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2 <br />On October 20, 2009, the BOCC approved applying for a Clean Water State Revolving Fund <br />(SRF) loan in the amount of $3.5 million to pay for a portion of the Central Efland and Northern <br />Buckhorn sewer extension projects. This loan will provide matching funds for two Environmental <br />Protection Agency (EPA) Special Appropriations grants totaling approximately $1.4 million that <br />were awarded in December 2010 for these projects. The remainder of the loan funds will pay <br />for the construction costs not covered by the EPA grants. <br />The resolution provided at Attachment 1 is a required part of the application packet. Before <br />approving the loan, the State Construction Grants and Loans Division and the Local <br />Government Commission require that the BOCC, as the governing body of Orange County, <br />resolve to repay the loan and maintain the asset that the loan is meant to construct. The loan <br />application, which would include the approved resolution, will be submitted to the Local <br />Government Commission which will approve or deny the County's application. If Orange <br />County's application for SRF loan funds is approved, the State's Construction Grants and Loans <br />personnel will draft a Loan Offer document. This Loan Offer document will be brought back to <br />the BOCC for final approval by resolution and signature. <br />Currently, the interest rate on this type of loan is 2.2%. This interest rate will be in effect until <br />March 31, 2011, at which point it will adjust to current market conditions. The interest rate is <br />based upon one-half of the 20-year bond buyer index. As a point of reference, the current 20- <br />year bond buyer index is 5.25% (as of 2/2/2011). If the SRF loan rate were reset now, the new <br />rate would be 2.625%. The maximum term of the loan is 20 years and the Local Government <br />Commission sets the term length as part of their review of our application. There will be a 2.0% <br />closing fee (approximately $70,000) invoiced when bids for the construction of the projects are <br />approved by the Construction Grants and Loans department. Other than this closing fee, there <br />are no payments due until the project is completed. <br />Repayment of the loan will begin 6 months from the completion date estimate (which is based <br />on data provided by Orange County) shown on the State's Notice to Proceed. The estimated <br />annual debt service payment for this loan would be approximately $225,000. This is based on a <br />loan principal amount of $3,500,000, a loan term of 20 years and an interest rate of 2.625%. <br />FINANCIAL IMPACT: If Orange County is approved for this loan, there would be a 2% loan <br />closing fee of approximately $70,000 due in September 2011. This will need to be budgeted for <br />FY 2011-12. Upon completion of the construction project, likely mid-2013, the annual payments <br />would begin in 6 months and be budgeted for the Fiscal Year 2013-14 and beyond. The <br />payment amounts are estimated at approximately $225,000 per year. <br />RECOMMENDATION(S): The Manager recommends the Board: <br />1. Approve the attached resolution stating that Orange County will repay the loan per the <br />given terms; and <br />2. Authorize the County Manager to sign the loan application as Chief Executive Officer. <br />