IRON MOUNTAIN — A sewer and water project in Iron Mountain will carry a total estimated price tag of $18.4 million — about $900,000 less than the initial estimate — although borrowing costs may go higher than anticipated, city officials learned this week.

The city council agreed at a special meeting Monday to award the project to Bacco Construction Co. of Iron Mountain at $15,403,788. That was the lowest bid among three potential contractors. Bids were opened June 23.

The work is contingent on funding being awarded and the earliest Bacco could receive a notice to proceed is Aug. 28, said Scott Nowack, project manager for Coleman Engineering Co. of Iron Mountain. The targeted completion date is Oct. 15, 2027.

The city expects to fund the water portion through a loan of up to $10.64 million at 2% interest from Michigan’s Drinking Water State Revolving Fund, plus a $2.666 million grant from the same source.

A loan is being sought through USDA Rural Development for the sewer portion, but that component is estimated at $7.6 million, up from $6 million.

The sewer work can’t be funded with DWSRF money, Nowack explained. While there’s a savings in Bacco’s bid on the water side, there’s a higher cost than estimated for sewer replacements.

At current rates, the USDA borrowing would carry an interest rate of roughly 3.75% on a 40-year loan. The actual rate won’t be known until USDA obligates the money, which may take into next year, Nowack said.

The city is intent on replacing sewer infrastructure while streets are torn up for the water project, but that carries a financial risk the longer the USDA funding is in limbo. Nowack, however, said the timeline should work out, provided there isn’t an extreme delay.

“They won’t accomplish much this year,” he said of Bacco’s construction schedule.

Higher-cost commercial loans could be an option if a federal loan is denied.

The project includes 11,900 feet of gravity sanitary sewer and 13,900 feet of water main; 426 lead water service replacements; and associated road restoration totaling about 2.5 miles. Much of the work will be done in the areas of West A, West Hughitt and East C streets.

Coleman’s engineering fee for designing and bidding the water project was not to exceed $2.17 million. The sewer engineering fee was not to exceed $674,000.

The other construction bidders were James Peterson Sons Inc. of Medford, Wis., at $16,249,911 and Payne & Dolan Inc. of Gladstone at $19,827,785.

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Jim Anderson can be reached at 906-774-2772, ext. 85226, or janderson@ironmountaindailynews.com.