published Tuesday, February 5th, 2013

Utility seeks loan for sewers

CLEVELAND, Tenn. — Long-range plans for safekeeping the environment call for quick action to save hundreds of thousands of dollars to fund those plans, Cleveland Utilities officials said.

On Monday, the utility board approved pursuing a $10 million loan package through the Clean Water State Revolving Fund Loan that includes a $451,000 loan forgiveness clause and requires a 5 percent increase to sewer rates effective July 1.

"We fully understand asking you to approve this rate increase outside of the normal budget process is unusual," Ken Webb, vice president of Cleveland Utilities' financial division, told board members. "However, we believe waiting on the process could have a negative impact on our ability to take advantage of the extremely attractive terms of this program and jeopardize the receipt of the debt forgiveness amount."

The $10 million loan will support SCOPE 10, the utility's 10-year Strategic Commitment to Protect the Environment program. It seeks to fix the worst stormwater leaks into the wastewater system that potentially can cause sewage overflows.

Terms for the loan now are set for a 20-year fixed rate of just over 1 percent, Webb said. The $451,000 loan forgiveness aspect would "essentially be a grant."

Officials discussed how the requested 5 percent increase would affect the bottom line for the utility's typical residential sewer customers. A minimum bill of $13.25 will increase to $13.91 in July. The average residential bill of $26.41 will increase to $27.73.

The 5 percent increase, which was required by state financial analysts in relation to the $10 million loan package, requires a minimal change to funding plans presented to city leaders last fall, Webb said. Those plans called for 4.5 percent sewer rate increases -- which will be subject to adjustments -- for the next four fiscal years.

The next step will be to present the issue to the Cleveland City Council in an attempt to get the measures approved as soon as possible, said Tom Wheeler, president and CEO of Cleveland Utilities.

Webb said there is a limited amount of money available through the Clean Water State Revolving Fund Loan. Waiting for the rate increase to be approved in the normal budgeting process could cause Cleveland Utilities to "lose its place in line," he said.

"The end result of this aging infrastructure in sewer is that in the worst case we have sewer overflows that occur from time to time -- and they get into the environment, they get into the creeks and streams," Wheeler said. "This is money towards making that go away."

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