Eagle agrees to pay $43,000 for water plant loan application preparation
EAGLE — Eagle is facing construction of a multimillion-dollar water treatment plant in the relatively near future and has approved a $43,000 payment to a local engineering firm to prepare the loan application required by the state for construction funds.
In late May, the Eagle Town Board agreed to contract with SGM, the firm that is providing a variety of engineering services related to the planned Lower Basin Water Treatment Plant, to complete a funding application to the Colorado State Revolving Fund.
The plant would be Eagle’s second treatment facility, planned upstream from the town’s existing wastewater treatment plant, at an estimated cost of $18.5 million. Phase 1 of the facility calls for a 2.4 million gallons-per-day capacity, a figure approximately equal to the treatment capacity of the town’s existing plant located southeast of town along Brush Creek Road. Eagle currently has roughly 2,500 water customers and there are 430 additional households the town has committed to serve but who have not yet tapped into the system. At current peak demand, with the additional units figured in, Eagle’s water production would be at 85 percent to 90 percent of current capacity. SGM consultants have warned the town that prudent planning calls for looking at a new plant at 75 percent of capacity.
While Eagle officials have conceded the need to start planning for a new water treatment plant, they are still debating how to pay for it. For a number of years, Eagle has instituted a 5 percent annual increase in monthly water rates and because of this practice, the town has built up a respectable fund balance in its water fund. But the amount the town has socked away isn’t enough to pay for the plant construction and maintain the fund balance it needs to safeguard against unanticipated expenses and provide maintenance for its existing system.
The town can pay approximately $5 million toward the plant cost and must finance the rest of the construction. Eagle is looking at a loan from the SRF to pay for the plant construction. But an SRF has a specified loan process that John Schneiger, the Eagle town manager who has since been placed on indefinite administration leave, recommended parcelling out to SGM.
“SGM has concluded it will take more time to prepare the SRF loan application than earlier anticipated,” Schneiger noted in a Mary 23 memo to the town board. He also noted that SGM recommended submitting the town application in January 2018 rather than in June of 2017. Schneiger said the loan application delay should not adversely affect the town’s plant construction plans.
When confronted with a $43,000 fee to submit a loan application, members of the town board questioned whether the work could be done in house and if the $18.5 million construction cost estimate was accurate.
Town board member Scott Turnipseed noted he had spoken with former Eagle Town Manager Willy Powell, who successfully applied for the town’s last SRF loan when the community’s new wastewater plant was built approximately 10 years ago. He asked if the process had changed so radically that the town could not complete its own loan application.
Warren Swanson of SGM responded that the process was updated approximately three years ago and it is more complicated.
Turnipseed also questioned the accuracy of the plant construction cost estimate. He noted many other decisions are tied to that number — such as the amount of the loan request and proposed water rate and tap fee increases.
Swanson agreed it was a legitimate concern. Swanson noted that two Colorado communities got an unpleasant surprise at recent bid openings. In Silverthorne, he noted the low bid on a wastewater treatment plant project was 28 percent higher than estimates. In Durango, Swanson said an infrastructure project estimated at $52 million generated a low bid of $64 million.
“At this point, one of the things I am feeling is you can prepare estimates until you are blue in the face,” said Swanson. “If you really want to know what this project will cost, get yourself a bid.”
Paying the bill
In anticipation of the plant construction costs, the town has completed a water rate and tap fee study and the numbers are daunting.
To pay off an anticipated $14 million debt, the recommended plant surcharge fee is $25 per month beginning in 2018. Customers would pay the surcharge on top of their regular, monthly water service rates. Additionally, the town would continue to increase water service fees annually.
Along with the proposed $25 per month plant surcharge, Eagle is considering increasing its tap fees for new development. Currently a water tap fee costs $7,000 in Eagle.
There are a couple of tap fee increase alternatives under consideration. The first is to institute a 13 percent annual increase. The second is to increase tap fees by a flat $1,000 annually. Both scenarios would bring tap fee revenues to between $17,000 and $18,000 by 2027.
Town officials know they face a communications challenge to present the plant financing to Eagle residents. As the SRF application is prepared and the project proposal becomes more defined, the town plans a series of information sessions and outreach efforts to inform residents about the plan.