2005 Clean
Water Bonds Referendum Frequently Asked Questions
Updated April 20, 2005
BUDGET
& FINANCE
PROJECTS
MISCELLANEOUS
How much
will the Town borrow in bonds?
If citizens vote in favor of the two bond issues on the May 3rd ballot,
the Town will have the authority to borrow up to $120 million in general
obligation (GO) bonds over seven years--$110 million for Cary’s
share of regional wastewater facilities and $10 million for open space.
Just how much of this $120 million in bond authority is used and when
will be up to the Town Council each year during the budget process.
Why general
obligation (GO) bonds?
GO bonds are the least costly financing option available to the Town
for these projects. Given the Town’s excellent credit rating and
financial management, Cary can borrow money at low interest rates and
issuance costs, thus saving utility customers and taxpayers hundreds
of thousands of dollars over the repayment period.
How will
the Town pay back the bonds?
The $110 million in bonds for Cary’s portion of the $193 million
regional treatment facilities will be repaid through utility rates—an
estimated additional $22 per month for an average Cary household (monthly
water consumption of 7,000 gallons) by 2012. For non-residential customers,
the cost will be about an additional $3 per 1,000 gallons of water used
each month.
Right now, we estimate
that utility rates will go up an estimated $3.10 per month per 1,000
gallons of water used by 2012, which translates into about $22 per month
per average Cary household (monthly water consumption of about 7,000
gallons.) Since non-residential uses vary so widely, we really can’t
provide a meaningful average monthly increase figure for this class
of customers.
The $10 million in bonds for open space will be repaid either with up to 1 additional cent on the property tax rate or using part or all of an existing $1 million annual appropriation from utility rates. Today, a Cary residential utility customer using 7,000 gallons of water per month pays about $25 a year in their utility bill to support the $1 million a year existing open space program, and business customers pay 35 cents per 1,000 gallons of domestic water used (irrigation meters not considered).
If the council decides to pay for the $10 million in open space bonds with property tax instead of utility revenues, a Cary tax bill could increase as much as $10 per year for each $100,000 of assessed value, depending on when the debt is issued.
This means that if your home and personal property, including vehicles, are valued at $250,000 for tax purposes, your related tax bill could increase as much as $25 per year to cover the proposed $10 million in open space bonds. How these changes would affect individual homeowners and businesses would depend on their respective average consumption of utilities versus the total tax value of their property.
What are
the property tax implications of these bonds?
Little if any impact on property taxes is anticipated for these bonds
since the Town plans to pay back most if not all of the bonds through
utility rates. That said, voter authorization for governments to use
GO financing is required by state law since the government must agree
to use its ability to tax if necessary as collateral for the loan. The
law does not require governments to use tax revenues to pay back the
bonds, nor are governments required to raise taxes because of the bonds.
Even so, the Town must advise voters that, in the current environment,
it would take up to 9 cents added to the current tax rate to pay back
the entire $120 million ’05 bonds over 25 years once all of the
bonds were issued.
Can we afford
these projects?
Yes. Cary has a reasonable amount of debt at this time, reasonable utility
rates, and the second lowest tax rate in Wake County. Wall Street financial
markets have given Cary a AAA credit rating, the best possible rating
in the world, and Cary hasn’t raised taxes in over a decade, even
after bond referendums in 1988, 1994, 1999, and 2003.
What happens
if the bonds don’t pass in May?
The regional treatment facilities must be built by 2011 to meet a state
regulatory requirement; therefore, if the GO election to pay for Cary’s
share of the regional treatment facilities fails, more expensive financing
options will have to be used for Cary’s portion. On the other
hand, the Town is not being required to set aside open space. Therefore,
it would be up to the Town Council to determine if and how to precede
with additional open space projects should that bond issue fail.
What is
the Town’s current debt service?
Our current debt service is approximately $21 million a year.
Given the
condition of the economy, is now the right time to vote on bonds?
