Costs

Costs associated with the construction and annual operation of a wastewater system are complicated and subject to a number of factors and assumptions.  Information presented on this page is based on best available information to date.

Once the municipal wastewater system is constructed, costs will include yearly fixed and variable costs, as well as one-time costs associated with connecting to the system.  Fixed costs are those that must be paid, even if no wastewater is generated, such as the debt service on loans and costs associated with maintaining the system.  This cost is reflected in the connected user base fee.  Variable costs reflect the amount of wastewater actually generated, which is measured by a meter measuring water entering the building.  This is called the use fee.  One-time costs include the cost to extend the service line from the right-of-way to the building as well as the connnection fee, which, among other things, covers the cost of the meter and fittings.  These costs and more are explained in detail below.

Construction Costs

The wastewater project is proposed to be constructed in two phases: Phase 1 is projected to cost $5,620,000 and provide a system capacity of 18,342 gallons per day (gdp) and have the ability to serve approximately 30-50% of the existing properties in Irasville (Table 1a).  Costs include the collection system, pump stations, force mains, and leach field at the Munn site.  An important goal of Phase 1 is to get the basic infrastructure in the ground within the service area prior to the upcoming sidewalk and paving projects. It also reflects the constraints of current funding options to offset the initial costs of the system.

Table 1a. Summary of Initial Costs - Phase 1

Initial Costs
Construction costs $3.6 M
Construction contingency (10%) $0.4 M
Other costs (engineering, legal, admin., easements, etc.) $1.6 M
Projected Initial Costs $5.6 M
Off-setting Revenues
Fed. State & Tribal Assist. Grant (STAG) ($2.5 M)
Vermont Dry Weather Flow (DWF) Grant - not secured (Town is on priority list) ($1.9 M)
Total off-setting revenue ($4.4 M)
Projected local share of initial costs
expected to be paid back with a municipal bond note from the VT Municipal Bond Bank, at 4.5% over 30 years.
$1.2 M

Phase 2 is projected to cost $6,490,000 and would increase the system's capacity by 5 times to 91,710 gpd.  Construction costs for Phase 2 are primarily related to construction of a tertiary treatment plant (Table 2b).  An inflation factor is included in the projected cost assuming Phase 2 does not commence until 2012.

Table 1b. Summary of Initial Costs - Phase 2

Initial Costs
Construction costs $4.0 M
Construction contingency (10%) $0.4 M
Cost increase, assumes 2012 construction $0.9 M
Other costs (engineering, legal, admin., easements, etc.) $1.2 M
Total Initial Costs $6.5 M
Off-setting Revenues
Assumes Obtaining Grants and/or Offsets of 50% of project costs, not identified or secured ($3.25 M)
Total off-setting revenue ($3.25 M)
Projected local share of initial costs
expected to be paid back with a loan from the Clean Water State Revolving Loan Fund, at 2% over 20 years.
$3.25 M

Annual Costs

If the bond passes and construction begins in 2009, annual costs will include the fixed costs associated with debt service, operation and maintenance costs, and the variable costs depending on individual use.  O&M costs, which includes labor, administration, power, and maintenance, is estimated at $70,000 per year for Phase 1 and $150,000 with Phase 2.  Labor may be in the form of a part-time employee or a contractor.  A town-wide assessment of 1.5 cents on the tax rate is proposed to help pay down the debt service.  The balance of costs will be distributed among connected users though new connection fees and annual base and use fees.  Properties in the service area not connected to the system are proposed to be charged an annual monitored use fee.

A summary of Phase 1 annual costs is shown in Table 2a.  Table 2b presents the annual cost and revenues associated with Phase 2.  O&M costs will increase due to the operational costs related to the wastewater treatment facility, and it is expected that the Monitored User Program costs will decrease as capacity becomes available and more existing users decided to connect to the Town system.

Table 3a illustrates one-time and annual cost for a typical household that connects to the wastewater system in Phase 1, and Figure 2 illustrates the projected user cost as more users are allowed to connect to the system.  Table 3b illustrates the increases in annual cost for a typical household that is connected to the wastewater system in the first years after Phase 2 is constructed. The increase is almost entirely due to the fixed cost of debt service for the treatment plant construction, and not until a wider user base is provided through new connections will the user fees return to reasonable levels. The lack of grant funding available and financial burden of the projected Phase 2 costs are the primary reasons the project is being phased.  The Town will need to identify and secure grant funding and explore other revenue sources, such as a Tax Increment Financing (TIF).

Important note:  If the bond vote fails and the project is not constructed, the Town will still need to pay back the 15-year no-interest $768,500 loan for planning and engineering.  If certain criteria are met, the STAG monies may be used to pay up to 55% ($422,675) of those costs, leaving $345,825 to be paid back over 15 years, or an annual payment of $23,055, which would equal $0.007 on the municipal tax rate.  For a property assessed at $200,000, this would amount to $14 per year for 15 years.

