During an update on the Pagosa Springs Sanitation General Improvement District’s (PSSGID’s) efforts to rehabilitate the town’s struggling wastewater system, the PSSGID board was presented with the likelihood that it would need to ask the voters to raise the town’s sales tax in order to pay for necessary expensive repairs coming down the pike.
The PSSGID is responsible, per its agreement with the Pagosa Area Water and Sanitation District (PAWSD), for 25 percent of any upgrade costs to the PAWSD-run Vista Wastewater Treatment Plant.
The PSSGID currently sends its wastewater 7 miles to the Vista plant for processing, but Colorado Regulation 85, which has to do with phosphorus and nitrogen output into area watersheds, requires that the plant be upgraded to meet this regulation.
At the Jan. 7 PSSGID meeting, Public Works Director Karl Johnson explained that the PSSGID’s portion of this upgrade would cost about $2.5 million.
Johnson added that “we are going to need to discuss how we are going to fund” the PSSGID’s share of this required upgrade.
In addition to this, the PSSGID is in the process of rehabilitating what it calls “Category 4 and 5” problems with its wastewater pipes through town.
Town Manager David Harris told the Pagosa Springs Town Council, which sits as the PSSGID board, that after conversations with PAWSD, it should consider a sales tax election and should form a joint-committee with PAWSD to address the problems.
Board member Brooks Lindner asked, “So, we are talking about a ballot issue, right?”
Harris answered, “Yes, sir.”
Lindner stressed that the board should be prepared for a “Plan B in case the voters reject” the ballot measure to raise the town’s sales tax.
Board president Shari Pierce suggested that the board should consider putting in front of the voters “one package deal to address our laundry list of” things we need to pay for.
Later in the meeting, Financial Advisor Joey McLiney told the board that the sales tax measure is the “Plan B,” and, if it failed, the district would need to raise its rates to an unsustainable level to pay for all the necessary repairs.
McLiney also advised the board to amend a previous ordinance authorizing revenue bonds for financing the project of fixing category 4 and 5 problems.
He explained this comes in the wake of the bond insurance company turning it down, lowering the district’s rating to “Triple B” status.
He explained that the lowering of the district’s rating was due to the insurance company being “afraid” to insure the project because the district has too many other projects on top of the category 4 and 5 project.
“There are so many projects that are required that they are afraid if they insure us that we’ll continue to fix the system and continue to raise rates and it won’t be affordable,” he said.
The district is “still on track” to receive the $4.8 million in revenue bond funding and should receive “money in the bank” within about 30 days, he told the board, but that it would “take more work and more risk to find an underwriter.”
The amendment to the ordinance would change the sale of the bonds from a competitive sale to a negotiated sale, and the principal and interest payments for the $4.8 million in bonds will still be funded through user fees that are reflected in the existing adopted rate structure.
McLiney explained, “A competitive sale is when you have something that is, for example, a triple B with a double A insured wrapper, if you will, that takes your bond and turns it into a commodity. Everybody knows what it’s worth and everybody knows the risk, and so you can get everyone to participate and bid on it.”
He continued, “A triple B standalone, without insurance, takes a little bit more nuance and takes a different kind of underwriter willing to take a little more risk.”
The motion to amend the ordinance to a negotiated sale of the bonds, instead of a competitive sale, was passed unanimously by the board.
McLiney then went back to the sales tax idea, saying that “continually raising rates to pay for the next $15 million is not affordable for anyone.”
He added, “Again, it’s everything we already knew. It’s what we’ve already been discussing since August. So, that’s where we are.”
He then looked further ahead.
“Once the sales tax [increase] is in place … we can refinance in five years,” and that would allow the district to climb out of the triple B status back to an A status, he explained, adding that he would like to meet with the board and have a work session about a strategy going forward on the possible November sales tax ballot measure.
He said that he “ran 25 elections last year” and that from now until November would be plenty of time to run a successful campaign.
derek@pagosasun.com
