The City Council will consider final approval of the loan during a future meeting.
The $1.4 billion-Pure Water project is expected to reduce San Diego’s reliance on imported water by generating 83 million gallons of potable water — roughly a third of the city’s water supply — by 2035. Phase one construction is expected to begin early in 2019.The 35-year loan under consideration, from the EPA’s Water Infrastructure Finance and Innovation Act, would fund roughly 38 percent of Pure Water’s Phase 1 costs. That includes construction, design and planning, as well as engineering and administrative expenses.
“We see this as a major milestone for the Pure Water project — providing for the critical mass of the funding to allow the program to kick-start,” said City Debt Management Director Lakshmi Kommi.
The low interest rate, 3 percent, makes the loan attractive compared with 3.75 or 4 percent interest rate revenue bonds, Kommi said.
“It’s materially cheaper than if we were to issue bonds on a 30-year basis,” she said.
An EPA loans also allows the city to avoid variable interest rates and customize amortization based on cash flow, Kommi said.
The final loan amount will depend upon other funding sources still being secured.
The remainder of Phase 1 funding will likely be comprised of State Revolving Fund loans, cash and capacity fees, commercial paper loans, debt proceeds and additional revenue bonds, if necessary.
— City News Service
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