With the help of a recently obtained federal grant, the City of Oakdale has ensured that it will be able to make its first payment of its debt for the wastewater treatment facility.

City Finance Director Albert Avila explained that the city secured a federal grant through the State Water Resource Control Board. Avila said the grant would be funding the interest portion of the loan through the first two years and that the city would only be responsible for paying the principal portion of the loan. That portion is estimated to be in the $500,000 range.

“The city has that money from the sewer (enterprise) fund,” said Avila. “There should be a budget amendment at the next council meeting to make the $500,000-plus payment.”

“The city is prepared to make its payment,” said Interim City Manager Stan Feathers. “Right now we’re waiting (for) a call back from the state’s revolving fund to what the exact amount will be.”

Feathers said the payment is due on Aug. 15.

In August 2009, Oakdale entered into a project finance agreement with the California State Water Resource Board, which provided $13 million in funding for the upgrade of the city’s wastewater treatment plant. The city also increased sewer rates to pay for the loan as part of the upgrade.

That project was completed in 2011.

In May, Moody’s Investors Service downgraded Oakdale’s sewer bond rating affecting over $1.6 million in debt, citing concerns about the city’s lagging economy and uncertainty of future financial performance. The city has not yet suffered any consequences from the downgrade.

Though Oakdale will be making its first payment of the waste water treatment plan debt, it is still required to have $855,000 in reserves for the debt in its budget. Avila stated that the revenue from sewer and water billings is not adequate to cover both the debt reserve and debt payment.

“We still don’t have that much in the reserve per loan agreement,” said Avila. “I don’t know what effect that will have later.”