Laurel officials have been able to have an estimated $1 million water infrastructure upgrade project completed and only pay $5,000, thanks to support from a state health revolving fund.
During a recent meeting of Laurel Mayor and Council, Town Manager Jamie Smith explained to council members that a water well replacement project exceeded the amount of money the town was able to secure from Delaware’s “Drinking Water Revolving Fund,” which supports municipal infrastructure projects to improve drinking water.
Laurel was able to receive $770,000 from the revolving fund for the replacement of a water well. However, when the project was completed, the costs exceeded the revolving fund allocation by about $219,000.
In an effort to cover the $219,000 that the town had paid to complete the well project, Smith requested that the town use its “General Obligation” power to secure the additional money from the revolving fund. This would enable the town to secure the funds and the state would forgive the principal amount. The town is then expected to pay two percent interest on the funds, which amounts to about $5,000.
General Obligation Bonds serve as a way for local governments to raise funds for projects that create streams of income for things such as roads, parks, equipment, and bridges that will serve the community’s citizens. According to the Laurel Town Charter, the town is authorized to borrow money, and rather than provide traditional collateral, it is allowed to use up to 50 percent of the assessed value of real property within the corporate limits.
The Mayor and Council approved a resolution (2020-5) to move forward with issuing a General Obligation Bond to secure the $218,900 that will allow it to recover the water well project costs. Mayor John Shwed said he wanted to make sure that taxpayers understand that by doing this the council has not created additional debt.
“By borrowing the money from the state revolving fund we have not put the town $219,000 in debt,” he said. “We will pay the interest on that money ($5,000) because the state needs to have a method to give us funds without calling it a grant.”
Resolution 2020-5 passed unanimously by Laurel Mayor and Council. This cleared the way for issuance of the town’s General Obligation Bond to secure the $218,900 from the state’s revolving drinking water fund.