State: Brace for higher water rates

If the city of McCook is going to finance the city's water problems through state agencies, residents of McCook will need to brace themselves for a dramatic increase in water rates, the McCook City Council was told at a Monday night's study session.

The Council heard from representatives of the U.S. Department of Agriculture -- Rural Division, the Nebraska Department of Health and Human Services, and the Nebraska Department of Environmental Quality, and the Midwest Assistance Program on options the city may have of funding the city's water solution.

Larry Steele of the Nebraska Department of Health and Human Services explained the State Revolving Loan Fund.

The loans are available to cities that receive a priority ranking due to acute health concerns, such as the nitrate, arsenic and uranium problems facing McCook, system deficiencies, lead and copper in the water and several other factors.

Steele told the council his agency ranks cities through a point system. There are 20 cities ranked at the highest priority level. McCook is listed as 15th of the 20.

Through the State Revolving Loan Fund, the city could be eligible for loans up to $6 million and a loan forgiveness of $100,000.

There are two conditions the city must meet before being eligible for loan forgiveness. The first condition -- to be under an Administrative Order from the Department of Health and Human Service -- has been met since the city received an AO in 1998.

The second involves water rates charged by the city. In order to qualify for the forgiveness program, the city must be charging 1.75 percent of the city's Median Household Income. Based on the 2000 census, McCook's MHI is $31,105, meaning the average cost of a water bill would need to be around $41,20. Currently city residents are paying an average of $20.73 a month.

"McCook is like any other town. It's water rates have been too cheap for a long time. Rates will have to be raised to pay the loans," said Tim Rutledge of Humboldt,a rural development specialist for Midwest Assistance Program, a not for profit organization that helps communities find funding for water solutions. Rutledge emphasized the importance of keeping the public informed on the city's ongoing process. "If you're going to raise rates its important to make people understand the reason the rates are being raised."

Fuenning told Councilman Steve Batty the rate could be reached on an incremental basis rather than more than doubling the rate in one action.

Roberta Mues, representing the USDA Rural Development - North Platte field office, told Council members her agency provides loans and grants to communities of 10,000 or less, but gives priority to cities of less than 5,500 in population. She told them the funds would only be available to the city if they were unable to finance through a revenue bond issue.

She said the maximum grant McCook would receive from the grant, if it qualified, would be 45 percent of the total cost of completing the project.

Tom Fuenning of the Department of Environmental Quality, told the Council the city is eligible for funds up to $6 million, but the NDEQ would consider a leveraged issue for a greater amount through the Nebraska Investment Finance Authority.

The first $6 million would be financed at a rate of 4.31 percent for 20 years, 4.61 percent for 30 years or 4.0 percent for up to 17 years.

The interest rate on any additional amount would be determined by NIFA and its bond underwriter.

All three representatives attended the meeting at Rutledge's request.

Rutledge offered the Council his assistance in submitting applications for loans and grants.

"All you've got to do is ask me. It's part of what I do," he said. Rutledge offered his services at no cost to the city. He explained that a great deal of his agencies funding comes from the Environmental Protection Agency.

Councilman Dick Trail asked Rutledge what his role would be in helping the city find funding.

"My role will be to attempt to hold your hand through the process, helping you take one step at a time. It is critical to take your time and ensure the process is completed correctly."