Eagle braces for surcharge to finance $23 million water plant
July 9, 2017
EAGLE — Eagle is eyeing construction of an estimated $23 million new water treatment plan and local water users should brace themselves to help pay for the project.
During the weeks ahead, the town plans to publicize its water needs and plans and solicit public comment regarding the issue.
"When do you pull the plug on timing for a new water treatment plant?" said acting Eagle Town Manager and Town Planner Tom Boni. "We don't want to move on it too soon, and you certainly don't want to wait until it's too late."
Planning for the plant — called the Lower Basin Water Treatment Plant and proposed upstream from the town's existing wastewater treatment plant — dates back several years. Since 2011, the town has been building its water-fund reserves in anticipation of the new plant construction. For example, Eagle has been collecting pre-payment for water tap fees when new development projects are approved. The town has also instituted annual incremental increases in basic water-service rates. All told, the town has built a reserve of $5 million in its water fund to apply toward the construction costs of the new plant.
But the plant is estimated to cost a lot more than what the town has on hand.
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Serious discussions of the plant construction have been ongoing during the past year and Eagle staff members have concluded 2018 is the time to move on the new plant project. To that end, the town has launched a process to determine the guaranteed maximum cost for the plant construction. Once that number is determined, the town will know how much it needs to borrow to complete construction of the new treatment plan.
To finance the project, the town will make a loan application to the Colorado State Revolving Fund — a low-interest loan program that exists to fund this type of infrastructure project. While the town feels confident it will be able to obtain financing for the project, that confidence is tied to a sticky issue. To pay back the cost of building a new plant, Eagle's water rates will be going up.
A fact sheet compiled by the town to detail the project estimates town water rates will be increased by roughly 26 percent to pay for the new water treatment plant.
"To repay the principal and interest on the (State Revolving Fund) loan, the town is proposing a monthly surcharge that will be applied to each water bill. This surcharge is estimated at approximately $30," notes the town's information.
Town officials stressed the final amount of the surcharge won't be determined until at least this fall and will be based on the final design and construction costs of the plant and additional analysis of cost sharing.
Presently, the base amount an Eagle resident pays for town water, sewer and trash services is $115.71 per month. The services break down is:
• Water: $35.29
• Yard waste fee: $2
• Sewer: $53.36
• Trash: $24.06
• Administrative fee: $1
Residents who use more than 6,000 gallons of water per month pay extra. The extra fee is $6.62 per each 1,000 gallons up to 28,000 gallons and $8.56 per 1,000 gallons over 28,000 gallons.
For comparison, with the $30 surcharge included, Eagle's base residential water, sewer and trash would be double the base rate in Gypsum. In Gypsum, the base residential rate for water, sewer and trash is $70. That amount does not include curbside recycling, but Gypsum doesn't charge extra for water until residents use in excess of 20,000 gallons per month.
Tap Fee increase
The town is also proposing an increase in its water-tap fees to help with plant financing.
"The current tap fee is $7,000 per Equivalent Residential Unit," notes the town's fact sheet. "The current level of these fees does not cover the replacement cost of the town's existing common water infrastructure (not including the new treatment plant). The proposed new tap fee is $12,265 per (Equivalent Residential Unit), which is calculated based on the replacement cost of the infrastructure in 2017 dollars ($61.28 million) and assuming 5,000 equivalent single-family home connections at build out."
The proposal also calls for annual tap-fee increases, based on inflation.
The Eagle Town Board is scheduled to review and discuss the water tap-fee proposal at its July 25 meeting and vote on the proposal on Aug. 8.
Cost of Delay
While town officials acknowledge the surcharge and tap-fee increases won't be popular with Eagle residents, they stressed the costs will climb the longer Eagle waits to launch the project.
"Delaying construction of the new plant means that Eagle residents will continue to be subject to the reliability risks of a single water treatment plant, and the town will not be able to execute its vision and plans for smart growth," states the town's fact sheet. "Furthermore, plant construction costs are projected to be higher in the future."
"Our peak days in the summer get us really close to our current treatment plant capacity," said Assistant Town Planner Morgan Landers.
Landers said as Eagle considers making the difficult decision to impose higher fees on current residents and future development, the goal is to ensure the town has infrastructure capable of meeting demand — both current and future needs. But imposing a surcharge and increasing tap fees won't be easy decisions to make, she acknowledged.
"The board is still in the decision-making phase for the water treatment plant, and the community will be part of making this decision," Landers said.