April 17, 2014

Edgerton debates intermodal wastewater funding

Corbin H. Crable
chcrable@gardnernews.com

Although plans to construct the intermodal facility and logistics park continue to come to fruition, Edgerton City Council members are still discussing how to fund wastewater improvements related to the project.

Since wastewater improvements are not eligible for funding through the Kansas Intermodal Revolving Fund (KIRF), local and state officials for months have been in talks on how to pay for sewer lines that would service the new facility. Instead, council members, at the governing body’s Oct. 21 work session, talked about the possibility of issuing General Obligation Bonds in excess of $1 million to fund Stage 1 wastewater improvements. During Stage 1 of the wastewater project, a main would be directed from Edgerton’s sewer plant to the intermodal facility itself. According to the project agreement between the city of Edgerton, The Allen Group and BNSF, the wastewater improvements will take place throughout six stages and cost a total of $60 million.

After paying for the improvements using General Obligation Bonds, that debt would be paid off using the city’s Public Infrastructure Fund. The sources of those funds, meanwhile, come from city sales taxes, excise taxes and tax abatement origination fees, among others. The city is obligated to deposit funds in the PIF as established in the city’s finance plan, according to a memo from City Administrator David Dillner.

If, for any reason, the city issues General Obligation Bonds and there are insufficient funds in the Public Infrastructure Fund, the city must use revenue from the General Fund or raise taxes.

“But the likelihood of having insufficient funds is very unlikely,” said Scott

Anderson of Kutak Rock LLP, the law firm assisting the city throughout the planning stages of the intermodal. “You could try to issue special obligation debt, but in this market that would be difficult. You also could issue revenue bonds, but those would be more expensive than General Obligation Bonds.”
General Obligation Bonds would be the cheapest financing option for the city, Anderson said.

In addition, according to a memo from Kutak Rock, the Kansas Department of Transportation (KDOT) has requested that the city establish a reserve fund within the Public Infrastructure Fund, which would require the city to set aside a certain amount of money to make IRF payments. The amount of payments has yet to be determined, but the city would not be able to use those reserve funds to make general obligation payments.

Anderson said he is optimistic that Kutak Rock and the city will be able to get KDOT to agree on giving IRF payments and general obligation payments equal parity, which means payments will be made on a pro-rate basis if insufficient funds are available to make IRF and general obligation payments.

The city and Kutak Rock will continue talks with KDOT regarding funding for wastewater improvements.

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