Petaluma residents see savings from debt restructure

With interest rates near a historic low, Petaluma officials have taken advantage by refinancing one of their largest outstanding loans, a move that could help residents save on their utility bills starting next summer.

The city recently refinanced the remaining $73 million balance on the construction loan that paid for the Ellis Creek Water Recycling Facility, which has been in operation in 2009. Boasting 195 miles of pipeline and nine pump stations, the Cypress Drive facility treats almost 7 million gallons of wastewater each day.

The project was one of the city’s largest infrastructural undertakings ever, budgeted at $165 million with $126 million provided through bonds from the California Water Boards’ Revolving Fund program. Ellis Creek replaced the 70-year-old facility on Hopper Street, which is now being primed for demolition and future development. The project also added nearly ?30 acres of wetlands at Petaluma’s eastern gateway.

Under the new agreement with Wells Fargo, the city is anticipating almost $5.5 million in savings over the remainder of the nine-year term ending 2029, officials said. The interest rate is less than 1%.

For local water utility customers, that will mean savings of roughly 2% beginning July 1, which could partially offset the yearly adjustment done automatically whenever there’s a change for water rates in the consumer price index, said Petaluma Finance Director Corey Garberolio.

“We felt an obligation to take advantage of the opportunity to save the ratepayers money,” she said.

The city took a similar action two years ago on the other wastewater bonds that helped fund the Ellis Creek project, refinancing $23 million. That effort resulted in approximately ?$5.6 million in savings over the next 18 years, Garberolio said.

In all, the city’s maneuvering on the Ellis Creek bonds will translate into $11 million in cost-savings.

Even though water and wastewater rates in Petaluma for a typical household are lower compared to many neighboring or similar sized jurisdictions in the Bay Area, rates have steadily increased.

Petaluma is in the middle of its most recent five-year hike, which was approved by the city council in May 2017, increasing annual water and sewer rates by 3.5% and 1.5%, respectively. Those adjustments are also before inflation and increases in wholesale costs from the Sonoma County Water Agency are factored in.

The 2017 increase was approved after a rate study was performed to get a sense of how Petaluma serviced its nearly 20,000 customers, and also projected future funding requirements so the city could collect enough dollars to upgrade its aging infrastructure.

At the time, conservation efforts during the most recent drought led to a nearly 20% decline in water sales, the study found. That, coupled by wholesale rate increases by SCWA and the city’s growing needs for infrastructure maintenance and repair, played a major role in determining just how much revenue needed to be generated when officials OK’d the increases.

Dan St. John, director of Public Works and Utilities, said the current rates were designed so they would be sufficient enough to fund the robust list of capital projects required to improve the delivery of Petaluma’s most essential resource.

“We’re where we need to be, but everyday we’re looking for ways to save money and add value back to the customers,” he said.

Many residents in Petaluma, however, say they need more relief on monthly bills.

Petaluma Peoples Services Center Executive Director Elece Hempel said her nonprofit has seen a rise in the number of residents seeking assistance on their water utility bill since the rate increases were enacted two years ago.

PPSC receives grant funding to help low-income residents pay their bills. According to figures from the nonprofit, more than 2,300 residents needed rental assistance last year - roughly ?400 more than initially projected. At least 13 residents had their water turned off or were at-risk because they couldn’t afford their water bill.

Some of those struggles can be attributed to larger economic forces, Hempel said, and one of the biggest conflicts is the reality that wages aren’t growing in the same way that costs are.

“We’ve seen an uptick in the number of residents that have to make a decision whether they’re going to have to pay their rent or mortgage or their utility bill,” she said. “Most people aren’t getting those cost of living increases, especially those living in poverty already.”

Refinancing efforts on the Ellis Creek loan should make a difference in the short-term by offsetting future adjustments, and officials are expect the savings will help fund additional capital improvement projects the city is pursuing, creating a resilient water system in Petaluma that’s self-sufficient and built to last.

But with environmental regulations changing and sustainability playing a bigger role in resource management at cities statewide, costs will likely keep increasing, and that means customers will have to assume a growing share of the burden when it’s time to pay their water bill each month.

“A little relief might give them an opportunity to catch up,” Hempel said.

(Contact News Editor Yousef Baig at yousef.baig@arguscourier.com or 776-8461, and on Twitter @YousefBaig.)