Table 2a. Summary of Annual Costs - Phase 1

Annual Costs
Debt service (30-yr bond) $72,000
Operation & Maintenance (O&M) $58,000
Contribution to Reserve Fund $10,000
Costs associated with monitored users $40,000
Total Annual Costs $180,000
Annual Revenues
Connection Fees (assumes 2 per year) ($10,000)
Town-wide tax assessment (1.5 cents) ($52,500)
Monitored user fees ($150 per ERU) ($40,000)
Connected user - base fee ($19,500)
Connected user - use fee ($58,000)
Total annual revenue ($180,000)

Table 2b. Summary of Annual Costs - Phase 2

Annual Costs
Debt service (20-yr Clean Water SRF loan) $200,000
Debt service for Phase 1 $72,000
Operation & Maintenance (O&M) $145,000
Contribution to Reserve Fund $50,000
Costs for Monitored User Program $30,000
Total Annual Costs $497,000
Annual Revenues
Town-wide tax assessment (1.5 cents) ($52,500)
Monitored user fees ($150 per ERU) ($30,000)
Connected user - base fee ($219,500)
Connected user - use fee ($145,000)
Total annual revenue ($497,000)

Annual Revenues

Revenues to pay the annual debt service costs are proposed to come from two sources: (1) a Town-wide assessment of 1.5 cents on the tax rate to help pay down the debt service and (2) a portion of the connected user fee (shown as the Base Fee on Table 2a and Table 2b).  Properties in the service area (including properties in Waitsfield Village) that do not connect to the system are proposed to be charged an annual monitored use fee.  The balance of costs will be distributed among connected users though new connection fees and annual base and metered charges.

Connected User Base Fee

A base fee will be charged to each connected user to pay for debt service and fixed operational costs.  The base fee will be charged as a multiple of the property's designated ERU value (i.e. a property with 2 ERUs will pay twice the amount as a property with 1 ERU).  A base allocation of wastewater flow will be included in this fee.  The more people that sign on to the system, the lower the fixed costs are for each connected user.  For example, in Phase 1, the connected user fee with 75 users on the system is projected to be $1,029 per ERU; if the number of connected users increases to 125, the connected user fee is projected to be $786 per ERU (Figure 2).

Because the proposed system is new the State requires conservative assumptions on wastewater usage. Consequently, the system's Phase 1 capacity of 18,000 will only allow 75 ERUs to connect.  After the system has operated for one year, the actual flows can be applied toward the system's 18,000 gpd capacity--which are expected to be lower than the State's "book value"--thus allowing additional connections to the system.

Metered Use Fee

The use fee will be based on water meter readings collected by the Town, either in conjunction with the water project or by a water meter installed as part of the wastewater project.  In order to cover the projected O&M costs, a use charge in the range of $20 per thousand gallons of water will be needed. To help encourage conservation, especially with the limited capacity on the wastewater system, a rate schedule may be set up where the charge for water increases for users with high water consumption.

Monitored User Costs

For properties in the service area that are not connected to the wastewater system, a monitoring arrangement will be set up by the Town so each property is inspected once per year, and if necessary the septic tank will be pumped by the Town.  For this arrangement, a fee of $150 per ERU per year is anticipated.  The program is intended to be self-sustaining and not provide another subsidized revenue source for the connected users. For properties in the service area that are not connected to the wastewater system, a monitoring arrangement will be set up by the Town so each property is inspected at least once per year, and if necessary the septic tank will be pumped by the Town. For this arrangement, a fee of $150 per ERU per year is anticipated.  For a property with an allocation of 5 ERUs, this would amount to $750.

Reserve Fund

A reserve fund is needed to provide a contingency for replacement of equipment and other incidental costs that are not budgeted in a given year.  A minimum fund balance (typically 10% of the annual debt service) is required as a condition of the long-term construction loan to ensure that annual debt service payments can be made.  The Reserve Funds will be established with a portion of the initial connection fees; future connection fees and accrued interest will provide additional revenue sources for the systems.  If needed, transfers from the Reserve Fund may also be used in the early years of the system to stabilize rates until more connections are added.

Table 3a. Phase 1 Example:
Single Family Home in Service Area, $200,000 Assessed Value

Annual Costs
Connected User Fee (per ERU) $260
Connected User Use Fee (based on water meter consumption) $769
Grand List Assessment $30
Total Annual Costs $1,059
One-Time Costs
New connection fee (per ERU) $5,000
Construction of service from ROW to structure (100 feet; estimated) $3,000
Total first year cost $9,059

Table 3b. Phase 2 Example:
Single Family Home in Service Area, $200,000 Assessed Value

Annual Costs
Connected User Fee (per ERU) $1,254
Connected User Use Fee (based on water meter consumption) $830
Grand List Assessment $30
Total Annual Costs $2,114

One-Time Costs

During the initial construction phase and each time a new customer connects to the system, two one-time costs must be included.

