LETTERS / Uninformed Council Commits Town to Boone-Doggle

Published Wednesday, August 24, 2016 at 11:57 am

Dear Editor,

The Boone Town Council in a vote of 4 to 1, with Loretta Clawson the lone dissenting voice, approved the bids, negotiations, an additional $12 million revenue bond and use of $3.7 million of existing water/capital reserve fund to pay for Phase 1 of the Boone/USDA Raw Water Intake.

WK Dickson told the USDA and Boone that Phase 1 of the project would cost $24,551,095 on September 9, 2009.

The voters approved a bond of $25 million.  The USDA committed to a $20 million loan for a 40 year term and a $1.8 million grant to fund Phase 1.  Boone was to pay the remaining out of the capital reserve fund.  Boone has been paying for the entire project out of its general fund anticipating that they would recoup those funds from the water-sewer fund.

On December 7, 2015, WK Dickson gave the USDA and Boone a new cost update for Phase 1, $30,093,670.  Last night, 8 months later, John Ward, Boone Town Manager, told the Council that the cost of Phase 1 was going to be $42 million.  Ward told the Council they could take 50% of their existing water-sewer fund, $3.7 million and apply for a revenue bond of $12 million from the USDA to pay for the project.

The funding summarized thus far is $37.5 million of the $42 million.  This means that the other $4.5 million already spent by Boone will not be recouped.

Ward told the Council that the loan on the wastewater treatment plant was going to be paid off soon and the payment being made for that loan could be used in the future to pay toward the new debt payment.  Sounds attractive on the surface.  But, it is what Ward did not tell the Council that is concerning.  As the town manager, Ward is obligated to give the Council all of the information needed to make an informed decision.

First, Ward did not tell the Council what the construction schedule or current projected costs of Phase 2 were.  Ward hopes we have forgotten that Boone is incurring this enormous debt  because Dickson claimed they needed a water resource with an additional 4 MGD to meet a future need of 7MGD and that the only resource available, out of 21 options, was 12 miles outside of Boone.   Phase 1 only provides an additional 1.5 MGD (4.5 out of the 7 MGD projected need).  If Ward knows Boone has no intention of going through with Phase 2, then Boone has gone through an elaborate scheme to deceive the US Senate, US Congress, USDA, State legislature, NCDENR, Local Government Commission. Watauga County, judges and citizens to grab a water resource.

On September 9, 2009, Dickson told the USDA and Boone that Phase 2 would cost $21,448,875.  Considering Dickson’s prior history, Boone could be looking at another $40 million to finalize the water intake project.  The questions that Ward should have answered:  Is Boone going to go through with Phase 2? If so, what is the timeframe and how will it be funded? If not, why didn’t Boone reconsider a closer and far less costly option to achieve the same results, 1.5 MGD additional water intake.

To justify the New River option 12 miles outside of Boone, the USDA required Dickson to include maintenance and operational costs of such option.  Ward, however, did not consider the future maintenance and operational costs that would need to drawn from the water/sewer fund.  Dickson’s figures for the New River option referenced above included the reoccurring project maintenance and operating costs for a period of 20.  These figures are not representative of costs for the next 20 years from today and need to be revised.  But, what are these costs? Will increased sales be enough to cover these costs? Ward allocated revenue from increased sales to pay the debt only.

Dickson computed 20 years of normal maintenance costs which is an indicator that capital improvements such as replacement will begin after 20 years.  What is the life-expectancy of the infiltration gallery being built in the riverbed, the new pump station, the new booster pump station, the waterlines, and the access road?  Ward has failed to develop and/or disclose a long-term capital improvement plan for Phase 1.  The same may be said for Phase 2.

Phase 1 of the project is going to increase the treatment capacity of the existing intake on the New River at the Greenway Trail in Boone.  This portion of the project includes repairs to an existing leaking clearwell tank.  Ward failed, although he made mention of renovation plans, what the short-term capital improvement plan was for the existing aged intake and water treatment facility, timeframe and costs.  What are these costs?  What is the timeframe?  Is there money to pay for this in the remaining water/sewer capital reserve?  If not, where is the funding for these costs to come from?

Ward pointed out that the existing wastewater treatment facility loan was being paid off.  Instead of shifting this expense to the capital reserve fund for future renovation, expansion or replacement of the wastewater treatment plant, he shifted the funds to pay debt on the Phase 1 of the new intake.  He has failed to develop and/or disclose a short-term capital improvements plan for the wastewater treatment plant.  What are these costs ? How will these costs be funded?

Ward had Miller make another failed projection of water needs.  Again Ward hoped no one was paying attention that he was projecting needs that could not be met by Phase 1 and that the need was greater than the need Miller had projected on the official water supply plans submitted to NCDENR earlier this year.   Council member Clawson shot back with current figures.  She realizes that she has been deceived by the engineers and is not going to be deceived by Ward.  Miller presented an immediate need of 3.7 MGD.  However, he told NCDENR less than 7 months ago that the water need for 2020 would be 2.048 MGD.

