C4kProject Report - Sept 2006.doc to September 13, 2006 at Mountain View’s request. City staff utilized the additional time to refine the cost estimate and review the funding options. The Project cost estimate was originally prepared in 2003, and escalated at 4% per year to $16.1 million in 2006 dollars. In view of the inflationary construction market environment in recent years, the consultant and a third-party estimator were instructed to update the cost estimate to account for the rapidly escalating costs of goods and to reflect the final design. The revised estimates valued the Project at approximately $20 million. Bid Process The Project was issued for bid on June 6, 2006. The invitation for bid was posted at the Palo Alto bid solicitation website and advertised in local newspapers. Plans and specifications were sent to ten Builders’ Exchanges, and twenty-four companies requested and received the bid documents. Potential bidders were encouraged to attend a non-mandatory pre-bid meeting, which was attended by representatives from eight companies. The bidding period was seven weeks and three bids, ranging from $20.8 to $26.8 million, were received on July 25, 2006. The contractor who submitted the lowest bid requested to withdraw it’s bid from consideration because of a multi-million dollar error. The two remaining bids are both over $26 million, substantially over the cities’ budget. The unexpected high bids illustrated the inflationary spiral of the construction market and significantly increased costs for pipe, concrete and material transportation costs. If the trend continues, the Project will not be affordable in the future. It is therefore critical to pursue all avenues to construct the Project as soon as possible so that future water supply options are maximized. A meeting was held with SWRCB staff to discuss the bid result and to request an additional extension of the grant sunset date in order to strategize and seek additional funding. The State project manager affirmed the value of the Project as a drought-proof Project Report-Progress of milestone activities 2 C:kDocuments and SettingskkdaviskLocal Settings\Temporary Internet Files\OLKl C4kProject Report - Sept 2006.doe water supply, and responded favorably to cities’ request. Palo Alto and Mountain View staff agreed to reject, all bids, use the extension period to seel~ additional fun~ting, re- structure the Project to reduce costs, and re-bid at a more favorable time of year. On August 17, 2006, Palo Alto PurchasingDepartment rejected all bids in accordance with Palo Alto city code 2.30.470 (b) - excessive cost over city budget. State Grant Status The State project manager determined that the Project team has made a good faith effort to meet the deadline of the grant and recommended the following for the Project: 1.A 12 month extension for the grant sunset date 2.An increase of the grant amount from $3.8 million to the maximum-per-project amount of $4 million 3. The option of reducing the scope of the Project In addition, the SWRCB will accept City’s application for immediate consideration of a State Revolving Fund loan (SRF) for the Project. Strate~ to Move Forward The strategy to move forward will include pursuing all avenues for additional grants and funding, and re-structuring the project to reduce cost. 1. Other Grants and Funding Several other grant/funding sources are potentially available to the Project. In two cases, application for funding for the Project has already been submitted. Project Report-Progress of milestone activities 3C:~Doculnents and SettingsLkdavis~Local Settings\Temporary Internet Files\OLK1C4~Project Report - Sept 2006.doc Program Prop 50, Chapter 8 Title XWI SRF Summary of Other Grant/Funding Application Submitted? Yes Yes Grant No Type of Funding Grant Loan (low or zero interest) Anticipated Amount $1.9 million $5 million Up to $25 million Anticipated Award date Dec ’ 06 / Jan’ 07 Possibly 2008 funding cycle 4 - 5 months after application Proposition 50, Chapter 8 Grant - The grant program is administered by the SWRCB and the Department of water Resources. The Project was included in the Bay Area Integrated Regional Water Management Plan and was submitted in the summer of 2005 to compete for the FY 2006-2007 chapter 8 grant. Announcement of the award is currently scheduled for December 2006 - January 2007. If the Project is selected for the grant award, the Project will receive a maximum of approximately $1.9 million, which will reduce Mountain View’s share of