Yes. No one disagrees that the economy is more sluggish than anyone
would like. But the state of the economy doesn’t change the Town’s
obligation to continue making steady progress on important quality of
life issues for Cary citizens using the most cost effective options
available over the next seven years, which is the life of the authorization
for these bonds.
What were
the funds used for from the 2003 bond referendum, and how much is left?
The 2003 referendum authorized the Town to use GO financing for streets
and recreation projects—these bonds were not intended for and
cannot be used to fund wastewater or open space projects. Even though
several projects are under way, the Town has not yet reached the point
of having to use any of the streets or recreation bond authority from
the 2003 referendum since the projects are not quite at the stage where
payments must be made. We are planning to issue some of the 2003 bonds
this summer—about $4.3 million of the $30 million approved for
recreation bonds and about $26.5 million of the $130 million approved
for street projects.
These
bonds are approved by the voters, how will the additional debt be viewed
by bond raters in light of Cary existing debut?
We expect that bond raters will view Cary's debt levels as significant
but manageable given Cary's continued, proactive attention to planning
for and managing growth, capital needs, and the Town's financial position.
What is the State Revolving Loan program and how might it affect
the Clean Water Bonds referendum?
In the past, Congress has provided states with grant funds to establish
revolving loan programs to assist in the funding of qualifying wastewater
treatment facilities, with states providing 20 percent of matching funds
to add to the revolving fund. In North Carolina, these funds have been
made available to local governments at very low interest rates--one-half
of the market interest rates for tax exempt bond issues.
Since the revolving fund interest rate is even lower than what the Town
of Cary could get with general obligation bonds, we are working hard
with our project partners to have the regional wastewater facilities
qualify for funding from the State Revolving Loan program, assuming
Congress continues to fund the program as it as in the past. We’re hoping
that as much as $38 million of Cary’s share of the cost of the facilities
might be funded this way.
If this revolving loan funding comes through from the federal government
and the state approves our regional project, Cary would not have to
issue all of the general obligation bond authority granted by the voters
on May 3. But since we won’t know if the project qualifies for the state
program until after the election, we are asking for the full $110 million
in bond authority in case the project doesn’t qualify. That way, we
will be in the best position to use the least costly financing option
no matter what happens.
Why doesn’t the Town just use some cash instead of debt to help pay
for these projects?
The amount of available cash is small compared to the amount of funding
needed for this regional project. Because of debt issuance and processing
costs, it is more cost effective to get authority to borrow a large
amount of money for one larger project all at once than to do so multiple
times for smaller projects. In addition, there are other important utility
system projects independent of the regional facilities that will require
funding in the coming years as well for which available cash will be
a necessary funding component.
Why is Cary
paying the majority of the $193 million in costs for the regional plant?
The amount of the total cost of the regional wastewater facilities that
each partner will pay is based on how much of the capacity of the facilities
they each say they will use. Cary is planning to use about 57 percent
of the capacity of the new facilities. That translates into about $110
million of the project’s $193 million estimated total cost.
How are
the other project partners paying for their share of the cost of the
regional facilities?
What we know right now is that both Cary and Apex are holding GO bond
referenda on May 3. Since Morrisville is considering merging its utility
system into Cary’s, Morrisville’s share of the costs could
be paid back through their utility rates as well, assuming the merger
does occur next
year. We do not have information to share at this time on exactly what
Holly Springs is planning to do, so we encourage you to contact Holly
Springs directly.
Why is another
treatment plant necessary?
The primary reason why Cary needs to build new treatment facilities
now is a state requirement to return treated wastewater to the Cape
Fear basin by Jan. 1, 2011 as outlined in the interbasin transfer certificate
that the state issued for Apex, Cary, Morrisville and the southern portion
of Research Triangle Park. This requirement was a condition on the state’s
agreeing to give these communities adequate drinking water from Jordan
Lake. If the state’s deadline is not met, fines up to $25,000
a day could be levied, and the Town’s ability to provide an adequate
supply of drinking water could be threatened.
Eventually, Cary will also need additional treatment capacity to serve the future community, and the treatment facilities will meet Cary’s capacity needs through 2020 based on a 3 percent annual growth rate.
