State runs out of money to loan Laguna

Mike Swanson

Laguna Beach will continue efforts to improve a sewer system deemed

in violation of federal codes last year by the Environmental

Protection Agency, though Sacramento officials have told the city

that the state had run out of money.

After having been preliminarily approved for an $11-million,

low-interest loan from the State Water Resources Control Board to be

spread over four years, the board told the city on Sept. 4 that it

had loaned every penny down to its reserve level.

Since starting work in 1997 on the San Diego Regional Water

Quality Control Board, one of nine regions governed by the state

board, Councilman Wayne Baglin said he’s never heard of the state

board running out of money to loan.

“We’re not talking about grant money here,” Baglin said. “This is

borrowed money. I’ve never seen anything like this.”

The city can’t expect to receive a loan from the state board for

at least six months, Assistant City Manager John Pietig said, and

officials are now looking for other sources to make needed

improvements.

“About three or four months ago, everything looked set,” Pietig

said. “We were on a waiting list along with several other cities

seeking funds, and they loaned everything they had before they got to

us. There are other cities in the same position we’re in.”

The city has filed an application with a state infrastructure bank

for a loan of about $2 million at 3.5% interest. The loan also

requires that the city pay up-front, loan-origination costs. The

$11-million loan from the State Water Resources Control Board came at

a 2.6% interest rate and didn’t require that the city pay

loan-origination costs.

Pietig said he hopes the $2-million loan will be finalized in the

next month, which would allow work to begin repairing the city’s 8-

to 15-inch sewer lines that serve as the veins to Laguna Beach’s main

sewer line.

Laguna Beach has a $607,000 sewer grant, but can’t use it without

matching the grant with its own funds, which is one reason why the

city is shooting for a smaller loan that won’t take as long to be

approved, Pietig said.

“Nothing borrowed within that $11 million was cosmetic, if you can

call anything involving our sewers cosmetic,” Baglin said. “If we

don’t find the money, this will be a really big problem.”

The city has completed several of the tasks ordered by the

Environmental Protection Agency, which pleased Baglin, but the city

still has a long way to go to make up for mistakes made more than 20

years ago.

“Some of the pipes we’re using throughout the city are made of

materials that aren’t up to the task,” Baglin said.

Baglin added that the city’s main line carries 2 million gallons

of sewage through the city per day, and an analysis last year

determined that the line’s shoddy piping could go at any time. All of

that sewage would end up on the beach, and there aren’t enough trucks

to haul such a massive amount of sewage before it reaches the ocean,

Baglin said.

Mayor Toni Iseman called the state-loan snafu a “minor setback,”

and the council in general was pleased with what city staff had done

to deal with a sewer problem that Iseman said had once “looked like

an impossible task.”

Councilwoman Elizabeth Pearson said the city was heading in the

right direction in addressing the Environmental Protection Agency’s

concerns.

“Our restaurant grease program has become a model for the rest of

the county,” Pearson said.

The city hasn’t had a grease-related spill in two years, Water

Quality Director David Shissler said.

Many of the city’s actions required by the Environmental

Protection Agency are well ahead of schedule, Pietig said. Much of

the design and engineering phases of staff’s plan is completed, but

more than just the $2-million state infrastructure loan will be

needed in the next few years to execute the staff’s plan.

“At this point, we’re just trying to meet our most immediate needs

and working every day to find other sources of revenue,” Pietig said.