WATER:

Strapped cities struggling to fund treatment upgrades

Under a federal order to upgrade its wastewater treatment plant, Buffalo, Mo., residents approved a $3.4 billion bond two years ago fully anticipating that its largest employer -- and its largest water user -- would repay the bulk of that loan.

But Petit Jean Poultry shut down in October 2008, months before the upgrade was completed. And the town, which has fewer than 2,500 households, was left to pay back the bond minus about 500 jobs.

"Had we known they would close, we wouldn't have went to the extent of improving the wastewater facility as we did," Mayor Jerry Hardesty said. "The citizens passed the bond with Petit Jean figured into that. We were counting on that."

Buffalo is not alone.

In Davenport, Calif., residents are bracing for a 74 percent increase in sewer bills this July to make up for the closing of the town's Cemex cement plant. Household rates will likely reach $4,000 a year -- $2,500 for sewer and $1,500 for water.

And Mount Airy, N.C., pumped its water and sewer rates by more than a third and froze capital improvements since 2008 to make up lost revenues from a series of textile factory closings.

"It's just been very difficult for everyone," said Barbara Jones, interim city manager in Mount Airy.

A decade ago, 57.4 percent of Mount Airy's water and sewer revenue came from its top 10 commercial users. Almost all of those are gone -- as are 4,774 jobs in the city -- but the cost of wastewater treatment has changed very little.

"It costs as much, really, to treat a smaller amount as it does to treat a larger capacity," Jones said. "So much of it is fixed costs, including the bonds that were taken out just a few years prior to increase capacity."

Chris Hornback, senior director of regulatory affairs for the National Association of Clean Water Agencies (NACWA), said factory closings typically hit smaller communities harder than larger communities where larger numbers of users can make up for lost revenue more easily.

"There might be ways to downsize and decrease power usage or chemical usage. But you're still going to have the same staff and capital debt that you have to service," Hornback said. "Larger communities can spread the cost of these losses out during economic downswings; small communities are more likely to struggle."

But almost every agency is feeling the pinch as large users -- because of the economic downturn and growing interest in resource conservation -- are finding ways to reduce their water consumption.

"Conservation is a positive thing, but most of our members base their wastewater treatment bills on water consumption," Hornback said. "So when you decrease volume, revenues decrease."

Federal assistance declines

As for capital expenditures, Hornback said that almost all of the burden now falls on the local water agency.

During the 1970s and into the 1980s, the federal government provided construction grants to upgrade public drinking water and wastewater systems to meet stricter regulatory standards imposed by Congress. Since then, Congress has put about $2 billion into a revolving fund for loans that Hornback said is not sufficient to meet today's needs.

There are 16,000 publicly owned wastewater treatment plants in the United States that operate 100,000 major pumping stations, 600,000 miles of sanitary sewers and 200,000 miles of storm sewers, according to U.S. EPA. That system received a grade of D- from the American Society of Civil Engineers in its latest "Report Card for America's Infrastructure." The society noted that billions of gallons of untreated wastewater is discharged each year because of lagging investments.

Hornback said many communities would be facing a difficult challenge even if the economy were more robust. Communities historically "undervalue" their water and sewer services, charging users less than is needed to keep the systems operating to modern standards.

"The pipes in the ground are in some cases over 100 years old," he said.

NACWA has asked Congress to establish a trust fund -- similar to the one used for transportation projects -- to help cities and towns upgrade their water and sewer infrastructure.

The U.S. Conference of Mayors Water Council is also calling on Congress to boost federal investment in wastewater treatment plants. A March report from the council blasted Congress for authorizing a "costly and increasing wave of mandates" while essentially abandoning any effort to provide "meaningful financial assistance" to local governments.

The conference report, written by senior adviser Richard Anderson, estimates that local governments will have to spend between $2.5 trillion and $4.8 trillion over the next 20 years to fulfill those demands for improved water and sewer systems.

There is a "vague and false confidence among Congress that they have already addressed the issue by granting $60 billion to cities over two decades ago to build water infrastructure when the cost in a single year (2008) is over $40 billion in capital investments and another $50 billion for operations and maintenance," Anderson wrote. "A more thorough understanding of how much is spent on public water and wastewater is a necessary first step in establishing a framework for a National Strategy."

The report advocates adoption of a national strategy that would prioritize the mandates based on comparative risk and direct federal resources where they would have the greatest public impact.

The report suggests allocating an additional $50 billion over the next decade, including $3 billion a year in grants to cities to comply with sewer overflow infrastructure and $2 billion in additional State Revolving Fund loan funding to rehabilitate aging infrastructure. The report also calls on Congress to fully fund environmental mandates and court-ordered consent decrees.

Struggling cities

When the textile mills were booming in the early 1990s, Mount Airy issued $15.8 million in bonds to upgrade one of its water plants, expand and upgrade its wastewater treatment plant, replace water and sewer lines, and extend water lines. The picture has changed dramatically in the past five years as factory closings have shrunk the tax base and pushed the local unemployment rate up to 12.5 percent.

The city has delayed or eliminated rehabilitation on older water and sewer lines and instead borrowed to extend lines to reach new customers, including the "Welcome Center" on Interstate 77. Although it has added nearly 2,000 new customers, the city was still forced to increase fees by 10 percent in 2009 to make up for the lost industrial usage.

In Buffalo, Hardesty said the city is also on the hook to replace aging sewer pipes to keep surface and stream water from ending up in the wastewater treatment system. The city is under a consent order from EPA to get the job done.

The town is setting aside $50,000 a year for the project to repair or replace manhole covers and broken clay tiles. The repairs, however, will likely cost more than $1 million to complete, Hardesty said. The city has looked for federal grants to help defray the cost but so far has struck out.

"The last estimate was that 30 percent of our residents are elderly on fixed incomes," Hardesty said. "Any rate increase affects them pretty hard."