The Bloomington City Council unanimously passed two ordinances Wednesday to approve the issuance of wastewater and sewage bonds required for multiple city projects, including construction to modernize the Dillman Road Wastewater Treatment Plant.
According to the U.S. Securities and Exchange Commission, a bond is a debt obligation that a company or government must repay.
Bloomington’s Wastewater Treatment Plant located on Dillman Road has been in operation since 1982. In addition to dealing with Bloomington wastewater, the plant also performs public services such as bacteria tests for swimming pools and private wells.
“In the fall of 2016, we received a letter from the Indiana Department of Environmental Management that required us to begin taking action to increase the capacity of the Dillman Road Wastewater Treatment Plant,” Bloomington Utilities Director Vic Kelson said during Wednesday’s meeting. “We had exceeded 90% rated capacity for three consecutive years.”
Rated capacity, or firm capacity, refers to the available capacity of a system and how much water it can service per day.
He noted that the COVID-19 pandemic set back the modernization efforts. The modernization project entails the replacing of select electrical and mechanical systems due to age and condition. He also mentioned the price increase due to the pandemic.
“We had a pandemic and a huge onset of massive increases in costs,” Kelson said. “So, the second part of it's going to be more expensive than the first part was.”
Kelson said the first phase of upgrades in 2016 cost $23 million. The second phase of the project will increase the rated capacity from 15 million to 19 million gallons per day.
According to memorandum documents, the wastewater issuance bond ordinance authorizes the city of Bloomington to issue sewage revenue bonds for 2024. The aggregate principal amount of the bond must not exceed $55 million.
Other projects under the bond proposal include building a new utility service center, upgrades to the Blucher Poll Wastewater plant and a stormwater collection system project. The collection system project includes the replacement and upgrades of sewer pipes and stormwater drains.
Councilmember Dave Rollo expressed concern about the 7% maximum interest rate and raised the idea of refinancing the 10-year bonds at a later date.
Kelson said the city will evaluate the market and analyze bond refinancing options when necessary.
According to a Corporate Finance Institute article, the most common reasons to refinance a bond is to take advantage of better interest rates or to reduce monthly repayment in exchange for a longer term for repayment.
The ordinance unanimously passed 8-0.
The council also unanimously approved an ordinance that issues a $95,000 principal forgiveness loan from the Indiana Finance Authority to purchase equipment to help the city’s service line inventory efforts.
“There’s no repayment. It doesn't show up as a liability on your financial statements,” Kelson said. “It’s a technicality of the entity that’s why it’s a principal forgiveness loan.”
According to Law Insider, a principal forgiveness loan is when a portion of the loan does not have to be repaid upon the closing of the loan.
Councilmember Isabel Piedmont-Smith echoed the feeling of the council.
“I wanted to thank [Kelson] for his good work,” Piedmont-Smith said. “Of course, I will be supporting this free money for the lead and copper pipe identification project.”
According to memorandum documents, the lead pipe identification project will fund a detection tool and iPads to conduct service line inventory and to record data.
The Service Line Inventory is a requirement of the United States Environmental Protection Agency for municipal utilities with the goal of identifying lead service lines that remain active on both the private and public side of the water distribution system.
To conclude the meeting, councilmember Stephan Volan thanked his colleagues as he is in his last month serving on the city council before retirement.
“I want to thank all the council members for their kind words tonight,” Volan said. “I have thoroughly enjoyed the time I've spent here, and these years have been really wonderful years for me, and I've enjoyed working with council to help you understand the complexities of what we do.”
Volan has served on the city council as the District 6 representative since 2004. Councilmembers Stephen Volan, Sue Sgambelluri, Ron Smith, Susan Sandberg and Jim Sims will not be returning to the council.
The five new councilmembers include Sydney Zulich, Shruti Rana, Hopi Stosberg, Andy Ruff and Isak Asare.
Read more about the incoming city councilmembers here.