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(THOMAS WALLNER | THE GRAHAM LEADER) Members of the Graham City Council listen to a presentation from City Manager Eric Garretty regarding the upcoming fiscal year budget. The council began discussions on the budget during their meeting Tuesday, Feb. 17 as they work to address a number of key issues in the city.
In a little over three weeks, the Graham City Council will consider taking the next step to issue $14.7 million in debt for a rehabilitation project at the wastewater treatment plant and the purchase of a new fire truck.
The city council will consider the Notice of Intent (NOI) to issue Certificates of Obligation (COs) not to exceed $14.7 million during their meeting Thursday, April 16. An ordinance approving the sale of the COs will be considered during a council meeting Thursday, June 11.
“Of this ($14.7 million in debt), $12 million is reserved for phase one of the sewer plant rehabilitation, and $2 million is reserved for acquisition of a new fire apparatus. The remaining $700,000 is the estimated borrowing costs,” City Manager Eric Garretty said Thursday, March 19.
The city’s wastewater treatment plant was built in 1978, with age impacting a number of components. Phase one of the proposed project includes replacement of failing electrical infrastructure, construction of piping and plumbing construction of a combined electrical room and operations center.
Nick Landes and John Lopez of Freese and Nichols presented a preliminary design report and option of probable construction costs for the wastewater treatment plant rehabilitation project during the city council meeting Thursday, Feb. 5.
The engineer recommended a combined administration and electrical building to get the electrical infrastructure in an air-conditioned, controlled environment that could last for 20-plus years. The duct banks which house the wires are in poor condition and showing wear.
Many of the duct banks within the facility are original from 1978 and would need to be moved if a new facility is constructed.
During a budget workshop in February the city council approved moving forward with the NOI to issue COs for the two projects. The NOI is the maximum number the city would need to borrow and, once approved, the council cannot exceed this number.
“We can borrow below this number if we find that we can do that, it’s safe and it makes sense. This is a maximum number that we set in the notice of intent. Council is not bound to borrow that amount,” Garretty said in February.
Senior Managing Director of Hilltop Securities Jason Hughes, the financial advisor hired by the city, spoke with the council Thursday, Jan. 8 regarding the debt options available.
The city discussed three types of debt issuance which were general obligation (GO) bonds, COs and tax anticipation notes (TANs). COs are not subject to a bond election but city council approval through a NOI.
“COs are normally used to fund what I call the day-to-day projects. So they’re the projects that are needed to keep the city moving again day to day (such as) water, sewer, drainage, streets, public safety going to be in the big ones there. You can also do renovation to existing buildings, things of that nature,” Hughes said.
NOIs are required to run for two consecutive weeks in the newspaper of general circulation and are required to run 45 days beforehand due to the fact that they are subject to petition.
“If you have 5% of your registered voters petition it, it can effectively force the COs to a (GO) bond election. So that’s the mechanism by which your citizens have more input into that CO notice,” Hughes said.
The city’s current outstanding debt is $13.14 million which is due to the previous renovation of the water treatment plant and the installation of the new 20-inch water main from the water treatment plant to the city.
With the addition of new debt, the total outstanding debt would be increased to $27.84 million. The debt can be paid off via property taxes and water and sewer rate revenues.
“I would note, payments on the sewer plant debt will be drawn from the sewer fund revenues. This is why we’re increasing the monthly sewer rates,” Garretty said. “Payments on the debt for the fire apparatus will be drawn from the general fund. Therefore, in the most likely scenario, the debt payments for the fire apparatus will result in an increase in property tax rates.”
The city manager said the new fire truck would be financed over 10 years, while the sewer plant debt will be financed over 30 years.
“Getting this debt will allow us to kick off that design portion of the phase one of the sewer plant, and then, once we’ve secured the money, we’ll be able to go and bring back a contract that he will shop around, put out a request for bids on a fire apparatus, and bring that to you and hopefully beat our 27-year old fire truck dying on us,” Garretty said.
