Council reviews $11.18 million CIP borrowing and wastewater financing; staff detail SRF, rates and debt capacity

Clinton City Council members spent the opening portion of a Feb. 13 budget workshop focused on the capital improvement plan and the debt implications of an $11,181,000 borrowing the city is considering for fiscal 2026.

The discussion centered on how a roughly $11.18 million issuance would affect the city’s general obligation debt totals, the tax levy and legal debt capacity; how the State Revolving Fund (SRF) loans and a proposed conversion of one SRF note to a GO bond would change sewer fund ratios; and how planned sewer projects and an industrial-rate arrangement with a large customer would pay for a new biogas project.

Why it matters: the city’s consultant and staff said the borrowing is large enough to change debt ratios and the pre-levy amount the city must include in the proposed levy. The financing plan also ties closely to wastewater rate decisions and a separate SRF note the council would convert to a GO bond to preserve the city’s SRF borrowing capacity for a biogas project tied to an industrial customer (referred to in the meeting as “ADM”). Those rate and SRF decisions affect both ratepayers (sewer rates) and property taxpayers (debt-service levy).

Details of the CIP and debt book

Staff member Matt (finance staff) and Anita (finance staff) reviewed PFM’s modeling showing a CIP borrowing figure that prints on the agenda at about $11,000,181 (PFM’s package grossed the borrowing to about $11.4 million to cover issuance costs). The presentation showed the city’s existing general-obligation (G.O.) debt outstanding and an illustrative post-issuance total, and noted an available legal capacity in the neighborhood of $22 million. The far-right column in the packet showed debt as a percentage of the legal limit; staff said that percentage would be roughly 79.79% in the projection shown.

Anita pointed to the debt policy the council adopted a few years ago, which directed the city to maintain a target available capacity, and said the current plan would meet that target in the near term while the council takes on required projects.

The debt book segment explained how PFM structures offerings: in some years interest-only payments (a pre-levy interest-only amount for FY26 was discussed by staff as “about $475,000”) are required before principal begins. Staff noted that PFM smooths payments when possible but structure varies by issue; the group discussed examples where principal payments “skip” in the early years of older issues because of earlier structures.

Sewer funding, SRF notes and the biogas project

City staff said the SRF loans (which the wastewater fund repays from sewer rates) are separate from the G.O. borrowing but that SRF sizing and timing affect the sewer fund’s debt ratios. The packet included a planned change that would move about $2.0 million from an SRF note to G.O. bond debt (a “refund” of the SRF into a GO bond) so the city would have a stronger sewer‑debt ratio when seeking an SRF loan for a biogas project. Staff said the conversion was intended to make the SRF application for the biogas project approvable by the SRF program’s ratio tests.

Staff described the biogas project as rate‑based: the city plans an industrial biogas rate for the large industrial customer (ADM) tied to the renewable natural gas sales and Renewable Identification Numbers (RINs) revenue the plant may produce. Anita said the sewer fund currently shows a deficit balance but that American Rescue Plan (ARP) receipts of roughly $3.8 million had funded several sewer projects earlier and that project timing and billing flow affected the current capital balance. According to staff, the city intends the biogas project and a possible federal tax credit to improve the sewer fund balance over time; the industrial customer would pay a dedicated industrial rate for flow that produces biogas, and that rate would adjust on the back end if renewable fuel sales and RINs revenue materialize.

Council questions and next steps

Council members pressed staff on timing and levy impacts. Staff said they would need PFM to provide the pre‑levy payment amount quickly so the finance office could finish the proposed levy documents for publication. The packet and discussion made clear no final bond sale was being approved at the workshop; the discussion was to finalize CIP priorities, understand levy pre‑levy impacts and decide whether to move the SRF-to-G.O. refunding and the SRF application forward.

What the council approved that night

The council voted to approve four capital project funds as presented (the motion passed on roll call with all members present voting yes). Council did not take a final vote to issue bonds at the workshop; staff said any final bond resolution, official statement or sale would return to council for formal action once the financing structure and PFM figures were finalized.

Looking ahead

Staff asked for PFM to provide the precise pre‑levy interest number and the final modeled payment schedule so the proposed levy filing (a required Department of Management posting) could be prepared on schedule. Staff also said they would return to council with firm SRF application materials for the biogas project and with a revised CIP that moves items into the railpark fund or other proprietary funds where appropriate.

Speakers quoted in this article are drawn from the workshop presentation and are identified as staff-level participants in the transcript. No final bond sale was approved at the meeting. The council asked staff to bring final numbers back before publication deadlines for the proposed levy.