HOSCHTON — The Hoschton Fiscal Resources Committee is planning to refinance a loan the city received to build a wastewater treatment plant that doesn’t work properly.

Councilman Tom Walden, chairman of the committee, said Hoschton sent a letter to the Georgia Environmental Facilities Authority asking for forgiveness on the $2.9 million loan, but was told the Authority could only consider restructuring it.

To qualify, Hoschton must prove the following: Their debt service coverage ratio has fallen below 105 percent; there has been a system user rate increase(s) since the date of the original loan; and there is evidence of prudent fiscal management and expense control.

“If we meet all of that, then I would like for the mayor and the water, waste and environmental services committee to meet with GEFA ... to see what they can do about refinancing the loan,” said Walden.

Hoschton currently pays GEFA a little of $53,000 on the loan every quarter, which totals about $212,000 annually.

The wastewater treatment facility was finished in 2005, and the city began making loan payments after a consultant reported to GEFA that the plant was in service. The next day, however, Walden said the same consultant reported to the Georgia Environmental Protection Division that the plant would not be able to treat the 500,000 gallons a day it was built to handle.

Several critical components of the plant, including the aeration basin, phase separator and pall membrane system, have failed or been ruled excessive, according to the letter Mayor Bill Copenhaver sent to GEFA.

“We’re paying for a plant that doesn’t exist,” said Walden during the meeting.

To remedy the problems, the city hired another consulting firm and received a second $3 million loan from GEFA in 2007. Hoschton is now planning to convert the phase separator into a digestor and existing digestor into primary clarifier, which will require $300,000, according to councilman Richard Green.

This amount would be added to the second loan Hoschton received, and if approved, the city plans to use $229,000 of uncommitted funds from the loan in addition to the $300,000 it has requested, said Green.

The city currently has two loans with GEFA, totaling almost $6 million, and Copenhaver said in his letter that the city is “finding these two loans to be very burdensome to our small city, especially during this pronounced recession which is, as you know, very adverse toward both commercial and residential development.”