The Fort Wayne City Council on Tuesday approved an ordinance to expand a 2014 bond issue by $55 million to take advantage of lower interest rates for the upcoming deep rock tunnel project.
The measure will allow City Utilities to take advantage of an offer from the state revolving fund to borrow $100 million at 2 percent interest, City Utilities Chief Financial Officer Justin Brugger told the council. By taking advantage of the offer, City Utilities can move up several tunnel projects previously slated for 2019 and later.
The deep rock tunnel is a $150 million project that is a major component of the city’s efforts to meet an unfunded EPA mandate to dramatically reduce the number of combined sewer overflows into Fort Wayne’s rivers by 2025. The tunnel will be able to store just under 37 million gallons during a high-water event, eliminating backups and overflows.
"We want to find the opportune bidding window so we’re not bidding (the tunnel project) at the same time other cities around the world are bidding tunnels, because we want good bids from contractors," Brugger said. "At the same time, it’s an opportune time nationally in terms of financing this. We’re seeing historically low interest rates."
Brugger said it’s not clear what the Fed’s policy regarding interest rates will be after Jan. 1.
The increase to the bond issue does not affect the five-year sewer rate plan the council also approved in 2014, Brugger said.
"We’re still staying within the rates (the council) approved in 2014, so rates won’t be affected," Brugger said. "It’s allowing us to do this additional work earlier. The total interest will be less than what we projected in 2014, so we’re spending $55 million earlier than we had planned, but we’re also paying less interest."
Although the increase will mostly go toward tunnel-related projects, some of the money will go toward other ongoing sewer rehabilitation projects, said Matthew Wirtz, City Utilities deputy director.
In addition to expanding the 2014 bond issue, the ordinance approved Tuesday refinances two older sewer bonds. That refinancing will save the city about $240,000 a year in issuance costs and interest, Brugger said.
In other business, the council approved the creation of a special distribution fund for local option income tax money being distributed by the state. Deputy Controller Valerie Ahr told the council that the state requires the city create the separate fund so the money can be tracked.
The city will receive about $8.3 million by June 1, Ahr said, 75 percent of which must be spent on roads and infrastructure improvements.