Storm Water Bond Issue Information
Frequently Asked Questions
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What is a bond?
A bond is basically an IOU where an investor agrees to loan money to a business or government at a predetermined interest rate.
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What are Recovery Zone Bonds?
The American Recovery and Reinvestment Act of 2009 (ARRA) created a number of new financing options for communities with the idea that these financing options would provide incentive to local communities to develop eligible public infrastructure projects. One of the programs was the Recovery Zone Bond program, which established two different types of bonds – one for economic development and one for facilities.
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What is ARRA?
ARRA stands for the American Recovery and Reinvestment Act of 2009. This act created a new bond program available for cities and counties.
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Who can receive these funds?
Adair County was designated to receive a bond allocation from the American Recovery and Reinvestment Act of 2009 for public and private bonds. Adair County agreed to designate their allocation of economic development to the City of Kirksville for storm water drainage improvements.
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What is the total dollar value of the bonds available to the City?
$2.274 million of Recovery Zone Economic Development Bonds. We can only receive $2.274 million. So the bond amount does not reflect an actual amount of money needed to make all of the storm water improvements, but only the amount of funds available to us. Based on the funds available and the number of identified problem areas, we are estimating that we will allocate about $300,000 in bond proceeds toward improvements in each drainage area.
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When do these bonds have to be used?
Because it is part of the stimulus plan, a substantial plan to use these funds must be in place by July 1, 2010 or the bonds will revert back to the State for distribution to other communities.
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Will the City have to pay these funds back?
The city will have to pay all but 45% of the interest over a 20-year period back. The federal government will pay 45% of the interest and the local community will pay the balance of the debt through the implementation of a monthly storm water utility fee.
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What interest rate is expected for the bonds?
The interest rate will be determined once the bonds are bid.
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What will this cost each household?
The estimated average cost to repay the bonds will be $2.25 per month in the form of a storm water user charge. This is the estimated amount and may be adjusted to reflect the payments owed toward the bonds.
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Will the monthly cost be the same for everyone, even though businesses may have more surface area to drain?
Yes, and here are the reasons. Many of the long term businesses paid either when their properties were developed or over time to establish drainage infrastructure needed for their developments, and all new developments (Home Depot and Walgreens) are required to install adequate storm drainage improvements to address the needs of their developments, and finally most of the storm water problems are within residential areas that were developed with little to no storm drainage infrastructure. For these reasons, the fee is scheduled to be a flat fee for all.
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How will this money be spent?
A small portion of the funds will be used to pay for a comprehensive review of the existing storm drainage system that will include all lands within the city and those that border the city that impact the drainage of the town. A majority of the funds will be used to address the most severe storm drainage issues by improving channels connecting existing structures, and the upgrade and expansion of existing infrastructure either damaged or found to be inadequate during the past few years of precipitation.
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Why are these bonds needed?
Many of the current storm water structures and channels were constructed prior to 1970. They are not sufficiently sized to handle the amount of storm water that the City has been seeing over the past several years. In addition, with growth and development the amount of land with impervious service has increased. In other words, there is more run off surface reducing the amount of time the water has to dissipate.
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What funds does the City have available today?
The City has been improving the storm drainage within and along city streets and has voter approved tax dollars through the Transportation Sales Tax that can be used solely for the streets. Funds from the existing Transportation Sales Tax and General Fund Street budget have been used to pay for both maintenance and improvements of storm drainage. In 2008, with the renewed passage of the Capital Improvement Sales Tax, the City has been able to allocate $50,000 annually of these monies to go toward storm water improvements. There are no other funds available to address the storm water needs that exist within the city limits.
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Why are we bringing this to the voters at this time?
It was an opportunity that presented itself and because the federal government wants the funds to be used rather quickly to address existing needs, there is a limited window of opportunity. The bonds themselves must be issued by January 1, 2011. There are three types of recovery zones. 1 - areas with significant poverty, unemployment, rates of home foreclosures; 2 – areas distressed due to military installation closures or base realignments; 3 – an area designated as an empowerment zone or renewal community. Adair County is one of 112 counties within Missouri designated as an empowerment zone. And as a result, there was an allocated of bond funds made available to the County to award. The allocation was based on a formula using the relative decline in employment in 2008. The County had until the end of August to determine whether or not they were going to allocate the bonds.
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Why does it have to go before the voters?
Since the funds are borrowed, the City must first obtain voter approval to go into debt. The City Council spent some time reviewing the information and discussing the needs of the community and decided to place the measure before the voters at the April election. If the voters are in support of this, then the City will go forward with the bond process.
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How will the City track the funds and the projects?
The City Council has approved the creation of a storm water utility. If the bond process goes forward, obtaining voter support and the deadlines to allocate the funds are met, there will be a utility fee established to repay the bonds. This utility fund is where the costs for the storm water improvements will be expended.
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