Council hears funding options for wastewater treatment plant upgrades

The city of Leavenworth must make required updates to their wastewater treatment plant by August of 2020. The Washington Department of Ecology is requiring the city to reduce the amount of phosphorus discharged into the Wenatchee River. 

The city has been working on this for several years. City Administrator, Joel Walinski, spoke to the council on ways to fund this projected $13 million project at the June 13 study session. 

“We’ve done the facility plan. It’s been sent to WSDOE. They’ve looked at it and sent back comments. We’re upgrading the plant to address some of their issues,” Walinski said. “The good thing is, even if we take phosphorus out of the discussion, when we look at our planning calendars and growth over the next 20 years, we don’t really need to increase the size of the plant to increase capacity.”

The plant can deal with the growth rates in the city, Walinski said. This project is not about increasing capacity at the plant, it is about treating phosphorus. Walinski said they have been looking at funding options through Rural Development and WSDOE. 

At this point, he said they are leaning toward the RD funding. 

“If we just looked at the specifics of DOE funding, items are due Oct. 17. We don’t find out we get funding until July of 2018, which stalls out our design phase which means we’re not going to get to construction until 2020,” Walinski said. “We needed to come up with a different funding mechanism. That’s why we looked at RD funding. That allows us to get something on the books that keeps us inline with making our improvements by August of 2020.”

The RD funding is usually a mix of a low interest loan (1.3 percent) and a grant, if there is available funding. Typically, the loan period is 30-40 years. To get a grant, he said the city must agree to the 40 year term. 

One of the requirements of the RD loan is that the city must be financially distressed. Mayor Cheri Kelley Farivar asked if the city was financially distressed. 

“We are going through that right now, in terms of what that means. We are financially distressed because we don’t have $13 million in the bank to pay for it. One of the things on the list...what is it going to take to go out and get a bank loan for $13 million loan and how high would the interest rates be?,” Walinsk said. “That might bring us into the financially distressed.”

Both Ecology and RD funding is split between a loan and hardship grant. Ecology goes with split of 56 percent loan, 46 percent grant. RD goes with a 55-45 split. 

“That is based on what it does to your rates. You take the new rate and divide by the median household income. If it is greater than 2 percent, that makes you eligible,” he said. “Those numbers get us there so we would qualify. That is another measure of financially distressed.”

There is not a median household income calculated for the city, Farivar said, so the county median income of $43,000 would be used. 

“Even with the grant and loans, this is the implication on what the new rate would be. This is if we only did the treatment and improvements only. This is if we did the treatment and the collection system. That is the whole package,” Walinski said. “The best world scenario would be a $24 increase to the currently monthly fee for sewer utility. The one thing that isn’t figured into this. There is a chunk of debt that is going away in 2019, 2020 on the existing treatment plant. It will drop the rate anywhere from $11 to $12.”

Other things could also impact the cost, including what the council decides to do to improve the city’s aged sewer collection system. Walinski said they may want to do priority one, part of priority two and none of priority three, in terms of the collection system. 

The other piece is, the cost of the wastewater treatment plant upgrades is an estimated number. 

“They put in a 20 percent contingency. They also put in an engineering contingency, which is based on a percentage, plus inflationary costs. Based on the percentages, there is a lot of movement on the price,” he said. “What Varella (engineers) has done...and I’ve asked for it...give us the top number and we’ll work our way down. I don’t want people to be surprised with a $7 million project turns into a $9 million project. We could, over time, see it go from $13 million to $12 million.”

Farivar wondered if they have factored in the city is converting some buildings across the street in order to accommodate the wastewater upgrade, including the city shop and Community Cupboard. 

Walinski said that has been factored in. 

“That would be another reason to go with RD, because you can use it for collection, but you can’t use Ecology. It’s an easier nexus to say, we need to replace the public works facility because of the expansion. They’ll look at that, and say that is true. We’ll give you funding,” he said. 

In terms of the funding pieces, the city spends its money first. 

“What that means is, you have your list of projects and we get to year two or three, a different council decides, we’re not going to do the collection system, which is fine, you can do that,” Walinski said. “But what you’re giving back is the grant money. You can’t give back the loan money, only the grant money. That’s why we need the bridge loan because the money would not be available until construction begins.”

City Councilwoman Margaret Neighbors said it doesn’t make sense to her not to do the complete project, including the collection system. 

“The condition of our current infrastructure and pipes. In 20 years, what would it be like?,” Neighbors said. 

Farivar asked what the penalty would be if the city did not meet the August, 2020 deadline. 

“There would probably be a daily fine that would be pushed on the city. It could be $400 per day,” Walinski said. 

Ian Dunn can be reached at 548-5286 or editor@leavenworthecho.com.