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Wausau water, sewer projects could push city debt past $208 million

in Investigations/News

By Shereen Siewert

Proposed $101 million upgrades to Wausau’s drinking and wastewater treatment facilities will likely push the city’s already burgeoning debt to to more than $208 million, a jump of more than 300 percent since 2014, according to city figures.

Wausau aims to borrow funds in 2020 for the projects, which will allow the current facilities to meet new, stricter phosphorous and capacity requirements while improving safety, reliability and performance, officials said.

As Wausau Pilot and Review reported in July, the city’s debt in 2014 was $50,473,575 and is projected to rise to $107,484,779 by Dec. 31, 2019. But those numbers do not account for the proposed water and sewer upgrades, which were addressed in a lengthy “press release” posted Aug. 14 on the city’s website and Facebook page by Public Works Director Eric Lindman.

In an email to Wausau Pilot and Review, Wausau Finance Director MaryAnne Groat confirmed the $101 million for the water and wastewater treatment facilities will be added to the city’s existing debt.

In his published statement, Lindman said the decision to move the existing facilities was based on a pilot study to determine the city’s best option moving forward. The plan calls for building a new drinking water treatment center, currently located on North River Drive south of Wausau Chemical, to the city’s northwest side at a cost of $31 million. The wastewater treatment facility, constructed in the 1930s, will undergo an $80 million upgrade.

Members of the city council have authorized application to three government financing programs to facilitate the debt: the Safe Drinking Fund and Water Infrastructure Finance Loan Program for the drinking water facility, and the Clean Water Fund for the wastewater system, Groat said.

If the city’s applications are approved the loan programs will also refinance the $5,055,000 of Revenue Bond Anticipation Notes issued by the utility in 2018, Groat said.

“These loan programs function on a draw program where we receive funds as construction draws are submitted so the debt will be issued over the construction period,” Groat said. “My understanding is that we are awaiting approval from the applicable government agencies.”

Groat said the utility loans are considered revenue issues and will rely on utility user fees to retire the debt.

“As such, they are not included in our statutory debt limits,” Groat said.

User fees have already increased in Wausau, with at least one additional increase planned. The first sewer rate hike, already implemented, will cost the average homeowner about $100 per year, according to a public notice issued in October. City officials say the first increase will cost an average residential user $8.59 per month, which calculates to a $25.76 increase in the average quarterly bill. The yet-to-be determined second rate increase, proposed for 2020, will depend on the final design and engineering estimate for the project, Lindman said in October.

Even the 2019 increase in spending places Wausau among the most indebted municipalities in the state and more than double the state’s average. The city’s borrowing in recent years has also shifted to higher interest, longer-term debt issuance, according to city documents.

The impact of the planned borrowing on Wausau’s credit rating remains unclear. Prior debt issues prompted Moody’s in November 2017 to downgrade Wausau’s credit rating from AA2 to AA3. Moody’s cited increases to the city’s debt, declines in tax base, deteriorating demographics, narrowed reserves or growth in the city’s outstanding general fund advances as factors that led to the downgrade.

The purpose of Moody’s ratings is to provide investors with a simple system of gradation by which future relative creditworthiness of securities may be gauged.

Moody’s is expected to release an updated credit rating for Wausau in September.

In his letter, Lindman said a presentation by outside financial advisors regarding the impact of borrowing for the upgrades is planned for Aug. 27 at both the utility commission meeting and a meeting of the city’s finance committee. Construction is expected to begin in 2020.

Read Lindman’s full statement here.

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