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Town’s DOLA grant in jeopardy

During last Thursday’s board meeting of the Pagosa Springs Sanitation and General Improvement District board, Pagosa Springs Town Manager David Mitchem announced that a $1.25 million grant from the Department of Local Affairs (DOLA) could be in jeopardy due to the district stalling on fixing a wastewater treatment problem that has plagued the town since 2003.

Earlier this month, DOLA informed the PSSGID that it would review the district’s initial grant award pending the expiration of that grant at the end of this year.

Not only has the town been plagued by how it treats wastewater — in 2003, the Colorado Department of Public Health and Environment (CDPHE) ordered that the town take action to rectify noncompliance with clean wastewater standards — but it has faltered several times in securing or holding onto funding allocated towards mitigating the problem.

Following a 2006 CDPHE “Significant non compliance” citation issued to the district, the town was mandated to construct a new wastewater treatment plant to meet environmental standards to replace the district’s lagoon system (currently still operating). Completion of the plant was set for fall 2008.

The initial project ran into funding and permitting problems during the planning stages.

In 2008, the district secured a $2 million loan from the Colorado Water and Power Development Authority (CWPDA), as well as a $4 million funding package from DOLA (the aforementioned grant, as well as a $1.5 million loan). At that time, the district was required by the CWPDA to raise its rates to a level 124 percent above the state average.

Bids submitted in mid-April 2009 ran at least $1.15 million over available CWPDA and DOLA funding.

The district board attempted various funding maneuvers with awarded money, unable to decide on plant construction, all while facing increasing pressure by CDPHE to clean up its act — or, at least, its water.

Faced with the growing impatience of funders, the district was forced to apply for extensions for deadlines stipulated by funding agreements. It was during that time the board voted to return its $1.5 million DOLA loan, a move that ended up costing the district around $75,000 in interest.

In mid-2009, it appeared the U.S. government would save the district in the form of funding from the USDA with a potential of $9 million.

However, the board scoffed at the $100,000 needed for plant reengineering to move the plant out of the 500-year flood plain (a USDA requirement). Ultimately, the board declined the $9-million offer.

Less than a year later, in the shadow of potential CDPHE sanctions for noncompliance, the board returned to the USDA, hoping to scrape something out of a quickly diminishing pool of federal funds. A day late and several million dollars short, the board was forced to accept a much less generous offer from the USDA, one that provided the district a higher loan-to-grant ratio and a 40-year debt service.

The USDA’s more modest funding package developed after ARRA (American Recovery and Reinvestment Act) funds had been slashed dramatically from 2009 levels, with stricter requirements placed on applications. The disparate ratio stipulated in the USDA’s second offer was predicated on the district’s rate structure, reasoning that fees were sufficient to service debt offered in that package.

An appeal to the USDA through town attorney Bob Cole, arguing that the abnormally high rates were due to requirements of the CWPDA loan, went unheeded.

In February 2011, the town received notice that the USDA awarded the district $3,145,000 in loan funding and $787,000 in grant funds.

A month later, the board approved an interim loan agreement with the CWPDA for $3,145,000 to meet USDA requirements.

Later that year, the fortunes of the district took an interesting twist when the Pagosa Area Water and Sanitation District proposed tying in to the town’s current system and treating that sewage at PAWSD’s recently commissioned Vista plant. In early 2012, the board approved an intergovernmental agreement with PAWSD, as well as allocating $50,000 to fund a feasibility study for the proposed project.

That feasibility study, completed in March of this year, suggested several options for pumping town sewage to the Vista plant, while estimating savings of approximately $1,800,000 to the town.

Although the proposed project with PAWSD was excellent news for the PSSGID board, it put the town sideways with the USDA. While PSSGID staff had hoped to retain the USDA funding in case the scheme with PAWSD proved unworkable, the federal government was displeased with the town’s apparent change of heart regarding the construction of a wastewater plant. Citing articles in The SUN as their source regarding the proposed PSSGID-PAWSD pipeline, the USDA pulled its funding, in part because that money had been issued for the construction of a wastewater treatment plant.

Likewise, it has been the district’s numerous delays in solving its wastewater treatment problems that led DOLA to put PSSGID on notice this month that funding could be in jeopardy. Although the town has appealed to DOLA, claiming a PSSGID-PAWSD pipeline would be underway before the end of this year, the delay in pursuing a wastewater treatment solution has put a question mark on available funding.

On Monday, Mitchem told The SUN that, “The division director (for DOLA) requested information that the town is moving along in a timely fashion to get this completed. We provided him with a packet to prove we’re on track.”

For his part, Tony Hernandez, director of local government with DOLA, told SUN staff Tuesday that, “We’re still reviewing the documents provided to us in order to make a good judgement. We’re partnering with them to make a sound decision regarding this investment.”

When asked what would happen if the town lost $1.25 million in DOLA money, Mitchem responded, “It would put the town in a very difficult financial situation. Any alternative I can see at this point is going back to the water and power authority to ask for more money in the form of grants and loans.”

Unfortunately, since 2003, the town has not exhibited the best track record in either securing funds for a wastewater treatment solution nor in finding a way out of its wastewater quandary. However, the CDPHE has made it clear that no solution is not an option and that further delays will not only result in hundreds of thousands of dollars in fines, but could also (as happened in Bayfield in 2007) lead to a building moratorium.

jim@pagosasun.com

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