Smyrna Town Council will face some big financial decisions in the coming weeks.
Stimulus incentives are available for over $10 million worth of town water and sewer projects, and Council will have to decide whether to borrow large sums of money to take advantage of these potential savings.
At its April 6 meeting, Council discussed the stimulus incentives for proposed wastewater projects.
The Town of Smyrna is eligible for low-interest loans on up to $6.34 million worth of wastewater construction projects, mostly for replacing and upgrading sewer lines and pump stations.
This is in addition to the principal forgiveness loans available for about $3.8 million in proposed water infrastructure improvements.
The stimulus incentives for the wastewater projects, which would come in the form of low-interest loans, are available from two sources: the Delaware Department of Natural Resources and Environmental Control’s “Delaware Water Pollution Control Revolving Fund,” and from the Rural Utilities Service of the U.S. Department of Agriculture.
Town Manager Dave Hugg said that the town could apply for loans through either of these programs, or through both of them.
According to Hugg, the loans through the USDA would have an interest rate not to exceed 3.25 percent annually for a loan of up to 40 years.
The loans through DNREC would have an interest rate of 2 percent over the span of at least 20 years. The normal interest rate for DNREC’s Water Pollution Control Revolving Fund is around 4.25 to 4.5 percent, Hugg said.
Low-interest loans available for 11 projects
The Town of Smyrna is eligible for low-interest loans for the following 11 projects:
• Utilities north of Duck Creek – $1.65 million
• Greens Branch pump station upgrade – $520,000
• Sewer replacement and upgrades on South Street – $1.54 million
• Sewer replacement on a portion of Cummins Street – $495,000
• Green Meadows pump station and force main upgrade – $195,000
• New Street pump station upgrade – $200,000
• West Shore pump station upgrade – $33,000
• South Main Street sewer replacement – $328,000
• North Main Street sewer replacement – $458,000
• East Commerce Street sewer replacement – $516,000
• West Commerce Street sewer replacement – $401,000
Council discusses loans and sewer projects
As Council discussed the proposed wastewater projects at Monday’s meeting, Mayor Pat Stombaugh expressed some reservations about the loans.
“I’m concerned,” she said. “I’m concerned about the town borrowing this much money on top of what we already have.”
Stombaugh said that all the projects listed are needed, and it’s good money with a low interest rate, but she wanted to be sure the town would have the ability to pay it back.
“I just want to know we won’t be putting our kids in financial problems and debt,” she said. “I want you to convince me we can afford to do this.”
Councilman Gene Mullen said Stombaugh was “absolutely right” that the projects on the list need to be done.
“You either pay it now, or you’re going to pay it five years down the line at twice the price,” he said. “These systems are going to fail. This is an opportunity we will never ever see again in our lifetime.”
Mullen also added that the proposed loans are within the town’s means.
“It doesn’t throw our debt service out of line that we can’t afford it,” he said.
At the end of the discussion, Council voted 5-1 to formally propose borrowing the money for these projects and to set a public hearing on the issue on May 4. Councilman Bill Raynor voted against the motion.
“I’m not in favor of mortgaging our kids’ future,” Raynor said after the meeting. “40 years is a long time.”
“I’m more in favor of budgeting for some of these items,” he added.
Although the motion at Monday’s meeting did not actually authorize any borrowing yet, Raynor said he wanted to let people know now where he stands on the issue.
Charter change requested to extend borrowing term
In related business, Council passed a resolution requesting an amendment to the town charter to increase the town’s maximum term of borrowing from 30 years to 40 years.
Hugg said this change would give the town the flexibility to take out a loan of up to 40 years through the USDA Rural Utilities Service if Council chooses to do so.
Council approved the resolution 5-1, with Raynor voting against it.
After Monday’s meeting, Hugg said the resolution requests that Rep. Bill Carson and Sen. Bruce Ennis introduce a bill to amend Smyrna’s town charter as such.
Upcoming public hearings on proposed loans
Council will hold two separate public hearings on the proposed loans for the town water and wastewater projects.
The public hearing on the loans for the water projects is scheduled for 7:15 p.m. on April 20 at Town Hall, immediately prior to the regular council meeting scheduled for that night.
Unlike the incentives for the wastewater projects, the stimulus funding for the town water projects would come in the form of principal forgiveness loans available through the Delaware Office of Drinking Water.
At the April 20 meeting, Council would have the option of approving these principal forgiveness loans, Hugg said.
The public hearing for the loans to fund the wastewater project is scheduled for 7:15 p.m. on May 4 at Town Hall, before that night’s regular council meeting.
Council could then vote to approve the low-interest loans for the wastewater projects at the regular meeting on May 4.
For both sets of proposed loans, Council would need a five-vote supermajority in order to approve the borrowing.