Council of Bloomington approves bond issuance for waterworks and wastewater

Bloomington, Indiana – To authorize the issuing of wastewater and sewage bonds needed for various city projects, including construction to update the Dillman Road Wastewater Treatment Plant, the Bloomington City Council unanimously approved two ordinances on Wednesday.

As per the U.S. Securities and Exchange Commission, a bond represents a financial responsibility that either the government or a firm has to fulfill.

The Dillman Road wastewater treatment plant in Bloomington has been operational since 1982. Apart from managing wastewater from Bloomington, the facility also conducts public services including testing for pathogens in swimming pools and private wells.

“In the fall of 2016, we received a letter from the Indiana Department of Environmental Management that required us to begin taking action to increase the capacity of the Dillman Road Wastewater Treatment Plant,” Bloomington Utilities Director Vic Kelson said during Wednesday’s meeting. “We had exceeded 90% rated capacity for three consecutive years.”

The term “rated capacity,” sometimes known as “firm capacity,” describes a system’s available capacity and the volume of water it can handle in a given day.

He pointed out that the modernizing efforts were hampered by the COVID-19 pandemic. A portion of the mechanical and electrical systems must be replaced as part of the modernization project because of their age and condition. He also brought up the pandemic’s effect on pricing increases.

“We had a pandemic and a huge onset of massive increases in costs,” Kelson said. “So, the second part of it’s going to be more expensive than the first part was.”

According to Kelson, the initial improvement phase in 2016 came for $23 million. The rated capacity will be raised from 15 million to 19 million gallons per day in the project’s second phase.

The wastewater issuance bond ordinance permits the city of Bloomington to issue sewage revenue bonds until 2024, per memorandum documents. The bond’s total principal amount cannot be more than $55 million.

The bond proposal also calls for the construction of a stormwater collecting system, improvements to the Blucher Poll Wastewater plant, and the construction of a new utility service center. Stormwater drains and sewage pipelines will be upgraded as part of the collecting system project.

Councilman Dave Rollo brought up the notion of refinancing the 10-year bonds at a later time, voicing concerns about the maximum interest rate of 7%.

According to Kelson, if necessary, the city will assess the state of the market and look into bond refinancing options.

The most frequent motivations to refinance a bond, according to a Corporate Finance Institute article, are to benefit from lower interest rates or to pay less each month in exchange for a longer payback period.

The ordinance passed 8-0 with a unanimous vote.

Additionally, an ordinance authorizing a $95,000 principal forgiveness loan from the Indiana Finance Authority to be used toward the purchase of equipment to support the city’s service line inventory operations was adopted by the council with unanimous votes.

“There’s no repayment. It doesn’t show up as a liability on your financial statements,” Kelson said. “It’s a technicality of the entity that’s why it’s a principal forgiveness loan.”

A principal forgiveness loan, according to Law Insider, is one in which a part of the loan is forgiven upon loan closure.

Isabel Piedmont-Smith, a council member, expressed the sentiment of the body.

“I wanted to thank [Kelson] for his good work,” Piedmont-Smith said. “Of course, I will be supporting this free money for the lead and copper pipe identification project.”

Memorandum documents state that iPads for data recording and service line inventory as well as a detection tool will be funded by the lead pipe identification project.

To identify lead service lines that are still in use on both the public and private sides of the water distribution system, the US Environmental Protection Agency requires municipal utilities to create a Service Line Inventory.

As he nears his final month on the city council before retiring, councilmember Stephan Volan thanked his colleagues to end the meeting.
“I want to thank all the council members for their kind words tonight,” Volan said. “I have thoroughly enjoyed the time I’ve spent here, and these years have been really wonderful years for me, and I’ve enjoyed working with the council to help you understand the complexities of what we do.”

Since 2004, Volan has represented District 6 on the municipal council. Jim Sims, Sue Sgambelluri, Ron Smith, Susan Sandberg, and Stephen Volan will not be re-elected to the council.

Sydney Zulich, Shruti Rana, Hopi Stosberg, Andy Ruff, and Isak Asare are the five new council members.