On Monday, July 13, Milford City Council voted to approve a referendum asking citizens to allow the city to borrow $1.6 million from the USDA in order to complete necessary improvements to the city’s sewer system. City officials have stated that passage of the referendum will not increase taxes or cause an increase in sewer rates. In addition, if citizens approve the referendum, the city will receive $2 million in grants from USDA in addition to the loan proceeds. The grants, combined with the $1.6 million loan and $400,000 transferred from sewer reserves, would allow the city to complete $4 million in sewer projects at a cost of only $1.6 million.
“The loan will incur $60,763 annually in debt service which will be paid using impact fees or sewer reserves,” said acting City Manager, Jeff Portmann. “The great benefit of this USDA Loan/Grant is that the USDA is providing us with $2 million in grant funds which means that half the debt is forgiven and no repayment is necessary.”
Sewer projects that will be completed under the $4 million project include improvements to monitoring, transmission and collections systems in the city. According to Mr. Portmann, approximately 45 percent of the collection system in the city is more than 35 years old and four of the 16 pumping stations are more than 25 years old. Poor collection systems facilities can lead to inflow and infiltration in the system. Poor transmission systems facilities could result in overflow, which may cause raw sewage to be discharged into the local environment.
“Inflow and infiltration is water that enters the collection system that is not accounted for by customer usage,” Mr. Portmann said. “Between 2011 and 2013, the City billed users for only 73 percent of the water sent to the Kent County Regional Treatment Plant although the city paid for 138 percent of the metered usage.” In addition to the collection system upgrades, the transmission system, which is comprised of pumping stations and discharge forcemains will also be upgraded.
The city plans to upgrade the transmission system by improving the Transmission Facilities Monitoring and Alarm System while also rehabilitating and improving older pump facilities. Monitoring of the transmission system will allow the city to determine the areas impacted the most by inflow and infiltration, especially during times of excessive rainfall. Monitoring system improvements are estimated to cost $400,000, collection system improvements approximately $750,000 and transmission system improvements $2.8 million.
Projects will be funded in two allotments. The city will contribute $400,000 from sewer reserves and borrow $600,000 for 40 years at a maximum interest rate of 2.375 percent. USDA will provide a grant in the amount of $1 million in the first allotment. The city will borrow $1 million in the second allotment for 40 years with a maximum interest rate of 2.125 percent and the USDA providing an additional $2 million grant.
City charter requires council to hold a referendum in order to issue general obligation bonds that will be used to borrow the money from USDA. After a public hearing, council voted to hold the referendum to issue the bonds on September 1, 2015. The referendum only permits the city to issue bonds for borrowing and will not authorize an increase in taxes or sewer rates.