By Myrna Trauntvein
The Electric Fund has two major projects in the budget this year.
A public hearing to accept feedback about the issuance of bonds will be held at the October 17 regular meeting which begins at 7:30 p.m.
Nephi City Council members set the wheels in motion by approving Resolution 09-19-17, the Parameters Resolution for Electric Fund Projects.
“The reason we are seeking to bond is to create some wiggle room in the budget,” said Seth Atkinson, city administrator.
“We do not want to break the piggy bank,” said Mark Jones, mayor.
Just as the piggy bank contents were being saved for a rainy day, the electric fund needed to be protected for the same reason, an unplanned emergency.
The two major projects are the electric line upgrade and a substation.
“The first project will be complete within the next few weeks,” said Atkinson.
That project is the electric line upgrade on the north end of the city near the hospital and industrial park and will assist with future growth in that area.
“There are several companies already taking advantage of the additional capacity,” he said.
The second project scheduled for this fiscal year is a new substation on the south end of the city.
“Capacity in this area of the city is at a maximum and the new substation will also assist development needs in that section of the city as well as provide the ability for three-phase power to be supplied,” he said. “There is currently a development in the design stages that could benefit from these improvements.” The substation is slated to begin in the spring with the city going out to bid early next year.
The parameters resolution passed by the city council dictates the limits allowed for any bond issuance.
“Although a bond would be allowed by the resolution, staff will explore other cost-saving options, such as a direct bank placement,” said Atkinson. The resolution was prepared by the city’s bond counsel, Chamberlain Associates.
“The electric fund has a fairly healthy fund balance and could probably fund these projects with existing resources,” he said.
The benefits to financing these projects would be twofold: 1) taking advantage of low interest rates in the current market and 2) allowing cash to remain in the electric fund balance for any emergency situations and to respond to any additional development needs.
“Many bonds or direct loans from banks have a call option after a certain period of time and if needed, the Electric Fund could pay the balance at that time without penalty,” said Atkinson.
The parameters resolution specifies the amount for which bonds will be issued ($2,500,000) and the maximum interest rate (5.0 percent).
The competitive market should allow the city to receive a rate below the maximum interest rate and as staff reviews the needed bonding amount, it will most likely be less than the maximum bond limit set forth in the parameters resolution.
“If we choose to implement impact fees,” asked Nathan Memmott, council member, “will they be able to be applied to these projects?”
Atkinson said he understood that because of the new debt being required to meet new growth, the projects would qualify.
However, Kasey Wright, city attorney, said the timing of the impact fee would be important.
“We will have to look into it,” he said.