the balance of the Project costs by approximately $1.27.million, and Palo Alto’s share by $0.63 million. Title XVI - The US Bureau of Reclamation (USBR) administers this grant program. The Project was included in the Bay Area Regional Water Recycling Program (BARWRP) and was submitted to USBR for feasibility determination in the winter of 2004. USBR determined that the Project has met all criteria except NEPA1 compliance. Staff has submitted the required documents and executed an agreement with USBR for NEPA compliance review, and NEPA review is presently underway. Concurrent with the NEPA effort, staff is working with other BARWRP members to 1 NEPA - National Environmental Policy Act Project Report- Progress of milestone activities 4 C:kDocuments and SettingsLkdaviskLocal Settings\Temporary lnternet Files\OLK1 C4kProject Report - Sept 2006.doc pursue congressional authorization for funding through Title XVI. Congressman Miller (D - 7th Congressional District) has agreed to introduce the Project along with five other feasible BARWRP projects for congressional authorization. Congressman Miller’s office is currently drafting legislation for the six BAWRP projects to be presented when congress is back in Session during the first week of September. The Project is submitted for a $5 million grant. Upon congress’ authorization, appropriations will be requested in the following funding cycle. Funding is retroactive so construction of projects could start after authorization and completion of NEPA. Congresswoman Eshoo has been informed of the Project.. State Revolving Fund (SRF) - The SRF loan program is administered by the SWRCB. The SRF provides a 20-year loan typically with an .interest rate set at half of the State Bond General Obligation Rate (presently 2.5%), but the program also provides zero interest loans to qualified projects. In order to qualify to apply for a StLF loan, the project sponsor must have applied for placement on the SRF priority list. The RWQCP has submitted an application and it’s recycled water program, including this Project, is on the current priority list. The SWRCB normally places projects that address safety or .regulatory issues at a higher priority than recycled water or infrastructure projects. The State project manager recognizes the value of the Project to the water supply of the Bay area, and will accept a loan application for immediate consideration of a loan up to $25 million for the Project. An application package with required documents needs to be prepared for submission to the SWRCB for the SRF loan. Because the SRF program is partially funded by the Federal government, before, approval of a loan, applicant must obtain environmental clearance and approval from SHPO2 and Federal agencies on the project. Review by SHPO and Federal agencies of the Project could be partly coordinated with the review that is currently underway for Title XVI. It is anticipated that approval of the environmental docnments would not be an issue. The timeline for SHPO review could take four to 2 SIJPO - State Historical Preservation Office Project Report - Progress of milestone activities C:kDocuments and Settings~kdavis~Local Settings\Temporary lnternet Files\OLK1C&Project Report - Sept 2006.doc5 five months and is the critical path for the Project if the cities decide to obtain SRF loan for the Project. Under State guidelines, construction of a project that is funded by the SRF cannot start until SttPO clearance is obtained. Mountain View and Palo Alto are reviewing this funding option. 2. Re-structure the Project The bid document was prepared under an extremely tight schedule to meet the State grant deadline, The design team completed the final design based on the scope of work that was identified in the grant contract. Value engineering and refinements to the design had not occurred due to the time constraint, and the SWRCB has agreed that certain non cost- effective items could be removed from the Project. The grant extension period would allow the following cost reduction efforts to take place: Consultant to refine the design to minimize construction costs Consultant to remove non cost-effective items per SWRCB allowance Cities to evaluate possibilities of streamlining city requirements/restrictions to reduce construction costs Value engineering to ensure a cost effective project The goal of the cost reduction efforts is to reduce construction costs bY up to $5 million reduction. The construction activities typically slows down during the