Little Rock Wastewater will get a $61 million loan from the Arkansas Natural Resources Commission after getting approval from the state agency's board of commissioners Wednesday morning.
The loan is a part of the commission's larger loan programs for utilities in the state.
The $61 million is a start in addressing Little Rock Wastewater's $220 million in estimated needs through 2023.
The utility's chief executive, Greg Ramon, told commissioners Wednesday that Little Rock Wastewater expects to ask for two more loans -- one in 2018 and one in 2020 -- to get the remaining funds for its needs.
Commission Chairman Mike Carter of Fort Smith asked Ramon if the utility was relying entirely on the commission to address its needs and why the utility was not seeking a bond issue for which customers would pay. Ramon said the utility wants to rely on the commission for loans and that customers would pay back those loans.
The Little Rock Board of Directors had already approved rate increases stretching from 2017-21 to pay back loans that the utility must get to pay for its improvement projects. Among those loans is the one that was approved Wednesday.
Ramon said Natural Resources Commission loans are preferable to sewer bonds because the interest rate is typically 1 percent less. The interest rate on the loan in question Wednesday won't be known until the commission and the utility are closer to closing on a deal.
The loan will be used for improvements at two of Little Rock Wastewater's three treatment plants: Adams Field and Fourche Creek.
The utility must improve its sewer system under a consent administrative order from the Arkansas Department of Environmental Quality to prevent overflows during heavy rains.
The Sierra Club sued the utility over numerous overflows, which were known to occur during heavy rainfall at nearly 300 sites across the city. The organization argued that the overflows were a health risk to people and the environment. Since settling the case in 2001, the utility has decreased the number of rainfall overflow sites to fewer than 60.
Little Rock Wastewater has through 2023 to complete the work required in the administrative order. Last year, the utility received approval for a five-year extension on the work's previous deadline.
"So we've got a lot of time to do a lot of really good work," Ramon told commissioners, adding that the utility will need a lot of design work before construction can begin.
Ramon has directed the utility to start fixing pipes that allowed rainwater to leak into the sewer system and cause sewer overflows. The Little Rock Board of Directors approved rate increases of 4.75 percent each year from 2017 through 2021 to pay for that work.
In addition to the rate increases each year, the franchise fee levied on the rate by the city also will rise. The levy is 10 percent of whatever monthly rate is charged.
For a customer who now pays $40 a month for sewer service, the rate will increase to $52.65 by 2021, a difference of nearly $152 a year. The $4 franchise fee at that point will rise to $5.27 monthly.
Little Rock Wastewater said the average monthly sewer bill is $31.71, paired with a $3.17 franchise fee.
Former CEO Reggie Corbitt had directed the utility to build additional storage for rainwater and requested a higher rate increase to do that.
Carter said after Wednesday's meeting that he wasn't opposed to the utility's request for the loan but mentioned that many of the loans approved by the commission are for small towns. He added that he is concerned about the engineering fees associated with the projects approved by the commission, which he considers to be too high for some.
The board of commissioners approved the loan for Little Rock Wastewater in the same vote that it approved five other loans for projects in Arkansas for up to about $8.6 million total.
Commissioners approved up to $700,000 to Waldo to improve its wastewater treatment plant; up to $4.7 million to Arkadelphia for construction that would allow more water to flow through its water system; $77,250 to Running Lake Drainage District in Randolph County to clean out ditches; up to $257,500 to Scranton in Logan County to improve and replace its water system; and up to about $2.9 million to Mississippi County to expand its waste-disposal facilities to handle waste from the Big River Steel mill.
Metro on 01/21/2016