Title
Approval of a Resolution Authorizing an Amendment of the Fir Street Reservoirs Seismic Upgrades Loan Agreement with the Washington State Department of Health
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Move to approve a Resolution authorizing the City Manager to sign an amendment to the Drinking Water State Revolving Fund (DWSRF) loan agreement for the Fir Street Reservoirs Seismic Upgrades.
Report
Issue:
Whether to approve the amendment to the Drinking Water State Revolving Fund Loan for the Fir Street Reservoirs Seismic Upgrades.
Staff Contact:
Aurora Isabel, Project Engineer II, Public Works Water Resources, 360.570.3741
Presenter(s):
None - Consent Calendar Item.
Background and Analysis:
The Drinking Water State Revolving Fund (DWSRF) makes funds available to drinking water systems to pay for infrastructure improvements. The DWSRF program provides federal and state funds through low-interest construction loans to publicly owned (municipal) and privately owned drinking water systems. These loans help pay for capital improvements that protect public health and improve compliance with drinking water regulations.
In 2018, the Washington State Department of Health (DOH) awarded the City a $1,515,000 DWSRF construction loan for a capital facilities project that will provide seismic retrofits to the Fir Street Reservoirs. The Fir Street Reservoirs provide water to the City’s 226 Pressure Zone that serves the downtown area. These are the only reservoirs in this pressure zone.
The project brings the reservoirs in compliance with standard seismic codes and protects the City’s drinking water supply by mitigating the risk of the collapse of a reservoir in an earthquake event. The project is near completion.
At the time the original loan was executed, up to $3,000,000 in total funding was available to each municipality. The City applied for $3,000,000 for two projects, $1,500,000 each, for Fir Street Reservoirs and Elliot Reservoir seismic upgrades. The original cost estimate for Fir Street Reservoirs seismic upgrade was approximately $1,500,000. However, during the design process, structural damages requiring repair or replacement were discovered. The adjusted total estimated cost of the Project increased to $1,986,670.
On January 14, 2021, DOH informed City staff of additional funding for projects facing construction overruns. The amount available is not to exceed $500,000 at 1.75 percent interest and with a 1.0 percent loan origination fee. The current Drinking Water State Revolving Fund Loan Agreement between the City and DOH for Fir Street Reservoirs Seismic Upgrades needs to be amended to receive this additional construction loan funding.
Neighborhood/Community Interests (if known):
The Fir Street Reservoirs are key to sustaining the supply of drinking and fire protection water to Downtown and approximately half of the Eastside.
Options:
1. Approve a Resolution authorizing the City Manager to sign an amendment to the Drinking Water State Revolving Fund (DWSRF) loan agreement for the Fir Street Reservoirs Seismic Upgrades. The additional funds will help pay for the remaining project cost. The seismic retrofits protect the drinking water supply for Olympia by mitigating risk from future seismic activity. Compliance with Olympia’s Water System Plan is maintained, ensuring the City fulfills commitments made to the State Department of Health.
2. Do not approve the Resolution, reject the additional loan funds, and instead use City Utility funds allotted to other projects to pay for the remaining project cost.
3. Consider approval of the Resolution at another time.
Financial Impact:
Total cost for this project is approximately 1.9 million dollars. The current funding for this project through the Drinking Water Utility (Utility) is largely with a low-interest loan from the Washington DWSRF. The current DWSRF construction loan amount is $1,515,000.00, financed at a 1.5% interest rate over 20 years. Payments of approximately $88,000 are due annually on October 1. The amended contract will be for a total loan amount of $1,986,670.00 (including loan fee). The additional $467,000.00 will be financed at 1.75 percent interest. The Period of Performance remains unchanged through 10/01/2038.
The additional funds allow the utility to smooth capital expenditures and moderate rate increases. The Utility has the funds to make these payments for the duration of the loan period. With the loan, there are currently sufficient funds in the budget to pay for this project.
Attachments:
Resolution
Contract Amendment