TO: Members of the Governing Board
FROM: Christopher Silke - District Engineer
REPORT BY: Annamaria Martinez - Assistant Engineer
SUBJECT: Consolidation of Two Outstanding Loans from Napa County into a New Loan
RECOMMENDATION
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Authorize a letter requesting consolidation of two outstanding loans from the County into a new loan totaling $1,214,634 for net zero total loans increase, adopt a Resolution requesting the loan and authorizing execution of the Promissory Note, and approve a Budget Amendment. (Fiscal Impact: Net Zero; Napa Berryessa Resort Improvement District Fund; Not Budgeted; Discretionary)
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BACKGROUND
Napa Berryessa Resort Improvement District (NBRID) is a special district of the State of California organized under the Resort Improvement District Law (Public Resources Code Section 13000 et seq.) for the provision of water and sewer service in an unincorporated portion of the County of Napa, which includes Unit 1 and 2 of the Berryessa Highlands and the Oakridge Estates.
NBRID currently has five active loans from Napa County totaling $5,000,000. The loans include: Loan No. 1 for $869,000 which is the result of the consolidation of two smaller loans issued between 2008 and 2012 used to fund capital projects and operations and maintenance activities; Loan No. 5 for $345,634 which is an original loan from 2022 used to supplement funding for a capital project, Loan No. 6 for $1,000,000 which is an original loan from 2023 used to fund operations and maintenance expenses, Loan No. 7 for $1,625,000 from 2024 which consolidated Loan No.2 (originally a consolidation of three smaller loans issued between 2008 and 2012) and Loan No. 4 (an original loan from 2021 used to fund operation and maintenance), and Loan No. 8 for $1,160,366 which is and original loan from 2024 used to fund operations and maintenance expenses and two small capital projects.
Loan No. 1
On May 7, 2013 two loans were consolidated into a principal amount of $869,000 and issued for a three-year term. This loan has been repaid and renewed for four, three-year cycles, with the fourth renewal occurring on May 17, 2022. Loan No. 1 is included with today’s requested action and will be consolidated with Loan No. 5 into a principal amount of $1,214,634 for a fourth three-year term. Loan No. 1 incorporates the following original loans:
1. On October 14, 2008 a loan for $474,000 was received to pay HydroScience Engineers. It was NBRID’s intent to sell bonds and repay the County immediately thereafter.
2. On June 29, 2010 a loan for $395,000 was received to cover shortfalls in the FY 2009-10 operating budget
and for District improvements.
Loan No. 2
On October 6, 2015 three loans were consolidated for a principal amount of $625,000 and issued for a three year term. This loan was repaid in FY2020-21 and renewed and consolidated with Loan No. 4 into a principal amount of $1,625,000 for a fourth three-year term on June 25,2024. Loan No. 2 incorporates the following original loans:
1. On May 10, 2011 a loan for $205,000 was received to pay for non-budgeted County costs, including engineering, accounting, Auditor's Office, legal and County Executive Office expenses that were needed for the day-to-day operations of the District.
2. On June 5, 2012 a loan for $325,000 was received to pay for legal expenses that exceeded the amount budgeted for the Administrative Civil Liability (ACL) Complaint R5-2011-0590 issued by the Regional Board for wastewater discharge violations that occurred in FY2010-11; professional services expenses related to the contract with Western Water Constructors; and emergency repairs to the District’s water distribution system. $45,000 of this loan was sourced from the County Accumulated Capital Outlay Fund.
3. On September 11, 2012 a loan for $95,000 was received to pay for the ACL Complaint R5-2011-0590 settlement which was not budgeted in FY 2012-13.
Loan No. 3 (defeased)
Special Assessment District 2012-01 was created and approved by property owners to finance the entirety of the USDA loans, but the District did not have sufficient reserves to meet USDA loan conditions. The County provided a loan in 2013 totaling $1.1 million to fund the reserve requirements for the water and sewer capital improvement loans issued to the District by the USDA Rural Development. By 2022, the payments received from AD 2012-01 were sufficient to meet current annual repayment and total reserve requirements and Loan No. 3 was paid in full.
