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TO: Mayor Richard C. Irvin
FROM: John Hoffmann, P.E. Engineering Coordinator
DATE: August 29, 2024
SUBJECT:
The City has previously applied for a 100% principal forgiveness loan from the Illinois Environmental Protection Agency to fund the upcoming "Lead Service Line Replacement" project. The attached debt ordinance must be adopted by the City for the IEPA to finalize the forgivable loan.
PURPOSE:
The attached ordinance outlines the requested $3,027,000.00 amount of the forgivable loan. The City of Aurora qualifies for principal forgiveness for lead service line replacement and for FY2025 the maximum forgiveness amount is $3,027,000.00. The proposed 2024 budget shows the partial loan amount for construction of this service replacement project; the City intends to front fund the construction and seek reimbursement at the same time as payments are made to the contractor. Processing contractor payments significantly quicker in this manner in lieu of waiting for the receipt of loan funds makes the project more attractive to contractors and will most likely result in lower bids.
BACKGROUND:
The State of Illinois passed Public Act 102-0613 in August 2021 titled the Lead Service Line Replacement and Notification Act requiring full replacement of lead water service lines when disturbed. The City of Aurora has an estimated 17,200 lead water services connected to the public water system. The Lead Service Line Replacement Project will include the full replacement of the lead service from the water main to the water meter in the house or the completion of previous partial lead water services to eliminate all sections of lead between the main and meter.
The service replacements per the funding approval must occur in Census Tracts 8542.00, 8529.04 and 8532.00. Please see the attached Exhibit A representing these 3 Census Tracts. Please see Exhibit B for the submitted Illinois Environmental Protection Agency's Funding Nomination Form for Public Water Supply Loan Program Lead Service Line Replacement Projects.
DISCUSSION:
Passing this ordinance is required by the IEPA to provide the City the forgivable funds necessary to construct this project in 2024 and 2025. The proposed 2024 budget shows the partial value of the forgivable loan in account 510-4058-511-73-02.
IMPACT STATEMENT:
By adopting this ordinance, the City will be utilizing available forgivable funds to construct this project. Once completed, the project will reduce the number of lead services lines requiring replacement in the City of Aurora. During construction, there will be various local roadway and lane closures, delays are to be expected. Individual residential water outages will be kept to a minimum while the service is be connected at the water main and inside the house.
RECOMMENDATIONS:
I request the proposed ordinance be enacted.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
ORDINANCE NO. _________
DATE OF PASSAGE ________________
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An Ordinance Authorizing a 100% principal forgiveness Loan Agreement (Public Water Supply Loan Program - Home Rule Entity) for the Lead Service Line Replacement Project.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, subject to said section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals and welfare; and
WHEREAS, the City of Aurora, Kane, DuPage, Kendall and Will Counties, Illinois, operates its drinking water system (“the System”) in accordance with the provisions of the Illinois Constitution, Article VII, and the Local Government Debt Reform Act, 30 ILCS 350/1 et seq. (collectively “the Act”); and
WHEREAS, The State of Illinois passed Public Act 102-0613 in August 2021 titled the Lead Service Line Replacement and Notification Act requiring full replacement of lead water service lines when disturbed; and
WHEREAS, The City of Aurora has an estimated 17,200 lead water services connected to the public water system; and
WHEREAS, the MAYOR and CITY COUNCIL of the City of Aurora (“the Corporate Authorities”) have determined that it is advisable, necessary, and in the best interest of the public health, safety, and welfare to improve the System, including the following:
The Lead Service Line Replacement Project, including the full replacement of the lead service from the water main to the water meter in the house or the completion of previous partial lead water services to eliminate all sections of lead between the main and meter all in accordance with the plans and specifications prepared by the City, which Project has a useful life of 50 years; and
WHEREAS, the Lead Service Line Replacement Project shall be completed in Census Tracts 8542.00, 8529.04 and 8532.00 as shown in Exhibit A and as was submitted in the Illinois Environmental Protection Agency's Funding Nomination Form for Public Water Supply Loan Program Lead Service Line Replacement Projects as shown in Exhibit B; and
WHEREAS, the estimated cost of construction and installation of the Project, including engineering, legal, financial and other related expenses is $3,027,000.00, and there are insufficient funds on hand and lawfully available to pay these costs; and
WHEREAS, the costs are expected to be paid for with a loan to the City from the Public Water Supply Loan Program through the Illinois Environmental Protection Agency, the loan to be repaid from the City of Aurora Water and Sewer Fund and the loan is authorized to be accepted at this time pursuant to the Act; and
WHEREAS, said loan shall bear an interest rate as defined by 35 Ill. Adm.
