PALMDALE — Officials are proceeding with a project to bring recycled water further into Palmdale for irrigation use, but have had to change direction in terms of securing financing.
The Palmdale Recycled Water Authority’s Recycled Water Line Phase 2 project will extend the lines carrying treated recycled water, known as “purple pipes,” about four-and-a-half miles from McAdam Park on 30th Street East, up East Avenue R, to Dominic Massari Park.
The Authority is a joint powers authority between the City of Palmdale and the Palmdale Water District, created to implement the use of treated recycled wastewater for irrigation on public areas such as parks, golf courses and cemeteries.
The Authority previously thought a loan from the California Infrastructure and Economic Development Bank, or IBank, would be used to fund the estimated $7 million project, but the bank’s terms were not beneficial to the Authority, Palmdale Water District Finance Manager Michael Williams said during an authority meeting Monday.
Because the Authority does not have a financial history of its own, the bank wanted to divide the loan between its two member parties rather than the body, as a whole.
“That was not what we had intended in terms of a finance package,” Williams said.
Instead, the Authority will look to using bonds to raise the necessary funding. In consultation with a financial advisor, the Authority could do a private issue of bonds for 15 to 18 years or a bond issue for about 20 years, both for the $7 million.
“The only difference there is the interest rate will be a little bit higher than it would be through the IBank,” Williams said. “But, I think it’s in the best interest of the Authority to pay a little bit higher interest and establish that financial credit, financial background.”
The difference in the interest rates between either type of bond issue and the IBank is less than a half a percent, he said.
With the small amount being financed, that difference in interest rate does not have a great impact on the total cost, he said.
“The main thing we want to do is establish the Authority as its own financial (entity), that’s able to stand on its own,” Williams said.
The Authority has enough money on hand, about $2 million from the annual payments by both the Palmdale Water District and city of Palmdale, to get started on the project while working to secure the remaining funds necessary in time to start construction, Williams said.
Founded in 2012, both entities were contributing $100,000 per year, which was increased last year to $300,000 each. The bulk of those funds were being held in preparation for projects.
“We’re building our credit, so to speak,” Director Austin Bishop said. “Now’s the time to leverage that asset.”
The Authority will also have to revisit the Joint Powers Authority Agreement to extend it through the life of the financing mechanism, as it currently is set to expire in 2022, Williams said.
Another possible source of funding is through two grant opportunities, Palmdale Water District Engineering/Grant Manager Jim Riley said.
The best opportunity is for $1.1 million through the Integrated Regional Water Management Plan. There is also possibly $2.5 million through a state fund, he said.
However, both grants will require an update to the environmental study for the project, which is now five years old.
The Authority Board approved hiring the same consultant who did the original study for an estimated cost of $33,707.
“A $30,000 update to our environmental document could guarantee us $1.1 million in funding,” Bishop said. “I don’t think that really takes a lot of thinking.”