Title
Resolution to Adopt the City of Detroit Water and Sewerage Department (DWSD) Stormwater Improvements - FY 2024 Clean Water State Revolving Fund (CWSRF) Project Plan
Body
Agenda of: April 26, 2023
Item No.: 2023-118
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Suzanne R. Coffey, P.E.
Chief Executive Officer
Great Lakes Water Authority
DATE: April 26, 2023
RE: Resolution to Adopt the City of Detroit Water and Sewerage Department (DWSD) Stormwater Improvements - FY 2024 Clean Water State Revolving Fund (CWSRF) Project Plan
MOTION
Upon recommendation of Nicolette Bateson, Chief Financial Officer/Treasurer, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA) approves the attached Resolution for the City of Detroit Water and Sewerage Department (DWSD) Stormwater Improvements - FY 2024 Clean Water State Revolving Fund (CWSRF) Project Plan; and authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
The Great Lakes Water Authority (GLWA) secures capital improvement financing for the of Detroit Water and Sewerage Department (DWSD) in accordance with foundational documents related to the establishment of GLWA. DWSD has identified two stormwater improvement projects for submittal to the Michigan Department of Environment, Great Lakes, and Energy (EGLE) for the CWSRF financing program for funding in the state’s 2024 fiscal year. These projects are described within one overall project plan. The deadline for submitting all CWSRF project plans to EGLE is May 1, 2023, but prior to submitting the project plans, a public hearing must be held for the affected area.
These two projects described in the project plan are comprised of upgrading stormwater infrastructure at select locations in the West Outer Drive neighborhood (West Chicago) and the Castle Rouge and Eliza Howell neighborhood (Schoolcraft) in the City of Detroit. Construction for both projects will include excavation and removal of existing materials, construction of the proposed storm sewer, backfill of the excavation required for piping work, and restoration of each work site. The impact of the projects will be improved ability of DWSD to provide reliable sanitary services and improved water quality of the Rouge River. The estimated cost of these projects is $78.2 million; $36.2 million for the West Chicago project and $42.0 million for the Schoolcraft project.
The FY 2024 CWSRF Project Plan and public hearing notice for DWSD Stormwater Improvements Projects has been posted on the DWSD website and can be found at: www.detroitmi.gov/dwsd <http://www.detroitmi.gov/dwsd>. This project plan for these two projects was presented at that DWSD public hearing on March 15, 2023.
JUSTIFICATION
Pursuant to Section 7.2(b) of the Regional Sewage Disposal System Lease between the City of Detroit and GLWA, the Authority shall cooperate fully with the City in the implementation of this Detroit capital improvement, including financing through the Authority. Therefore, GLWA will submit the local project plan as it will be the CWSRF loan applicant. Per notification from EGLE, GLWA does not need to hold a separate public hearing on the local projects, however, the GLWA Board of Directors will need to act on the included resolution adopting the Project Plan. The resolution must be approved and signed to ensure that the finalized Project Plan is assembled, printed, and submitted to the EGLE by the deadline of May 1, 2023.
GLWA concurs with the DWSD Stormwater Improvement Project Plan adoption, and as the CWSRF applicant, is seeking low interest loan assistance from the SRF Program. Although the EGLE interest rate for FY 2024 will not be determined until October 2023, the current 30-year loan interest rate for an overburdened applicant, which is applicable for DWSD projects, is 1.875 percent. Compared to an estimated market-based rate of 5%, potential interest savings on a 30-year loan would be $49.7 million based on a CWSRF loan amount of $78.2 million.
Another advantage of SRF is that interest costs are only incurred on the amount drawn from the SRF loans as project expenditures are incurred. This results in additional debt service savings early in the term of the loan compared to market-based transactions. Further, use of SRF funding as junior lien does not impact GLWA debt reserve requirements.
BUDGET IMPACT
GLWA will be the loan applicant on CWSRF loans issued on behalf of the DWSD, and DWSD will be the CWSRF loan recipient as determined by EGLE. All project costs financed by GLWA, on behalf of DWSD, through the CWSRF program bonds and resulting principal and interest payments on the bonds will be directly allocable to the DWSD local system. Debt service is anticipated to begin in FY 2027 for this project and will be included as part of the FY 2026 - FY 2027 biennial budget.
COMMITTEE REVIEW
This matter was presented to the GLWA Audit Committee at its March 24, 2023 meeting. The Audit Committee unanimously recommends that the Great Lakes Water Authority Board of Directors approve the attached Resolution for the City of Detroit Water and Sewerage Department (DWSD) Stormwater Improvements - FY 2024 Clean Water State Revolving Fund (CWSRF) Project Plan as presented.
SHARED SERVICES IMPACT
This item does not impact the shared services agreement between GLWA and DWSD.