The city of Snoqualmie’s Utilities Capital Improvement Plan saw some changes on Monday, Sept. 25, after the city council approved ordinances to update the plan and alter some of the short-term funding methods for the next six years of future projects.
The utilities section of the Capital Improvement Plan outlines the planned projects and continued maintenance for sewer, stormwater and water infrastructure for a six-year period, 2017 to 2022. The plan details 39 projects across all three categories of utilities and projects a total expense of $71.5 million, just under the $71.9 million of utilities revenue projected for that same time period.
The document is not a budget, it is simply a plan to guide future city projects and decisions.
The city council acted on two ordinances in relation to the utilities CIP, approving an updated version of the plan, and accepting the updated plan.
The updated version of the plan, Chief Financial Officer Nicholas Lee explained, covers 2017-22 and takes into account the utility rate increases approved in February.
Lee said with the voter-approved utility rate increase, it was a good time to update the utility plan and look at how the projected revenue could fund the continued maintenance and upgrades to the city’s utilities.
The utilities section of the Capital Improvement Plan was converted from a spreadsheet into a document, with a page for each project or update. The information on each page includes who will manage the project or update, its cost, when it is planned to occur, funding sources and community impact. The goal was to make the document more readable so people could easily understand each project and the details behind them.
With the council’s second action on the plan, adopting it by reference, the Utilities Capital Improvement Plan will be moved out of the comprehensive plan to become a standalone document, which will be reviewed more frequently.
Lee explained that the Utilities Capital Improvement Plan was made part of the city’s overall comprehensive plan about a decade ago, but that is an uncommon practice. The cities of Bellevue, Issaquah, Sammamish and Redmond all maintain their utilities plans outside of their comprehensive plans, he said.
“We want to be able to update that regularly, every year or so,” he said. “We have more flexibility about when we can update it, how we can update it and to make sure the numbers are more accurate, refreshed regularly, and (the plan) provides more transparency to the public so it’s not buried inside another document… We are getting back to a common practice, I don’t know if any still do it the way Snoqualmie does.”
The council also voted on two resolutions related to utilities, to refinance city date.
In a unanimous vote, the council authorized the sale of a Water and Sewer Utility Revenue Bond Anticipation Note not to exceed $10 million. The city currently has a revenue bond for $15.5 million that expires Dec. 1, requiring the city to pay back the full amount at that time. The anticipation note will extend the line of credit into July of 2018, allowing the city to continue to fund improvements and projects in the short term before working on a longer term bond in 2018.
Of the $15.5 million current line of credit, the city has only use $500,000 Lee said. Reducing the cap from $15.5 to $10 million would also reduce the interest rates.
“It was a good practice in the last few years and saved us a ton of interest costs,” Lee said. “As we progress through the plan, we can draw money, pay for the projects, and then at some point in the future, wrap all that stuff up into a long term bond and pay off that line of credit… It’s giving us one more year of short-term availability before we have to make a longer term decision.”
The council also issued a $4 million Water and Sewer Utility Bond in order to refinance the city’s previous Water and Sewer Utility Bond from 2008. This bond issuance will not affect tax payers, it is simply a restructure of the city’s debt at a lower interest rate.
Lee said that in 2008, the city took out a $7 million bond for projects and infrastructure improvements necessary at the time. Of the original amount, $4,100,000 is eligible to be refunded on Dec. 1.
The new ordinance would be refinancing the remaining bond with a single bank which would result in lower interest rates on the bond, saving the city about $400,000 in interest.
“It was a long term debt obligation, it currently has 10 year left to pay on it, and instead of keeping the current interest rate we are going to refinance the interest rate. So historically they had just over four percent interest, we are looking to get a rate closer to two percent,” Lee said. “That $400,000 would net against any cost increases that may come in the future. It’s a net savings to the ratepayers. It’s not something we are going to go spend anywhere else, it’s not something we are going to reinvest, it’s just savings.”
The refinanced bond will remain a 10-year bond. The only change, Lee said, is the city is placing the bond privately with a bank which will save money on issuance costs.
“We are going to be looking for banks to buy the whole bond and have a bank loan against it. That will save us a lot of money in issuance, it will also drop the interest rate in half,” he said. “Overall this will be a bunch of savings to the city that would otherwise not exist.”
Lee reiterated that the city did not authorize any long-term debt for future projects that night, but made steps to prepare the city for that process in the coming year.
“We think we will finance all this stuff by debt, we actually think it’s important that we do that. But we are not asking to authorize that debt today, we are asking to authorize the plan for it,” he said. “When we actually issue long-term debt we will be coming back to council at a future date, which will probably be in 2018, about the size, rate, how do we do this, and how does it fit into our plan.”