SD-4 proposes sewer plant

Apr. 16—SUMMIT — A standoff between the city of Ashland and Sanitation District 4 over sewer rates bubbled to the surface Friday when the district publicly presented its proposal to build its own sewer treatment plant.

At Friday's public hearing, officials from the city of Ashland were in attendance as Engineer Ken Howard, of Summit Engineering, presented the proposal to build a $28 million sewer plant at the intersection of Roberts Drive and Bob McCullough, where the technical school used to be.

Present at the meeting were the engineers from Summit, supervisors from SD-4 and city officials from Ashland. The SD-4 board — which makes the decisions and is appointed by the Boyd County Fiscal Court — was not present at the meeting.

SD-4 Chair T.J. Morrison said they did not attend on the advice of the engineers, who were presenting a technical presentation.

In the presentation, Howard said it was SD-4's position that its own sewer plant would be more cost-effective for the district, which serves Cannonsburg and Summit areas. Initial estimates by Howard showed the plant's debt (pegged at a loan on a 2.625% interest rate, well below the current federal rate of 4.8%) would cost the district $1.8 million, about $200,000 less than what the district pays the city of Ashland to treat its sewage on average.

However, Howard said the cost savings hinged on what the feds do with interest rates, stating the district would have to take out a $25 million loan to cover it.

City officials present — Mike Graese (City Manager), Mark Hall (Utilities Director), Jim Moore (City Attorney) and Steve Cole (City Engineer) — all contended the move would not be cost-effective and it probably wouldn't be legal during the public comment portion of the meeting.

Moore pointed out that SD-4 signed a contract in 2018 for 40 years, locking itself into paying 90% of the Ashland residential rate. He said the minimum amount the district has to pay per month is 20 million gallons, which equals to $105,000 per month. The current average shows the district is paying $166,000 per month.

"Those provisions are in there so an entity can't walk away from a contract," Moore said. "If you don't have a minimum, it's not really a contract because they can just walk away at any time."

Morrison, who was contacted after the meeting, said the nexus of the plant idea was born out of a meeting in which he convened with officials in March 2021 to discuss renegotiation the rates.

"We inherited some of the highest rates in the area, so we were trying to renegotiate that," Morrison said

He said the current 90% proposition is unfair, stating some months the district pays $250,000 for the sewage to be treated. He said while the SD-4 output is only 18% of what the Ashland plant treats, it accounts for 33% of the revenue for the city.

Graese said the district has never demonstrated how the rates were unfair and stated the current rate is $5.27 per 1,000 gallons for residential, without being charged the $3.50 surcharge for Combined Sewer Overflow that city customers pay.

However, the district charges $14 to customers, a $9 markup. Morrison said that's necessary to cover the costs of maintaining the sewer system.

"We have an office to maintain, crews to pay, pipes to buy, we can't just charge only the treatment costs the city is charging," Morrison said. "That's not how that works."

Morrison said during the March 2021, Graese told him "if you want to build a plant, knock yourself out." Graese confirmed he said something to that effect. From there, Morrison said the district looked into the feasibility of the plant, while trying to negotiate with the city.

He said in the fall of 2022, a series of meetings between the district and the city led to SD-4 sending over an "ideal situation" of what they would like to see renegotiated. Around this time, SD-4 bought the 17 acres off Roberts Drive for more than $400,000.

Graese said that "ideal situation" was a list of eight points to negotiate — Graese said the city could negotiate five of those points, but three sticking points were "no-go's." Those included a request for the SD-4 to not be bound by state or federal regulations and a rate decrease.

The negotiations stalled and, by the beginning of the year, Morrison said it became clear the city wasn't negotiating. By this point, the Division of Water was asking for a public hearing in order to move forward SD-4's application.

After scheduling, then delaying the hearing for further negotiations, Morrison said SD-4 received word that the city couldn't adjust the rate.

"So we proceeded forward," he said. "We've tried to go forward here and negotiate, but the city hasn't met us in the middle. It's been one-sided."

Graese said the arguments SD-4 has made so far "don't make sense."

"We feel like we've been willing to work with SD-4, but they haven't asked for anything that was legally supportable," Graese said. "Their arguments don't make sense."

Alongside the plant proposal, the district is also set to expand its footprint to the Lawrence County line through southern Boyd and over to EastPark, doubling its geographic footprint and adding another estimated 2,600 customers onto the system.

Howard said SD-4 was also concerned about the capacity of the Ashland plant in handling economic growth, possibly slowing growth in the county. Hall said that was poppycock, stating the current plant (which is due for an overhaul to comply with an EPA order) only uses 43% of its capacity on average.

"We can take on the entire system — that's Ashland and SD-4 — and still have room for 13% more capacity," Hall said during public comment.

Graese said the move toward a separate plant was also in contradiction to Kentucky Administrative Regulations that state that a new wastewater plant can't be built unless a district can demonstrate an existing plant is unable to serve them.

"SD-4 cannot demonstrate that the proposed wastewater treatment plant cannot be served by a regional facility," Graese said. "In fact, SD-4 is currently being served by a regional facility."

Morrison said so far, the Division of Water hasn't thrown a roadblock up about the plant.

"This hearing was approved by the Division of Water and we're moving forward with this fact-finding mission," he said. "Government is funny, because they could change their mind tomorrow. But so far, they've let us proceed."

Graese said that shift toward regionalization — which began in the 1990 — can only lead to higher costs, stating smaller systems are "costed out" due to EPA regulations.

Morrison said the current proposed cost savings of a new plant could become higher as the city of Ashland raises sewer rates. He said the current cost estimate showing a $200,000 savings for SD-4 shows the concern about costing out isn't true.

The city officials also brought up environmental concerns — with the current Ashland plant, wastewater is discharged into the Ohio River, which Hall said can take more of a hit than the Little Hood Creek, the proposed discharge water for the proposed plant.

"It's a more sensitive stream," Hall said.

What now?

Howard said the project, at a minimum, is eight months out from permitting. He said once the minutes of Friday's meeting are submitted to the Division of Water, there will be 180 days before a special report is generated called a SPEAR report.

Once that report is generated, there will be another 60-day comment period on said report. Then, and only then, could permitting even come into the equation.

Morrison said the presentation of the plan doesn't mean anything is set in stone — he said it's still in an exploratory phase.

"I don't know if it's feasible or not, but that's why we're looking into it," he said. That's the point of this exercise — those numbers aren't refined. That's what's great about this — we're just looking at our options. It's not a declaration of intent."

Graese said in addition to the comments read into the record at Friday's meeting, the city will be finalizing written comments to send to the Division of Water regarding the plan.

For the foreseeable future, the waste will continue rolling downhill to the Ashland Waster Water Treatment Plant.

(606) 326-2653 — henry@dailyindependent.com