This article was published on: 11/1/10 12:00 AM

‘Strange bedfellows’ challenge water plan

By Nick Grube / The Bulletin

Published: October 31. 2010 4:00AM PST

Skepticism over a $73 million proposal to upgrade Bend’s Bridge Creek water system has brought together a diverse group of businessmen and conservationists who aren’t sure the project is the best for ratepayers, economic development or the Deschutes River watershed.

These individuals, who together make up a Who’s Who list of water experts and business leaders in Central Oregon, now want to meet with city officials to discuss their concerns before Bend City Councilors vote Wednesday on whether to move forward with the project.

The city of Bend currently gets water from two sources: the gravity-fed Bridge Creek pipeline and water pumped from wells. City officials tout the Bridge Creek overhaul as one of the largest and most important undertakings in the history of Bend’s infrastructure. It includes replacing about 10 miles of aging pipelines, adding a state-of-the-art treatment system to meet federal clean water standards and protect against wildfires, and building a hydropower plant to generate green energy.

If approved, this project would provide a significant portion of Bend’s water supply for the next 50 to 100 years. It would also mean hefty rate increases for current water customers, with fee hikes expected to be between 37.5 and 45.5 percent over the next five years. Currently, a typical customer pays about $66.95 during the summer and $36.36 in the winter.

But some members of the stakeholder group believe many benefits of the surface water project have been exaggerated when compared to drilling for groundwater. They also feel a recent city cost analysis was flawed enough to warrant further scrutiny and possibly even a change in direction.

“This is one of those unique times when you find strange bedfellows seeking common goals but for different reasons,” said Bill Buchanan, a Bend attorney who’s trying to organize the meeting with the city. “Hopefully the City Council will find a way to put this off so they can hear the concerns of this group of interested people.”

Diverse challengers

Those who want an audience with the city include the president of Bend’s largest private water company and a number of top officials from conservation groups like the Deschutes River Conservancy, Upper Deschutes Watershed Council, WaterWatch and Central Oregon LandWatch. Representatives from the Central Oregon Builders Association and Economic Development for Central Oregon are also included as part of the group, as is the developer behind Bend’s Old Mill District.

Buchanan, of Karnopp Petersen LLP in Bend, said many of the individuals have questions surrounding a recent report that found switching to a well-based, groundwater system would cost between $372 million and $454 million more than the proposed surface water project over the next 50 years.

That report was prepared by the firm the city had already hired to do work on the surface water project, HDR Engineering Inc., and its conclusions were largely based on the energy costs of pumping groundwater. It also came to much different conclusions than a similar study in 2009 that found the 50-year cost difference between surface water and groundwater to be $250 million — even though the cost of the surface water project had increased since then, and hydropower revenues were now projected to be less.

“I think if you look at the report prepared by HDR — I won’t say that it’s a lie or false — it’s just that it doesn’t answer the right questions,” Buchanan said. “And I think it makes some assumptions that aren’t supported.”

New analysis

Working with some members of the stakeholder group, Buchanan said he is preparing a financial analysis that compares the surface water and groundwater. He said this analysis will show that the groundwater option is less than one-third of the cost of the surface water project over time.

“We think we can save about $60 million or more up front, and you can buy a whole lot of power for wells with $60 million,” he said. “In fact, you can buy a whole lot of power with the interest on $60 million.”

Part of the reason for this difference is because the upfront costs of the infrastructure would have a price tag of less than $10 million versus the $60 million HDR estimated because, according to Buchanan, much of the infrastructure already exists.

Buchanan’s analysis also takes into account the time value of money, which basically means a dollar you don’t spend today is worth more now than in the future. He said this accounts for the biggest difference in cost. For instance, when HDR projects that the power costs of pumping wells over the next 50 years is more than $300 million in 2010 dollars, Buchanan estimates that when the time value of money is accounted for, that figure diminishes to about $50 million.

Costs and demand

There are a number of other places some of the stakeholders think HDR greatly overestimated as well. For instance, Central Oregon LandWatch sent a letter to the city that argued the city’s assumed 6 percent increase in electricity costs — which was based off estimates from the Northwest Power and Conservation Council — was “highly speculative.”

The letter did not provide an alternative estimate that the group believed would be more appropriate.

Central Oregon LandWatch was also concerned that future water demand seemed to outpace projected growth and didn’t take into account that increased water prices tend to lead to lower use.

Due to some of these concerns, the city had HDR perform an analysis on its projections that took into account smaller rises in power costs and less demand. That update to the study, which will be presented at Wednesday’s City Council meeting, found the surface water project was still cheaper over the long run than a groundwater alternative.

