To: Board of Supervisors
Department or Agency Name(s): Transportation and Public Works
Staff Name and Phone Number: Johannes J. Hoevertsz 707-565-2231
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Transportation and Public Works Disaster Finance Intradepartmental Revolving Credit Line
End
Recommended Action:
Recommended action
Adopt a resolution approving a $13 million revolving credit line between the Integrated Waste Division of Transportation and Public Works and the Roads Division of Transportation and Public Works to finance disaster-related public works projects.
end
Executive Summary:
The County of Sonoma has been impacted by seven federally-declared disasters since January 1, 2017. Each of these events resulted in significant damage to the County’s transportation infrastructure requiring both emergency efforts to reopen County roads as well as the design and construction of long term, permanent repairs. The Department of Transportation and Public Works (TPW) has completed debris removal and emergency protective measures at the various disaster locations and permanent repairs are scheduled for completion by December 31, 2024.
Significant portions of this work are eligible for reimbursement from the Federal Emergency Management Agency (FEMA) and the California Department of Emergency Services (Cal OES). The combined reimbursement rate for this funding is 93.75% (75% FEMA/18.75% CalOES) with the 6.25% balance drawn from local sources. In order to remain eligible for reimbursement, authorized work must be completed within FEMA-mandated timelines. TPW is requesting approval of an intradepartmental revolving credit line between the Integrated Waste and Roads Divisions of TPW to supplement cash reserves in the Road Fund in order to complete open FEMA projects on a timely basis.
The Auditor-Controller-Treasurer-Tax Collector (ACTTC) has reviewed the proposed credit line and concurs with this recommendation. The County Auditor’s Office will conduct an annual review to ensure compliance with its terms.
Discussion:
The County of Sonoma has been impacted by seven federally-declared disasters since January 1, 2017 including four fire events (Sonoma Complex Fires, Kincade Fire, LNU Complex Fires, and Glass Fire), as well as, three major storm/flood events (January 2017, February 2017, and February 2019). Each one of these events caused significant damage to the County’s transportation infrastructure requiring a substantial commitment of resources to immediately clear disaster debris from County roads (FEMA Category A), perform emergency repairs and implement protective measures to prevent further losses (FEMA Category B), and make permanent repairs to damaged roads and bridges (FEMA Category C).
TPW has substantially completed the work in Categories A and B for all seven disasters. The majority of the remaining Category C work is associated with the 2017 and 2019 flood events, which require design, permitting, and right-of-way acquisition. This work is scheduled to be completed by December 31, 2024 with significant portions eligible for reimbursement from FEMA and Cal OES. The combined reimbursement rate for this emergency funding is 93.75% (75% FEMA/18.75% CalOES) with the 6.25% balance drawn from local sources. This funding comes with strict timeframes and failure to complete approved work in a timely manner can result in loss of funding.
Permanent repairs associated with major flood events often require large-scale construction projects to rebuild or reinforce severely damaged sections of roads. These projects require extensive engineering and design work, environmental permitting, right-of-way acquisition, and coordination of construction resources across multiple years. As a result, permanent road repairs associated with flood events often require significant financial resources and can take five or more years to complete.
Engineering and design work for permanent flood repairs is ongoing with several projects scheduled to begin construction in the summer of 2021. However, due to the volume of projects associated with recent natural disasters, as well as, the timing of FEMA/CalOES reimbursements, TPW has expended a substantial portion of fund balance in the Road Fund (11051). While Pavement Preservation Projects continue to move forward as planned and approved, uncommitted maintenance funds have been re-directed to address emergency needs. As a result, TPW is requesting the ability to increase the cash position of the Road Fund in order to move flood and other disaster repair projects into the construction phase in a timely manner.
Anticipating this issue, TPW began exploring financial alternatives in May 2020. After completing an internal analysis and consulting with members of the County’s Debt Advisory Committee and County Counsel, it was determined that intradepartmental revolving credit line between the Integrated Waste Division of TPW and the Roads Division of TPW is the best option.
Specifically, TPW is proposing the Roads Division utilize a portion of the reserve cash available in the Former Rural Landfills Fund (41122-34050200). The Former Rural Landfill Fund receives income each year via County franchise agreements with waste haulers who serve unincorporated Sonoma County. The County uses these funds to monitor and maintain closed landfills in unincorporated Sonoma County. Because these services will be required in perpetuity, the Fund maintains a significant cash balance in order to address long term, future liabilities.
Note, in making this line of credit available, integrated waste staff reviewed anticipated long term costs necessitated by the rural landfills, noting that funds accumulated are appropriate for future anticipated maintenance and capital improvements at the facilities, which, when incurred are considerable, though at the same time not instantaneous. As such, there is a reasonable basis to extend funds through a line of credit to roads, which will be readily capable of paying the funds back if and to the extent that a larger capital project for the rural landfills is identified during the term of any loan.
The attached resolution sets forth the terms of the proposed financing mechanism. Below is a summary of the terms:
1. TPW Roads Division may borrow up to $13,000,000 (which constitutes approximately 76% of the available fund balance) from the Former Rural Landfills Fund (41122) to be deposited in the Road Fund (11051) for working capital to complete disaster-related permanent repairs to County transportation infrastructure.
2. Integrated Waste will be paid simple interest on any outstanding principal balance, on a quarterly basis, at interest rates equal to those paid on pooled cash held by the County Treasury.
3. The Roads Division may draw on the credit line for five years, until May 25, 2026, and all principal and accrued interest will be repaid as reimbursements from federal and state funding sources are received, and no later than May 25, 2028.
4. Interest payments will be made by the Roads Division with discretionary, unrestricted funding sources including revenues from parking fines, vehicle fines, or any available unrestricted contributions from the General Fund.
5. Principal payments will be made with a combination of grant reimbursements from FEMA, Cal/OES, the Federal Highway Administration and appropriations from Highway Users Tax Account (HUTA) and SB1.
6. Integrated Waste will have the option to call the loan(s) with 90 days’ written notice, should it anticipate that the existing balance of the Rural Landfill Fund is inadequate to fund projects and/or liabilities for which it exists.
7. The County Auditor will conduct and annual review to ensure that all terms and conditions of the resolution have been met.
In the unlikely event the sources of funding outlined above are insufficient to make principal and/or interest payments at any time, TPW will return to the Board of Supervisors to secure necessary funding.
Prior Board Actions:
None.
Fiscal Summary
Narrative Explanation of Fiscal Impacts:
There is no budgetary impact at this time. Financial impacts of transfers between Integrated Waste and Roads Division will be addressed during future consolidated budget adjustments and/or budget requests. Interest payments will be drawn from available sources such as parking fines, vehicle fines, or unrestricted contributions from the General Fund. Principal payments will be made with a combination of grant reimbursements from FEMA, Cal/OES, the Federal Highway Administration and appropriations from HUTA and SB1.
Narrative Explanation of Staffing Impacts (If Required):
None
Attachments:
Resolution
Related Items “On File” with the Clerk of the Board:
None