Council creates LEAP wastewater rate district, sets availability fee and paves way for financing

Lebanon City Council voted April 14 to create a separate wastewater service rate district for the LEAP (Large Economic Asset Project) area and adopt rates specific to that district, the council announced during its meeting.

The council adopted Ordinance 20 25-08 on second reading, establishing the LEAP Wastewater District and attaching a monthly metered base rate of $6.50 and an availability fee of $5,400 per equivalent dwelling unit. The action separates LEAP from the existing civil wastewater rate district; council members were told the civil district's availability fee is $4,800 and its monthly base rate is $5.64.

Why it matters: the split isolates ratepayer obligations so that LEAP development pays for LEAP infrastructure, rather than the city's non-LEAP (civil) customers. Council members and financial consultants also briefed the council on related financing steps being laid out to refund prior bonds and issue project bonds that will match LEAP revenues and debt service.

Jeff Jacob, a city staff member who introduced the ordinance on behalf of the utility board, said the measure mirrors the earlier water-rate district structure and applies only to the LEAP area. "This ordinance does not have any impact on the civil rate district. This is exclusively an action affecting the LEAP District," Jacob said.

Scott Miller, a consultant with Baker Tilly/Pinkerton Tilly who presented the rate analysis, described the composition of the $6.50 rate. He told councilors the calculation combines projected debt service for phase 1 and phase 2 wastewater infrastructure and estimated operation, maintenance and replacement costs. Miller said the LEAP projects carry estimated construction costs of about $161,800,000 for phase 1 and about $164,400,000 for phase 2, and that the draft debt-service schedule feeds into the rate calculation. He also explained that state IDD revenues (state development dollars) will be pledged to reduce the rate: "That reduces our debt service rate. We add in our operational rate and end up at the $6.50," Miller said.

The council then received two related bond ordinances on first reading. Ordinance 20 25-11 would authorize a taxable refunding of the city's 2018 sewage works revenue bonds (and address earlier 2014 bonds) so the remaining civil-district debt can be held and managed distinctly, clearing the way for LEAP-specific financing. Ordinance 20 25-12 would authorize issuance of revenue bonds (not to exceed stated caps) to fund additions, extensions and improvements in the LEAP wastewater district; the ordinance sets a not-to-exceed estimate for the total project and an initial-issuance cap of up to $165,000,000 for the first series.

Scott Miller explained why the city is working with the Indiana Finance Authority (IFA) for the refunding rather than the open market: the IFA pools many municipal issues and can achieve more favorable pricing under current market conditions and state ratings, and its structure allows the city to preserve the separation of civil and LEAP revenue priorities.

Council action and next steps: the LEAP wastewater-rate ordinance (20 25-08) passed on second reading at the April 14 meeting. The two financing ordinances (20 25-11 and 20 25-12) were presented on first reading; both will return for later action after required procedural steps and staff follow-up. Staff and consultants said additional documentation and sale steps will follow and that the city will present bond-sale and financing details at subsequent meetings.

Councilmembers and the city's utility board were identified in the record as having recommended the rate-district approach; the utility board was noted to have issued a unanimous recommendation in favor of establishing the separate LEAP wastewater district.

The council did not adopt the financing ordinances on April 14; those were read for the record and scheduled for later consideration.

The meeting also included a briefing on prior TIF (tax increment financing) activity and other agenda items that city staff said were unconnected to the LEAP matter.

The adoption of the LEAP wastewater district and the first readings of the bond ordinances are expected to be followed by staff work on bond documents, additional public notices and required filings, with financing and construction timing dependent on bond market conditions and required state approvals.