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GEFA’s tab in Effingham — $45M

POSTED: August 15, 2008 5:01 a.m.

The cities of Rincon, Guyton, Springfield and Effingham County collectively owe over $45 million to the Georgia Environmental Facilities Authority. And that is just the current numbers.

GEFA recently approved a $1.38 million loan for Springfield to construct a new well, water main and pump station.

And if Guyton moves forward with its plans to build a 500,000 gallons-per-day wastewater treatment facility on Riverside Drive, the cumulative total jumps to over $58 million.

So what does that mean to citizens?

GEFA — a state organization that provides financing and other support services for infrastructure improvements, land conservation, energy programs and fuel storage systems — requires borrowers to pledge “full faith and credit and revenue-raising power (including its taxing power) … to the extent necessary to pay the amounts required to be paid”, according to their standard loan agreement.

Furthermore, if necessary, borrowers who sign the agreement agree to “levy an annual ad valorem tax on all taxable property located within the territorial limits” at a rate high enough to “fulfill the (b)orrower’s obligations.”

Usually in cases of water and sewer infrastructures, elected officials plan to use new development tap-in fees to pay for their GEFA loans. Developers who plan to build anywhere in the county stand to pay water and sewer connection fees that range between $3,500 and $9,000 combined.

For Guyton’s proposed treatment facility, city council has said they will need anywhere from seven to 10 new tap-ins a month over the next 20 years to pay their $1 million annual loan payment.  

Development is at standstill across the nation. So what will happen if the cities are unable to meet their payments?

According to the Georgia Fund Policy, which funds water and sewer loans, if a borrower drops below GEFA’s required debt service coverage ratio or fails to make its payments, GEFA “must take action against a community” and  “will require the community to raise rates sufficient to meet its payment obligations” and if that fails, they “may also require the community to raise ad valorem taxes.”

However, Shane Hix, director of public affairs for GEFA, said that they have never required cities or counties to raise taxes.

“GEFA would use its authority to require a borrower to raise taxes only as a last resort,” he said. “GEFA works with borrowers to adjust their enterprise fund rates to generate sufficient revenue to pay their debt service.”

An enterprise fund is a fund that governments have for goods and services that are suppose to be self-supporting. In other words, increased water and sewer rates for a water and sewer loan.

In order to obtain the requested $13.35 million loan, Guyton had to increase their water and sewer rates enough to generate an additional $395,000 in yearly revenue. So although the Environmental Protection Division has not approved the project yet, the citizens of Guyton have already had their rates increased.

And if new development does not bring in enough growth to pay for the county’s GEFA loans that total over $34 million, then citizens who live within both the county and city limits could see a double whammy of an increase from both the city in which they live and the county.

The county has a 1 million gallons-per-day wastewater treatment plant; Rincon has a 500,000 gallons-per-day facility and Springfield is in the process of getting EPD’s approval to increase to a 600,000 gallons-per-day plant.

If Guyton moves forward with its plans to construct a wastewater treatment plant, then that means there will be 2.7 million gallons-per-day treatment capacity within the county with a current population of about 50,000 people. The average family household is projected to use 300 gallons per day.

Guyton and Springfield city officials are discussing ways to find a way to work together to avoid incurring additional debt.

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