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°q`'FOIL " City Council Staff Report
Date: January 3, 2018 NEW BUSINESS
Subject: ADOPTION OF A WASTEWATER FUND PLEDGED REVENUE
RESOLUTION FOR A CLEAN WATER STATE REVOLVING FUND
LOAN ASSOCIATED WITH THE CONSTRUCTION OF A BIOGAS-TO-
ENERGY PROJECT AT THE WASTEWATER TREATMENT PLANT,
CITY PROJECT NO. 15-26
From: David H. Ready, City Manager
Initiated by: Engineering Services Department
SUMMARY
This action will adopt a Resolution pledging the City's Wastewater Enterprise Funds as
payment to the State Water Resources Control Board for a Clean Water State
Revolving Fund Loan required as a precursor to receiving the State's final approval of a
financial loan agreement for the construction of a biogas-to-energy project at the
Wastewater Treatment Plant, City Project No. 15-26, (Project).
RECOMMENDATION:
Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF PALM SPRINGS, CALIFORNIA, PLEDGING ITS WASTEWATER ENTERPRISE
FUNDS AS PAYMENT TO THE STATE WATER RESOURCES CONTROL BOARD
UNDER THE CLEAN WATER STATE REVOLVING FUND FOR CONSTRUCTION OF
A BIOGAS-TO-ENERGY PROJECT AT THE WASTEWATER TREATMENT PLANT,
CITY PROJECT NO. 15-26."
STAFF ANALYSIS:
On October 19, 2016, the City Council approved various actions related to the
development of a biogas-to-energy facility at the City's Wastewater Treatment Plant,
City Project No. 15-26, (Project). The staff report for these actions is provided for
reference as Attachment 1. These actions included adoption of Resolutions 24122 and
24123 requesting funding from the State Water Resources Control Board under the
Clean Water State Revolving Fund for the City of Palm Springs biogas-to-energy project
at the Wastewater Treatment Plant, City Project No.15-26.
ITEM No. ;; 5
City Council Staff Report
January 3, 2018- Page 2
Biogas-to-Energy at WWTP, CP15-26
The City Council had previously approved a non-binding Letter of Interest with Veolia to
develop the Biogas-to-Energy project, which consisted of two phases. Phase 1 included
the feasibility and conceptual development (Study) of the Project, which was paid for by
Veolia. Upon review of the Study, it was determined that the best course of action was
to not proceed with Phase 2 due to technical considerations dealing with the uncertainty
of the performance of proposed new and unproven technologies. Alternatively, the City
elected to pursue financing for the Project through a low interest loan through the Clean
Water State Revolving Fund Loan (SRFL). One of the benefits of utilizing the SRFL is
that the State's Green Project Reserve (GPR) that sets aside grants to local agencies
for projects that implement environmentally beneficial projects that improve air quality or
other environmental enhancements, with the grant provided in the form of loan
forgiveness, or Capitalization Grants, for eligible projects funded through the SRFL
program. The GPR will provide a grant of 50 percent of the total project cost, up to a
maximum of $4 million.
On August 15, 2016, the City Manager approved a contract with AndersonPenna to
prepare a SRFL application for the City of Palm Springs Biogas to Energy Project, CP
15-26. Over the last year, staff and AndersonPenna have coordinated with the
California State Water Resources Control Board (Board), to apply for and secure a low
interest (less than 2%) loan through the Clean Water State Revolving Fund (SRF)
Program for the Project. Final legal approvals from the Board on the financial
agreement have been obtained, contingent upon the City Council's adoption of a
Resolution pledging its Wastewater Enterprise Funds as payment to the Board for the
loan.
Staff is recommending the City Council adopt the Resolution pledging its Wastewater
Enterprise Funds required to repay the state for the loan agreement to be entered into
with the state. Following adoption of this required Resolution, staff will finalize the loan
agreement with the state, and proceed with the initial design phase of the biogas-to-
energy project, CP 15-26.
ENVIRONMENTAL IMPACT:
Aside from the potential financial benefit of the Project, the Project will result in a
significant improvement to the environment. As identified in the City's 2011 GHG
Emissions Inventory, in 2012, the City's WWTP generated an estimated 15,957 of the
31,738 MTCO2e1 by all City activities and operations, equivalent to 50% of GHG
emissions City-wide, primarily due to the fact that the methane produced by the WWTP
is flared to the atmosphere and not currently reused for a beneficial purpose. Capturing
the 15,957 MTCO2e of methane flared to the atmosphere annually at the WWTP would
have the effect of eliminating GHG's generated from the following equivalent activities:
"MTCO2e" means metric tons of equivalent carbon dioxide emissions.
02
City Council Staff Report
January 3, 2018- Page 3
Biogas-to-Energy at WWTP, CP15-26
Greenhouse gas emissions from
3,371 38,243,434 5,064 723
Passenger Miles driven by Tons of waste Garbage
vehicles driven an averse recycled p trucks of
for one year ', passenger MN instead of ', waste
vehicle landfilled recycled
instead of
la ndfilkKt
OR
COZ emissions from
1,795,544 17,027,636 :1 211 1,685
gallons of Pounds of coal tanker trucks' 4 homes'energy
gasoline burned ! worth of use for one
WA consumed tir gasoline -°.-,_ year
4 2,356 f` 85 a 565,650
Wind turbines homes' railcars'worth Incandescent
installed electricity use of coal burned lamps switched
� for one year -a- to 1E05 I�
36,944 ��-- 652,318 0.005
= barrels of oil - propane coal-fired
consumed cylinders used power plants
= for home wr in one year
barbeques
Carbon sequestered by
413,544 15,105 127
�^/y tree seedlings acres of U.S. acres of U.S.
