OKLAHOMA CITY – A loan of up to $72 million to finance construction of a new, larger water treatment plant in Chickasha was approved Tuesday by the Oklahoma Water Resources Board.
After subtracting fees for the project bond counsel, financial adviser and local counsel, the trustee bank, and the OWRB’s costs of issuance, approximately $69 million will be available to spend on building the new treatment plant. The loan proceeds will be coupled with $5 million in existing capital outlay funds, city officials said.
The loan provisions decree that the debt will be retired over a maximum period of 31 years.
Joe Freeman, chief of the agency’s Financial Assistance Division, said the loan will have a fixed interest rate. As of June, OWRB loans with a 30.3-year payout period commanded an interest rate of 4.46%, said Tonya White, the agency’s marketing and outreach manager. However, by the time Chickasha’s loan closes the interest rate may have changed.
Chickasha residents will vote in a special election Aug. 8 on a proposition to retire the loan with a permanent 1.25% sales tax that would go into effect January 1, 2024. The new levy would be a half-cent increase in the city’s existing three-quarters of a penny Capital Improvement Project sales tax that is scheduled to expire Dec. 31, 2023.
City officials estimate the 1.25% sales tax would produce approximately $4.67 million each year – from residents and visitors alike – enough to retire the OWRB loan and to fund other capital improvements. The debt service requirement on Chickasha’s loan – the amount needed each year to meet the principal and interest payments – would be approximately $3 million, leaving ample revenue for other needs, city officials believe.
The water treatment plant “is not the only capital project the City will be facing,” Mayor Chris Mosley wrote in a letter to the state Commerce Department last month. “We also have significant needs in the wastewater system and a large storm drainage project upcoming.” Other capital needs include improvements to public safety facilities and much-needed repairs to crumbling streets and leaking water lines.
If the sales tax measure fails, City Council members previously voted to automatically raise water rates on Oct. 1, 2023, to pay off the OWRB loan.
Water rates would increase by approximately 82% to meet the debt service requirement on the loan. An “average” customer using 5,000 gallons of water per month currently pays $34; if the sales tax proposal is rejected, that water bill will increase by almost $28, to $61.87 per month.
Chickasha experienced a double-digit increase in its water rates just last summer, City Manager Keith Johnson noted.
Freeman said that without increasing the capital improvement sales tax or raising water rates, Chickasha has insufficient resources to pay off the OWRB loan.
If the draconian increase in water rates were instituted, Chickasha’s debt coverage ratio would be 1.41, which means the city would have 1.41 times the revenue needed to meet the debt service requirement on the loan.
If water rates remain static and the sales tax hike is approved, the city’s debt coverage ratio would increase to 1.67, Freeman said.
The combined city and state sales tax rate in Chickasha is 9 cents per dollar, or 90¢ per $10. The new combined rate would be 95¢ per $10 if voters approve the modest tax hike.
Ironically, Chickasha’s city sales tax disbursement this month from the Oklahoma Tax Commission climbed to $1,389,222, “the most we’ve ever had,” Mosley told Southwest Ledger. That amount was 24% higher than the town’s $1.119 million disbursement in July 2022, and was 17.4% higher than the city’s $1.183 million sales tax allocation from the Tax Commission last month.
Building permits up, 1M visitors counted, water plant aged
Chickasha has “some pretty high demands,” Mosley told Ron Justice of Chickasha and other members of the Water Board prior to their vote on the loan application. “Building permits are up, and we had 1,074,000 visitors” in the last 12 months. Also, “We have an aging facility that has trouble meeting water demands during extreme temperatures, hot and cold.”
Water consumption in the Grady County town totaled 878,481,000 gallons during the past 11 months, usage records filed with the state Department of Environmental Quality show.
In addition, California businessman Chet Hitt’s development plans in Old Town Chickasha include construction of a restaurant and distillery producing 500,000 to 1,000,000 bottles of liquor a year. Each of those bottles would contain 750 milliliters of alcoholic beverage, slightly more than the volume of two 12-ounce cans of soda. Thus, water consumption from Hitt’s Town’s End Stillhouse & Grill distillery would total approximately 99,000 to 199,000 gallons per year.
The existing water treatment plant is believed to be at least 60 years old, and perhaps even older. Regardless, the water plant has already surpassed its design capacity and useful life.
The facility was designed to produce 6 million gallons of pure, disinfected water each day but now “provides a maximum of 4.6 million gallons daily” to Chickasha and the nearby community of Norge, Johnson said.
“We have some serious issues with our water infrastructure,” he said. “We’re at risk of not being able” to meet demands imposed on the water delivery system. Chickasha’s water treatment plant has several “deficiencies.”
The Chickasha Municipal Authority has tentatively proposed to locate the new treatment plant near the existing plant off Genevieve Street, but on a tract of land that’s not in the flood zone; however, no decision has been finalized, Mayor Chris Mosley told Southwest Ledger on July 13.
The new facility envisioned by the CMA will be capable of producing up to 6 million gallons of potable water daily “with provisions to expand to 8 mgd.” The treatment process would include pretreatment, clarification, filtration and disinfection, the Authority said.
Construction of the new water plant is expected to take three years to complete, city officials said.
City has talked to Chickasaws about buying water
Chickasha draws its water from the Fort Cobb Reservoir in Caddo County. The town’s water usage is nearing one billion gallons per year and the Fort Cobb Master Conservancy District has imposed a 1.5 billion-gallon water withdrawal limit on the city, Mosley said.
Consequently, Chickasha is in search of a supplemental water source. “A couple of years ago we started talking to the Chickasaw Nation about buying water from them,” Mosley said, “because eventually we will need another source of drinking water.”
Chickasha has joined with Blanchard, Dibble, Tuttle, Newcastle, and Cole, a small town in McClain County, in tentative discussions about a bulk water contract with the Chickasaw Nation, Mosley indicated.
Through the first six months of 2023, Chickasha experienced “dramatic growth in visits to its historic downtown district versus the same period of 2022,” Jim Cowan, president of the Chickasha Economic Development Council, announced Tuesday. Visits are defined as anyone who comes into the downtown borders, and the numbers include repeat visitors, he said.
Foot traffic analytics from Placer Labs showed there were more than 561,000 visits from January through June this year. “This was a 39% increase in visits from the same six-month period of 2022,” Cowan said.
Furthermore, March 2023 “saw the most traffic – 103,000 visits – of any calendar month since the start of Placer’s records in 2017,” he said.
New businesses in the downtown district have contributed to the increase, including but not limited to the Flower Shop Winery & Pizzeria and Brandi’s Bar & Grill, Cowan said. The iconic ‘Leg Lamp statue’ has also made an impact, “with tourists from nearby, out-of-state, or outside the country, stopping by to see the attraction and take pictures.”