BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A – Gov. Code § 84308)
SUBJECT: Title
Adopt a Resolution Authorizing the Execution and Delivery of Corps Water Infrastructure Financing Program Master Agreements, Credit Agreements, Term Sheets and Certain Other Documents with Respect to the Water Utility, and Authorizing Certain Acts in Connection Therewith, to Obtain Loans of up to One Billion Dollars for Certain Water Enterprise Projects.
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RECOMMENDATION: Recommendation
A. Adopt the Resolution AUTHORIZING THE EXECUTION AND DELIVERY OF CORPS WATER INFRASTRUCTURE FINANCING PROGRAM MASTER AGREEMENTS, CREDIT AGREEMENTS, AND TERM SHEETS AND CERTAIN OTHER DOCUMENTS WITH RESPECT TO THE WATER UTILITY AND AUTHORIZING CERTAIN ACTS IN CONNECTION THEREWITH, to obtain loans of up to one billion dollars for certain Water Enterprise projects; and
B. Authorize and direct the Chief Executive Officer, the Chief Financial Officer (or any acting or interims of such positions), or their designees, (each an “Authorized Officer”), and such other officers and staff of the Santa Clara Valley Water District, acting singly to do any and all things, to execute and deliver any and all documents which such officers may deem necessary or advisable in order to consummate the execution and delivery of all the Corps Water Infrastructure Financing Program agreements, and the ongoing administration thereof.
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SUMMARY:
Board approval of staff recommendations will allow the Santa Clara Valley Water District (Valley Water) to implement the United States Army Corps Water Infrastructure Financing Program (CWIFP), to provide up to one billion dollars in funding for dam seismic stability projects, including the Almaden, Calero, Coyote, and Guadalupe dams (collectively, the “Dam Safety Program”).
Board approval of the Resolution (Attachment 1) would authorize Valley Water to: (a) enter into a CWIFP Master Agreement under which up to seven (7) CWIFP Loans can be executed over a maximum of five (5) year period; and (b) enter into additional CWIFP agreements to access future funding increases, up to a maximum of one billion dollars. The CWIFP Master Agreement currently provides up to $653 million in loan capacity, plus an estimated capitalized interest capacity of $100 million. Future CWIFP funding increase of approximately $247 million may be required to fund the Coyote Dam Seismic Stability Project. The PowerPoint presentation (Attachment 2) provides a summary of the CWIFP Loan Program.
Approval of the CWIFP Master Agreement and related agreements (Attachments 3, 4, and 5) does not commit Valley Water to a definite course of action with regard to any particular project and does not limit Valley Water in exercising any discretion following California Environmental Quality Act (CEQA) review of the project, including (i) considering other feasible alternatives and mitigation measures to avoid or minimize project impacts, (ii) making modifications deemed necessary to reduce project impacts, or (iii) determining not to proceed with one or more component of a project.
Approval of the CWIFP Master Agreement and related agreements does not obligate Valley Water to approve the construction of any of the projects. To remain eligible for CWIFP loan funding, the bid plans and specifications and construction contracts for each subject project must include the federal compliance requirements outlined in the Master Agreement.
CWIFP Loan Program
The CWIFP Loan Program is administered by the United States Army Corps of Engineers (USACE) and provides a low-cost source of financing for up to 80% of eligible project costs. The interest rate for the CWIFP Loan is set on the date of each specific loan closing, based on the US Treasury rate of a similar maturity plus 0.01%. The CWIFP Loan Program allows a very flexible debt service schedule with no prepayment penalty. Valley Water has negotiated for interest and principal payments to be postponed until after substantial completion of the project(s) to reduce the financial burdens for the Water Utility fund in the near term. CWIFP Loans are secured by a pledge of Water Utility revenues on a subordinate lien basis but would spring to senior lien in a bankruptcy-related event.
Good Faith Estimated Costs
Pursuant to California Government Code Section 5852.1, the good faith estimates with respect to the $653M CWIFP Master Program are as follows: (1) the true interest cost is currently estimated to be 5.45%, this is the interest rate paid after accounting for all fees, timing of payments and any price premiums or discounts; (2) the finance charge, including all fees and charges paid to third parties, is estimated to be $5,720,000; (3) the amount of proceeds received by Valley Water, net of the finance charge, is estimated to be $647,183,504; and (4) the total payment amount, equal to the sum of all principal and interest payments, is estimated to be $1,845,954,728.
The good faith estimates with respect to the initial $112.6M CWIFP Loan are as follows: (1) the true interest cost is currently estimated to be 5.45%; (2) the finance charge is estimated to be $1,130,000; (3) the amount of proceeds received by Valley Water is estimated to be $111,516,753; and (4) the total payment amount is estimated to be $340,133,583.
The CWIFP Loan Program is projected to save Valley Water $240 million over the life of the loans, compared to issuing long-term bonds, which Valley Water would otherwise have to issue to finance these projects. The initial CWIFP Loan is estimated to save $39.9 million over the life of the loan.
The above estimates are based on market conditions as of July 29, 2025, plus 0.50%. Actual results will differ depending on market conditions on the CWIFP Loan closing date, which is currently anticipated to be October 6, 2025.
Financing Documents
The following forms of financing documents are attached for Board review and consideration:
Attachment 3: Master Agreement
Attachment 4: Term Sheet
Attachment 5: Credit Agreement
Issuance Costs
The estimated issuance cost of $1.13 million includes the CWIFP Fees paid to the United States Army Corps of Engineers and various advisors, consultants, and legal fees. The CWIFP Fees of $815,000 reflect an upfront payment of $185,000 for the CWIFP legal fees, financial advisory, and other costs, payable at closing, and an estimated annual fee of $15,000 for the term of the loan (FY 2026 – FY 2067). The costs of issuance will be paid by Valley Water upon or shortly after closing:
|
Description |
Estimate |
|
CWIFP Fees |
$815,000 |
|
CWIFP Consultant |
$50,000 |
|
Rating Fee |
$80,000 |
|
Bond Counsel |
$75,000 |
|
Municipal Advisor |
$40,000 |
|
Contingency |
$70,000 |
|
Total |
$1,130,000 |
The estimated issuance costs for the entire CWIFP Master Program of $5.72 million assumes that in addition to the $1.13 million outlined above for the execution of the Master Program and the initial loan, an additional cost of $765,000 will be incurred for each of the six subsequent loans allowed under the Master Program to pay for legal, financial advisory, and CWIFP annual fees over their respective terms and other related costs of issuance.
ENVIRONMENTAL JUSTICE IMPACT:
There are no environmental justice impacts associated with this action. This action is unlikely to or will not result in disproportionate impacts on any specific communities relative to the general population from the implementation of this program.
FINANCIAL IMPACT:
The CWIFP issuance costs will be paid from the adopted FY 2025-2026 Budget, project number 95993046 CWIFP Dam Safety.
Interest and principal payments due on the CWIFP Loan are scheduled to start on December 1, 2032, and June 1, 2037, respectively, with the final principal and interest payment on June 1, 2067.
The CWIFP Loan Program is projected to save Valley Water $240 million over the life of the loans, compared to issuing long-term bonds which Valley Water would otherwise have to issue to finance these projects. The initial CWIFP Loan is estimated to save $39.9 million over the life of the loan.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have the potential to result in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Resolution
Attachment 2: PowerPoint
Attachment 3: Master Agreement
Attachment 4: Term Sheet
Attachment 5: Credit Agreement
UNCLASSIFIED MANAGER: Manager
Darin Taylor, 408-630-3068