Sebastopol staff want the City Council to borrow $5 million from a federal loan program to replace Well 4, a 1953 well that provides about 48% of the city’s well pumping capacity. Because the program has a $5 million minimum, according to staff, two other water projects would be folded into the loan.
A draft staff report written for the council’s Tuesday, Oct. 20, meeting asks the council to approve the federal Water Infrastructure Finance and Innovation Act program, known as WIFIA, as the city’s preferred way to pay for its top water projects, and to direct staff to update the city’s water rate study. The report went first to a joint meeting of the city’s Budget Committee and Enterprise Fund Oversight Committee on Oct. 5.
The council meets at 6 p.m. Oct. 20 at the Sebastopol Youth Annex, 425 Morris St., with a Zoom option, according to the city’s meeting page. The page says the agenda will be posted 72 hours ahead.
What the July plan said
The five-year capital improvement program the council adopted July 7 lists Well 4 construction at $2.6 million in fiscal 2027-28, paid for with “Loans and other Financing.” Its justification reads: “The City will be looking for outside financing (such as a State Revolving Fund loan or revenue bond) for the construction of the new replacement well.”
The October report puts Well 4 at about $3.4 million, citing the 2026 Water Master Plan update. Because the small-community WIFIA program “has a $5 million minimum,” the report says, the strategy is to combine Well 4 with other high-priority water projects: the Pleasant Hill Loop project, listed at $955,000, and seismic retrofits of city water tanks. The package totals about $6.25 million, with $5 million from WIFIA and $1.25 million in local money spread over the five-year construction period.
The lowest rate
Staff and the city’s well engineering consultant, Luhdorff & Scalmanini Consulting Engineers, compared three lenders: the state’s Drinking Water State Revolving Fund, the California Infrastructure and Economic Development Bank, known as IBank, and WIFIA.
“Although DWSRF offers the lowest interest rate,” the report says, the state fund would take about two years to approve and sign a loan. It also cites the state program’s extra “CEQA-Plus” environmental requirements, higher administrative costs and less flexible reimbursement.
On a scoring chart in the slides, where lowest is best, the state fund totaled 16 points, and IBank and WIFIA 8.5 each. The chart’s note on interest rates reads: “DWSRF is lowest however costs can increase while waiting for approvals.”
The same report says the Well 4 project “is exempt from CEQA with replacement on the same site with the same capacity, function, and purpose.”
WIFIA’s small-community program can cover up to 80% of project costs and offers five years with no payments required, the report says. “This flexibility provides the City with additional time to complete construction and place the assets into service before beginning debt payments,” it says.
No interest figure
The staff report and slides list no interest rate for any of the three lenders and no total interest cost. Under fiscal impact, the report says: “Final debt service, interest costs, loan term, and the timing of payments will be determined through the financing procurement process and will be brought back to the City Council for approval.”
Lee Mathias raised that gap in a written comment for the Oct. 5 committee meeting that the city posted online. “Why were current interest rates and total loan costs + interest not presented in the comparisons between the two projects,” he wrote. He put WIFIA’s rate at 5.5% and the state fund’s at 2.1%. By his math, a $5 million WIFIA loan over 30 years would cost $5.32 million in interest, while borrowing $3.5 million for Well 4 alone from the state fund would cost $1.25 million. The rates are his figures, and his comparison sets two different loan amounts side by side.
How the packet describes the water fund
The staff report says that since the council suspended tiered water rates and didn’t put the scheduled July 2026 increase into effect, the water enterprise “is not collecting sufficient revenues to maintain water system resiliency.” Before taking on major new debt, it says, the city needs to show the water fund has enough steady revenue to run the system, keep reserves and make the payments.
A slide headed “Water Funding Procurement,” listed in the presentation’s agenda as “Considerations For Best Terms,” says “City In Good Financial Standing,” with “Good credit rating,” “Adequate reserves” and “Current debt service covered.” Under “City Utility Rates Support Projects,” it lists “Approved rates in place tracking increases” and “Rates support projects.”
The well
Well 4 is about 73 years old, against an estimated useful life of about 40 years, the report says. It sits inside a plume of PCE groundwater contamination tied to a former dry-cleaning site, and it runs with granular activated carbon treatment at the wellhead.
A monitoring well has been drilled at the site, and water-quality sampling there will shape the replacement well’s design, the report says.
The 2026 Water Master Plan update identifies about $10 million in recommended water projects over the next five to 10 years, according to the report.
The report gives the council three options on Oct. 20: approve the WIFIA strategy and have staff return with a financing schedule and final documents, give different direction on the lender, package or timing, or reject the strategy and seek another way to pay for Well 4.