By Jim Bloch
The final financial piece of the $19 million overhaul of the city of St. Clair’s water treatment plant and water distribution system is now in place.
At its regular meeting May 19, the city council unanimously approved the sale of up to $5.725 million of construction bonds to finish the project, which began in 2023.
Tom Colis, a senior principal at Miller Canfield, the city’s bond councilor, presented the implications of the bond sale to the city council.
So far, the city has received an American Rescue Plan Act grant of $2.7 million toward the project and an Environmental Protection Agency grant of $970,000 for improvements to the city’s shorewell pump station in Palmer Park at the edge of the St. Clair River.
“We financed just under $9 million through the state revolving fund program – which was the city issuing revenue bonds to the state,” said Colis, as heard on the CTV-Channel 6 recording of the meeting posted on YouTube. “The state bought those bonds. The interest rate was two percent.”
Even with the EPA and ARPA grants and the bond sale through the state revolving fund, there was still a funding gap in the project.
“The idea was that the city would issue capital improvement bonds” to fill that gap, said Colis, who pointed out the highlights of the issue.
The bonds will be guaranteed by the taxing power of the city, and their sale will be advertised in The Bond Buyer, the national subscription source for news and analysis of the municipal bond scene. A competitive sale of the bonds will be held in late June and the city will have the proceeds in hand by mid-July. The city will determine the length of the payoff, up to 30 years.
“The city will be able to pay these off after 10 years or refinance them,” said Colis.
Council member Micah Volz asked about the annual cost of the payoff to the city.
Colis said the annual cost would hinge on the length of the payoff and the interest rate, which will not be known until the time of the bond sale.
“If it was 20 years at 4.25 percent interest, it would be about $425,000 annually,” said Colis.
Ten years at 3.75 percent interest would result in $690,000 in yearly payments with total interest payments of less than $1.3 million over the life of the bonds. A 30-year payoff would result in lower annual payments but a much higher cost — more than $5 million –in total interest costs.
“I’m in favor of shortening the term as much as we possibly can,” said Volz. A shorter payoff period, he said, will mean a lower tax or water rate burden on residents.
“Shorter is better,” agreed council member Kris Paul.
St. Clair Township, which accounts for about 25 percent of the city’s water use, will pay for its share of the overall project costs.
Jim Bloch is a freelance writer based in St. Clair, Michigan. Contact him at bloch.jim@gmail.com.
