The Clinton Herald, Clinton, Iowa

November 2, 2013

Committee debates how city will pay for sewer work

By Katie Dahlstrom
Assistant Editor

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CLINTON — The looming $2.6 million bill from the Iowa Department of Transportation for completed Camanche Avenue sewer work sparked a debate among members of the Capital Improvements Program Committee on Wednesday about what the city wants to do and what its obligations are.  
"There's no bill sitting in front of us right now, but we need to program this because everything we do has an impact on our general obligation debt capacity, including this," City Administrator Jessica Kinser told committee members as they narrowed the list of projects the city will fund.   
City staff proposed a $2.2 million state revolving fund loan partnered with a $400,000 general obligation bond to pay for the sewer and other work that the state already completed.  
The SRF loan has to be paid with sewer rates, meaning if more debt is incurred but not retired rates have to rise. The DOT bill will come in late 2015, the city's fiscal year 2016.  
The city's original plan was to use a general obligation bond to pay for the bill, which was slashed by $2.7 million thanks to a TIGER grant the city received last year. 
Staff suggested the SRF loan would be the preferable option for paying the Camanche Avenue sewer bill because of the changes in local option sales tax funding, the city’s tight general obligation bonding capacity as well as a fiscal year 2016 obligation the city has to purchase more land in the Lincolnway Railport.  
The cash flow model prepared by Public Financial Management, the city’s financial adviser, showed a 9.5 percent sewer rate increase in 2014 and 2015. However, Kinser explained during last week's discussion, 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.
At-large Councilman John Rowland was adamant Wednesday that Clinton residents are "maxed out" in terms of rates and fees.  
"I've said it before and I'll say it again. If something like this is going to cause greater fees and greater rates for the taxpayers than what we currently have, I don't care what it is, I'm not voting for it," Rowland said. 
At-large Councilwoman Jennifer Graf asked Rowland if he had any suggestions regarding how to pay for the sewer work. Rowland said he didn't, but recalled other work the city did not do only to be mandated by the state to do it.  
"This is a different situation in that the work has already been done," Kinser said. "So that's where we have to pay for it."  
Kinser explained the proposed option would have the least impact on the taxpayer, though she did not know what increase it would create on the debt service levy.  
The outlook for the sewer user is not as rosy. The city would need to implement sewer increases to cover the $165,000 annual principal and interest payments for the SRF loan or reduce costs to offset the growing debt.  
Although Kinser is exploring cost-saving options such as how to cut down on the Regional Waste Water Reclamation plant's monthly electricity bill, she told committee members there appears to be only one real option to forgo an increase.  
"We're pursuing things, but I don't think you could do it without reducing employees," Kinser said.
Liberty Square development, which Graf pondered as an option to neutralize the $2.2 million SRF loan, isn't likely to happen by the time the city needs to pay the DOT bill. 
Although the committee doesn't have the final say in how the city funds projects, it is responsible for passing on a plan to the plan commission, which will then come before the City Council during budget season.  
The $2.2 million SRF loan partnered with the $400,000 general obligation bond remained in the recommendation that will move on to the Plan Commission.  
"I guess there's a difference between do you want to vote for it or do you have an obligation to do it," Committee member Sue Tugana said.