In early 2018, Municipal Finance Services, Inc. (MFSOK) began working with the Town of Locust Grove (the Town) to evaluate funding options for the construction of a new water treatment plant. It was necessary for the Town to increase treatment capacity from 0.5 million gallons per day to one (1) million gallons per day and provide a reliable source of treatment necessary for safe, clean drinking water while also accommodating future growth of the population.
Over the following two years, MFSOK explored various funding possibilities for long-term, fixed interest rate financing. The most feasible options included funding from the Environmental Protection Agency’s Water Infrastructure Finance and Innovation Act (WIFIA) Program, a loan from the USDA’s Rural Development Loan and Grant Program or the OWRB’s Drinking Water State Revolving Fund (DWSRF) loan program. The Locust Grove Public Works Authority (the Authority) decided to use the DWSRF loan program, which offers a subsidized fixed interest rate, a drawdown feature during construction, and significant flexibility in structuring principal repayment. The ability to structure principal repayment around existing debt obligations was a critical factor for the Authority because of the desire to minimize any increases in total annual debt service requirements and maintain reasonable utility rates for the Town’s utility customers.
MFSOK worked with the Town and other transaction participants to structure the loan terms, prepare and submit the loan application on behalf of the Authority, and facilitate the loan application, review, approval, and closing process. The loan application was submitted in January of 2020, and the loan closed on May 18, 2020, with a fixed 30-year interest rate of 2.35% (including the OWRB 0.50% Administrative Fee).
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