- Last Updated on 07:53 AM 07/19/10
- BY Staff
The HCSA Board of Directors discussed the recent approval of its loan and grant application project at its Maple Avenue Wastewater Treatment Plant and its subsequent letter of Conditions from representatives of Rural Development at its monthly meeting Thursday night, subsequently approving a $1,403,706 contract for engineering and administration costs (with contingencies) associated with the project. Answering questions regarding the amount of the contract, HCSA Executive Director Willie Jones said Rural Development has really strict guidelines about allowable engineering charges.
“With a project of this size a huge amount of work and coordination has to be done, and Dewberry is following the guidelines,” Jones said.
“We have to have interim financing for engineering work, and we’re also exploring use of State and Tribal Assistance Grants (STAG) grant money to help pay for engineering design work.
“The estimate is by June 30 we’ll be ready to sign off on the loan, sign off on the grant and get ready to move forward,” added Jones, who estimates construction would take from July 2011 to January 2013.
Additional permits are anticipated, and the HCSA will eventually need to get an expanded permit to discharge up to 4 million gallons a day, instead of the currently permitted 3 million gallons, according to the executive director.
The project is budgeted at $16,525,000 with $12,033,000 allocated for construction, $5,000 for legal and bond counsel fees, $1,403,706 for engineering, $95,000 for administration, $1,203,294 for project contingencies and $1,800,000 allocated for refinancing.
A total of $80,000 in interest is also budgeted, according to the Letter of Conditions signed Tuesday.
“What I would like for us to consider is expanding the line of credit we have, and at closing we will be reimbursed for all money plus interest we borrowed to do the engineering and design,” said Jones.
The HCSA received the formal Letter of Conditions from the U.S.D.A. on Tuesday, with HCSA Executive Director Willie Jones signing for the HCSA.
The Letter of Conditions is the first step toward pulling $15 million out of the federal treasury and establishing it in an account in the name of the HCSA, according to Art Powers, area specialist for rural development with the U.S. Department of Agriculture, who noted the money has not yet been awarded.
“We have only issued a Letter of Conditions, and if they meet these conditions we can look to closing and actually putting the money out,” said Powers on Tuesday.
“A Letter of Intent to meet the conditions was signed, as well as specific forms to pull the $5 million loan, the $6 million grant and $4.4 million grant out of the federal treasury and establish it in these separate accounts.”
Jones advised the board Thursday that because the loan money is through the federal stimulus program, there are additional requirements and reports to consider, including monthly expenditures and the number of jobs created.
“It has to be approved by all the regulatory agencies, and there are permits and other things that have to be completed,” he explained.
“Then the project is bid out. If the bid is deemed valid, you have a contractor ready to go, and you are ready to issue instructions to the contractor to begin construction. At that point you close out your loan provided a lot of other administrative tasks have been completed.
“As a practical matter, we’re hoping that next July or August we’ll be ready to close the loan and start receiving the money.
Three reserve accounts are required, one for operation and maintenance, one for depreciation of short-lived assets and one for a debt service reserve.
The HCSA will need to build working capital, which is 25 percent of operation and maintenance.
“[Rural Development] gives you five years to accumulate that amount ($329,257, sewer only),” Jones said.
A second reserve account totaling $385,941 (short-lived assets) is a replacement account intended to replace pumps and any related equipment used in the sewer operations.
“This does not include water operations, and you have 10 years to set this account up,” continued Jones.
The HCSA also has to build up a debt service payment of one year’s debt service ($240,400), according to Jones, a restricted account that may collect interest but otherwise is not used.
“It just sits there until the loan is paid off, and it’s a common practice with Rural Development, and you have 10 years to build up that amount,” he noted.
Budget Amendments Approved
An amended 2010-2011 budget was approved at Thursday’s meeting, one that projects expenditures for the year at $5,962,865, including $3,005,069 in operating expenses, $1,110,455 in debt service, $1,265,810 in HCSA large capital projects, $331,531 in HCSA self-funded capital projects and $250,000 in cash reserves.
Most of the debt service lies in the sewer operations, said Jones, and that’s to be expected.
“There are two critical sewer pumps we have to replace ($67,000),” Jones told the board.
“We have more room in deferring some capital maintenance in water than sewer.
“Coming down to the bottom line you have a net shortfall ($240,891), but look at where it’s coming from, and you see it’s the sewer system that’s the biggest draw on your system.
“You’re actually supplementing sewer with water, and you can get away with that until you start making full debt service payments on Rural Development.
“That’s when you have to have your rates up to address that shortfall.
“There are very few increases in water rates other than may come through equalization, and sewer is where we have to look really hard to see what kind of increases we do.
“This is an increase before you start factoring in Rural Development…but we’ve got to have it so the system is paying for itself.”
Rural Development will have an impact over what final rates turn out to be when all is said and done, Jones explained to the board.
“It’s going to take awhile to push all those numbers through, but the fact is the Rural Development loan and interest rate of 2.38 percent really helps out a lot,” he added.
Banister Shores Update
The Banister Shores Project now has 11 households interested in hooking up to the proposed waterline out of a total of 20 potential customers, reported Mark Estes, HCSA director of operations.
Last month, nine residents had responded positively, less than half the total number of households in the subdivision.
The current number makes the project reasonable to build, according to Estes.
“DEQ says that’s sufficient, said Jones, who anticipates the project moving forward.
“Some initially say no and come back later and say yes, so we’re likely to end up with more than 11. There’s some interest outside the area for connecting, so we may wind up with more than 11.
“As Mark said, that opens up some more possibilities for the area for the future,” Jones said.
DEQ Consent Order Studied
Jones advised the board of a DEQ Consent Order received by the HCSA regarding the exceeding of permit limits at Maple Avenue.
During last winter’s flooding, the flows coming through the plant exceeded permit limits and also exceeded 95 percent of the monthly average for three consecutive months, which prompted the consent order, Jones explained.
“Each time you get into a situation like that the DEQ makes your permit subject to review. We get notices of violation because the flows coming through the plant are too great and exceeding discharge requirements.
“But, we knew that was a potential problem because we had done some preliminary engineering work.”
Jones said he met with DEQ officials in March and shared preliminary engineering work that had been done, the HCSA’s goals in obtaining Rural Development funds and plans they had to move forward.
The Consent Order gives the HCSA until the end of 2013 to complete an upgrade at the plant, which can handle high wet weather flows, and it also relieves the HCSA of liability for violating permit limits during that period, according to Jones.
“By virtue of us already having the preliminary engineering report and by giving it to [DEQ], we saved ourselves potential fines and penalties, because it showed good faith on our part that we’ll address the issues down there.”
HCSA Officers Elected
The board elected Dexter Gilliam as vice-chairman for the 2010-2011 year, and it elected Jones as the secretary-treasurer.