NEWS

Federal relief funds offer an unexpected solution to costly local water projects

Federal and state relief funds offer solution to costly Oregon water projects

Connor Radnovich Adam Duvernay
Salem Statesman Journal

Smaller towns in the Willamette Valley often struggle to pay for critical improvements to drinking and sewer water infrastructure, hampered by a limited consumer base that makes it difficult to support projects through loans backed by utility rate increases.

Low-interest loans are the most common way to fund expensive infrastructure projects. While cities also can seek state and federal grants to reduce the cost to consumers, these are usually scarce and have caps that can be far below the total cost of a project.

This year, however, the influx of billions of dollars in federal coronavirus pandemic relief funds offered a unique opportunity. 

Some local communities have been able to use it to their advantage, utilizing their own allotment of federal relief funds for projects or getting funding from the state's share. Lawmakers this past session funded dozens of projects via the federal relief funds.

But not all of the region's essential water projects were tapped as beneficiaries. 

This has left some towns still struggling to replace systems that are nearing the end of life with no clear path that doesn't push costs onto consumers.

Oregon cities are collectively facing an estimated $23 billion in drinking and wastewater infrastructure improvements over the next two decades, according to a recent survey and analysis by the League of Oregon Cities and Portland State University. 

Failure to replace some of these systems is not an option — too little water can mean seasonal shortages, constraints on future construction, lost property value or the death of the town itself. 

Blue River upgrading sewage system

There is no sewage system to speak of in Blue River, and neither was there before the Holiday Farm Fire burned the town to the ground during the Labor Day fires in 2020.

A rural town in unincorporated Lane County, Blue River's residents used personal and often outdated septic systems on their own properties. Though Blue River residents knew a community wastewater site would solve the problem, the cost was out of reach.

“This is something we had been dreaming about and looking forward to, but there were many challenges associated with that. Some were just challenges that we never were going to be able to overcome," Blue River Water District Superintendent Al Artero said.

Artero said Blue River's history of development led to properties dividing into small lots over time, which made building septic systems to modern code difficult within the town. 

Very little remained of Blue River after the Holiday Farm Fire, which burned more than 400 homes in the McKenzie River Valley. Reconstruction was always going to be tough, but challenges to the area's waste and water systems survived the devastating wildfire.

“This was always going to be a hurdle for Blue River to even develop, but when it came to losing everything, to even be able to rebuild to meet the standards — the ecological and environmental standards — the town really wasn’t going to come back,” Artero said.

The 2021 state Legislature offered a helping hand with a $600 million package for statewide wildfire recovery efforts. The nearly $22 million in state funds devoted to rebuilding Blue River will finally solve the area's sewage issues. The funds going to projects in Blue River include:

  • $15.5 million for water and sewage infrastructure,
  • $1.8 million to rebuild the McKenzie Valley Wellness medical clinic,
  • $1.4 million to rebuild the Blue River Community Library,
  • $2.1 million to rebuild an Upper McKenzie Rural Fire Protection District station, and
  • $903,000 to build the McKenzie Fire & Rescue disaster relief logistics center.
By the summer of 2021 a few community members have returned to Blue River to build again.

"The sanitation system is the one piece the town of Blue River has needed for a very long time," Blue River Water District Board member Tony Casad said in August while Gov. Kate Brown toured the town. “We have people now that are trying to get their permits, but with the new land use regulations, they’re struggling to be able to fit their house and their septic tank and their septic system and their drain field on the property."

Casad said he was involved in a septic system survey in Blue River a decade ago. 

“We had one around here, the septic tank was a 1962 Volkswagen Beetle," Casad said.

The state funds will facilitate the construction of a sanitation system that will allow for the elimination of some drain fields and help raise property values there, Casad said.

The state money will provide the opportunity to fix Blue River's aging water system, too.

The Blue River Water District pumps about 3 million gallons of water, Casad said, but between 40% and 50% of it is lost through leaks and other problems.

“We have a water system that's 60-something-plus years old. It had a 50-year shelf life and has exceeded that somewhat, and we are showing some failings along the way. We have valves failing. We have some leaks," Casad said.

