The North Little Rock City Council Monday followed the recommendation of the city’s wastewater treatment board and chief administrator to approve the issuing of $21 million worth of revenue bonds to update and upgrade the sewage treatment system, thus complying with state mandates.
Earlier this year, following a vote of the North Little Rock Wastewater Treatment Committee, city sewer treatment rates were raised to implement a consent decree reached between the city and the Arkansas Department of Environmental Quality.
"The engineering report has estimated the cost of the improvements, including the furnishing of all labor, materials, and engineering and other services in connection with the completion thereof and all bond issue costs, to be at least $21 million," according to the ordinance adopted by the city council. "To secure funds necessary to finance the planning, designing and construction of the improvements and the engineering, legal and other costs incidental to the issuance of the revenue bond upon the most favorable terms to the city and the users of the system, the city is making arrangements for the sale of its sewer revenue bond in the principal amount of $21 million to the Arkansas Development Authority."
According to approved repayment schedule, the city will start to begin to pay down the debt starting on April 15, 2016, with the monthly payments before then being earmarked for interest.
Payments of $670,350 will be paid twice a year, with the first being on April 15 and the second one on Oct. 15, according to the ordinance. The first interest-only payment is being made this month.
The city is being charged a 1.5 percent interest rate on the loan and an additional one percent service fee. North Little Rock is procuring the funding through the Arkansas Natural Resources Commission.
While interest-only payments will be made now through April 2016, the city will finally retire the debt in April 2035, according to the ordinance.
While the city is repaying the principal amount of $21 million, the 1.5 percent in interest charges is costing city wastewater treatment plant customers $3.488 million over the loan’s 20 years and the one percent service fee is costing $2.32 million through October 2035, according to the ordinance.
The council followed the recommendation of the sewer committee which had Marlar Engineering of North Little Rock design the state-mandated improvements.
Besides using the funds to help pay for current improvements, the revenues are being used as collateral for past debts incurred by the city when former improvements were implemented, including the payment of $2.7 million of 1991 revolving loan fund bonds for $7 million worth of work done to the Faulkner Lake wastewater treatment project.
According to the ordinance, the city has assured the bond holders that it is able to pay back the debt because of sewer rate increases enacted in March of this year.
"The city covenants and agrees that the rates established will produce total revenues at least sufficient to pay the operation and maintenance expenses of the system, to pay the principal of and premium, if any, and interest on all outstanding bonds to which system revenues are pledged, as the same become due, to pay any trustee’s or paying agent’s fees in connection therewith, to pay the financing fee as the same becomes due, to create and maintain any required debt service reserves, and to make the required deposits into the sewer depreciation fund," according to the ordinance.
"The city also convents and agrees that the rates shall, from time to time, as and when necessary, be increased to such an amount as will provide revenues at least sufficient for the above purposes."