YYY\\\Yyyy� grown for 10 forests in one vv forests
years year -a- � preserved from
conversion to
cropland in one
year
Section 21084 of the California Public Resources Code requires Guidelines for
Implementation of the California Environmental Quality Act (CEQA). The Guidelines are
required to include a list of classes of projects which have been determined not to have
a significant effect on the environment and which are exempt from the provisions of
CEQA. In response to that mandate, the Secretary for Resources identified classes of
03
City Council Staff Report
January 3, 2018- Page 4
Biogas-to-Energy at WWTP, CP15-26
projects that do not have a significant effect on the environment, and are declared to be
categorically exempt from the requirement for the preparation of environmental
documents. In accordance with Sections 15301 and 15303, the project is an addition of
a small structure to an existing, operating WWTP. In addition, Section 15329
"Cogeneration projects at existing facilities," Class 29 consists of the installation of
cogeneration equipment with a capacity of 50 megawatts or less at existing industrial
facilities resulting in no net increases in air emissions from the industrial facility, or
resulting in the production of emissions lower than the amount that would require review
under the new source review rules applicable in Riverside County. Lastly, Section
15332 applies as the Project is less than five acres contained entirely within a
developed WWTP. Therefore, in accordance with Sections 15301, 15303, 15329, and
15332, staff determined that the Biogas-to-Energy Project at the WWTP, City Project
No. 15-26, is considered categorically exempt from CEQA. A Notice of Exemption was
signed on December 28, 2016, and recorded and filed with the Riverside County Clerk
(Attachment 2).
FISCAL IMPACT:
The estimated total cost for the Project is identified in Table 1.
Estimated Project Costs Amount
Design $1,000,000
Construction $5,000,000
Construction Management $1,000,000
Contingency $1,000,000
Total Cost $8,000,000
Table 1
The total project cost, with contingency, is estimated to be $8 million. If funded through
the SRFL, the project is eligible for a loan forgiveness program through the state's GPR
for a maximum amount of $4 million. The City would be responsible for the repayment
of the loan balance for the remaining $4 million in project costs.
The City's WWTP generates an estimated total volume of 33 Million cubic feet of
methane gas annually, which when processed to operate a cogeneration plant can
generate electricity which will be fed into SCE's electrical grid and purchased by SCE at
the PUC mandated Feed In Tariff (FIT) of $0.127 per kWh. The electricity generated by
the cogeneration plant may produce a gross revenue stream of $331,576 annually. The
waste heat generated by the cogeneration plant will also offset the City's need to
purchase natural gas for heating, resulting in an estimated savings of$19,186 in Year 1,
for a total gross revenue of $350,762 in Year 1. Operation and maintenance costs of the
cogeneration plant are estimated at $101,696 in Year 1 resulting in a net positive
revenue stream of$249,066 to the City.
0
City Council Staff Report
January 3, 2018- Page 5
Biogas-to-Energy at WWTP, CP15-26
Staff recommends that the City reserve its Wastewater Enterprise Fund Balance for
working capital, unexpected costs and emergencies, and utilize low interest financing
for capital costs. In this case, there are two options available: 1) traditional bank loan or
bond financing, or 2) a low interest (less than 2%) loan through the Clean Water State
Revolving Fund (SRF).
For reference, a traditional bank loan or bond financing at 4% on the capital cost of $8
million ($4 million GPR loan forgiveness is not available with traditional financing) would
yield an annual debt service payment of $290,870, causing a net operational deficit of
$41,804 in Year 1.
Alternatively, the SRFL has a rate of approximately 1.7% for a 30-year term, and
provides up to a 50% Capitalization Grant as an eligible GPR project; the debt service
of the final loan principal amount of $4 million at 1.7% over a 30-year term would yield
an annual debt service payment of $170,304, leaving a final net positive revenue stream
of$78,762 in Year 1.
Based on these figures, the SRFL is a far more attractive financing tool in terms of debt
service cost and loan forgiveness through the GPR. The final terms of the SRFL would
be subject to future review and approval by the City Council. Staff will review the
funding commitments of the City's Wastewater Enterprise Fund and may recommend
the City Council enter into a shorter term loan.
In addition, the "California Carbon Dashboard" listed the carbon price on November 2,
2017, at $15.40 per Ton of MTCO2e. Eliminating 15,957 MTCO2e produced annually at
the City's WWTP would have the equivalent value of just under $250,000 as would
otherwise be applicable on the Cap and Trade Program.
The City recently approved its first SRFL agreement with the state for the Wastewater
Treatment Plant Upgrade Project, with a loan amount up to $29,917,266 which will
result in maximum annual debt service payments commencing in 2019-2020 of
approximately $1.1 million. The final debt service payments will be lower, as the final
cost debited to the SRFL will be lower than the maximum loan cap of $29,917,266. The
City's Financial Advisor previously concluded that the City's Wastewater Enterprise
Fund can comfortably assume net bonding capacity of up to $1.8 million in annual debt
service payments.
