TO: Board of Supervisors
FROM: Ryan J. Alsop, Chief Executive Officer
REPORT BY: Jasmine Elo, Management Analyst
SUBJECT: Loan No. 9 in the amount of $1,214,634 to the NBRID to consolidate and extend the term of two outstanding loans
RECOMMENDATION
title
Adopt a Resolution authorizing a new loan of $1,214,634 to the Napa Berryessa Resort Improvement District which will consolidate and extend the term of two outstanding loans for no net increase to total loan balances, accept a promissory note from the District; and approve a Budget Amendment. (Fiscal Impact: Net Zero, General Fund, Not Budgeted, Discretionary)
[4/5 vote required]
body
BACKGROUND
Napa Berryessa Resort Improvement District (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 $5,000,000. Further description of each active loan is as follows:
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.
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 for the design of capital improvements to the water and wastewater facilities. It was NBRID’s intent to sell bonds for the construction of the improvements 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 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 new loan, to be known as Loan No. 9, will be used to consolidate and extend the term of outstanding Loan Nos. 1 and 5 which are both currently due on June 30, 2025 with no net increase to total loan balances. Government Code section 25214.4 authorizes Napa County to loan funds to NBRID with a term of up to three years after the end of the fiscal year in which the loan is made, with a 4/5 vote of the Board of Supervisors.
Requested Actions:
1. Adopt a Resolution approving a new loan of $1,214,634 to NBRID from the County, which will be used to consolidate and extend the term of Loan Nos. 1 and 5;
2. Accept a new promissory note from NBRID in the amount of $1,214,634 to be known as Loan No. 9, due on June 30, 2028.
3. Approve a Budget Amendment for the following:
a. Increase revenue of $1,214,634 to Loan Proceeds in the ACO Fund (Fund 3000, Subdivision 3000000, Account 48400);
b. Increase appropriations of $1,214,634 to Short Term Loan in the ACO (Fund 3000, Subdivision 3000000, Account 54890) offset by the increase of revenue.
FISCAL & STRATEGIC PLAN IMPACT
|
Is there a Fiscal Impact? |
Yes |
|
Is it currently budgeted? |
No |
|
Is it Mandatory or Discretionary? |
Discretionary |
|
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. |
|
Is the general fund affected? |
Yes |
|
Future fiscal impact: |
The District will repay the loan within three years, as required by Government Code Section 25214.4. |
|
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.