A deal was worked out between the Yuba County Water Agency, Calif., and Yuba County at the end of 2016 to refinance levee bonds issued in 2008. At the time, the deal was expected to save about a half million each year, but recent figures show savings have exceeded officials' initial expectations.
"The county and YCWA will save an average of approximately $822,000 per year or $18.9 million while the loan is outstanding," said Grace Mull, deputy county administrator.
That means nearly a million dollars a year — generated by local taxpayers — originally expected to go toward paying off the debt can now go to other things.
"The savings benefit the entire county as it reduces the County's and YCWA's annual debt service obligation, which allows the YCWA to further its flood control objectives in the region," Mull said.
General Manager Curt Aikens said YCWA's annual savings from the deal will go a long way in improving water supply reliability and reducing flood risk in the county.
"That savings has provided funding that we offer as grants to local flood control agencies for graveling the tops of rural levees, emergency repairs on the Bear River and the temporary repair of the Ellis Lake drainage pump system, to name a few recent examples," Aikens said. "It also helps fund our ongoing flood risk reduction efforts, such as the Marysville Levee Improvement Project, as we continue working to reduce the risk in the city of Marysville."
Yuba County and the water agency jointly issued $78 million in revenue bonds in September 2008 to help fund the Phase 4 Feather River Setback Levee Improvement Project conducted by the Three Rivers Levee Improvement Authority.
Aikens said urban area levees in the southern portion of the county were in need of extensive improvements to prevent another flood from devastating the area.
In order to receive a chunk of state funding that was available through Proposition 1E, there needed to be a local match — hence, the bonds. Using the two funding sources, TRLIA was able to bring the levees in south Yuba County up to a 200-year level of protection — meaning there's a one-in-200 chance in any given year that a storm will overtop the levees, Aikens said.
"It was really important. Without that local share of the bond sale, we wouldn't have been able to improve our levees," said Paul Brunner, executive director of TRLIA.
The average interest rate of the 2008 levee bonds — which has a maturity date of 2038 — was 5.08%. Then in September 2016, a county financial advisor brought up the idea of refinancing, Mull said.
The action was expected to save the county and YCWA about $500,000 to $750,000 a year, but one major hurdle stood in the way.
Basically, the Yuba County Courthouse -- used as collateral on the 2008 levee bonds -- was determined to not meet certain seismic requirements. The county didn't have many other assets to substitute worth the same value (about $7 million), so officials had to get creative.
YCWA and the county were able to devise a side deal to free up the Yuba County Government Center to substitute as an asset. This involved YCWA paying off the county's remaining loan to Bank of America for bonds issued in 2011 for solar panels, which used the government center as collateral.
"Basically, this works similar to refinancing your home," Mull said. "The bond or 'lender' pays off your current loan and you refinance the outstanding principal at a lower interest rate. You achieve savings due to the application of the lower interest rate."
Under the refinanced terms, the new interest rate for the 2008 levee bonds is 3.98% (down from 5.08%). The deal will go through 2038.
"YCWA's long-term flood protection plan has identified about $400 million in projects to reduce our risk of flooding, and those will take decades to accomplish, and every dollar we can save helps move us closer to that goal," Aikens said.
