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HomeMy WebLinkAboutAgenda Item - 2025-07-15 - Number 07.1 - Res 25-37 - WIFIA Loan with EPA 7.1 O F �s� COUNCIL REPORT —� OREGO� Subject: Resolution 25-37, Authorizing the execution and delivery of the WIFIA Loan with the Environmental Protection Agency (EPA). Meeting Date: July 15, 2025 Staff Member: Stefan Broadus, PE Director of Special Projects Report Date: July 3, 2025 Department: Public Works - Engineering Action Required Advisory Board/Commission Recommendation ❑ Motion ❑ Approval ❑ Public Hearing ❑ Denial ❑ Ordinance ❑ None Forwarded ❑X Resolution ❑ Not Applicable ❑ Information Only Comments: ❑ Council Direction ❑ Consent Agenda Staff Recommendation: Adopt Resolution 25-37 as presented. Recommended Language for Motion: Move to adopt Resolution 25-37 authorizing the execution and delivery of the WIFIA loan with the EPA for the Wastewater Treatment Facility project in an amount no to exceed $123,480,000. Project/ Issue Relates To: Collaborate with the City of Portland to make a financially and environmentally responsible long-term investment in a wastewater treatment facility. Issue before Council (Highlight Policy Question): ❑X Council Goals/Priorities EAdopted Master Plan(s) ❑Not Applicable BACKGROUND The existing Tryon Creek Wastewater Treatment Plant (TCWTP) was built in 1964 and is owned and operated by the Portland Bureau of Environmental Services (BES). The plant is reaching the end of its useful life cycle and needs to be upgraded or replaced. On December 6, 2021, the United States' Environmental Protection Agency (EPA) selected Lake Oswego's Wastewater Treatment Facility (WWTF) project to apply for a low-cost, long-term loan under the Water Infrastructure Finance and Innovation Act (WIFIA). On February 15, 2022, the Respect. Excel'ence. Trust. Service, 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO,OR 97034 WWW.LAKEOSWEGO.CITY Page 2 City Council approved submitting the formal application for the loan. The WIFIA loan was to be executed by EPCOR Foothills Water Partners (EWFP) as a means to reduce the monthly payment installments(and therefore overall cost)from the City in the P3 agreement. Essentially,the public financing would reduce the amount of private equity required which was at a higher rate. When the City decided not to pursue the Project Agreement with EWFP on January 30, 2024, it became necessary for the City to reapply for the WIFIA loan as the loan-holder if that was still going to be part of the project's funding plan. DISCUSSION While considering the separation from EWFP, the City evaluated the impact of removing the private equity and replacing it with public funding. The City's available fund balance is not nearly sufficient to pay for the capital cost of the new plant. However, using a combination of available funding sources (utility revenue, City of Portland cost share payments, and System Development Charges) as well as public financing creates a funding plan that minimizes utility rate increases. The public financing mechanism would include Lake Oswego Municipal Bonds as well as the WIFIA Loan. Based on that analysis, City staff submitted a revise application for the WIFIA loan on December 31, 2024 with the City named as the loan-holder. Over the past several months, the project team has coordinated with WIFIA staff to develop the financial details of the loan. In terms of next steps,the project team will continue to collaborate with Jacobs Engineering over the next several months as they prepare their proposal for the Design-Build-Operate-Maintain Project Agreement. The City will not begin to draw from the WIFIA loan until the Project Agreement is executed which is anticipated in early 2026. This approach defers fees and interest accrual on the WIFIA loan for as long as possible and until the project actually requires the funds. FISCAL IMPACT The maximum WIFIA loan amount is based on 49% of allowable expenses which include construction, land acquisition, and professional services, among a few other minor categories. Based on current cost estimates as well as eligible expenses to date,the WIFIA loan amount was calculated at just under $123,480,000. Executing this loan is the most cost-effective means for the City to deliver this much needed project. Without the WIFIA loan, utility rates would need to rise faster to accumulate needed capital to pay for construction. RECOMMENDATIONS Approve Resolution 25-37 authorizing the execution and delivery of the WIFIA loan with the EPA for the Wastewater Treatment Facility project in an amount not to exceed $123,480,000. Respect. Excel'ence. Trust. Service, 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO,OR 97034 WWW.LAKEOSWEGO.CITY RESOLUTION NO. 25-37 A RESOLUTION OF THE CITY OF LAKE OSWEGO, OREGON, AUTHORIZING THE EXECUTION AND DELIVERY OF A LOAN AGREEMENT IN AN AMOUNT NOT TO EXCEED $123,480,000 (EXCLUDING CAPITALIZED INTEREST) WITH THE ENVIRONMENTAL PROTECTION AGENCY AND RELATED DOCUMENTS TO FUND A PORTION OF A WASTEWATER TREATMENT FACILITY PROJECT FOR THE CITY AND FOR PAYMENTS OF COSTS OF ISSUANCE; PLEDGING THE CITY'S FULL FAITH AND CREDIT TO THE PAYMENT OF SUCH LOAN AGREEMENT; DESIGNATING AUTHORIZED REPRESENTATIVES AND DELEGATING AUTHORITY; AND RELATED MATTERS. WHEREAS,the City Council (the "City Council") of the City of Lake Oswego, Oregon (the "City"), a municipal corporation of the State of Oregon,finds that it is financially feasible and in the City's best interest to finance (1) a portion of the costs of the design, development, acquisition (including acquisition of land), construction, equipping and improvement of a Wastewater Treatment Facility of the City(the "Facility") and related facilities, and (2)the related financing and issuance costs (collectively, the "Project"); and WHEREAS, the City is authorized pursuant to Oregon Revised Statutes ("ORS") Section 271.390 (i) to enter into financing agreements, lease-purchase agreements or other contracts of purchase for any real or personal property that the City Council determines is needed and to provide for the issuance of certificates of participation in the payment obligations of the City under such financing agreements, lease-purchase agreements or other contracts of purchase and (ii) to pledge lawfully available funds to payment of such financing