By Melissa Rollins, Editor, editor@newsandpress.net
In a special called meeting last Tuesday night, Darlington City Council passed first reading of Ordinance 2018-06-Master Storm Water Ordinance and a Series Ordinance for financing the Southwest Storm Water Project, though not without reservations from council members Bryant Gardner and John Milling, both of whom cast a nay vote.
Before Bond Attorney Ben Zeigler spoke to council, City Manager Howard Garland gave a recap for council and community members present.
“This project started with the original grant application in October 2015, through the South Carolina Rural Infrastructure Grant; the application was rejected,” Garland said. “We reapplied in March of 2016 for the same project, which is the Chalmers Street ditch. That project application was successful in June of 2016. The original amount was $445,000.”
Garland said that through a procurement process Mike Hanna, with Hanna Engineering in Florence, was secured as the engineer for the project. A Preliminary Engineering Report by Davis and Brown indicated that an additional 72-acre area needed to be included in the project, Garland said.
“(The report) said that that needed to be included as part of the outfall and that the project was essentially just designed to work in the middle but wasn’t designed to take it all the way to the outflow,” Garland said. “That is where the project grew in size.”
Hanna gave an original estimate of around $1.5 million, Garland said, but when bids came in during the first round of bidding the lowest bid was $2.8 million dollars.
“It was strongly suggested that we re-bid, which we did,” Garland said. “The low bid was Landsdown Earth & Pipe and their bid was $2.567 million dollars. That is where we sit.”
Garland said that city officials looked for a way to fund the million-dollar shortfall but avenues they sought did not pan out.
“First we approached the USDA about doing a rural development loan for 40 years,” Garland said. “Everything was looking good until Rural Development said that we had to submit bid documents. I said that we already had the bid and…they said we had to do their bid documents. Well, we can’t do that because we already bid the project out. So the USDARD lane was closed.”
The new series ordinance is “An ordinance providing for the issuance and sale of a not exceeding two million seven hundred fifty thousand dollars City of Darlington, South Carolina stormwater system revenue bond, series 2018; and other matters relating thereof.”
Zeigler reminded council about the bond that they passed last year to fund the stormwater project.
“We did a stormwater bond last year for this project in the amount of $1,350,000,” Zeigler said. “This is a borrowing that is secured by and payable from that stormwater fee that you imposed. What you are able to do in terms of this revenue bond, or a revenue bond like this, is constrained by the amount that you collect from the stormwater fees.”
A couple of options were explored to help with the shortfall, Zeigler said.
“When we first looked at this, we had a couple of different ways to potentially handle it but what we decided in talking with Mr. Garland and the financial advisor at First Tryon was to try to, first of all, try and refinance the existing bond, which could be refinanced, to try to roll it in with a new money component with the money you needed to cover that shortfall. If you did all that, and you just did it on the basis of that revenue stream from the stormwater fee, it doesn’t cover all of that; it is not one-to-one,” Zeigler said. “We started looking for other options and one of the things that Mr. Garland suggested was the Sunday alcohol sales fee. That statue has a list of things that you can pay for out of the fee. One of the things that you can fund out of the license fee is draining projects; this is a drainage project.”
Tyler Trout, with First Tryon in Charlotte, explained some of the technical facts of the bond to council. When asked about the possibility of paying the bond off more quickly than the 20-year period provided in the bank documents, Trout said that the city must wait at least five years to pay it off.
“For the first five years, the bank wants you to not repay them,” Trout said. “In their documents, they are going to have a no-call prepayment provision. For the first five years you cannot give them their money back but after that you can give them their money back. There is a period where you would have a one percent penalty, which you have in your current documents as well. Banks want to have some protection that you if you are going to prepay them early, that they get a little bit of a fee to offset the economic loss.”
Sterling National Bank will be the lender, with a roughly 4.15 percent interest rate; Trout said that a final interest rate would be set at closing.
Trout also talked with council about using their alcohol sale license fees for bond payments.
“The stormwater revenues that you collect every year are about $135,000,” Trout said. “The payments on this bond are about $180,000. Of your temporary license fees, which is about $75,000 that you are expected to collect on a yearly basis, $45,000 of it has got to go to pay this debt. That money is going to be used for this purpose. The rest of it, you can use for other purposes.”
Zeigler told council that each year the alcohol sales license fee money must be put aside because there was no mechanism that allowed council to write into the ordinance that that money be allocated to the stormwater project.
Councilman Milling said that he was unable to vote for the new ordinances.
“I’m not opposed to things that help the city but I couldn’t vote for this the first time around and I’m just not going to be able to vote for it the second time around,” Milling said.
Councilman Gardner said that his concern with the project was that it was costly and tying up the city’s funds for a long period of time.
“I’m really worried,” Gardner said. “We’ve now approached over 100 percent of our stormwater fund per year. It has grown from a $400,000 project to a $2.3 million project to now a $2.7 million dollar project. It is just growing and growing. We are going to put our city at a disadvantage from a stormwater standpoint for, now, 20 years. That’s very scary from a financial standpoint for our children’s future.”
