Rainbow MWD approves financing agreement for capital projects

The Rainbow Municipal Water District board approved a financing agreement for a group of planned capital projects.

The March 22 board vote authorized Rainbow general manager Tom Kennedy to execute a financing agreement with Western Alliance Business Trust for $9,750,000. The financing will have a 3.55% interest rate and will be repaid over a 20-year period.

The funding will be used for five projects which are known as the “Wholesale Water Capital Projects,” and although the financing is for $9,750,000, the board action approved a budget of $9,700,000 for those projects while also finding the financing element categorically exempt from California Environmental Quality Act review.

“The projects are an important way for us to help hold the cost of water down for our ratepayers and help eliminate challenges when the Water Authority pipelines are out of service,” Kennedy said.

The San Diego County Water Authority annually shuts down portions of the Second Aqueduct for inspection and maintenance as does the Metropolitan Water District of Southern California. The SDCWA takes over operation of the aqueduct from MWD approximately six miles south of the Riverside County border. During those shutdowns Rainbow rents, installs, and operates temporary pump stations in up to four locations to supply water to the Hutton, Turner, and Gopher Canyon tanks.

Four of Rainbow's eight connections to the aqueduct are from MWD rather than from the CWA. Regular use of pumps to move water from the Morro Zone to the south zones would allow Rainbow to save money by using the MWD connections even when the CWA portion of the aqueduct is operational. The CWA transportation charge for calendar year 2022 is $173 per acre-foot, and that is expected to increase to $193 per acre-foot for 2023. The temporary pumps also require fueling, so permanent pump stations will also reduce the risk of a fuel leak or spill.

The Robert A. Weese Filtration Plant is owned by the City of Oceanside and operated by Oceanside's Water Utilities Department but is physically located in the Rainbow service area off of Silverleaf Lane in the Gopher Canyon area. In August 2017, the Rainbow board authorized district staff to proceed with the design for an interconnection to the Weese Filtration Plant, and the design phase is now complete.

The interconnect project includes the purchase and installation of a pump station to move water from the Weese treatment plant into Rainbow’s southern Gopher Zone. The estimated cost of the pump station is $1,325,000.

In January 2021, Rainbow awarded Hoch Consulting a professional services contract to design the Hutton Pump Station and Turner Pump Station. Both pump stations are along the Second Aqueduct route just west of Interstate 15. The Hutton Pump Station is near the Old Highway 395 bridge north of West Lilac and the Turner Pump Station is south of Camino Del Rey. The pump stations will provide water to the Hutton Tank and Turner Tank zones. The project has an estimated cost of $5,350,000 and is currently in the design phase.

The design phase is complete for the upsizing of an existing 12-inch water line along Gird Road to 18 inches if not larger. That project will install 1,600 feet of a larger water line and will allow transport of water to various parts of the district. The work will be performed in-house, and Rainbow expects expenses of $450,000.

The design for the Wilt Road Feeder 18-inch water line is nearly complete and will also utilize an in-house installation. That project will install and provide associated material for more than 5,000 linear feet of 18-inch water line along Wilt Road from Canonita Drive to Peony Drive and Citrus Drive. That water line will also have a tie-in at Citrus Drive and Vern Drive and will allow water to be transported to the Morro Zone and the Morro Reservoir. The budget for the project is $1,050,000.

The fifth project in the group is a retrofit of the existing Morro Pump Station which will allow transport to the Morro Tank Zone once the pump station is returned to service. The upgrades are expected to cost $1,525,000.

The Wholesale Water Capital Projects components also include the Rice Canyon Pipeline from the Rice Canyon Tank to the water main on Horse Ranch Creek Road, although that project is fully funded and is in construction. A subsequent phase would extend that pipeline to Dulin Road while the Ocean Breeze planned development would extend that pipeline from Dulin Road to West Lilac.

The estimated service life of the projects is 55 years, so they would continue in operation after the loan is paid off. Rainbow estimates cost savings from the projects of $11.7 million over the 20-year period of the loan based on 13,000 acre-feet a year of water purchases and $3.6 million over 20 years based on 10,000 annual acre-feet of sales. After the loan is paid off the estimated annual savings are $2 million for 13,000 acre-feet and $1.4 million for 10,000 acre-feet.

“The savings from the avoided transportation costs will offset the cost of the improvements,” Kennedy said.

Rainbow staff contacted four banks. Western Alliance has the most experience working with utilities in the area and provided a proposal letter offering the 20-year term at 3.55% interest. Western Alliance added $50,000 to the budgeted amount to address contingencies.