LOS ANGELES — California’s Department of Water Resources has secured an $800 million line of credit through two commercial paper sales that closed Wednesday to pay for repairs to the Oroville Dam spillways.
Concerns over rising water levels forced the evacuation of 188,000 people downstream of the dam in February after days of severe rain resulted in damage to the dam’s main relief valve, a 3,000 foot concrete chute, or spillway.
The notes were sold in two tranches with $300 million in the first series dedicated for general capital improvements and $500 million in the second note designated to pay for costs associated with damage to the spillways that serve the dam.
DWR only tapped $67 million Wednesday from the second note series designated for the Oroville project of the $800 million available, said Russell Mills, a Department of Water Resources assistant division chief in fiscal services.
“All we did on Wednesday is set ourselves up with a commercial paper line to handle the costs of restoration,” Mills said.
Residents, who live downstream from the dam in Butte County, Calif., north of Sacramento, were evacuated after large chunks of concrete broke off in the main spillway causing operators to close it. The reservoir behind it then filled up rapidly when dam operators closed the spillway to assess damage. That resulted in Lake Oroville water levels rising above the dam's emergency spillway, which was designed to prevent water from overflowing the dam.
Spillways are typically concrete chutes that release water from reservoirs to prevent flooding.
The emergency spillway had not been used in the dam's 49-year history, and design flaws quickly emerged when the overflowing water eroded the hillside that supports the emergency spillway wall.
President Donald Trump announced April 2 that the federal government would provide $540 million to California to cover the cost of winter storm damage, including $274 million for repairs to the Oroville Dam spillway.
The $274 million would cover emergency response costs incurred through May that include stabilizing the emergency and main spillways, as well as debris removal and work on the dam's Hyatt Powerplant, Mills said.
It will cost an additional $231.7 million to replace the 3,000 foot-long concrete chute comprising the main spillway. Kiewet Infrastructure West Co. of Omaha, Nebraska was chosen April 18 to do the work, which started a race for the construction company to finish by Nov. 1, before the November rains come.
With the President’s declaration of the area as a disaster, Mills said the state is eligible to have 75% of the emergency responder and repair costs covered by the U.S. Federal Emergency Management Agency. FEMA officials have approved reimbursement of those costs; and Mills said they are expecting that FEMA will also reimburse the state for 75% of the costs of the work being performed by Kiewet to permanently replace the spillway.
The other 25% of Oroville spillway replacement costs would be shouldered by the water agencies, who receive water from the system that flows all the way to the Los Angeles basin.
“It would be a slight increase, because it would be spread across 20 years if we issue long-term bonds,” Mills said. “As we work on Oroville, we are also deferring other capital projects.”
Though the bond documents say the notes mature Jan. 28, 2018, Mills said the letters of credit backing the commercial paper don't expire until 2020.
DWR had decided before the Oroville crisis to increase the line of credit for capital projects from its existing $150 million to the $300 million in the first note series that is for projects unrelated to the dam, Mills said.
Bank of America Merrill Lynch was selected as the underwriter for the $300 million note series and Wells Fargo for the $500 million series that will fund the Oroville projects.
Wells Fargo bid on the entire $800 million, but DWR decided to split it between the two banks, Mills said.
Though the state treasurer has barred Wells Fargo from operating as an underwriter in the state’s business, it still uses Wells Fargo for commercial paper and if the bank offers the lowest bid on competitive bond sales.
“The state treasurer’s office and the governor’s office supported us using the bank,” Mills said. “They did come in with the best offer.”
Mills said he doesn’t anticipate issuing revenue bonds this year to replace the commercial paper.
“We actually won’t be in the market this year for long-term revenue bonds for DWR, because we pre-funded projects last fall securing $270 million through a revenue bond sale,” Mills said. “We had the Cortopassi measure staring us in the face and we couldn’t be in a situation where we had to go to voters if we needed to make repairs on part of the water system.”
Dean Cortopassi, a wealthy Stockton farmer, bankrolled a ballot measure that failed in November that would have required revenue bonds exceeding $2 billion to be approved by voters. But officials feared it might have affected smaller revenue bond sales as well.
DWR is responsible for a system of aqueducts that delivers water from the Eastern Sierra Nevada Mountains to southern California. The Oroville Dam, a key piece in the system, controls the flow of water from the Feather River of the Sacramento-San Joaquin Delta into the aqueduct system, which provides a major supply of water for irrigation in the San Joaquin Valley as well as municipal and industrial water supplies to coastal Southern California.
