Fairpoint Regional Utility System, an entity created about 15 years ago to provide water service for the south end of Santa Rosa County, is seeking to refinance around $9.1 million in debt which was incurred to construct a well system in East Milton. But Holley-Navarre Water System must sign off on the deal and last night postponed approval, seeking further information.
FRUS is comprised of three utilities, South Santa Rosa Utility System (City of Gulf Breeze), Midway Water System and Holley-Navarre Water System, which each contributed an initial investment of roughly $267,000 to get FRUS started, according to Paul Gardner, general manager of Holley-Navarre Water System.
Currently FRUS has six wells which are used to provide water from the sand and gravel aquifer in East Milton to a 53-mile service area in the south end of the county.
But officials say upgrades to the well system are needed, and some say FRUS doesn’t have the cash available to make them — despite having $1 million in its operating budget as revealed during the HNWS meeting.
“FRUS evaluated this and said what should we raise rates to fund capital improvements,” FRUS President Eddy said, noting FRUS thought it would be “wiser” to refinance.
So the FRUS board, consisting of two members from each of the three utilities plus one at-large member, recently approved refinancing two loans, which are scheduled to be paid off by 2024.
The refinancing would extend the loans over a 20-year period, and Eddy during an August 22 FRUS meeting admitted the refinancing would be at higher interest rate.
Additionally, he and City of Gulf Breeze Mayor Matt Dannheisser cited the need to refinance as a “fairness” issue.
“In municipal debt service you always tag the debt service to the life of the project so that its costs are equitably shared amongst everyone and not just some of the people,” Dannheisser said.
Because FRUS bylaws require all three of its partner utilities to approve refinancing to proceed, the matter was brought to HNWS board, which deferred the matter to the HNWS finance committee for more review.
During Tuesday night’s meeting HNWS members expressed concerns about refinancing at a higher rate over a longer period and the potential that some of the refinanced money might instead be used by the FRUS board to pay back its three utilities for their initial investments.
Although Eddy did mention some of the funds could “possibly” pay back the utilities, he said the “first thing is to have cash available, second thing is to address needs.”
Some other details, including term conditions of the new loan versus the old loans and solicited bank bids for refinancing, are expected to be discussed during the finance committee meeting, which has not yet been called by Chairman Brian Kelly.
Gardner stressed the proposed 20-year refinancing is for FRUS. “Holley-Navarre Water System is not borrowing any money,” he said.