The Lake Oswego City Council voted Tuesday to approve up to $100 million in bond sales to finance the Lake Oswego sewer interceptor, a sewer pipeline that will serve more than two thirds of the city's buildings.

The one-of-a-kind floating sewer pipe will carry effluent through Oswego Lake east to a treatment plant on the Willamette River. It replaces an undersized pipe now on pilings in the same location. Construction on the job is set to begin this fall.

As work unfolds, the Lake Oswego City Council will oversee costs and the bonds will be issued and spent incrementally. Tuesday's approval signals only a willingness to fund the construction and materials for the sewer pipe with revenue bonds, repaid through an increase in sewer rates.

The revenue bonds are planned to increase the sewer portion of utility bills 10 percent a year for the first 10 years of the 20-year bond repayment period. They will increase today's average sewer bill from $326 a year to $768 a year over the first 10 years. Bills would then remain at a $768 annual average for the remaining 10 years of the bond repayment period.

The city council opted to fund the sewer interceptor through revenue bonds because the bonds spread the burden of cost more evenly throughout the community than general obligation bonds, which were also an option.

General obligation bonds would have increased property taxes in Lake Oswego, also over a 20-year repayment period. Had general obligation bonds been used for the project, a home with an assessed value of $300,000 - the average assessed value for Lake Oswego homes - would have paid an additional $474 a year in property taxes.

But many properties in Lake Oswego do not pay property taxes, such as schools and nonprofit corporations.

'Because it is a user fee rather than a general obligation fee, everyone that uses the system has to pay for it,' including the city, said John Turchi, president of the Lake Oswego City Council.

'(Choosing the revenue bonds) also allows us to issue the bonds in a phased amount so the cost of repaying the bonds will go up in a slower, more gradual way,' said Turchi, causing less shock to the financial systems to those who pay.

The financing plan is typical for municipal utility projects. Revenue bonds are a special type of bond available to government agencies. They are repaid with revenue from utilities for which the bonds are used.

City officials in Lake Oswego are still negotiating the final cost of the sewer interceptor with the project's contractors. The total cost of the project has been steadily estimated at $100 million but negotiations on a final price are expected to wrap up this month.

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