Chanute city commissioners began the process to finance a $16.7 million water plant Monday evening when they passed resolutions on the proposal.
City Attorney David Brake said the resolutions are preliminary and are not binding until specific financial terms are available, but they set the total for the project and financing.
Todd Holder, senior vice-president of United Missouri Bank, presented financial information on issuing bonds for the project. The city is limited to $10 million per year in bank-qualified financing.
Other options included financing through the Kansas Department of Health and Environment or the United States Department of Agriculture, but issuing bonds was the overall preferred method. The city may also refinance some existing bonds to generate savings.
Holder said interest rates remain relatively low.
“There is plenty of cash on the sidelines and there are a lot of folks looking for tax exemptions,” he said.
The plan is to fund $9 million in the first bond issuance this year and then issue a second set of bonds for $8 million in 2022 or 2023. The city would ease rate increases gradually.
City Manager Todd Newman said city utilities need to pull their own weight, but the water department hasn’t been. The commission increased water rates effective in September, and Mayor Jacob LaRue said that will provide 10 to 11 months of information by the next budget planning cycle.
Chanute officials are also looking at pending expenses to replace the wastewater treatment plant, fund an electrical generator turbine and other projects that Newman said could create $60 million in debt.
“For Chanute, that scares me,” he said.
The water plant financing would be paid over 20 years. Commissioners said they would like to have that with an expected life expectancy of 40 years for the new plant, so they could have time before its eventual replacement. The refinancing of existing bonds would not extend the dates.
In other business, commissioners approved a Neighborhood Revitalization Program application for the building next to the Chanute Regional Development Authority office.
The CRDA owns the building at 3 W. Main and has created a for-profit entity, Chanute Building Management. A planned bar and grill, Outsiders, has leased the building for five years and will pay for $120,000 to $150,000 in upgrades.
CRDA Director Matt Godinez said Outsiders plans to be open by March 1, but is shooting for as early as the end of January.
Commissioners gave a consensus approval for an ordinance change that lets the city recover legal advertisement notices of nuisance abatements when the city performs the work.
In his report, Newman said officials are paying close attention to natural gas markets in preparation for the coming winter.
The city’s gas reserves in storage helped users dodge problems last winter when a late cold snap in February caused electric generators in Oklahoma and Texas to freeze and fuel costs skyrocketed. Newman said officials now have seen gas prices double.
The current gas in storage averages $3.50 per unit, and Newman said the reserve is at capacity except for what it is pulling out. Diesel fuel at the power plant is also fully restocked.
But Brake warned that other plants that froze last winter will not be fully winterized until 2023, which could impact Chanute.
Newman also reported on projects to improve the ball complex and to install fiber optic broadband service in a triangular area north of K-39 between the railroad tracks and Ashby Avenue. He hopes to have the project finished by the first of the year.
Commissioners approved resolutions to declare properties at 814 and 814 1/2 S. Washington, owned by Jacob Dale Clark; 1102 W. Main, owned by Lowell O. and Ella F. Head; 924 W. Main, owned by HR & SS, Inc.; and 525 W. Olive, owned by Samuel Curry, in violation of city code.