Sale of bonds this week, great in a physical and financial sense for rehabilitation of some flood control structures in Oklahoma
Responsibility comes in many forms and sometimes those are combined.
This week the Oklahoma Capitol Improvement Authority (the “Authority”) sold $5.116 million in bonds on behalf of the Oklahoma Conservation Commission (OCC) for the rehabilitation of some flood control structures in the state. Governor Kevin Stitt and Secretary John Budd signed the bond purchase agreement on April 16, 2019.
In this case, the sale was an example of OCC combining its physical and financial responsibilities to the people of Oklahoma.
“The main benefit is to protect the lives of Oklahomans who live below these dams,” said Trey Lam, OCC executive director. “These dams are high-hazard dams, not because there’s anything wrong with them, but just because people live below them. Also, in the case of Perry, Meeker and Wilburton, these are multi-purpose dams that provide either primary or secondary water supplies to communities across Oklahoma.”
Tammy Sawatzky, the OCC Conservation Programs Division director, added that many of these are old, but, “It doesn’t mean they are unsafe. These dams were designed and built for a 50-year life and with rehabilitation, it will extend it to a 100-year life.”
That’s part of the physical responsibility.
Financially, Lam said the Authority refinanced what was remaining of an existing bond issue and combined it with the new $5.116 million bond.
“So now we have one bond that’s combined and it reduced the interest rate like you would save money in your home refinance,” Lam said.
How much did it save? By combining the refinancing of the existing bond issue and the new money bond issue, the Oklahoma Conservation Commission saved the State of Oklahoma $509,633.71.
Scott A. Reygers, Administrator of the Authority, said the combined bond issue is financed at a historically low all-in-true-interest cost of 2.43%.
How it works
In the 2014 Farm Bill, $256 million was provided for small watershed flood control dam rehabilitation. Over time, $32 million was made available to Oklahoma. However, this was in a cost-share scenario.
“The time period that it came in was during the budget crisis in Oklahoma and we had a hard time matching the federal funds,” Lam said in reference to a cost-share of 65 percent federal (United States Department of Agriculture Natural Resources Conservation Service, USDA NRCS) and 35 percent state funds. “The original appropriation was $3 million and we later received another $1 million, but we were still short and the danger was that without the state matching funds, that money could be diverted to other states, such as to Texas that has an ongoing/revolving fund available for these projects.”
The Oklahoma Legislature came up with the bond proposal of $5.116 million.
“So the Legislature approves it, then the bond authority approves the issuing of it and then it has to be taken out and sold by the Authority in the marketplace,” Lam said. “That’s when the interest rate is established. In this case, it was a good market.”
Again, this was about more than just the present.
“In 2007 we had the inland hurricane that did a lot of damage to flood control and a $25 million bond was passed then,” Lam said. “We’ve been paying on that since then and have it paid down some. So similar to what you might do with a house, OCIA refinanced that portion. They paid off that bond at the same time that they sold these new bonds. Now we have one and with the reduced interest rate, it saved the state about a half of a million dollars.”
The funds are scheduled to be available May 9, 2019, Reygers said.
What it means
While Lam mentioned projects at Perry, Meeker and Wilburton, Sawatzky also mentioned what is called the “Upper Elk Creek Site 23D” in Beckham County.
“It is a flood control dam that protects Elk City,” Sawatzky said.
This site is one of 35 flood control dams in the Upper Elk Creek Watershed Project, with dams in Washita, Beckham and Kiowa counties.
So, we’ll use this area as an example.
Before the dams were constructed, the Upper Elk Creek Watershed was subject to frequent and severe flooding. During the years of 1940-1960 there were 33 major floods which covered more than 50 percent of the floodplain and 29 minor floods. These floods destroyed roads, bridges, crops, and fences and eroded the land. Flooding cost landowners and county governments thousands of dollars each year. In 1964 the North Fork of Red River Conservation District, Kiowa County Conservation District, Washita County Conservation District, City of Elk City and Town of Sentinel developed a work plan for the watershed with the assistance of OCC and the USDA NRCS that included the construction of flood control dams and land treatment practices. The 35 flood control dams, including this “Upper Elk Creek Site 23D” were constructed between 1968-1990.
Obviously not all projects across the state can be addressed through the sale of the bonds this week. However, Sawatzky, is very encouraged by what the sale of the bonds and the matching of the funds will provide in regards to this site.
“It will increase the flood storage, the flood protection downstream and it will reduce the sediment that goes downstream,” she said.
Lam added that on the financial side, “The Legislature’s philosophy was that they would provide OCC an appropriation every year to make our payment. So we built into our base budget the ability to repay this and it’s our number one priority obligation.”