Lawsuit spurs city to borrow from itself to keep sewer project moving

With the bond-funded portion of Winlsow’s new sewer plant under litigation, the City Council on Wednesday narrowly approved a plan for the city to loan itself enough money to keep the project moving.

The council’s four-to-three vote allows the city sewer fund to borrow up to $3 million from the water fund.

The city plans to pay back the water fund by May 2010 or after having reached an agreement with the Bainbridge Ratepayers Alliance, a citizen group that sued the city over its plan to use $6 million in bonds to pay for part of the $14.4 million sewer plant.

The alliance contends that an expected utility rate increase to pay for the plant constitutes an “illegal tax” because it may be used for unrelated capital projects, including the Winslow Way utilities upgrade. The lawsuit also asserts that the city’s bond-funding plan is inflated beyond the actual costs of the sewer project.

“Making a loan like this is not part of our financial plan. We’re here because we have to be,” Councilman Barry Peters said, noting the lawsuit’s impact on the project’s funding.

Delaying the project to find other sources of funding would increase the project’s budget and the cost burden on rate payers, he said. He added that loaning funds within the city is a less expensive option than borrowing from a bank.

Opponents of the spending plan were uncertain the city will be able to pay back the loan.

“An inter-fund loan carries a huge risk.” said Councilwoman Debbie Vancil. “It’s not a safe haven. It’s putting us in jeopardy.”

If the city can’t reimburse the water fund in time, the loan may imperil the Winslow Way project, which is slated to use a portion of the water fund, Vancil said.

City Administrator Mark Dombroski stressed that the city likely will not need the entire loan. The loan is intended to cover immediate sewer plant construction costs until the lawsuit is resolved, he said.

“We’ll only borrow what we need,” he said. “If we don’t have the inter-fund loan, I can’t pay the bills next week.”

Councilman Bill Knobloch said the city is in a tough position because of a poorly planned project rather than a lawsuit.

“We have a management issue here, and we should stop assessing blame to citizens,” he said. “It’s a sad state of affairs where citizens have to sue the city to get our attention.”