Council completes crash course on high finance
Last updated 6/21/2019 at Noon
After an extended debate and some serious soul searching, members of the Mill Creek City Council approved an agreement with the capital management firm DA Davidson to issue $2.8 million in bonds to fund repair of the aging stormwater system that runs under Mill Creek streets.
The first $1 million will be used to repair the worst failures in the system identified by an engineering firm using underground cameras, according to the ordinance approved by a unanimous vote of the council Tuesday, June 11.
The balance will be held back in anticipation of failures in miles of underground pipes that have not been examined.
Underground cameras have inspected only 14 percent of the city’s underground stormwater network, according to Gina Hortillosa, director of Public Works and Development Services. The council approved borrowing the extra money based on the condition of the sections of the aging system inspected.
The decision to ask for additional funds was made easier by the offers for bond financing Davidson obtained. The competitive bidding process resulted in a fixed rate of 2.56% over 15 years.
Finance Director Peggy Lauerman urged the council to leverage the low cost of funds to avoid possible tax increases in the future to fund inevitable repairs that will be needed in the future.
“What else can we do with this money?” asked Councilmember John Steckler. The members agreed to examine the list of capitol projects in the city that could be completed with the inexpensive cost of funding.
Councilmembers debated the need to borrow extra funds, but the majority eventually agreed that today’s dollars could not keep up with the rising cost of construction and cost overruns.
“We can borrow $500,000 with no points of fees,” said Mayor Pam Pruitt. “If the projected cost of upcoming contracts are correct, we can return the money with no pre-payment penalty. If he costs are higher, as I suspect, we will still have the money to complete the inspections and repairs that our Public Works director says need to be fixed.”
The City Council was forced to increase the surface water rate it charges to homeowners for the first time in 20 years last December. This was to repay a loan from the city’s general fund for the emergency work needed to repair the catastrophic failure to the stormwater system under the Sweetwater development in October.
Following the Sweetwater incident, the council approved a jump from $78 to $150 per year in the first of a series of increases approved to repair the aging underground system.
Regular increases were approved at the same time that will boost the rate to $175, $200 and even higher over the next few years.
The 2019-2024 Capital Improvement Plan adopted by the council Oct. 23, 2018, included more than $19 million for 27 projects. The CIP includes funds for major repairs to the underground stormwater system, as well as pavement preservation.