OKLAHOMA CITY – In part because of the City of Lawton’s excellent financial status, the Oklahoma Water Resources Board on Tuesday approved a $47 million low-interest loan to the Lawton Water Authority.
Of the proceeds, $46,669,000 is expected to be spent to rehabilitate the sewage treatment plant, the bond counsel will be paid an estimated $177,000, the financial adviser will receive an estimated $153,500, and the trustee bank will get $500, OWRB records indicate.
The loan will be secured with a lien on the city’s water, sewer and trash collection revenues, and perhaps a mortgage on Lawton’s water and sewer systems, said Joe Freeman, chief of the Water Board’s Financial Assistance Division.
Principal and interest payments will be made semi-annually. Repayment of the loan will start no later than a year after the project is completed, and the debt will be retired within 30 years, the loan agreement provides.
Because of the OWRB’s AAA bond rating, Lawton’s loan from the Clean Water State Revolving Fund will bear an interest rate of approximately 1.8%.
Lawton's wastewater treatment plant went into service more than 40 years ago, in 1977, records reflect. Because of the facility’s age, “Many key processes have exceeded the design life of the equipment,” Communications Director Tiffany Martinez Vrska said. The plant has an average treatment capacity of 18 million gallons of wastewater per day, she said.
“Once we know when the loan payback will begin, we will know when any potential rate increase is needed,” Vrska said. “The [City] Council and staff are looking at ways to limit any sewer rate increase to the lowest extent possible.”
Lawton has four outstanding loans with the Water Board, totaling $9.3 million, Freeman related. However, three of those will be paid off “relatively soon,” Jerri Hargis of the OWRB’s Financial Assistance Division said earlier this month.
Two loans of $1 million plus were secured in 2002 and another of $1 million-plus was received in 2003, she said. The balances on those loans are $139,956 and $78,461 (both scheduled to pay off in August 2022) and $167,948 (to be paid off in August 2023), Freeman said.
In addition, the City of Lawton received a $12,705,000 loan from the OWRB in 2018; the balance on that loan is $8,951,276, Hargis said.
The City of Lawton has a debt coverage ratio of 5.54, Freeman said Tuesday. That means the city has fi ve and a half times the amount of cash necessary to meet its long term debt obligations.
In Fiscal Year 2019 the City’s non-capital expenditures totaled $109.4 million, of which $20.9 million (19%) were payments for principal and interest on long-term debts.
“This is an indicator of satisfactory solvency and indicates that for every dollar the City spent on non-capital items, 19 cents of that dollar was used for debt service,” consultants Crawford & Associates wrote in a financial statement analysis. In comparison, in FY 2018 the amount devoted to long-term debt payments was 27%; in 2015 it was 33%; and in 2014 it was 42%.