The Clinton Herald, Clinton, Iowa

October 19, 2012

Clinton residents face referendum to reallocate money to sewer work

By Katie Dahlstrom
Herald Staff Writer

CLINTON — Members of the Clinton City Council on Thursday came together to ensure there will not be a sewer rate increase in January. 

What will happen to residents’ bills and the city’s finances in the coming decade, or even year, is not so certain.    

During a special Committee of the Whole work session, council members approved a series of measures that will be taken in order to bring some level of solvency to the city’s sewer funds.

To make a large change to the immediate and near future expenditures, the Iowa Finance Authority, at the request of the city, will restructure the city’s $62 million debt for the new treatment plant from a 20-year to a 30-year debt service schedule.

The IFA will also waive certain bond requirements that will allow the city to pursue a State Revolving Fund loan of $2.2 million to cover the payment to the Iowa DOT for the sewer work along Liberty Avenue which will be payed back over a 20-year period.

The city will also pursue another SRF loan for $6.5 million for the 25th Avenue North pump station project. Additionally, the city will not perform transfers to reserves for fiscal years 2013 to 2015.  

These items altogether have a $1 million expenditure impact, allowing the city to push the proposed sewer rate increases back and hopefully have a positive balance in the sewer fund by the end of fiscal year 2015.   

“All of us collectively, have all said we are not going to put this on the  the taxpayers in the form of a monthly increase in January,” At-large councilwoman Jennifer Graf said.

While the new plan does not involve the 25 percent increase in January as was suggested at the Sept. 25 COW work session, it does involve a 25 percent rate increase in July 2013 and a subsequent 15 percent increase in July 2014 with moderate 3 percent increases in 2015 and beyond.

However, these increases are not set in stone. They are merely place holders, Finance Director Jessica Kinser said, and will be reviewed during budget discussions in February.

During Thursday’s meeting Kinser stressed the weight of the situation and the effects it will have on city finances.  

“We are talking about things that will have a long-term impact on the city. Ultimately, This is a delicate balance of what being’s required right now with what risk can the future take....This is a drastic step. I don’t want to minimize this in anyway way because this is a drastic step,” Kinser said. “Is it the best case financial scenario? It’s not. But we’re in a position where we don’t really have a best case financial scenario that really conforms to good financing principles at this point.”

The council also was asked to pursue a $20 million, 20-year general obligation bond with annual interest and payments equal to $1.5 million to fund a majority of the projects in years 2013 to 2016 established in the city’s long term control plan.

This will use a half of the 1-cent local option sales tax that is currently allocated for streets, sewer and waste water treatment plant construction and put the city near its bonding capacity. This will also use the funds that had been previously planned to fund the city’s pavement management program.

Because the 50 percent of the local option sales tax allocated for these types of projects will be tied up in funding projects for the long-term control plan and the general obligation bond will put the city near its bonding capacity, the city will hold a special election in March to ask voters to allocate the other 50 percent of the local option sales tax to street construction and maintenance as well as sewer projects.

That other 50 percent is currently used to provide property tax relief by offsetting the debt service from the tax levy. For fiscal year 2013, $1.3 million of the local option sales tax was used to abate the levy.  

If the referendum were to pass and 100 percent of the local option sales tax was allocated to sewer, streets and wastewater, it would mean an additional $1 per every $1,000 of assessed value on resident’s property tax bills.  

However, if the referendum does not pass, it will mean the city will need to pursue a $1 million general obligation bond annually plus an additional $2.7 million general obligation bond in order to continue funding the city’s pavement management program if the council chooses to do so.  

This referendum will come forward in March at the earliest if it is approved by the City Council.

All of these items will move forward for council approval.