Water Bombshell In Berlin

by Kieron Kramer
As promised at the July meeting, Town Board Member Richard von Schilgen dropped a water bombshell at the Berlin Town Board’s regular meeting last Thursday, August 12. The bombshell was in the form of a lengthy letter about the deficiencies of Water District #2, which supplies water to the village of Berlin, from  Pa’s Country Car Wash on Route 22 in the north, down South Main Street to the intersection of Route 22 and South Main, branching up Plank Road one house past Morse Heating and up Green Hollow Road to Whitney Rathbun’s, through Echo Park, Brookside Park and to Berlin Elementary in the south of the village. The letter, which included the possible remedies and funding possibilities is a fairly comprehensive report  prepared by the Laberge Group, a consulting and engineering firm from Albany that has serviced successfully other municipalities in the valley. Representatives from Laberge met with von Schilgen, who Chairs the Water Advisory Board, Water District #2 Supervisor Jim Winn and Water Advisory Board members Ivan Wager and Leon Morse. Laberge’s consultation was free of charge, and von Schilgen began his revelation Thursday by thanking Richard and Ron Laberge for it and by thanking the members of the Water Advisory Board and Jim Winn in particular “for trying to educate me about the water system.”
The idea that the Water District #2 system is woefully outdated is not new. At several meetings  over the last few years representatives of the Berlin Fire District have expressed their concern that the water volume that the system could provide during a fire fighting operation might prove inadequate or that the system might even fail under the stress. The system is ambiguously mapped and, in a multitude of meetings, Winn has reported digging to reach a shut off valve or to replace a hydrant and discovering mysterious pipes and/or connectors in the process. As far back as 1990 an engineering study of the system was made, and it recommended  a new 300,000 gallon water storage tank or repairs to the concrete reservoir, the  installation of water meters, water main improvements and a telemeter system if the reservoir is used. Presuming no new storage tank, these improvements would have cost $668,800 in 1990, with $592,500 estimated for water main improvements alone. In 2010 dollars it would cost $1,350,000, according to Laberge.
The present concerns regarding the water main system listed in the Laberge letter are:
• Lack of isolation valves in the system requires that large portions of the system be turned off to make repairs. Due to the presence of schools in the district, the repairs must be put off until school is out of session to avoid early dismissal.
• Lack of a loop at the elementary school provides very little volume and any failure in the main requires the school to be closed. A loop to Mill Street or NY 22 of sufficient size will provide a redundant feed to the school while at the same time providing more adequate fire protection. It will also provide an alternate route for water to service areas that may otherwise be out of water in the event of a pipe failure and resulting shutdown.
• The Health Department is requiring that if flow is taken from the existing 250,000 gallon concrete reservoir that it be re-chlorinated prior to introduction into the water system. There is currently no power supply at the reservoir to allow such chlorination. In order to avoid water use from the reservoir, the water supply pumping system is operated 24 hours a day.
• Other than the ones that have been replaced, the existing service shut off valves are buried and impossible to operate unless excavated. The valves should all be provided with a valve box and cover for proper system operation.
• Approximately ten customers on Plank Road and two more on Elm Street are at such a high level compared to the reservoir that they must have booster pumps to pressurize the household system. In the event of fire flows or system flushing, these homes may be completely without water service.
• The hydrant connection configuration provides for only a 4 inch leader and guard valve from the main to the hydrant. A six inch connection is recommended.
A Ton Of Money
So, the modernization of Water District #2 is going to cost a ton of money. The users of the District finance the system through their water bills. The rate was raised last October to cover the cost of running the system and to begin to build a cash reserve fund for emergencies. The average charge per residential customer is $120 to $180 per year based upon a fixture count formula. There are approximately 180 customers within the Water District. The system has the ability to produce approximately 550,000 gallons of water per day, according to Laberge.
