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City Hopes Loans Will Speed Storm Water Projects: Officials Want 1 Percent Interest Rate on Funds

Posted on: Wednesday, 10 May 2006, 06:00 CDT

By Ryan Garrett, Messenger-Inquirer, Owensboro, Ky.

May 10--If the city is successful in applying for $23 million in low-interest loans from the state, 19 storm water projects could have a direct effect on about one-third of the city in five years, City Engineer Joe Schepers said.

If it doesn't apply for the Kentucky Infrastructure Authority loans, three projects will have a direct effect on only 200 acres over the next five years, and the city will spend an estimated additional $8.5 million over 25 years to complete the other projects, Schepers said.

The 19 projects cover the most significant parts of the city's storm water master plan, Schepers told city commissioners during a work session Tuesday at City Hall.

The city hopes to receive a 1 percent interest rate on the loans, meaning it would spend about $26 million in debt service over 20 years, Schepers said. If the city completes the projects over 25 years as scheduled, it will spend about $34.5 million because of inflation, he said.

The 25-year figure is based on 3.5 percent annual inflation, but construction inflation is actually growing faster than normal inflation, Schepers said.

City Commissioner Ron Payne, who originally suggested that Owensboro look into the loans, said he is concerned about taking so long to complete projects where sewer and storm water systems are combined.

During downpours, the combined systems are often inundated and waste overflows into streets and yards.

"When you have major rain events, you've got raw sewage in people's yards," Payne said. "What concerned me is when we talked about that it would take somewhere in the neighborhood of 20 to 25 years to address these problems. Personally, I think that's entirely too long to deal with something that's a major health problem."

In an interview earlier in the day, David Hawes, executive director of the Regional Water Resource Agency, said he thinks the local sewer agency has so far been the biggest beneficiary of the infrastructure loans.

RWRA has used the loans for rehabilitation projects at its treatment plants and for capital expansion projects on U.S. 60 West and East, Kentucky 54 and near Yellow Creek.

It has borrowed $32.9 million and is getting ready to borrow another $7 million for work along Center, Frederica and Locust streets, Hawes said.

The loans require more paperwork than other financing options, so it's best to combine as many projects in an application as possible, Hawes said.

Other groups may be catching on to the program, Schepers said during the work session. Madisonville hired a consultant last week specifically to pursue the loans, he said.

Commissioners were enthusiastic about speeding up what would otherwise be more than two decades of work.

Storm water capital projects are currently funded through the Your Community Vision fund, which is the 0.33 percent tacked onto the 1 percent occupational and net profits taxes. The proposed fiscal year 2006-07 budget doesn't include any money for such projects and estimates $1.55 million for them in 2007-08 and $625,000 in 2008-09.

Even Mayor Pro Tem Charlie Castlen, who usually opposes assuming debt, said he would support the loans if the city receives a 1 percent interest rate or lower.

"If we stop (at the 19th project) before going any further, I think that would be appropriate," he said after the meeting. "And then let a future commission look at it and see whether or not it's something the community believes is appropriate."

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Copyright (c) 2006, Messenger-Inquirer, Owensboro, Ky.

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Source: Messenger-Inquirer

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