“We have 26 fire hydrants. We had them surveyed: 23 need major repairs and three need to be replaced completely.”

Blue River Water District President Joshua Cloke said the water district will take over operations of a local sanitary district once it is formed. He said funding the project was not feasible without the kind of financial help the wildfire recovery funds will provide.  

"Typically, it would have been done through a bond issue. There's private lending sources that will do it for communities today, but you've got to have investors that are willing to take that one and you have to be willing to set rate accordingly," Cloke said. "Unfortunately, there's just not a lot of population. Our water district was 130 or 140 structures of which we've got maybe 60 structures still getting water from us today."

ARPA funds infrastructure projects

Arthur Chaput, regional development officer with Business Oregon, said that while city councils often don't like raising water rates and residents don't like paying more, not increasing rates at all can result in painful spikes if a system breaks.

However, with the availability of American Rescue Plan Act funds and potentially more federal infrastructure aid on the horizon, Chaput said there could be a surge in the undertaking of critical projects that cities have been putting off.

“Most projects are planned expenses that are important and need to happen, but they don’t necessarily need to happen this month or this year,” Chaput said. 

“I think we’re going to see a lot of water projects happen over the next couple of years that were delayed or that cities didn’t necessarily want to spend the money on."

Scott Lazenby, local government projects manager in the Center for Public Service at Portland State University, said it can be difficult for city leaders to advocate spending money on preventative maintenance, particularly in smaller towns where the cost per resident is higher.

Sometimes the need for upgrades isn't clear to the public until there is a crisis. 

“People don’t like paying for water rate increases, but they sure don’t like losing water in the middle of a hot summer, either," Lazenby said.

Lazenby was the city manager of the town of Sandy in summer 1995 when the city's aging water filtration system reached its limit. People were using water faster than the system could treat it.

That event — along with a 20% rate increase to upgrade the city's sewer plant — pushed the city to set regular rate increases to pay for ongoing maintenance. It's a longer-term view that saves customers from unexpected and painful rate spikes needed to replace a system nearing failure.

"You try to squeeze as much life out of these systems as you can. You don’t want to replace things before you have to," Lazenby said. "But some time, you need to do it.”

'Not going to let the community die'

Willamina, a city of 2,250 people on the border of Polk and Yamhill counties, is facing the challenge of finding a way to replace its water system. The city's river water intake is going to be destroyed by a shifting gravel bar in the next two to three years.

“If that intake fails, we can’t provide water," city manager Kenna West said.

The cost of construction for moving the intake 150 feet downstream and adding water lines to the school for future expansion is approximately $6.2 million — a price that has doubled since the pandemic began because of increased labor costs and supply chain shortages, West said.

The last option they want to turn to is a low-interest loan that puts the responsibility of repayment on consumers through rate increases.

Smaller town residents already pay higher-than-average water rates compared to other Willamette Valley cities.

For example, the base water rate in Willamina for a 5/8 - 3/4 inch meter is $38.31; 15 miles up the road in comparably sized Amity, that rate is $51.77.

But in Salem — with a much larger population of about 175,000 — paying for the city's water needs can be stretched across many more ratepayers. The base water rate for a meter of that size in Salem is $11.72.

Currently, monthly water loss is between 24% and 36%, in part because old meters don't alert anyone when usage is abnormally high, which can be sign of a leak.

West said replacing them will save water — especially important in drought situations — and save residents money so they aren't paying for water they aren't using.

In Willamina, rates increase by 5% every January to pay for preventative maintenance, in the hopes systems will last longer. But that 5% comes nowhere close to paying for major infrastructure projects, and other funding options have proven difficult to locate, West said.

The city received an $800,000 Community Development Block Grant — a federal community improvement program — to pay for the project's design; it could return to ask for more, but there is a $2.5 million grant cap per project.

West said they reached out to Oregon's U.S. senators to see about getting $2 million in direct federal aid. 

They also looked into securing $750,000 in unspent federal coronavirus CARES Act funds and will commit about $250,000 in American Rescue Plan Act funds to the project, half of what the city received.

Much is still unsettled as the risk of intake failure looms. 

