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Town owes interest on unused loans

A combination of decisions made and an inability to make decisions has ended up costing the town upwards of $75,000 — and it remains to be seen if those costs will continue to climb.

Addressing the board of the Pagosa Springs Sanitation General Improvement District (PSSGID) at Tuesday night’s meeting, PSSGID Supervisor Phil Starks said that the town owed $76,000 in interest on a Department of Local Affairs (DOLA) loan taken out to fund a new wastewater treatment plant — a plant that the board decided to not construct at its July 7 meeting.

It was later confirmed by SUN staff that the interest amount was actually $75,000.

Last year, the board agreed to funding for the plant, taking a $2 million loan from the Colorado Water Resources and Power Development Authority (CWRPDA) and combining that with $4.75 million in DOLA funding — a $1.25 million grant and a $1.5 million loan (up $1 million from an earlier DOLA application).

Having grappled with construction estimates that outstripped available funding and unable to secure further funding for the plant, the board eventually scrapped plans for an improved wastewater treatment plant, despite mandates from the Colorado Department of Public Health and Environment (CDPHE).

Following several years of inactivity regarding a CDPHE mandate to mitigate effluent violations by the town’s current wastewater system, the board had considered many plans to fund a new plant that would meet standards set by the feds and the state, but was unable to find adequate funding options for a new plant.

The current wastewater treatment plant uses a lagoon treatment system which can be problematic in colder climates, like Pagosa Country. The town’s system first ran afoul of state regulators in 2004 and the district proposed a new plant in early 2006. Since then, the town has been unable to secure adequate funding for a plant that would meet regulatory guidelines and the needs for growth in the area.

At the July 7 meeting, the board seized on one part of a two-part recommendation made by Brilliam Engineering (primary consultants on the project). That recommendation, developing a revised lagoon system (improving on the current lagoon system), had not been proven for environmental conditions similar to the Pagosa area. As such, the revised lagoon scheme requires a pilot study to ultimately prove the viability of the system for the local area’s discharge levels and environment.

In the meantime, the district would need to renegotiate its compliance schedule with CDPHE for meeting allowable effluent levels. The previous effluent levels, determined in studies conducted as far back as 2002 (a drought year), based suggested effluent discharge levels on an ostensibly anomalous measure of flow rate through the San Juan River. Brilliam engineers felt that a new study, using data collected from a river running closer to normal levels, would provide the town reason to renegotiate effluent levels allowed by the state.

Discarding one part of the recommendation — pursuing a revised lagoon system — the board approved the second part, agreeing to pursue a study that would, hopefully, allow the town to increase the amount of pollutants it discharges into the river.

As reported in The SUN this past July, after the decision to not pursue the new plant was reached, Starks suggested the board return DOLA and CWRPDA funds —money granted and loaned to the town on the condition of constructing a new plant.

However, a few members of the board laughed at Starks’ request, with board member Jerry Jackson saying at that meeting, “Why would we be giving away money?”

Despite the board’s disregard for Starks’ request in July, reasons for returning that money were compelling. First of all, due to the conditions of the CWRPDA loan, the district could not lower customer wastewater rates until the loan was returned. Secondly, the district was paying 5-percent interest on the DOLA loan.

The mood on Tuesday was not so lighthearted, however. Explaining the situation, Town Manager David Mitchem said, “There was a performance clause in the loan. We cannot meet that performance clause. I think it’s in the best interest of the town to return the loan.”

“As far as I’m concerned, we give them both back,” said board member Stan Holt.

Board member Don Volger asked, “Can we make a decision to return the loan?”

Volger’s point was that the decision to return the loan had not been listed on the agenda and, as such, the board was prohibited from taking action on whether to direct staff to return the loan.

Mitchem replied that, since the board was presumably not held to the standards set on Town Council, the board could, by consensus, direct staff to return DOLA and CWRPDA money.

Board member Mark Weiler responded, “I’m not comfortable that it’s not on the agenda. We have no documentation.”

Weiler asked why the letter from DOLA (asking for loan and grant money back) was not included in the board packet and likewise, why documentation showing the amount of interest due was lacking.

“If we demand transparency from council, we need transparency from this board. We need transparency on all levels,” he said.

Although the board earned $25,535 in interest on the DOLA loan, it still needs to come up with just under $50,000 to pay back the accrued interest.

Interestingly enough, $50,000 was roughly half to two-thirds of the amount that would have been needed to fund additional engineering to pursue $9 million in USDA funding for a new wastewater treatment plant. The other $50,000 would have been available from a July 2009 CDPHE research and engineering grant — money that the board failed to apply for.

What remains to be seen is if the board will continue to accrue costs for its inability to construct a new wastewater treatment plant. Although it is almost certain that the board will vote to return CWRPDA and DOLA money at the Sept. 17 meeting, failing to return the money could mean a liability of up to $120,000 in interest and principal due.

On top of that, it is unknown if the study to reassess effluent levels for wastewater discharge will result in data commensurate with the board’s wishes. In fact, the study could conclude that current levels continue to violate CDPHE standards, resulting in further fines (the town of Bayfield was fined $150,000 for similar violations) and, more severely, the imposition of a building moratorium — making the town’s economic development plan, with its waiver of building and impact fees, a moot point.

In another matter, Starks reported that the Socorro Senior Living Center was waived $44,000 in Plant Investment Fees, due to action taken by the board on July 7 regarding the town’s economic development plan. Unfortunately, builders for Socorro opted to use subcontractors from Bayfield and purchased materials from outside the county. Although it was later confirmed that Socorro did not qualify for the fee waiver (permits were drawn well before the July 1 start date), it illustrated to the board the need to refine its economic development plan.

The board meets again Thursday, Sept. 17, at Town Hall, directly following the mid-month meeting of the Pagosa Springs Town Council.