News Column

Jerome Eyes Savings on Wastewater Bond

February 23, 2014

By Brian Smith, The Times-News, Twin Falls, Idaho



Feb. 23--JEROME-- The Jerome City Council may have approved a $35.9 million bond ordinance last week to fix its wastewater treatment plant, but now the real work begins to whittle down costs for residents and industrial users.

With fees already increasing, Mayor David Davis said, he wants to find ways to save money over the project's five years. So the city and its engineering firm have been meeting with Darigold, Idaho Milk Products and Jerome Cheese Co., the wet industries that account for about half of the plant's volume.

"We've had some positive meetings, and that's the good thing," he said.

Davis said Darigold and IMP have joined forces and hired their own engineers to determine whether they can agree with city plans for cost saving measures such as pretreatment. Jerome Cheese wants to build its own wastewater treatment plant.

"Having these ideas and some of these changes come about, they have got to happen quickly," he said. "We have got to have some feasible ideas that will help reduce the cost to us and to them as long as it doesn't negatively impact the rest of the city and the rest of the users. We want to do what is best for the whole city."

City Council members tried last May to get voter approval of a $48 million wastewater bond that would have increased the plant's capacity and fixed processes that led to $56 million in potential fines by the U.S. Environmental Protection Agency.

The city violated 1,500 regulations in 2010 when an overflow discharged untreated effluent into a canal. The EPA ordered the city to improve its plant, but how much it will fine Jerome remains unclear.

When voters rejected the bond issue, the council sought and won judicial confirmation to bond for $35.8 million. That money won't expand plant capacity, and the improvements will take about five years.

In the first phase, the city will borrow about $13.6 million, packaging that bond with a $38 millionTwin Falls bond for a similar purpose. Both bonds will be sold to the Idaho Bond Bank, which will sell them on the open market.

That bond bank is rated better and garners a better interest rate than if the city were to go it alone, said city Finance Director Burke Richman.

The city had to raise sewer rates before applying for the bond to show it could cover the plant's operation and maintenance. On average, industrial users' rates increased 50 percent and a household's monthly bill rose by $19.50, Richman said.

He said the city shouldn't have to raise rates again to cover the 25-year bond, but the situation will be reviewed annually to ensure that.

"They hadn't raised the rates for quite a while, but we don't anticipate raising rates again for this bond," Richman said. "You always want to look at your maintenance and operation and make sure you are covering the debt."

Projects associated with the first phase will be completed next year, he said. Later, the city will bond for the remainder of the $35.9 million or less.

Usually, cities bond for the whole amount at once, but Jerome didn't have enough revenue to do that, Richman said. The two-phase bonding structure, though, will give the city time to look for cost savings.

At a Jan. 21 meeting, Councilman Dale Ross asked Boise-based bond attorney Stephanie Bonney if the city could use any money saved to add capacity to the plant. Jerome officials see adding capacity as critical to accommodate future development.

Bonney said the borrowed money can only be used for the project that won judicial confirmation, but the city could expand the plant with any other revenues it gets. Savings from the second phase of the bond, however, wouldn't be stranded in city coffers.

"They may be either able to refund or defease some of the bond, meaning pre-pay them," she said. "Or it goes back into the bond fund and is used to make payments for the bond. That's all they can do with (saved) money. They legally aren't allowed to do anything else."

___

(c)2014 The Times-News (Twin Falls, Idaho)

Visit The Times-News (Twin Falls, Idaho) at magicvalley.com

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Times-News (Twin Falls, ID)


Story Tools