Why Did Cape Charles Build a New Sewer Plant?

New Town sewage treatment plant cost about $19 million, with $14 million paid by government grants. (Wave photo)

New Town sewage treatment plant cost about $19 million, with $14 million paid by government grants. (Wave photo)

By DORIE SOUTHERN
Cape Charles Wave

May 24, 2013

Pop quiz: Cape Charles built a new $19 million sewage treatment plant because:

A. The old plant was too small;
B. The old plant was polluting the Bay;
C. Government sewer grants were too good an offer to refuse;
D. Both A and B;
E. Both B and C;
F. None of the above.

(Answer appears at end of story)

In an effort to bring clarity to an otherwise murky subject, the Wave met recently with Town Manager Heather Arcos and Assistant Town Manager Bob Panek. The latter was the driving force behind the new sewer plant.

Panek informed Town Council last week that the new wastewater treatment plant is substantially complete, with the exception of plans to reuse a portion of the effluent currently flowing into the Bay.

The plant has been treating wastewater since April 2012, and has reduced nitrogen and phosphorous discharge into the Bay by 93 percent compared to the old plant, according to Panek.

Arcos and Panek claim that when all expenses have been paid, the project will have cost about $300,000 less than the budgeted $19.2 million.

But whether the Town came in under budget or over budget depends on the starting point.

The $19.2 million includes cost overruns and change orders amounting to $558,000. So even with the $300,000 savings, the final cost is $258,000 higher than originally budgeted.

But there can be no argument that the Town got a good deal on the project: The Water Quality Improvement Fund provided $8 million, and the Virginia Clean Water Revolving Loan Fund (funded by the Federal stimulus program) contributed another $6 million, free and clear.

The Town borrowed the remaining budgeted $5.2 million from the same Virginia Clean Water Revolving Loan Fund, but at not quite as good terms: this money has to be repaid, albeit at 0 percent interest.

CONTINUED FROM FIRST PAGE

That 0 percent interest loan will cost the Town $260,000 annually for 20 years.

There’s also an existing bond with annual debt service of $47,750.

Contrary to popular perception, the new sewage treatment plant has no greater capacity than the old plant.

The new plant originally was designed to handle anticipated increased wastewater from the new Bay Creek development.

Under the Town’s annexation agreement, Bay Creek developer Brown and Root agreed to help fund any increase in water and wastewater treatment capacity required by the development.

But by 2009 when construction of the new treatment plant began, not enough lots at Bay Creek had been built out to require any additional treatment capacity.

The Town therefore decided to cut the planned 500,000 gallon per day treatment capacity in half, to 250,000 gallons – the same capacity as the existing sewage plant.

According to Bob Panek, the current average flow is 160,000 gallons per day.

ANSWER: E

Signboard outside treatment plant shows a total cost of $18,575,200. Cost overruns and subsequent changes added another half million dollars which the Town must pay. (Wave photo)

Signboard outside treatment plant shows a total cost of $18,575,200. Cost overruns and subsequent changes added another half million dollars. (Wave photo)

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One Response to “Why Did Cape Charles Build a New Sewer Plant?”

  1. Bob Panek on May 28th, 2013 2:50 pm

    A few corrections are in order:

    1. The original project budget was $18.6 million, as shown on the sign in front of the new plant. However, the project budget was increased to $19.2 million when water reuse capability was added to the project scope. We didn’t incur the cost to change the sign, but this was approved by Council and has been consistently reported at Council meetings as the project progressed. The ability to reuse the treated water is important for future growth, as our discharge is limited to a finite number of pounds of nitrogen and phosphorous per year. The Virginia Department of Environmental Quality (DEQ) was very supportive of adding this capability and it was a contributing factor in raising our grant from the American Recovery and Reinvestment Act (ARRA, aka Federal Stimulus) from $4.5 million to $6.1 million. The project should come in about $300,000 below the revised budget after accounting for all contract change orders.

    2. The Water Quality Improvement Fund (WQIF) is not part of the stimulus program as reported in the above article. WQIF is a state program to provide grants to partially fund the cost of removing nutrients from discharges to the Chesapeake Bay. It is financed by Virginia bonds not Federal money. As consistently reported at Council meetings, the Federal ARRA money (stimulus) was provided through the Virginia Clean Water Revolving Loan Fund as a “principal forgiveness” loan.

    3. The answer is not “E”. The new plant was built for two reasons. First, nutrient discharge limits were imposed by state law as part of the effort to clean up the Bay. Second, the existing plant needed to be replaced. By the time the new plant came on line it had been in operation for 29 years, the approximate limit of service life for a steel tank “package plant”. The Town would have had to build a new plant whether government grants were available or not. The Town was indeed fortunate to be able to work cooperatively with the DEQ and the Virginia Resources Authority to secure both grants and a zero interest loan to fund the project.

    Mr. Panek’s comment #1 above states that “the project budget was increased to $19.2 million when water reuse capability was added to the project scope.” A reader might infer from that statement that the budget increase from $18.6 million to $19.2 million was due wholly to adding water reuse capability. For anyone interested in the nuts and bolts, here is a memo from Mr. Panek to Town Council summarizing the change orders adding $600,000 to the cost: http://capecharleswave.com/wordpress/wp-content/uploads/2013/05/Panek-memo.pdf. The memo cites a cost of $177,000 “to enable effluent reuse.” The Wave stands by its statement that the final cost of the sewer project was higher than originally budgeted. –EDITOR