By Katie Dahlstrom
With a $2.6 million bill from the Iowa Department of Transportation set to be delivered in two years, city of Clinton officials are contemplating the impact on city sewer rates.
During the Capital Improvement Program Committee meeting Thursday, city staff and committee members discussed the city’s looming expenses including the $2.6 million bill from the Iowa DOT for sewers and other items on Camanche Avenue.
Of that $2.6 million, $2.2 million is related to sewers and the remaining $400,000 stems from miscellaneous expenses.
City Engineer Jason Craft told members of the committee the city’s proposed plan is to use general obligation bonds to pay for the $400,000 and a state revolving fund (SRF) loan to pay for the $2.2 million.
The SRF loan will add another $163,000 a year in principal and interest the city has to pay with sewer rates.
“There’s no way of knowing what that would do on the sewer rates until the sewer cash flow model is done,” Craft said. “And anyway it wouldn’t have to go into effect until 2016.”
The cash flow model prepared by Public Financial Management, the city’s financial adviser, showed a 9.5 percent rate increase in 2014 and 2015. But, City Administrator Jessica Kinser explained, those numbers were mere place holders and the model at the time it was prepared last year did not include this $2.2 million SRF loan.
To use SRF loans, the city has to set rates so it can collect 110 percent of the amount of debt it has, which means as more debt is incurred, rates have to rise.
“It’s always looming out there that we need to set our rates to 110 percent coverage for operations, maintenance and debt,” Kinser said.
Until the cash flow model can be updated to include the project, it’s unclear what rate increase the city actually needs to implement in order to fund the Camanche Avenue sewer and other projects, she said.
“I’m not anxiously awaiting to see it, but that’s the moment of truth we need to get to,” at-large Councilman John Rowland said.
City staff believes the SRF loan would be the preferable option for funding the Camanche Avenue sewer because of the changes in local option sales tax funding, the city’s thinly stretched general obligation bonding capacity as well as a fiscal year 2016 obligation the city has to purchase more land in the Lincolnway Railport.
“When you look at 2016 when this is due, there is a definite squeeze,” Kinser said.
The city’s position could be worse, Craft explained. The city originally was going to be on the hook for more than $5 million, but the number was slashed in half thanks to a $2.7 million TIGER grant and other grants.
Regardless, Councilwoman Jennifer Graf pointed out, the city knew it was going to receive a bill for the stormwater and sanitary sewers when the project started more than a decade ago.
“My point is, it was a project that was not entered into the books with an outcome of payment until now,” Graf said. “That wasn’t a visionary action that the council took and now we have to pay for it, a project that started in 2000. It is what it is and we’ll have to come up with the money.”