At no time did Ward have Miller address the capacity of the wastewater treatment plant.  According to the water supply plan submitted to NCDENR earlier this year, the existing wastewater treatment plant has the capacity to treat 4.820 MGD of sewage.  Miller’s plan showed Boone reaching treatment of 5.020 MGD of sewage in 2015.   They have gone over the sewage treatment capacity.  The law requires that when they reach 80% capacity that they start planning and when they reach 90% capacity that the new facility be under construction.   The law provides that NCDENR may issue a moratorium on new sewer hookups.  Boone has a wastewater treatment capacity problem that needs to be resolved before building a larger intake.  We recently contacted NCDENR to discuss Boone’s historical water supply reports and NCDENR was surprised that Boone did not have any plans to expand their wastewater treatment plant.  We understand that the 2015 report has been referred to the wastewater division for review.

Please note that ASU has its own water supply; but, Boone treats ASU sewage.  What if ASU’s water intake increases and pushes more sewage to Boone to treat?  ASU has the capacity to take in 2 MGD of water and is taking in only .245 MGD.  How many well users are using Boone’s sewage treatment plant?  Ward has failed to develop a short-term capital plan for the wastewater treatment plant or inform the Council of the immediate wastewater treatment problem.

In summary, Ward has failed to give the Council the information they need to make an informed decision.  Ward has not planned for increased maintenance or operational costs of the new intake, performed short-term and/or long-term planning for capital improvements to the existing water/sewage system, the long-term plan for capital improvements for the new intake system or for the implementation of Phase 2.  His focus as a manager on funding of Phase 1 of the new intake, absent of all other water/sewer planning and costs, is grossly negligent.  This style of management will put Boone citizens in danger of onerous water rates, burdensome tax increases, at the will of developers who want to build “to-the sidewalk” high rise high density multifamily structures so as to increase water/sewer customers, under a moratorium on sewer hookups  which would completely stop development and  in danger of a fire-sale of assets.

The only Council member who raised the issue of maintenance costs and future capital improvements was Loretta Clawson.  She has learned from her tenure as mayor of Boone that Boone cannot put all of its eggs in one basket.  It was obvious Ward attempted to use Miller in a failed attempt to discredit Clawson.   Clawson said she could not fathom Boone taking on a project of this magnitude, $42 million, and voted against going forward while Mason and her fold blindly voted in favor of the USDA, Dickson and Ward recommendation.

Ward said the $20 million USDA loan is a general obligation bond.  A general obligation bond is a municipal bond secured by Boone’s pledge to use legally available resources, including tax revenues, to repay the bond holders.  Ward said the additional $12 million USDA loan was a revenue bond.  A revenue bond is a municipal bond that finances income-producing projects and is secured by a specified revenue source.  So, this loan is being made to the income-producing fund, Boone’s water/sewer fund.  The water/sewer fund is a separate fund with its own income and expenditures.  Please note, the Council can vote to move funds between the town’s general fund and water/sewer enterprise fund when the need arises.

The USDA required Boone to show how the water rates would repay the $20 million general obligation bond.  But, Boone pledges tax revenues as well for the $20 million general obligation bond.  And, the tax payers approved that pledge when they voted in favor of the $25 million voter referendum years ago.  With Ward not including the costs of future maintenance and operational costs; and the short-term and long-term capital improvement plans in his presentation to the Council, he is able to deceive the Council that they will not need to increase water rates or taxes to fund the construction of Phase 1 of the new water intake project.  But, he doesn’t tell the Council that they will not have to increase taxes or water rates to pay for the enormous costs he left out of his presentation.  Is it poor management skills, self- preservation, short-timer attitude or just what that explains Ward’s failure.

Finally, a 5% contingency is a minimum requirement.  Consider Boone’s 7-page letter to Dickson in 2013 accusing Dickson of poor performance and blaming Dickson for cost overruns.  Consider the gross underestimation of the project cost as recent as 12/7/2015, And, consider excessive overestimation of the water need that left Boone with only one option out of 21 that Dickson studied and provided to Boone.  That option, the most costly option, is 12 miles outside of Boone requiring 63,000 feet of waterline to transmit the water to Boone, miles of right-way negotiations, construction in the median along 421 and the other right-of-ways, boring under the riverbeds and stream beds on the way back to Boone, dispute with Ashe county, lawsuits and future maintenance cost increases of 63,000 feet of waterline.  If these considerations are any indication of what is to be encountered in the actual implementation of WK Dickson’s design, then Boone should consider at least a 10% contingency.

Deborah Greene

New River Advocates, Inc.

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