Citing it as a necessary measure to ensure that the town’s water system remains up-to-date and operational well into the future, on Monday Kermit officials took the first step towards assuring this goal.

During the town’s regular council meeting, Mayor Charles Sparks brought councilmembers up to date on the proposed two-pronged project to re-extend a waterline back to East Kermit which was destroyed during a 2015 flooding event, as well as get an essential and long overdue upgrade to the town’s aging water plant.

Sparks said the funding needed for the combined project — approximately $3.6 million — would have to be financed with a USDA grant/loan, with the town likely being required to borrow and pay back at least half the amount in monthly installments stretching over a 40-year loan agreement.

Jonathan Carpenter with Thrasher Engineering, the firm tasked by the town to seek out the best possible funding source for the project, joined Monday’s meeting via phone.

Carpenter explained that the best funding source currently available is the USDA, and that in order for the town to gain the grant/loan the council would initially be required to authorize a preliminary loan agreement in the amount of $360,000.

This initial money, he said, is needed to cover the necessary pre-construction costs of the duel project—such as would be incurred by upfront permit, design, legal, and accounting work.

He said the term for the preliminary loan would be for approximately two years but that the town would not be required to make payments on the loan during this timeframe.

“It’s actually being capitalized and being added to the total amount at the end,” he said. “The idea is that it provides you with the money to pay for these professional services until we close on the permanent financing.”

Carpenter said the preliminary loan would ultimately be added to the total of the permanent loan and that in the interim the town would only be required to pay the interest on the amount it draws down to pay the costs of the professional services.

Carpenter further explained the preliminary loan as being a means “to speed up the overall loan/grant” for the town’s water project.

“This gets the project designed, the plans, specifications, and the permits,” he said. “And what that does is get the projects shovel ready and gets us ready to go to construction. This also puts you in a much better position to get the permanent financing.”

While he said there is always the possibility that the town might not get the permanent loan, which would result in it having to pay back the preliminary $360,000 loan, he pointed out the chances of this scenario playing out were very slim.

“The USDA has the money and this is just the process of going through the USDA ... it just takes a while,” he said.

“This is the first year of a brand new program that the Water Development Authority (the West Virginia agency that facilitates the USDA funding) has brought out, so you guys are on the cutting edge, the first community selected for this project.

“Other states have employed similar programs, and they have done really well.”

Carpenter said the next step, to be taken later on, will be for the town to pass an ordinance sanctioning the project, which he added will require three readings—the third being held during a public meeting.

Should the permanent loan be approved as expected, Sparks said water rates would have to be increased to pay off the 40-year loan but that they would be spread out over a 10-year period, likely beginning two years after the permanent loan is acquired.

The overall amount the rates would have to be increased has not yet been determined, he pointed out. However, depending on the final amount that has to be borrowed from the USDA to complete both projects it could be as much as an 18 percent increase.

“This is a great deal of money to have to borrow, no question,” Councilmember Dr. J. W. Endicott said.

“But if we’re going to continue supplying water for the town and all the other areas we currently serve in the years ahead, we really don’t have any other choice but to go forward with this loan.”

Following more discussion, council authorized Sparks to sign the preliminary loan agreement.

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