More Funding for Water & Sewer Projects

(from Maine Townsman, April 2009)
By Douglas Rooks

Federal stimulus money continues to flow into Maine — $1.1 billion at last count. And a substantial fraction of that funding is being allocated to wastewater treatment and community drinking water projects, local infrastructure needs that the state sees as high priorities.

Many municipal water systems have 100-year-old pipe that is now failing, and many of the sewage treatment plants built in the 1970s and ’80s with Clean Water Act funding are now in need of substantial upgrading or replacement. Yet water and sewer systems often rank well down on the list of local spending priorities.

In a 2007 Townsman article surveying municipal water and sewer needs, the manager of a multi-town water system in southern Maine that is aggressive in keeping up with maintenance and replacement said that the job is much tougher for municipal departments that don’t have their own budgets. “I’d hate to be competing with schools or roads when it came time to do the budget,” said Norm Labbe of the Kennebunk-Kennebunkport-Wells Water District. “Water mains are kind of out-of-sight, out-of-mind.”

So the influx of federal money through the American Recovery and Reinvestment Act, or ARRA, is doubly welcome for many municipal plant managers. It not only puts Mainers back to work, its main purpose, but it allows at least a down payment on a backlog of projects that has become both lengthy and expensive.

In the Department of Environmental Protection’s annual survey of wastewater treatment needs, released in January, more than 100 projects are listed that amount to $347 million for the next five years, and another $533 million for the five years after that – some $880 million in all.

Drinking Water Projects

While there is no comparable list of drinking water projects, which come under the purview of the Department of Health and Human Services, needs there are also quite substantial.

Roger Crouse, who manages the Drinking Water State Revolving Fund for HHS, said that the program normally funds about $14 million a year in projects. Some $19.5 million in stimulus funding plus an anticipated state bond issue this fall will allow nearly $40 million in drinking water projects to go forward, nearly three times the usual amount.

Steve Levy, who assists smaller communities as director of the Maine Rural Water Association, says the combined impact of water and sewer projects could be even greater. “We may be doing as much over the next 12 months as we usually do in four or five years,” he said.

So while the ARRA funding may not be a once-in-a-lifetime opportunity, it’s probably a once-in-several-decades chance, and towns and cities have quickly stepped up with plans and applications.

Lists of funded water and sewer projects have now been released, and work will soon be going on in communities all over the state.

One of the largest projects is a combined water treatment plant for the cities of Lewiston and Auburn that will cost $7 million and is almost entirely covered by state and federal grants and loans, according to Crouse. Building on an existing structure described by participants as highly cooperative, the Twin Cities may be eligible for a series of grants, no-interest, and low-interest loans.

In the case of water projects, everything comes under one heading. Because its program, authorized by Congress in 1996, includes principal forgiveness – essentially a grant – and no-interest loans, it dovetails closely with ARRA requirements. Crouse said that the Lewiston-Auburn project is an example of one that was not only shovel-ready, but represents an efficient response to the upgraded requirement of the Safe Drinking Water Act, originally passed in 1986, and that now requires advanced treatment for larger communities.

In addition to Lewiston-Auburn, municipalities projected to receive more than $1 million in funding include Camden-Rockport, $3.6 million; Livermore Falls, $1.6 million; Orono-Veazie, $3.6 million; Bangor, $1.8 million; Passamaquoddy Water District, $1.5 million; and Belfast, $1.3 million. The Portland Water District will receive an array of funding for several separate projects that total $4.5 million

There are more than 60 projects in all, with a substantial backup list if any of the current candidates cannot meet deadlines or other requirements.

Crouse said that the Camden-Rockport project is an example of how long-contemplated work can be accelerated to meet the requirements of the federal program. It employs an innovative design-build model that will enable work to go forward this spring even as the final details are being pinned down.

Wastewater Treatment

On the sewage treatment side, the ARRA list includes 23 projects that will collectively use $29.1 million, according to Steve McLaughlin, director of the Clean Water State Revolving Fund for DEP.

McLaughlin explains that DEP’s program, which dates to the original Clean Water Act of 1972, has different provisions than the drinking water program, so another round of project funding can be expected once the state bond issue is authorized. The DEP program doesn’t include principal forgiveness or zero-interest loans, so it tends to rebuild a bigger revolving fund balance from repayments on previous loans. This year, at least $52 million will be available.

While collectively, there’s a lot more money this year for wastewater treatment than most, there’s still a substantial backlog. From the stimulus, “We’re awarding $30 million for projects, but there’s at least $300 million that needs to be done,” McLaughlin said.

Some of the funding for sewer projects is going to larger communities that are required to meet the Combined Sewage Overflow (CSO) standards now included in the Clean Water Act. The name refers to the stormwater runoff that used to bypass treatment plants during high water, but is now captured in holding tanks and treated during low-water periods.

Bangor will be getting a total of $2.84 million for storm water management projects, while Biddeford will qualify for $2.6 million in sewer separation CSO projects. Cumberland will receive $2.1 million, Ellsworth $2 million, Limestone $3 million, Machias $1.2 million, Oakland $1.7 million, Winterport $1.8 million, and Portland $3 million. Machias, Winterport, and Limestone will be upgrading their treatment plants, while Ellsworth and Oakland are funding force mains.

The alternate list is even longer. Portland, for instance, applied for another $11.9 million in projects. McLaughlin said that it’s unlikely that many, if any, of the alternate projects will be funded by ARRA, but they will be eligible for the round of state-supported loans later in the year.

Both the HHS and DEP lists have strict deadlines attached. Funds are supposed to be committed within four months, and construction should start between April 30 and November 30 of this year.

