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Boyne City approves $5,000 SRF loan draw to meet EPA audit requirement
Summary
To avoid potential penalties tied to a $12.8 million Clean Water State Revolving Fund loan, the commission authorized staff to draw $5,000 to satisfy EPA audit rules, after debate about timing, interest and which contract costs are reimbursable.
Boyne City’s commission voted on March 14 to authorize an initial draw of $5,000 from a $12.8 million Clean Water State Revolving Fund (CWSRF) loan to satisfy an EPA audit requirement.
Public works staff advised the commission that the city has an approved $12.8 million SRF loan related to sewer and wastewater projects but had not drawn any loan funds, while the city has incurred about $815,000 in design and bidding costs. Staff said EGLE advised the city it must draw on the loan by April 1, 2025, to meet EPA audit requirements — the draw need only show execution of the loan, not payment of all incurred costs.
"The city must draw on the loan by 04/01/2025 in order to satisfy the EPA audit requirements," public works staff said during the presentation.
Commissioners debated the tradeoffs: drawing funds starts any loan clock and interest obligations, and part of the design fees paid to consultants may not be reimbursable if portions of contract scope (for example, sewer expansions) are not ultimately performed. Staff said one way to satisfy the audit requirement would be to submit an existing $5,000 invoice for payment under the loan as evidence that funds are being used.
After discussion, a commissioner moved to authorize the clerk/treasurer or appropriate staff to initiate a first loan draw of $5,000 to meet the order of approval; the motion passed by roll call (Dimitchek: Aye; Farrell: Aye; Moody: Aye; Pritchard: Aye). The motion was recorded as carried.
Why it matters: Drawing a portion of the SRF loan avoids potential audit penalties but also triggers debt administration actions and potentially interest payments. The commission must later determine how much of the larger loan will be used and confirm whether specific design and engineering costs are eligible for reimbursement.
Next steps: Administration will proceed with the authorized $5,000 draw and continue to work with EGLE and counsel to clarify which contract costs are eligible for SRF reimbursement and how to handle unperformed sewer expansion work in contract 1.
