Sewer rates in Carthage are going up.

Increases are needed, town officials say, to pay for upgrades to two pump stations.

One is near the Cox service station near Phillips Ford and across from the offices of Moore County Schools. The other is on McNeil Street/N.C. 22 a mile down from midtown near Pinehurst Avenue.

The commissioners signed required paperwork to acquire a federal loan/grant to cover the cost after hearing an explanation from Allen Hart, the area specialist with U.S. Department of Agriculture Rural Development at their July meeting.

“We are proposing a loan in the amount of $1,056,000 — a grant in the amount of $580,000 — and $80,000 from you all, with our total cost being $1,716,000,” Hart said. “Your loan/grant will be considered approved when you receive our loan obligation documents back from our state director.”

Currently the town charges a base fee of $14 a month in additions to sewer charges based on the water bill.

While no action has been taken to set the figure, that base rate was estimated to rise to around $23 a month at some future time.

Towns must by law break even on services like water and sewer and are not allowed to supplement that part of the budget — called an “enterprise fund” with tax money.

Hart told the board the $1.7 million figure had been worked out in consultation with Hobbs & Upchurch, the town’s contractor.

“They provided budgetary information, and we have agreed,” Hart said. “The repayment schedule will be for 40 years. Each installment will be due on June 1 with the first installment due the first June 1 following the date of loan closing. The loan will be closed after construction is completed — less than a year — so you are probably looking at two budget years before that first loan payment is due.”

The town will pay $80,000 right away. Another $11,000 will have to be kept for a year in an asset reserve fund to cover. Interim financing in the form of a bond anticipation note will also be required.

“The $80,000 that you guys are going to put in will be spent first,” Hart said. “Then the loan money’s second. Lastly, the grant money is spent. If the project comes in under budget — we don’t need all the money — unneeded grant monies will be refunded.”

Because of the amount of federal funds, Carthage will have to have a more extensive audit every year, and that kind of audit may cost more that the regular ones done in the past, Hart said. In addition, USDA will have to see an operating budget and sewer rate schedule before closing.

“We want to see that you have a operating budget that provides for sufficient revenues to cover all your operation and maintenance of your sewer system, the debt service that you have, at rates sufficient to cover that,” he said. “We want to make sure of that. We need you to certify to us you have a minimum of 773 customers on the system. That’s how many you’ve got now — if you have more, that’s great — all this is based on that number of customers.”

The town will determine the actual base rate charge at some point in the future, but does not have to raise rates until repayment begins in two years.

Carthage is waiting for final approval documents from the USDA office before the project will go out for bids.

The loan rate is 2.75 percent.

Contact John Chappell at (910) 783-5841 or jfchappell@gmail.com.