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This page contains a single entry from the blog posted on August 7, 2008 8:14 AM. The previous post in this blog was My sentiments exactly. The next post in this blog is Fifty years later. Many more can be found on the main index page or by looking through the archives.

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Thursday, August 7, 2008

Portland water bills may zoom upward

The City of Portland's debt load just gets heavier and heavier. Last week the city borrowed another $79.68 million against the drinking water system. The city's debt manager, Eric Johansen, reports:

The City's water revenue bonds sold last Tuesday, July 29th. Nine firms submitted bids at the competitive sale. Goldman Sachs bought the bonds at a true interest cost (TIC) of 4.570351%. Cover bid was from Prager Sealy & Co. at a TIC of 4.573072%.

Yields on the $79.68 million of tax-exempt first lien water system revenue bonds, maturing from 2009 through 2033, ranged from 2.14% to 4.90%.

The bonds are rated Aa1 by Moody's.

An interest rate of 4.9 percent on 25-year, double-tax-exempt bonds isn't anything to write home to Mom about. And there are lots more borrowing and a lot more interest payments to come. According to the bond sales pitch, the city is planning to borrow another $72 million for water system improvements next year, and $80 million more two years after that.

Last week's bond proceeds are set be used to help the city pay some of the $236 million of capital improvements that the water system is projected to need over the next five years. This does not include, however, the estimated $335 million of additional capital costs that will be incurred if the federal government stands firm in requiring the city to install filtering for the germs cryptosporidium and giardia, and to cover or disconnect its open reservoirs in town. The bond document explains:

Commissioner Randy Leonard has directed the Bureau to begin planning and budgeting to achieve compliance with the LT2 Rule [flitering rule] as written. This direction includes the planning and design of an ultraviolet treatment facility at the Bureau’s Headworks facility and a plan for replacing the open finished water storage at Mt. Tabor and Washington Parks with enclosed storage. In addition, Commissioner Leonard has directed the Bureau to pursue variances from the rule requirements with EPA. A variance could conceivably enable the Bureau to avoid the expenses associated with building an ultraviolet treatment facility or replacing its open reservoirs if the City can demonstrate to EPA that, due to the nature of the Bull Run source and the open reservoirs, neither action is necessary. Research, design and development of an effective data collection program is necessary for the City to submit variance proposals to the EPA, which makes it likely that an actual application for a variance will not occur until sometime in 2009. The FY 2008-09 budget includes $1.0 million to evaluate, select and develop the treatment approach to comply with the LT2 Rule and $650,000 to prepare for and request a variance to the rule. The City currently cannot predict whether it will be successful on the request for the variance.

Based on an initial screening estimate, up to $335 million in total capital expenditures over the next eight to ten years may be needed to comply with the LT2 Rule. The estimate includes 1) UV treatment capacity of up to 225 MGD and 2) construction of up to 90 MG of in-town covered finished water storage, including land acquisition, access ways, pipelines, chemical addition facilities, electrical subsystems and site restoration. When complete, the UV improvements will require an additional $3 million annually for operating expenses. The preliminary work approved in the FY 2008-09 budget will develop the next refinement of the estimates classified as "feasible concept level."

The resulting retail rate impact based on these LT2 cost estimates could be as high as 25 percent. If necessary, the LT2 cost to ratepayers could be phased in over many years, most likely during the eight to ten year construction period. The estimated rate impacts will be revised when the cost estimates are revised or refined.

Even without the costly measures that the feds are currently demanding, the projections for Portlanders' water bills are not so rosy:

(The footnotes are available on page 67 of this pdf file.)

The price of water is scheduled to increase by more than 10 percent a year indefinitely, and that's even if the city convinces the feds to back off and not require filtering and reservoir covering. If the feds won't budge, it's Katy bar the door. Watch for that $335 million grow to something much higher between now and the time construction ever starts.

In the meantime, an eco-roof for the library! Go by streetcar!

Comments (11)

Let's see..... a residential bill 7ccf per month equals about 5,250 gallons. Delivered 24-7 and of excellent quality. In 2012 for $26.08 a month, less than a penny a gallon. This is a bargain to me. For too long potable water has been taken for granted and its true value not reflected in price. And it still won't be with these projceted rate increases. Compare to other utility bill increases of late,and these are marginal at best.

"... and He divided the land from the waters" -- well, that's the problem, right there.

America's Looming Water Shortage - Water Conservation Blog, October 26, 2007.

Clearly much of the problem can be ... starting to have a more noticeable impact. ... the price of upgrading America's water pipes alone is given as $300 billion over 30 years.

So how much water do those cute little bubbling water fountains downtown use? Is the City borrowing money to psay that water bill?

less than a penny a gallon.

That's the city propaganda line. Thanks for repeating it here.

these are marginal at best.

10.3% growth every year for five years is not "marginal." And congratulations, you are the PITA of the day.

OK, 10.5%/yr increase so in 7 years our bill will double.

WRT to msheets, the increase is due to the sewer system and paying for its neglect over 20+ years. Besides the water coming into Bull Run is free and Bull Run has always existed along with its ditribution system - why the 10% increases then?

I emailed the Water Bureau a few years back to see if they were considering an enlightened approach for consumers: a tiered rate structure that rewarded rate payers who water conservation. The answer was no. I'd say the WB is failing the public if the same people keep showing up on Willy Week's annual water hog list. It's simple - water hogs need to pay big and water mizers need to pay small.

My comment as to 'marginal' was in relationship to the much greater increases in other utility bills.

Potable drinking water is not 'free' becasue it falls from the sky. Treatment, storage, and distribution costs are much the same as other endeavors (natural gas/electricity).

And the cost is a fact Jack. Easy to dimiss it as propaganda if it doesn't fit your rant.

Portland's water infrastructure is mostly very old, falling apart in many places, and in need of replacement. Water pipes put in the ground 100 years ago are all starting to fall apart at the same time. Repairs and replacements are expensive. Upgrading to withstand earthquakes (something engineers didn't consider 100 years ago) is also expensive. The increases in price are happening at a very inconvenient time, but I feel like this is money well-spent - unlike many other projects/initiatives taken on at City Hall. The EPA-forced treatment plant/water storage requirements will be money wasted, however. Not looking forward to paying for that.

Yes, the free lunch we have enjoyed on all infrastructure is ending (highways, bridges, sewer and water systems). This is not peculiar to Portland's water system. Its time to pay the bill.

The real discussion lays in our priorities as a nation and where our money goes. Billions to the military industrial complex, with little left for the real needs of the country.

And by the way, the water bureau includes citizens in its budgeting. Get involved if you do not think your money is being spent wisely. By any measure I have seen, from per unit cost to industry peer review, the bureau compares favorably with any water utility-public or private.

$18.00 for residential water? How do I hook up? Come on out to Yamhill county. We pay $70.00+ for the same service in Lafayette.

"The real discussion lays in our priorities as a nation and where our money goes."

Tell that to Mr Adams, from being Vera's hey-boy to now he has had almost 16 years to bring up the fact that fixing sewers and roads is not as interesteing as building streetcars and expensive condos.

So now after all of the neglect and failure to makke any allowance for maintenance infrastructure becomes an issue as it gets ready to fall apart.

This is why having a college drop-out with no financial background deciding how to spend $2.4B (CoP budget) might be an iffy propostition.


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