Kermit Town Council conducted the last of three readings of a West Virginia Water Development Authority ordinance as well as a special mandatory public meeting while conducting regular business at Monday’s council meeting.
Both the finalization of three readings of the ordinance along with public meeting were requirements for the town to be eligible to receive a pre-construction loan in the amount of $360,000 to pay for preliminary logistical work essential for a $3.6 million water project.
The two-pronged project includes the re-extension of a waterline back to East Kermit as well as an upgrade to the town’s aging water plant.
The minutes of the regular council meeting reflected that there were no Kermit residents and/or water customers in attendance at the time the special public meeting was conducted.
Ryan Ewing, an attorney with the Charleston-based Steptoe and Johnson law firm which is representing the town in its efforts to secure the $360,000 loan from the West Virginia Water Development Authority, attended Monday’s regular/special meeting to explain the terms of the loan and to have three documents of the loan agreement accepted and passed by council.
The first document passed by council was the $360,000 note ordinance, which Ewing explained as being the third reading of a stopgap loan to pay for the pre-construction costs, such as will be incurred by up front permit, design, legal, and accounting work.
He said this preliminary loan will be paid back out of the permanent $3.6 loan/match, the source of which will be determined by Thrasher Engineering and which most likely will be the USDA. In the interim, he further explained, the town will only be required to draw down funds to pay the interest on the preliminary loan as well as to pay the costs for all the professional services rendered.
Kermit’s part of the loan/match for actual construction of the waterline re-extension and water plant upgrades, which at last month’s meeting Thrasher Engineering’s Jesse Alden pointed out could be as much as half of the $3.6 million projected to be the cost for both projects, will be paid back in monthly installments stretching over a 40-year loan agreement.
The second document approved by council, Ewing explained, allows for the “locking in” of the terms that were initially agreed upon in the note ordinance, which he further described is required to assure that the amount is enough to cover all the construction anticipation notes, i.e., the preliminary planning, design costs and all the other associated expenses.
The final document, referred to as the “first draw resolution,” authorizes that the first funds deducted from the $360,000 pre-construction loan will first go toward paying the capitalized interest of the WV WDA loan, along with pre-construction costs. The balance of the loan, he said, will subsequently be put into escrow for the town.
During last month’s meeting, Alden said the USDA’s loan interest rate is down this current quarter from 3.25 to 2.75 percent, and that if it ultimately goes down even more in the next quarter the town would get the new lower rate for its match/loan funding.
Should the permanent loan be approved as expected, Mayor Charles 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.
Because the overall amount that the customer water rates would have to be increased has not yet been determined, which will be dependent upon the final amount that has to be borrowed from the USDA to complete both projects, Sparks said it could be as much as an overall 18 percent increase.