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August Newsline: Senate panel cuts EPA budget, update on sewer debt crisis
Jefferson County’s bond deals unraveled after insurers that guaranteed the bonds against default lost their top credit ratings because of losses on securities linked to subprime mortgage loans. When investors dumped the county’s floating-rate bonds, interest rates surged as high as 10 percent. Most of the debt is now held by JPMorgan, Bank of America Corp. and others who agreed to act as buyer of last resort. However, JP Morgan Chase & Co. may be sued by the SEC for its work on bond and interest-rate swap sales for Jefferson County’s sewer system in 2002 and 2003.
In an effort to put pressure on Wall Street, Collins wants the federal agency to find a solution to the county’s $3.9 billion sewer-debt crisis and keep investment firms that are violating laws from dealing with the county.
The 17-page proposal sent to the SEC calls for: the creation of a state sponsored bond issuer that would sell new bonds to replace the county’s variable-rate sewer bonds with a low interest rate 3.5 percent that mature in 40 years; using excess one cent education sales tax to augment sewer system revenue to pay sewer debt – state lawmakers have not supported this bill; and the plan would extend the sales tax over 40 years to limit future sewer rate increases.
The Great Miami River watershed in Hamilton, OH, should get a significant improvement by 2014, when the city is required by the Ohio Environmental Protection Agency to eliminate sanitary sewer overflows (SSOs).
According to city records, 278 overflows have occurred at five locations since 2005; one of the more frequent overflow sites dumped more than 11 million gallons of wastewater into the river in 2008.
Initially mandated to eliminate SSOs in 1991, Hamilton has now been ordered to upgrade its sewer systems in five targeted locations over the next five years.
Because the upgrades are complex and costly, and must be completed in the five-year time line, the “unfunded mandate” puts an added burden on Hamilton residents who will have to pay for most of the project costs through higher sewer rates.
Those rates are increasing from 2008 to 2012 to pay for the estimated $36 million that will be needed to fix the city’s five overflow sites. The city has yet to calculate future rate hikes; the average city resident paid a little more than $13 more this year on sewage bills than last year, a 5.1 percent increase.