Oxford Township officials last week voted 6-1 to approve a contract with Oakland County for the acquisition, construction and financing of an estimated $17,725,000 worth of improvements to the unincorporated water system.
The project includes construction of a 1-million gallon elevated storage tank on N. Oxford Road, up to four water treatment plants and eight water main projects totalling more than six miles.
County-issued bonds will finance the entire project.
Paul Stauder, the township’s financial consultant on this project, explained that the county’s AAA bond rating ? the highest possible rating a municipality can receive ? translates into ‘the least risk and lowest (interest) rates,? which can make a big difference when it comes to the township’s annual bond payments.
On its own, the township has an A bond rating.
Stauder explained the bonds will not be issued in a single transaction, but rather in phases as proceeds are needed to finance various construction projects over the next two years.
Unincorporated (outside the village) township water users will pay for these improvements through new connections to the system (i.e. tap fees) and a monthly capital charge.
In February, township officials voted twice to raise tap fees. On Feb. 9, they were raised from $2,500 to $3,800. Then on Feb. 23, tap fees were increased again to $4,800.
Officials have yet to take any action regarding assessing a capital charge on the water system’s 2,462 existing users. However, it’s been estimated a capital charge of between $5 and $6 per month will be needed to help pay off the county bonds.
Because the $17.7 million bond figure is a maximum estimate purposely calculated on the high side to give some leeway as there are no final costs yet, Stauder advised the board there’s no need to start assessing the maximum charges right away.
‘At this point in time, I would not recommend the township put a tap-in charge or connection fee in place at a level of $4,800,? he told officials.
Instead, Stauder recommended the township charge a $4,500 tap fee now and adopt a capital charge of $5 per month on existing users.
With project estimates ranging from $16.5 million to $17.7 million, Stauder recommended putting charges in place based on the lower end of the cost estimates, then adjusting them accordingly once the final numbers are determined.
Supervisor Bill Dunn asked Stauder when the capital charges should be implemented.
‘If the township has decided to proceed with the project, then I would implement the rates right away,? Stauder said.
Stauder said the township can’t avoid assessing a capital charge by relying solely on new tap fees.
When balancing tap fees and capital charges ‘you have to be careful about equity,? he said. ‘There has to be a cost on all users of the system and not just on the new development.?
Stauder noted the proposed projects are an ‘investment? in the water system that benefits current users, who tapped into the system at an original cost of $1,800-$2,500 ? far below future connection fees.
Township officials directed the clerk to publish a ‘notice of intent? regarding the approved contract with Oakland County and issuance of up to $17,725,000 bonds from the county.
Publication of the notice begins the ticking of a 45-day clock.
If within this 45-day period a petition requesting a referendum on this contract is signed by at least 10 percent of the registered electors in the unincorporated township and filed with the township clerk, the contract will not become effective until its approved by a majority of unincorporated voters.
If the 45-day period expires with no referendum petition filed, the contract becomes effective.