Therefore, the Wastewater Enterprise Fund has capacity to assume up to an additional
$0.7 million in annual debt service payments; staff anticipates that the Biogas to Energy
Project, CP 15-26, at a maximum loan amount of $4 million will result in not more than
$0.2 million in annual debt service payments.
05
City Council Staff Report
January 3, 2018- Page 6
Biogas-to-Energy at vWVTP, CP15-26
There is sufficient funding in the Wastewater Enterprise Fund to proceed with this
project. All costs associated with the Project, both prior and future costs, are entirely
funded by the Wastewater Enterprise Fund (Fund 420). No General Fund or Measure J
Capital Fund budget will be required in the delivery of the Project.
The requested action is to have the City Council adopt the Resolution (Attachment 3)
pledging the City's Wastewater Enterprise Funds to repay the loan agreement to be
entered into with the state. There is no financial commitment being taken at this time by
the City Council; the final SRFL agreement will be presented to the City Council at a
later date, which will confirm the financial terms estimated in this staff report.
SUBMITTED:
homas Ga ia, P.E. Marcus L. Fuller, MPA, P.E., P.L.S.
City Engineer Assistant City Manager
2�
David H. Ready, Esq.,
City Manager
Attachments:
1. Staff Report (October 19, 2016)
2. Notice of Determination
3. Resolution
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ATTACHMENT 1
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cgJFF:01t P City Council Staff Report
DATE: October 19, 2016 NEW BUSINESS
SUBJECT: AUTHORIZATION TO PURSUE CLEAN WATER STATE REVOLVING
FUND LOAN FOR DEVELOPMENT AND CONSTRUCTION OF A
BIOGAS-TO-ENERGY PROJECT AT THE WASTEWATER TREATMENT
PLANT, CITY PROJECT NO. 15-26
FROM: David H. Ready, City Manager
BY: Marcus L. Fuller, Assistant City Manager/City Engineer
SUMMARY:
Over the last year, staff has coordinated with Veolia Water West Operating Services,
Inc., ("Veolia"), on the preliminary analysis of a biogas-to-energy project at the City's
Wastewater Treatment Plant ("WWTP"). This action will authorize staff to pursue a
Clean Water State Revolving Fund Loan ("SRFL") to finance the capital cost of the
Biogas-to-Energy Project at the Wastewater Treatment Plant, City Project No. 15-26,
(the "Project"), which, given the sustainable nature of the Project, is eligible of receiving
up to a 50% ($2 Million maximum) grant. This action does not commit the City Council
to funding the Project, but will allow staff to formally submit applications to the state to
confirm grant eligibility; future review and approval of a SRFL financial agreement will
be required by the City Council.
RECOMMENDATION:
1 . Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF PALM SPRINGS, CALIFORNIA, AUTHORIZING THE REIMBURSEMENT
OF FUNDS REQUESTED FROM THE STATE WATER RESOURCES CONTROL
BOARD UNDER THE CLEAN WATER STATE REVOLVING FUND FOR THE CITY
OF PALM SPRINGS BIOGAS-TO-ENERGY PROJECT AT THE WASTEWATER
TREATMENT PLANT, CITY PROJECT NO. 15-26;" and
2. Adopt Resolution No. , "A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF PALM SPRINGS, CALIFORNIA, AUTHORIZING THE CITY MANAGER
TO ACT ON ITS BEHALF TO SIGN, FILE AND EXECUTE A FINANCIAL
ASSISTANCE APPLICATION FOR A FINANCING AGREEMENT FROM THE
STATE WATER RESOURCES CONTROL BOARD UNDER THE CLEAN WATER
STATE REVOLVING FUND FOR THE CITY OF PALM SPRINGS BIOGAS-TO-
ENERGY PROJECT AT THE WASTEWATER TREATMENT PLANT, CITY
ITEM NO.�h P
08
City Council Staff Report
October 19, 2016--Page 2
WWTP Biogas-to-Energy Project, CP15-26
PROJECT NO. 15-26."
STAFF ANALYSIS:
In 2011, the City completed a greenhouse gas ("GHG") emission inventory as an initial
step in meeting its Path to Sustainable Communities objectives. According to the GHG
inventory, the City (through its governmental activities and operation of its various
facilities) generated 31,738 metric tons of carbon dioxide equivalents (MTCO2e) in
2012, which was estimated to increase to 33,234 MTCO2e by 2020. The City is subject
to state legislation (Assembly Bill 32), the California Global Warming Solutions Act of
2006, which created a program to reduce GHG emissions to 1990 levels (estimated at
26,812 MTCO2e) by the year 2020.
GHGs have varying global warming potential and atmospheric lifetimes. Carbon dioxide,
the reference gas for global warming potential, has a global warming potential of 1. The
calculation of the carbon dioxide equivalent (CO2e) is a consistent methodology for
comparing GHG emissions, since it normalizes various GHG emissions to a consistent
metric. Methane's warming potential of 21 indicates that methane has 21 times greater
warming affect than carbon dioxide on a molecule per molecule basis. A carbon dioxide
equivalent is the mass emissions of an individual GHG multiplied by its global warming
potential.
