Tecumseh City Manager Kevin Welch outlined some repayment options that could be pursued for a Waste Water Treatment Tertiary plant upgrade that is being done, complying with new mandates from the Michigan Department of Environmental Quality. Construction is under way on the project, which should be done by summer. The project is being funded by a State of Michigan Revolving Fund Loan, totaling approximately $1,965,000, and with a very low interest rate of 1.67 percent.
Joel Piell, the city’s bond attorney with Miller Canfield, provided a loan payment schedule. Principle and interest payments are due twice a year. The first payment is due April, 2008, with approximately $16,000 absorbed into the normal operating expenses of the Waste Water Fund.
The scheduled debt service is for 20 years and the annual principle and interest payments due to the State of Michigan will range between $113,000 and $118,000 each year. Welch outlined two options to establish a Bond Debt Service Charge to cover the bond payments: a flat debt service charge to each sewer customer, or a calculated annual rate needed to cover the annual bond cost. Each scenario would likely add just under $6 to an average user’s bill.
With the flat fee, which would be similar to the water tower debt that will be paid off this year, a flat charge would be charged quarterly to each customer, based upon the meter size and the percentage of sewer volume used by that type of customer. A flat charge could be calculated either based on volume or upon sales figures. Disadvantages to a flat rate system would include the fact that customers with the same size meter would pay the same amount each quarter regardless of usage, meaning high users would pay the same as low users, and the fact that there could be fluctuating changes to sales volume over the coming years.
