Soaring costs for sewer plant mean more rate hikes

·4 min read

Aug. 5—Rising construction costs for the rebuild of Waynesville's antiquated sewer plant coupled with bad luck on a state grant mean even more sewer rate hikes are in store for some 10,000 homes and businesses in Haywood County.

The town will have to borrow $10 million more to pull off the rebuild than it originally planned. Additional borrowing means monthly sewer bills will go up, putting pressure on the public, to absorb the annual loan payments.

The sewer plant serves 10,000 customers — not only in Waynesville proper, but from Clyde to Lake Junaluska to Iron Duff, which send their sewage to Waynesville's plant.

The town has been incrementally raising sewer rates for the past five years in anticipation of the rebuild. Rates increased 10% this year, 10% in 2021, 10% in 2020, 10% in 2019 and 5% in 2018.

The town hoped to level off after one more rate hike.

"We've tried all along to keep the average sewer bill for a family of four to below $50," Town Manager Rob Hites said.

However, that now won't be possible given the bigger loan needed to cover the funding shortfall.

How we got here

The first blow to the sewer plant's price tag came in December, when bids to rebuild the 1960s-era plant came back far more than expected — $9 million more to be exact.

The town went back to the drawing board with engineers and the contractor to shave costs. The redesign netted more than $4 million in savings.

Those savings, coupled with the prospect of a state grant, were cause for optimism.

Hedging its bets should the grant fall through, the town pursued a plan B to increase its original loan amount by $5 million — from $19.5 million to $24.5 million. That was the maximum it could get through the state's competitive, no-interest loan fund.

But then came another blow. During the intervening months, the cost of materials went up even more, and $1.5 million of the hard-fought savings gleaned from the redesign evaporated.

"It was not unexpected," Hites said. "The increase in concrete and steel has continued to increase dramatically, so we didn't expect the contractor to hold its original quote."

Meanwhile, the town racked up another $250,000 in engineering costs due to the redesign and preparing the state grant application.

And, given the additional borrowing, closing costs on the loan went up by another $100,000.

But that's not all. The narrow road leading to the sewer plant isn't sufficient to bring in materials and equipment, so a temporary access road must be constructed — adding another $150,000. Plus, there was $1.2 million in contingency that had to be included.

The town also decided to tack $1.8 million onto the construction loan to reimburse itself for engineering fees spent to date. The town had been paying for engineering services over the past three years with cash from sewer coffers.

But those coffers needed replenishing to pay for sewer line repairs mandated by the state to address inflow and infiltration issues, Hites explained.

All tolled, the total cost of the plant rebuild now comes to $29.5 million, but the existing state loan is only for $24.5 million.

"We lump all the additional costs together and realize we are $5 million short for the total project," Hites said.

Plugging the gap

The town hoped a state grant would plug the shortfall. But the grant didn't come through (see article in the Aug. 3 paper).

The town is now crafting plans to borrow another $5 million through the private lending market.

"We will apply for a grant again in the fall and hope for the best," said Misty Hagood, town finance officer. "If the grant doesn't come through, our plan is to go out to the private market and do a loan for the remaining $5 million."

Payments for the additional $5 million added to the state loan and the additional $5 million private loan would be spread across monthly sewer bills.

The town will hold off on the additional $5 million private loan, however, pending the next round of grant applications and lobbying efforts next winter to secure a line-item state budget earmark.

"We aren't going to the market right now to borrow $5 million because we won't need to draw that money down until the very end of the construction contract," Hites said. "That will give us the chance to go through the legislature to see if we can get any help."

The town is expecting to break ground by December, with an estimated completion date of summer 2024.