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COUNTY OF SAN MATEO
Inter-Departmental Correspondence
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Department of Public Works
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DATE:
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September 28, 2006
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BOARD MEETING DATE:
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October 17, 2006
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SPECIAL NOTICE/HEARING:
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None
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VOTE REQUIRED:
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Majority
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TO:
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Honorable Board of Supervisors
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FROM:
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Neil R. Cullen, Director of Public Works
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SUBJECT:
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Amendment to Loan Agreement between the Crystal Springs County Sanitation District and the County of San Mateo
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Recommendation
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Adopt a resolution as the governing board of both the Crystal Springs County Sanitation District (District) and the County of San Mateo (County), authorizing the President of the Board to execute Amendment No. 1 to the agreement between the District and the County for the $1,000,000 loan to the District from the County’s General Fund. The amendment will extend the term of the agreement by two (2) years and require “interest only” payments by the District for fiscal years 2006/07 and 2007/08.
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Vision Alignment
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Commitment: Responsive, effective and collaborative government.
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Goal 20: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.
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The proposed amendment to the agreement will defer principal loan payments for two fiscal years in order to allow the District’s limited funds to be used to finance some maintenance of District facilities.
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Background
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Previous Board Action
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Acting as the governing Board of both the District and the County:
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1.
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Entered into a four party agreement dated July 18, 1989, between the Town of Hillsborough (Town), the City of San Mateo (City), the District, and the County that designated relationships with respect to the use and ownership of sewage conveyance and treatment facilities jointly used by the four agencies.
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2.
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Authorized execution of an agreement between the District and the County which provided a $1,000,000 loan to the District that was used to reimburse the Town of Hillsborough (Town) for District costs associated with the Town’s Sewer Capital Improvement Project that improved the Town’s sewer transmission lines that are used to transport District wastewater through the Town.
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3.
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Adopted the sewer service charge rates that were established for the 2005-06 fiscal year for the District, as your Board was precluded from increasing rates to match District expenses due to a majority protest by the rate payers in the District pursuant to Article XIII D of the State Constitution.
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History
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The Town’s main trunk sewer transmission line (trunk sewer) in Crystal Springs Road was experiencing overflows into San Mateo Creek due to both the lack of capacity as well as its deteriorating condition. The Town, under the threat of sanctions by the Regional Water Quality Control Board, replaced the undersized and deteriorated portions of the trunk sewer, determined the cost of the work for each entity pursuant to the four party agreement, and billed the entities. The District obtained a loan from the General Fund to reimburse the Town for its share of the upgrades as it had insufficient funds to cover this cost.
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The loan agreement provided that payment of principal and interest would be made over five (5) successive years and we anticipated that the loan would be reimbursed from revenue from increased sewer service charges. However, a majority protest was received by your Board as described above, and sewer service charges could not be increased this fiscal year. Therefore, the District has insufficient funds to make the required loan payments and finance the cost of limited maintenance of the District’s collection system.
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Discussion
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The proposed amendment to the agreement restructures the loan payments as follows:
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Original Loan
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Proposed Restructured Loan
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Loan Amount:
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$1,000,000
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Loan Amount:
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$1,000,000
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Term:
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5 years
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Term:
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7 years
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Assumed Interest Rate (See note)
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4.75%
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Assumed Interest Rate (See note)
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4.75%
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Estimated Payments
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Estimated Payments
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Payment Due Date
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Principal ($)
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Interest ($)
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Total ($)
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Payment Due Date
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Principal ($)
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Interest ($)
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Total ($)
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Jan 2007
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100,000
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46,849
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146,849
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Jan 2007
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0
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46,849
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46,849
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Jun 2007
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100,000
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17,686
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117,686
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Jun 2007
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0
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19,651
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19,651
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Jan 2008
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100,000
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22,279
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122,279
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Jan 2008
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0
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27,849
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27,849
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Jun 2008
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100,000
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13,809
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113,809
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Jun 2008
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0
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19,727
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19,727
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Jan 2009
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100,000
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16,664
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116,664
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Jan 2009
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100,000
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27,773
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127,773
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Jun 2009
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100,000
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9,825
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109,825
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Jun 2009
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100,000
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17,686
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117,686
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Jan 2010
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100,000
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11,140
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111,140
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Jan 2010
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100,000
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22,279
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122,279
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Jun 2010
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100,000
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5,895
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105,895
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Jun 2010
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100,000
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13,755
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113,755
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Jan 2011
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100,000
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5,570
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105,570
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Jan 2011
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100,000
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16,710
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116,710
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Jun 2011
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100,000
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1,965
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101,965
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Jun 2011
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100,000
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9,825
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109,825
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Jan 2012
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0
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0
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0
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Jan 2012
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100,000
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11,140
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111,140
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Jun 2012
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0
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0
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0
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Jun 2012
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100,000
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5,918
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105,918
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Jan 2013
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0
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0
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0
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Jan 2013
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100,000
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5,555
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105,555
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Jun 2013
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0
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0
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0
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Jun 2013
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100,000
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1,965
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101,965
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Total
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1,000,000
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151,682
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1,151,682
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Total
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1,000,000
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246,682
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1,246,682
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Note: The agreement provides that the interest rate shall be equal to the annual interest rate paid on pooled reserves in the County Treasury.
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A resolution and an amendment to the agreement have been approved as to form by County Counsel.
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Fiscal Impact
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The proposed amendment to the loan reduces the first two year’s payments by an estimated $386,547, but increases the estimated cost of the loan by $95,000 over the term of the loan. Payments will be made from the revenues that the District receives, primarily sewer service charges, and the amendment does not change the loan provision that allows the District to accelerate payments if other revenues or funds become available to the District.
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The District is re-evaluating the sewer service charge rates that are required to support on-going maintenance, District capital improvement projects, the District’s share of expenses for the jointly used facilities, requirements of the RWQCB, the loan repayment, and other options for providing sewer service in the District. Recommendations regarding these issues will be the subject of separate reports.
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There is no impact to the General Fund as the General Fund will be receiving interest calculated at the same rate as the General Fund receives on its other pooled reserves.
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