CHARLESTON, W.Va. -- A state panel unanimously approved a $25.8 million low-interest loan Wednesday for the Charleston Sanitary Board to fix or replace about 18 miles of aging sewer lines in the Sissonville Drive area.

But West Virginia Infrastructure and Jobs Development Council member Chris Jarrett warned he would introduce new loan rules, possibly next month, that would force cities like Charleston and Huntington to get private -- and more expensive -- funding for future water and sewer projects.

Jarrett handed out data sheets that he said show the Infrastructure Council has far more projects in the pipeline than it has money to lend out through its revolving loan fund.

"We're in the hole about $2 billion," he said.

According to his figures, the council has $358 million of partially funded projects and $419 million of projects returned for more information or other reasons.

Another $1.1 billion of projects sit in what Jarrett called, "the boneyard -- projects the council has looked at and found technically feasible but had no money for. Because we have this slew of projects out there, we have to be smarter on how we use our money."

Jarrett, director of the state Water Development Authority, introduced the measure at the council's June meeting but withdrew it after at least one member said it would shut out cities and harm the revolving loan program.

Under the Private Sector Resolution, utilities that charge less than $35 per 4,000 gallons or whose rates are less than 1.5 percent of the median household income for the area would have to seek bank loans for the projects.

However, the council can consider "blended" financing, or 100 percent loans from the revolving fund if project sponsors can show they can't find favorable rates elsewhere, the measure says.

The council has already used those standards on an informal basis, Jarrett said after the council meeting. The group rejected "numerous projects" based on those standards, he said, but also granted exceptions, like the one Wednesday to Charleston.

With the loan money, the Sanitary Board will begin to tackle its combined storm and sanitary sewer control plan, estimated to cost $250 million in 2009 dollars, director Larry Roller said.

The Kanawha Two Mile project focuses on 18 miles of sewer lines in or near the riverbed of Kanawha Two Mile and its tributaries on W.Va. 21, Chandler Drive and Sugar Creek, Roller said.

"We are either replacing sewer lines that are in the ground or the creek, or lining them. You take an 8-inch-diameter clay pipe and push a 7 1/2-inch-diameter plastic pipe through it. This starts Aug. 1, 2011 and is about a two-year project," he said.

"It's the highest-priority project in our long-term control plan that hasn't already been effected. We've done a few easy things."

At 3 percent interest, the total loan payback will be $34.4 million, Roller said. If the Sanitary Board had to borrow half the $25.8 million privately, as the council first proposed, the payback would rise to $45.5 million.

The extra $11 million in interest would have forced a rate increase, he said.

Roller, Mayor Danny Jones and state Sen. Dan Foster, D-Kanawha, all attended the council meeting Wednesday prepared to argue for the loan.

Jones, who said he did a lot of behind-the-scenes lobbying before the meeting, thanked the council.

"We're really grateful for this. I realize you're under a lot of pressure," he said.

"We were lucky, but what we heard today is they're going to raise the threshold," Jones said later. "We're at 1.22 percent of the median income. They -- Chris Jarrett and the board -- want to raise it to 1.5. So, many cities wouldn't qualify."

Jarrett said the new policy isn't aimed at penalizing cities.

"It's to make it equitable for everybody. It's based on a doctrine of fairness," he said. "People paying high rates need low-interest loans."

Reach Jim Balow at ba...@wvgazette.com or 304-348-5102.