The City's GHG Inventory identified a significant source of GHG emissions at the
Wastewater Treatment Plant ("WWTP"). The Palm Springs WWTP was originally
constructed in 1960 to treat 4.15 million gallons per day (mgd). Two facility expansions
were completed in 1979 and 1983, bringing the total design capacity to 10.9 mgd for
average annual flow. The treatment processes consist of preliminary screening, grit
removal, primary clarification, trickling filters, and secondary clarification. Treated
effluent is disposed of onsite in percolation ponds or is supplied to the Desert Water
Agency for further treatment to meet reuse standards for offsite irrigation. Biosolids from
the treatment process are thickened, then stabilized by anaerobic digestion and dried
with sludge drying beds before final disposal. According to the GHG Inventory, the
City's WWTP is the single largest source of GHG emissions, as shown in Table 1 on the
next page.
In 2012, the City's WWTP generated an estimated 15,957 of the 31,738 MTCO2e by all
City activities and operations, equivalent to 50% of GHG emissions City-wide, primarily
due to the fact that the methane produced by the WWTP is flared to the atmosphere at
and not currently reused for a beneficial purpose. Identifying a cost-effective method to
reuse the methane for production of energy at the WWTP has been an item investigated
by staff for many years, however, the technology required to adequately process
methane to operate fuel cells or a cogeneration engine to generate electricity has
historically been prohibitively expensive.
09
City Council Staff Report
October 19, 2016 -- Page 3
WWTP Biogas-to-Energy Project, CP15.26
Emesmorns(MT(Qie per year)
Ceteltaty 1990 2000 2005 2008 2012 202o 2035
`Former Palm Springs Lawffill' 1 R 11 14�� 1 311 1 2�,:< 1 ld; =r t7 632
Wastewater freatrrlent pi tnl Ifugllw)' 13.236 14,028 14 841 15 282 15 9`.7 17,308 19.841
Cb-�erallcm plants 6,646 1 10,020 9.112 8.746 8,746 8.746 8.746
Atport W use' 53 79 86 109 115 133 162
City M kle neet i fi87 JAW 1.450 1,559 1,628 1,767 2.026
Ozone-deW,ttrig substance st"tules' 99 99 99 99 99 99 99
Etednaty—munocipar 834 IN1,809 2208 2.302 2.467 2.7i6
EWcbk ty—streets ghts' 741 652 633 681 710 761 838
Empk"ecommute' 1,71W 1,312 1,216 1,= 1,036 1.036 1.036
Total 2kV2 29.901 ?3GA93 31 2'tT 31.M 33.234 36.096
Nales: 2012.2020,and 2036 are prgec lairs based on burine.ss as twW.
MTCO,e=metric tons of carbon doxide equrwaleM
* Soope I emissions
= Soope 2 emrssrons
Scope 3 emissions
Source. Appendix 0.
Table 1
Recent events have changed the dynamics by which the City may realize on an
opportunity to reuse the methane produced at the WWTP, which is an abundantly free
energy source, and significantly reduce the City's carbon footprint by preventing its
release into the atmosphere.
Senate Bill 1122: Bioenergy Feed-in Tariff
In September 2012, Gov. Brown signed SB 1122 (Rubio, 2012) into law, requiring an
incremental 250 MW of renewable Feed-in Tariff ("FiT") procurement from small-scale
bioenergy projects that commence operation on or after June 1, 2013.
SB1122 requires that each of California's three large investor owned utilities (PG&E,
SCE, and SDG&E) must procure a share of the 250 MW requirement based on the ratio
of each utility's peak demand to statewide peak demand. Additionally, the statute orders
the CPUC to allocate the 250 MW procurement requirement among the following
categories:
(i) For biogas from wastewater treatment, municipal organic waste diversion, food
processing, and codigestion, 110 megawatts.
(ii) For dairy and other agricultural bioenergy, 90 megawatts.
(iii)For bioenergy using byproducts of sustainable forest management, 50 megawatts.
In December 2014, the California Public Utilities Commission ("PUC") issued a
proposed decision on implementing SB 1122, which identified a requirement for SCE to
purchase 114.53 MW of the 250 MW of renewable energy generated by bioenergy
City Council Staff Report
October 19, 2016-- Page 4
WWTP Biogas-to-Energy Project, CP15-26
projects (46%), The most important issue to be determined by the PUC is the price set
for the FIT to be paid by SCE to operators of bioenergy projects that generate
renewable energy and feed it into SCE's grid. The PUC has proposed a decision where
the initial FiT starting price will be $127.27 per MWh (megawatt-hours) or $0.127 per
kWh (kilowatt-hours) of energy produced.
A final ruling on the implementation of SB 1122 setting the price for the FIT at $0.127
per kWh was adopted by the PUC on September 22, 2015. As of September 30, 2016,
SCE reported fewer than 3 applicants requesting Power Purchase Agreements with
SCE to take advantage of the PUC mandated purchase of renewable energy via the
FiT.
