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Highlands Today

City Plunges Into Sewer Deal

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By JOE SEELIG

Highlands Today

Published: October 23, 2008

SEBRING - The city of Sebring took the first step to plunge deeper into the sewer business Tuesday night; about $1.55 million deeper.

A public hearing lasted about 10 seconds as dead silence greeted a call from the Sebring City Council when it asked for comments from the public to determine if the purchase of the Highlands Utilities sewer system was in the public interest.

A unanimous vote by the full council followed that passed the resolution on first reading.

A second public hearing will be held Nov. 4.

The sewer system, owned by Dixon Pugh, is located on the west side of U.S. 27 north. The main sewer plant, located at the end of Thunderbird Road on southern Cougar Boulevard, and a second smaller plant located closer to U.S. 27, will cost the city about $1.4 million plus $150,000 for the land it sits on.

Councilman Scott Stanley asked staff if there will be some net proceeds.

Without taking any new growth into account, with annual revenues of $448,613 and annual operating costs of $153,017, staff estimated conservatively it would take the city about 10 years to recoup its money from customer receipts.

However, city staff anticipates substantial growth over the next five to 10 years.

Highland's 1,286 customers who already are on the system will continue to pay the same rates they've been paying to Pugh. These rates are higher than city rates, but are necessary in order to meet operational costs, according to city staff.

The system consists of about 36,485 linear feet of gravity mains with 15 sewage lift stations and 62,790 linear feet of force mains transporting the sewage into two wastewater treatment plants. It also has about 124 manholes located throughout.

Its service area includes commercial frontage on U.S. 27, including the Lakeshore Mall, as well as residential areas in Sebring Falls, Brunner's mobile home park, and other communities along Brunns Road and areas of Sebring Country Estates.

Once the deal is completed customers on the Highlands Utilities system will receive their sewer bills as part of their city of Sebring water bills.

Immediate capital improvements to the system will include $114,630, according to staff. Upgrades to the system will not be charged to the existing customers.

The city is still in negotiations to purchase the Landmark Utilities sewer system, located in Thunderbird Hills for $100,000. However, the purchase hangs on the cooperation of the county and Department of Environmental Protection.

In other council action, the board agreed to pursue the acquisition of the Sebring Airport Authority's water and sewer systems.

The plan was that the city would buy the two systems for what the authority owes - minus money the authority has in its reserves for debt payment - leaving a net $699,708 that the city would pay.

The real question on councilmember's minds was should it pay for the system outright or should it assume a Farmers Home Administration Rural Development bond issue. The airport still owes $1.158 million.

It was unclear Wednesday if the money the authority has in its reserves for debt repayment would transfer to the city, if the city chose to assume the loan.

Councilman Dan Andrews wanted to hear from staff why it recommended buying the system outright.

"We've looked at this every which way we can," said Utility Director Marty Roepstorff."

This water system comes with four deep wells and permits for new wells are not being issued, he said.

In a previous report, Roepstorff explained that the city has four wells now, and if it was to have to take two or more wells off-line, it may not be able to service all of its customers. Connecting these wells into the city's system would give the city the added water it may need to satisfy projected growth.

While it doesn't have a positive cash flow right now, there are a lot of unknowns, new tenants, new residential customers. Tenants would continue to pay airport water rates for at least five years.

But the city would be acquiring $11 million in assets for $1 million, Roepstorff told the council.

City Administrator Scott Noethlich said Wednesday that it was a lot easier to pay for the system outright than to assume the RD loan and keep the money in its utility fund.

"From a paperwork perspective it's harder to go through the process for an RD loan, but it's OK. That's the price you pay to have a little more liquidity."

There was virtually no discussion by the council Tuesday of the wastewater treatment aspect of the deal.

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