Last night the Berryville Town Council held its regularly scheduled meeting to discuss an agenda loaded with important items. A primary issue for discussion and public comment was a resolution authorizing the issuance of an 18 million dollar bond to fund construction of the new sewage treatment plant by the Town of Berryville. The controversial upgrade to the existing sewage treatment system presents an onerous financial burden that has been the subject of public criticism. The cost of the project will have a dramatic impact on sewer rates for all residents. While the town has come under fire for allowing the situation to come to a point that will require unprecedented rate hikes, Town Manager Keith Dalton defended the towns actions, stating that in his dealings with bond council and state organizations, everyone has characterized the town preparations for this reality as exemplary.
After a brief overview of the project, attention quickly focused on the funding situation. To pay for this project the town is relying on a formula that includes cash on hand, grant money from the Virginia Water Quality Improvement Fund (WQIF) and a loan from The Virginia Resources Authority (VRA). Provisions for each element must be met for the entire funding strategy to work.
The cash element is secure thanks to rate hikes enacted in 2006.
Grant money will come from the Virginia Department of Environmental Quality via the Virginia Water Quality Improvement Fund (WQIF). According to town representatives, 75% of the cost of the treatment plant is eligible for this grant money. Keith Dalton expressed some concern over, what he characterized as “nervousness” coming from the DEQ over its ability to fund the grant. Given the fiscal atmosphere in the state capital and the fact that the DEQ has over committed to WQIF grants the state expressed some concern over their ability to fund the grant at the levels previously discussed. This could prove problematic for Berryville.
Dalton stated, “If the grant is not funded at the levels discussed, then this project cannot move forward.”
The final component is the loan from VRA. Based on information revised late Tuesday afternoon by The Virginia Resources Authority (VRA), the actual amount of the loan for the project is now at 11.75 million, a drop of over 6 million dollars. The loan would be for a term of 25 years at an interest rate of 0%. While these terms are quite favorable, some conditions associated with the loan were called into question.
Bond council, Caroline Perry, spoke at the meeting and pointed out that the economic conditions this project faces are subjecting it to closer scrutiny than similar projects in the past. Where a loan may have been very quickly underwritten in the past, that same loan takes more time and may require tighter conditions to be underwritten now. One condition pointed out by Keith Dalton that seems out of place is the requirement that water rates be raised in addition to sewer rates. Dalton pointed out that this project is clearly a sewer project that does not involve water rates. Council Perry stated that she will pursue revisions to the agreement to allow for more flexibility on the town’s part. However, Ward Three Council Member Mary Daniel pointed out that VRA has the final decision on this loan and that all the town can really do is request changes, to which council concurred.
During the public hearing portion of the meeting only one resident, Alton Echols, spoke. He questioned the council on how these funding actions would impact rates and how they were incorporating connection fees into their financing formula.
Keith Dalton told the meeting that detailed rate estimates would be forthcoming soon but his estimates and the engineers estimates for rate changes differ. The town’s preliminary estimates put the new sewer rates at $17 dollars per thousand gallons once the new system comes online. The engineers associated with the project estimate rates could climb as high as $22 per thousand gallons. As far as connection fees, Mr Dalton was emphatic, gesturing with his hand to illustrate that the town has incorporated zero connection fees into their calculations. Their hope is that, when the economy revives and the building industry rebounds, that connection fees will provide some bonus dollars into the system.
Mayor Wilson Kirby was quick to point out that this public hearing was not about rates. Kirby stated, ” A rate hike will require another public hearing specifically on that matter.”
As the project continues to move forward attention will fall squarely on the rate hikes. With a burden of 11.75 million dollars to retire over a 25 year period, town residents and the local economy will feel the impact of this project for generations.