Mount Olive forced to borrow money to pay on sewer loan
By Steve Herring
Published in News on July 18, 2010 1:50 AM
MOUNT OLIVE -- The burden of paying for what was promoted as a regional sewer system continues to be borne by residents in Mount Olive and nearby Calypso. It also has once again forced the town to borrow money to cover the $385,000 debt service payment on the new sewer treatment plant that comes due each June 1.
The town has borrowed $200,000 from Southern Bank and Trust, and could borrow another $140,000, Town Manager Charles Brown said.
Town officials, though, are anticipating the receipt of $344,000 from the U.S. Department of Agriculture in reimbursement for money the town already has spent on the next phase of its sewer system rehabilitation project.
And because of that, Brown explained, the loan doesn't affect the rest of the budget.
"Unfortunately it is at that time of year when our revenues are at their lowest. We don't have any property tax revenues coming. We get a little sales and use tax very month, but it is not a lot. The timing could not be worse on the bond payment. If that bond payment was due on December 1 it probably wouldn't be an issue," he said. "We will be able to recoup that money. As soon as the bids are approved on that project, I assume that would probably be October, we will submit pay requests to USDA to be reimbursed for those funds.
"If we didn't have the money that is coming back, we would have to make provisions in the budget to pay that. As it turns out, we don't have to do that. We would not have been comfortable doing that (bank loan) if we didn't have written confirmation from USDA in the hands of the bank already that the funds will be reimbursed to us as soon as the project gets off the ground."
And while a similar action was taken last year to deal with the same problem, Brown is confident they've adjusted the budget enough for 2011 to avoid having to borrow the money for a third time.
As originally envisioned, Faison, Calypso, Dudley and Seven Springs would have participated in the development of the sewer system, thereby providing revenues to help pay for it.
However, at present, only Calypso is part of the system, leaving Mount Olive and Calypso playing the bill.
Because of that, Mount Olive had to make adjustments in water and sewer rates, Brown said. Adjustments have been made on how much Calypso is charged as well, he said.
Faison town officials recently contacted the town about possibly hooking onto the system, Brown said.
Brown said he told Faison officials they would be required to install the sewer lines and necessary lift stations to tie into Mount Olive's system, as well as help with property acquisition at the plant's spray field.
There also have been some discussions with the Southern Wayne Water District and Wayne County, he said.
Karl Knape of the N.C. League of Municipalities said that it is not uncommon for towns to borrow money if the new interest rate is lower than the one that is already being paid on, and that all loans must be approved by the Local Government Commission.