REPORT TO COUNCIL & PUBLIC FACILITIES FINANCING CORPORATION
SUBJECT
Title
Action to Approve Amendments to 2020 Installment Sale Agreement that Financed Capital Improvements at the San José-Santa Clara Regional Wastewater Facility (RWF)
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The San José-Santa Clara Regional Wastewater Facility (RWF) treats an average of 110 million gallons per day (mgd) of wastewater for the cities of San José, Santa Clara, and five tributary agencies in the South Bay Area. The City of Santa Clara is a co-owner of the facility with the City of San José, who is a majority owner and is responsible for the operations, management, and administration of the facility. The RWF was built in 1956 and, in 1959, Santa Clara signed an agreement to gain an ownership stake of approximately 20% in the RWF. Allocation of the operations and maintenance (O&M) and capital improvement program (CIP) costs is based on the ownership percentage, and is also charged out in appropriate proportions to the various tributary agencies. As a co-owner, Santa Clara is represented on the Treatment Plant Advisory Committee (TPAC), along with representatives from the tributary agencies, which advises San José and its Council on the operations and administration of the facility. Santa Clara’s portion of RWF related expenditures are paid for by Santa Clara sewer customers.
In 2020, in order to finance the City’s share of capital improvements to the RWF, the City of Santa Clara Public Facilities Financing Corporation (Financing Corporation) and the City entered into an Installment Sale Agreement dated as of June 1, 2020 (Installment Sale Agreement), pursuant to which the Financing Corporation agreed to provide financing for the Project. Funding under the Installment Sale Agreement was provided by JPMorgan Chase Bank, N.A. (JPMorgan), as assignee of the Financing Corporation’s rights under the Installment Sale Agreement.
DISCUSSION
Calculation of interest under the Installment Sale Agreement was originally based on the London interbank offered rate (LIBOR), which is anticipated to be discontinued as of June 30, 2023. As permitted by the Installment Sale Agreement, JPMorgan has provided notice to the City that JPMorgan has selected an alternate rate of interest to replace LIBOR, which is known as Secured Overnight Financing Rate(SOFR), and provided revised interest rate provisions. Staff has reviewed the new provisions with its municipal advisor and bond counsel. In order to memorialize the interest rate provisions, the City and the Financing Corporation will need to execute an amendment to the Installment Sale Agreement, which has been submitted to this Council.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
This action itself does not have a fiscal impact beyond the cost of staff time. The alternate rate, SOFR, does not impact interest expense and calculation.
COORDINATION
This report has been coordinated with the Finance Department, Water and Sewer Utilities Department, and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
That the Council:
1. Adopt the Resolution approving the First Amendment to Installment Sale Agreement; and
2. Authorize the Chief Operating Officer to execute all required agreements necessary to consummate any of the transactions contemplated by the agreements and documents approved under the Resolution.
That the Financing Corporation:
1. Adopt the Resolution approving the First Amendment to Installment Sale Agreement; and
2. Authorize the Director of Finance to execute all required agreements necessary to consummate any of the transactions contemplated by the agreements and documents approved under the Resolution.
Staff
Reviewed by: Gary Welling, Director, Water and Sewer Utilities
Reviewed by: Kenn Lee, Director, Department of Finance
Approved by: Office of the City Manager
Approved by: Kenn Lee, Director of Finance of the Financing Corporation
ATTACHMENTS
1. Council Resolution Amending Installment Sale Agreement
2. Financing Corp Resolution Amending Installment Sale Agreement
3. First Amendment to Installment Sale Agreement