City responds to questions about how it will pay for water plant bonds

Friday, August 3, 2007

"We've got to do this, but how are we going to pay it back," Don Hutchison said Thursday afternoon.

Hutchison believes the annual bond payment will be about the same as the user fees collected annually if the city borrows the entire $15 million estimated for the new sewer treatment plant and other sewer line improvements, and that's a concern to him.

"They need to do the project, but the money is going to be tight and we're looking at increases in sewer rates in the future," he said.

Hutchison believes that with most or all of the sewer user fees needed to cover the repayment of the bonds the city will be left with money from the 1/2-cent capital improvement sales tax voters approved in 2003 to cover maintenance and operating expenses, he said.

This sales tax currently brings in about $750,000 per year.

The city started collecting the sales tax in 2004 and Hutchison would like to know where the city has put that money.

"They ought to have $2 million in a bank account somewhere," he said.

When Nevada voters passed the 1/2-cent sales tax in 2003 the plan was for the city to use half of the sales tax revenue to pay for retiring the original $5.2 million in sewer revenue bonds approved in 2003 and use the other half to replace and repair city sewer mains on a pay-as-you-go basis using city crews.

The current plan calls for the city to finance the entire $15 million cost of the project. The 300 percent increase in the total cost of the project appears to be due to several factors including inflation, a 25 percent increase in the size of the treatment plant and the use of outside contractors for the north interceptor line.

City Manager Bill McGuire said during the city's sewer bond forum July 31 that the Missouri Department of Natural Resources would not let the city use the sales tax as originally planned to secure the bonds because the sales tax ends sooner than the bonds mature.

When Hutchison asked McGuire during the forum what was the city doing with the $750,000 the sales tax brings in each year, McGuire said that it had been used to build a lot of sewer lines and other capitol improvement projects, as well as for operation expenses.

During a special election Aug. 5, 2003 Nevada voters approved issuing $5.2 million in sewer bonds to improve the city's sewage system. Voters also approved a 1/2-cent capital improvement sales tax at that time.

The 1/2-cent capital improvement sales tax has a 20-year life; however, the city started collecting that tax in 2004, so it will expire about three years before the 20-year bonds mature if they are issued this year.

The original $5.2 million in sewer revenue bonds have never been issued and the city intends to combine them with the $9.8 million in bonds they are asking voters to approve on Aug. 7 to cover the entire $15 million estimated cost of a new sewer treatment plant, repairing or replacing the north interceptor line and fixing the inflow and infiltration problems.

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