Sewer plant payment highlights Orange Council retreat

Orange Town Council members met in a day-long retreat Friday, discussing everything from how to pay for the new wastewater treatment plant to a possible strategic long-term work plan.
The question of how best to pay for the new wastewater treatment plant is one that has been looming over council since the project began five years ago when the current wastewater treatment plant violated its permit. The violation was the result of rain water seeping into underground pipes, which has to be treated as sewage. The extra volume caused by the rain water made the plant treat more gallons per day than its permit allowed. Also, the Chesapeake Bay Act was enacted, aiming to keep the bay healthy, and the plant was unable to meet the requirements set forth by the act. So, the town made plans to construct a new, higher-capacity plant, one that can handle 3 million gallons of fluid per day, 1 million gallons more than the current plant.
To pay for the $24 million construction of the plant, the town applied for a grant to cover the cost of nutrient removal, which ultimately resulted in an $8 million grant towards the cost of the construction. To offset the remaining $16 million, the town took out a .05 percent interest loan with the Virginia Resource Authority, which according to town manager John Bailey, has to be paid back over 20 years.
According to Bailey, an interest-only payment of $75,000 is due June 2011 with the large annual payments of $871,000 beginning June 2012. Originally, the funds to repay the loan were expected to come from two sources, the wastewater availability fee and the rate fee. The availability fee, $16,400 per unit, is what someone pays when they are first hooking up to sewer. Had the projected growth occurred as expected, this fee alone would have paid the loan back. Bailey explained now it's likely the rate fee, what households pay per month for their sewer service, will have to increase in order to make the payments.
To do this, without burdening citizens financially, Bailey and director of finance Greg Woods outlined five different options. Option one is based on the existing debt structure of the loan, .05 percent at 19.5 years and almost doubles the sewer base rate in fiscal year 2012 to make payments. Option two includes refinancing the plant's loan. According to Woods, this will still require an increase in rates, but it would be less than the increase in option one. Option three would be to refinance the entire sewer fund, option four to refinance water and sewer fund debt and option five would be to refinance all town debt. Council members agreed that option two seemed like the best choice.
"This is an excellent start," council member Kent Higginbotham said.
"We need to start addressing it this year, not next year," Bailey cautioned.
During the retreat, council members also discussed strategic level concepts to work into a long-term plan. Topics included infrastructure, information technology, green technology, health, education, economic development and general administration. As part of the conversation, council discussed conducting a space needs assessment to determine if spaces owned by the town are being fully utilized.
"The [idea here] is to reset [the council's] foundation so we have a plan," Bailey said. "We can achieve [this] by involving citizens through an advisory committee structure."
Other items on the retreat agenda included developing an immediate work plan and budget calendar.
Council members will next meet Tuesday, Feb. 16 at 7 p.m. in the Town Community Room.