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L-EWA approves early bond arrangements

Posted: December 11, 2012 4:25 p.m.
Updated: December 12, 2012 5:00 a.m.

The Lugoff-Elgin Water Authority (L-EWA) Board unanimously voted Dec. 6 to give L-EWA General Manager Mike Hancock the authority to arrange the details of paying off two bonds totaling approximately $2.9 million. Hancock said the bonds would not be eligible for repayment until May 2013, but noted the L-EWA needed to approve the proposal in order to begin preliminary work.

“We are discussing it now because of the different expenses we may face between now and then and to better plan the budget for the next fiscal year, which begins in July 2013,” Hancock said.

He said that during the last several years, the L-EWA has accumulated a sizeable reserve, which is mostly classified as “unrestricted” funds. Hancock said he determined that with a portion of the organization’s available unrestricted cash, the L-EWA could pay down some of its long-term debt which would reduce annual bond payments.

With a reduction in cash on hand, it would also create a reduction in interest earned, he said. A greater return would be realized, Hancock said, through infrastructure projects and gaining new customers than by having money “sitting in bank accounts drawing the miniscule interest income currently available.”

He suggested the board pay off the eligible bonds with the highest interest rates and the longest maturities, which equaled $2.9 million. Paying off the bonds would save $137,425 annually on interest payments and $2.2 million over the life of the bond.

Hancock indicated that the L-EWA is required by the bond covenants to have the payments plus 20 percent left over each year, creating additional savings. The payments amount to $137,425. Combined with 20 percent of that total creates a reduction in the organization’s budgetary pressure by nearly $165,000 a year. Additionally, he explained that after paying the bonds, the L-EWA would still have more than $4 million left in unrestricted funds.

Hancock also presented his manager’s report. He outlined current drought conditions and offered updates on several projects. L-EWA Chairman Dr. Charles Everett indicated that Hancock expected below average rainfall in the area for December, but normal levels in January.

Updating the board on existing projects, Hancock said the L-EWA had received local approval to operate at Trinity School Road in Lugoff. He noted that a water line was recently installed at the location.

He said the authority is still waiting on construction permits for projects at Brookside and Wildwood West. He said the project would allow water to be run to potential customers in Elgin just west of Laurel Ridge subdivision.

At the L-EWA water treatment plant, a project related to a valve and line is moving ahead, according to Hancock.

“With all the piping that’s been up there for years and years as we added on things, a bottleneck was created that needed to be taken care of,” he said.

Also, repairs to a leaking clearwell tank at the plant are proceeding. Hancock said the L-EWA will be receiving a report soon as to how to complete the project.    

The authority’s sludge pond, a repository for water treatment leftovers, also needs to be cleaned out according to Hancock. The board unanimously agreed to allow Hancock to contract with Bio-Nomics, a sludge and liquid waste management company based in Charlotte, N.C., in order to provide dredging, dewatering, and sludge disposal from the sludge pond. The company outbid two others for the project. The estimated cost for the sludge removal is $150,480.

Hancock also indicated that the L-EWA’s consulting engineer, Brown and Caldwell, recommended several years ago that the organization keep $500,000 on hand for the system’s renewal and replacement fund and $1 million for the plant’s renewal and replacement fund. The system fund includes costs associated with pipes and tanks, which is separate from funds related to the plant itself.

“As long as we have at least that much on hand in those two restricted funds, we don’t need to place any more burden on ourselves by increasing rates where we have to set aside additional funds every year,” Hancock said.

The board unanimously accepted the recommendation from the consulting engineer to keep such funding levels on hand.

In other business, the board unanimously approved:

• the minutes of its Nov. 1 meeting;

• the October financial report;

• the October water reports; and

•a proposal to hold the next board meeting Jan. 10 instead of Jan. 3.

The L-EWA board normally meets the first Thursday of each month. The meetings are open to the public and are held at the L-EWA’s office, located at 88 Boulware Road, Lugoff.

 

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