The Amherst Finance Committee voted this week to borrow $692,000 to design a new town water treatment plant, which is ultimately expected to cost about $11 million to construct. The vote was taken at their meeting on Tuesday July 23rd, after just six minutes of presentation and discussion.
The Centennial Water Treatment Plant, located off of Amherst Road in Pelham, treats water from the Hill and Hawley Reservoirs. Built in 1981, it is the oldest of three water treatment facilities that supply water to Amherst. According to the Superintendent of Public Works, Guilford Mooring, the Plant is currently not functioning after being hit by lightning last year.
Mooring is proposing a complete replacement of the existing Centennial building and equipment. The $692,000 request is for a redesign of the plant, and Mooring advised he will be “coming back in about a year to bond the actual construction, which will be a little more”. The estimate for the construction of the new plant is $11,000,000.
A 2010 study by Tighe & Bond, the same firm that designed and built the Centennial plant in 1981, estimated a cost of $2.1 million to rehabilitate the plant. In 2011, Town Meeting authorized an appropriation of $4,000,000 for improvements to the plant, including an extension of the sewer line to it. According to a memo from Mooring to the Finance Committee dated July 17th, the sewer line extension and new water pump station were completed. Subsequent research by this writer shows that since Fiscal Year 2013, the Water Fund has been used to pay debt service on that bond, although the actual amount of money borrowed was not available.
Mooring reported that more stringent Department of Environmental Protection regulations mean a new treatment process is needed, requiring a complete replacement of the existing plant building and equipment. He told the Finance Committee he is going to hire Tata & Howard to do it (the design). A search of bid postings on the Town website for the design services bid was unsuccessful.
Council President Lynn Griesemer asked if the borrowing would have an impact on the Town’s debt limit – a concern weighing heavily on Councilors’ minds as they consider all of the major capital projects against the Town’s limited debt capacity. Finance Director Sonia Aldrich responded, “It depends on whether it is voted inside or outside of the debt limit. I believe the plant itself would be outside the debt limit so it wouldn’t count.”. Griesemer then asked where the funds would come from to pay for the design and the construction. Mooring responded it would come from the Water Enterprise Fund.
The Water Enterprise Fund is separate to the General Fund and its goal, as stated in the Fiscal Year 2020 budget (FY20) is “To provide an adequate amount and proper balance of revenue sources to ensure that the Water Fund is completely self-supporting.” The primary revenue source is water rates.
Councilor Cathy Schoen asked if the $692,000 request had been included in the FY20 budget. Mooring replied, “It was. We did not put in the actual construction yet; we put in a placeholder for the construction that was a little less than the total $11 million, but the borrowing for engineering was put into the capital budget.”
However, the Water Fund section of the FY20 budget does not appear to have any figure listed for the Centennial Plant design or construction costs. It does include $150,000 for “Water System Improvements”, and $260,850 for debt service on the FY13 borrowing for Centennial. An FY20 objective states “Begin design of Centennial Water Treatment Plant upgrade.”
Schoen continued, “Had you already figured it (the cost of borrowing for design services) into the water rates?”, to which Mooring replied “yes”.
In FY20, the water rate will increase from $3.80 to $3.90 per 100 cubic feet (or 748 gallons). The FY20 budget states that these rates are below comparable state and regional averages. A search for Amherst on the Tighe & Bond Water Rate Survey seems to support the claim.
Debt service on this new $692,000 borrowing likely wouldn’t begin until FY21. It is unknown at this time if water rates would need to rise significantly to cover the debt. The Town typically gives residents 6 months notice of water rate increases. The Water Fund has a healthy Free Cash Balance of over $1.7M, which could be used if there is insufficient revenues from water bill payments to cover expenses.
The borrowing authorization for the Centennial Plant redesign will come before the full Town Council at their next meeting on August 19th.