Also serving the communities of De Luz, Rainbow, Camp Pendleton, Pala and Pauma

Rainbow MWD approves $10M financing agreement for capital projects

The Rainbow Municipal Water District will be paying for $10 million of capital projects and equipment with a loan.

A 5-0 Rainbow board vote April 23 approved a resolution authorizing an installment purchase agreement with U.S. Bank to finance the infrastructure and equipment. The loan will begin as a line of credit with a variable interest rate before converting to a 4.7% fixed rate for the remainder of the ten-year period.

“We’re hoping to use the debt to help keep our cash reserves healthy and prevent any type of shock rate increase,” said Rainbow general manager Jake Wiley.

On July 10, San Diego County’s Local Agency Formation Commission approved a reorganization in which Rainbow and the Fallbrook Public Utility District would detach from the San Diego County Water Authority and join the Eastern Municipal Water District contingent upon approval by the Rainbow and FPUD voters. The voters of both districts overwhelmingly approved the reorganization Nov. 7.

After the LAFCO decision, the SDCWA filed a lawsuit against LAFCO, FPUD, and Rainbow. The four agencies agreed to a settlement Dec. 21. FPUD’s detachment from the CWA and annexation to Eastern became effective Jan. 1.

The Rainbow detachment will be completed after pump stations allow all Rainbow water to be taken from turnouts north of the delivery point where the CWA takes over operation of the San Diego Aqueduct from the Metropolitan Water District of Southern California.

The LAFCO conditions included an exit fee to be paid over five years to cover the loss of the CWA’s revenue from fixed charges. The total exit fee is $24,305,000 with Rainbow responsible for 65% and FPUD paying 35%. The settlement agreement included payment of the full exit fee amount upon detachment, which equates to $8,506,750 for FPUD with Rainbow paying $15,798,250 when that detachment is complete.

“It’s just a two-year payback on the exit fee. That’s what we’re predicting right now,” Wiley said. “We continue to save money after that.”

FPUD’s Jan. 22 meeting included approving the issuance of water revenue bonds to provide rate relief to water users rather than to incorporate the exit fee into the current rates or to defer capital improvement or maintenance projects. “That’s something we’ve been thinking about,” Wiley said. “We have a couple of large capital projects going on right now.”

The replacement of Lift Station No. 1 includes the new Thoroughbred Lift Station and appurtenant pipeline modifications, a force main from the Thoroughbred Lift Station to Old River Road, upsizing the existing sewer line along State Route 76, and a gravity main from Olive Hill Road to the Thoroughbred Lift Station.

Including construction management and inspection services, the planned project cost is $16,821,287. The three pump stations which will allow detachment from the CWA are currently a $5,767,980 expense including construction management and inspection.

The State Water Resources Control Board has a State Revolving Fund which provides 20-year loans at interest rates between 1.5% and 3.0%. The loan through U.S. Bank is more flexible than a State Revolving Fund loan.

“It was a very competitive interest rate,” Wiley said.

U.S. Bank is Rainbow’s primary banking services provider for both checking account services and investment trusts.

The 10-year loan is payable in monthly installments and may be prepaid in whole or in part any time after five years without penalty. “From a government debt perspective it’s really short-term debt,” Wiley said.

The estimated total payment including interest is $12,784,291. Although the pay-as-you-go method for capital expenses frees up interest payments for other projects, bond debt for capital improvement projects translates into future beneficiaries paying their share as opposed to being paid for in full by current residents who leave the area before the project's completion with newer residents not paying at all for the project.

Author Bio

Joe Naiman, Writer

Joe Naiman has been writing for the Village News since 2001

 

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