Rural Development Assistance

The timeline at the Rural Development Agency in Bangor, a program of the federal Department of Agriculture, is a little less demanding, and the managers of the various programs – and the municipalities involved – are working out what the best deals might be for each community.

“I’m really excited about this program, and so are most of our towns,” said Ron Lambert, the Bangor office manager for RDA.

RDA isn’t bound by the four-month “shovel ready” terms for the other agencies, which require environmental permits and engineering to be in place. While funds need to be obligated within six months, actual construction may take place next year, and the agency is processing requests as they come in, he said.

The way the RDA program works is that $2.4 billion is assigned nationally, and, potentially, all qualifying Maine projects could be funded in the first round. It’s not yet clear how much money will be committed, but Lambert said $20 million is a reasonable estimate, of which $5 million could be outright grants.

RDA loans are limited to communities of 10,000 population or less, so it targets the small rural systems that often have the most difficulty sticking to maintenance and replacement programs. Steve McLaughlin commented that while most larger municipalities with full-time treatment plant staffs have generally kept up to date, that’s not always true for smaller systems. “We trying to encourage better asset management plans,” he said. “The investment we made earlier should be maintained.

After the initial allocations are made, the remaining RDA money will be pooled and could be available to states like Maine that have more projects on a waiting list, Lambert said. This is a feature of the regular RDA program that has often benefited Maine.

Lambert said that regular meetings have taken place with representatives of RDA, DEP, HHS and the Department of Economic and Community Development, which administers the Community Development Block Grant program. This coordination allows towns to shop for the best deal, often combining funding from RDA and the state programs. “We’re very fortunate to have this kind of cooperation in Maine,” he said.

Lambert encouraged towns that have not yet applied to consider doing so. Another RDA program provides low-interest loans for other municipal projects, such as fire stations, town halls and public safety facilities, and can even assist non-profits such as hospitals. These loans, at a fixed rate of 4% or 4.5%, are for unusually long terms, up to 30 years for municipalities and 40 years for non-profits, so payments are affordable. There’s usually about $4 million available annually, but ARRA should provide another $7.5 million.

A Robust Effort

Another factor that has created a relatively robust Clean Water Act program in Maine is that state funding is provided through bond issues for the required match to federal dollars. In other states, loan repayments are taken for the match, which accordingly reduces the amounts that can be loaned out in subsequent years.

Still, it’s questionable whether even the addition of lots of stimulus dollars will change the aging infrastructure equation in the long term.

In a Summer 2008 issue of Maine Policy Review, Andrew Fisk, director of DEP’s Bureau of Land and Water Quality, noted that the value of federal funding for the revolving loan funds dropped 39 percent during the Bush administration. “The recent reductions in absolute dollars between 2003 and 2007 have meant that the money available to Maine to build its loan fund to a permanently sustainable basis has declined from $10.6 million to $5.3 million, annually,” he wrote.

Congressional budget committees were then projecting that the program might end by 2013, which Fisk said would leave the state short of the money necessary to keep the loan fund going permanently.

While this federal budget decision is subject to review in a new administration, it suggests some of the continuing challenges facing towns and cities that must ultimately carry out clean water and drinking water directives.

There is some evidence that federal priorities could be changing. In the first Obama administration budget, for instance, there’s a substantial increase in the request for Safe Drinking Water Act grants, Crouse said. If appropriated at the requested level, it could increase the current level of federal assistance by as much as 50 percent, which could in turn fund “a substantial increase” in the state loan program. The state and federal program managers have differing estimations of how far the stimulus funding, and a relatively robust state bond package, might take water and sewer infrastructure in the years ahead.

Steve McLaughlin at DEP said that “the new money is nice to have, but it’s only a start” on what will eventually need to be done.

At HHS, Roger Crouse agreed. “It’s not really about getting caught up, but about not falling further behind.”

Steve Levy at the Rural Water Association strikes a positive note in saying, “This is a lot of money compared to the funding we’ve been seeing.” He said that “it bites off a chunk” of eventual funding needs, and it does so in a way much more advantageous to local taxpayers and ratepayers, who would otherwise be bearing the costs themselves.

Potential Bottlenecks

As is often the case when gearing up for a big new effort, not everything may go according to plan. “There will be some bottlenecks,” Levy said – though exactly where may occur is hard to predict. Simply because the timeline for construction is so deliberately compressed mean a possible shortage of labor, materials, or both.

Crouse wonders about the “Buy America” amendment added to ARRA by Congress at the last minute. Finding American-made water and sewer pipe won’t be a problem, he said, but finding advanced electronic components used in water treatment systems may be. “Some of these things we just don’t make here,” he said.

While waivers to the requirements are possible, Crouse wonders how long that will take – particularly since the overall purpose of ARRA is to get people back to work quickly. He said that the Office of Management and Budget is working to provide some clarity to what he terms “a poorly written document,” but such guidance had not arrived by early April despite several promises that it was coming.

Another feature of the bill that will have some impact is the Davis-Bacon Act, or “prevailing wage” standards that must be followed. Crouse said that it won’t have a big impact on contract prices, but it does provide some reporting challenges for municipalities and contractors.

Finally, there’s the question of whether there will actually be enough contractors, and enough staff, to carry out all the work planned for this year.

Levy said that most construction firms have downsized their workforces over the past 18 months, and most will welcome the opportunity to re-hire. But whether there’s enough trained labor to do the job is uncertain. “We don’t know that yet,” he said. “But when the bids go out, we’ll begin to find out.”

Overall, he said, “This is a big pot of money, and it represents a real opportunity for rural communities to fix their infrastructure on favorable terms.”

Douglas Rooks is a freelance writer from West Gardiner and regular contributor to the Townsman.