NEW ALBANY —
The final piece of a sewer-rate increase puzzle will be vetted by the New Albany City Council today.
At 5 p.m., the council will convene to take a final ballot on a loan ordinance that would allow the sewer utility to accept a $7.4 million state loan. The second reading of the measure passed 5-4.
The third reading was delayed so sewer attorney Greg Fifer could finalize the rate structure and other details of the loan.
An immediate sewer rate increase of 23 percent followed by a 20 percent hike in 2012 was approved by the council April 15 — the same night it passed the loan ordinance on second reading.
Councilmen Jeff Gahan, Dan Coffey, Steve Price and Pat McLaughlin voted against the rate increase and the loan, which sewer officials say is needed to complete infrastructure projects over the next two years.
The rate increase should bring in an additional $5 million in revenue during the next 15 months and the same amount every year thereafter, according to Gahan.
That’s enough money to fund projects without taking on more debt, he said.
“The loan is what set the rate. Now that they’ve pushed that rate increase through, we don’t need the loan,” Gahan said. “Hopefully when we look at it separately, it will be more apparent that we don’t need a loan.”
The Indiana Finance Authority has agreed to allow the city to use money from its debt reserve fund to pay off $1.4 million in short-term financing, as well as to refinance $1.1 million of New Albany’s long-term debt, dependent on the council’s acceptance of the loan.
The $7.4 million would come through the State Revolving Loan Fund program, or SRF. The state is requiring the city to fund projects that have been included in the utility’s updated capacity assurance plan with the loan.
That plan is awaiting approval from the U.S. Environmental Protection Agency, which hasn’t set a schedule for completion of the infrastructure upgrades.
John Skomp, of Crowe Horwath — the financial analysis agency hired by the utility to examine its rates — said the sewer board would have to dedicate the increase in funding revenue to debt service without the loan.
“The bond ordinance basically puts everything in place so that we can accept SRF’s plan they put together,” Skomp said Monday.
The added revenue from the sewer rate increase wouldn’t be enough to fund the capacity assurance projects and cover the utility’s debt obligations, Skomp continued.
“If we just did the rate increase without the financing, those projects would be many many years off in being completed,” he said.
Skomp told the sewer board in January a 70 percent rate increase would be needed immediately for New Albany to fulfill its debt obligations and pay past due bills.
That was before the state agreed to the loan offer, which Skomp told the council earlier this month was surprising considering the financial condition of the utility.
The city would have a difficult time securing a loan from another source, Skomp has told officials numerous times over the more than three months the sewer rate increase has been deliberated by the council.
The utility is obligated for about $52.5 million, the majority of which is owed to the state.
The meeting begins at 5 p.m. in the third-floor Assembly Room of the City-County Building. The loan ordinance is the only item of business on the agenda.
At 6 p.m. in the same room, a public hearing is scheduled for residents to learn more about the new stormwater masterplan.
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How they voted
• The second vote for the sewer loan April 15 had the same result as the sewer rate increase. Council members Diane McCartin-Benedetti, Bob Caesar, John Gonder, Kevin Zurschmiede and Jack Messer voted in favor. Councilmen Steve Price, Dan Coffey, Jeff Gahan and Pat McLaughlin voted against.
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