Go with the flow

City to issue $5.9 million in bonds for waterworks

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The City of Kilgore’s been tackling water projects for the past several years while also refining plans for major work in the future – those are ever-closer to fruition as City Hall prepares to issue bonds totaling almost $6 million for a variety of work.

“Over the last four years, we’ve been working on a capital program in the utility department that we know would not be fair to our current ratepayers to cash-flow,” Kilgore City Manager Josh Selleck told council members Feb. 26. “It’s an extraordinary program, it’s tens of millions of dollars over the next 10-15 years, and this year is a year in which we need to fund some of the construction projects using the debt-funding move we’ve agreed on.”

In the early stages of the planning, city planners anticipated they’d be issuing about $7 million in bonds for the utility projects. Factoring in serendipitous delays, the city now has cash on-hand to offset some of the expense in addition to issuing bonds.

“It gives us the flexibility to structure the debt in a way that gives us the lowest possible interest rate,” Selleck said. “These projects, most of them will last a minimum of 20 or 30 years but some as many as 60 years. It doesn’t make sense to make ratepayers for it all now when it will also be used by future ratepayers.”

The city has been steadily increasing utility rates in preparation for the work, still estimated at the same total cost.

From those reserves, “We’re using around $1 million to buy-down that number this year. Our total need is about $7 million, but we’re issuing a good deal less than that,” Selleck said. “Each of the adjustments we’ve had over the last several years were designed to support these bonds, to cash fund as many projects as possible and then to pay the bond payments on everything that couldn’t be cash-funded.

“It’s supported by the utility rates that we’ve already set. Our utility rate structure is based on this capital program.”

After the cash off-set, the remaining estimated current project cost is $5.77 million. The cost of issuing the bonds brings the total to $5.875 million. The city aims to improve on the numbers through a competitive bidding process for the bonds come early April.

The bonds will have a 20-year debt service at a projected 3.2 interest rate, approximately $400,000 per year in debt service.

During their second regularly-scheduled meeting in February, the council members unanimously signed off on the publication of the city’s ‘notice of intention’ to issue the necessary certificates of obligation.

“There’s a variety of water and wastewater projects that this funds,” Selleck said. “This is part of our 20-year capital program designed to rehabilitate and replace nearly the entirety of our water and wastewater system.

In particular, the funds will cover the replacement of the Dudley Road Water Main and the installation of an isolated pressure plane toward the end of Dudley.

“That avoids several million dollars of other projects by isolating a few key houses off of our water system and onto their own pressure plane,” Selleck said, the Mercerview Pressure Plane.

The project also covers the complete rehabilitation of the deep-water intake at the Sabine River.

“That was constructed back in the early ’90s when the water treatment plant was made,” Selleck noted. “This will repair and replace most of the equipment out there.”

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