IJDC clarifies PSD sewage loan status
During recent Pocahontas County Public Service District (PSD) meetings, questions have been raised about the status of funding for Thrasher Engineering's proposed $25 million sewage plant at Site 7, near Linwood.
James Ellars, Infrastructure and Jobs Development Council (IJDC) executive director, clarified the status of the loans in emails dated July 12 and July 13.
According to Ellars, a total of $27.382 million has been recommended for the project through IJDC loans and Clean Water State Revolving Fund (CWSRF) loans, but there is no guarantee that all of that money will be available for the project.
Ellars wrote in a July 12 email:
"For the Pocahontas PSD project as applied for in Applications 2003S-762 and 2009S-1090, the following funds are associated with the project as of this date: IJDC Loan - $2,500,000 (0 percent @ 40 years); loan closed on 12/30/08; IJDC Loan - $7,047,000 (0 percent @ 36.5 years); CWSRF Loan - $5,711,000 (0.5 percent @36 years); administered by DEP; CWSRF Loan - $12,725,000 (0.5 percent @ 36 years); administered by DEP."
In a follow-up email on July 13, Ellars wrote the IJDC had issued binding commitment letters for the two IJDC loans, totaling $9.547 million, but only the $2.5 million IJDC loan, which had closed, was available to the PSD.
Ellars' July 13 email states:
"I believe the important point to remember is that IJDC funds are not 'made available' to the project sponsor unless and until the loan is closed. The first step in the project culminates with the letter of eligibility and funding recommendations issued by the IJDC. The next step typically is the binding commitment letter, which is mainly done in order to allow the project sponsor to secure funding from other sources and regulatory approvals."
Ellars added that a binding commitment does not preclude the IJDC from withdrawing loans that have not closed.
"Although the IJDC issues binding commitment letters, it still retains the right and ability to withdraw that commitment later if the Council determines it to be appropriate, i.e, if a project does not proceed, fails to obtain regulatory approvals, etc. Again, funds are not available to the project sponsors until the loan closing process is completed. In other words, none of the $7 million IJDC loan is 'available' to the sponsor as of today for this project," his email continues.
Ellars commented that Site 7 project funds had been committed "a very long time" and that IJDC policy was to not let funds sit idle.ﾠ
"As you can see, the loan funds in question have been 'committed' for a very long time (6 years)," he wrote. "Therefore, it is critical for the Council to retain the option of possibly withdrawing its funding commitment should other projects that are ready to proceed apply for those same funds. One important priority of the IJDC is to optimize fund utilization; Therefore, future projects which are simply unable to proceed may run the risk of having its committed funds withdrawn in order to allow other ready projects to go forward. I can say that the IJDC is very committed to ensuring that its funds do not sit idle for long periods of time without being utilized and this is an area the IJDC is expending much time and effort on."
Ellars further clarified the status of recent changes to IJDC lending policy, which will apply to future loans.
During his analysis of David Rigby's alternative plan for a Snowshoe sewage system, Thrasher Engineering project engineer Jonathan Carpenter told the board that the IJDC was considering eliminating zero-interest loans and establishing one-percent as the lowest rate available for future loans. He said the IJDC was scheduled to take action on the item at its July 7 meeting.
Carpenter warned the board that it would pay $57,500 in debt service every year on a one-percent loan if it sacrificed the $9.5 million zero-interest loans currently eligible for the project.
"Just recently, and I believe it was at last month's Infrastructure council meeting, Chris Jarrett of the WDA proposed a policy," he said. "That policy stated, and I don't know if you've read the Charleston paper - it has been a heated topic - that the minimum interest rate, going forward, would be one percent."
Ellars' July 9 email clarifies the policy change, which the IJDC actually adopted at its June 2 meeting. The resolution restricts applications for zero-interest loans, but does not eliminate IJDC loans less than one-percent interest, as Carpenter claimed.
The interest rate resolution was on the IJDC's July 7 meeting agenda for discussion only, "due to concerns and opposition," according to Ellars.
Ellars' July 12 email states:
"Generally, the Interest Rate Resolution accomplishes the following: a) requires any pre-applications requesting 0 percent loans to be returned to the applicant without further review; b) establishes guidelines for project sponsors when making funding requests based on a comparison of the proposed user rates to the Median Household Income (MHI); and c) allows the IJDC to retain the right to award non-interest bearing (0%) loans on a case-by-case basis. So, the resolution does not completely eliminate zero-percent loans from consideration."
During a June 29 briefing to the PSD board, Carpenter estimated the cost of Rigby's alternative three-plant system at nearly $27 million. Rigby, president of Waste Water Management, Inc., had estimated the cost of his design to be $14 million.
Rigby is currently preparing a response to Carpenter's evaluation.
The PSD has scheduled a special meeting for Thursday, July 15, at 6 p.m. at the PSD office in Linwood, when it will consider and/or act on submitting Carpenter's report on Rigby's plan to the DEP.