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City utilities director recommends private loan to fund $4.6M in waterline projects
Summary
Utilities Director Randy Kim told council the city has four waterline replacement projects plus a tank recoating totaling about $4.6M. Staff recommended a privately underwritten loan (Flagstar) over the State Revolving Fund because one CDOT-managed segment would be ineligible for SRF and SRF federal requirements could add cost.
Randy Kim, the city's utilities director, briefed the council on a recommended financing plan to cover four waterline replacement projects and a tank recoating that together total just over $4.6 million.
Kim said the city evaluated two primary options: a State Revolving Fund (SRF) loan—which offers a lower interest rate and a 20‑year term but triggers federal requirements such as Davis‑Bacon prevailing‑wage rules and American iron and steel procurement—and a privately underwritten 10‑year loan. Kim explained the SRF option could raise project costs because of federal compliance rules and, crucially, that one of the projects (a CDOT‑managed segment that the city is reimbursing) would not qualify for SRF funding.
"We could pursue SRF for the other projects, but that would leave us with two separate financing instruments and additional administrative costs," Kim said. City staff and the city's underwriter (Davidson) reviewed private offers and recommended pursuing a private loan arranged through Flagstar as the most favorable single‑instrument approach. Kim said staff will bring an ordinance to council for first reading on Feb. 18 and a second reading on March 4 for final approval if the council agrees to proceed.
Council members asked how the city's reserves and rate policy factor into the decision. Kim said the long‑range financial plan anticipates using loans to smooth project costs while protecting rate affordability and rebuilding reserves in lower‑project years. The council generally indicated support for the staff recommendation, noting SRF's lower rate but agreeing the administrative burden and ineligible CDOT project make the private loan a practical choice.
Next steps: Staff will present ordinance language and final loan documents for council's first reading on Feb. 18 and a second reading on March 4.
