USDA money sought for treatment plant

Navigating the straits of funding a new wastewater treatment facility, the board of the Pagosa Springs Sanitation General Improvement District (PSSGID) heard options last Thursday that did little to elucidate the board’s ultimate position — or mollify the board’s discomfort with lack of funding for the project.

The project has been beset with multiple problems over the past few years. The Colorado Department of Public Health and Environment (CDPHE) mandated construction of a new plant in 2006 after the current wastewater treatment system reached capacity and was subject to several outflow violations. Originally set for construction in October 2008, the project ran into funding and permitting problems during the planning stages. The project was further hobbled with construction on the plant delayed indefinitely, and with contract bids for construction of the facility far exceeding the amount the town had secured for the project.

Bids for construction of current iterations of the wastewater treatment plant, submitted in mid-April, ranged from $5.9 million to $8.8 million. Unfortunately for PSSGID, even low bids for the project come in around $1.15 million over budget.

Given the funding shortfall, the onus for PSSGID Supervisor Phil Starks was to explain funding and building alternatives to the board. Presenting options, along with Patrick O’Brien from Brilliam Engineering (design engineers for the plant), Starks provided the board with a Hobson’s choice: two sure bets with low returns and one bet with riskier odds but a potentially much larger purse.

Beginning his presentation on a note of uncertainty, Starks informed the board that it might be given a little room to breathe as it figured out funding options.

“We’ve had a conversation with the Colorado Department of Health for extending our deadline,” said Starks, “that could buy us some time,” referring to the narrow timeline the CDPHE has placed on the town for the completion of the facility.

Starks then explained how proposed alternatives for administrating the treatment facility were, in essence, nonstarters.

“I have to say that leaseback options are weak in a bull market,” Starks said, “and with utility service options, unfortunately, we’re just too efficient and too small. We’ve exhausted all sources of grant funding except rural development.”

A leaseback agreement allows a private concern to fund or build a capital improvement project outright, providing a municipality a facility and/or services at an annual fee and giving the municipality the opportunity to buy back that facility. Although board members expressed interest in a leaseback option during the May 4 meeting, Starks was almost certain that such an option was not feasible.

Of the three options offered by Starks, funding from the USDA, split between a loan and a grant, offered the highest returns with a potential of $9 million in funding. However, As reported in last week’s SUN, the USDA money would require further engineering for the project as well as additional environmental studies and flood plain mapping (to meet federal standards requiring wastewater treatment facilities to be outside a 500-year flood plain). Those additional requirements would need to be fulfilled prior to submitting an application for the USDA grant to meet the Sept. 30 deadline. And meeting the additional requirements would mean additional expense — up to $100,000, by Starks’ estimate.

“We cannot circumvent the statutes they have in place,” Starks said, predicating the terms for pursuing USDA funds. “It’s going to be a long, arduous process that requires about $70,000 to $100,000 just to apply for the rural services (USDA) grant.”

According to Starks, the only other options would be to pursue another Colorado Water Resources and Power Development Authority (CWRPDA) loan (which, Starks said, would increase fees along with the PSSGID’s debt service) or greatly reduce the scope of the project so that construction bids would fall within current funding capabilities – but would certainly result in further expenses in the near future as a scaled-back project would fail to meet future needs.

The risk involved is that, after paying to meet the requirements for USDA money, there is no guarantee that the USDA would approve the application. Although Town Manager David Mitchem reported to the board on May 4 that, “the money is there,” neither Mitchem nor Starks could assure the board, with 100-percent certainty, that USDA funding was absolute.

Reflecting majority opinion, council member Darrel Cotton said, “I don’t know that we have much of a choice, although we may be out $100,000, we may be up $9 million.”

Council member Stan Holt agreed, saying, “I don’t see that we have any other option other than to go to the USDA.”

However, council member Mark Weiler was not convinced that USDA money was necessarily the best course of action. “How much are we into on this?,” he asked, inquiring on what investment had been spent on the project to date.

Neither Mitchem nor Starks were certain of the exact cost but estimated about $250,000. Starks later verified that the current cost stands at $380,000, with $268,000 invested in engineering and the other $112,000 for the site application.

Weiler was nonplussed. Stating that too much had already been spent with little to show for the expense, Weiler said, “In business, it’s called trying to catch a falling knife and the wisdom is, you just don’t do it. I want the feds to lead and not tell us what to do with our money and not promise anything.”

The rest of the board, however, was unwilling to retreat from the potential payoff from the USDA.

“At this point, I think we need to pursue it,” said Mayor Ross Aragon. “We need to try and catch a falling knife.”

When asked by the board for a recommendation, Mitchem qualified his suggestion to the board, saying, “See if we can get the flood plain map and see if we can reset the DOLA and CWRPDA loans and grants; and if we can get that done, we should pursue the USDA funding.”

Council member Don Volger asked O’Brien what it would cost PSSGID to secure initial flood plain data, per Mitchem’s recommendation. O’Brien estimated that additional work on delineating flood plain maps would cost PSSGID about $1,000 — if previous flood plain mapping could be secured from Stanley Levine. Previous engineering done for the Reservoir River Ranch annexation would have likely included flood plain mapping that would encompass the area for the proposed wastewater treatment plant site. However, staff was uncertain if the information would come from Levine, much less that the study existed.

Unconvinced that spending an additional $100,000 for the pursuit of funding that could fall through, Weiler said, “I should have asked this at the beginning: do we even have the money for this?”

Starks assured the board that PSSGID had just over $100,000 in reserves. Although Weiler stated an objection to spending PSSGID reserves, tapping reserves for capital improvements for the PSSGID is not without precedent. According to a 2003 article published in The SUN, PSSGID spent $130,000 for a sewer line extension out of the district’s capital improvements fund. And, according to Jay Harrington (town manager at the time of the extension project), “For the PSSGID, the capital improvements fund is essentially PSSGID reserves.”

Convinced that the board should not spend any more money on the wastewater treatment plant, Weiler made a motion to spend no money on the project until a CDPHE extension could be assured and that previous grants and loans could be held. The motion died for lack of support.

Moments later, Volger presented a motion to pursue answering questions regarding the USDA grant and loan but spend no more than $1,000 on engineering. That motion passed, with six approving and Weiler opposing.

Should PSSGID get extensions on current funding, state compliance timelines and secure necessary flood plain mapping, the board appears poised to continue with pursuit of USDA funding. If those conditions are not met, however, it is anyone’s guess how the board will next proceed.

jim@pagosasun.com