SOLON — The City Council approved a $3 million loan for costs associated with the planning and design phase for the new wastewater treatment plant during their regular meeting last Wednesday. The loan is through the Iowa Finance Authority (IFA)’s State Revolving Fund (SRF) program. In December City Administrator Cami Rasmussen explained the benefits of financing through the SRF by saying historically the SRF has offered the best interest rates for cities. She added the SRF is one of the state’s primary sources for financing projects designed to improve Iowa’s water quality through the Clean Water Program, used for funding wastewater treatment plants, sewer rehabilitation, and stormwater runoff quality improvements.
At Wednesday’s public hearing ahead of the Council’s vote, Rasmussen said the SRF allows cities to apply for a loan up to $3 million to help with preliminary costs associated with a major infrastructure project related to water or wastewater, and noted the City entered into a similar agreement in 2017 for the ground water storage tank project. The 2017 loan, she said, covered much of the costs associated with the design work for the project. Rasmussen said it is often difficult for cities to come up with the dollars for planning and design costs upfront. “What this program does is it allows the City to borrow up to $3 million interest-free to go through that process. Then, when it comes time for construction, those are rolled into the construction loan.”
Dave Schechinger, City Engineer with Veenstra & Kimm Architecture, Engineering, and Design, estimates planning, design, and the bidding process will take about three years with another two years of construction to follow. “This allows us to take this loan at 0% interest and borrow against that up until the point we enter into the construction phase,” he told the Council. “It works out pretty well, it’s a nice tool for planning, it helps out with the financing in the interim until we get that construction loan.”
Update on the planning and design process
“We’re in the early part of the timeline,” said Schechinger. “We’re in the anti-degradation analysis and that’s the first step we have to go through, which is looking at the different alternatives we could work through (different treatment processes). Once we identify which one is our preferred alternative, we’ll move forward with that into the design process. The State will have to review and sign-off on the chosen process as well. “While sorting through the various treatment alternatives, Schechinger said cost is a factor as is determining what will be the most environmentally friendly (not degrading the receiving stream, hence the “anti-degradation”). “We have a long road ahead of us,” he said.
How the SRF loan works
Rasmussen explained with the SRF loan bills are initially paid by the City. “And then we ask for a reimbursement loan from the SRF. It’s not money that comes to us first, we need to spend it and then verify that those were actual costs associated with the program.” The site for the new facility has already been acquired but Rasmussen noted, and Schechinger confirmed, the loan can be used to reimburse the purchase price after an environmental study is concluded.
Concerns from the public
Solon resident Toni Russo spoke during the public hearing stating she had spent the previous weekend going door-to-door raising awareness of the vote, and hearing concerns.
“There is a lot of concern in Solon, a strong feeling is building beyond its infrastructure. And it’s not just the water and sewer plant,” she said citing the capacities for law enforcement, streets, and sidewalks are also being maxed out. “And there’s a greater concern that Solon is also growing beyond its capacity.” Russo said financing benefiting new developments deprives other necessary projects and has the potential for a larger financial impact on residents, especially those on fixed incomes or lower incomes.
Russo cited sewer rate increases suggested in December by Heidi Kuhl, Director of Public Finance with Northland Securities in Des Moines (as a potential way to pay the debt service that will be incurred by construction of the new plant) and noted with all of the uncertainties associated with the project at this point, that the Council was essentially asking residents to write a blank check.
“The big question,” Russo said, “is how large of an impact is this going to be on the community? There’s no ceiling for raising the annual 2% (sewer rate increase), for raising our debt levy…for people on fixed incomes this is terrifying.”
The City will implement a 2% annual increase in utility rates as of July 2024. Rasmussen explained the increase has been a regular practice for several years. In addition, the sewer debt fee will increase from $5 per month to $10 per month.
Looking ahead
In December 2023, Heidi Kuhl, Director of Public Finance with Northland Securities in Des Moines met with Rasmussen and the City’s Finance Committee to lay out a proposal for a three-pronged approach and presented her plan to the full Council Wednesday, Dec. 20, 2023, during their regular meeting. Kuhl recommended a 20-year bond from the Iowa Finance Authority (IFA) for $20 million (to be paid through sewer revenues), a 20-year bond from the IFA for $5 million (to be paid by TIF (Tax Increment Financing), LOST (Local Option Sales Tax revenue) or the City’s debt service levy) and allocating $2.5 million of the City’s cash reserve toward the project’s cost which was estimated at $27.5 million. Rasmussen noted in December this will be the largest project ever funded by the City.
“Ever since I’ve been on the Council we’ve known that we’re probably going to have to look at another site for a new treatment plant so it’s not something that we haven’t know about for quite a while,” said Councilman Steve Duncan (attending via Zoom) I think it’s a combination of the age of our treatment plant plus growth. It’s going to happen one way or another.”
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