2015 Veolia Non-Binding Letter of Interest
On September 2, 2015, the City Council approved a non-binding Letter of Interest
('LOI") with Veolia to develop a biogas-to-energy project for the City. The LOI was
established with two phases, with Phase 1 including feasibility and conceptual
development, at 100% Veolia's cost. The intention at that time was for Veolia to partner
with Biogas & Electric, LLC, ("ME"), who was awarded a grant of $2,249,322 by the
California Energy Commission, ("CEC"), for "installation of a lean burn biogas engine
with emissions control at a wastewater treatment plant in South Coast Air Quality." As
part of the biogas-to-energy project envisioned by Veolia in partnership with B&E, B&E
would deploy their "wet scrubbing technology' to clean the methane produced by the
WWTP for fuel to operate a cogeneration system at the City's WWTP, with the
cogeneration plant generating electricity to sell to SCE at the FiT rate adopted by the
PUC.
Following City Council's approval of the LOI, Veolia completed the feasibility and
conceptual development of the biogas-to-energy project, and determined that due to the
experimental nature of B&E's technology, there remained uncertainty regarding the
ability for ME to deliver a fully functioning, reliable product. Therefore, Veolia
recommended that a second, more traditional system of cleaning methane for the
cogeneration plants operation would be required in addition to the system to be
deployed by ME as part of the project. Veolia estimated the simple payback at 10.9
years including the CEC grant awarded to B&E; a copy of Veolia's feasibility study is
included as Attachment 1.
Staff requested that its on-call wastewater services engineer, West Yost Associates,
review Veolia's feasibility study and determine the degree of risk associated with
proceeding with the project. Based on its review, West Yost Associates identified high
risks with the following elements of the proposed project:
• B&E's technology — having only been deployed at one WWTP in Bakersfield with
limited performance, it is an unproven technology
• Project structure — project delivery selection and structure was not clear, with
multiple parties including the City, Veolia, B&E, and the CEC
w
City Council Staff Report
October 19, 2016--Page 5
WWTP Biogas-to-Energy Project, CP15-26
• Grant and schedule — the CEC grant was awarded specifically by CEC to ME in
January 2015, with a requirement to be deployed within 3 years, leaving insufficient
time to complete design, construction and commissioning
• Process output estimates — assumptions on biogas production require further
review, and uncertainty with elements of the CEC grant local match requirements
had the potential to increase simple payback to over 20 years
A copy of the City's third party review of Veolia's feasibility study is included as
Attachment 2. On the basis of this review, staff advised Veolia that the City would not
proceed with Phase 2 of the LOI approved by the City Council. However, there is an
alternative to implementing the Project, with the City pursuing development and
construction of it directly.
Clean Water State Revolving Fund Loan- Green Project Reserve
Given the uncertainties related to B&E's technology and its grant awarded by the CEC,
staff recommends eliminating these elements from the project, utilizing generally
available methane gas cleaning technology, and directly pursuing financing of the
project through a low interest loan through the Clean Water Sate Revolving Fund Loan,
(or "SRFL"). What makes the SRFL attractive for the biogas-to-energy project is the
state's "Green Project Reserve" which sets aside grants to local agencies in the form of
loan forgiveness, or"capitalization grants", on eligible projects funded through the SRFL
program. The SRFL is funded by the state in part with federal funds it receives, and the
state is required to apply certain funding requirements through the SRFL as adopted by
Congress.
The Green Project Reserve ("GPR") was enacted based on Congress' intent to direct
State investment practices in the water sector to guide funding toward projects that:
• adopt practices that reduce the environmental footprint of water and wastewater
treatment, collection, and distribution;
• utilize green or soft-path practices to complement and augment hard or gray
infrastructure;
• adapt to climate change;
• enhance water and energy conservation;
• help utilize more sustainable solutions to wet weather flows; and
• promote innovative approaches to water management problems.
GPR Guidance describes projects and activities that fit the four specific categories listed
in Congress' Fiscal Year 2012 Appropriations Act, that include Energy Efficiency, Green
Infrastructure, Water Efficiency, and Environmentally Innovative projects. This guidance
further defines each category of GPR projects and lists projects that are clearly eligible
under the GPR. The U.S. Environmental Protection Agency ("EPA") Fiscal Year 2012
Appropriation includes the details for determining GPR eligibility for the state's SRFL
program, and requires that not less than 10% of the funds made available to the state
n
L
City Council Staff Report
October 19, 2016 --Page 6
WWTP Biogas-to-Energy Project, CP15-26
for SRFL capitalization grants shall be used by the state for projects ".,.that address
energy efficiency, green infrastructure, water or improvements, or other environmentally
innovative activities."
The energy efficiency category is defined as the use of improved technologies and
practices to reduce the energy consumption of water quality projects, use energy in a
more efficient way, and/or produce/utilize renewable energy. Renewable energy
projects such as wind, solar, geothermal, micro-hydroelectric, and biogas combined
heat and power systems ("CHIP") that provide power are some of the examples of
projects eligible to receive capitalization grants through the GPR.
Based on these criteria, the biogas-to-energy project at the City's WWTP is clearly
eligible for a capitalization grant through the GPR, which can be used for development,
design, and construction phase costs. Entire projects, or the appropriate discrete
components of projects, may be eligible for a capitalization grant of up to 50% of the
total project cost with a maximum grant of$2 Million.
To initiate the process with the state to pursue the SRFL and confirm the GPR
capitalization grant available to the Project, staff recommends that the City Council
adopt the Resolutions required by the state in authorizing staff to submit funding
applications, and make eligible reimbursement of costs incurred from any SRFL
ultimately approved by the City Council
There is no commitment by the City Council at this time to actually fund the
Project.
