City Commission Approves Loan Amendment for Wastewater Plant Upgrades

Jennifer Lamer -

At Monday's City Commission Meeting, the commissioners deliberated on the authorization of an ordinance to approve Amendment No. 1 to the Loan Agreement (Loan) between the Kansas Department of Health and Environment, acting on behalf of the State of Kansas, and the City of Salina, Kansas. The purpose of this amendment is to secure financing for essential improvements to the Wastewater Treatment Plant KWPCRF Project No. C20 2049 01.

Background:
This project is set to bring various enhancements to the Wastewater Treatment Plant (WWTP) with the aim of improving the quality of effluent and reducing nutrient levels in the effluent discharge into the Smoky Hill River. The WWTP has been in operation for nearly three decades since its last major upgrade, and much of the treatment equipment has reached the end of its useful life, necessitating replacements. The WWTP Improvement Project includes equipment replacements to address the existing facility's needs, ensuring the WWTP remains operational and compliant with the 2020 National Pollutant Discharge Elimination System permit. The equipment replacement costs are estimated at $8.5M and are in addition to the expenses for WWTP Improvements aimed at nitrogen and phosphorus removal, which are covered by the Loan.

On April 14, 2021, the City Commission authorized the Loan for an amount not to exceed $31.5 million at an interest rate of 1.3%. The first semi-annual payment of principal and interest, totaling $896,848.56, was made on March 1, 2023.

During the development of the 90-percent documents and Guaranteed Maximum Price (GMP), it was discovered that project costs were increasing, and the 2022-2026 Water and Wastewater Rate projections were based on a $40M project. In November 2022, a Study Session took place, during which the City Commission concurred with amending the loan amount to $41.5M. Amendment No. 1 increases the Loan amount from $31.5M to $41.5M.

The amended Loan now amounts to a maximum of $41.5M with an interest rate of 1.3%. The yearly payment is set at $2,365,136.54. A semi-annual payment of principal and interest ($1,182,568.27) was made on September 1, 2023, and the Loan is scheduled for full repayment on September 1, 2042.

The Kansas Department of Health and Environment (KDHE) has mandated the adoption and publication of Ordinance No. 23-11181 in the official city newspaper. The Form of Opinion of Municipalities Counsel must also be completed. The following documents are required to be submitted to KDHE:

  1. First Amendment to Loan Agreement
  2. Excerpt of Minutes from City Commission Meeting (Exhibit F, Pages F-1 & F-2)
  3. Ordinance No. 21-11057 (Exhibit F, Pages F-3 - F-6)
  4. Proof of Publication in the Official City Newspaper
  5. Form of Opinion of Municipality's Counsel (Exhibit G, Page G-1)

Fiscal Note:
The cost associated with the proposed loan amendment amount of $41.5M is accounted for in the 2024-2028 Water and Wastewater Rate projections. These rates are subject to annual review and adjustment to meet debt obligations, operational expenses, maintenance costs, and fund balance maintenance.

The Utility Reserve Fund currently holds a balance of $10M, with $8.5M allocated for equipment replacement at the WWTP.

The motion was approved 5-0.