The Gypsum City Council on Tuesday took the first step toward issuing nearly $90 million in bonds to finance a new wastewater treatment plant, passing on first reading an ordinance authorizing the bond sale.

The project required a large increase in sewer rates, which will eventually reach $107 per month in 2026. The bond issue will cover about $84 million in construction costs and another $4 million to $5 million in engineering and other costs.

The bonds will be repaid over a 30-year period. According to the bond agreement, only two entities can receive free sewer services: the city and the Gypsum Fire Protection District.

Bond consultant Robyn Moore said the new power plant could serve a city population of up to 20,000 people, but she added that this is unlikely.

Planning for the new plant began when the current facility was operating at 80% capacity. However, planning for the new plant was complicated by new state regulations regarding discharge temperatures into the Eagle River.

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Although the city received a nearly $1 million grant for the project earlier this year, that and the city’s existing $5 million wastewater fund contributed little to the overall project.

The good news is that the project cost was initially estimated at around $120 million, almost double the 2018 estimate.

As of August 2023, the project’s cost was estimated at $75 million to $77 million, but costs continue to rise.

Bond underwriter Robyn Moore shared some good news with council members on Tuesday: Interest rates have dropped slightly since work began on the 2023 bond issue. If the bonds were issued this week, the interest rate would be about 4.4%. A year ago, it would have been about 5%. That would put the annual payment at about $5.5 million, compared to an annual payment of $5.7 million if the bonds were issued in 2023.

Further good news for the city is Gypsum’s credit rating of A+ from Standard & Poors.

Council member Scott Green pointed out that the city’s sewer system is classified as a “corporate fund,” meaning it must finance itself without help from the city’s general fund. This classification also means the fund can issue municipal bonds without voter approval.

“Staff and consultants have been working on this for two years,” Green said. “The more time passes, the more it grows.”

Green cited the need to comply with government regulations, noting that the project must be implemented on schedule to satisfy both government regulations and bondholders.

“We’re going to continue to work very hard” to reduce costs, even if only slightly, Green added. But, he added, “this is very specialized work,” so the city has no choice but to move forward.

The Council must approve a second reading of the bond sale regulation. If that happens, the bond sale is scheduled for 24 September and the sale will be completed on 15 October.