Franklin board recommends up to $47 million in sewage revenue bonds to fund plant expansion and sewer projects

The Board of Public Works and Safety recommended that the City Council approve issuance of sewage works revenue bonds of up to $47,000,000 to pay for the wastewater treatment-plant expansion, the West Side interceptor and lift station, and general sanitary-sewer and manhole rehabilitation.

The recommendation came after a presentation from Rick Hall of Barnes & Thornburg, the city's bond counsel, and Jeff Peters, the city's financial adviser. Hall told the board the resolution before them would allow the city to issue bonds "in the amount of $47,000,000 up to $47,000,000" and use proceeds for the projects listed on exhibit A of the resolution. Peters said the city expects to amortize the debt over 20 years and that the rates set last fall are expected to cover the planned borrowing.

Why it matters: The recommended bonds, if approved by City Council, will fund the next phase of a multi-year wastewater-improvement program. Board members raised questions about whether the new borrowing would require further sewer-rate increases; Peters responded that, as currently planned, no additional rate increase is anticipated.

Hall described the process the city will follow if Council approves the board's recommendation: the council would introduce a bond ordinance, secure a rating from rating agencies and finalize an offering document before construction bids are received. "So between April and August, what we would do is go to the rating agencies and get a rating on the bond and approve an offering document," Hall said. Construction bids are not expected until mid-August, Hall said; the city does not plan to sell bonds until later in the year when bids are known.

Peters said the city set rates last fall with these kinds of projects in mind. "Short answer is yes. The rates were approved last fall," Peters said when asked whether the existing residential and commercial rates could support the bond payments without further increases. He added the council's ordinance would permit up to 25 years of amortization and an interest rate up to 7 percent as flexibility measures, though he said neither is expected to be necessary.

Board members and staff also discussed contingency plans should construction bids exceed estimates. Peters said the city could pursue redevelopment commission tax-increment financing or other targeted funding streams to avoid raising sewer rates beyond the amount set last fall. Hall noted these bonds would be on parity with the city's 2020 sewer bonds.

The board made the recommendation in one motion and voted in favor; the matter will move to City Council for introduction of the bond ordinance, with final approval possible at a subsequent council meeting after the bonding documents and ratings are in place. City staff said construction bid openings are expected in mid-August and that the working group expects to take bonds to market after bids are received and the financing plan is finalized.

Next steps: The resolution recommending bond issuance will be presented at tonight's City Council meeting for introduction. The board and advisers indicated they expect to return to the market after construction bids are in hand and after securing a rating, with a tentative timetable pointing toward bond sale in the fall.