Background
Since 2009, the North Davis Meadows County Service Area (CSA) has been working toward a permanent solution for mitigation of water quality concerns in the community's public water system, most notably nitrate, hexavalent chromium, aluminum and iron in excess of maximum contaminant levels (MCLs). Absent progress toward a viable solution, the community is at risk for $1,000 fines per day, per constituent over the MCL (currently $3,000 per day absent an MCL for hexavalent chromium).
After assessing a variety of options for providing a potable water supply that meets all drinking water standards, including treatment at the well-head and drilling deep wells, the North Davis Meadows CSA Advisory Committee and the community concluded that consolidating with the City of Davis public water system was the most reliable and cost-effective method to comply with California drinking water regulations and to ensure the health and safety, including fire protection, for the residents of North Davis Meadows ("the Project").
On March 18, 2018, the Yolo County Board of Supervisors adopted a resolution, after a successful Proposition 218 proceeding, that increased fees commensurate with the cost of a construction loan and approved the project. On December 18, 2018 the City of Davis Council approved a resolution executing an agreement with Yolo County to provide potable water to the North Davis Meadows community (Agreement No. 18-261; Attachment B hereto), which will connect North Davis Meadows CSA to the City of Davis ("Consolidation Agreement"). Prior to the project initiating construction, legal challenges were made regarding the Proposition 218 process which halted progress on the connection. The litigation was resolved in 2021 in the County's favor, allowing the Project to move forward.
Project Update
County Staff reinstated the Project and have been working directly with the State Water Resources Control Board (SWRCB) to finalize financing for the Project through the Drinking Water State Revolving Fund (SRF) program. The SWRCB provides financial assistance to municipalities for water and wastewater projects, including loan and grant funding for the construction of municipal drinking water facilities. The County received commitments from the SWRCB for both a grant in the amount of $7.6 Million for the Project ($80,000 per parcel) to cover the majority of the costs of the Project, with the remainder funded by an SRF loan at a low interest rate (2.1% per annum). The Board of Supervisors approved the Project financing through the SRF program and authorized Staff to execute necessary implementing documents on June 6, 2023 (Resolution No. 23-97).
The SRF Loan received final approval from the SWRCB in January 2024 with the execution of an installment sale agreement (the “Installment Sale Agreement”) between the County and the SWRCB, under which the SWRCB agrees to sell the Project to the County in return for annual installment payments (the “Installment Payments”) to be made by the County as the purchase price of the Project. The Installment Payments are sized to repay the SRF loan over 30 years and are payable by the County solely from the water fees and charges adopted by the North Davis Meadows CSA on March 20, 2018, to cover the anticipated annual repayment of the SRF Loan.
The Installment Sale Agreement requires an amendment to the 2018 Consolidation Agreement to make the SWRCB a third-party beneficiary and incorporate the Installment Sale Agreement into the Consolidation Agreement. In addition, the City and County further agreed to delete the additional requirement for individual property owner agreements to simplify the connection process and commencement of City water service. The First Amendment (Attachment A) to the Consolidation Agreement amends the Consolidation Agreement to make these changes. Approval of the First Amendment will allow the County to proceed with construction of the Project with award of the construction contract anticipated to occur in early May and construction anticipated to begin by July 1, 2024. The Installment Sale Agreement requires the County to complete the Project by September 30, 2025.
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