ROCK FALLS – The city's finance committee weighed financing options Tuesday for an infrastructure project at one of its interstate development properties.
The city bought 30 acres just west of state Route 40 near Interstate 88 from local farmer Wayne Schmitt last year with the knowledge that it would require a substantial water, sewer, and electric buildout. The city's sale agreement included a 7-year option to buy 25 more acres at the site.
The city wants to move ahead with an estimated $2.1 million water and sewer extension project to make the site more enticing to prospective developers.
When the land was acquired, city officials were leaning toward bonding out for the project, but bonds likely will be used to fund a new Avenue A electric substation that could cost up to $9 million.
The finance panel kept the bond option on the table at Tuesday's meeting, but a second option emerged the favorite.
The committee recommended that the city go after a low-interest loan from the Illinois Environmental Protection Agency to pay for the water and sewer work. That proposal will be moved to the City Council for further discussion and action.
A contract also will be presented to the council for Stanley Consultants in Muscatine to do the work in pursuing the loan.
After doing some preliminary bond work for the water and sewer work, the loan option became a clear-cut favorite.
"With almost $9 million for the electric station, that would put us over the $10 million point – that drives up our interest," City Administrator Robbin Blackert said.
Federal tax code dictates that for a municipality to keep its bank-qualified status on bond sales, a small issuer must not go over $10 million in a calendar year. Banks usually buy municipal bonds, and in lieu of the tax-exempt benefit, banks then charge more interest to compensate.
"The best financial move is to borrow the money, because we're bumping our heads on the bonding ceiling," Alderman George Logan said.
The loss of bank-qualification status would cost the city hundreds of thousands of dollars, Blackert said. The trade-off would be that the loan process would take longer.
"The bonds would take about 3 months and the loan could take 6 months, but we don't have a land deal there yet, and even if we did, work doesn't happen overnight," Blackert said.
The IEPA loan would have a low interest rate of 1.76 percent plus an opportunity to have part of it forgiven.
"We received 30 percent forgiveness on our well loan, and economic development projects usually get between 20 and 30 percent," Mayor Bill Wescott said.
Blackert said the loan payments wouldn't show up as a line item on water and sewer bills because the project was included in the latest rate study. The electric substation also was worked into the new electric rate study.
The city has nine electric substations, and each substation has two generators, which alone cost about $1 million each.
The Rock Falls City Council will discuss the water and sewer project funding options when it next meets at 6:30 p.m. Nov. 21 at City Hall, 603 W. 10th St.
The agendas will be posted at rockfalls61071.net and at City Hall. Call 815-622-1100 for more information.
The council meeting also airs live on Channel 5.