winter months, and it is anticipated that re2bidding the Project in December 2006 or January 2007 could produce bids at $21 million - $23 million. The Next Step In summary, staff of cities of Mountain View and Palo Alto agreed to use the grant extension to: (1) pursue additional funds, (2) re-structure the Project to reduce costs, and (3) prepare for re-bid (December 2006 - January 2007). The next step requires the following tasks to be performed: Project Report- Progress of milestone activities 6C:kDocuments and SettingskkdaviskLoeal Settings\Temporary Internet Files\OLKlC4kProject Report - Sept2006.doc l. Initiate/obtain SHPO and NEPA clearances 2. Prepare and submit an application package for the SRF loan including resolutions from Council to apply for the loan -. 3. Brainstorm cost reductions and re-structure bid document 4. Revise the Institutional and Operational Agreement between cities of Palo Alto and Mountain View to incorporate new Project terms and needs 5. Prepare to re-bid in December 2006 - January 2007 Project Report- Progress of milestone activities 7C:kDocuments and SettingskkdaviskLocal Settings\Temporary Internet Files\OLK1C4kProject Report - Sept 2006.doc Linda $. Adams Secretmy for Envh-omnental Protection State Water Resources Control Board Division of Financial Assistance ATTACHMENT B] 001 1 Street, Sacramento, California 95814 (916) 341-5700 Al:nold SchwarzMailing Address: P.O. Box 944212, Sacramento, California 94244-2120 Fax (916) 341-5707 http://w~vw.xvalerboards.ca.gov Governor 2006 Mr. William D. Miks, Plant Manager Palo Alto Regional Water Quality Control Plant 2501 Embarcadero Way Palo Alto, CA 943()3 Dear Mr. Miks: SUNSET DATE EXTENSION REQUEST; CITY OF PALO ALTO (CITY); MOUNTAIN VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT (PROJECT); WATER RECYLING FUNDING PROGRAM (WRFP) PROJECT NO. 3212-030 Thank you for your August 3, 2006, request for a second extension of the "Noticekto-Proceed" (NTP) deadline sited in the grant agreement (No. 05-705-550-0) for the above Project. In accordance with’ the grant agreement, executed on March 13, 2006, which stated that the grant agreement shall terminate if the District did not issue a "Notice-to-Proceed" (NTP) to construction by June 15, 2006, unless the District requested a 90-day extension. On March 27, 2006, the City requested approval for a 90-day extension to the NTP deadline due to delays during the design process. The Division of Financial Assistance (Division) issued an approval for the extension on Apd! 6, 20.06. The current deadline is September 13, 2006 for issuance of NTP for the project. The City is requesting a second extension toissue the NTP’ because of the following reasons: 1.The City .received three bids for the project ranging from $20.6 to 26.3 million, which exceeded the estimated project cost of $16.1 million; 2. To finance the increase in construction costs of the project the City intends to apply for a State Revolving Fund (SRF) loan. The City requested additional time to allow processing of their loan application, and; 3.Due to the high bids received the City intends to evaluate a redesign of the project for potential reductions in construction costs. The City also requests the following project considerations: 1.The City requests a one-year extension to the current project schedule; 2.The option to eliminate approximately 31 acre-feet of recycled water deliveries which would .provide savings of up $1 million, and; 3.The City request that the sunset date be changed from issuance of NTP to submittal of Final revised Plans and Specifications (P&S)for the project. The City has provided a revised project cost estimate and has begun preparing the SRF loan application package for submittal. Based on my review of the August 3, 2006 request and further discussions with the City, I have made the following conclusions and recommendations: The .City advertised and received three bids for theProject. All the bids were over the estimated project cost of $16.1 million. The increase in construction costs are outside the i:ontrol of the City and the City has made a good faith effort to meet the current NTP schedule. The one-year extension is reasonable and should be granted to allow processing of the SRF loan application. California Enviromnental Protection Agency ~,, Reo’cled Paper Mr. William D. Miks - 2 - 2.A requirement of the SRF program is the completion of a Value Engineering Study for all projects with construction costs above $10 million. Due to the high bids received, the City’s request to evaluate a redesign of the project for potential reductions in construction costs is recommended and a requirement of the SRF Loan funding process. 