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Committee discusses landfill, compactor financing options

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The Roswell City Council’s Finance Committee talked trash Thursday morning — or rather, how to pay for dealing with it for the next decade or two.

Committee members Jason Perry, Jacob Roebuck and Margaret Kennard unanimously voted to recommend approval of three items concerning the construction of a new cell this year in the Roswell Municipal Landfill. Each will go before the full council for discussion and possible vote at its March 11 meeting.

The majority of discussion focused on the second item, a resolution that would authorize the city to apply for financial assistance from the New Mexico Finance Authority for the construction of Cell 5A at the landfill, estimated to cost around $4.5 million, according to Souder, Miller and Associates, an Albuquerque firm designing the new landfill cell.

The resolution would authorize applying for $5.7 million to also provide financing for the $1.2 million heavy compactor recently purchased by the city.

While the compactor is in operation at the landfill, it has not yet been paid for, Administrative Services Director Juan Fuentes said. Initially the funds for it will come from existing funds in the Solid Waste Department. The council in January authorized obtaining a loan to reimburse itself for the purchase.

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Erik Harrigan, managing director of RBC Capital Markets, Albuquerque, gave an analysis of the financing options.

Reporting virtually via GoToMeeting, Harrigan presented two options. The first combined debt service for the compactor and the landfill cell with the compactor paid off over 10 years and the landfill cell paid off over 20 years. Total interest on the compactor was estimated at about $77,000 and $893,000 on the landfill cell.

Annual debt service would be about $150,000 for the compactor and about $225,000 for the landfill cell, at current interest rates. Harrigan said a “buffer” for rising interest rates was taken into consideration in the analysis.

To finance just the landfill construction over 10 years would increase the debt service the city pays but decrease the total interest paid. In that scenario, annual debt service would be about $395,000 with a total interest of $206,000.

The analysis did not present an option of financing both the compactor and cell construction over a 10-year period, but when asked by the committee, Harrigan said the total debt service would be about $550,000 per year.

Harrigan said looking at the last three years of operation of the Solid Waste Department, there should be sufficient revenue to make the debt service payments in any of the scenarios.

Roebuck said he had two concerns with the financing proposals regarding the lifespan of the new landfill cell and the city’s cash funds.

He acknowledged now is a good time to be borrowing money with interest rates being low, but said the city should be cautious in borrowing past the life of the cell.

The new landfill cell is estimated to have a lifespan of about 10 years, Scott McKitrick, senior geoscientist and environmental services manager for Souder, Miller and Associates, told the committee.

“I would really be inclined for us, if it’s within our means, not to make this bond go past the 10 years. I’d hate for a city council 10 years from now to be dealing with still paying for an old cell that’s full and we need a new one,” he said.

Fuentes said Janie Davies, the city’s new finance director, recommended the 10-year financing for that reason.

“Historically we might have taken out a loan for 20 years because of the annual debt service payment being lower,” he said.

The city could afford to pay for the compactor without financing the reimbursement to the Solid Waste Fund, Fuentes said, but city staff recommends authorizing financing for the landfill cell.

“Between the Solid Waste Fund, both the solid waste collection and the landfill, as of the second quarter, we only have about $5 million,” Fuentes said. “Out of that $5 million, we haven’t paid the compactor. So we have those resources there.”

It’s important to keep cash reserves for unanticipated expenses, Fuentes said, such as equipment purchases.

Roebuck said his preference would be to keep the cash reserves and finance both for 10 years.

Perry, chair of the committee, asked Harrigan to add to his presentation for the full council an analysis of 10-year financing for both. Kennard also asked about the expected lifespan of the compactor. City staff on hand could not answer that and Kennard asked that be presented to full council as well.

One of the other items regarding the landfill was a resolution that would authorize the city to enter a loan agreement with NMFA for the funding. Daniel Alsup, the city’s bond counsel, said it has been drafted to include financing for both, but it could be changed if the City Council decided not to finance the compactor.

Should the full council approve both resolutions and the NMFA approve the application, Alsup said the funds would be available May 14.

The city is looking to expedite the construction of the new landfill cell because Souder, Miller and Associates has estimated the current cell in use will reach capacity in about five and a half months.

The third item related to the landfill before the committee was to consider recommending awarding professional services for the bidding and construction administration for the landfill cell to Souder, Miller and Associates for $162,316. The Infrastructure Committee voted 4-0 to recommend the award at its Feb. 22 meeting.

City/RISD reporter Juno Ogle can be reached at 575-622-7710, ext. 205, or reporter04@rdrnews.com.