Impact to water bills unclear with federal grant
Pending Pure Water Soquel driving much of recent years’ rate hikes
SOQUEL >> Soquel Creek Water District announced this month its approval to lean on a low-interest $89 million federal loan as backup funding for its Pure Water Soquel project.
For water district customers who have seen rising water bills for the past four years, however, the specific benefit to their wallets remains unclear.
“The entire ( Pure Water Soquel) project cost, including the upper-end estimate, has been secured through grants and low-interest loans,” wrote district Special Projects- Communications Manager Melanie Mow Schumacher in an emailed response to questions. “The WIFIA loan also allows borrowing for additional contingencies, so with prudent planning, we have also included that in that loan amount. This loan has a couple unique features: we only pay interest on what we borrow and we don’t have to start paying back on the loan until five years after project completion.”
Rising ratepayer bills, in part, are tied in with Pure Water Soquel construction costs. Project estimates put about a $90 million price tag on the effort, based on the preliminary design, with an upper range of $145 million, Mow Schumacher said.
The U. S. Environmental Protection Agency Water Infrastructure Finance and Innovation Act loan, accompanied by a previous State Water Resources Board $50 million Proposition 1 grant executed in July and earlier $2.25 million in state and federal design phase grants, “will have a positive impact in our ratepayers’ bills in the future,” Mow Schumacher said. With its 1.34% interest rate, the loan represents more than $66 million in interest savings compared to typical financing that is available to the district, according to agency releases. The district is not on the hook to utilize or pay back the entire $88.9 million approved, but will draw down only the funds necessary for project completion, without financial penalty.
The water recycling project, approved last year, is designed to replenish groundwater and prevent seawater intrusion, so as to halt further seawater contamination of the Santa Cruz MidCounty Groundwater Basin. The plant would draw its water supply from semi-treated Santa Cruz Wastewater Treatment Facility water normally piped off the city’s shores. The water then will undergo a multi-step advanced purification process to produce water cleaner than bottled water, according to the district, before pumping it into the groundwater basin.
While assembling a finance plan for the project without certainty about outside finding, the Soquel Creek Water District board of directors in February 2019 authorized as many as five years of customer water rate increases that would cumulatively equal a 41% increase for the average residential customer.
Additionally, in the three years prior, customers saw
rates rise an average of about 12% each year.
Specifics of those financial impacts, however, remain unknown until the district updates its 2018 rate study with these and
pending new f unding sources, Mow Schumacher said. To paint a clearer financial picture, the district is awaiting finalization of a State Water Board Seawater Intrusion Control Program loan, she said. That loan may be a 20-year loan
for as much as $36 million, at a 1.3% interest rate, according to Mow Schumacher. Other missing pieces of the puzzle include potential approval for a U.S. Bureau of Reclamation Title XVI water reclamation and reuse grant, finalized Pure Water Soquel project cost estimates and assessment of the financial impacts related to coronavirus pandemic, which has given some customers reprieve in paying their bills without having their water shut off, per state mandate.