Terre Haute Council, mayor hear about revenue demands from Indiana Finance Authority

That step involves either a sewer rate increase, a new stormwater fee or an alternative revenue source, said Jim McGoff, IFA director of environmental programs, who oversees the State Revolving Fund Loan program.

“The current loan agreement between the IFA and the city requires rate action, or an alternative source [of revenue] be created,” McGoff told the council. He urged them to move forward, consistent with recommendations from the city’s financial adviser, Umbaugh and Associates.

The city already has borrowed a substantial amount of money from the State Revolving Fund for projects related to its long-term control plan, and it must take out another bond next year for the next phase.

Mayor Duke Bennett, and several council members, believe a stormwater fee is a more equitable fee structure than a sewer rate increase; residences would pay less, while facilities with more paved parking would pay more. Next month, an ordinance will be introduced and discussion will begin with the city council on a proposed stormwater fee, Bennett said.

The State Revolving Fund program has provided more than $150 million to Terre Haute to finance wastewater infrastructure improvements, making it one of the program’s largest borrowers, McGoff said. “It makes up almost 9 percent of our loan pool.”

In 2011, the SRF program provided a loan for $14 million, and in 2013 it provided another loan for $139 million.

In spring 2015, the State Revolving Fund program had concerns about the city’s financial challenges, McGoff said. “We contacted the city to see what issues needed to be worked out,” McGoff said. While the city and SRF worked through various issues last summer, “our review of the (wastewater) utility’s financials suggested an increase in rates/and or an alternative source of revenue was necessary,” similar to recommendations of Umbaugh.

McGoff encouraged the council to move forward with either the sewer rate increase or new stormwater fee.

Earlier this week, Chuck Ennis, city engineer, explained that new revenue is needed to provide added “coverage” for existing bonds, and it’s also needed for the next phase of the CSO plan. The next step for the CSO plan calls for replacement of the main lift station and added capacity for the high-rate treatment facility. “We will go to bid in 2017,” he said.

The cost of those projects is about $40 million, to be paid from a bond issue, and the city needs added revenue to pay for that bond, Ennis said.

In terms of the “coverage” needed for existing bonds, Ennis said the SRF wants 125 percent coverage, or “additional revenue you have beyond bond payments. They want to see us be able to make our bond payments comfortably. ... They are telling us we need more revenue to satisfy that coverage requirement.”

After the discussion Thursday night, council member George Azar said, “It sounds like to me that we are pretty much backed into a corner.” He asked what would happen if the council didn’t pass either a sewer rate increase or a stormwater fee.

In that event, McGoff said State Revolving Fund would closely monitor the financial position of the wastewater utility “to make sure that there were no monthly payments missed.”

Bennett responded that if the city doesn’t pass a sewer rate increase or new stormwater fees necessary to continue the long-term control plan, “We’d be in violation of the long-term control agreement with EPA.” The next phase must be done on EPA’s schedule, he said. Otherwise, “they come in take over” and “they set the rates.”

Bennett added, “We don’t get to say we’re not doing it.”

Azar noted that EPA also could impose expensive fines if the city doesn’t follow through with the next phase of the long-term control plan. “The public needs to be aware it’s an unfunded mandate. ... We don’t have a choice.”

Council member Earl Elliott told McGoff: “I believe we’ll do what we need to do to get this right and keep it right.”

Council member Don Morris noted that spending millions on wastewater treatment plant improvements and combined sewer overflow problems is not “glamorous.” But EPA said “fix it or else,” he said.