August 22, 2010 - Bend Bulletin - Behind Bend's water options
Sep 27, 2010
Behind Bend’s water options
City Council’s decision to focus on 3 things: where it comes from, how to clean it, and how much it will costBy Nick Grube / The Bulletin
Published: August 22. 2010 4:00AM PST
If Bend wants to continue taking much of its water supply from Bridge Creek over the next several decades, city councilors will have to weigh a number of options for how to do so, each one with a different cost and impact on ratepayers.
The city’s surface water system needs several repairs to meet clean-water mandates, protect against wildfires and serve a growing population. City officials and paid consultants have come up with several options, and based on estimates released last week, the total price could range from $54.7 million to $73 million. This means water rates could go up between 37.5 and 45.5 percent over the next five years.
City Manager Eric King said if councilors decide to take on this project it would be one of the single largest infrastructure overhauls in Bend’s history, and would help ensure there was safe drinking water for years to come.
“We’ve got a big challenge ahead of us in educating the public about the value of this project and what it means,” King said. “We’re not doing this project for our own benefit. It’s for the community, and we have to think about what’s in the best interest for this community.”
While the city has studied this topic for years and put together estimates for how much it will cost, many things have changed over the past year that have caused officials to re-evaluate the surface water options and how the city will pay for them.
Some estimates for parts of the project have become more expensive, while others, like a hydropower plant, might not get certain green-energy incentives or tax credits that would have helped pay a large share of the cost.
If councilors want to reinvest in the surface water project, there will be a minimum $29.9 million price tag just to replace a nearly 10-mile-long pipeline that runs from Bridge Creek to the city. The current pipeline is decades old and could fail if it isn’t replaced.
Councilors aren’t expected to make a decision on the surface water project until November or December.
To comply with U.S. Environmental Protection Agency clean-water standards, the city must treat its surface water to take out potentially harmful bacteria and micro-organisms like Cryptosporidium, which can cause infection and diarrhea.
The city looked at two ways to do this. One is to use ultraviolet lights to deal with the micro-organisms in the water. This method doesn’t actually take the micro-organisms out of the water, but in effect changes their DNA structure so they can’t reproduce and make people sick. The other option is to use a membrane filtration system that basically acts as a strainer to remove Cryptosporidium and other debris that might get into the water from winter runoff or wildfires.
Ultraviolet lights are cheaper than membrane filtration. In a 2009 study, the difference in cost was about $13 million — $16.5 million for the lights and $29.8 million for the membrane. Those estimates changed drastically in the latest projections, in particular for the UV, which is now projected to cost $24.9 million. The membrane is still more expensive, at $4 million more, according to the estimates.
Assistant Public Works Director Tom Hickmann said the reason for the pricing spike is mainly the possibility of wildfires in the Bridge Creek watershed. If there was a wildfire in that area, ash and other materials could contaminate the water. While a membrane system can remove those materials, UV lights cannot, and the surface water would have to be shut off.
Hickmann said the new projections take this into consideration and include extra costs to build space for a membrane filter and other water treatment infrastructure to more easily respond to a wildfire. This, he said, will cut down on the time the city’s surface water would be shut off.
“One of the things — no matter what treatment option we go with — we know we want to make that system flexible to be able to rapidly respond to changing water-quality issues in the event of a wildfire,” Hickmann said. “You have all that investment in those structures, and it’s basically concrete. They’re either holes in the ground or building structures that house the other things, and that’s where your costs are.”
Because city officials and consultants believe a wildfire threat is a matter of when, not if, they suggest councilors choose the membrane filtration system over the ultraviolet lights — especially since the lights would essentially be useless if a fire did start.
A $13 million hydropower plant is also in limbo with the new projections. This portion of the project was supposed to practically pay for itself and generate millions of dollars in revenue for the city over its lifespan.
What made the project even more attractive was nearly $25 million in green-energy tax credits, grants and low- or no-interest loans that would have paid much of the cost of the hydro plant and the steel pipeline that is needed to bring the Bridge Creek water into the city. But many of these incentives are disappearing, and the city likely won’t be able to take advantage of them.
