By DANIEL SUDDEATH
NEW ALBANY —
The New Albany Sewer Board voted to pay off a revenue bond from 1999 ahead of schedule Thursday.
The bond was originally worth $500,000, and about half of the sum was still owed, according to city officials.
“By approving the early retirement of this bond, we have saved the taxpayers of New Albany five years’ worth of interest payments,” City Controller Mary Ann Prestigiacomo said.
Since the city raised sewer rates in 2010 and again last year, the total debt service owed by the sewer utility has decreased from about $70 million to about $60 million.
Thursday’s vote was another step toward paying down that debt, Mayor Jeff Gahan said.
“This action will not only reduce our overall debt, but it will further our goal of improving the overall financial strength of the sewer utility,” Gahan said.
By the end of the year, the utility will also have completed about 90 percent of the projects approved by the U.S. Environmental Protection Agency to reduce sanitary sewer overflows and strengthen the wastewater system, sewer board member Ed Wilkinson said.
“So going forward, we thought the best use of the constituents’ money was to start paying down the bond obligations,” he said.
The action taken by the board Thursday to retire the bond early shouldn’t hamper the utility’s attempt to have the annual Economic Development Income Tax pledge removed, Wilkinson continued. The utility is subsided by a $570,000 annual EDIT pledge, and the amount has been as high as $875,000.
Though rates are supposed to be set at amounts to cover utility expenses, the State Revolving Loan Fund department mandated the EDIT pledge remain intact in 2010, when the city borrowed money to foot the EPA projects. The EDIT pledge is slated to continue until 2023, but with improvements in the utility’s finances, officials have been in talks with the state in hopes of having the subsidy removed.
The firm Crowe Horwath was hired to analyze the contract, and the city is awaiting a final determination.
Wilkinson said the utility should be able to stand on its own without the EDIT pledge.
“We’ve got ourselves in shape and we feel comfortable that we can pass that back” to the EDIT account, he said.
Wilkinson emphasized the end of the EDIT pledge shouldn’t mean an increase in sewer rates. However he said the utility should consider a cost-of-living increase that would stave off a substantial rate hike. If the utility approved a small annual increase of about 2 or 3 percent for cost-of-living, the city could probably go another decade without implementing a sizable rate hike, Wilkinson said.
But he added there’s no rate increase on the radar for the utility for at least four or five years.
As for the subsidy, the New Albany City Council approved on initial readings this week spending $2 million of EDIT for paving this year. Councilman John Gonder said with the EDIT account being tapped for resurfacing, it’s even more important to have the subsidy removed from the sewer utility.