The city of Morro Bay locked down a $62 million federal loan with a .83 percent interest rate for its water reclamation facility on March 10. The funds come after the city received results from the U.S. Department of Fish and Wildlife's review of the future facility and its potential impacts on the California red-legged frog.

In order to pay for the $126 million water facility—which includes construction of a new 1-million-gallon-per-day advanced treatment facility, two new lift stations, an approximately $3.5 million pipeline alignment, and wells to inject the purified water into the groundwater aquifer—Morro Bay has been working with the U.S. Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) program to secure a low-interest loan since 2017.

In 2017, the project was chosen for funding out of 12 nationwide applicants.

Morro Bay City Manager Scott Collins told New Times that part of the loan application process included having the EPA and other federal agencies, such as Fish and Wildlife, review the overall water reclamation facility project and environmental impact review (EIR)—that were certified in 2018. The agency's review started in June 2019 and the city received the results right before the Feb. 25 Morro Bay City Council meeting.

Last year, Fish and Wildlife sent the EPA a letter stating that it didn't agree with the EPA's determination that the project "may affect, but not likely to adversely impact," the California red-legged frog and its critical habitat.

Collins said the agency's call for additional review and consultation on the potential impact to the species wasn't due to a frog sighting. According to city officials, there hasn't been a red-legged frog occurrence documented within a square mile of the South Bay Boulevard site since 1996.

"[Fish and Wildlife] said we need to pay closer attention to the sort of migratory patterns of frogs and make sure that there isn't any prohibitions for them to make their journey along the path," he said. "It's not necessarily that all of a sudden the project is a habitat where the frogs are living but it could be a future place of their travel."

Now that Fish and Wildlife's review is over, Collins said, its biological opinion states that there are precautions the city can take to minimize potential "take" of the species. "Take," according to the federal Endangered Species Act, means to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.

"So we have to have biological monitors out there throughout construction, conduct surveys prior to construction, and then put in exclusion barriers so that it would be hard for frogs to get onto the site and get trapped. That's the key: [the agencies] don't want the frogs to get trapped in there and then not be able to continue their journey to wherever they're headed," the city manager said.

Within the next few months, city staff will take a detailed look into the mitigation measures it must take and how much that will cost.

Now that Morro Bay complied with the additional review of the project, the city successfully secured up to $62 million in low-interest funding from the WIFIA program. About 55 percent of the total funds will be allocated to the water system portion of the program, and 45 percent of the funding will go to the wastewater portion of the program. The loan is ultimately expected to save Morro Bay ratepayers $29 million over the life of the project.

"When we did our rate study in 2018, we projected the WIFIA loan would be at 3.25 percent interest, so now it means that on average our annual debt payment to the federal government will be anywhere from $800,000 to $900,000 less per year," Collins said. "I'm not an expert by any stretch, but I believe the coronavirus and recent oil price drops have roiled the stock market, and in response the federal government's response is to lower interest rates."