Finance Director Sonia Andrews said the city has applied for about $5 million for the hydro plant through the Oregon Business Energy Tax Credit program. City officials should learn this fall whether that application was successful.
The city is still looking for more funding options, Andrews said, because the earlier the hydropower plant is up and running, the sooner ratepayers can start to realize the benefits.
“Anytime you can find a source of revenue to offset what ratepayers have to pay, it would be irresponsible for us not to look at it,” she said. “The longer you delay it, the longer they have to wait to receive the benefit.”
Another major change in the projections for the hydropower plant is how much revenue it would bring in once it was built. Consulting engineers hired by the city estimated the plant would generate $1.7 million in revenues in its first year. But that projection was flawed, city officials found, because it assumed more water than what was needed to meet Bend’s demand could be flowed through the pipeline. Now that revenue estimate is $700,000 in the first year.
Even with that smaller revenue estimate, Andrews said the hydropower plant is still a good idea because the money it brings in will be more than what it costs to run the facility, meaning future ratepayers would likely see fewer increases in their water bills in the future.
“It has proven to be a good investment,” Andrews said. “The real question is: Are we able to make this investment without impacting the ratepayer today?”
Councilors ultimately must decide how much of an impact they want to have on ratepayers. Every option has a different cost and therefore a different effect on how much a water customer will pay each month. Water rates have already risen the past three years to help set aside some money for the surface water project, including a 7.1 percent increase that took effect this fiscal year. With the surface water project, rates will continue to increase for at least the next five years.
The cheapest option, installing a new pipeline and using ultraviolet lights for filtration, costs $54.7 million. This would increase water rates by an estimated 7.5 percent each year for the next five years. For a typical monthly charge in the summer this would increase a bill that was $66.95 to $71.97 in the first year. In the winter, the typical bill would increase from $36.36 to $39.09.
Membrane filtration without the hydropower plant would be the next cheapest, with annual rate increases of 8.5 percent. This would make next year’s typical charge increase to $72.64 in the summer and $39.45 in the winter.
The most expensive option would be to keep the hydropower plant in the plans and use membrane filtration for water treatment. Rates would go up by 9.1 percent in this scenario, to $73.04 in the summer and $39.67 in the winter.
Andrews said these rate increases are fluid and could change as the project nears construction and more details are known. She also said all the overall cost estimates for the surface water improvement project are based on a 35 percent contingency that accounts for unforeseen cost increases.
“They’re just estimates. Anytime we produce projections, even with our budget, our budget is just our best guess,” Andrews said. “Hopefully we’ve built in enough contingencies so we don’t have to go back to the ratepayers and say, ‘Oh, we were wrong. The project is now $100 million, not $73 million.’”
A different direction
Even with all these options floating around Bend’s proposed surface water improvement project, councilors could decide to go a completely different direction. While that seems unlikely, since a number of councilors are fans of the hydropower option and the potential revenues it could generate — at least three of the seven declared support for that part of the project at a City Council meeting last week — Councilor Jeff Eager doesn’t want to abandon his options.
At the same meeting where some of his colleagues lauded the hydropower plant, he asked to receive more information about the city using groundwater, which is one of the alternatives to the surface water project and one that wouldn’t need to include the same treatment options to meet federal mandates. Right now the city receives about half its water from wells, mainly during peak demand in the summer.
Eager said the changes in the original financial estimates, particularly those involving the hydropower plant and how much power it could generate, was the reason he wants more information on groundwater. When the council told city staff to keep moving ahead on the surface water project, he said the numbers were “significantly more rosy” than what was first assumed. Now he’s not so sure everything pencils out, and thinks the alternatives should be re-examined.
“What I don’t want to see happen is to see a bunch of bureaucratic inertia get built up behind a single option and have that inertia get built up against a set of projections that don’t hold,” Eager said. “We want to make sure we’re making good decisions based on the best information we have now. It’s our job as councilors to make sure we are looking at all those options, and we’re not just narrowly focusing on one option.”
Nick Grube can be reached at 541-633-2160 or at email@example.com.
Published Daily in Bend Oregon by Western Communications, Inc. © 2010