ENVIRONMENTAL IMPACT:
Aside from the potential financial benefit of the Project, the Project will result in a
significant improvement to the environment. As identified in the City's 2011 GHG
Emissions Inventory, in 2012, the City's WWTP generated an estimated 15,957 of the
31,738 MTCO2e by all City activities and operations, equivalent to 50% of GHG
emissions City-wide, primarily due to the fact that the methane produced by the WWTP
is flared to the atmosphere and not currently reused for a beneficial purpose. Capturing
the 15,957 MTCO2e of methane flared to the atmosphere annually at the WWTP would
have the effect of eliminating GHG's generated from the following equivalent activities: i
City Council Staff Report
October 19, 2016-- Page 7
WWTP Biogas-to-Energy Project, CP15-26
Greenhouse gas en►issions from
3,371 38,243,434 5,064 723
Passenger Miles dxwen by Tan of waste Garbage
ve,, l"dnven an ayetage AfillhQ recycied taKioi of
for one yea, 9 passenger autead of waste
vehicle tandF&d mgxled
instead of
landflled
OR
COZ emissions from
1.795,544 17,027,636 2111 1,685
Pounds of coal ranker ttWlm' homes'enevVy
burned worth of use fix ow
�•.u;.x.i ° v .�.� gasorT,e � year
4 2,356 '+? 85 565.650
wmd turbe,es tames' iadcars':wrlh I brcdndvs'ers
mstafled elector-ky use of Coal burned Onvx swrrctr�d
°`- for one year " to LE17s `..
F 36,"4 652,318 0.005
bafn?tsle W Y pybrlder ar Sea flied
conaunted [yMders used powe*(,larus
for home MI rn one year
ba beques
Carbon sequestered by
413,544 15.105 127
60Y n-ee seed ovs 0 y acres;of U.S.
grown for 70 forests yea,
years rya* .ti,.\�ie preserved form
conversion to
cropland in one
yea+
City Council Staff Report
October 19, 2016-- Page 8
VVWTP Biogas-to-Energy Project, CP15-26
Section 21084 of the California Public Resources Code requires Guidelines for
Implementation of the California Environmental Quality Act (CEQA). The Guidelines are
required to include a list of classes of projects which have been determined not to have
a significant effect on the environment and which are exempt from the provisions of
CEQA. In response to that mandate, the Secretary for Resources identified classes of
projects that do not have a significant effect on the environment, and are declared to be
categorically exempt from the requirement for the preparation of environmental
documents. In accordance with Section 15329 "Cogeneration projects at existing
facilities," Class 29 consists of the installation of cogeneration equipment with a capacity
of 50 megawatts or less at existing industrial facilities resulting in no net increases in air
emissions from the industrial facility, or resulting in the production of emissions lower
than the amount that would require review under the new source review rules applicable
in Riverside County. Therefore, in accordance with Section 15329, staff has determined
that the Biogas-to-Energy Project at the Wastewater Treatment Plant, City Project No.
15-26, is considered categorically exempt from CEQA and a Notice of Exemption will be
prepared and filed with the Riverside County Clerk.
FISCAL IMPACT:
The estimated total cost for the Project is identified in Table 1.
Estimated Project Costs Amount
Design $438,000
Construction $3,262,120
Construction Management _ $375,000
Start U /Commissioning $47,000
Contingency $224,500
Total Cost $4,346,620
Table 1
If funded through the SRFL program, the Project is likely eligible for a capitalization
grant through the GPR of $2 Million, reducing the City's capital cost to $2.3 Million.
Veolia has prepared a revised financial proforma for the Project on the basis of the City
pursuing financing of the Project itself, with a net capital cost of $2.3 Million. A copy of
the 20-Year Proforma Cash Flow Summary is included as Attachment 3.
The City's WWTP generates an estimated total volume of 33 Million cubic feet of
methane gas annually, which when processed to operate a cogeneration plant can
generate electricity which will be fed into SCE's electrical grid and purchased by SCE at
the PUG mandated FIT of $0.127 per kWh. The electricity generated by the
cogeneration plant may produce a gross revenue stream of $331,576 annually. The
waste heat generated by the cogeneration plant will also offset the City's need to
15
City Council Staff Report
October 19, 2016-- Page 9
WV TP Biogas-to-Energy Project, CP16-26
purchase natural gas for heating, resulting in an estimated savings of$19,186 in Year 1,
for a total gross revenue of$350,762 in Year 1. Operation and maintenance costs of the
cogeneration plant are currently estimated at $85,409 in Year 1 resulting in a net
positive revenue stream of$265,353 to the City.
Assuming a 20-year loan (at 4%) on the net capital cost of $2,346,620 (less the $2
Million GPR capitalization grant), would result in an annual debt service payment of
$153,577 leaving a final net positive revenue stream of$111,776 in Year 1.
The final terms of the SRFL would be subject to future review and approval by the City
Council, and is anticipated to have an interest rate below 2%; at that time, staff will
review the funding commitments of the City's Wastewater Enterprise Fund, and may
recommend the City Council enter into a shorter term loan.
The simple payback assuming a 20-year loan at 4% is 8.8 years.
