The Price of Liberty is Eternal Vigilance
City Council, November 10
CWS gets approval for $155 million bond issue
Replacement of West Ashley Sewer Tunnel is urgent
Last night’s meeting was slow to start. Four members were absent and the Ways and Means Chairman did not begin proceedings until a quorum was present. There was nothing contentious on the agendas of either the Ways and Means, or Council. But the planned bond issue of the Charleston Water Systems (CWS) was certainly a matter of substance.
Council was asked to approve a bond issue of up to $155 million for CWS though according to Kin Hill, CEO of the utility, the immediate needs amounted to $128.44 million. Of this latter total, $43.4 million would refinance existing bonds and the balance of $85.1 million would finance new projects.
The refinancing was motivated by the present low rates of interest. The bonds to be refinanced bear an annual interest rate of 5.25%. This compares with present rates of between 0.9% and 2.58% depending on the term. CWS estimates the saving over the life of the bonds between $3.5 million and $4 million.
As for the bonds issued to finance new construction, the rates vary between 0.3% and 3.74%. These are the lowest rates on tax exempt bonds for more than 20 years, CWS said. Mr. Hill also noted that construction costs had also fallen with the recession so the timing of the new construction projects was propitious.
The new projects were:
- West Ashley Sewer Tunnel replacement - $51 million
- Ashley River 24” Water Main Crossing Replacement - $134.5 million
- Bees Ferry Road Water Storage Complex - $5 million
- Hanahan Waste Treatment Plant Stoney Filter Rehabilitation - $3 million
- Sewer Pump Station #77 Rehabilitation - $3 million
- SCDOT/Roadwise Water Main Relocations - $2 million
- SCDOT/Roadwise Sewer Main Relocations $2 million
The urgent need for first and most costly project was stressed by Mr. Hill. The tunnel was the last stage of the utility’s Sewer Tunnel Replacement Projects. The existing tunnel was built more than 40 years ago and is in bad shape. It links the sewage collection in the West Ashley area and parts of Johns and James Islands to the Plum Island treatment plant. The new tunnel will parallel the path of the old tunnel and will be more or less 100 feet underground.
We are not sure whether Mr. Hill feared that Council would reject the financing but he certainly piled on the consequences of not replacing the existing tunnel. He showed photographs of the deterioration and warned of sewer overflows throughout the entire tunnel service area. He also warned of raw sewage in the Ashley and Stono Rivers and potential public health threats. It would be an environmental catastrophe, he said.
If the existing tunnel is in such poor shape, and the photographs suggested it is, why has CWS waited so long to replace it, we ask? And indeed if there were a failure with consequence that CWS fears, the fury of citizens would be intense, probably with political consequences.
In line with the urgency, CWS stated that most of the design work had been completed on the tunnel and construction could begin early next year. The other projects however were not so far advanced.
Council unanimously approved the bond issue request
Bond issues for Stage 2 of City Market Renovation, and GOB refinancingCouncil also unanimously approved a revenue bond issue to finance the final stage of the renovation of the City market, and a refinancing of $6.55 million of existing general obligation bonds.(GOB)
The bond issue for the City market renovation had been planned for some time and followed on the successful renovation of three of the existing buildings. The proceeds of the new bond issue of $3.4 million will be applied to renovation of the fourth and last building. The interest and amortization of the bond will be drawn from Accommodation Tax revenues
Mr. Hank Holliday, principal of the management company said he was pleased with what had been accomplished at the markets. He said that renovation to date had been accomplished with out losing any vendors. He also said that vendors were happy with the renovation and a number of new and substantial tenants had agreed to take space in the larger and to-be-renovated fourth building.
Council members who spoke on the bond issue had only praise for the City Market development and for the management team. Accordingly, there was no dissention when it came to giving approval for the bond issue.
There was no dissention for the $6.55 million GOB refinancing either. And indeed, there hardly could be as the City would be paying much lower rates of interest and achieving substantial savings. The bonds to be refinanced were issued in 1996. 1998 and 2001 and bear interest at annual rates from 4% to 5.4%. All mature between 2011 and 2015. CFO Bedard did not indicate present interest rates but the presentation by CWS indicated how much rates have fallen in the last year or so. CFO Bedard said the saving to the City in 2011 would be over $100,000. Presumably the amount would decline in subsequent years as the bonds mature.