With a zero interest loan from the state off the table, the City of Paris will now turn to the open bond market to finance a $60 million-plus rehabilitation of its wastewater treatment plant, and residents will see substantial increases to sewer bills over the next six years.
Paris City Council on Monday gave the go-ahead for staff to proceed with plans, which include the first of several sewer rate increases in April, the sale of $46 million in certificates of obligation by May, design completion in June 2022 and the start of the first part of a two-phase construction project in August 2022.
Unlike general revenue bonds, certificates of obligation do not require a public vote. Payment of the certificates of obligation over a 30-year timeframe comes from the Water/Sewer Utility budget and not from the city’s tax-supported General Fund.
With three options presented, councilors chose a sewer rate increase with the least impact on monthly bills, but one that could cause the city to dip into utility reserves during the course of construction, projected to be complete by May 2026. Another estimated $18 million in bonds would be sold by July 2024, and the second phase of construction would begin in October 2024 to be completed in May 2026.
“This third option is not quite as financially secure but it is probably the most powerful for the consumer,” Paris Finance Director Gene Anderson said in introducing sewer rate increases. “For your reference point, the average residential water consumption over the past five years has been 4,194 gallons.”
Although sewer usage is billed separately from water, the sewer bill is based on water usage.
Residents who use 2,000 gallons of water a month would see a sewer rate increase of $1.59 in April, another $1.72 in October, $1.86 in April 2022, 89 cents in October 2022 with increases on a semi-annual basis for a total increase of $13.94 over the course of six years. The current bill is $18.62, bringing monthly sewer bills to $32.56 in April 2026.
Those who use 5,000 gallons of water a month would see an increase of $3.95 a month in April and another $4.29 in October, $4.63 in April 22 and $2.21 in October 22 with increases on a semi-annual basis for a total increase of $34.62 over the course of six years. The current bill is $46.33, bringing monthly sewer bills to $80.95 in April 2026.
At the Monday meeting, engineer Les Klement with Garver USA first broke the news that Paris ranked 90th of 99 projects in line for a zero interest loan from the Texas Water Development Board and would not be eligible for a loan. The city contracted with Garver in June 2019 for $370,000 to evaluate the needs of the 60-year-old wastewater plant and to assist the city in applying for a water development board loan.
“In December, they capped projects to $44 million, so with our ranking and our project costs being above $60 million, we were no longer able to qualify,” Klement told councilors.
In anticipation of the news, City Manager Grayson Path said city staff began working with Garver, the city’s bond counsel and with financial advisers to “soften the blow.”
Because of an Internal Revenue Service requirement that funds from bonds must be spent in three years, Godwin said the project is now divided with two proposed certificate issues, one by May of this year for $46 million and another for $18 million by July 2024. He noted total cost estimates could change when actual construction bids come in.
“That’s the unfortunate news here, but I think you’ve got some good options here,” Path said. “Our goal tonight is to get guidance, and we will bring documents back to you at a Feb. 8 meeting for the phase one bond of $46 million and an amendment to the Garber contract to divide construction into two phases.”
Councilors asked a number of questions before recommending the third rate hike option.
“I agree on one thing. and that is we need to get going on this,” Councilor Linda Knox said. “I know it is a huge project, and it is expensive, but we need to get going as soon as possible because there might be future councils who might get wet feet.”
The 2019 vote to hire Garner marked the second time a professional service agreement had been before city leaders. With a split vote in January 2016, the council voted against a similar contract, opting to delay work on the sewer treatment plant until a $45 million water and sewer line project was completed. That project should be completed this year.