What is
interbasin transfer, why did it play a role in our getting adequate
drinking water supplies, and how is it affecting the new regional facilities?
Hundreds of communities in North Carolina get drinking water by drawing
it out of a river or lake and making it safe to use through a complex
treatment process. Once used by the community’s residents and
businesses, the wastewater goes through a complex treatment process
to clean it and gets discharged back into the same river system to become
a source of drinking water for communities downstream.
Unlike most communities, Cary rests atop a ridge that divides two river basins – the Neuse and the Cape Fear. Cary draws drinking water from Jordan Lake, which is part of the Cape Fear River basin, and makes it safe for drinking at a plant that Cary owns with the Town of Apex. That plant currently provides drinking water to Cary, Apex, Morrisville, and the Wake County portion of the Research Triangle Park.
Cary discharges its highly-treated wastewater into the Neuse River basin. The North Cary and South Cary water reclamation plants have been designed as regional facilities and currently handle wastewater from Morrisville and the Wake County portion of Research Triangle Park.
Since Cary and many of our neighbors draw water from one river basin and discharge into another, the state requires an interbasin transfer certificate to ensure the long-term balance of water supplies in both river basins.
In connection with the water treatment plant expansion, Cary and its partners obtained an interbasin transfer certificate from the N.C. Environmental Management Commission on July 12, 2001. One requirement for the certificate is that the towns return treated wastewater to the Cape Fear basin by 2011 for use by others downstream on the Cape Fear River.
$110 million
seems like a lot of money for regional wastewater facilities that will
only serve Cary through 2020. Why is the project so expensive?
Based on a long and comprehensive study, Cary and our partners have
actually chosen the least expensive alternative for meeting the state’s
regulatory requirement and meeting future capacity needs.
In addition to a new wastewater treatment plant, the $110 million will
pay for Cary’s share of the raw wastewater pump stations and piping
necessary to serve northwestern Cary. It takes more pumping to serve
that area because of the hills and valleys that must be crossed. Environmental
regulations also require that the treated water be discharged to the
Cape Fear River at a point 13 miles away from the wastewater treatment
facility.
Why is Cary
participating in a regional project as opposed to simply expanding one
of the two existing treatment facilities?
A comprehensive study showed that a regional facility will be cheaper
to build, better for the environment, and preferred by state regulators.
Cary is working with Apex, Morrisville, and Holly Springs on the project.
Learn more at www.westernwakepartners.org.
What is
included in the “regional wastewater facilities”?
Proposed regional facilities include a treatment plant and pumping stations
and pipelines to collect wastewater for treatment and to pump treated
wastewater to the Cape Fear basin and a “biosolids facility”
to handle the sludge that is a byproduct of wastewater treatment. Cary,
Apex, Morrisville, and Holly Springs will continue to own and operate
their existing facilities and will handle their own water and sewer
billing and other customer service. Learn more at www.westernwakepartners.org.
What projects
are being considered for funding with the Open Space Bonds?
The $10 million Open Space Bonds will be used to continue the Town’s
commitment to preserving and protecting natural resources according
to the 2001 Open Space and Historic Resources Plan as well as the 2003
Parks, Recreation, and Cultural Resources Facilities Master Plan.
Has a site
been selected yet for the new regional plant?
Yes. We are in talks now with a landowner who has property in Wake County
south of Apex that would be ideal for the plant.
Have the
partners looked into scalping to promote increase use of water reuse
at a lower cost?
Yes. We agree that the scalping plant concept is valuable, and it was
one of the alternatives evaluated in detail during the planning phase
of the project.
However, because the primary demand for reclaimed water in this region is for warm season irrigation, the need for treating and discharging wastewater during the high flow winter months is not reduced.
Therefore, the concept
depended on either 1) support from the state regulatory agency to have
winter discharges from the scalping plants (to streams with very low
flows because of their locations) or 2) to continue to size facilities
for transporting the flow during winter months to a
regional plant for treatment and discharge. We discussed the first option
with the state, and they were not supportive.
