The borough assembly on Tuesday approved $1.1 million for design and engineering of a new water treatment plant, though actual construction will depend on additional funding.
The project is a top priority for the borough.
The assembly authorized the design and engineering contract with Anchorage-based DOWL. About 10% of the cost will come from the borough’s water fund reserves, 35% from a loan from the borough’s general fund to the water utility at zero interest for 10 years, and 55% from Wrangell’s share of federal pandemic aid under the American Rescue Plan Act.
Construction of the new water treatment plant is estimated at $14 million, and most of that would be funded through federal grants and loans. The borough, however, has only about $10 million in federal aid available, leaving it short at least $4 million that it would need to raise or borrow.
Public Works Director Tom Wetor said the borough can get reimbursed from the federal funds for some or all of the design and engineering cost if the project goes to construction.
The big concern is if it doesn’t.
“Let’s say we get the design done, and the costs continue to escalate and we can’t make up the missing funding. Then we’re on the hook,” Wetor said. The project was estimated in 2017 at $9 million.
“(If) we spent a million to get the design done and we can’t make it, depending on who you ask, that would be a lot of money to blow to not actually build anything that could be much better spent,” Wetor said. “On the other hand, our water treatment plant needs some attention. If we do move forward with replacing the whole thing this step will need to be done anyway. At that point, it is money well spent to get us over the hurdle.”
Wetor estimated it could take DOWL six months to a year to complete the design and engineering work, which “gives us a little time to find a little bit more funding.”
Near the end of design completion, the public works department will begin discussions on equipment and contractors needed to build the plant.
Borough Manager Jeff Good said approving the design work is necessary as a good-faith move on the part of the borough assembly to shore up a grant extension request to the U.S. Department of Agriculture, which is one of the federal sources of funding for the project. Without an extension, that funding is due to expire.
Mayor Steve Prysunka said he is concerned about lending money from the general fund to an enterprise fund at no interest. As an enterprise fund, the water account is supposed to pay its own way through user fees.
“When you start pulling from the community chest and giving it over to the enterprise fund, that money can be lent, that’s fine, but it should come along with an interest rate as a part of that,” Prysunka said.
“(Finance Director) Mason (Villarma) said it’s not something that should happen all the time,” the mayor said. “It should be once in a blue moon. You can drain down your general fund really quickly.”
However, Prysunka continued, “I’m not opposed to this, and after a discussion with Jeff (Good) today, I have more insight on why this happened really quickly. We need to show a good faith effort to our lenders that we are moving forward.”
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