BURTON — While the council approved authorizing the administration to work with a consulting firm on the next phase of an estimated $15 million sewer repair and reconstruction project, Aug. 2, some council members remain skeptical about whether the venture will result in higher sewer rates for residents.
The council approved authorizing the mayor and clerk to enter into an agreement with Stantec Consulting Michigan of Ann Arbor to complete the preliminary engineering, design and plan preparation phases of the 2021 State Revolving Fund for improvements (Phase 2) to the city’s sanitary Sewer System at a cost not to exceed $196,500.
Council approved the first phase, which is currently underway, back in March, resulting in the relining of pipes in the city’s south end where the 60-year-old sewer infrastructure is failing.
In all there will be five phases to the project, all funded from the State Revolving Fund in the form of low interest bonds over a 30-year period.
At 2.125 percent for the 30-year loan, the project went through design last fall.
In March, Councilman Tom Martinbianco said if the cost of the first phase is less than $2 million the city might consider paying for it in cash.
But DPW Director Charles Abbey said because the city is borrowing money at 2.25 percent interest it makes more sense to borrow and hold onto money in the sewer fund, which is currently operating in the black.
At the Aug. 2 meeting where the early stages of phase two were discusses, Martinbianco asked where the project is at with phase one.
“I can’t believe you can ask for legitimacy for phase two when there’s no report on phase one,” said Martinbianco, who admitted he doesn’t agree with the entire process.
Abbey said the work is “well underway” and the contractor is lining aging pipes in the south end of Burton to prevent future breaks or leaks.
He said further now that the city is in the first phase, everything is time sensitive and there is a schedule that must be met so the city can keep taking advantage of the State Revolving Fund low interest bonds.
Martinbianco suggested the council wait before approving the next phase for President Biden’s national infrastructure bill to receive approval by the federal government and find out what kind of money the city might receive.
But Abbey said the timetable for the project can’t wait and the city would lose money if it stopped the work now.
“The infrastructure bill not completed and any money we’re potentially receiving is not available now,” said Abbey. If we don’t stay on this track, we will lose this. We’re borrowing good money because it is cheap money.”
He said the reason the city went this route was it always allows for options with using the city’s own money, currently sitting in the water and sewer fund, in later phases.
“If the money dries up and we don’t stay on the track, we will lose this,” Abbey warned. “And then we won’t get into (phases) three, four and five. We will be funding the rest of it out-of-pocket 100 percent.”
He added that if the city backs out of this now, it won’t qualify for potential loan forgiveness, which it received with some of the water system improvements done a few years ago when nearly $3 million was forgiven by the government.
Brian Simmons from Stantec said the schedule is dictated by the Michigan Environment, Great Lakes & Energy Department (EGLE) so it falls in line with a five-phase program. The schedule, he said, is “quite tight” and requires preliminary plan submittal on phase two by Oct. 25, final plans by Dec. 27, advertise the project Jan. 10 and opening of bid on Feb. 15.
He said phase two is about the same size and cost as phase one, each of the five phases being divided up equally.
“If you step out of line now, you may lose some of the eligibility for the rest of the program,” said Simmons. “You may lose your spot for phases two, three and four. Down the road, if you want to apply for other revolving fund programs, you may be looked at unfavorably by EGLE because you took somebodies spot and didn’t continue the program.”
Overall, Stantec estimates the cost of phase two at around $3 million. Abbey said each phase is approximately $3 million, balanced over the five years of the project.
Council President Steve Heffner said the council figured it would take 2-3 phases before it started costing money out of the taxpayers’ pockets.
“I know there is a bipartisan infrastructure bill in the works right now as we speak that will probably go to the president’s desk in the next week or two,” said Heffner. “I just hate for us to do something that we’re going to miss out on some federal money. We also have our CARES (federal COVID-19 relief funds) money, the pandemic money, the $2.8 million coming our way that can be used for sewer infrastructure also.”
Abbey said the city has until 2024 to spend that relief money, adding he thinks the city would be better suited to stay the course with phases 1 and 2 since these are the sewers in the worst condition. He said the city would be “foolish” not to stay the course at this point and look at exercising its options down the road.
Heffner said he is afraid the of the city ending up in the same situation it did with the water system, where it was under-charging residents resulting in a large deficit in the water and sewer fund. That deficit has since been corrected.
Mayor Duane Haskins said at no time during discussion about the sewer system improvements did the administration ever mention raising sewer rates on the residents.
“You may have,” he said, addressing Heffner. “But it never came from this side. We’re making more money on our money in the sewers – interest that is going to pay the bond payment because the interest is so low on these payments.”
Haskins said the administration has never said rates would go up but has never made a guarantee that they wouldn’t.
“Nobody knows what’s going to happen with rates on anything,” he said. “But we’ll watch it diligently and we watch everything diligently. Things that haven’t been done in the past are being done today.”
The vote to approve moving ahead with preliminary phase two engineering was 5-1, with Martinbianco being the only dissenting vote. Councilwoman Deb Walton was absent.