Code 663, which does not exceed the maximum rate authorized by the Bond Authorization Act, as amended, 30 ILCS 305/0.01 et seq., at the time of the issuance of the loan; and
WHEREAS, the City of Aurora qualifies for principal forgiveness for lead service line replacement and for FY2025 the maximum forgiveness amount is $3,027,000.00; and
WHEREAS, in accordance with the Public Water Supply Loan Program, the City of Aurora is eligible to have up to 100% of the principal of the loan forgiven by the State of Illinois; and
WHEREAS, in accordance with the provisions of the Act, the City is authorized to borrow funds from the Public Water Supply Loan Program in the aggregate principal amount of $3,027,000.00 to provide funds to pay the costs of the Project; and
WHEREAS, the loan to the City shall be made pursuant to a Loan Agreement, including certain terms and conditions between the City and the Illinois Environmental Protection Agency.
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Aurora, Illinois, as follows: SECTION 1. INCORPORATION OF PREAMBLES
The Corporate Authorities hereby find that the recitals contained in the preambles are true and correct, and incorporate them into this Ordinance by this reference.
SECTION 2. DETERMINATION TO BORROW FUNDS
It is necessary and in the best interests of the City to construct the Project for the public health, safety, and welfare, in accordance with the plans and specifications, as described so that the System continues to be operated in accordance with the provisions of the Illinois Environmental Protection Act, 415 ILCS 5/1 et seq.; and that for the purpose of constructing the Project, it is hereby authorized that funds be borrowed by the City in the aggregate principal amount (which can include construction period interest financed over the term of the loan) not to exceed $3,027,000.00, the principal of which is 100% forgivable in accordance with the Public Water Supply Loan Program.
SECTION 3. ADDITIONAL ORDINANCES
The Corporate Authorities may adopt additional ordinances or proceedings supplementing or amending this Ordinance, authorizing entering into the Loan Agreement with the Illinois Environmental Protection Agency, prescribing all the details of the Loan Agreement, and providing for the collection, segregation and distribution of City of Aurora Water and Sewer Fund so long as the maximum amount of the Loan Agreement as set forth in this Ordinance is not exceeded and there is no material change in the project or purposes described herein. Any additional ordinances or proceedings shall in all instances become effective in accordance with the Act or other applicable laws. This Ordinance, together with such additional ordinances or proceedings, shall constitute complete authority for entering into the Loan Agreement pursuant to applicable law.
However, notwithstanding the above, the City may not adopt additional ordinances or amendments which provide for any substantive or material change in the scope and intent of this Ordinance, including but not limited to interest rate, preference or priority of any other ordinance with this Ordinance, parity of any other ordinance with this Ordinance, or otherwise alter or impair the obligation of the City to pay the principal and interest due to the Public Water Supply Loan Program without the written consent of the Illinois Environmental Protection Agency.
SECTION 4. LOAN NOT INDEBTEDNESS OF CITY OF AURORA
Repayment of the loan to the Illinois Environmental Protection Agency by the City pursuant to this Ordinance is to be solely from the revenue derived from the City of Aurora Water and Sewer Fund and the loan does not constitute an indebtedness of the City within the meaning of any constitutional or statutory limitation. The foregoing notwithstanding, the City of Aurora is only seeking a loan for which 100% principal forgiveness is available and, to the extent that 100% principal forgiveness is not available for the Project, the City of Aurora has determined that it will not be seeking a loan for the Project.
SECTION 5. APPLICATION FOR LOAN
The MAYOR is hereby authorized to make application to the Illinois Environmental Protection Agency for a loan through the Public Water Supply Loan Program, in accordance with the loan requirements set out in 35 Ill. Adm. Code 663.
SECTION 6. ACCEPTANCE OF LOAN AGREEMENT
The Corporate Authorities hereby authorize acceptance of the offer of a loan through the Public Water Supply Loan Program, including all terms and conditions of the Loan Agreement as well as all special conditions contained therein and made a part thereof by reference. The Corporate Authorities further agree that the loan funds awarded shall be used solely for the purposes of the Project as approved by the Illinois Environmental Protection Agency in accordance with the terms and conditions of the Loan Agreement.
SECTION 7. RESERVE ACCOUNTS
As long as the City has outstanding revenue bonds payable from revenues of the system that are senior to the revenue bonds authorized by this ordinance, the City shall maintain an account, coverage and reserves equivalent to the accounts, coverages and reserves required by the outstanding ordinances.
SECTION 8. AUTHORIZATION OF MAYOR TO EXECUTE LOAN AGREEMENT
The MAYOR is hereby authorized and directed to execute the Loan Agreement with the Illinois Environmental Protection Agency. The Corporate Authorities may authorize by resolution a person other than the MAYOR for the sole purpose of authorizing or executing any documents associated with payment requests or reimbursements from the Illinois Environmental Protection Agency in connection with this loan.
SECTION 9. SEVERABILITY
If any section, paragraph, clause or provision of this Ordinance is held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions of this Ordinance.
SECTION 10. REPEALER
All ordinances, resolutions, orders, or parts thereof, which conflict with the provisions of this Ordinance, to the extent of such conflict, are hereby repealed.