Of other relevance, the "California Carbon Dashboard" identified the current carbon
price at $12.95 per Ton of MTCO2e —eliminating 15,957 MTCO2e produced annually at
the City's WWTP would have the equivalent value of over $200,000 as would otherwise
be applicable on the Cap and Trade Program.
SUBMITTED
Marcus L. Fuller, MPIA, P.E., S. David H. Ready,
Assistant City Manager/City Engineer City Manager
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, AUTHORIZING THE
REIMBURSEMENT OF FUNDS REQUESTED FROM THE
STATE WATER RESOURCES CONTROL BOARD UNDER
THE CLEAN WATER STATE REVOLVING FUND FOR THE
CITY OF PALM SPRINGS BIOGAS-TO-ENERGY
PROJECT AT THE WASTEWATER TREATMENT PLANT,
CITY PROJECT NO. 15-26
WHEREAS, the City of Palm Springs, (the "City"), desires to finance the costs of
developing and constructing a renewable biogas fired cogeneration plant to convert
methane generated by the City's Wastewater Treatment Plant into electricity, identified
as the Biogas-to-Energy Project at the Wastewater Treatment Plant, City Project No.
15-26, (the "Project'); and
WHEREAS, the City intends to finance the development, design and construction of the
Project or portions of the Project with moneys ("Project Funds") provided by the State of
California, acting by and through the State Water Resources Control Board (the "State
Water Board"); and
WHEREAS, the State Water Board may fund the Project Funds with proceeds from the
sale of obligations the interest upon which is excluded from gross income for federal
income tax purposes, (the "Obligations"), and
WHEREAS, prior to either the issuance of the Obligations or the approval by the State
Water Board of the Project Funds, the City desires to incur certain capital expenditures,
(the "Expenditures")with respect to the Project from available moneys of the City; and
WHEREAS, the City has determined that those moneys to be advanced on and after
the date hereof to pay the Expenditures are available only for a temporary period and it
is necessary to reimburse the City for the Expenditures from the proceeds of the
Obligations.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES
HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City hereby states its intention and reasonably expects to reimburse
Expenditures paid prior to the issuance of the Obligations or the approval by the State
Water Board of the Project Funds.
SECTION 2. The reasonably expected maximum principal amount of the Project Funds
is $5,000,000.
17
Resolution No.
Page 2
SECTION 3. This resolution is being adopted no later than 60 days after the date on
which the City will expend moneys for the construction portion of the Project costs to be
reimbursed with Project Funds.
SECTION 4. Each City expenditure will be of a type properly chargeable to a capital
account under general federal income tax principles.
SECTION 5. To the best of our knowledge, this City is not aware of the previous
adoption of official intents by the City that have been made as a matter of course for the
purpose of reimbursing expenditures and for which tax-exempt obligations have not
been issued_
SECTION 6. This resolution is adopted as official intent of the City in order to comply
with Treasury Regulation §1.150-2 and any other regulations of the Internal Revenue
Service relating to the qualification for reimbursement of Project costs.
SECTION 7. All the recitals in this Resolution are true and correct and this City so finds,
determines and represents.
ADOPTED THIS 19th day of October, 2016.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
Resolution No.
Page 3
CERTIFICATION
STATE OF CALIFORNIA ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on October 19, 2016, by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, AUTHORIZING THE CITY
MANAGER TO ACT ON ITS BEHALF TO SIGN, FILE AND
EXECUTE A FINANCIAL ASSISTANCE APPLICATION
FOR A FINANCING AGREEMENT FROM THE STATE
WATER RESOURCES CONTROL BOARD UNDER THE
CLEAN WATER STATE REVOLVING FUND FOR THE
CITY OF PALM SPRINGS BIOGAS-TO-ENERGY
PROJECT AT THE WASTEWATER TREATMENT PLANT,
CITY PROJECT NO. 15-26
WHEREAS, the City of Palm Springs, (the "City"), desires to finance the costs of
developing and constructing a renewable biogas fired cogeneration plant to convert
methane generated by the City's Wastewater Treatment Plant into electricity, identified
as the Biogas-to-Energy Project at the Wastewater Treatment Plant, City Project No.
15-26, (the "Project'); and
WHEREAS, the City intends to finance the development, design and construction of the
Project or portions of the Project with moneys ("Project Funds") provided by the State of
California, acting by and through the State Water Resources Control Board (the "State
Water Board"); and
WHEREAS, the State Water Board may fund the Project Funds through its Clean Water
State Revolving Fund ("CWSRF"), and
WHEREAS, the CWSRF can provide a very low interest loan to the City for Project
Funds necessary to fund the Project; and
WHEREAS, it is necessary to designate and authorize the City Manager to act on
behalf of the City Council to sign, execute and file all required applications and to
execute all required agreements necessary to secure the Project Funds made available
to the City by the State Water Board through the CWSRF.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES
HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council hereby authorizes the City Manager, (the "Authorized
Representative"), or his designee, to sign and file, for and on behalf of the City, a
Financial Assistance Application for a financing agreement from the State Water
Resources Control Board for the planning, design, and construction of the Project.
2n
Resolution No.
Page 2
SECTION 2. The City Council hereby authorizes the Authorized Representative, or his
designee, to provide the assurances, certifications, and commitments required for the
financial assistance application, including executing a financial assistance agreement
from the State Water Resources Control Board and any amendments or changes
thereto.
