Price City has secured funding for water improvements and projects after passing a motion approving a resolution authorizing over $1.4 million in taxable water and sewer revenue bonds.
The city council unanimously approved the resolution which could possibly have the city paying off the bonds in increments per year until the year 2039.
Eric Johnson, a bond attorney working with the city, presented the resolution before the council and laid out the requirements the city has agreed to follow to secure the funding for projects.
The resolution is "fairly lengthy" and the dollar amount is "significant", according to Johnson. The city is going to be receiving the bonds at a zero percent interest rate and the Community Impact Board is giving a grant in the equivalent amount in the form of a grant, he said.
The authorized repayment schedule begins on July 1, 2012 with a starting payment of $72,000 per year. This payment schedule will continue until July 2039 with a final payment of $75,000, unless the city is able to secure a higher interest rate and pays off the bonds earlier. Only money from water and sewer revenues will go towards repaying the bonds.
The city has agreed to follow a few points within the resolution that says one of the first priorities is that the water and sewer systems must be maintained.
"If those systems are not maintained, then you are not getting revenues to repay the bonds," Johnson said.
Also the city has agreed to pay the principal and interest payments bond and other bonds on parody, meaning any and all projects must be paid off. Third, the city will also develop a rainy day fund that will reach an amount of $72,000, which will be built up over a period of five years, according to Johnson.
The city has promised to keep water and sewer rates high enough to pay expenses plus 25 percent. Rates will be high enough to pay all operation and maintenance expenses and then with the water and sewer bonds, it will be enough to make all of those payments plus 25 percent more than those payments. If at any time the city is not meeting that, the lender can come in and tell the city to increase the water and sewer rates, Johnson said.
Included within the resolution, the city will make sure there is insurance on the system and that projects are built in a timely matter.
The contract would be binding over the entirety of the project and would only be amended under very limited circumstances, Johnson said.
Also in the terms of the contract, the city would not allow any competing water or sewer systems to install lines down the same streets that the city services.
The resolution would have no collusion with Price River Water Improvement District, according to Nick Sampinos, Price City attorney. They serve different customers and although they have some lines on the same streets they derive any financial benefits from those, he said.
"Basically you're saying is this is a monopoly and you're not going to allow someone else to provide water service within the city," explained Johnson. The reason that decision is made is to protect the water and sewer revenues, he said.