Justin Burnett / The Record The Freeland Water and Sewer District called a halt to design work on the phase 1A sewer project this week, citing soaring costs to ratepayers.

Freeland sewer work suspended; draft study reveals unacceptable rates

After spending more than three years and about $1.6 million to bring sewers to downtown Freeland, decision makers announced this week the project is presently too expensive for ratepayers and ordered an immediate halt to all design work.

Freeland Water and Sewer District commissioners announced the decision Wednesday following a meeting last week with its consulting firm, Redmond-based FCS Group. The company was hired to perform a rate study, and the preliminary results painted a grim financial picture for ratepayers. Under the most optimistic scenario, the study suggested a $6,700 initial hook-up fee for existing customers and base monthly charges of about $150 for each unit of water used, classified by the district as equivalent residential units or ERU.

“Prompted by the preliminary results of a rate study, the Freeland Water and Sewer District commissioners have paused project work at the 90 percent design stage,” said Commissioner Lou Malzone, president of the board in an email to county and state lawmakers. “The rate study assumptions are optimistic, but costs are at the high (if not highest) range of affordability.”

Of the 68 properties named in the study that are within the project boundaries, the average number of ERUs during winter range from zero to more than 18 at Payless Foods. The second highest user on the list was China City at 16 ERUs.

It’s unclear how those customers feel about the draft rates; Tom Brown, store director for Payless, declined The Record’s request for comment, and a message left Thursday afternoon with Jack Ng, owner of China City, was not returned by press time Friday.

The study also included ERU usage in the Main Street Sewer District, which is being considered for a potential merger with the Freeland district. The number of average montly winter ERUs in that system topped 42.

District commissioners were rocked last month by news that the $10.2 million project cost would soar by an additional $1 million. It’s a hefty add-on to what’s already a very tight and grant-assumptive budget. The unexpected overrun is tied to the district’s plans to use “Vadose Zone” wells to drain treated effluent. A space saving alternative from traditional ponds, it was discovered that they might only last a decade, much shorter than initially believed, and that replacing them would cost tens of thousands of dollars.

Later investigations suggest an even shorter lifespan, as short as five years, according to Malzone.

Also, the district’s engineering firm, Arlington-based Gray &Osborne Inc., said about $800,000 in additional funding would be needed for controls and modifications to the treatment plant to make the wells work. The board may need to fund a $200,000 study as well, that would examine the performance of the wells and drainage rates.

That $1 million expense is built into the current rate study estimates.

Gordon Wilson, a senior project manager for FCS Group, stressed that the study results were preliminary, but also said he doesn’t expect much change. The district commissioners have asked Gray &Osborne Inc. to look at ways to reduce the unexpected costs, but it would need to go down a lot to make a difference.

“These are preliminary numbers, but I don’t think they will change significantly as long as we’re making the same assumptions about the amount of grant funding,” Wilson said.

The project hinges on $3 million in state funding that is not yet secured. The extra $1 million is an un-budgeted overrun that, under the current funding model, would be left to ratepayers to pick up — it’s the primary driver in the inflated monthly rates.

Wilson said he couldn’t supply standard industry averages, but that he’s worked on enough rate studies to say that monthly bills usually don’t exceed $100. Anytime they do, he recommends ways to lower the cost, he said.

As for the initial connection fee of $6,700, that’s more standard for new development but still tough for existing customers.

“The overall message of this for the board… is that $3 million really isn’t enough,” Wilson said.

In an interview Thursday, Sen. Barbara Bailey, R-Oak Harbor, said she couldn’t say whether the state could pick up the extra cost or even whether the district’s existing ask will go through.

“I can’t even begin to answer a question like that, because there are so many moving parts at the moment,” she said.

She said the sewer district’s success at the state level may be based on how thoroughly it’s sought out other revenue sources, from local to federal pots. It will help if the commissioners can demonstrate that they have exhausted all other possibilities, she said. Bailey added that she’s communicated this to district leaders before.

“I haven’t heard from the sewer district yet about what success they’ve had with that, if any,” Bailey said.

Malzone said it’s not that simple. There aren’t a lot of “straight grant programs,” he said, that most require some level of matching funds. This project is on a shoestring budget, and the district simply doesn’t have the money.

He is looking into local funding sources, however, specifically the Island County Rural Economic Development Fund. It received $2.7 million from the pot earlier this year, and the district was considering asking for another $100,000 per year for 16 years. Bumping that up to $162,000 per year would cover the extra $1 million, Malzone said.

Island County Commissioner Helen Price Johnson said she would likely support a request for additional funds from the rural economic development fund.

“I think it’s the number one capital improvement project in my district… I would advocate strongly for it,” she said.

She couldn’t say, however, what kind of support the ask might get from the rest of the board; in past discussions, concerns were voiced about such a large portion of the grant pot going to one project. Price Johnson said it may be that the budget gap is filled by a variety of sources, including monies from the federal government. There’s been much talk recently, she note, for vast infrastructure investments throughout the country, referring to the voiced hopes of President-elect Donald Trump. Perhaps Freeland could be one of the beneficiaries, she said.

“Who knows?” Price Johnson said. “This is certainly shovel ready.”

In the meantime, the sewer district will hold a meeting at 2 p.m. Tuesday, Jan. 3 at the district’s headquarters in Freeland to “discuss the financial assumptions and the technical challenges of the sewer project.” County and state officials may be in attendance.

Malzone said he hopes the meeting will provide some light on options, but made it clear that the commissioners can’t justify additional design work until they have answers.

“We’re not spending any more money until we know this is affordable and that we can move forward,” Malzone said.

Justin Burnett/The Record Freeland Water and Sewer District Commissioner Lou Malzone speaks during a presentation last week of a draft rate study. The results showed the average water unit charge of about $150 per month.

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