Connection Fee

A one-time connection fee of $5,000 per ERU will be charged for each new property to connect to the system (although for properties with a signed commitment letter received on or before January 31, 2008, that cost per ERU is $4,000), which is comparable to connection fees in other Vermont towns.  Included in this fee will be an allocation to a Reserve Fund.  A limited number of new connections to the system will likely be allowed after the system is operational for a year and actual metered use is known.  For a property with an allocation of 5 ERUs, the connection fee would be $20,000 after January 31, 2008.

Cost to Connect Service to Structure from Right-of-Way

Property owners will be responsible for the cost to extend the water service from the edge of the right-of-way to the building.  This cost will depend on the distance of the structure from the edge of the right-of-way, obstacles such as ledge or landscaping features, and who the property owner hires to do the job.  Typically, a cost of $30 per foot can be budgeted.  In some cases, internal plumbing changes to allow the wastewater piping to exit the front of the house may save costs. Properties that will not be able to connect to the system by gravity, will be responsible for providing a private pump station and force main to the right-of-way.

Costs shown are based on a typical 3-bedroom house and does not include the grand list assessment.

Funding Sources

The Town continues to actively pursue several potential sources of funding for the capital portion of the municipal wastewater project. 

Grants & Loans

State and Tribal Assistance Grant (STAG).  The Town successfully applied for three earmarks totaling $3 million from this federal program though the Vermont ANR and our Congressional delegation.  After administrative costs are subtracted, approximately $2.95 million is available to be applied toward 55% of either the water or wastewater projects.  If the bond is voted down and the project has obtained all its permits, this money can be used to reimburse the Town for up to 55% of the planning, design, and engineering costs incurred.

Vermont Dry Weather Flow (DWF) Grant.   Awards of 35% of eligible project costs may be made to municipalities for the planning and construction of facilities for abatement of dry-weather pollution. This grant normally requires the identification of sources of pollution to the surface waters of the State.  Although no specific pollution sources have been identified, the Town of Waitsfield received a legislative action identifying the Town's current situation as an "emergent condition" and eligible for this funding source.  Grants are awarded based on a project's ranking on a priority system compared to other projects.  This funding source has not yet been secured, but the Town of Waitsfield is on the priority list.  Approximately $1.9 million is anticipated for Phase 1 and $2.2 million for Phase 2.

Vermont Clean Water Revolving Loan Fund.  If the Town receives additional grant funding other than the DWF grant described above, then the Town will be eligible to receive a long-term loan through the Clean Water State Revolving Loan Fund (CWSRF) which offers a 20-year loan without interest, but with an administrative fee of up to 2%.

Vermont Municipal Bond Bank.  If the Town qualifies for the DWF grant, the long-term loan will probably be issued as a Municipal Note through the Vermont Municipal Bond Bank. Current rates are between 4% and 5% with typical terms of 20 years, however for water and sewer projects the terms can be extended to 30 years.

Other Sources of Funding

Connection Fees.  The connection fees are a cost, but they are also a revenue.  While it is prudent to establish a reserve fund to provide for fluctuations in cash flow, a portion of the connection fee can be applied toward the project's direct costs.

Tax Increment Financing.  Tax increment financing (TIF) allows the Town to "divert" new tax revenue from future developed properties within the district to be spent on infrastructure within the district. The Town is actively exploring the use of this financing tool to offset the debt service costs.  If approved by the state, approximately $2 million may be available during that 20-year period.

Town-wide grand list tax.  The Selectboard has proposed a town-wide assessment of 1.5 cents per $100 assessed value to raise $52,500 per year toward debt service.

Bond Vote

A bond vote scheduled for March 4 will ask voters whether they support two articles related to the wastewater project.  Article II relates to funding for Phase 1 and Article III relates to funding for Phase 2 (Article I relates to funding for the municipal water project).  Although a large proportion of the project is expected to be paid by user fees, grants, and low-interest loans, the Town is required to ask voters to support a bond for the full project.  From the funding agencies' perspective, it is a form of collateral.

Costs to Connected Users

The costs to users, both the on-going costs and the one-time connection costs, will depend on a number of variables, including the number of ERUs the property represents (connection fee and base rate) and the distance of the structure from the right-of-way (physical hook-up).  Table 3a illustrates one-time and annual cost for a typical household that connects to the wastewater system in Phase 1.  As shown in Figure 2, the higher the number of connected users, the lower the costs.

Costs to Non-Users in the Service Area

Property owners in the service area that are not connected to the municipal wastewater system will be expected to pay an annual monitored user fee.

Costs to Taxpayers

An assessment on every property in town will be imposed to offset a portion of the debt service on the project.  A decision was made to limit the cost to taxpayers to 1.5 cents on the tax rate, which, on a property assessed at $200,000 in 2007, is expected to amount to $30.  This approach requires that all other costs associated with the project above that must be distributed among the users.  

Contact

Town Administrator

VALERIE J. CAPELS

Waitsfield Town Office
9 Bridge Street
Waitsfield, VT 05673

Phone: (802) 496-2218
Fax: (802) 496-9284
E-mail: townadmin@madriver.com

Municipal Project Manager

HENRY ERICKSON

Erickson Consulting

Phone: (802) 496-4558
E-mail: mpm@madriver.com