By Cindy Allen, Managing Editor
March 18, 2009 12:06 am
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Enid city commissioners were presented some attractive interest rate options if they want to borrow money through Okla-homa Wa-ter Re-sources Board for three in-frastructure capital im-provement projects.
During their stu-dy session prior to the regular city commission meeting Tuesday, the city’s financial adviser offered some financing options for construction of a new wastewater treatment plant, installation of a new automated water reading system and construction of two water towers in the east and south parts of town.
Rick Smith, of Municipal Finance Services Inc., told commissioners time is of the essence in making application with Oklahoma Water Resources Board for some low-interest financing options, as well as taking advantage of some stimulus funding and grants for these projects. The clean water loan program made available through OWRB means the city can borrow money at a discounted rate of 3 to 4 percent.
“It’s a fixed rate that’s more attractive,” Smith said.
If the city takes advantage of the low-interest loan rates, it would free up reserve money that has been built up in the water bond fund for immediate use on roads or other projects that aren’t subject to the kind of low-interest financing these water projects are.
City Manager Eric Benson said he will call a special session next week to provide resolutions for the financial advisers to begin the process of applying for the financing and getting the projects moving forward.
A key element to moving forward on the projects is to get a loan application to OWRB. The loan application would lay out existing debt, the repayment sources and other information OWRB would need to determine the city’s financial capability to repay the debt.
Currently, the city has about $13 million in water sales tax reserves that has been freed up due to voter approval last year extending the one-cent sales tax in effect until 2017 and freeing up the reserves for other purposes. Also, the city is going to have a gap in its debt service in 2011 and 2012, freeing up about another $9.5 million.
Another added bonus is the stimulus money promised for the state includes money for water improvements like the meter reading system. What is not known at this time, Smith said, is if part of that money can be provided in grants to cities that qualify. The most Enid could qualify for in these water grants would be around $2 million, Smith said.
Commissioners balked when they heard new figures for construction of a wastewater treatment plan now are estimated at $53 million. Ward 2 Commissioner Don Rose said the largest estimate he had ever seen from the engineers is a cost of $42 million, and that includes “everything.”
Cost of the automated water meter reading system is estimated to be about $7 million, and cost of building the two water towers is estimated to be around $6 million.
Commissioners discussed priorities of the project, agreeing the wastewater treatment plant and the meter reading system as the top two priorities, and the water towers a distant third. However, they were told the city could apply for all three projects and pay a one-time $500 loan application fee but that would not bind them to pursue all the projects.
Commissioners are interested in the low-interest financing options, and Smith said the city has the repayment mechanisms in place for repayment.
“In my view, the deal is you have the ability to get subsidized funding through the state and borrow at some of the cheapest rates we’ve seen in my lifetime,” said Ward 5 Commissioner Daron Rudy. “Because of the way they’re putting out the stimulus money, it makes sense to do the loan and grant on the meter system. It frees money up for roads and other things. It makes a whole lot of sense to finance this and lock in that interest rate as far as we can get on these projects.”
Allan Brooks, another adviser with Municipal Finance Services, said the bottom line is if commissioners want to use that estimated $25 million cash in hand for the water projects or borrow the money at these low rates and save that cash in reserve for projects that can’t be financed this inexpensively.
Commissioners were told repaying the financing shouldn’t be a challenge based on the freed up restrictions on the water bond interest rates. Repayment for the wastewater treatment plant would come 70 percent from the one-cent sales tax and 30 percent from the Sanitary Sewer Capital Improvement Fund (SSCIF). The advisers’ figures show a 3 percent growth in sales tax revenues each year and no change in the SSCIF over the next 24 years.
“This presents a sound financial plan,” Smith said.
Commissioners agreed to pursue the financing plan; however, Rose said he’s not willing to just accept the engineer’s increase to $53 million for the wastewater treatment plant.
“I’m not willing to let that increase just wash over us,” he said. “I would like to see an itemized list of what those increases are.”
He said Jacobs Engineering Group, the contractors hired to build a wastewater treatment plant, needs to present reasons why those original figures have changed.
Smith said commissioners can still apply for the loan for $53 million, but the actual dollar amount for the loan won’t be established until all the projects are bid.
“That’s another attractive part about this,” Smith said.
City commissioners approved several routine items during their regular commission meeting, including an agreement to use stimulus funds to purchase four vehicles for Enid Transit, an agreement with Oklahoma Aeronautical Commission for an airport maintenance agreement for rehabilitation of a runway, along with several consent agenda items.
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