A city councilor makes the case for authorizing the city to issue revenue bonds to finance construction of a new water treatment plant

By Bob Kaplan

A long list of Ashland’s elected officials have concluded since 2012 that we need to replace our drinking water treatment plant, built below Reeder Reservoir in 1948. 

The plant provides about 80% of our drinking water, with the rest pumped from Medford via TAP (the Talent-Ashland-Phoenix intertie). Here’s a column I wrote last spring in Ashland.news about where we get our drinking water and why we can’t get it all from Medford. Three quick takeaways: (1) we don’t have rights to enough water from Lost Creek Lake (and we’re unlikely to get more); (2) TAP pipes can only carry about a third of our daily needs in summer; and (3) TAP connects to only part of the city.

Problem and solution

Tucked into a narrow canyon, our current drinking water plant is vulnerable to floods, landslides and wildfire, and there’s no space to treat harmful toxins that are more frequent as our summers get warmer and drier. It’s also more expensive to operate and maintain than a new plant with modern technology and easier access.

The city contracted expert engineers to analyze all the options for our drinking water treatment plant, and our own citizens advisory committee has spent many hours and public meetings to arrive at a unanimous conclusion. At every step, successive City Councils approved plans and directed staff to move forward.

Fortunately, there’s a good alternative site in the old gravel pit at the top of Granite Street. It’s out of the flood zone and has plenty of space for ozone pre-treatment to handle toxic algae. There’s also surprisingly good solar access in this south-facing location, making solar power and battery backup a feasible add-on to improve resilience.

We now have approved designs and a solid financial plan. HDR Engineering estimates the plant will cost about $62 million. Since major infrastructure projects can be uncertain, HDR provided a confidence interval of 15% on the high side and 10% on the low side — for a range of costs between $56 million and $71 million. An optional add-on of solar generation and battery backup would add between $4.4 million and $5.6 million. 

With construction costs going up all the time, we can’t afford to wait any longer. Fortunately, we don’t have to.

Financing plan

Last March, the City Council passed a resolution enabling staff to secure a long-term, low-interest loan for up to $75 million from the federal Environmental Protection Agency through a program designed specifically to support municipal water and wastewater projects. Over 100 utilities, including the Medford Water Commission, have taken advantage of the program since it was established in 2014 by the Obama administration through the Water Infrastructure Finance and Innovation Act (WIFIA).

Several features of the WIFIA program make it attractive:

• The program provides funds at the federal government’s cost, which means a lower interest rate and longer repayment period than we could get in the traditional municipal bond market. Stretching repayments over 35 years means lower annual payments and therefore less impact on our water rates than a shorter-term loan or bond.

• The EPA loan works like a line of credit. Unlike a bond or traditional loan, where interest payments are due on the entire amount from Day One, a WIFIA program loan charges interest only on what’s actually been disbursed. So total interest charges over the life of the loan are much less. Having the EPA loan in place allows us to go ahead and bid the project now to get ahead of ever-rising construction costs, but we don’t start paying interest until we begin using loan funds.

• The WIFIA program locks the interest rate at signing but allows for an adjustment if interest rates go down before we take our first draw. The loan reimburses payments we make to our contractor, so we’ll use our water fund to start construction and time the first reimbursement from the EPA loan to take advantage of a lower interest rate if rates come down.

• Although the EPA has authorized a loan of up to $75 million, we don’t have to use the full amount and we don’t pay interest on what we don’t use. That’s important because securing a large EPA loan allows us to sign a contract with a construction company and begin work. In the meantime, we’re applying for grants to fund as much of the project as possible, so we expect to borrow much less than $75 million. That also means less impact on water rates.

City staff recently briefed the council on three grant and forgivable loan programs that could cover a portion of the project’s cost. Staff have submitted applications, but it’ll be a year or two until those funds are available, and they won’t cover the full cost of the project. It makes sense to seal the deal with the EPA so we can get started now.

Water rates

The City Council reviews all rates and fees every spring, and the last time we raised water rates was 2019 — five years ago! I compared Ashland’s water rates to our neighboring cities in a second Ashland.news column last spring.

We know we’ll need to raise water rates soon because operational costs have gone up over the last five years, and we’ll need to repay whatever we borrow to build the new plant. 

The council rejected the consultant’s rate recommendation last December, and we asked for a new proposal that protects low-income households and incentivizes conservation by raising rates more on those who use a higher volume of water. That will be back on the council’s agenda soon.

Vote yes on Measure 15-234

We need a new drinking water treatment plant in a resilient location. After discussing it for over a decade, it’s time to act now. It’s the prudent and fiscally responsible thing to do. 

No more delay! Please vote “yes” on Measure 15-234 to affirm the council’s decision last March. 

Bob Kaplan is an Ashland city councilor. He is speaking for himself, not the City Council, in this Viewpoint.

Related Viewpoint: Why I oppose Measure 15-234