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Cary Town Council Work Session Minutes Update on Western Wake Regional Wastewater Management Facilities Conference Room 10035 316 N. Academy Street, Cary, NC April 24, 2007
Mayor McAlister called the meeting to order at 4:33 p.m.
Present: Mayor Ernie McAlister, Mayor Pro Tem Jack Smith, Council Members Ervin Portman, Jennifer Robinson, Julie Robison and Nels Roseland
Absent: Council Member Marla Dorrel
Director of Engineering Tim Bailey stated that the issues are complicated with things being interrelated to each other, including the language which consists of the several acronyms:
Acronyms used in PPT ATC – Authorization to Construct CG&L – Construction Grants & Loans DLQ – Division of Land Quality DWQ – Division of Water Quality EA – Environment Assessment EIS – Environmental Impact Statement Mgd – million gallons per day NCDE – NR North Carolina Department of Environment and Natural Resources NEPA – National Environmental Policy Act NPDES – National Pollutant Discharge Elimination System PER – Preliminary Engineering Report SEPA – State Environmental Policy Act SF Loan – State Revolving Fund Loan USACE – US Army Cops of Engineers WRF Water – Reclamation Facility
Water Resources Manager Leila Goodwin outlined a detailed PowerPoint presentation. (Staff’s PowerPoint presentation attached to and incorporated herein as Exhibit A.) (NOTE: Information contained in the PowerPoint presented is not duplicated in these minutes.)
Mrs. Robison asked the location of the West Cary plant. Mr. Bailey said it is under construction just west of Greenlevel. Ms. Goodwin said before 2011 that pump station will be used to pump north to Durham County and will be expanded and modified to pump south to the new water reclamation facility. She stated the Kitt Creek pump station will be modified to turn around and pump south to West Cary, which will pump south to the new water reclamation facility. She stated at that time nothing will be going to Durham.
Mr. Portman asked if Holly Springs is treating its own waste and is only using Cary’s effluent discharge permit. Ms. Goodwin said Holly Springs will have their own effluent discharge permit and will pump from their plant over to Beaver Creek. She stated there will actually be two separate permits (one for Cary and one for Holly Springs), and the compliance points will be before they combined.
Mrs. Robison asked about Holly Springs’ goals. Ms. Goodwin said Cary staff initially talked to the state about a new facility and a new discharge permit and other municipalities (Apex and Holly Springs) were trying to do the same which lead to a regional project. She stated the state didn’t want to see separate discharge points and they told the municipalities to work together. She stated Holly Springs decided to expand their existing wastewater treatment facility and pump the effluent to the Western Wake facility, and she stated this is Holly Springs’ portion of the Partnership. She stated this is necessary because they need to remove their effluent discharge from Harris Lake.
Mrs. Robison asked if there’s a cap on the amount of effluent Cary will accept from Holly Springs. Ms. Goodwin stated it’s part of the agreement, and they pay according to the design capacity.
Ms. Goodwin explained the term “environmental justice”. She stated there’s a federal policy statement where environmental justice requires looking at whether there is a disproportionate adverse impact economically or racially or disproportionate number of minorities or low income people in the area. She stated with Cary’s preferred site, there is a higher percentage of minority population than there is in the county and in the service areas a whole, which requires the Town look at the disproportionate adverse impact, which led staff to talk to the people in that area to see what concerns they have and to determine whether there is an adverse impact and what they perceive as the impact and to determine how to deal with it. She stated staff determined that about everything was addressed except their concern that they would not have access to the facilities without annexing and paying high costs for their existing homes. She stated this is why the Partners looked at proposing a policy where it would defer those up-front costs of hooking into the system until the property is redeveloped. She stated this issue is still being discussed by the Partners.
Mrs. Robison asked about the historic sites with the minority population. Ms. Goodwin said there are some historic properties north of the site. She stated it was raised during the public input process, and the state said there isn’t a direct impact because there is a large buffer around the plant and it’s not adjacent to the site. She added that the state official advised the people with concerns to work with the staff on issues of concern (i.e., noise, light, odor, and traffic).
