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By Becky Killian, Staff Writer
Officials will use a projected $7.7 million loan to refinance existing debt used to upgrade Salem’s wastewater treatment plant and to make further improvements to the utility to remain compliant with state and federal guidelines.
The financing – which included rate increase projections – was discussed during a special joint session of the Salem Board of Public Works and Safety and Common Council on Monday, September 16th.
The initial estimated cost to rehabilitate the city’s manholes, the lining on wastewater pipes, and required lift station improvements is $4.2 million. That amount, combined with non-construction costs of just over $1 million and the refinancing of the 2020 loan of $2.4 million, brings the total loan estimate to $7.7 million.
The 20-year low-interest loan will be financed through the state. The current subsidized loan rate is about 2 percent.
Andre Riley, of Baker Tilly Municipal Advisors, of Indianapolis, used an estimated rate of 2.5 percent to calculate the total loan interest of $2.3 million. The annual payments are projected to be $474,600.
The upgrades aim to reduce water infiltration into the city’s wastewater treatment system. During heavy rains, the system can be overwhelmed, which can lead to overflows of untreated water.
In 2019, the Indiana Department of Environmental Management (IDEM) 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.
Those violations led to a mandate from the state to improve the city’s wastewater system.
The lift station improvements will include the installation of an automatic 24-hour monitoring system that will notify the operator of any system failures – which IDEM requires.
The projected rate increases Riley provided intend to make it possible for the wastewater utility to keep up with increasing operating costs and inflation, to build and maintain a cash balance as required by the state, and to fund further needed improvements.
The estimated rate increases – which could change – were phased in over three years as illustrated by Riley.
Currently, the average monthly bill for Salem wastewater customers who use 4,000 gallons is about $40. That amount would increase by about $6 in 2025, $7 in 2026, and $3 in 2027.
A rate comparison chart showed that the increases would put Salem in the low- to middle-range when compared to the wastewater rates of eight regional utilities. Those rates ranged from $31 in Bedford to $68.48 in Boonville.
The financing must be in place by June 1 to pay off the utility’s $2.4 million short-term loan. To meet that deadline, Wessler Engineering will begin to design the improvements in October and present them to the city in January. The rate increases will likely be approved in February or March before the anticipated loan closing date of March 31.
Before the vote, Mayor Justin Green cautioned that any delays with the wastewater improvements could result in consequences such as a possible sewer ban, which would stall the city’s growth.
“Let’s not push the panic button on that, but there is a cost to inaction,” Green said.