Silicon Valley reservoir expansion project receives $92 million EPA loan

The Environmental Protection Agency is making $92 million available to a trio of water districts to significantly expand a reservoir in California’s Santa Clara County. The expansion will increase long-term water storage capacity and strengthen drought resistance in the area.

The loan is funded through the EPA’s Water Infrastructure Finance and Innovation Act (WIFIA), a credit program designed to support water, wastewater and infrastructure projects. WIFIA has provided $19 billion for over 100 projects nationwide since 2014.

The water districts of San Benito County and Pacheco Pass along with Santa Clara Valley Water will use the funds for planning and design of the Pacheco Reservoir Expansion Project.

Located 60 miles southeast of San Jose, the current reservoir’s capacity is limited to 5,000 acre feet. The ambitious expansion would increase its capacity to 140,000 acre-feet. The expansion would meet the water needs of more than a million area residents for up to a year in the event of an emergency.

Plans include building an earthfill dam, a pump station and conveyance pipeline, inlet/outlet works, a spillway, roadways and a power transmission line. The existing dam at the site will need to be decommissioned, and there will be opportunities to restore 1.3 miles of new stream channel habitat.

“These loans reflect the commitment from federal lawmakers to invest in our nation’s water infrastructure,” John L. Varela, Valley Water Board chairman, said in a recent blog post. The line of credit will “allow Valley Water to finance major projects in a cost-efficient manner,” he said.

Construction on the $2.78 billion project is expected to begin in 2027, with an estimated wrap date in the fall of 2035.

Conceived in 2015, the project’s original estimated cost of $1.37 billion has steadily risen in the years since, in part because of inflation.

Unstable geology on a previously considered site is another reason for the project’s ever-ascending price tag. Santa Clara county’s neighbor to the west, Santa Cruz, is No. 15 on a list of the most landslide-prone counties in the U.S.

“We looked at two different sites, and the one that was closer to the existing dam had geology that would require us to excavate deeper to get to really competent bedrock for the foundation of the dam,” Ryan McCarter, Valley Water’s deputy operating officer of dam safety and capital delivery, told Government Market News. Conditions at the current, upstream site were more favorable, he said.

Pitched as a solution to the state’s infamous battles with periodic droughts in the wake of climate change, studies conducted by Valley Water show the completed project would kickstart many positive environmental outcomes, including improved water flow and temperature conditions that would allow the ESA threatened steelhead trout to thrive.

The Pacheco Reservoir Expansion Project will be the second WIFIA-funded project this year for Valley Water, which received $115 million in February to prepare for a retrofit of Anderson Dam, a structure located 25 miles northeast of the Pacheco site.

Now entering its seventh round of financing, WIFIA currently has $6 billion up for grabs, and the program is currently accepting letters of interest. The State Infrastructure Financing Authority (SWIFA) loan is a second option, extending an additional $1 billion line of credit exclusively to state infrastructure financing authority borrowers.

^{Strategic Partnerships, Inc. can provide information on contract opportunities, plus existing and future government funding. For more information, contact research@spartnerships.com.}