Locust will pay off $703,000 in sewer debt early
By Shannon Beamon, for the SNAP
The Locust City Council has decided to wipe out the last of its sewer debt in one swoop.
By the end of the fiscal year, it will pay off nearly $703,000 on its last wastewater loan, making the city’s system debt-free.
The loan was originally granted in 2014 by the N.C. Department of Environment and Natural Resources to pay for a gravity sewer in the King Heights neighborhood. The loan totaled about $928,000 and had a 20-year term with a 2 percent interest rate.
“By paying that off now, the city will save (about $104,000) in interest costs,” Finance Director Stephania Morton said at the council’s last meeting.
In order to do that, the city will pull funds from at least two sources.
The first is an unused wastewater project fund. About $350,000 was budgeted for North Basin sewer improvements during budget planning this year. However, since then city staff found the funds will not be needed.
So rather than put the money back into savings, the city council will re-allot it to the DENR loan.
“If the funds are there, then it makes sense to use them on this,” City Administrator Cesar Correa said.
The second source for the payment is the wastewater fund’s surplus income.
“We anticipate the wastewater fund will have a healthy surplus at the end of the fiscal year,” Correa said.
This is primarily due to the influx of new houses in Locust. Each new residence must pay a sewer development fee to the city, which then goes into the wastewater fund. Due to the number of new houses this year, that income will likely be higher than expected, Correa said.
Any such surplus will be used toward the loan.
However, since there is no way to know how much surplus there will be until the end of the fiscal year, a third source will be lined up to complete the payment — the wastewater reserve fund.
Anything remaining on the loan after the surplus is applied will be paid from that source, staff said.
“We will only transfer money out of the reserves if needed,” Correa said.
Council members agreed completing the payment would be worth those expenses — and not just to save money on interest payments.
“It puts us in a healthy spot for the future,” Mayor Steve Huber said. “And that’s always a good place to be.”
Shannon Beamon is a freelance contributor for The Stanly News & Press.