New Treatment Plant FAQ

This page provides board responses to district customer’s questions regarding the financing and construction of the proposed new waste water treatment plant.

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A November 2008 memo prepared by board treasurer Dave Kratovil on behalf of the NOSD board addresses some recent and Frequently Asked Questions regarding the financing of the proposed waste water treatment plant.

(A pdf copy of the original document can be downloaded by clicking here.)

Q – Why is the NOSD using *G.O. Bonds, which are repaid from property taxes, to finance the system repairs/replacements?

A – The voters in the District passed, by large margins, two ballot measures to finance this infrastructure. Both measures stated, quite clearly, that they would be repaid from increased property taxes.

Q – Why have there been delays in completing the projects listed in the Facilities Plan?

A – The Facilities Plan, as intended, is an estimate of when and how repairs/replacements to the system are to take place. Changes to the dates and the design specifics in the plan were both expected and necessary. Moving the replacement of the Force Mains to the top of the list became necessary in order to protect the environment. Delaying the new plant construction was mandated by the fact that time was needed in order to find a suitable site for construction.

Q – When will we know exactly how much the entire Facilities Plan requirements will cost?

A – Exact costs cannot be estimated. Exact information will not be available until each part of the Plan is completed and the Bonds are sold to pay off the interim financing. In the meantime, we will continue to refine our estimates as the work progresses and will keep the District owners informed of any significant changes. The figures presented always include all of the work that has been through preliminary design. We occasionally, as in the case of the new treatment facility, will try our best to estimate costs in advance.

Q – When will the **WWTP portion of the work be completed under the single and two phased methods?

A – Final completion dates must be arrived at with the consent of the ***DEQ. However, the Board has taken into consideration the views expressed by several people at the August 16th meeting and decided to move forward on the construction of this project as quickly as possible in either case. In order to take advantage of the least expensive financing it will be necessary to accomplish financing in phases but the project will move forward as rapidly as possible once the necessary permits, design approvals and easements are obtained. We are currently estimating project completion in the 2012/2013 time frame, based on the preliminary design we received on October 10th.

Q – Can the District apply for grants to help with the cost?

A – Both the Board and the Citizens Action Committee (CAC) are actively searching for assistance. We believe that we can count on Rural Development, our lender of choice, for about $2M in grant funding if we use the phased funding approach. The CAC is working on various political possibilities. If you would like to help in this regard the CAC meets in the Netarts Community Club every Thursday following our regular Board meeting.

Q – How much are the various developments in the District contributing to the funding?

A – All new homes sited in the District pay an initial hook-up fee, currently $8742 and about to be increased to $9293 per connection. In addition, developers must pay for the extension of the sewer into their area and also need to pay for pumping stations if they are required in order to service the development.

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* General Obligation Bonds

** Waste Water Treatment Plant

*** (Oregon) Department of Environmental Quality

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The following Q & A document is the board’s follow up to questions coming out of public meetings and other public comment and concern in August of 2008.

(A  pdf copy of original document can be downloaded by clicking here.)

Q&A from the public
Via email and public meeting of 8/16

Q – What will be the total cost of the new plant?

A – The cost of the new WWTF is not definite and will not be until we settle on a funding source, complete the design and have bids from contractors for completion of the work.
We are presently using $23.5M as an estimating place holder. This number should not be exceeded but is the amount that we will need to borrow not the amount we will need to pay back, which will include interest and fees.
Depending on how we intend to borrow the money (whether from GO Bonds, payable from property taxes, or from Revenue Bonds, payable from user fees and system development charges) the interest and fees will be different. The lowest interest and fees can be obtained from lenders with the backing of GO Bonds.
We are presently limited to $15M in GO Bonds with the balance of the debt to be financed through more expensive Revenue Bonds.
The scenario we received from our least expensive lender, Rural Development, ranged from a total cost, including interest and fees, of $39,914,060 for the single phase project down to $38,014,100 for the two phase project.
This indicates that we can afford a price increase of about $1,114,000 (or 4.7%) for the two phased project before it would begin to cost more than the single phased project.
Since the funds for the two phased project would be available in two successive years. This seems to be a reasonable approach. Additional savings could be realized if the NOSD furnished more than $.3M for the single phased project and more than $.8M for the two-phased project. Given that we will have more than $1M available this F/Y and can project an additional $1.5M by the conclusion of the project it would seem likely that we can expect some additional savings.

Q – Why is it so expensive?

A – The large expense is due to two factors. The cost of the new plant is only one and that is about half of the total, the other factor is the large cost of interconnecting to the existing system (the only stable ground we have been able to find is over 3000 feet away from the present site and over 350 feet higher than the existing site) that will require a large pump station on the present site and interconnecting pipelines between the two sites for both incoming waste and outgoing effluent. Water, telephone and electric connections as well as road access are also added expenses.

