Town seeks refinancing, electric provider before study

Herald Staff Writer

FERDINAND — The Town of Ferdinand is looking to complete a rate study, but first, it plans to examine its options for refinancing two sanitary sewer bonds and possibly changing electric providers.

At a town council meeting Tuesday, Councilman Ron Weyer noted the last rate study was completed five years ago. At the time, the town was advised to do a rate study every four or five years to avoid large jumps in rates.

Town Attorney Bill Shaneyfelt suggested the study be done after looking into bond refinancing.

The town has two 1998 bonds from the expansion of the wastewater treatment plant and collections system. The town borrowed $3,736,000 from the U.S. Department of Agriculture’s Rural Development division with an interest rate of 4.75 percent. The current outstanding balance is $2,642,000 with the last payment due Jan. 1, 2038.

H.J. Umbaugh & Associates of Plymouth worked with the town on issuing the original bonds in 1998 and recently approached the town about refinancing.

“They feel they could provide us with some significant savings if we were interested in (refinancing) that bond,” Shaneyfelt told the council. “They believe that the savings would be substantial. Even if the market conditions went south, (Umbaugh representatives) believe they would have to go really south for it to not be worth our while to go through the cost and expense.”

Shaneyfelt said current estimates indicate the town could save $650,000 to $950,000 if it were to refinance those bonds.

“That could fund a few things,” council President Ken Sicard said.

The bond could be refinanced in three ways, Shaneyfelt explained. The town could shorten the term of the bond or keep the same term but refinance with a lower interest rate, allowing the savings to be put toward special projects or to keeping rates low. The final option is to issue a bond for a new project and refinance the old bonds at the same time.

Wastewater Superintendent Roger Schaefer said this morning that he has a few ideas in mind for using the savings from the refinancing to improve the utility, but he is not ready to elaborate.

He also reminded the council that the wastewater plant’s new permit from the Indiana Department of Environmental Management will be issued in 2014, and could require the town to begin removing phosphorus. That change would require additional infrastructure that could impact rates.

“It depends on what they might require of us,” Schaefer said. “By next year, we should know more on that too, what it might cost us.”

At the same time, the town’s contract with Vectren as an electric provider expires at the end of 2014. American Electric Power and Duke Energy have expressed interest in providing the town’s electricity beginning in 2015.

“It might be beneficial for us to see how those discussions go and find out what those costs would be, and then look at that with the rate study,” Shaneyfelt said.

Sicard noted that the contract with Vectren could be extended and the Indiana Municipal Power Agency also should be included in the exploratory process.

A rate study on the town’s water utility could be done immediately.

“If we’re going to look at ultimately analyzing all the utilities, we should ask Umbaugh what kind of package arrangement they might be willing to work for us” for the refinancing and for the rate study, Shaneyfelt said.

The council granted Shaneyfelt permission to obtain a proposal from Umbaugh for the rate study and for refinancing the wastewater bond.

“It seems like it makes sense to do it all together,” Councilwoman Debbie Johnson said.

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