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SD1 to terminate $6.2 million loan agreement with Boone County for Hebron sewer system upgrades

By Mark Hansel
NKyTribune managing editor

The Boone County Fiscal Court Tuesday evening approved a resolution to terminate a $6.2 million loan agreement with Sanitation District No. 1 for an infrastructure upgrade project in Hebron.


The request by SD1 to terminate the loan, which was unanimously approved by the Boone County Fiscal Court in November, 2016, means the entire amount will be returned to county coffers.

In a letter to Boone County Judge/Executive Gary Moore, SD1 Executive Director Adam Chaney said the funds were never activated and are no longer needed.

“As you know, SD1 and Boone County worked together to finance sanitary sewer capital improvements in Hebron when SD1’s financial situation could not otherwise justify sewer expansion. This cooperation culminated in the enclosed Project Loan Agreement dated December 20, 2016. While SD1 remains grateful for the cooperation of Boone County in this endeavor, SD1 has yet to draw upon the loan and will not need to…”

Moore was not present at Tuesday’s meeting, but county commissioners Cathy Flaig, Charles Kenner and Jesse Brewer voted unanimously to approve the resolution.

The loan was designated for a $9.4 million project to upgrade the sanitary sewer system in Hebron. SD1 also set aside $3.2 million in its Fiscal Year 2017 budget for the project.

The upgrades were considered essential because Hebron was, and still is, one of the fasted growing areas in Northern Kentucky and its sewer system was at capacity.

At the time the funds were approved, Boone County Administrator Jeff Earlywine said the decision to recommend loaning SD1 money was a difficult one that took years to reach.

In a presentation to the Fiscal Court in 2016, Earlywine outlined the three-year process that led to the decision to recommend the loan.

“In September 2013, this court appointed a task force to begin to roll up its sleeves and study the problem, acquaint ourselves with possible solutions and to endeavor to find a funding solution for the Hebron area,” Earlywine said then.

This 2016 map shows yellow blocks that represent pump stations around the area of North Bend Road (KY 237), north of Interstate-275 that, at the time, sent sanitary wastewater up and over North Bend Road. The Sand Run Pump Station, the workhorse for the area, was at capacity and at times could not handle the flow. Additional development planned in Hebron was expected to overwhelm the pump station and other pinch points along the line. Boone County agreed to loan SD1 up to $6.2 million to upgrade the system to accommodate the growth. A series of developments in recent years have resulted in SD1 being able to complete the project without the funds. Tuesday, the Boone County Fiscal Court passed a resolution agreeing to accept repayment of the loan in full from the utility.  (provided image, click to enlarge).

The committee included a county commissioner, representatives from the Home Builders Association of Northern Kentucky (now the Building Industry Association of Northern Kentucky), and business owners from the Hebron area.

“There was no panacea, no specific plan at that time, but some good feedback, Earlywine said then. “I think we acknowledged that we were all better-educated regarding the scope and the extent of the problems up in the Hebron area. We better understood some of the options that SD1 and its staff were exploring (and) we certainly came away with a renewed sense that time was of the essence.”

The group met for several months and delivered a report to the Fiscal Court in March, 2014.

The recommended transfer of funds to SD1 was a loan, but the task force members saw it more as an necessary investment in the continued growth in Hebron.

Terms of the loan included SD1 pledging all revenue from future sewer taps in the Hebron area, uninterrupted continuation of new sewer taps, and that the utility would own and maintain system improvements.

Ultimately, the feedback from that report and follow-up discussions led to the decision to recommend the loan.

At the time the loan was approved, there were fewer than 20 permits available for new tap lines in the area.

With as many as 2,700 new homes planned for Hebron and a system that was already experiencing overflows during heavy rain events, all parties agreed an upgrade was needed.

At that time, however, SD1 could not budget the improvements because it was dealing with aging infrastructure in some areas, consent decree requirements from the U.S. Environmental Protection Agency and capacity issues in other high-growth areas. Since then, fortunes have improved at SD1 and the utility determined it will not need the loan funds designated for the project.


In the letter to Moore, Chaney outlined some of the reasons the loan will not be needed, including:

*The bids for this project came in almost $4 million under the original $9.4 million estimate

*Bond refunding has decreased SD1’s indebtedness

*SD1’s rate structure has been revised to include base fees

*SD1’s Amended Consent Decree with the EPA and an extension of time for overflow mitigation have been approved and finalized

“These are just some of the major factors that have improved SD1’s financial health,” Chaney wrote in the letter. “As a result of these factors, the Board of Directors of SD1, at their October 17, 2019 meeting, expressed gratitude for Boone County’s cooperation and resolved to not draw upon and to request termination of the Project Loan Agreement with Boone County’s approval.”

Reached by phone Tuesday evening, Moore called the project a win for all involved, including the Boone County taxpayers.

“The county’s commitment to SD1 enabled the Hebron project to move forward at a critical time,” Moore said. “It was basically a line of credit and not one taxpayer dollar was ever transferred to the project. By backing the project, economic development continued to flow and SD1 rate-payer dollars were saved by bidding the project then rather than now.”

The upgrades to the sanitary sewer system in Hebron that were identified in the loan agreement are nearing completion.

Contact Mark Hansel at mark.hansel@nkytrib.com

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