Ms. Goodwin stated officials have stated that they will rely on the federal environmental impact statement (EIS) (Corps of Engineers) and they suspended the state process.
Ms. Goodwin stated the state has indicated a willingness to work with Cary to keep the schedule moving. She reiterated that there are still numerous opportunities for the public to be involved in the process.
Mr. Bailey reviewed the design phase. He outlined the three major components of the design: (1) raw wastewater facilities getting them to the plant, (2) treatment plant including the biosolids, and (3) work for effluent pump station and facilities. He introduced consultants from Hazen & Sawyer who are doing the pipeline work and consultants from Arcardis who are doing the treatment plant part of it.
Mr. Bailey stated the West Cary plant is under construction now, because it is needed as a temporary measure to serve the basin. He reiterated that we will temporarily pump to Durham County, and later when the new plant is on line, the flow will be switched to move the flow in the opposite direction. He stated the Beaver Creek site will take all of the flow from Cary, Morrisville, RTP South, a good portion of Apex’s drainage basin and will pump it to the treatment plant site. He stated staff continually explores to find the best route, to avoid wetlands and to find the path of least resistance.
Mr. Portman asked if duplicate pumping capacity will be installed in order to switch the direction of flow or will the system be down for a period of time to accommodate the flow redirection. Mr. Bailey said we can’t be down for any time, and he described technically how the redirection occurs.
When discussing the water reclamation facility, Mr. Bailey pointed out that the design allows for technology advances, such as use of membranes, in the future. He stated this lets us increase future treatment capacity both as quality and volume levels without potentially building new tanks. He stated this technology is not included initially because the cost of the membranes is high at this time, and he hopes in the future this cost will decrease. He hopes that as more capacity is needed and discharge limits get tighter, then this will be a technology to consider in the future. He stated the hybrid approach is the least cost to the Town and provides future flexibility.
Mrs. Robison asked the purpose of the membranes and she asked when it’s anticipated that they’ll come on-line in Phase II. Mr. Bailey responded that 2020 is the projection for 30 mgd. He stated the membranes are an ideal filter and are similar to reverse osmosis treatment filters. He stated they’ve recently started using them for wastewater, and instead of having a large tank where the biosolids settle out and the clear water flows off the top, you instead insert the membranes into a tank and draw the clear water through the membrane itself. He stated they have a good long life expectancy and allow no ability to pass through the membrane, they don’t get holes in them, and because of the small pore size, it filters out pollutants and results in a higher effluent quality for discharge.
Mr. Portman stated it’s a mechanical filter. Mr. Bailey concurred. Mr. Portman asked about loading and clogging. Mr. Bailey stated they need redundancy, they have to be cleaned, and some have to be taken out of service so excess capacity is important. He stated they will need to be replaced over time, but they do not clog as a normal paper filter and they’re much more durable.
Mrs. Robison asked what will be done with the sludge from this plant. Mr. Bailey stated the biosolids will go to a holding facility on site for initial treatment with some aerobic digestion. He stated the current thought is to then send it to a composting facility. He stated the second plan is to use some type of dryer; he stated it’s possible to ship the sludge to the south plant and through that dryer, or long-term we may need a dryer at this site. He stated these discussions are all preliminary, and it’s important to note that the sludge regulations constantly change. He stated the plan gives the Town the flexibility for both options. He stressed the importance of flexibility in managing biosolids.
Mrs. Robison asked if anything will go to the south plant biosolids dryer in Phase 1. Mr. Bailey stated staff’s preference is to work with McGill (a private company) to make arrangements for them to take the Town’s biosolids to a composting facility; however, he stated if this doesn’t work, then staff will look at using the south plant and using the dryer.
Utilities Director Rob Bonne said there is a charge for McGill to take the sludge. He stated there is also an option to use the landfill.
Mr. Portman asked the benefits of membrane vs gravity. Mr. Bailey stated this is the same tank that accommodated 18 mgd, and we’re now putting 30 mgd in this footprint, so there’s an immediate cost savings on the capital side (i.e., concrete, tanks, pipes). However, he stated membranes aren’t cheap, but as competition increases and more people use them, then the cost of membranes should decrease. Ms. Goodwin reminded council that we still have the option of expanding conventionally, and planning for future use of membranes provides additional flexibility.
