Los osos sewer project may get a little cheaper

State water officials will meet in Sacramento on Monday to consider lowering the interest rate on a loan for the Los Osos sewer project, a move that could shave millions of dollars off the price of the project, reducing the cost to residents.

The State Water Resources Control Board will consider a staff recommendation to lower the rate on a $69.7 million loan from 2.6 percent to 2 percent. The county and Los Osos Community Services District are sending letters to the water board urging that the interest rate be reduced to zero in an effort to make the massive infrastructure project as affordable as possible.

“The district board is wholly supportive of a reduction in the current interest rate of 2.6 percent to 0 percent, and we believe we speak for the overwhelming majority of the 12,500 residents affected by the project,” community services district board President Marshall Ochylski stated in a letter to the board.

Reducing the interest rate to 2 percent would result in an overall savings of $5.9 million, said John Waddell, county project manager. No interest would result in a savings of $22 million.

Lowering the rate to 2 percent translates into a reduction of the monthly payment for a single family residence by $4 to $159, while a reduction to zero would lower the rate by $18, to $141 per month.

These reductions could come with a catch, however. Water board staff is recommending that the county be required to retain ownership of the project for the duration of the 30-year loan.

A state water board staff report says concerns about the CSD’s solvency following a 2006 declaration of bankruptcy are the reasons for wanting the county to retain ownership. The law allows ownership to be transferred to the Los Osos Community Services District three years after construction is complete.

The county would prefer to see the system turned over to the CSD but is willing to own it for as long as necessary in order to secure a lower interest rate, said County Supervisor Bruce Gibson, who represents Los Osos.

“It’s not that outrageous an idea,” Gibson said. “I’m comfortable with it as long as they couple it with a large interest rate reduction.” Dan Gilmore, CSD general manager, said he hopes that the district’s efforts to repair its finances will cause the state to allow a transfer of ownership at an earlier date.

The $189 million project calls for the construction and installation of an entire sewage collection and treatment system to serve the Los Osos and Baywood Park communities. The treatment plant will be able to handle 1.2 million gallons of wastewater daily, fed to it by 41 miles of collection lines.

Although the county has committed to building the sewer, several important steps remain. An election will be held on a yet-to-be-determined date, to include undeveloped parcels in the sewer’s assessment district.

A successful outcome of the assessment vote coupled with low construction bids and receipt of additional grants could lower the overall cost of the project even more, Waddell said. If the cost goes low enough, those property owners who have already paid their assessment could receive a refund, he said.

The project will go out to bid in March, and construction should begin in early summer and will take three years to complete. In addition to the state loan, the county will also receive a federal Department of Agriculture loan of $83.1 million.

Anyone wishing to send a letter to the state water board concerning the proposed interest rate reduction can do so at commentletters@water boards.ca.gov.