Laberge’s letter says, “These costs [modernization of the water main and installation of meters, etc.], combined with the very low water rates currently established in the District make it difficult to budget the capital expenditures necessary to keep the system in operating condition over the long run. There is no way the Town can perform any of the required work without raising the water rates appreciably. As an example, if rates were to be increased by $100 per customer, the District would raise about $ 18,000. This amount will support the debt service on a loan of $250,000 for 20 years at an interest rate of 4 percent.” Laberge estimates that the water main improvements will cost over $1m so if the Town were to borrow the full amount the yearly rates would have to be raised $400.
Catch 22
Of course, government money, in the form of grants and low interest loans, is available to municipalities to improve their water system infrastructure. But Town Supervisor Rob Jaeger said that when he and Board Member Sheila Hewitt met with State representatives, they  described the point system that determines eligibility for such government aid. Jaeger said, “3,500 points are needed for eligibility; we had 20 points.” Hewitt said, “The only way to get points is to have a problem.” Presumably, the more catastrophic the problem, the more points are given. Of course, Jim Winn works very hard to prevent such problems. The other catch is that Berlin’s water charges are too low to compete successfully for the government grants and loans and would have to be raised considerably.
Funding
Laberge identifies the following funding sources:
• The Office of Community Renewal (OCR) administers HUD funds that can be used for public improvement projects. According to the 2000 census, median household income is $38,875 and median family is $44,464. HUD shows median income for a family of four for 2010 is $75,500. The Town of Berlin is at 51.3% low and moderate income levels which is just above the 51% threshold necessary for community-wide eligibility for OCR. The current maximum amount that can be requested is $600,000. This program is a grant program with no local match requirements; it is also highly competitive. While there is no local match provision in their grants, the OCR does look to the cost currently paid by district customers and whether those costs are too low to require grant assistance. The current average cost of $120 per year is, in Laberge’s opinion, such an extremely low rate that OCR will not likely provide grant assistance unless there is an increase in the rate charged to the average customer.
• The USDA Rural Utilities grant/loan program is also available to the Water District. This program offers a maximum 55 percent grant coupled with a minimum 45 percent loan. The loan terms are 38 years currently at 3.25 percent. As with OCR, Rural Utilities will likely want to see an increase in the rates charged to customers to support the District.
• The Environmental Facilities Corporation (EFC) Drinking Water State Revolving Fund (DWSRF) is also a potential source of financing. They offer low interest loans and interest free loans and grants for hardship circumstances. EFC uses a target charge system wherein they determine what the affordable water rate to the community is, based on median income. Using the Town wide figure of $38,875, the Target Service Charge EFC will expect to see is approximately $500.
Laberge’s Analysis
Laberge analyzes the Town’s situation thusly, “In an effort to keep the cost low to the customer over the years, the system has suffered from a lack of maintenance and capital reserve funding. Any effort to perform significant upgrades will result in a significant increase in cost to the customer regardless of assistance through any of the programs identified above.  To further complicate matters, as costs increase, customers have the option of installing their own well to avoid use charges, resulting in even more financial difficulty for the District. Based upon how future improvements are financed, the District has the ability to have all properties within the District contribute to the cost regardless of whether they are connected to the system. Debt service for financed improvements can be assessed to all properties within the District on an ad valorem or other basis to recoup that cost. The concept is that even though a particular property is not currently connected to the system, the property still benefits from the future ability to connect as well as the current fire protection capacity of the system.
Laberge’s Recommendations
If the Town wishes to pursue financial assistance for the District, the following is recommended:
1. Update the existing engineering report to include all the current concerns. The report should also analyze and propose alternate rate structures to eliminate the guess work of fixture counts as the basis of residential cost.
2. Perform an income survey of the District to verify the household incomes and to determine actual eligibility for OSC.
3. If the income survey results are appropriate, apply to the OSC for grant funds for the most advantageous project. This can provide up to $600,000 of grant funding.
4. Request inclusion on the EFC Intended Use Plan to determine how much if any likelihood there is of receiving assistance through the DWSRF.
5. If additional financing is required, prepare a preliminary eligibility determination request to USDA Rural Utilities.
Laberge will charge the Town $25,500 to implement these recommendations.