Town, USDA discuss treatment plant options

Uncertain funding options will once again delay the construction of a much-needed wastewater treatment plant, as the town of Pagosa Springs scrambles to secure additional cash to fill a $1.15 million budget shortfall for the project.

Originally set for construction in October 2008, the project ran into funding and permitting problems during the planning stages. The project was further hobbled by delays when construction on the plant, moved out to early this summer, when contract bids for construction of the facility far exceeded the amount the town had secured for the project.

As noted two weeks ago in The SUN, Sanitation Supervisor Phil Starks reported on the funding shortfall during the Pagosa Springs Sanitation General Improvement District (PSGID) board meeting on May 4. At that meeting, Starks informed the board that bids for construction of the wastewater treatment plant ranged from $5.9 million and $8.8 million. With the apparent low bid looked at for a contract award, the project still comes in $1.15 million over budget.

The May 4 board meeting yielded much discussion but no results, in large part because town staff was still days away from conversations with possible funding sources.

Those discussions, in the form of a conference call held May 6 that included Starks, Pagosa Springs Mayor Ross Aragon, Town Manager David Mitchem and representatives from the Colorado Health Department, the USDA, the Department of Local Affairs, and the Water and Power Authority, kick-started the arduous process of chasing down necessary additional funding for the project. Although both the mayor and Mitchem reported the outcome of the call was “very productive,” both conceded the call was only a first step towards acquiring those funds.

Following up on the call, Aragon and Mitchem met with USDA representatives Tuesday morning to learn what steps would be needed to grab federal money.

“They want us to jump through hoops,” the mayor said, “but they have the money we need. There’s still a lot we have to discuss.”

Aragon reported that the USDA representatives brought up the possibility of a rate hike (one of several ideas) but said, “That’s not really an option, as far as I’m concerned. We’ve already gone up sixty-seven percent, and that’s much more than I wanted.”

The mayor also stated that, although the idea of scaling back the project was floated by the USDA representatives, the town would continue with the current scope of the project, adding, “We don’t want to build it and then find that, five years down the road, we need something bigger.”

No less sanguine regarding the conversation with the USDA representatives, Mitchem was nonetheless optimistic that the town could meet federal benchmarks set out by the USDA. “We’re going to move ahead with our preliminary plans,” he said, “We’re going to refine some of the engineering, review our current environmental studies and fine tune the flood plain mapping. We’re under a tight deadline from the feds. Everything has to be approved by Washington by October 1.”

According to Mitchem, federal dollars are contingent on the project meeting a set of requirements and regulations beyond what the state of Colorado had stipulated. “In some cases they’re stricter, in some cases, just different,” Mitchem said.

For example, Mitchem said, “The USDA wants the plant set above the 500-year flood plain. The state just wanted the plant set above the 100-year flood plain.”

Mitchem added that although the 100-year flood plain was a firm requirement by both the state and the U.S. government, the 500-year flood plain requirement would not be a game stopper, “if there is no reasonable option.”

However, Mitchem stated that the town would look into engineering options, “one that would bring the plant up and out of the 500-year flood plain.”

Another engineering option the town might consider, Mitchem said, “would investigate if the original plans would accommodate a scalable design, so we could meet immediate requirements by the state when we build it out and then scale it to meet future demands.”

In fact, original designs for a new wastewater treatment facility called for a scalable design. When the town was first put on notice by the state for possible violations in 2006, preliminary designs called for a 500,000 gallon facility that could, when needed, expand to another 500,000 gallons.

According to Mitchem, several options will have to be considered by the board before submitting plans to the USDA. “We’re going to have to firm up our flood plain mapping, review our environmental studies to meet USDA requirements and look at our engineering options before we submit our application,” Mitchem said.

While keeping several balls in the air, the town’s ultimate juggling act will be to maintain rates at their current level while securing adequate funding to complete the project. “The goal is,” Mitchem said, “to keep the total debt service within the current fee structure that is in place.”

According to Mitchem, funding from the USDA would come in the form of both a grant and a loan, the ratio of grant-to-loan money Mitchem said, “depends on the engineering, financial capacity of the town and any other number of criteria set out by the USDA.”

Should the USDA award the town federal funding for the plant, Mitchem said the town would probably restructure financing for the project, replacing a previous $1.5 million loan from the Colorado Water Resources and Power Development Authority (CWRPDA). When that loan was taken out by the town, the sanitation district agreed to substantial customer rate increases as set forth by the CWRPDA.

The CWRPDA loan was required, by and large, to mitigate an earlier funding gap for the project. After a preliminary engineer’s estimate of $4.3 million in 2006 rose $1 million in 2007 to $5.3 million, total funding for the plant still fell short by about $550,000. It was that shortfall that led to CWRPDA stipulating the 67 percent rate hike, along with a CWRPDA mandate raising tap fees — from $3,750 per Equivalent Residential Tap (ERT) to $4,400 per ERT — an increase of 17.3 percent.

The funding scheme, if successful, would replace CWRPDA money with USDA money. The bad news for PSGID customers is that the rates would stay the same. The good news for PSGID customers is that the rates would stay the same — but at least those rates would not increase due to the additional $1.15 million in funding.

However the town proceeds with the project, Aragon insists that the town won’t scrap the project and start over. “We can’t afford to go back to square one,” he said. “We can only move forward.”

Where “forward” leads to remains uncharted. With an Oct. 1 deadline for the USDA loan and grant application perhaps yielding an award by late winter, construction on the town’s new wastewater treatment plant would not begin until late spring 2010, just months before the new plant was set to go on line.

Starks agreed that the pursuit of additional funding has created further delays for the construction of the new facility. “There’s a lot of hoops to jump through,” Starks said. “It could potentially put the project back a year.”

Asked if the local economic situation and the resulting lack of population growth — or even negative population growth — might lead the state to pull back on its demands for a new wastewater treatment facility, Starks replied, “No. We had a violation in April, probably due to the dramatic rise in temperature in April, which led to an overload in the system. But even without that, the state’s not backing off. The town is between a rock and a hard place, with a rock on top of it.”

Starks pointed to additional engineering and environmental studies required to secure the USDA funds that, he said, “could run as much an additional $100,000 up front, before we even get the money, if we even get the money.”

The Town Council, in its capacity as PSGID board, will have to sort through those issues when it meets today at noon in council chambers at Town Hall. Whether it will risk spending money it does not have for further studies that do not guarantee funding for a new plant, or whether it will risk continued violations (that could possibly bring fines or a state imposed building moratorium), the board will indeed find itself stuck in the position to make a hard choice — quickly.

jim@pagosasun.com