TO: Board of Supervisors
FROM: Ryan J. Alsop, County Executive Officer
REPORT BY: Jasmine Elo, Management Analyst
SUBJECT: Reissue temporary loans in the amount of $1,625,000 to the Napa Berryessa Resort Improvement District
RECOMMENDATION
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Adopt a Resolution authorizing the reissuance of two loans totaling $1,625,000 to the Napa Berryessa Resort Improvement District (NBRID) from the County and approve issuance of a note to borrow funds for the purpose of consolidating the two loans, extending the term and repayment, to fund ongoing operations of NBRID facilities. (Fiscal Impact: $1,625,000 Expense, General Fund, Not Budgeted, Discretionary)
[4/5 vote required]
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BACKGROUND
NBRID is a special district of the State of California organized in 1965 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.
Beginning in 1995, the NBRID’s infrastructure suffered significant deterioration due to many components reaching the end of their useful life. In response, staff initiated small-scale rehabilitation projects whenever permissible within the confines of available funding. However, many necessary repairs were beyond the NBRID’s budgetary capacity, and the deficient critical facilities resulted in negative action by the Regional Water Quality Control Board (“Regional Board”).
The decline of the facilities and the mandates imposed by the Regional Board prompted a series of requests for loans from Napa County for various repair and improvement projects between 2008 and 2013. NBRID currently has five active loans from the County totaling $3,839,634.
Further description of each active loan is as follows:
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 three, three-year cycles, with the fourth renewal occurring in June 2022. 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 then 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 FY 2020-21 and renewed for a third three-year term on May 04, 2021, and is now scheduled to be paid in full by June 30, 2024. Todays requested action includes this loan. 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 NBRID’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 FY2012-13.
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 NBRID’s operating budget. The shortfalls were projected using budget models prepared for NBRID by Robert D. Niehaus, Inc. (RDN), the consultant retained to complete a five-year rate analysis for NBRID. Today’s requested action includes this loan, due on June 30, 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 scheduled to be paid in full by June 30, 2025.
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 (i.e., 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.
District residents agreed to a rate increase (~12%) effective December 1, 2021. While the additional revenue received as part of this rate increase did help the District’s financial situation, it was not sufficient to cover prior expected and future anticipated annual deficits, and the District has not been able to build enough budgetary reserves to satisfy the current payment for the third term of Loan No. 2 for $625,000 and the first term of Loan No. 4 for $1,000,000 - both of which are due June 30, 2024. Thus, the District is asking Napa County to renew and consolidate Loan Nos. 2 and 4, pursuant to Government Code Section 25214.4, for a new three-year term ending on June 30, 2027 for the purposes of enabling NBRID to satisfy the payment owed for the current terms of Loan Nos. 2 and 4.
Requested Actions:
1. Adopt a Resolution approving the reissuance and consolidation of two loans totaling $1,625,000 to NBRID from the County;
2. Authorize the issuance of a new promissory note to NBRID in the amount of $1,625,000 to be known as Loan No. 7 and to become due on June 30, 2027.
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: |
Pursuant to Government Code Section 25214.4, the Board of Supervisors may loan any available funds of the county to a county service area to pay for any lawful expenses of the county service area. |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
The District will repay the loan within three years, as required by Government Code Section 25214.4. |
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Consequences if not approved: |
NBRID will not have sufficient revenue to cover expenses at the end of the fiscal year and will deplete 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.