The City Council on Tuesday night approved an ordinance authorizing the issuing of sewer system revenue bonds.
The $2.8 million bond issue will be used to cover the purchase and installation of new pumps and UV treatment apparatus at the sewer treatment plant and the purchase and installation of lining for sewer system pipes.
Originally estimated at $750,000, the total cost for equipment and installation services at the treatment plant was about $50,000 less than anticipated, said City Administrator Jeff Davis.
The contract was awarded to CSE Enterprises of Rolla for $534,240.
"We had to take about $160,000 or so from reserves for the equipment, and we will use some of the funds to pay ourselves back," Davis said.
The remainder of the funds, estimated at $1.6 million, will be used for sewage collection system improvements, which includes lining sewer pipes and improving manhole covers.
Davis said there are parts of the city's sewer system that are antiquated and require the lining.
"A lot of these pipes were installed back in the Fifties, so they are in pretty bad shape," Davis said. "We won't line the entire system, but it will be pretty significant when it's done."
The total debt service of just over $4 million will be underwritten by Stern Brothers with an annual debt service of $210,000.
The decision to issue the bonds came earlier this year when the City received word that its anticipated $2.7 million USDA loan might not come through.
The bond issue is related to the recent 20 percent sewer rate increase, which was approved by the City Council earlier this month.
Also discussed at the meeting was the topic of the City's general obligation refunding bonds (pool bonds).
Joy Howard of WM Financial Strategies, who serves as a financial adviser for the City, advised the Council earlier this year that reissuing the bonds at a lower interest rate could save the City more than $100,000 after expenses.
However, recent trouble with the bond market dropped those savings to about $60,000.
Howard put the item on hold earlier this month and said she would return this week with an update.
And with the recent bankruptcy in the City of Detroit, the bond market is not where it needs to be.
Davis said the City will continue to monitor progress.
"It improved a little, but not enough," Davis said. "We're just kind of waiting, but our next big point will be in October."
Earlier this month, Howard told the City Council that she was "not ready to come back to the council unless we can have at least $100,000 in savings."