Lynchburg council approves financing package for Blackwater CSO tunnel, including low‑interest loan and principal forgiveness

City Council voted unanimously to adopt a resolution authorizing a financing package for the Blackwater combined sewer overflow (CSO) tunnel, intended to secure low-cost funding and principal forgiveness to limit Lynchburg's local cost for the project.

Tim Mitchell, Director of the Department of Water Resources, described the project as the largest capital project in Lynchburg's history "from a financial standpoint," and said the tunnel restores sewer capacity to the Blackwater Creek interceptor and meets requirements of the city's CSO long-term control plan and a state consent order. He told council the project has been coordinated with state legislators, regulatory agencies and multiple stakeholders to meet a tight schedule.

Mitchell said the project budget and funding package includes appropriations totaling about $107,000,000 for CSO-related projects and that the Blackwater CSO tunnel cost is roughly $104,000,000. He said the city secured $50,000,000 in ARPA grants from the Virginia General Assembly, which required a $25,000,000 local match, and that the Virginia Department of Environmental Quality (DEQ) and the State Water Control Board approved a funding package in December 2024 for $54,100,000. Of that $54,100,000, Mitchell said $29,395,000 is structured as a loan at 0.5% interest for 25 years and $24,705,000 is principal forgiveness.

"Our recommendation is upon conclusion of the public hearing, adopt a resolution that issues the sewer revenue bonds not to exceed $29,395,000 for a term of 25 years and a rate of 0.5% interest, enter into a funding agreement with the Virginia Resources Authority for a grant in the form of principal forgiveness for $24,705,000 and authorize the city manager and staff to execute the appropriate documents," Mitchell said. No members of the public spoke during the hearing.

Council members who spoke praised staff and state partners for securing grant support and low interest rates; several asked about a site visit and expressed interest in touring the tunnel during construction. The council approved the resolution by a 7-0 vote.

The resolution authorizes the city manager to execute documents to issue sewer revenue bonds not to exceed $29,395,000 and to accept principal forgiveness and related funding agreements. Council members emphasized the environmental benefits for the James River and downstream users and commended staff and legislators for the grant work that reduced local costs.