But Andy High, vice president of governmental affairs for the Central Oregon Builders Association, said there are still enough questions about the surface water project to warrant a delay in a council decision.

As one of the people who wants to meet with officials before councilors vote on the issue, he said he worries that the $73 million cost of the Bridge Creek project could affect homeowners and other individuals who are considering a move to Bend.

“If they can afford to buy the home but can’t afford to live in it, we’re not growing, we’re not selling new homes,” High said.

This could impact economic development in the area, he added, and should be a consideration in finding a cheaper water option that “maybe isn’t the Cadillac, but is the Chevy.”

Conservation concerns

Conservation groups are keeping a keen eye on the discussion as well. WaterWatch, a nonprofit group that tries to restore flows to Oregon’s rivers, sent a letter to the city this week outlining its concerns about the project and its potential impacts on the watershed.
Bridge Creek drains into Tumalo Creek, which is a tributary of the Deschutes River.

WaterWatch is concerned about the city’s plans to take more water away from the stream, especially considering the millions of dollars that have been spent so far on restoration efforts in the basin.

The city currently uses an average of around 6 million gallons of water per day from Bridge Creek. In the summer, when demand is higher, that can increase to about 11 million gallons a day. With the proposed upgrade, the city would be able to take up to 13.6 million gallons a day, though city officials say they wouldn’t always be able to take that much in the summer.
High water flows can also be seen as a boon for tourism, according to some of the stakeholders. And Bill Smith, the man behind the Old Mill District, has said he supports more stream flows because it can bolster fish
counts, and make the area more attractive to anglers and others who visit.

The Deschutes River Conservancy also has interests in having a stake in the discussion. While Executive Director Tod Heisler said his group doesn’t have an opinion on whether surface water or groundwater is a better alternative for the city, he wants to be able to provide input.

“If there’s a faction that’s going to get the attention of the city councilors and is going to reopen the book on this, of course we want to be there with our expertise,” Heisler said.
He said the Deschutes River Conservancy has had the opinion that the more water that was left in Bridge Creek the better.

Much to consider

But whether that’s the best alternative, economically or politically, he said he isn’t qualified to say, and there are a number of other considerations about cost that need to be made. What his group would be able to provide though are inputs on the logistics of transferring water rights from Bridge Creek to groundwater and ways the city could mitigate the impacts of using it.
From the city’s perspective, however, upgrading its surface water system seems to be the only option. Bend must comply with a U.S. Environmental Protection Agency mandate to treat its surface water for dangerous microorganisms like Cryptosporidium by 2012.
Officials also don’t want to give up a dual source system that they say provides redundancy should one fail, such as during a blackout.

Perhaps the biggest selling point for the city at this point is cost. City staff is sold on the idea of a gravity system that doesn’t require paying for electricity to operate, and officials remain intrigued by the possibility of generating revenue with the hydropower plant.

City Manager Eric King said he can’t say what councilors will decide Wednesday when presented with a vote on whether to move ahead with the surface water project or if they’ll delay a decision until they meet with the stakeholder group. As of Saturday, no meeting had been scheduled.

So far, he said the city has spent more than $1 million on the surface water project, and it has a number of looming deadlines it must meet to make sure the project moves ahead as planned. Some of those include agreements with other agencies such as the U.S. Forest Service to try to coordinate construction dates on Skyliners Road so the city can place its pipelines under the asphalt.

“We need a decision from council,” King said. “We’ve been talking about this issue for more than two years.”

Estimating Bend’s water bill

The city of Bend and HDR Engineering’s analysis of the costs of water system options over 50 years:

Bridge Creek with hydropower:
Total capital cost with interest: $151 million
Total operations and maintenance: $71 million
Total revenue: $119 million
Total long-term cost:
$103 million

Bridge Creek without hydropower:
Total capital cost with interest: $119 million
Total operations and maintenance: $66 million
Total revenue: $0
Total long-term cost:
$185 million

Groundwater only:
Total capital cost with interest: $122 million
Total operations and maintenance: $434 million
Total revenue: $0
Total long-term cost:
$557 million

Source: City of Bend and HDR Engineering Inc.

If you go
What: Bend City Council meeting
When: 7 p.m. Wednesday
Where: Bend City Hall, 710 N.W. Wall St., Bend
Estimate challenged

A group of businessmen and conservationists has the following critiques of Bend’s cost analysis:
• Increases in energy costs are too steep.
• Estimates fail to take into consideration when money was spent (time value of money).
• Existing well capacity not properly taken into account.

Nick Grube can be reached at 541-633-2160 or at ngrube@bendbulletin.com.

Published Daily in Bend Oregon by Western Communications, Inc. © 2010

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