ITEM 5:  REQUEST FOR RETROACTIVE FUNDING BY THE CITY OF SACRAMENTO (CITY) FOR THE UNIVERSITY OF CALIFORNIA DAVIS MEDICAL CENTER, REGIONAL STORAGE PROJECT, SRF PROJECT NO. C-06-4652-110

DISCUSSION: In accordance with the State Water Resources Control Board's (SWRCB) Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities (SRF Policy), adopted on February 16, 1995, and amended on June 18, 1998, projects where construction has been initiated prior to Division of Clean Water Programs (Division) approval of plans and specifications (P&S) are not eligible for Retroactive Funding. Section VI of the amended SRF Policy reads as follows: "Retroactive funding will be provided for only those projects where the applicant has submitted all required program documents and such documents have been approved before initiation of construction, but due to a lack of funds or other reasons, the applicant initiated construction after the approval of either plans and specifications or Request for Design-Build Proposals, but prior to issuance of the loan contract. Projects where construction is initiated before Division approval are not eligible for retroactive funding." Construction of the City's University of California Davis Medical Center Regional Storage project has commenced, but the necessary approvals from the Division have not yet been received.

The City currently has two SRF loan contracts totaling approximately $40 million for improvements to Sumps 1/1A and 2, and pump stations. The City also has two projects on the SRF Priority List for an additional $15 million. The subject project is estimated to be $7 million. All of these projects are part of the City's Combined Sewer System (CSO) Improvement Plan. In order to receive a SRF loan from the SWRCB, each project must first receive Facilities Plan Approval (FPA), and subsequent P&S Approval from the Division. FPA is issued by the Division upon approval of a project report, a draft revenue program, environmental documents, and a water conservation program. The Division cannot approve the environmental documents until it receives and approves the adopted final document, the Notice of Determination filed with the Governor's Office of Planning and Research, and the resolution adopting the final document. The City has completed the required environmental documents but has not submitted them to the Division for the pro-ject. The project report and the P&S were received by the Division on August 31, 1998. Eight weeks are typically necessary to review the project report and the P&S. The construction contract was awarded by the City on September 22, 1998, and construction began October 6, 1998. In cases where planning and design work has been conducted by an applicant agency without concurrent review by the Division, the intent of the SRF Policy amendment was to,

a) assure timely compliance with CEQA and NEPA environmental requirements, and b) provide sufficient time for the Division staff to review and approve P&S prior to construction. Under the previous version of the SRF Policy, the applicant lost eligibility only for the portion of the work completed before P&S Approval. Both of the City's previous SRF loan projects lost a portion of the otherwise eligible project costs under the previous SRF Policy.

POLICY ISSUES: Should the SWRCB grant relief from Retroactive Funding provisions of the SRF Policy for the subject project?

RWQCB IMPACT: Central Valley Regional Water Quality Control Board. If the project does not receive SRF funds, it could impact the City's ability to complete the CSO improvements.

FISCAL IMPACT: None at this time. If the City's request is granted, there would be a $7M fiscal impact to the SRF program.

STAFF RECOMMENDATION: Based on discussion at the February 3, 1999, Workshop and a status review of other projects currently seeking SRF loan approvals, staff now recommends approval of the City's request for Retroactive Funding.

1. The State Water Resources Control Board, on February 16, 1995, adopted the Policy for Implementing the State Revolving Fund for Construction of Wastewater Treatment Facilities (SRF Policy) ;
2. The SRF Policy was amended on June 18, 1998, to direct staff not to approve Retroactive Funding for projects where construction is initiated prior to Division of Clean Water Programs (Division) approval of plans and specifications;
3. This project was added to the Statewide SRF Priority List on January 22, 1998 in Priority Class B;
4. Design for this project was well underway when the SRF Policy was amended on June 18, 1998;
5. The project report and the Plans and Specifications were received five weeks prior to the initiation of construction by the City's contractor for the project;
6. The City has completed the required environmental documents for CEQA, but has not yet submitted them to the Division;
7. Construction of the City of Sacramento, University of California Davis Medical Center Regional Storage project has been initiated.
8. The project is an important element of the Combined Sewer System Improvement Plan approved by the Central Valley Regional Water Quality Control Board, and the City is subject to a Cease and Desist Order and time schedule to complete the projects; and
9. The project is vital to the protection of water quality in the Sacramento River and to prevent overflows in the collection system in the University Medical Center neighborhood.