Q – Will we still be paying for this plant when it becomes necessary to replace it?

A – No. Newer technology, better materials and better upkeep will significantly increase the life of the new facility compared to the old. Ignoring the repairs that could have extended the life of the existing plant early in its life is not something that will be repeated with the new plant.
With the amount of area available on the new site and the modular configuration of the new treatment bays, it will also be much less expensive to expand and replace older equipment in the future.
We may have to increase the size of the plant if population growth or District expansion exceeds the planned for amount but the plant itself, with proper upkeep, will outlast the thirty year payment period

Q – How much will this actually cost me every year?

A – Remember that the numbers we are using are estimates and we do not expect the final cost to be quite as much as we are quoting. The numbers are also dependent on the method of financing (who the loan funds come from) and the amount of grant funding we can obtain
If we do not decide to ask the district to pass another GO Bond (which would make the final total cost less) We will use the $8M in revenue bonds (backed by user fees and System Development charges) and as much of the $15M GO bond as necessary to obtain funds from RD and other less expensive sources and then obtain the rest of the needed funds from the balance of the GO Bond. The yearly costs will look like this:
Taxes (deductible from income tax)
Taxable value of property – $100,000  -  $200,000  -  $300,000  -  $500,000
Single phase project          -     $375     -      $750     -     $1125    -      $1875   Max. yr. 2014
Two phase project             -     $340     -      $680     -     $1020    -      $1700   Max. yr. 2017
User Fees/month
Single phase project          -      beginning at $66 this year and increasing to $110+  (2019)
Two phase project             -      beginning at $66 this year and increasing to $100-   (2019)
Total cost per year
Taxable value of property           $100,000            $200,000           $300,000                $500,000
Single phase project          – $1167 to $1695 – $1542 to $2070 – $1917 to $2445 – $2667 to $3195
Two phase project             – $1132 to $1660 – $1472 to $2000 – $1812 to $2340 – $2492 to $3020

If we pass another GO Bond for $8M the costs will look like this:
Taxes (deductible from income tax)
Taxable value of property – $100,000  -  $200,000  -  $300,000  -  $500,000
Single phase project          -      $500    -      $1000   -     $1500    -      $2500  Max. yr. 2014
Two phase project             -      $465    -        $930   -     $1395    -      $2325  Max. yr. 2017
User Fees/month
Either project                     -      $66
Total cost per year
Taxable value of property    $ 100,000     $200,000      $300,000     $500,000
Single phase project                 $1292         $1792           $2292           $3292
Two phase project                    $1257         $1722           $2187           $3117

Q – What is the time schedule of the single and two phase projects?

A – The single phase project would require us to finance the entire project at one time. The schedule for constructing the project would depend on the time required for final design, approval and contract.
We are estimating the financing to be completed by early 2009, design to be completed by third quarter of the same year and the contract to be bid and awarded by the beginning of 2010. Estimated time to complete the construction would be on the order of two years with construction finished sometime in 2012.
The phased approach would allow us to finance the construction in two phases. The first phase finance would complete in early 2009 and the second phase in early 2010. First phase design is estimated to complete in the third quarter of 2009 and construction would begin early in 2010. The first phase construction should complete in about one year (mid-to-late 2011). Design for phase two should complete before the end of 2010. Award of contract and start of construction should be early 2011 with essential completion late in 2013.

Q – How will the delay of phase two affect the pricing of the project?

A – Since phase two will be a significant portion of the dollar cost (about 2/3), delaying the start of construction by about one year would cause the price to escalate by less than 5%.

Q – How much will it cost to keep the present plant operating while the new plant is being built? We have heard both $1,000,000 and $400,000.

A – Some short term repairs to the plant will be needed in order to keep it operating while the new plant is being constructed. Our District Engineer and Staff have looked over the plant with that in mind and came up with an estimate of $400,000 for the repairs that are needed. This estimate has not been reviewed by DEQ nor has it been actually designed so the figure of $1,000,000 is being used as a not-to-exceed figure assuming that no catastrophic failure of the plant occurs.

Q – How will we pay for the cost of the delay if the two phase approach is used?

A – Since the cost of borrowing money for the project will decrease with the two phase approach and since we will have an extra year to collect the increased user fee and additional SDCs to pay for the project the two phase approach should not require any increase in the yearly cost to the users. Actually there will most likely be a reduction in the yearly fees with a one year increase in the total time required to pay off the loans.

Q – Will the new connection fee be increased as well as the user fee?

A – Yes. We have our financial consultant look at the SDC (System Development Charge) every year in August/September. This will happen this year as usual. Due to the escalation in the cost of the plant, the outfall and the completion of projects to date, the hook up fees will definitely increase this year. We do not yet have a figure for that increase but it will be significant.
Q – Can we change the Revenue Bonds to GO Bonds?

