The 5-Mile Creek Lift Station Project involves the replacement of the sanitary sewer lift station which is currently located north of Mary Street and west of Bitterroot Drive near 5-Mile Creek.  The current lift station is undersized and has significant corrosion and infiltration problems.  This project is included in the Capital Improvement Program (CIP) with a specified funding source of State Revolving Fund (SRF) loan.  Using debt for large capital improvements to spread costs over time helps in achieving rate stability and also provides rate equity by spreading costs over the period of time that the capital improvement benefits the public.  The SRF Loan Program was established by the Montana Legislature to make at-or below-market interest rate loans to eligible Montana entities for water and wastewater improvement projects. The SRF programs are funded with capitalization grants from the U.S. Environmental Protection Agency and are matched with State-issued general obligation bonds. Combined, these two sources of funds create the State Revolving Fund, from which loans are made and borrower repayments revolve to provide loans for infrastructure projects. 

The current SRF loan terms are 20 year amortization with a 3% interest rate. The comparative current market rate for 20 year, non-collateralized revenue bonds is approximately 4.5%.  The 5-Mile Lift Station Project is included on the Montana Department of Environmental Quality's Water Pollution Control SRF Intended Use Plan; however, the attached SRF Application is required to apply for the loan.

The Council may:

• Apply for SRF funding; or
• Do not apply for the SRF loan.  Alternate financing would need to be secured or other capital projects would need to be deferred to complete this project. 

The total cost of this project is estimated at $3,515,000, including $245,647 of related loan costs for bond counsel, audit fees, and required loan reserves.  Wastewater revenues will be used to fund $65,000 of the project and the remaining $3,450,000 will be funded through the SRF loan.  The estimated annual debt service over the next 20 years for this loan is $230,647 and will be funded with wastewater revenues.

Staff recommends that Council authorize the Mayor to execute the application for a State Revolving Fund backed wastewater loan in the amount of $3,450,000.