News

Sewer loan still in limbo

The council and city staff continue crisis management by delaying until December repayment of the $3 million interfund loan between the water and sewer utility.

The controversial loan was approved by council in May 2009 to pay the costs associated with the city’s Waste Water Treatment Plan (WWTP) update project and allowed the city to transfer up to $3 million in water utility funds to the sewer fund on an as-needed basis.

The city extended the loan in May 2010 due to the city’s poor financial status and the ongoing litigation filed by the Bainbridge Ratepayers Alliance.

The City Council agreed Wednesday to extend the repayment until Dec. 1 in the hope that the city’s improved 2010 financial standing will allow it to have a successful bond issuance.

The city is currently in the process of trying to access the bond market, and plans by Dec. 1 to use revenue from a new bond issue to refund and replace previous bonds, including the loan between the water and sewer funds, according to Interim City Manager Brenda Bauer.

The city ended 2010 with an improved financial standing after receiving a $2 million cash settlement from the Washington State Ferry system. As a result, the city hopes to get off Moody’s credit watch and obtain a bond to pay off debt, which has not been an option in the last two years.

Finance Director Ellen Schroer said the city is currently investigating what type of bond to pursue and is working on resolving issues related to accessing the market. She advised the council that a Limited Tax General Obligation (LGTO) bond, which would be paid by the sewer utility fund, would come at the lowest cost to the city.

If successful, the bond proceeds would be delivered in late July or early August, allowing the city to pay the interfund loan by the new deadline of Dec. 1.

Bauer said the impact on sewer ratepayers will depend on several factors. A new bond issue would increase the debt service that the sewer fund must pay for all bonds issued as a result of the WWTP. Specifics will also depend on what is available in the bond market. According to Bauer, the sewer rates were already adjusted to adequately pay debt service on the treatment plant.

The interfund loan itself was deemed necessary at that time it was issued and was approved after months of uncertainty over how to finance the ongoing WWTP construction costs.

At Wednesday’s meeting, council members directed the city administration to try to obtain a LGTO bond, and return with more specific financial information as the process moves forward, including a report on the current status of the sewer fund.

Councilors Barry Peters and Bill Knobloch agreed that extending the loan is the citys only option at this point since the loan would default should nothing happen.

But the councilors pointed out that it is still uncertain whether the city will be able to issue a bond, and repay the loan in December.

The WWTP itself is substantially complete, according to Bauer, but the city is holding off on making a final release of the payment until it resolves equipment malfunction with the contractor. The original completion date was February 2010.

We encourage an open exchange of ideas on this story's topic, but we ask you to follow our guidelines for respecting community standards. Personal attacks, inappropriate language, and off-topic comments may be removed, and comment privileges revoked, per our Terms of Use. Please see our FAQ if you have questions or concerns about using Facebook to comment.
blog comments powered by Disqus

Read the Dec 26
Green Edition

Browse the print edition page by page, including stories and ads.

Browse the archives.

Friends to Follow

View All Updates