SECTION 3. The City Council hereby authorizes the Authorized Representative, or his
designee, is designated to represent the City in carrying out the City's responsibilities
under the financing agreement, including certifying disbursement requests on behalf of
the City and compliance with applicable state and federal laws.
ADOPTED THIS 19th day of October, 2016.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
CERTIFICATION
STATE OF CALIFORNIA ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on October 19, 2016, by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
z
ATTACHMENT 2
.Notice of Exemption 201 12 3 7 6 Form D
TO: X Office of Planning&Research FROM: Department of Public Works
1400 Tenth Street-Room 212 City of Palm Springs
Sacramento,California 95812-3044 3200 East Tahquitz Canyon Way
Palm Springs,California 92262
X County Clerk-County of Riverside
4080 Lemon St, Is'Floor
PO Box 12004
Riverside,California 92502
Project Title: Palm Springs Wastewater Treatment Plant Methane Capture Project
Project Location: 4375 Mesquite Drive,Palm Springs,Riverside County,CA
Descfipilon of Project: The Proposed Project will result In the construction of a structure on a 0.25 acre site within the
City's existing Wastewater Treatment Plant to capture methane currently produced by the Plant's anaerobic digestion
process, and convert it to energy to power the Plant and reduce energy costs. The project site is within the Plant and is
entirely disturbed.
Name of Public Agency Approving Project: City of Palm Springs
Name of Person or Agency Carrying Out Project: City of Palm Springs
Exempt Status: (Check One)
. Ministerial(Section 21080(b)(1); 15268:
X Categorical Exemption CE42A Section 15301,15303,15329 and 15332
Declared Emergency(Section 21080(b)(3);15269(a);
Emergency Project(Section 21080(bx4);15269(b)(c);
Reasons why project is exempt:The Project qualifies as a Categorical Exemption pursuant to Guidelines Section 15301
and 15303 because it consists of the addition of a small structure to an existing, operating Wastewater Treatment Plant.
The Project also qualifies under Section 15329, because it is a cogeneration project to capture methane currently being
generated and released at the existing Wastewater Treatment Plant. Finally, the project qualifies under Section 15332
because it consists of a project area of less than 5 acres within an entirely developed Wastewater Treatment Plant.
Lead Agency Contact Person:Savat Khamphou, Assistant Director of Public Works
Telephone:(760)3253,ext.8744
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ATTACHMENT 3
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, PLEDGING ITS
WASTEWATER ENTERPRISE FUNDS AS PAYMENT TO
THE STATE WATER RESOURCES CONTROL BOARD
UNDER THE CLEAN WATER STATE REVOLVING FUND
FOR THE CITY OF PALM SPRINGS BIOGAS-TO-ENERGY
PROJECT, CITY PROJECT NO. 15-26
WHEREAS, the City of Palm Springs, (the "City"), desires to finance the costs of
developing and constructing a renewable biogas fired cogeneration plant to convert
methane generated by the City's Wastewater Treatment Plant into electricity, identified
as the Biogas-to-Energy Project at the Wastewater Treatment Plant, City Project No.
15-26, (the "Project"); and
WHEREAS, the City intends to finance the development, design and construction of the
Project or portions of the Project with moneys ("Project Funds") provided by the State of
California, acting by and through the State Water Resources Control Board (the "State
Water Board"); and
WHEREAS, the State Water Board may fund the Project Funds through its Clean Water
State Revolving Fund ("CWSRF"), and
WHEREAS, the CWSRF can provide a very low interest loan to the City for Project
Funds necessary to fund the Project; and
WHEREAS, the Project is eligible for the State's Green Project Reserve (GPR), which
provides grants to local agencies in the form of loan forgiveness under the SRFL; and
WHEREAS, it is necessary to pledge the City's Wastewater Enterprise Funds as
payment to the State Water Board for the Project Funds made available to the City
through the SRFL.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES
HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council hereby dedicates and pledges the Net Revenues of the
Wastewater Enterprise fund and the Wastewater Enterprise fund to payment of any and
all Clean Water State Revolving Fund financing for the Project.
SECTION 2. The City Council hereby commits to collecting such revenues and
maintaining such funds throughout the term of such financing and until the City has
satisfied its repayment obligation thereunder unless modification or change is approved
in writing by the State Water Resources Control Board.
25
Resolution No.
Page 2
SECTION 3. The City Council hereby acknowledges that the City's pledge hereunder
shall constitute a lien in favor of the State Water Resources Control Board on the
foregoing funds and revenues without any further action necessary, so long as the
financing agreement is outstanding.
SECTION 4. The City Council hereby commits to maintaining the funds and revenues
at levels sufficient to meet its obligations under the financing agreement, so long as the
financing agreement is outstanding.
ADOPTED THIS 3rd day of January, 2018.
David H. Ready, City Manager
ATTEST:
Anthony J. Mejia, MMC
City Clerk
CERTIFICATION
STATE OF CALIFORNIA ) ss.
CITY OF PALM SPRINGS )
I, Anthony Mejia, City Clerk of the City of Palm Springs, hereby certify that Resolution
No. is a full, true and correct copy, and was duly adopted at a regular meeting of
the City Council of the City of Palm Springs on January 3, 2018, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Anthony J. Mejia, MMC
City Clerk
26-