With the acceptance of terms for over $3 million in USDA loans, the board of the Pagosa Springs Sanitation General Improvement District signaled last Thursday that it was ready to move forward on construction of a new wastewater treatment plant, but not without some reservations about the financial obligation the loan package would place on town residents — and their descendants.
The USDA funding package includes $3,145,000 in loans (at 2-percent interest) and $787,000 in grants. Along with other funds secured two years ago, a $2 million loan from the Colorado Water Resources and Power Development Authority (CWRPDA) and a $1.25 million grant from the Department of Local Affairs, the Town of Pagosa Springs has just over $7 million to construct the plant.
Presenting the agreement to council, Pagosa Springs Town Manager David Mitchem indicated that accepting the terms was a necessary step towards breaking ground on the proposed facility.
Board member Shari Pierce stated that she had not fully studied the agreement (which had only recently been delivered to council members) and asked if council could have more time to study the documents.
Mitchem responded that, unfortunately, the agreement needed to be expedited but that the town’s attorney had reviewed the documents prior to forwarding them to council.
“He assured me that the town’s interests have been protected,” Mitchem said.
However, lack of time to review documents was not the primary objection regarding the agreement.
That objection was raised by board member Darrell Cotton (who had raised a similar objection during a previous meeting).
“We can’t afford to borrow $5 million ... I know we don’t have an alternative but I just want everyone to know that I think this is a mistake,” Cotton said. “I think all the USDA has done is give us a gun to shoot ourselves with.”
Cotton referred to the potential for 40 years of debt service as well as sanitation rates that already exceed state averages (by 114 percent), pointing out that there had been steep rise in delinquencies since rates went up in 2008.
“We’re going to run people off because they can’t afford to live here,” Cotton added.
While other board members expressed agreement with Cotton’s point, they also conceded that the district was in no position to further delay construction of the plant.
“As much as I agree with trustee Cotton,” board member Don Volger said, “and I do think we’ll be taking it in the shorts ... I also don’t think we can subject our constituents to state sanctions or fines.”
In 2007, the town of Bayfield found itself in hot water with state and federal regulators over its wastewater treatment system, a situation that resulted in almost $200,000 in fines, as well as the state imposing a building moratorium on the town until a new wastewater treatment facility could be built.
Bayfield completed its plant two years ago at a cost of over $7 million.
Although Pagosa Springs has never reached the level of water-standard violations that occurred in Bayfield, the Colorado Department of Public Health and Environment put the town on notice in 2004 that the district’s current lagoon system was obsolete given the town’s size and location.
To date, the current system has logged numerous violations to state and federal discharge standards.
In 2006, town officials began the arduous process of pursuing a funding mechanism for the construction of a mechanical wastewater treatment plant, a system that would effectively double the capacity of the current system while also meeting state and federal standards for discharge.
In fact, the design proposed by the district would put just a fraction of the ammonia, total residual chlorine, dissolved oxygen and fecal coliform that the current lagoon system discharges into the river, a point raised by local resident Chris Pitcher. Stating that his family owns property down river from the wastewater treatment plant, Pitcher asked that the board not only look at the effect on growth in the town but also, “The ethic of improving the water quality of the river, which has not been talked about.”
Improved water quality has rarely (if ever) been a consideration by the board, however. Previous discussions regarding water quality standards have focused on a 2002 CDPHE study (which established discharge standards for the district) that the board felt imposed onerous restrictions on the district due to depleted river flow measurements taken then (during a drought year).
Several discussions by the board in 2009 involved asking PSSGID supervisor Phil Starks to appeal those measurements and commission another CDPHE study for the purpose of revising discharge standards.
Several times, Starks reported back to the board that CDPHE refused to conduct a new study and would not revise discharge standards.
Likewise, Thursday’s board discussion focused largely on the effects that not building a plant would have on potential growth in Pagosa Springs.
“I just think that for the future of the community, we have to move forward,” said Pierce.
Board member Stan Holt also raised the issue of new growth in town (along with the effect of a potential building moratorium), mentioning a funding option suggested by town auditor Mike Branch (see related story) during the earlier Pagosa Springs Town Council meeting. That suggestion involved paying off the balance of a district bond (that funded the current system) and then asking voters to keep the current mill levy in place to help fund construction of the new plant.
Branch had earlier addressed council with positive news regarding the town’s and the district’s finances.
During his presentation, Branch stated that he had been asked by several board members if the district would be able to afford a new wastewater treatment plant without a further increase in rates.
“I’m confident with your ability to fund the new plant without any new increase in rates,” Branch said.
Branch stated that, even without recertification of the mill levy by voters (which would bring in about $50,000 annually to fund the plant), annual district cash flows exceeded loan obligations for the new plant by over $100,000.
While Holt’s recommendation was met by a brief nod from the board, most attention was given to the district’s potential for renegotiating terms of the funding package.
“We are approaching the USDA to pursue either more grant money or loan forgiveness,” said Mitchem.
Mitchem indicated that the possibility for loan forgiveness existed for both CWRPDA and USDA loans and that it was not unheard of for either agency to look at exigent circumstances of a municipality and turn loans into grants. Mitchem said that the issue of payment delinquencies within the district would be one of many issues raised in attempting to renegotiate funding terms.
Board members Pierce, Jackson, Holt and Volger directed Mitchem to immediately pursue those negotiations.
With the board voting on two motions to approve terms for the USDA loan (as a procedural obligation) and only Cotton dissenting, the board signaled its willingness to move forward with construction of a new wastewater treatment plant despite unanimous reservations over the financial obligations that funding would impose on the town for decades to come.
Still, after years of wrangling over state and federal funding for a wastewater treatment plant, the PSSGID board took one more step in expanding the district’s system, bringing the district in line with state mandates and opening the door for future growth in the town.
Short of unseen complications, construction on the plant should begin early this summer.