Mr. Portman asked about the operating cost differences in the two methods. Mr. Bailey said there’s no extreme difference in operating costs; the main part of the process is basically the same. He stated due to the high cost of membranes, typically only small plants utilize them today.
Mr. Bailey stated except for the entry road, there are hardly any stream or wetland impacts on the site. He thinks the regulators will be very pleased. He stated only about 50 of the 240 acres is impacted, and there is a huge buffer to prevent anyone from seeing or hearing this site. He stated additionally, the power source will be provided across the stream and the clean water (effluent) pipe will more than likely follow that route as well. Ms. Goodwin stated the pipelines stay away from the main roads to limit the impact.
Mr. Bailey stated the effluence conveyance corridor is a rural area, where there will be very little impact to the corridor.
Mrs. Robison requested a map or an aerial depiction showing the location of the effluent bank discharge. Mr. Bailey will provide this information to council.
Mr. Bailey stated the biggest risk management issue is that we’re strongly considering parallel force mains for the raw wastewater. He stated ultimately as flows increase over time we’ll need them anyway. He stated we’ll only need one initially with Phase I, but we would probably alternate between the lines. He stated it’s very rare we’d need both a one time (heavy rainfall and storms). He stated this item is not in the upcoming budget. He stated with this project if staff actually makes this recommendation then it would apply to all the shared facilities that we build as part of the project – from West Cary pump station to Beaver Creek and from Beaver Creek to the plant site.
Mr. Portman asked about the cost of parallel lines. Mr. Bailey stated this is a conversation possibly for a future work session. However, he stated parallel lines results in actually building Phase II earlier, and there are some efficiencies of building it now (i.e,. time value money issues).
Ms. Goodwin outlined the project cost (refer to the PowerPoint presentation).
Mr. Roseland asked how sewer impact fees are factored into the cost. Budget Director Scott Fogleman said it is part of the cash coming in as the project moves long, and staff will use that cash to the extent possible to offset borrowing.
Mr. Roseland understands there are two ways to pay for these improvements: (1) rates charged to the customers and (2) impact fees charged to the customers or builders. He stated the rate model is being reviewed for updating, and he asked if we need to also look to adjust the impact fee cost model to help minimize the rate impacts. Mr. Fogleman said staff’s plan is to determine the possible impact at 100 percent cost recovery, and then it becomes a policy question to determine what fee the council wishes to charge. .
Mr. Portman asked about the debt financing mechanism to cover incremental rate fees up-front. Mr. Fogleman said we don’t know today what the mix of debt and cash will be, and staff monitors this on an annual basis as projects come up for appropriation. He stated he and his staff works closely with finance in terms of utility models to manage the cash to avoid debt funding when possible.
Mr. Portman asked if it’s the Town’s normal strategy to not charge rates to cover the debt service up-front. Finance Director Karen Mills responded that we will have to bring the cash to the project as it spends, whether it’s through impact fees, cash revenues or through borrowings and debt service. She stated we will manage the debt service to the extent possible to minimize its impact on rates and to stretch it out to impact rates as smoothly and as minimally as possible. However, she stated at some point debt service will create rate impacts.
Mr. Portman asked the estimate of the debt service as a percentage of the total cash flow through the utility at this time. Mrs. Mills said staff will provide that information to council. She stated there are other utility projects that impact the rates.
Mr. Roseland asked if we can use impact fee revenue to pay debt service. Mrs. Mills responded no, and she stated we must use operating rates to pay debt service. She stated we may use impact fees to avoid borrowing money, but once we borrow it, then it must be covered by the operating rates. She stated impact fees are one-time revenues and they are not operating revenues that are a sure stream, so we must not use that for operating revenue. She reiterated that debt service must be covered by the operating revenues, so we would use rates to cover the debt service.
