On Sept. 19, the Pagosa Springs Town Council approved a resolution to authorize the professional services of a financial advisor to guide the town through the difficulties of financing large capital projects, such as the town’s needed sewer system improvements.
The council approved a professional services agreement with McLiney and Company, a Division of SAMCO Capital Markets Inc., to serve as the town’s financial advisor.
According to an agenda document on the matter, Town Manager David Harris recommended McLiney and Company to the council after interviewing two additional companies specializing in financial advisory for municipalities.
Joey McLiney, who represented the firm at the meeting, said, “This is what I do. This is what my family has done since 1928.”
McLiney’s main role will be to help the town financially navigate the overhaul and improvement of its sewer system, which is governed by the board of the Pagosa Springs Sanitation General Improvement District (PSSGID).
At the Oct. 1 meeting, McLiney recommended that the PSSGID move forward with a $4.5 million revenue bond to finance repairs to the most urgent problem — failing sewer lines.
Town staff has described this emergency as “Phase 1” of a much larger project.
McLiney explained that taking the revenue bonds route could be accomplished without raising rates on wastewater customers beyond what is already planned.
The board ultimately voted to move forward with this revenue bond, with Mayor Shari Pierce voting against the measure.
However, the remainder of the project facing the district has an estimated price tag of $41 million, according to the Summary of Engineering Report.
Doubts about the long-term viability of PSSGID’s wastewater system arose after a town-hired consultant, Roaring Fork Engineering, conducted a comprehensive study of the district’s sewer system in 2023, pointing out all the necessary repairs.
Currently, the PSSGID pumps its wastewater through a series of lift stations 7 miles uphill to the Pagosa Area Water and Sanitation District’s (PAWSD’s) Vista wastewater treatment plant.
Aging infrastructure and a history of failing lift station pumps have required the district to spend millions of dollars to keep its current system running, and if the district sticks with this system, or moves to something new, multimillion-dollar capital projects loom in the future.
According to the recent memorandum of understanding (MOU) between the PSSGID and PAWSD, “There remains uncertainty as to the long-term viability of the [district’s] main pipeline and two pump stations.”
PSSGID’s “collection system suffers from clogging, root intrusion … and pipe deterioration, resulting in significant intrusion and inflow due to the advanced age and deferred maintenance,” the MOU states.
In addition, PAWSD’s Vista wastewater treatment plant also faces “significant costs to remain in compliance” with state environmental regulation 85, regarding the amount of nitrogen and phosphorus discharge, the Roaring Fork study explains.
The PSSGID would be responsible for 25 percent of these upgrade costs, per its current agreement with PAWSD.
PAWSD has estimated that bringing the Vista Plant into compliance with Regulation 85 would be a multimillion-dollar upgrade project.
Roaring Fork’s analysis suggests that, in the short term, the PSSGID would need to fix the sewer pipe problems and, in the long term, should think about consolidating with PAWSD.
McLiney explained to the board that it could look at financing this larger project through either a general obligation bond or a sales tax solution. Both of these options would need to come before the voters in a future election.
During public comment, resident Bill Hudson suggested that the district should seriously consider the sales tax option.
A general obligation bond would place the burden of paying back the loan squarely on the ratepayers living within the town’s wastewater district, whereas a town sales tax option would spread the burden out to others, including out-of-town visitors, Hudson suggested.
McLiney described the sales tax option as the more “elegant approach,” saying it would put the district in “the driver’s seat of its own future.”
He suggested that the district take action immediately on the $4.5 million revenue bond to fix the urgent problem and then, in the coming months, explore the sales tax option.
Public Works Director Karl Johnson has stated at multiple public meetings that his staff is currently working on identifying and fixing what he calls “category 4 and 5 problems.”
At a Sept. 3 meeting, the board of the PSSGID voted to move $500,000 from town funds to allow Johnson to start on critical repairs to the sewer system, and the board moved forward on Oct. 1 with the revenue bond to finance the completion of the Phase 1 project.
McLiney explained that the $500,000 loan from the town to the PSSGID would be paid back through the financing from the revenue bonds.
He explained that the district should see the financing by December, but it should be no later than January, which would allow staff to finish the pipe repair project relatively soon.
Johnson explained that the $500,000 that the town loaned the district was currently being used to purchase “some equipment, some materials that will allow us to start addressing some of the Category 4s that we are really afraid will turn into 5s.”
Board member Mat deGraaf expressed that he is in favor “of getting you guys the equipment that you need to do as much of the work that we can.”
Board member Leonard Martinez said, “In any scenario we look at,” the rehabilitation of category 4s and 5s “has to be done.”
At the Oct. 1 meeting, board member Madeline Bergon asked her colleagues, “Are we feeling that, at least, step one, going after the [$4.5 million] revenue bonds … seems like a logical first step?” and suggested that the sales tax question could be explored later.
Board member Matt DeGuise wanted clarification that the bonds could be supported by the current fee schedule, without raising rates, with McLiney affirming that it would be.
Pierce said, “I don’t feel like I’m prepared to make a decision tonight.”
“I’m prepared to make a decision on the revenue bonds, but on the next step, I’m still needing time,” deGraaf said.
Martinez said that the revenue bonds seemed “straightforward to me, and it’s timely. We need to get on with the Cat 4s and Cat 5s, so I don’t see a downside to that at all.”
A motion was made to direct McLiney to proceed with Phase 1 using revenue bonds. The motion passed 6-1 with Pierce opposing.
derek@pagosasun.com