A – Yes. It would require the approval of the voters in the district to accomplish that. The Board will consider putting it on the ballot at our next meeting.

Q – Do we have a date for when the PUD will complete their new electrical substation on the land next to our new site?

A – No. The PUD is planning to complete their improvements in the 2010/11 time frame but they face the same problems that the NOSD does with the County Planning Commission and finalizing the land use process so that they can obtain the land. Our best guess is that the two phased plan best ties in with their plan.

Q – Has the Board analyzed the total user fee cost for single versus two phase projects?

A – We have estimates based on specific assumptions. These may well change depending on how the MAO is changed by DEQ. Currently we estimate that the user fees would repay that portion of the loan obtained from Rural Development (thus the term would be 30 years) and total costs would be spread over that period. Using the numbers from pages 2 and 3, we can estimate a difference of $120/year from 2019 to 2039 ($2400 less for the two phased project).

Q – Could we continue to use the existing plant for Oceanside and build another plant in Netarts?

A – No. There are several reasons: 1. The existing plant is on unstable ground and is reaching end-of-life. 2. A plant in Netarts would have no outfall and getting one permitted in this day and age would be practically impossible. Hence we would have to pump effluent over to the present outfall in Oceanside. 3. Separating the two sections of the District would put large cost burdens on both communities and would have to be approved by the DEQ, which is highly unlikely.

Q – Could we use Bancroft Bonds for this project?

A – Not likely. They are for smaller projects and carry higher interest rates.

Q – If a GO Bond comes before the district again, can people who have second homes here change their voter registration to vote on the issue?

A – Yes. They must take steps to change their registration as required by the County and the State.

Q – Where does the $4,000,000 figure for funds raised come from?

A – The District currently has $1.5M in cash reserves. We currently produce about $82,000 per year in net income and just increased our user fee by $20 per month ($240/year x 1400 users = $336,000/year). That gives us a per year positive balance of $418,000. We are currently estimating that the single phase plan will complete in 2012 and the two phase plan in 2013, figuring that the final loan would take place after project completion, the single phase plan would complete after four years and the two phase plan would complete after five years. For the single phase plan we would have about $3.1M collected and for the two phase plan about $3.5M. By increasing the user fee an additional $20 sometime in the period between now and the completion of either plan we can collect a total of $4M.

Q – What about the increased cost of maintenance and repair?

A – Maintenance and repair are covered by the operating fund and the emergency repair fund.

Q – What about the sinkhole issue?

A – The only damage to the plant over the thirty years since it was built on the sinkhole has been some broken sidewalks and some holes in the earth that needed to be filled with gravel. We are looking at extending the time to build a new WWTP by one year in order to get the lowest cost funding available (the two phase option). It doesn’t seem that we are taking much of a chance. In the event of a real disaster we have funding available to take care of keeping the plant operating. This was required by DEQ as a part of the MAO. If it becomes necessary to utilize this funding, it will negatively impact the $4M mentioned in a previous question.

Q – What capacity is planned for growth?

A – The new WWTP will be configured to handle projected growth for, at least, the next 20 years (the planning period). The modular nature of the new facility will allow for easy and cost effective expansion for new growth beyond those capacities.

Q – Could we combine with other communities to reduce our per user costs?

A – No. The NOSD presently covers an area that is not contiguous with other Districts. The cost of making a connection with Tillamook, for instance, would approach the cost of the new plant and that would only cover the interconnection, not any needed increase in the Tillamook system. In addition, we may someday by required to expand our District boundary to take in other communities.

Q – Are we all paying the same for this project?

A – Yes & no. If you have a property that is tax valued the same as someone else in the District, you will pay the same. Keep in mind that this project is an improvement in infrastructure, not payment for the services provided by the District. Everyone pays the same amount to flush their toilet $44/month, the amount that goes into our operating fund. In addition we are now each paying $2/month for the emergency repair fund and $20/month to go into savings for the construction of the new WWTF. The amount that will be added to your taxes to repay the GO Bond loans is based on the taxable value of your home.

Q – Have the District or DEQ looked at other technologies, such as an Orenco non-centralized system?

A – No. The configuration of our system is based on centralized processing of waste. Converting to a system like Orenco would require a complete system redesign and would be many times more expensive than what we are presently faced with. Our engineer believes that the Sequencing Batch Reactor which they recommend is the least expensive/best solution for the District.

Q – Is the Bond Market really that much more expensive?

A – That depends. The example given by a user, a 20 year Bond sold by Pacific City at 4% was for a GO Bond backed loan. Other small systems have been turned down by the market when trying to sell revenue backed bonds. Even if we could get such a loan the charges for user fee backed bonds are higher than for GO Bonds.

As far as could be determined, the above addresses all of the questions asked in the meeting of the 16th and in the various emails that were received by the District and by the DEQ.

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