Stimulus Waste -- How One Town's Loss Is Another Town's Gain

Wednesday, September 30th 2009, 10:48 pm
By: News On 6

By Alex Cameron, Oklahoma Impact Team

MOORE, Oklahoma -- U.S. Senator Tom Coburn issued a warning this summer stating stimulus money is not free, and the plight of a wastewater treatment plant in Perkins was his proof.

Despite that warning, other towns, like Moore, are going down the same path without regret or worry.

Moore City Manager Steve Eddy said water and sewer connections have increased 40 percent in the last ten years and they have simply outgrown their current wastewater treatment facility. City leaders began looking at building a new facility a couple of years ago.

"We were already well underway with the paperwork and the processes through the board whenever the stimulus funds became available," Eddy said.

The Oklahoma Water Resources Board received $31.5 million in stimulus money. No less than 96 percent of that was to be used for loan forgiveness in connection with loans made through OWRB's Clean Water State Revolving Fund. The maximum amount of "forgiveness" a municipality could receive, officials determined, was 30 percent of the loan amount, but no more than $2 million.

Moore was approved for a loan of $32 million, the cost of the new treatment plant. With stimulus funds erasing $2 million of that debt, the city will have to pay back only $30 million.
But there's a catch -- accepting this stimulus money means having to abide by certain stimulus rules. Project contractors may use only American-made materials and must pay prevailing wages.

In Perkins, where they're also replacing an old treatment plant, those rules increased the cost of their project by an estimated $2million, and since they're getting just $1.5 million in loan forgiveness, taking the stimulus money is costing Perkins $500,000 more. Instead of having to pay off a loan for $5.2 million, the original cost of the project, they'll be on the hook for $5.7 million.

Adding insult to injury, the town had to raise sewer rates to get the loan. Sen. Coburn said the stimulus legislation entices towns like Perkins to make potentially harmful decisions.

"What you have is the influence of a mother-overloaded federal government telling us how to spend money not wisely," Coburn said.

Coburn is certainly not alone in criticizing the OWRB loan program. Brian Downs, executive director of Oklahomans for Responsible Government, said he doesn't blame towns for going for the money, but he blames Washington for tying so many conditions to it.

"The strings that are attached to the money that's coming from Washington makes it very difficult for the taxpayers in these communities," Downs said.

Taxpayers in Moore, however, could come out ahead. Accepting stimulus money is expected to increase the cost of their treatment plant project approximately $1.3 million. With $2 million in loan forgiveness coming their way, the stimulus should save them $700,000. The fact that they will be paying interest on a smaller loan, Eddy said, over the long run, it will save them an additional $2.8 million.

Moore city leaders acknowledge they did have to raise sewer rates, about $5 per month, per household, but Eddy said they would have had to do that regardless of whether they were getting stimulus money. He said raising sewer rates was necessary to secure the loan.

"Our position is if there's federal funds that become available that can help us out and reduce the cost ultimately to our ratepayers or taxpayers, then we're going to take advantage of it if we can," Eddy said.