Mayor McAlister referred to his recent conference call with bond raters; he stated there was a graph that showed the amount paid by development fees was above 40 percent. He stated those fees may need to be adjusted in the future, but he wanted to point out that development fees are funding a significant portion of the cost.
Ms. Goodwin outlined the schedule for the project (refer to the PowerPoint presentation). . She clarified that the construction steps are concurrent.
Mr. Portman asked what happens if we miss the deadline. Ms. Goodwin said it depends on Durham County, because the flow we send them will return to the Cape Fear river basin. She stated it doesn’t mean we are necessarily violating the interbasin transfer. She stated staff would look at whether flow management has an impact on development in the area. She stated there could be a fine if we miss the deadline, and the state has some discretion in how they deal with this issue.
Mr. Roseland understands that many of the delays have been the result of the state asking us to spend more time on the various issues, and he thinks they should be understanding if we miss the schedule.
Mrs. Robison asked about the next update on financial information. Mr. Fogleman said staff is addressing the 2008 needs and the capital improvement plan needs identified through the budget process in next few weeks. He stated it will show all capital needs associated with the project.
Mr. Portman asked when we’ll know the rate impact. Mr. Fogleman said the potential rate increases have been forecasted. Mr. Portman asked if it is a significant increase. Mr. Fogleman replied that it depends on many different variables to determine the significance over time. He stated there are rate impacts.
Mr. Portman said this is a huge investment that will generate huge debt service, but we’re building capacity for a long period of time. He stated the concept if building capacity for a long period of time to not charge that to the current rate users and in effect finance some losses that are repaid as volume builds to keep the rate steady might be prudent unless not allowed legally. He stated this would allow us to manage a more constant rate artificially with debt financing so as the volume builds, the debt service financed early on would be paid off and there would be less impact to the current rate payers. Mayor McAlister said he agrees because that’s the way to pass the cost of new facilities to the new users. Mrs. Mills said there will be some things that can be done to manage the debt service and postpone some of the higher impacts of that debt service into later years; she stated in that way we will push some of the costs out into future years. However, through bond covenants we must cover the debt service to which we are obligated. She stated once we commit to the debt and structure it, we must cover it and we can’t postpone a lot into the future.
Mrs. Mills stated we can do some variable rate debt that would theoretically have a lower interest rate, we can extend the term of the debt, and we can structure the principal repayment in more aggressive means than what we’ve done in the past. She stated these are the types of tools that we will use to minimize the impact on rates to the best of our ability.
Mr. Roseland would like the council to get a copy of the full presentation that was provided to the bond raters, including the information that showed impact fees versus utility rates. He would like different scenarios to view on rates and impact fees. Mrs. Mills will send the presentation to council.
Mrs. Robison said there are policy questions about how much Cary contributes versus other jurisdictions. She said there are questions of equity, and this must all be considered if we change the impact fees. Mrs. Mills stated staff will share with council the choices in managing utility rates. Mr. Bailey stated there have been many changes since council’s last utility rate exercise. For example, he stated Cary is no longer a lot higher than Raleigh. He stated we’ll always have competition issues. He stated it will all be addressed in the study.
Mayor McAlister stated the results of the study will mean more to council since having this work session.
Mr. Portman stated we have up-front investments to get the project done, and we have downstream operating costs. He stated we have a regional partnership across multiple communities. He stated to the extent we get more impact fees going into the construction, then is this directly transferable to Cary. Mr. Fogleman concurred. Mr. Portman asked if the same is true with operating costs. Mr. Fogleman concurred. Ms. Goodwin stated operating costs will be proportional to flow with some fixed cost based on capacity and some variable costs. Mayor McAlister stated it’s a policy decision for each community that is part of the Partnership to decide on developer fees or rate increases.
Mrs. Mills stated that Cary as lead agency must appropriate the entire $261 million for this project. However, a revenue source to it is Apex and Holly Springs. When construction invoices are received, the Town will carve out their portion, send them a bill, and they’ll pay the Town of Cary immediately. She stated it’s up to Apex and Holly Springs to determine how they come up with the revenue sources to pay the Town of Cary.
The meeting adjourned at 5:47 p.m.
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