The Clearwater City Council Monday continued its discussion about potentially restructuring some of its debt service to try to reduce water and sewer rates.

 

Over the pat two months, the council has debated whether it was worth extending its existing utility improvement loans over a longer time period to lower its annual debt service payment.

 

Monday, Administrator Kevin Kress said he ran the numbers and didn’t recommend extending the loan an additional 10 years. He said up front, it looked like the city would save. But not in the long run.

 

“The payment is cut in half, but we have an additional $780,000 in interest. We generally would spend $78,000 a year to save $200,000 a year in payments,” he said. “In my opinion, that’s not worth it.

 

The best case scenario is we have a housing boon and are able to prepay the new loan.”

 

The largest debt the city has is the 2007 PFA loan to upgrade the wastewater treatment facility. The city currently owes about $5 million on the loan. With annual debt service payments of about $497,000, the city would have it paid off in 2027.

 

Mayor Pete Edmonson has proposed restructuring that loan and extending it 10 years, plus paying off smaller loans to lower the city’s debt service even more. The new payments for the 2007 loan would be reduced to about $295,000 a year until 2037.

 

Edmonson said it the city could also free up $140,000 by paying off other debt service loans immediately.

 

Councilman Kris Crandall said he wasn’t convinced the restructure would lower water and sewer rates.

 

“I’m more apt to pay off the smaller (loans) and then maybe a small (rate) increase as opposed to the restructure at this point,” he said.

 

Councilman Mike Ranum also had doubts.

 

“How much is the restructuring really going to save?” he asked.

 

Edmonson said the city’s current expenses for the sewer plant were about $800,000 a year, of which about $500,000 goes toward debt service.

 

“If we free up $200,000 and something in debt service, that should affect or rates somewhat,” he said.

 

Ranum, who owns the laundromat, said he has been paying up to $1,000 a month in sewer charges in some months. But if there wasn’t a significant benefit to the restructure, he’d rather the debt service ended sooner than be extended.

 

“If my bill goes down a couple hundred bucks a month, then that might be beneficial,” he said, “But we’re looking at another 10 years. The way I look at it in 10 years it’s going to be whole lot cheaper.”

 

Crandall said he didn’t see how the city could lower rates and still build up the sewer fund to cover future expansion and projects.

 

Kress agreed. He said the city is already falling behind, and the restructure probably wouldn’t help build up the fund if rates were reduced.

 

“The shortfalls each year keep adding up, so if we drop down the debt service we’d be really close to breaking even,” he said. “I think if you did this, the rates would have to stay the same just to break even - based on the cash analysis.”

 

Edmonson said the biggest complaint by residents and business owners was the high cost of water and sewer. He said the restructure would eliminate that complaint.

Councilman Chris Ritzer said he would need to see how much the rates could be dropped.

 

“If my water bill is going to go down $20 a month, that’s not worth $800,000,” he said.

 

“Show me hard numbers of what it would go down,” said Ranum.

 

Edmonson asked Kress to work on a rate scenario based on the restructuring numbers. Kress said he could have preliminary numbers for the June meeting.