Valdosta Daily Times

April 2, 2013

City explores sewer funding options

Officials explain the need for both GEFA loans, SPLOST

Jason Schaefer
The Valdosta Daily Times

VALDOSTA — The City of Valdosta plans to spend $55.4 million out of the proposed $80 million anticipated proceeds from the seventh cycle of the Special Purpose Local Option Sales Tax (SPLOST VII), but the City is saying that won’t be enough to address all wastewater infrastructure problems.

“We’re going to spend a lot more than $55.4 million,” said Mark Barber, Deputy City Manager for Administration, adding that “construction and debt repayment are synonymous,” meaning large portions of the SPLOST revenues will be used to retire debts taken out through the Georgia Environmental Finance Authority (GEFA).

Loans through GEFA allow cities to begin projects relatively soon, and enable them to spread out the cost over the loans’ 20-year repayment schedule, according to the City, which has already been approved for a $30 million GEFA loan for the construction of a force main project.

The City negotiated with the Lowndes County Board of Commissioners for a larger portion of the SPLOST than the amount appearing in the 2012 referendum. This time around, the City is expected to receive 53 percent of the total, while the County will receive 41 percent and the Cities of Hahira, Remerton, Dasher and Lake Park will receive the remainder.

The City justified the request for the additional 3 percent with a look into its history of negotiation with the County over SPLOST referendum—the County agreed to give the City “the lion’s share” of the proceeds this time because the County “took the money last time” for the construction of the Lowndes County Judicial Complex and an annex for the Lowndes County Jail, according to Mayor John Gayle.

However, according to the Association of County Commissioners of Georgia (ACCG) guidebook on SPLOST, projects that are for the “use and benefit of the citizens of the entire county needed to implement state mandated county responsibilities” are classified as Level One, which means those monies came off the top of the SPLOST proceeds and were not given to the county. Rather, the money for the courthouse, administration building and jail, all of which are one of the five projects Level One funds are approved for, came from the total amount before the county and five cities split the remaining proceeds.

Earlier this year, the City tried to seek approval for a Municipal Option Sales Tax (MOST) with the help of Georgia lawmakers in the General Assembly because “we weren’t sure the County was going to call for a referendum,” Gayle said. When the County Commission Chairman Bill Slaughter agreed to the City’s request for more of the funds, the City’s push for the MOST went away, according to Gayle.

“The County Chairman (Bill Slaughter) agreed that Valdosta is in Lowndes County, and that the Board needs to take care of everyone in Lowndes County,” Gayle said.

In its proposed SPLOST VII list, Valdosta plans to spend $12.68 million on engineering projects including road and drainage improvements and ditch piping, $4.2 million on the fire department, $3 million on the police department, $2.5 million on public works and $1 million on parks and recreation.

A further $500,000 will go to administration and the downtown area, and $250,000 will go to repairs to Mathis auditorium. The remaining $55.4 million will go to water/sewer for the purchase of the relocation of the Withlacoochee Wastewater Treatment Plant and a force main project.

The amounts allocated for the Cities of Hahira, Remerton, Dasher and Lake Park have not changed from the previous SPLOST referendum.

At the City Planning Retreat in March, Barber presented the City Council with a breakdown detailing the estimated proceeds and disbursements of both SPLOST funds and GEFA funds for water/sewer projects.

On the list, Barber explained that $55.4 million from SPLOST proceeds and $32 million from GEFA funding will pay for water/sewer upgrades, making $87.4 million available for City use over the next six years.

Barber explained that out of that $87.4 million, $25.6 would go to the payment of GEFA debt from old projects, $20 million to the relocation of the WWTP, and $11.03 to the new GEFA debt incurred for the force main project. The remaining $30.76 million, then, would go to accelerated debt service and other projects.

This proposed breakdown suggests that SPLOST and GEFA moneys can be placed in the same coffer and spent freely between debt and construction. However, GEFA loans cannot be spent on GEFA debt, and can only be spent on the projects under which they are listed in GEFA’s contract agreements with the City.

After The Valdosta Daily Times met several times with Barber to understand his numbers, Barber issued a new breakdown that takes the payment of debt out of the equation. According to the new list, out of the $55.4 million in SPLOST proceeds, $32 million will be spent on the force main and $20 million on the WWTP relocation, leaving $3.4 million available for other purposes.

The City still plans to take out the loan through GEFA in the amount of $30 million for the force main, according to Barber, who hopes to have SPLOST money to pay back the loan in two to five years.

“But if we borrow $30 million, and we pay it all back with SPLOST VII, then we’re back to not having any money for projects,” Barber said.

The GEFA loans would be taken out as a stopgap measure, an “interim financing tool” to pay for the force main project without having to wait for SPLOST proceeds to roll in.

“We couldn’t do the projects until 2019 because the money comes in one month at a time for six years,” City Manager Larry Hanson said. “And we obviously want to address these problems and solve them well before then.”

To save further SPLOST funds, the City scaled back the original plan for a new WWTP with a price tag of $90 million down to a humble $20 million, according to Gayle.

When asked why SPLOST funds were not being solely allocated to the WWTP to prevent additional debt from being incurred, Hanson provided an email response, stating, “Elected officials and staff must balance the needs of the entire city.  In addition to addressing the wastewater issues, they must ensure the 287 miles of city streets are maintained, drainage improvements made, fire trucks replaced and purchased to maintain the city’s Class 2 ISO rating, sanitation vehicles replaced and purchased to serve the nearly 18,000 residential customers, and other capital improvement needs met.”

The current treatment plant uses both a primary and a secondary treatment system. The primary system filters solids from raw sewage and uses bacteria and a settling process to clarify wastewater before sending it back into the environment; the secondary system uses a chlorination and de-chlorination process to further purify the wastewater.

The new WWTP, at a cost of $20 million, will not have this secondary process, but will only utilize a primary system.

The City will not make the final decision on the SPLOST breakdown until the adoption of the budget, which will occur in June.