Watsonville City Council · Tuesday, September 22, 2026, 4:30 PM · Item 12.a · NEW BUSINESS
Issue up to $22.5 million in bonds for wastewater plant energy upgrades
In plain English
The City would borrow money by selling Wastewater Revenue Bonds, Series 2026, in an amount not to exceed $22,500,000, to pay for the Energy Infrastructure Modernization Program at the city's Wastewater Treatment Facility that the Council authorized on September 9, 2026. The project costs $20,849,967; $20 million would come from the bonds and the rest from reserves in the City's Wastewater Enterprise Fund. A yes vote adopts a resolution approving the borrowing documents (Indenture of Trust, Bond Purchase Agreement, Continuing Disclosure Certificate and Official Statement), hires the financing team, and sets limits on the deal. The bonds are expected to be sold the week of October 5th and the money received the week of October 19th.
The debt would be repaid from the net revenues of the City's wastewater system, meaning sewer customers' payments are the source of repayment, which staff estimate at $1,575,186 per year through a final maturity of May 1, 2046.
Key facts
- Bonds authorized in an aggregate principal amount not to exceed $22,500,000; the resolution's not-to-exceed parameters are a principal amount not exceeding $20.6 million, a true interest cost not exceeding 5.25%, and an underwriter's discount not exceeding 0.75% of principal
- Good faith estimates: principal amount $19,445,000, true interest cost 4.41%, finance charge $577,321, project proceeds received $20,000,000, average annual debt service $1,575,186, total debt service payment amount $30,759,882
- Total project cost is $20,849,967, with $20 million from bonds and the remainder from Wastewater Enterprise Fund reserves
- Financing team: Urban Futures, Inc. as Municipal Advisor; Anzel Galvan LLP as Bond and Disclosure Counsel; Samuel A. Ramirez & Co. as Underwriter; U.S. Bank Trust Company National Association as Trustee
- Staff state the issuance "in and of itself is not anticipated to require increases to the Wastewater System's rates that were previously adopted by the City Council in May 2026"
Reasons to support
- The borrowing pays for the energy modernization project at the wastewater plant that the Council already approved on September 9, 2026 after a presentation from Climatec and a public hearing.
- Staff say the bond issuance by itself is not expected to require sewer rate increases beyond those the Council adopted in May 2026.
- The resolution caps the deal — principal no more than $20.6 million, true interest cost no more than 5.25%, and underwriter's discount no more than 0.75% — giving cushion if market conditions change while limiting the City's exposure.
- Staff's alternative is not approving the resolution, which would delay funding for the project.
Reasons to oppose or change it
- Repayment totals an estimated $30,759,882 to receive $20,000,000 in project proceeds — roughly $10.8 million more than the amount borrowed — plus a $577,321 finance charge, all paid from wastewater system revenues.
- The debt commits the wastewater system's net revenues to payments averaging $1,575,186 a year until May 1, 2046, and rate stability is described only as "not anticipated" to change rather than guaranteed.
- Final interest rates and amounts are not known until the bonds are sold; the Council is being asked to approve documents whose final numbers will be filled in later and approved by an Authorized Officer rather than by the Council.
Official wording
APPROVE/AUTHORIZE ISSUANCE OF WASTEWATER REVENUE BONDS, SERIES 2026, IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $22,500,000, TO FINANCE THE ENERGY INFRASTRUCTURE MODERNIZATION PROGRAM AT THE WATSONVILLE WASTEWATER TREATMENT FACILITY 1.Report - Issuance of Wastewater Revenue Bonds Series 2026 .pdf 2.Resolution - Watsonville PFA Wastewater Revenue Bonds, Series 2026.pdf 3.Indenture of Trust (Watsonville Wastewater Revenue Bonds, Series 2026) - 4934-9556-4206 - 4.pdf 4.Preliminary Official Statement - Watsonville Wastewater Revenue Bonds, Series 2026 4899-1745-6064 v5.1.pdf 5.BPA - City of Watsonville 2026 Wastewater Revenue Bonds - 4930-2221-9984 - 2[98][6].pdf 6.Presentation - Issuance of Wastewater Revenue Bonds Series 2026.pdf 1) Staff Report by Administrative Services Director Duran 2) City Council Clarifying & Technical Questions 3) Public Input 4) Motion 5) City Council Deliberation on Motion 6) Resolution Authorizing & Approving the Issuance of Wastewater Revenue Bonds, Series 2026, in an Aggregate Principal Amount of Not to Exceed $22,500,000, Authorizing the Execution & Delivery of an Indenture of Trust, Continuing Disclosure Certificate & Bond Purchase Agreement in Connection with Such Bonds, Authorizing the Distribution of an Official Statement in Connection with the Offering & Sale of Such Bonds, & Authorizing the Execution of Necessary Documents & Certificates & Related Actions
Summary written by claude-opus-5 from the agenda and the Report - Issuance of Wastewater Revenue Bonds Series 2026 .pdf. It can contain mistakes. The official documents govern.