PRWID Evaluates Project Funding Alternatives, Repayment Scenarios
A higher than expected engineer's estimate and a bid exceeding the estimate forced Price River Water Improvement District to rethink how the agency will fund line upgrades for five small companies in the county.
When the PRWID board evaluated the bids last week, the members found that TNT Construction of Lehi had submitted the lowest proposal on the projects at $1,018,206. But the bid was almost $14,000 more than the engineer's $1,004,300 estimate. In addition, PRWID had initially arranged for only $904,000 in financing to start the project.
The 10 other submitted bids ranged from $86,000 to more than one-half of a million dollars higher than the engineer's estimate. The bids include Claw Construction, $1,090,989; Johansen Construction, $1,097,636.95; Terry R. Brotherson Excavating, $1,112,322.51; Nelco Contractors, $1,188,824.50; Vancon Inc., $1,278,714; Reynold Brothers Inc., $1,363,481.10; Dunn Construction, $1,373,038; Terry Larsen Excavating, $1,410,614; Dwight W. Peterson and Sons Excavating, $1,434,991.99; and J. West Oil Field, $1,545,644.94.
PRWID manager Phil Palmer felt there would be no problem securing the extra money from the Utah Division of Drinking Water to complete the project.
During a special meeting of residents from the affected areas and small water company representatives, he reaffirmed that belief on Monday.
"We had a conference call this afternoon with representatives from the DDW and it still looks like we can get the money we need. But we need to hear from you to tell us how to proceed," explained the PRWID manager on Nov. 24.
All five involved entities were represented at the meeting. The operations included Thayn Water Company, Jewkes Water Company, East Wellington Water Company, East Carbonville Water Company and Carbonville Water Company.
The plan to upgrade the companies' water systems to meet state standards and then absorb the entities into PRWID has been in the works for a long time. Now it appears the planned action will happen within the next year. But first, full funding for the upgrades must be secured.
Since the bid opening, Palmer indicated that the district has been talking to various agencies, including the Utah Community Impact Board, about providing the extra funding needed for the project. After the conversations, he still felt the DDW was the best option.
"On top of the bid, we will also need money for the design and engineering as well as $42,000 for the issuance of the bonds," pointed out Palmer. "We also will need to build in a 10 percent contingency for money to support any kinds of problems that might arise."
More money in bonds means a higher cost for consumers. The increased costs for local residents was one of the primarily reasons for Monday's special meeting.
At the gathering, PRWID staff members passed out charts listing possible funding and payback scenarios for the project.
The list included various options in terms of years of amortization, the splits the drinking water division might give the district on the loan versus grant/forgiveness and the total amount each alternative would cost per month.
Originally, the $904,000 was to be funded with 80 percent of the money paid back at a low interest rate and the DDW forgiving the remaining 20 percent of the related revenues.
"We need to know what direction you want us to head and to hear your comments," said Keith Cox, PRWID board. "For us, the question is the best way to fund this project."
One unusual subject surfacing up at the district's special meeting on Monday involved the idea of the small water companies simply walking away from the responsibilities and turning the systems over to the state.
The idea basically stemmed from the hope that the state would then upgrade the water systems and absorb the cost.
But if the water companies decided to abandon the systems, the state would not automatically step in and cover the expenses associated with completing the necessary upgrades, indicated assistant PRWID manager Jeff Richens.
"You could say no to this plan. But in the end, it would end up the same as it will be with what we are doing here right now. It would just take longer to get done," noted Richens.
"If the state takes over, they will come to us and ask us to upgrade the systems and then we will have to get the money to do the work and charge residents in the same way," pointed out Richens.
Some people in attendance at the Monday meeting wondered if that would allow the cost of the system to be spread over all of PRWID's customers rather than just the affected residents.
"No," replied Richens. "The cost would still go to the residents who gain the benefit only."
Several questions about future growth in areas like Carbonville and Wellington were also raised.
"I just wonder how long this system will last us if there is growth," said Rex Sacco of Carbonville. "If more construction takes place, will these lines need to be replaced to provide the extra service?"
The water improvement district has no control over growth - only the county has that power, stated Palmer.
"But we can raise red flags if we think it is going to cause a problem for our system," pointed out the PRWID manager. "In your area, the eight-inch lines that will be put in would accommodate 1,200 connections."
Richens pointed out that lines must meet state requirements not by the number of connections they can service but by the fire flow requirements the state has set.
Another question from the audience was about which lines need to be replaced and what else needs to be upgraded in the systems.
Richens explained that, in some of the water companies, 100 percent of the lines will need to be replaced.
But in other companies, only 50 percent of the lines will have to be replaced.
"However, everyone will be getting new customer meters as well as new fire hydrants," said Richens.
In addition, Palmer advised the representatives from the water companies that, to go ahead with final funding, the district would need letters from all of the organizations giving PRWID permission to proceed.
"You will have to meet with your boards and follow your bylaws," stated the water improvement district manager.
The explanation brought a question from PRWID board member Steve Rigby.
"What if one of the water companies decides to not go along with this, does that mean we scale back the project or does it mean the whole thing is dead? asked Rigby.
Palmer indicated that all of the water companies must agree to go ahead or the entire project will need to be rethought by PRWID.
When a hand vote was taken, the majority of water company representatives agreed to go ahead with pursuing the extra funding.
The PRWID board then voted on two resolutions, one to proceed in the matter and ask for $1.3 million to fund the projects and another to advertise the bonds.
PRWID must act quickly because the DDW advisory committee meets Wednesday, pointed out Palmer.
The district will have to make a presentation to the committee in order to get final approval from the DDW board in December.
Once the steps are completed, a public hearing will be slated for Dec. 16 to let the parties know what the final disposition will be regarding the project.