Wellington commits to sewer bonds, proposes rate increase
The Wellington City Council committed the city to a $240,000 bond issue for sewer improvements, but the town won't see the money from the Community Impact Board until sewer rates increase to guarantee payment.
That rate increase, which the council will vote on at its next meeting, will add $5.25 to monthly bills. Customers will be paying $28 per month if approved.
There are reasons for the increase beyond getting money to pay the $8,000 per year on the 30-year, interest-free loan. This is largely because bond covenants are far from handshake deals.
CIB bond attorney Eric Johnson explained that in addition to the annual payment, the agreement also requires the city to build a reserve of at least one year's payment over the next six years. The city also has to demonstrate that its sewer enterprise can cover routine operation and maintenance expenses, and the loan repayment, plus have 25 percent left over for unexpected expenses.
On top of that, Mayor Ben Blackburn advised that the city should start banking money to pay for the mandatory flush and video survey that will be needed in five years. State law requires each achieved by a system-wide survey once every five years.
Blackburn explained that in talking with contractors he has learned that it would be more economical for the city to do the all-at-once inspection rather than bring in the expertise and specialized equipment five times.
Wellington has already received a $75,000 grant from the CIB for this year's video survey.
The final reason for the increase is to provide some cushioning in case the tapes show other problems with the system.
The town learned that there was trouble underground over the Thanksgiving holiday. A sewer main under Main Street backed up and the city had to bring in out-of-town contractors to clear it and determine what caused the blockage. After dragging a camera through more than a half-mile of the pipe, officials got a view of extensive corrosion and some places where there was no pipe at all.
Faced with an emergency and a $480,000 repair estimate the city could not afford, Blackburn got an emergency package from the CIB last month - a $240,000 outright grant and an equal amount in loan. He told the council at the time that the CIB would not award the full amount as a grant because the city's rates were too low in comparison with other systems.
The city would have to demonstrate its willingness to carry its own share of the maintenance load by bringing its rates into line, he stated.
Attorney Johnson said the CIB will close on the loan Tuesday. However, the check will have to be deposited in a construction escrow account with the state treasurer until the rate increase is approved.
The council's unanimous vote cannot be rescinded.