Republic drops pursuit of $36 million wastewater ballot issue

By: 
Steve Chapman

Thanks to interest rates, city to fund major upgrade with Certificate of Participation instead
 
The Republic City Council voted to no longer pursue a $36 million bond issue, which was supposed to finance upgrades to the city’s wastewater treatment plant. The proposal was anticipated to be on the April 6 ballot, but during the Jan. 19 council meeting, the plan was halted. Instead, the council opted to issue a Certificate of Participation (COP) to finance the project.
Mike Landis, public information officer, said there were strong reasons that the council chose to issue the COP. One was time. Currently, the interest rate on a Certificate of Participation is 3-percent, while the bonds issued through the State Revolving Loan Fund (SRF), the bonds that would have been issued if the citizens of Republic had voted in favor of the bond issue, is only 1.6-percent.
However, the SRF program requires a process that takes 18 months to issue bonds, and in that time, interest rates could rise.
“When comparing the interest rates of the COP … and the SRF Loan Program, there was only a 1.6-percent difference,” he said. “In a normal market, this interest rate spread can be a lot higher with interest rates around 5 or 6-percent.”
Another factor, Landis said, was the possibility of increased construction costs by the time bonds issued through the SRF were available.
“Construction costs continue to climb,” Landis said. “By the time the plant was started in 18 months through the revenue bond, the additional cost of construction might have
 lessened the actual interest rate savings.”
Landis added that if the current bond market environment was normal, it would benefit the city to utilize the SRF, but current interest rates don’t justify it.
“Right now, interest rates are very favorable for financing,” he said. “The city can obtain funding without going through the SRF loan process at a low interest rate.”
According to information provided during the council meeting on Jan. 12, the city is currently under a voluntary compliance agreement with the Missouri Department of Natural Resources (MDNR) which requires it to progressively make improvements to the wastewater treatment plant to eliminate the practice of bypassing the treatment process during rainwater events. Currently, a bypass of the treatment process is necessary because the current amount of stormwater runoff entering the sanitary sewer lines through inflow and infiltration (I & I) exceeds the volume the plant can process, but this is in violation of the Clean Water Act and the NPDES operating permit for the wastewater treatment plant. One of the upgrades to the plant will be an expansion of the plant’s capacity to address the additional stormwater volumes. The expansion is expected to cost $20 million. Another $10 million would be allocated to the Brookline Lift Station and force main, while the remaining $6 million would go towards eliminating I & I from the system.
The current voluntary compliance agreement ends this year, after which the MDNR has indicated the city will enter an Administrative Order to address the compliance issue. The administrative order would establish a strict timeline and process for addressing the compliance issue, and could include fines if the timeline is not met.
 

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Lawrence County Record

312 S. Hickory St.
Mt. Vernon, MO, 65712
www.lawrencecountyrecord.com

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