Home Water fund Different water projects require different financing plans | Sun News

Different water projects require different financing plans | Sun News

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Water projects of all kinds can be expensive, especially large ones.

Often, projects are only for routine maintenance or replacement of old water pipes and cities use funds set aside from their monthly fees to cover costs.

But in some cases, a project can end up being major and require local municipalities to borrow to cover the higher costs.

Jeff Boyle, superintendent of water works, said the bonds will be used for projects involving the maintenance and painting of the water tower and upgrades to the water pipes on Second and Third streets.

Ligonier’s water utility operating fund is currently $ 660,035.88 and its amortization for capital and larger expenses is $ 65,032.37.

Municipal bonds are a financing mechanism available to local governments to borrow money, usually at very low interest rates, and to repay the amount with tax revenue or future charges.

These municipal bonds are an investment for the buyers, who buy the debt and then realize a return on the interest. Since bonds backed by taxpayers’ money – and a local government may raise its tax rate to ensure it makes payments – municipal bonds pose extremely low risk compared to stocks or to other debt investments.

When communities exploit bond income for a project, it is usually because the size and scope of the project is something they cannot afford to pay out of pocket.

Scott Mosley, superintendent of water for Kendallville, said municipalities are using bond funds for more expensive projects and do not have enough funds in their regular budgets.

One example he highlighted was the maintenance carried out on water towers. Painting and sanding can cost up to $ 180,000. This type of maintenance is typically performed every 10 to 20 years.

If you add this to the installations upgrades, the total amount can reach $ 300,000.

“Since you only do it every 20 years or so, the rules and regulations change a lot,” he said. “It’s about the types of safety devices you need, the size of the gangway, and the things that keep people from falling in the center of the tank. This is all that has changed in the past 20 years.

Another challenge comes from the Indiana Utility Regulatory Commission. He said the IURC posed a number of challenges for municipalities like Kendallville when it came to retaining funds for major projects during the days when the city was under their jurisdiction.

“They are afraid that there is too much money lying around,” he said.

The city has been under the control of the agency for almost 15 years.

He said the IURC often pushed municipalities to sell bonds in order to finance projects because they often did not trust them to keep their own funds and would be tempted to waste their money on others. things.

The Kendallville Water Department’s budget for 2021 is $ 2,648,000, including $ 2,418,000 for operations and $ 230,000 for improvements. The city currently has $ 1,093,437.06 in its water fund, giving it a healthy balance for capital works.

“We will try to paint these (water) castles with our own chests,” he said.

He added that the department’s budget is pretty healthy right now, but upgrading and maintaining the city’s three water towers will be very expensive, and they won’t be able to do so. all three at the same time.

Unexpected events can mess up the department’s incoming projects for the year. He referred to the water pipe rupture that occurred on South Main Street in 2019, where five different pipes ruptured along the water pipes that cross South Main Street to Waits Road.

The cost to repair these main lines was $ 230,000.

“Even though it put us on the sidelines, we got over it pretty well and it took us about a year to get over it,” he said.

The city reserves 10% of its budget for routine maintenance of the year. He said that in the past, the state has required municipalities to set aside 10% of its water department’s budget for repairs and maintenance.

“It is no longer in place and they are recommending it to us now,” he said.

The Kendallville water pipes were first installed in 1887 and Mosley said many of these pipes are still in use today. Repairs between South Main Street and Waits Road were only half a mile of water pipes and the city has a total of 65 miles.

He said the city cannot afford to change the water pipes due to the high costs, so they are fixing them instead.

“Every once in a while a case will crash totally and you will have no choice but to change it,” he said.

In the case of carrying out large projects, he said the state often does not help local water utilities with financing and forces them to sell bonds to finance them themselves.

The state would only step in to help if the situation meant that the water was contaminated and considered unsafe.

“We have always preferred to use bonds for large projects. Often times, if you get revolving funds from the state, they have a lot of restrictions, ”he said.

In Albion, the city does not use bonds to finance routine maintenance.

The city’s water utility funds amount to $ 1,718,702.75. Like other municipalities, the ministry’s revenue comes from user fees and monthly rates, not taxpayer dollars.

Jacob Ihrie, city manager of Albion, said the city is using tax increase financing funds for a wastewater treatment project it is working on.

“We get a lot of our money from it, about 41% coming from TIF funds,” he said. “It has to be prorated based on the service area. “

The city recently had its water tower serviced and did not use any bonds to finance it, having enough reserves to pay for the works out of pocket.

He said the city has a significant amount in its funds for water and wastewater.

“We used bonds to fund street projects and other things in this area,” he said. “We renovated our municipal building 15 years ago and financed it with bonds.”

He said it may be common for municipalities to use bonds throughout the year when collecting tax revenue, even when performing routine maintenance on things like water pipes. .

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