16 - Wastewater Treatment Plan Renovation Project-Long Term Financing-Wastewater Utility Rate Adjustment

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At the time of the July 27th City Council meeting, the City was pursuing a low interest loan with the Texas Water Development Board (TWDB). The goal was for this low interest loan to be secured and then the City Manager could sign the Agreement Amendment with Garver to proceed with design. The concern was making sure the City could cash flow the expenses associated with designing the WWTP Project in preparation for bid. The backup option was to pursue traditional long term financing via Certificates of Obligation (COs). Both of these options were favorable given the very low interest rates we were seeing. STATUS OF ISSUE: TDWB: The TWDB continues to experience long delays with their process, which they state is due in combination because of CoVid-19, having received a large number of requests, and concerns about their ability to meet future obligations. We finally received word in September that the City's WWTP scored 90th out of 99 projects. At the time, there still appeared to be more available funding than total request, so we were hopeful that a low interest loan was still available. Nevertheless, the process continued to be delayed as we attempted to work with the TWDB. In late November, the TWDB came out with some drastic changes to their program. In short, timelines were extended well into 2021, the total available funding for all projects was slashed, the cap per project was dropped, and they stated their intention to no longer fund projects over multiple years. Given our ranking, the size of our project, and our needed timeline, every change they made fatally impacted our proposal. On top of this, while these months continued to pass by, the TWDB's interest rates continued to creep upwards, slowly eliminating the advantage of the loan over traditional bonding. Next Steps: Throughout all of this time, City Staff worked very closely with representatives of Garver, SAMCO Capital (financial advisers), McCall, Parkhurst & Horton LLP (bond counsel), and NewGen Strategies & Solutions, LLC (rate consultants) to carefully examine all possible options we have. This group heavily vetted several options for phasing the WWTP, phasing CO options, possibly pursuing TWDB loans as part of future phases, and phasing in rate increases. At the conclusion of this, we have developed a new plan of action to present to the City Council tonight. This is not an action item as there are no actions to be taken, but rather if the City Council is agreeable with this plan, City Staff will bring back to the Council several action items at the February 8, 2021 City Council meeting. With every option the City Staff examined, we kept two focuses in mind: 1) Completing the WWTP Renovation Project and 2) Financial impact to the rate payers. Significant rate increases cannot be avoided as part of this project. Garver was tasked with finding alternative funding options, but none have turned up, particularly given the size and scope of our project. It cannot be