The city obtained a short-term loan in 2020 to upgrade its wastewater treatment plant, and now officials are preparing to seek long-term financing. The matter was discussed during the Monday, July 8, meetings of the Board of Public Works and Safety and Common Council.
In 2020, the Council approved sewer works bond anticipation note, which allowed the work to begin. The loan must either be paid in full – including interest – or refinanced before June 1. Beau Zoeller, the city’s attorney, noted that the 2020 vote approved both the short-term and long-term financing of the project.
Andre Riley, of Baker Tilly Municipal Advisors in Indianapolis, said that Salem is in a good position to obtain a low interest loan through the state. The state’s low interest loans see a lot of applicants, making it competitive. It was noted that the Indiana Finance Authority has favorably ranked Salem 13th of 108 communities seeking the loans.
The state’s loans have interest rates of about 2.5 percent or less. If the city were to obtain other financing, interest rates could be about double that amount.
The city currently owes about $2.4 million on the note, including interest; however, it’s possible the city could refinance that debt and obtain more funds to pay for mandated upgrades to remain compliant with state and federal guidelines as well as capital improvement needs.
The work approved in 2020 was based on an assessment conducted by Wessler Engineering. Part of that assessment included smoke testing of the city’s underground wastewater pipes. Wessler had told the city to expect a total project cost between $1.4 million and $1.5 million.
In May 2020, officials approved the bond anticipation note of up to $3 million. In addition to construction costs and interest, other costs such as administrative fees are included in the loan.
In December 2020, Thieneman Construction Inc. was approved as the winning bidder for the $1.4 million project.
The 2020 vote came about a year after the Indiana Department of Environmental Management fined the City of Salem $6,000 for violations by the city’s wastewater plant. Those violations included six instances when an estimated 3.5 million gallons of raw sewage was released into the West Fork of the Blue River.