While the Town of Cary continues to look for ways to cost-effectively expand our use of reclaimed water, current regulatory policies prohibit the scalping concept from reducing the needed capacity of the planned regional treatment plant or conveyance facilities.
Access the full
Phase I study for the plant at www.westernwakepartners.org.
The scalping option is Option 8 in that study.
When the bond referendum comes before the citizens for
a vote on May 3, will each item be separate or will they all be rolled
into one bond question?
There will be one open space bond financing question ($10 million) and
one wastewater facilities bond financing question ($110 million) on
the May 3 ballot.
Why isn’t
the bond referendum being held at the time of the general election?
Cary has a tradition of using special elections for bond referenda.
It helps ensure that citizens can focus on the issues at hand and not
have informative discussions lost in the fray of general elections.
May was chosen for the ‘05 election so that the issues' passing
or failing could be factored in to the Town's annual budget process,
which concludes in June. Finally, having the election sooner rather
later puts us that much closer to continuing to meet our community's
needs, assuming the bonds are approved.
How much
water is the state requiring Cary to ship back to the Cape Fear Basin
by 2011?
Just how much water we’ll have to discharge into the Cape Fear
is based on a complex formula that has to do with how much water we
use throughout the year from Jordan Lake. We estimate it to be about
1.6 million gallons to the Cape Fear a day based on an annual average.
So, for example, if in 2011 Cary, Apex, Morrisville and RTP South are using 22 million gallons of water from Jordan Lake on average per day over that year, we will have to send about 2.2 million gallons on average per day to the Cape Fear River Basin.
Will we
have to idle capacity at one of our two existing wastewater treatment
plants when the new plant comes on line in order to meet the 2011 regulatory
requirement?
No. In the long term, all three plants are needed to serve Cary's utility
service area. While we will have capacity remaining in our two existing
plants in 2011, the South Cary Water Reclamation acility will be used
to full capacity when the service area is built out, and the expanded
North Cary Water Reclamation Facility is projected to be at capacity
by 2020.
How well
will the new regional facility treat wastewater before it is discharged
into the Cape Fear River?
Very well. The project partners have worked closely with the North Carolina
Department of Environment and Natural Resources Division of Water Quality
and the Middle Cape Fear River Basin Association on an Interim Nutrient
Management Strategy to ensure that the discharge from this plant will
be safe for the Cape Fear River.
The new plant will
use a state-of-art biological nutrient removal (BNR) process plus filtration.
The regional partners
have selected Cary to operate the new plant, which we will do according
to the high standards for environmental protection that we currently
employ with our existing wastewater facilities. We are committed to
meeting all requirements of all discharge permits, including those that
set safe release levels for bacteria and pathogens back into streams
and creeks following the
wastewater treatment process. Read more about the issue of treatment
during extreme weather events (“blending").
Does the Town of Cary still have water supply problems?
No. Thanks to the authority granted to the Town by citizens in the 1999
GO bond referendum, Cary and Apex expanded the treatment capacity of
our jointly owned water treatment plant in 2002 from 16 to 40 million
gallons a day. Also in 2002, the N.C. Environmental Management Commission
granted Cary and Apex a water supply allocation from Jordan Lake that
should meet
Cary's needs through about 2030.
Why is the
bond referendum being referred to as "Clean Water Bonds" when
the ballot issues are for building wastewater facilities and acquiring
open space?
Most communities get their drinking water from lakes, rivers, and streams
that are also the discharge points for wastewater facilities. For any
of us—upstream or down—to have clean drinking water, it’s
important for us to discharge clean, treated wastewater back into these
lakes, rivers, and streams.
Another part of
this cycle is ensuring that rainwater that runs over the land and directly
into our lakes, rivers, and streams is as clean and free of pollutants
as possible. That’s where preserving open space comes in. Keeping
land undeveloped near these water sources allows nature to help
cull out pollutants from rainwater before the rainwater makes its way
into our lakes, rivers, and streams.