Consent order bonding costly

The work on the city of Dunkirk’s water system under a consent order will lead to the city paying some $1 million interest per year for the financing of the project.

Fiscal Affairs Officer Richard Halas and City Treasurer Mark Woods talked about the financing aspects of the project, which may end up at the $20 million mark if the plant’s capabilities are upgraded to 10 million gallons per day. Currently the city is using bond anticipation notes, but will be required to use long-term bonding when the project is complete.

“These have to go long-term sooner or later. Right now, if you received that update from Hill (Engineering), a lot of these projects are already completed and we probably have a shorter time frame for the entire thing,” Halas told the Common Council Finance Committee on Monday. “When they go long-term this will not be a one-year bond anticipation, this will be a bond, 25 years, 30 years, whatever we decide.”

Woods said at the project’s beginning the city was hoping to get a rate in the upper 3 percent to 4 percent range on a 25-year bond. As of March 21 the interest rate was 5.19 percent, according to Halas.

“It’s going to cost us over $1 million in interest alone … every single year. Every single year $1 million in interest alone,” Halas stressed. “Right now we’re at $12.4 million. … Let’s say $20 million, $20 million at 5 percent, a million dollars in interest alone every single year. So just keep that because our water department, … they always run about break-even. … When you’re talking about the region, the only option we really have is really to increase our users to justify the debt.

“In my opinion you really can’t raise rates because the market will dictate, people, businesses will leave. You’ve got to be within the market so you have to plan for that.”

Halas said the regional effort is dragging “on and on.”

“Even if we decided today to do this it would probably be another two years before it really takes effect. Fast-track, year and a half at best. … We’re faced with this million dollars so we have to plan now, that’s my point,” he continued. “We really have to plan now and it all comes into play … with this regional water.”

The city’s 2014 budget cut revenues from Carriage House and should be good for this year.

Mayor Anthony J. Dolce said between the water and sewer funds the loss would be about $170,000 if production stops as planned in February 2015.

Dolce said he had talked to Carriage House officials and is setting up a meeting with Fredonia Mayor Stephen Keefe to “further discuss regional efforts.”

Councilman Michael Michalski said he was hoping to hear more from Fredonia.

“My personal feeling was that we needed their households to make it work because everything else was not populated enough, not enough users and … as you go further out from Dunkirk and Fredonia, there’s more well users,” he stated. “I’m sure this will be forcing them to reevaluate all their options, I would think.”

“Most definitely and we traded some phone calls today and we’re looking to meet this week and keep talking along those lines,” Dolce said. ” … We should continue to be on target as far as our water and sewer. We did build up those funds as far as contingencies go from 2013. If you look at those reserves compared to ’14, we put aside more. .. I don’t want to say that gives us some room because who knows what can come up during the course of a year and we all want to do some work at the wastewater plant. So we’ll definitely be taking those numbers into account for 2014 in preparing a budget.”

Kiyak asked if the city should reexamine its plans given the loss of a big manufacturer and no guarantees the rest will stay.

“That wish list needs to be narrowed down to the necessities,” she said of proposed sewage plant work.

Dolce said a regional approach to that work is also a possibility. Halas said a regional approach must be kept in mind.

“This is the only way we’re going to come out of this. You talk about Fredonia, we’re all part of this,” Halas added.

“We’re too small and too close together to not do this as one big family in this,” Kiyak added.

After the meeting Dolce was asked if the Carriage House closing reinforces the urgency of a water district.

“A regional system is something we want. How that looks and who’s involved is to be determined,” he replied. “The goal has always been to accommodate as many homeowners and industrial users as possible, getting the best rate possible.”

Dolce said he and Keefe have talked a few times since the Carriage House announcement.

“We’ll keep talking and kick ideas back and forth and see if there’s something we can come up with. Again, it’s something we all want, but how you get there is the great unknown.”

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