To fund this project the District has two basic options.  The first option which the District Board has selected as the cheapest funding option is a General Obligation (GO) Bond backed State Revolving Fund loan.  A GO Bond is a municipal bond that is sold and is backed by the credit and "taxing power" of the issuing jurisdiction which in this case would be the River Rock County Water and Sewer District.  The GO bonds are sold to provide the money which the Montana Department of Natural Resources State Revolving Fund loan program administrators.  The repayment terms would be a 20 year loan at 3.75% interest rate which is cheaper than private bank funding options.  The annual debt service is computed as the annual loan repayment amount which includes a principal and interest payment amount.  The money to repay the loan would come from a mill rate tax that is based on the total taxable value of the District applied to the taxable value of each property.  Property that has a higher taxable value would pay more than those that have a lower value.  The table below shows the loan amortization for a 3.8 million dollar loan over 20 years at 3.75% interest.  The total cost of this loan scenario is $5,571,060.  The table blow shows the loan amortization over the 20 year life of the loan under the General Obligation bond scenario.

The other option that the District has to fund this project is a Revenue Bond.  This option is the second option and is not preferred because it is more expansion to District property owners.  For a revenue bond the District would sell municipal bonds which would be used to secure an SRF loan at the same 3.75% interest rate over 20 years,  Instead of a mill rate property tax levy for the loan repayment, 100% of the debt service costs would be placed on the sewer rates.  The annual debt service cost would be added to the sewer rate that District customers pay.  Under this scenario all customer accounts would be the same prorata amount of the debt service.

The problem with this option is that there are additional requirements for a revenue bond that drive the total cost of the loan up.  The first additional requirement is that the initial loan cost is increased by 20% to create a "revenue bond reserve".  The effect of this is that the loan increases from 3.8 million to 4.1 million dollars.  The second factor that drives the cost up is that the District is required to collect 120% of the actual annual loan payment,  Over the life of the loan this increases the total principal and interest costs to $7,201,577.  This is a $1.6 million dollar increase to the financing costs of the project.  The table blow shows the loan amortization over the 20 year life of the loan under the revenue bond scenario.

The table below shows the side-by-side comparison of the costs of a General Obligation bond and Revenue bond.  The annual cost of the revenue bond debt service payment is to be $80,000 than the GO bond payment.  Over the life of the loan the revenue bond cost is cost difference is 1.6 million dollars more than the GO bond option.

The next table shows the impacts to District customers under each bond option.  For the revenue bond option the average annual debt service payment is $354,034.  If this payment is spread across 1,031 sewer connected customers the monthly increase to the sewer rate is $28.62, or $343.39 annually.  If the GO Bond is approved, the annual debt service is $273,931 which is approximately $80,000 less.  The money for the debt service payments will be collected through a mill rate tax so no debt service costs are added to the sewer rate.  Under the GO Bond scenario a 90 mill tax would cost the average single family home owner $250 per year which averages to $20.79 per month, but it is not paid on a monthly basis since it is paid through the property tax bills.  For an average condominium owner the GO Bond cost is estimated at $206 per year, or $17.20 per month if it were paid on a monthly basis.

In summary, the General Obligation bond has been selected as the preferred financing option for the following reasons:

• It is the least cost option for District property owners and rate payers.  The total financing costs for the General Obligation Bond option is estimated at $5,571,060; and the total financing costs for the Revenue Bond option is estimated at $7,201,577.

• The General Obligation bond option debt service is paid through a property tax levy as opposed to raising monthly sewer rates for the debt service costs.

• The General Obligation bond option is more equitable in that property that has a higher valuation will pay more that property that has a lower taxable valuation.  Under the Revenue Bond each customer would pay the same amount based on a prorated share of the annual debt service costs spread across the billable accounts.

• If the election for the general obligation bond option fails, because the upgrade is mandated by the Montana State Department of Environmental Quality the State State Revolving Fund loan program has the ability to loan the money to River Rock without an election if they so choose.  The alternatives to borrow money without voter approval by an election require the revenue bond method of financing which as shown above is more expensive.

For more information contact:

Department of Environmental Quality
Jenny Chambers
Water Protection Bureau
1520 E 6th Ave
PO Box 200901
Helena, MT 59620-0901
Tel.(406) 444-3080


Gallatin County Elections Office
Charlotte Mills
311 W. Main, Room 210
Bozeman, MT 59715
Tel. (406) 582-3060
Fax (406) 582-3068
Email: elections@gallatin.mt.gov
Website: Election Department Website


Project Engineer
Marty Gagnon
Morrison & Maierle
2880 Technology Blvd. West
Bozeman, MT 59718
P.O. Box 1113
Bozeman, MT 59771
Tel. 406-587-0721
Email: mgagnon@m-m.net


River Rock County Water & Sewer District
265 North River Rock
Belgrade, MT 59714
Tel. 406-581-7644
Email: rrwsdprojects@gmail.com