STAR CITY — A resolution that would have authorized the city of Star City to borrow about $266,000 on a 10-year note to finance new water meters and a remote meter reading system died before the aldermen could consider it.
City Attorney Phillip Green told the City Council on Monday that state law forbids cities borrowing money on any terms longer than five years.
“The only way to get the [loan] payment we were looking at was a 10-year finance,” said Green.
Green said the city could borrow on a five-year term and replace perhaps half of the city’s older meters with new electronically read meters and then borrow again for another five-year period.
“But then again we were counting on the income to make the payment,” said Green.
Economic Development Coordinator Dwayne Snyder reported last month that an independent lab, which examined 25 city meters selected at random, discovered that the city is only collecting revenue on about 73 percent of the water it is selling because of old or faulty meters.
Snyder then estimated an increase of at least 15 percent in water revenue from the new meters, even though the random tests pegged water revenue losses at about 26 percent. He said then that the city might be able to finance the new system for 10 years at a 4 percent interest rate. Snyder concluded that the city’s annual savings and new earnings from more accurate water meters would more than pay for the new system. (The city had 1,034 water meters as of Oct. 31, 2012.)
Green said one other possibility is for the city to implement a revenue bond through a government agency, where the city would get funding up front and pay off the bonds over time with interest with revenue from the Water Department.
“That’s something we might can do,” said Green. “What you would basically have to do is pledge part of your revenues to pay the bonds.”
Green said, through a bond issue, the city could finance the project for 15 or 20 years. The city would not have to hold a special election because the council could implement the project by ordinance, if the city can find an agency willing to loan the money.
Yarbrough and Councilman Pete Kiefhaber then noted that Snyder is already working on getting more proposals from other companies that might be interested in selling and installing the new meters, perhaps more cheaply. Yarbrough, however, stressed that he wanted to make sure a “reputable company” did the work.
Green said the city could request proposals without any obligations. Green also said that another advantage to doing the project all at once instead of over a long period of time is the probability of getting a better price and that all of the new meters would be identical.
“Anyway, Dwayne will get some more quotes and some more facts,” said Yarbrough.