Article submitted by Jamie Fleury, The Pilot News Staff Writer
The Bourbon Town Council heard the Preliminary Rate Analysis on the Municipal Water Utility during their regular meeting in January. The Council adopted Bond Ordinance 2023-1 to authorize borrowing funds on first, second and third read. The Council adopted Rate Ordinance 2023-2 on first read; pending final adoption at a public hearing scheduled for Tuesday, February 14 at 6 p.m. Adopting the Bond Ordinance simply started the rest of the process and did not obligate the Town of Bourbon to a certain rate or loan amount. The Rate Ordinance had to be approved on first reading in order to advertise and hold the public hearing.
Baker Tilly Municipal Advisors, LLC Partner Eric Walsh presented the findings. Three components of the project include a well rehabilitation, a new water treatment plant, and an alternative new production well (Well No. 3). The Town has retained Wessler Engineering as the Consulting Engineer for the Project. Based on their preliminary design estimate, the project is estimated to cost between $4M and $4.5M.
Walsh illustrated that with project expenses and estimated incidental expenses the Town could expect to borrow $5M to $5.5M dollars. The Town of Bourbon would be a secondary borrower in a State Revolving Fund (SRF) loan; benefiting from the state’s Triple A credit rating resulting in a lower cost of borrowing. Interest rates are in the 4% range; up from previously lower 2% rates of years past – but still low.
The project qualifies through the SRF program for a 35 year loan. Though the Town will be paying for the loan longer; annual payments will be lower resulting in potentially lower water rates than if the Town tried to pay the loan back in 15 or 20 years. If the Town of Bourbon sought the same funding using their own Credit Rating, the interest rate would be 1% to 2% higher; a significant cost difference on a project this size.
Walsh explained that grant options were explored but were not procured in this funding round. Council President Ward Byers informed the Council that Indiana Office of Community & Rural Affairs (OCRA) funding was considered but that funding would have minimal impact on the monthly bill by approximately $5 and would have significantly delayed and prolonged the project with no guarantee of receiving the funds.
The average residential customer – two to three person household – uses 4,000 to 5,000 gallons a in the State of Indiana. Based on a 4,000 gallon average a customer now pays approximately $31 a month on their water bill. The rate increase is estimated in the $65 to $70 range.
The firm proposed that the Town of Bourbon implement the rate adjustment in two phases rather than all at once. Residents will see an increase in their water bills as soon as March or April of this year.
The rates will be officially calculated based on the actual bids. If bids come in lower that rate adjustment will come down. If bids come in higher, the rate adjustment increases.
Bond Ordinance 2023-1 was prepared by the bond counsel and gives the Town of Bourbon the authority to borrow up to but not to exceed $6.6M. The actual amount will be determined by the bids.
In order to borrow the funds, the rates must be in place. Rates can be adjusted lower; but never higher than what is advertised prior to the public hearing. Bids will be in place prior to the public hearing. The Rate Ordinance will be published and subject to public hearing prior to final adoption.
