IRON MOUNTAIN — Bacco Construction Co. of Iron Mountain is expected to begin work in about two weeks on an $18.4 million sewer and water project in Iron Mountain.

That news comes as the city council Friday moved closer to receiving a $7.63 million loan from USDA Rural Development to finance the sewer portion.

The water project is funded through a loan and grant from Michigan’s Drinking Water State Revolving Fund. Those terms call for a 40-year loan of $10.64 million at 2% interest, plus a $2.666 million grant.

It’s anticipated USDA will award its loan with a 40-year payback at an interest rate in the range of 3.125%. If everything proceeds as planned, closing might take place in December, City Manager Jordan Stanchina said.

The Rural Development loan was pursued because the sewer work can’t be funded with DWSRF money, city officials have explained. The city is intent on replacing sewer infrastructure while streets are torn up for the water project.

The council at a special meeting Friday approved a request for obligation of the federal loan, along with a letter of intent to meet conditions.

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.

Final completion is targeted for November 2026. Construction bids were opened in June, with Bacco’s the lowest among three at $15,403,788.

Coleman Engineering Co. of Iron Mountain has charged fees not to exceed $2.17 million for designing and bidding the water project. The sewer engineering fee was not to exceed $674,000.

The city earlier this year increased water rates by 3.5% and sewer rates by 5% in anticipation of the major project. Further adjustments are expected in the years ahead as financing costs are finalized.

The DWSRF funding is awarded through the Michigan Department of Environment, Great Lakes and Energy.

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