agreements, lease- purchase agreements or other contracts of purchase; and WHEREAS, after consultation with its financial advisor and bond counsel, the City finds it is in the best interests of the City to authorize the execution and delivery of a loan agreement (the "WIFIA Loan Agreement") with the United States Environmental Protection Agency, acting by and through the Administrator of the Environmental Protection Agency("EPA") through the loan program authorized by the Water Infrastructure Finance and Improvement Act ("WIFIA") in an amount not to exceed $123,480,000 (excluding capitalized interest) (the "WIFIA Loan"), which loan shall be evidenced by an obligation executed and delivered to EPA(the "WIFIA Bond"); and WHEREAS, the City adopts this Resolution (i) to authorize the execution and delivery of the WIFIA Loan Agreement, the WIFIA Bond and any other related agreements, certificates and documents (collectively, the "WIFIA Financing Documents"), (ii) to designate certain officials and employees of the City as authorized representatives to take action on the City's behalf and (iii) to delegate to such representatives the authority to negotiate and execute the WIFIA Financing Documents. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City, as follows: Section 1. Authorization of the Obligations and Related Agreements. The City hereby authorizes the WIFIA Loan and the execution and delivery of the WIFIA Financing Documents. The proceeds of the WIFIA Loan received by the City pursuant to the terms of the WIFIA Loan Agreement shall be used to pay a portion of the eligible project costs of the Project. The remaining terms of the WIFIA Financing Documents shall be established as provided in Section 4 hereof. Section 2. Authorized Representative. The City authorizes and directs each of the City Manager, the Assistant City Manager, the Finance Director or the designee of any of them (each acting individually or collectively, an "Authorized Representative") to act on behalf of the City and execute and deliver the WIFIA Financing Documents and to determine the remaining terms of the Obligations to be established as set forth in Section 4 hereof. Section 3. Security. The WIFIA Loan shall be secured by and payable from the City's general non-restricted revenues and other funds that are lawfully available for that purpose, including revenues from an ad valorem tax authorized to be levied under the City's permanent rate limit under sections 11 and 11b, Article XI of the Oregon Constitution, and revenues derived from other taxes, if any, levied by the City in accordance with and subject to limitations and restrictions imposed under applicable law or contract, that are not dedicated, restricted or obligated by law or contract to an inconsistent expenditure or use. The City pledges its full faith and credit and taxing powers to the payment of the WIFIA Loan as contemplated by ORS 287A.315, or any successor statute. The registered owner of the WIFIA Bond will not have a lien on or security interest in the Project or any other property financed or refinanced with the proceeds of the WIFIA Bond. Section 4. Delegation for Establishment of Terms and Sale of the Obligations. Each Authorized Representative is hereby authorized and directed, on behalf of the City without further approval of the City Council to: (a) negotiate the terms of the WIFIA Financing Documents, including provisions related to capitalized interest; (b) make any covenants or agreements necessary or desirable to obtain favorable financing terms for the WIFIA Financing Documents, including without limitation, a pledge of the City's full faith and credit and, if desirable, a pledge of other amounts available to the City including net revenues of the City's wastewater system; (c) obtain ratings on the WIFIA Bond if determined by the Authorized Representative to be in the best interest of the City and expend WIFIA Bond proceeds to pay for such ratings; (d) enter into covenants regarding the use of the proceeds of the WIFIA Bond received by the City pursuant to the WIFIA Loan Agreement; (e) approve, execute and deliver the WIFIA Financing Documents; (f) execute and deliver a certificate specifying the actions taken pursuant to this Section 4, and any other certificates, documents or agreements that an Authorized Page 2-Resolution No.25-37 Representative determines are desirable to execute, deliver and administer the WIFIA Financing Documents and otherwise to sell, deliver and administer the WIFIA Bond in accordance with this Resolution. Section 5. Appointment of Special Counsel and Financial Advisor. The City hereby appoints Orrick, Herrington &Sutcliffe LLP of Portland, Oregon, as special counsel to the City with respect to the WIFIA Financing Documents, and PFM Financial Advisors LLC, as Financial Advisor to the City with respect to the WIFIA Financing Documents. Section 6. Resolution to Constitute Contract. In consideration of the purchase and acceptance of the WIFIA Bond by those who shall own the same from time to time (the "WIFIA Bond Owners"),the provisions of this Resolution shall be part of the contract of the City with the WIFIA Bond Owners and shall be deemed to constitute a contract between the City and the WIFIA Bond Owners pursuant to ORS 287A.315 and ORS 287A.325, or any successor statute. The covenants, pledges, representations and warranties contained in this Resolution, and in the WIFIA Financing Documents, including without limitation the City's covenants and pledges contained in Section 3 hereof, and the other covenants and agreements herein set forth to be performed by or on behalf of the City shall be contracts for the equal benefit, protection and security of the WIFIA Bond Owners,all of which shall be of equal rank without preference, priority or distinction except as expressly provided in or pursuant to this Resolution. Section 7. Effective Date. This Resolution shall take effect immediately upon its adoption by the City Council. //Signatures on Page 3 of 4 Page 3-Resolution No.25-37 Considered and adopted by the City Council of the City of Lake Oswego, Oregon, at a regular meeting held on the 15th day of July 2025. AYES: NOES: EXCUSED: ABSTAIN: Joseph M. Buck, Mayor ATTEST: Kim Ono Vermillion, Interim City Recorder Approved as to Form: Ellen Osoinach, City Attorney Page 4-Resolution No.25-37