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Council backs preliminary financing for $93.4M WARF expansion; bids exceed estimates
Summary
Council adopted a preliminary financing resolution enabling staff to pursue $67.3 million in revenue bonds and additional grants and cash to fund an estimated $93.4 million Water Resource Recovery Facility expansion after bids came in about $18 million higher than pre-bid estimates.
The Mebane City Council voted to adopt a preliminary financing resolution to proceed with funding for the Water Resource Recovery Facility (WARF) expansion after staff and consultants laid out bids and updated cost estimates.
Finance Director Daphne Schwartz and consulting advisers told the council that the total project cost is roughly $93.4 million after the low construction bid of about $81.96 million and other soft costs, contingencies and allowances were included. The city plans to use a combination of American Rescue Plan funds, a state directed grant, system development fees and about $67.3 million in revenue bonds secured by utility-system net revenues.
Doug Chapman of McGill Engineering explained the bid results and technical scope: the project will expand capacity from about 2.5 million gallons a day to 4.0 million gallons a day, install biological nutrient removal to meet Jordan Lake nutrient rules, add enhanced filtration and provide space to expand later to 6.0 million gallons per day. Chapman said roughly two-thirds of the bid cost relates to expansion and about one-third to nutrient upgrades.
Ted Cole, the city's financial adviser, said the city is working toward Local Government Commission review on Oct. 1 and a bond sale target of Oct. 9 with a 25-year term and two years of interest-only payments during construction. Cole gave an illustrative debt-service estimate of about $4.5 million annually under current planning assumptions and a planning interest rate of roughly 4.25 percent; he said the model assumes rate increases and projected new customer growth that together provide coverage adequate for a revenue bond offering.
Council members probed alternatives and the effect of higher bids on rates and system-development fees; staff said they will update the system development fee study and continue to seek grants and appropriations. "We received our bids on September 5, and they were approximately $18,000,000 higher than pre bid construction estimates," staff said; council then approved a preliminary resolution authorizing continued work toward financing and final documents to be considered in October.
What's next: staff will update the LGC application and system development fee study and return with a final bond resolution for council consideration in October after rating-agency discussions and LGC review.
