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Homeowners to help pay for $4.6M water expansion
By: ALICE HUMMER Review Correspondent, Staff Writer
The $4,635,000 bond issue to expand the water system in East Cocalico is two-fold, explained Terry Reber, township authority administrator, at the authority’s April 11 meeting.
"Existing users with water will benefit since if one of our wells goes out, we could have a problem," said Reber. "Therefore 25 percent of the cost of the bonds will be borne by existing rate payers."
Water rates increased April 1 from $5.90 to $6.45 per 1,000 gallons. Sewer rates, which are based on water use, will remain at $12.10 per 1,000 gallons.
"The other 75 percent of the project cost will come from new system users," Reber said. "We need 600 new users over the next 20 years to make this work. We already have 465."
The 465 potential new users to which Reber refers are those people who purchased EDUs. Initially, the thought was that when 800 EDUs were reached, there would be a solid financial base for expansion.
"We have letters of credit for all 465 people on the EDU list," said Reber.
The Cocalico Commons Shopping Center developer is not on the EDU list.
An EDU is the number of gallons of water used per day by an equivalent dwelling unit. Currently that number is 253 gallons.
Although the township has 115 EDUs remaining to award for new construction, that is not enough for a developer who is looking to put in a large housing development.
"Right now about the only person who can use it (the remaining EDUs) is a person building a single family home," said Reber.
With the goal of 800 paid EDUs stalled, and the bids for the proposed expansion coming in about 1 million dollars more than anticipated, the size of the project was reduced and some contractor concessions, as recommended by the water committee, were adopted. Some concessions, such as using block facing instead of brick were aesthetic, and others were modifications which generated savings.
"Closing on the bond is set for May 8," said Scott Kramer, from RBC Capital Markets, LLC. "That’s when the actual money changes hands. We’ll direct Fulton into buying government securities to secure the best interest on the money in the interim."
Both Kramer and Bond Counsel, Jonathan Cox, from Rhoads & Sinon, LLP, praised the Authority’s A+ Stable rating, which they obtained on their own, without backing of the township supervisors.
"Relative to your peers, you are very strong," said Kramer. "Some of your peers are at minus AA."
Positive aspects of the favorable rating include the Authority’s total assets which are just under $12 million, the strong financial management under Reber and the leadership of the board.
The loan’s amortization schedule has payment on the principal beginning in 2017. The full load of debt service kicks in in the year 2029.
Build America Mutual was the winning bidder on East Cocalico Authority’s bonds. The company has a AA rating, which helped East Cocalico get a lower interest rate.
The Authority will borrow $4,625,000 at a fixed rate for 30 years at a yield of 3.2 percent. Sale of the bonds will begin this year. It is the Authority’s intent to pay down the debt in less than 30 years.
Vice-chairman, Donald Koser, conducted the meeting in the absence of chairman Dan Becker. Assistant secretary, Brad Fichthorn, performed the duties of secretary in the absence of Ray Wolf.
In other business:
? The board approved three resolutions needed in order to issue bonds. The first extends the life of the Authority for 50 years, until 2063. Township supervisors at their April 3 meeting authorized Paul A. Lundeen of Rhoads and Sinon, LLP, to advertise the ordinance for adoption at supervisor’s April 17 meeting. The second resolution deals with covenants and agreements granted by the township to the authority for water and sewer services. The third resolution accepts the proposal regarding the issuance of bonds and names Fulton Bank, N.A., as trustee.
? Authority solicitor, Lucy Dowd, explained the proposed agreement to be sent to Lakeside area homeowners regarding construction of the sanitary sewer extension project. Dowd said that the responsibility for any homeowner property damage would be the responsibility of the contractor doing the work, not the Authority. Dowd suggested that homeowners may want to have their own attorney take a look at the agreement prior to them signing it so that they clearly understand it.
? The Board awarded low bidder, Landmark Excavating (no relation to Landmark Builder) the Lakeside sewer extension project. Winning low bid was $328, 359.20. Highest bid was $600,000.
? George Wagner, authority engineer, said, "The company located near Erie recently completed six low-pressure drilling projects much larger than the East Cocalico project."
Wagner also reported, "Service lines that homeowners will be paying for came in at $12 per square foot. This is good news since we had estimated about $30 per foot."
? Wagner will inspect two sanitary sewer mains that authority superintendent, Ken Spitler, reported have backed up. One section has root problems and affects the Harvest Fellowship Church near Redner’s. The other one is where Brookview Estates ties into the sanitary sewer line.
"I think we should look into these sooner rather than later," Spitler said.