West described it as the city's most important project  — without a new intake, not only would the people be water-less, but their homes would become essentially worthless, devastating for a community where houses are the primary savings.

Residents can't afford to singlehandedly pay for the project — especially at double the cost the city initially projected — but they can't afford to wait, either.

“We can’t stop and wait for the supply chain to get back in order. We have to keep pushing through," West said. “We’re not going to let the community die."

If they do have to resort to finding a loan, West said they will have to bump back other important projects so as not to overwhelm consumers.

The city has a total of $20 million in highest priority water projects, she said.

However, the city's ARPA funds were able to fully fund one critical project. 

While the second chunk of the city's approximately $500,000 in ARPA funds will go toward the water intake project, the first will be used to replace aging water meters.

Water projects lined up in Amity

Drought was also a greater issue in Amity over the past six years as the city functioned with only half of its water reservoir tanks.

The city's largest tank failed nearly six years ago, and without it the city came close to issuing water restrictions during the summer months, city administrator Mike Thomas said.

But in June, the city completed a $2.1 million project — funded by a Community Development Block Grant — to fix the reservoir tanks and refurbish its two primary water treatment machines, effectively doubling the amount of water the city could hold in reserve for droughts and firefighting.

While Amity shares similar infrastructure payment handicaps with Willamina — being a town of about 2,000 people with already-high water rates and plenty of infrastructure needs — coincidence, happenstance and available funding has the city undertaking or having recently completed five water infrastructure projects, rare for a smaller Oregon city.

“For many small Oregon communities, raising water rates is often a difficult proposition," Thomas said. "That’s why a lot of the cities have to stagger these things, so the rate increases … can be done in a slow and steady progress that can be accepted and tolerated by the community.”

Construction on two of the city's biggest water infrastructure projects will begin construction in the spring, and funding is already intact. 

The first will move the city's water intake from its current position in South Yamhill River to a deeper and wider location in the river. 

The current intake is in a bend in the river, where now sediment can build on the protective screen, which reduces intake efficiency and requires frequent cleaning. Additionally, when river water levels are low, the intake is partially exposed above the waterline.

The city secured $7.5 million in grants and loans from the U.S. Department of Agriculture's Rural Development program to pay for the project. As part of this funding, Thomas said the USDA asked the city to raise its water rates to demonstrate it could pay back the loan.

Rates were raised the past two years, and a new rate will be set in January to ensure payment of the USDA's loan, Thomas said.

The second project involves the city moving a water transmission line currently hanging underneath the Salt Creek Bridge. The Oregon Department of Transportation determined the bridge needs significant repairs, so the pipe must be moved to allow for that construction, Thomas said.

After repairs, the pipe will be re-hung beneath the bridge.

Total cost for the project is $600,000, which is being funded through a grant from Business Oregon, the state's economic development agency.

Amity will also put $200,000 of its ARPA funds toward replacing water meters across the city like Willamina, but Amity received an additional $2 million in ARPA money from then-Rep. Mike Nearman, who represented House District 23 until he was expelled from the Legislature. 

During the 2021 legislative session, each representative was given $2 million in ARPA funds to distribute to whatever applicable recovery project in their district they deemed fit. 

Nearman's funds will be used to replace and refurbish major water lines in the city.

These projects can now be completed without needing to rely on any rate increases for Amity's residents, Thomas said.

"Big picture, ARPA funding allows Amity to undertake these expensive — for us — projects and complete them, without having to seek out funding and raise utility rates," he said. "We don’t have $200,000 (much less $1.2 million) in our coffers."

Over the past few years, Amity has repaired pipes and fixed leaks as part of prioritizing preventative maintenance, Thomas said. This has made the system more efficient: In July 2021, the city drew 1.6 million fewer gallons of water from the river than it had in July 2020.

This kind of maintenance can sustain the life of water systems, experts said, but paying for them through rate increases can be unpopular.

Contact reporter Adam Duvernay at aduvernay@registerguard.com. Follow on Twitter @DuvernayOR.

Contact reporter Connor Radnovich at cradnovich@statesmanjournal.com or 503-399-6864, or follow him on Twitter at @CDRadnovich.