ELKHART — Plans by the city to begin two major sewer projects and use lower-than-market interest rates gained support Monday night, April 28.
The city council’s finance committee offered a vote of support for the plans to seek the issuance and sale of bond to finance up to $24 million for two projects, including the million gallon underground tank that will be constructed in the downtown area.
The city council has final approval on the matter, but officials suggested they might need much less than the $24 million to complete the two projects.
City officials were motivated months ago when they learned they could apply for a state revolving fund that comes with a two percent interest rate, which is twice as low as the current market rate.
As a result, the city moved up the planned schedule for the tank project and improvements at the waste water treatment plant on Nappanee Street.
Making it even more enticing is a thirst among construction companies for work, said Mike Machlan, city engineer. That became clear with a recent construction project officials saw unfold in Chesterton.
“We heard that and that’s when we pulled our heads together and (asked) could we do more, could we do it faster ,” Machlan said.
Machlan said there’s a chance total costs could be several million less when the bids are opened.
The tank project and treatment plant improvements are both part of the long-term combined sewer overflow work mandated by the federal government.
The three-member finance committee plus two other city council members asked city officials and a consultant questions for nearly two hours before the committee voted unanimously to recommend the council approve the plan.
The council meets Monday night, May 5, and could consider the recommendation at that time.
Councilman Brian Dickerson asked if parts of the project such as plans for a parking lot that includes large planters and extra-wide sidewalks could be scaled back to save money.
Randy Rompola, a representative of Faegre Baker Daniels, of South Bend, said the environmentally friendly amenities such as planters and pervious pavement are federal incentives that partially contributed the availability of a lower interest rate.
Council members pressed officials on where the proposed new level of indebtedness would leave the city utility, which currently has a debt of about $11 million.
Officials, in turn, said the current finances of utility would not require a utility rate increase to cover the proposed work.
In 2012, the council approved a series of rate increases sought by the administration to pay for some of the sewer improvements.
However, Dickerson questioned how the city would be positioned for future projects and what the choices for funding the next CSO project might be.
Specifically, Dickerson asked if “there are no more bonding capability at that rate, then hypothetically we could see the potential for another rate increase later this year.”
Machlan replied, “Hypothetically, yes, but there’s also the possibility that we can delay it for another year.”
“We have a lot of cards we can play,” he said.
Afterward, Machlan said Mayor Dick Moore has worked hard to look for grants and minimize the impact on customers.
The entire CSO construction price tag is expected to be in the neighborhood of $135 million, but the city remains ahead of schedule and still has 15 more years to complete the work.
“Undoubtedly, in the future, we’re going to have to do a rate increase, but we’re not going to do one this year,” Machlan said after the meeting.