CHICKASHA — The debt service which the Chickasha Municipal Authority will pay to retire the loan that will finance construction of a new water treatment plant should come as no surprise to any homeowner.
The loan will be amortized over a 30-year period. And just like a residential mortgage, principal payments will start low and gradually increase, while interest payments will start high and progressively decline.
The interest rate on the bonds will hover at 5.20% for the first 15 years, then drop a full point to 4.20% for nine years, then inch up to 4.325% during the last five years, Oklahoma Water Resources Board (OWRB) ledgers reflect.
“Rates go down on longer maturities in today’s market,” said Joe Freeman, chief of the Water Board’s Financial Assistance Division. “The yield curve in the market is inverted right now.”
The CMA’s first payment, interest only, will be almost $2 million and comes due on March 15, 2024. The final principal and interest payment, $4,061,000, will be due on Sept. 15, 2053.
By that time, the Chickasha Municipal Authority will have paid $67,660,000 in principal and $57,043,922 in interest, a total of $124,703,922.
The loan agreement between the CMA and the OWRB authorizes the state agency to attach a lien on revenues generated by the Grady County town’s water, sewer and sanitation systems as security on the transaction.
The OWRB has a ‘debt service reserve fund’ that totals $26,687,761 to cover any potential loan defaults. “Our default rate is essentially zero,” Tonya White, the OWRB’s marketing and outreach manager, said earlier this year. “We have had some technical defaults, but those were remedied fairly quickly.”
Chickasha residents voted in a special election Aug. 8 to renew and increase a sales tax that’s dedicated to capital improvements; that levy, which is three-quarters of 1%, is scheduled to expire at the end of this year. The CMA asked residents to renew the levy and increase it by one-half penny, to 1.25%.
City officials estimate the 1.25% sales tax will generate approximately $4.67 million in revenue each year – from residents and visitors alike.
The debt service requirement on Chickasha’s loan – the amount needed each year to meet the principal and interest payments – would total $4.49 million next year, $4.142 million in 2025, and approximately $4.14 million each year thereafter, a spreadsheet shows.
If city officials’ estimates are accurate, that would leave about half a million dollars a year for other infrastructure needs, such as streets, sewer and water lines, and storm drainage issues.
Chickasha’s existing water treatment plant was built in the 1950s or 1960s, depending on who you ask. It was designed to process 6 million gallons of potable water daily but now provides “a maximum of 4.6 million gallons daily” to Chickasha and the nearby community of Norge, City Manager Keith Johnson said.
Approximately $74 million is the projected cost of the new water treatment plant, including engineering, construction, and buying land, city officials report.
The CMA reportedly intends to finance the water plant project using proceeds from the OWRB loan, coupled with several million dollars in existing capital outlay funds.
The new facility envisioned by the Municipal Authority will be capable of producing up to 6 million gallons of drinking water daily “with provisions to expand to 8 mgd.” The treatment process would include pre-treatment, clarification, filtration and disinfection, the CMA said.
Construction of the new water plant is expected to take three years to complete, city officials said.
The OWRB sold $176,805,000 in water/sewer bonds Aug. 1, and Aug. 10 is the closing date, Freeman said. The proceeds from those bonds are earmarked for loans for seven entities, Ms. White said.
The seven entities include the Chickasha Municipal Authority and the Lawton Water Authority. Other recipients are Pittsburg County Rural Water District #20, Rogers County RWD #3, Harrah Public Works Authority, Bristow Public Works Authority, and Claremore Public Works Authority, she said.