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Options spendy on sewer repairs

If Lake Oswegans pay for sewer repairs through property-tax-backed bonds, an average landowner would pay $474 a year if the city borrowed $90 million over 20 years. Over 40 years, that figure would be reduced to $345.

Lake Oswego officials continue to probe a variety of funding options for sewer repairs and recently looked at how funding the project through property tax would affect landowners.

An 'average' Lake Oswego landowner is a property owner assessed at $300,000, the mean value for local land according to the Clackamas County Assessor's Office.

Lake Oswego leaders have also discussed using incremental increases in sewer rates, charged to local water bills, to service debts on bonds to fund the job.

Capital costs to repair Lake Oswego's sewer system have topped $90 million in new estimates. Lake Oswego is under order from the Oregon Department of Environmental Quality to fix sewers by 2010. How the city affords those costs is up to the current city council.

The city of Lake Oswego could borrow from $90 to $110 million to fund the project.

Finance director Richard Seals said it's too soon to say which finance plan might best serve that debt, but said bonds backed by utility rates and by property tax have different characteristics.

General obligation bonds, or those backed by property tax, are based on assessed property value and would need voter approval to go forward.

'Only people that pay property taxes would pay for it,' Seals said, while noting that tax-exempt properties would not face the costs.

The bonds have lower interest rates and can be itemized on taxes by those eligible for deductions using a 1040 schedule A. Those eligible could deduct 35 percent of the expense from state and federal governments.

By comparison, the revenue bonds, or those backed by utility revenues, have a higher interest rate but spread the burden of payment over all utility users evenly.

'Everybody pays that uses the system, it's not tied to your property's assessed value, it's tied to your utility bills,' Seals said.

A preliminary plan for utility fee increases shows sewer fees will rise by 145 percent over 10 years if the city borrows $100 million over 40 years. Sewer fees currently cost a typical family $49 bimonthly. Over 10 years of fee increases, the typical bill is expected to land at $120 bimonthly.

The Lake Oswego City Council will decide on one of five options for repairing local sewers in August. Out of the gate, the city will sell $12 million in revenue bonds to get the project started this year. Those bonds may be repaid by general obligation bonds later or city leaders may choose to combine the two types of bonds in a variety of ways.