3. Recommend that the Deputy Director of the Division increase the City’s grantfunding for the project from .$3,802,475 to $4,000,000, due to the increased eligible project construction costs. 4. " In accordance with the WRFP guidelines, recommend that the new sunset date milestone be changed from issuance of NTP to submittal of Final P&S. If you have any questions regarding this letter, please contact me at (916) 341-5828 or by email at rpontureri@waterboards.ca.gov. Robert Pontureri, Project Manager Project Development Unit 1B cc:Ms. Daisy Stark, P.E. Senior Engineer Palo Alto Regional WQCP . Ms. Yousra Tilden Senior Project Manager RMC Water and Environment 2290 North First Street, Suite 212 San Jose, CA 95131 California Environ~nental Protection Agency Recycled Paper ATTACHMENT C CITY OF MOUNTAIN VIEW RESOLUTION NO. 17145 SERIES 2006 Certified to be a True Copy of the Original D~uty City.C]~rk A RF~OLUT!ON AUTHORIZING THE CITY oF PALO ALTO TO SUBMIT AN APPLICATION FOR A STATE WATER RESOURCES CONTROL BOARD REVOLVING FUND LOAN ON BEHALF OF THE CITY OF MOUNTAIN ViEW FOR~ THE RECYCLED WATER PROJECT ’ WHEREAS, on February 24, 2004, the City Council approved ~e recyded water project and appropx*iated $8,100,000 from the Shoreline Park Regional Co~u-nm’dty WHEREAS, on Ianuary 11, 2005, the City Coundl authorized ~he City Manager or his designee to enter into a recycled water proiect operating agreement with the City of Palo Alto; and WHEREAS, the City supports the concept of water recycling to preserve potable water for domestic and industrial uses; and WI-IEREAS, the City desires to secure a low-cost source of construction ~tancing and intends to finance a portion of project corustruction costs with funds provided by the State of Califorffia, acting by and through the State Water Resources Control NOW, THEREFORE, BE IT RESOLVED that the City Mountain View: 1. Authorizes the City of Palo Alto to ,complete, sign and file, for and on behalf of the City of Mountain View, a FLnancial AssLstance Application for a loa~ from the State Water Resources Control BoRrd for the design and construction of the Palo Alto!Mou~atain View Recycled Water Distribut[o.~ System constructior~; and 2. The City C_~~e~t.a joi~t application with the City o~ Palo Alto for a State r . " "~.t:.,b/, an interest rate of 0 percent repayable by the City of Palo Alto and the City of Motmta~n View over a.20-year period; and. 3, The City Manager or his designee is hereby authorized ’to negotiate and execute a loan/grant conffact and any amendments or change orders.thereto and to cerfi£’y loan/grant disbursement on behalf oJ~ City of Mountain View; and 4. The City wil] comply w~th all applicable State and Federal sta .t:utory a~d regtfl~tory requirements related to any Federal and Sta~6 loan/g-rants received, including contribution of matchLng hinds; a~d 5. The City Manager or !-ds designee is hereby authorized to revise and amend the Recycled Wa~ter Operating Agreement between the City of Mountain View and the City of Palo Alto (Palo Alto contract C059999) as necessary to comply with payment terms of the State revolving loan fund agreement; and 6. The CAty agrees to submi’t repayment.to the Ci~3r of Palo Alto for Moumain View’s portion of any Share revolving ftund loal~ payment with art L~t~rest rate of 0 percent over a 20-yea¢. period, Mountain View will reimb~trse to Palo Alto the percentage of the payment specified ~ the Recycled Water OperatLng Agreement betweert the City of Mountain View and the City of Palo Alto (C059999, Section Payments will be made within 30 days of receiving an invoice front the City of Palo Alto; and 7, , ’Loan reixnburseme~ts will be made from the Shoreline Regional Park Commurdty Fund. The foregoing Resolution was r gularlymtroduced end adopted at a Special Meeting of the City Council of the City o£ Mountain View, duly held on the 14th day of November, 2006, by the following vote: AYES:Councflrnembers Kasperzak, Macias, Means, Pear, Peri-y and Mayor Ga~otto NOES:None ABSENT:None NOT VOTING:None APPROVED: ANGEL1TA M. SALVADOR CITYCLERK MAYOR ~ AH l’n l l~ O 761-11-~.4-06R-E^ I do hereby certify that the foregoing rc~olu.fion was passed ~nd adopted by the City Coundl of the CRy.of Mouni~tin View at a Special M~thng hdd on the 14th day of Novamber, 2006, by the ~regoing vo~e. City of Mounta~ View