HomeMy WebLinkAboutA009 - Resolution authorizing and approving Loan and Disbursement Agreement and providing for the issuance and securing the payment of $5,700,000 Sewer Revenue Bonds, Series 2026BITEM #:13
DATE:05-12-26
DEPT:FIN
SUBJECT:APPROVING STATE REVOLVING LOAN AGREEMENT IN THE AMOUNT OF
$5,700,000 TO BE REPAID WITH SEWER UTILITY REVENUES
COUNCIL ACTION FORM
BACKGROUND:
This resolution represents the final step in authorizing a not-to-exceed amount of $5,700,000
in Sewer Revenue Bonds through the Iowa State Clean Water State Revolving Fund
(CWSRF) Program. The purpose of this loan is to support the City’s annual program for
rehabilitation and reconstruction of deficient sanitary sewers and deteriorated manholes at
various locations throughout the city.
The goal of this program is to identify and remove major sources of inflow/infiltration (I/I) as a
means of lowering the peak wet weather flow at the treatment plant. By eliminating I/I in these
sewer mains, the sanitary sewer system will also regain needed capacity. This project
includes the rehabilitation and lining of sanitary sewer segments along E. Lincoln Way
and the Nikkol Trunk Line, extending from E. Lincoln Way to south of U.S. Highway 30.
On March 24, 2026, the City Council approved a resolution proceeding with additional action
for the authorization of a Loan and Disbursement Agreement and the issuance of Sewer
Revenue Bonds (SRF Loan) in an amount not to exceed $5,700,000. The Council also
approved the final plans and specifications and awarded a contract to Municipal Pipe Tool Co.
LLC in the amount of $4,462,230.40. Staff believes that utilizing the CWSRF to fund these
improvements is in the City’s best interest. The program has a long history of providing below-
market-rate loans to municipalities for utility improvements, including several prior loans to the
City of Ames.
The current rate offered by the CWSRF program for a 20-year loan is 3.00%, with an
additional 0.25% annual servicing fee and a $28,500 origination fee. The 20-year loan is
estimated to have total debt service costs of $7,747,638.74. Repayment of the loan will
be funded through sewer utility revenues, which have been incorporated into the
financial model used to project future rate increases.
Based on current market conditions and information provided by the City’s financial advisor, if
the City were to issue Sewer Revenue Bonds in the open market, the true interest cost would
likely range between 4.00% and 4.25%. Additionally, bonds issued in the public market would
require a debt service reserve fund and higher debt service coverage requirements than those
associated with the CWSRF program. Staff believes this further confirms that utilizing the
CWSRF program as the funding source for this project represents the lowest-cost alternative.
ALTERNATIVES:1
ALTERNATIVES:
1. Adopt a resolution approving a State Revolving Fund Agreement in the amount of
$5,700,000 to be repaid with Sewer Utility revenues.
2. Do not approve the Loan and Disbursement Agreement and provide staff with additional
direction regarding the project’s financing.
CITY MANAGER'S RECOMMENDED ACTION:
Authorization of the loan agreement will allow the City to access State Revolving Funds
to finance necessary improvements to the City’s sewer collection system. The financing
terms of the CWSRF program represent the most cost-effective method for funding the
project. The principal and interest payments associated with the loan have been
incorporated into the Sewer Fund rate design. Therefore, it is the recommendation of the
City Manager that the City Council adopt Alternative No. 1, as noted above.
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