Loan No. 4
On May 18, 2021 a loan for $1,000,000 was received to cover projected three-year shortfall in the District’s operating budget. The shortfalls were projected using budget models prepared for the District by Robert D. Niehaus, Inc. (RDN), the consultant retained to complete a five year rate analysis for the District. This loan was repaid in FY2023-2024 and renewed and consolidated with Loan No. 2 into a principal amount of $1,625,000 for a second three-year term on June 25, 2024.
Loan No. 5
On October 27, 2022, a loan for $345,634 was received to supplement construction of the Wastewater Pond 2
Slope Stabilization Project. This loan is due June 30, 2025 and will be repaid and renewed for a three-year cycle, with a renewal occurring with today’s requested actions. This loan will be consolidated with Loan No. 1 into a principal amount of $1,214,634 for a second three-year term.
Loan No. 6
On June 6, 2023 a loan for $1,000,000 was received to cover projected operating budget shortfalls while concurrently granting staff time to 1) update a Median Household Income Survey to determine eligibility for Federal and State grants for capital projects that will contribute to reduced operating and maintenance costs and 2) proceed with measures (ie, rate adjustment, special tax, other) to bring in enough revenue to balance the budget over the next five years. This loan is scheduled to be paid in full by June 30, 2026.
Loan No. 7
On June 25, 2024, Loans No. 2 and No. 4 were consolidated into a principal amount of $1,625,000 and issued for a new three- year term. This loan is scheduled to be paid in full by Jun 30, 2027.
Loan No. 8
On July 23, 2024, a loan for $1,160,366 was received to cover projected operation expenses and two minor capital improvement projects that were necessary to increase operational efficiency at the water and sewer treatment plants and one sewer lift station. This loan is scheduled to be paid in full by June 30, 2028.
The loan requested as part this agenda report is to consolidate Loan Nos. 1 and 5 to into a single loan to be redesignated as Loan No. 9 for a total amount of $1,214,634. Both Loan Nos. 1 and 5 are due on June 30, 2025.
Requested Actions:
1.Authorize the attached letter to the Board of Supervisors requesting a loan of $1,214,634 pursuant to Government Code section 25214.4 - which will be used to consolidate Loan No. 1 in the amount of $869,000 and of Loan No. 5 in the amount of $345,634 into a single loan and designated as Loan No. 9.
2. Adopt a Resolution approving the loan to provide the requested funding and authorize the Chair to sign the Promissory Note - contingent upon approval of the loan from the Napa County Board of Supervisors.
3. Approve a Budget Amendment for the following:
a. Increase revenue of $345,634 to Long Term Debt Proceeds in the NBRID Operations Fund (Fund 5240, Subdivision 5240000, Account 48500);
b. Increase appropriations of $345,634 to Principal on Other Debt in the NBRID Operations Fund 5240, Subdivision 5240000, Account 54105) offset by the increase of revenue.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
NBRID may request a loan from Napa County pursuant to Government Code Section 25214.4 establishing a three (3) year term. Through a Proposition 218 protest hearing, rates were increased in Fiscal year 2021-22; however, due to limited growth in active water and sewer accounts and an overall reduction in water usage and revenues, NBRID is not able to repay the previously issued loans at this time. The requested loan will consolidate two existing loans (Loan Nos. 1 and 5) that are due June 30, 2025 into a new loan to be designated as Loan No. 9. |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
NBRID will repay the loan as required by Government Code section 25214.4 which allows NBRID to avoid being required to repay the funds plus interest for three years. However, it is not anticipated that NBRID will have the ability to repay the loan within the statutory three-year period, which will likely prompt refinancing on the loan term length until such time that a proposed rate schedule, or increase in customers, or addition of a resort, provides sufficient revenue for repayment. |
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Consequences if not approved: |
If the District does not request the loan renewal, the payment for the third term of the two prior loans - issued on June 30, 2022 - is due on June 30, 2025, and must be paid from its operating fund balance. Repayment of the loans issued on June 30, 2022, will deplete NBRID’s operations budget and available fund balance, causing NBRID’s inability to pay for other critical operating and maintenance expenses. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California
Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.