Waynesville board votes to reject $8.7M SRF loan to pursue $5M DEQ grant despite risk of losing both

The Town of Waynesville board voted to reject an $8,700,000 State Revolving Fund (SRF) loan offer so the town could pursue a $5,000,000 grant from the Department of Environmental Quality. The presiding officer put the question to the board, Councilmember (unnamed) S4 moved to "protect the $5,000,000," a second was recorded and the motion passed by voice vote.

Rob explained the financial trade-offs behind the vote. He said the SRF loan was offered at 0% interest with a 20-year amortization, but the town was not granted the principal forgiveness that distressed communities are often told they would receive. "We were granted the loan last week for $8,700,000 at 0% interest for 20 years, but we were not granted principal forgiveness," Rob said. He reported DEQ staff had told the town Waynesville's water and sewer rates were too low to qualify for principal forgiveness, a reason staff said was unexpected.

Rob gave an estimate of rate impacts if the town accepted the SRF loan: an annual payment of about $435,000 for the Little Champion Junction pump station project, which he said would be a "considerable rate increase" for sewer customers. By contrast, if the town obtained the $5,000,000 grant and borrowed only $3,000,000 at an estimated 4% on the private market, Rob said the annual payment would be about $220,000 — roughly $214,000 less per year than the SRF option. He also broke the SRF option into per-connection impacts: about $112 per year per connection, or roughly $9.34 per month, if the SRF loan were used.

Rob cautioned that turning down a 0% SRF loan carried risk. "I really don't think at the staff level I could feel comfortable turning down an $8,700,000 loan at 0% interest ... without their concurrence," he said, repeating that the town would be taking a gamble that the DEQ grant would be awarded. Rob said the town planned to reject the SRF offer, request the $5,000,000 grant in the current cycle, and — if the grant was denied — reapply for loans during the fall funding cycle.

A council member asked when the town would know about the $5,000,000 decision; Rob said, "We should know in September." The board approved the motion to reject the SRF loan and pursue the grant by voice vote. The transcript does not record a roll-call tally or any recorded nay votes.

Next steps spelled out in the meeting: staff will submit the grant application for the current cycle, monitor DEQ's response, and if unsuccessful will reapply for SRF funding in the fall funding cycle. The board was made aware of the funding-source distinctions and the General Assembly's reductions in available funds affecting bridge and SRF programs.