SacSewer approves $1.14bn treatment capital plan as borrowing outlook falls

SacSewer approves $1.14bn treatment capital plan as borrowing outlook fallsThe Sacramento Area Sewer District has adopted its capital funding projection for FY2026-27 to FY2035-36, including nearly $1 billion of treatment-system investment in the first five years. Staff said grant receipts, refinancing and lower project costs have materially reduced the utility's expected borrowing needs.

The approved 10-year treatment and resource recovery capital programme totals $1.14 billion, including $938 million in the first five years.

The collection-system programme is projected at $237 million over 10 years, with $190 million scheduled in the first five years.

Expected borrowing over the next five years has fallen from more than $400 million in the prior forecast to less than $200 million, including a possible $30 million issue this year and another $160 million.

Biosolids works are a major new driver of treatment capital expenditure, while the $118 million East Rancho Cordova interceptor and Zinfandel Extension is also among the largest schemes.

Staff said rate increases will be needed under the financial forecast, with a rate proposal due to be presented at the next board meeting.

Sacramento Area Sewer District’s board has approved a 10-year capital funding projection that places a $1.14 billion treatment and resource recovery programme at the centre of its long-term financial plan, but with a substantially lower borrowing outlook than forecast a year earlier. The board approved the capital funding projection for FY2026-27 through FY2035-36 at its 23 September meeting. Director of Finance Tepa Banda said the treatment programme accounts for $938 million of the $1.14 billion total during its first five years, followed by $206 million in the subsequent five years. The programme is being driven in large part by biosolids investment. Banda told the board that the capital programme needed to address the biosolids emergency had not been designed or incorporated into assumptions when the district’s last rate increase was adopted. It is now a major element of planned treatment-system expenditure. Other large treatment projects include the East Rancho Cordova interceptor and Zinfandel Extension, estimated at about $118 million and currently in design, and the Lower Central Interceptor, now under construction at approximately $85 million. The plan also includes work at the EchoWater facility, including $35 million for secondary sedimentation tanks, a $21 million chiller replacement and digester rehabilitation. The collection-system capital programme totals $237 million over 10 years, of which $190 million is planned in the first five years. Major projects cited by staff include the $22 million Rio Linda Relief Project, the nearly $29 million Arden Towne sewer relief project, and a $46 million replacement of the North Area Corporation Yard office building. Despite the scale of the programme, Banda said the district’s projected five-year debt requirement has been reduced sharply. The prior long-term financial plan anticipated borrowing more than $400 million, including about $150 million in the current year and another $260 million subsequently. The updated forecast assumes a possible $30 million issuance this year and a further $160 million, or less than $200 million in total. Banda attributed the change to additional Harvest Water grant funding, reductions in some project costs and efficiencies in capital-project execution. The district is also forecasting $28 million in direct payments under the Inflation Reduction Act, revised down from a preliminary estimate of $52 million after tax advisers assessed eligibility and risk. The finance director said a May refinancing of collection-system debt had been successful, leaving about $135 million outstanding on that system and creating room to absorb future costs without raising collection-system rates. Treatment-system debt stands at about $1.78 billion, mostly State Revolving Fund loans used for the EchoWater project. Staff forecast revenue growth of 2.2% annually against 4.1% annual cost growth and said rate increases would be required. A detailed rate proposal, including potential rate-structure options, is scheduled for a future board meeting. During the discussion, board members asked staff to demonstrate more clearly how major projects are tested for necessity and cost-effectiveness. Staff said project proposals are scrutinised through long-term planning processes and a staff Planning Action Committee, while alternatives, lifecycle costs, in-house delivery, vendor competition, grants and debt restructuring are considered to control capital and operating costs.