News

Munich Option vs. Devils Lake Option: By the numbers

The following information was provided by Kent Ritterman, Vice President of Moore Engineering.

Republican

Posted on 4/11/15

By Melissa Anderson

Ritterman informed the paper that these numbers will also be using the recent $10 increase in water rates.

“They [Langdon City Commission] need to make this decision now so they can move forward with the rest of improvements” Ritterman stated.

What will the increase in water rates be for the project based 75%, 45%, and 0%  grant funded?

The City of Langdon increased the base rate for water in December of 2014 from $17 to $27. Moore Engineering used the following to figure the Monthly Water Bill based on 2015 schedule of $27.

The formula for figuring cost of water each month per use is the base rate of $27.00 per month+ $3.50 per 1000 gallons used. For Example, if a resident uses 4000 gallons per month their monthly water bill would be $27.00 + $3.50 X 4=$41.00 per month.

If project is financed 75 percent grant – 25 percent loan. We are estimating the monthly water bill increase of $7 per month with loan terms of 40 years at 3 percent interest or approximately $10 per month accelerating the repayment on the water treatment plant in 20 years.

If the project is financed 45 percent grant – 55 percent loan. We are estimating the monthly water bill increase to be $27.50 per month with loan terms 40 years at 3 percent interest or approximately $37.00 per month which accelerates the repayment on water treatment plant in 20 years.

The city may realize additional savings depending on how  operation and maintenance savings and equivalent user calculations are applied with further discussions with the city.

If no grant funding is given for the project where will the funding come from? Can the project even move forward at that point?

From our discussions with Rural Development and recent successes financing similar projects we are comfortable with the city receiving some grant funding. I feel if no grant funding was available it would be difficult to move either project forward.

We know that the city is facing some upgrading needs at the water treatment plant in the near future.  If no grant dollars are available, a scaled back project of some upgrades would need to be reviewed at a minimum so that the city can continue producing drinking water.

What kind of interest rates will the city be facing with loans? Will they be fixed rate? How long will they be for?

In our analysis we have been using a fixed rate of 3 percent over 40 years which is on the conservative side. The actual interest rate the city can qualify for with Rural Development would be closer to 2 percent which would make repayment dollars less. For estimating purposes and to be conservative we are using the 3 percent rate. Although the loan is fixed at 40 years the City is discussing financing the water treatment plant in 20 years.

Will the Munich Aquifer project cost more over all in the long run in comparison to the Devils Lake water source?

There are some unknowns for future costs with the Devils Lake water treatment plant upgrades that would occur and rural water system upgrades. As noted, the city is basing their decision on control of their water system for years to come even if costs are slightly more.

Will Moore Engineering be in control of the Munich Aquifer project?

Yes, Moore Engineering will be helping with finding funding followed by design and construction of the Munich Aquifer project.

The following information provided by Northeast Regional Water District (NRWD) and Advanced Engineering and Environmental Services. It should be noted that the numbers provided reflect the 2014 base rate of $17.

The Devils Lake Project in relation to the City of Langdon:

When NRWD/AE2S put together the additional cost per user for the Devils Lake WTP, we used the projected cost of the Devils Lake WTP water supply which was $24,000,000 ($12,000,000 each).

Then using 75 percent grant towards the total project costs, comes to a local loan share of $6,000,000 ($3,000,000 each).  Amortized at 3.0 percent interest over 38 years (RD loan) pay back with reserves is equal to $294,000 per year ($147,000 each). $147,000 divided by 934 City of Langdon Customers is equal to $13.12 per month” Geoffery Slick of AE2S stated.

What will the increase in water rates be for the project based on 75%, 45%, and 0% grant funding?

Based on $12 million or 50 percent share of project.

75% = $13.09 per month per user

45% = $28.80 per month per user

0% = $52.35 per month per user

If no grant funding is given for the project, where will the funding come from? Can the project even move forward at that point? What kind of loans, rates and terms?

With no grant, the project is pretty much cost-prohibitive, but loan funding from USDA-Rural Development for a 40 year term loan generally has an interest rate at about 3 percent or the North Dakota Department of Health’s State Revolving Fund program (SRF) at 2.5 percent up to 30 year term are possibilities. Both are fixed-rate loans.

Will this cost more over all in the long run in comparison to the Munich Aquifer project?

No. Up-front, capital costs are about the same in a joint project, at an estimated $24 million.

In all reality, costs will be substantially less with Devils Lake’s simpler, less expensive treatment process. The operation, maintenance, and replacement costs of the Munich Aquifer Project infrastructure would prove to be more expensive in the long run.

Will Advanced Engineering (AE2S) be in control of the Devils Lake Project?

In a joint project, both NRWD and City of Langdon would be in control of what the project entails.

Logistically, NRWD would be in charge of the pipeline and storage/pumping facilities between Devils Lake and Langdon.

NRWD would employ AE2S for the design and construction oversight between Devils Lake and Langdon, including a pipeline to the Munich area.

Inside the city limits of Langdon, the City would most likely employ their City engineer to extend the pipeline to a pumping facility that would fill the water towers and distribute to their customers.

In research conducted by the Cavalier County Republican it should be noted that both options as separate projects are rated as “Low Priority” by the State Water Commission (SWC) which received funding requests totaling $1.5 billion for the 2015-2017 biennium. The SWC’s budget for the biennum was slated to be around $954 million but had that proposed budget slashed to an estimated $500 million. The SWC could not give an estimate on how much funding would be available until the State Legislature finalizes their budget.

Moore Engineering requested a total of $6.8 million in the form of a loan from the SWC with local funding producing an additional funding of $1.7 million for a combined total of combined total of $8.5 million.

The NRWD requested a total of $11.6 million in the form of a loan from the SWC with local funding providing an additional $2.9 million in local funding for a combined total of $14.5 million.

The USDA-Rural Development (RD) fund program provides affordable funding to develop essential community facilities in rural areas. The USDA defines an essential community facility as a “facility that provides an essential service to the local community for the orderly development of the community in a primarily rural area, and does not include private, commercial or business undertakings”.

Funding through a direct loan from the USDA-RD must meet a few criteria before it will be given. The direct loan option that has been discussed has repayment terms that may not be longer than the useful life of the faciltiy, state statues,the applicants, authority, or a maximum of 40 years. Whichever of these options is less is the one that will be applied to the loan repayment terms.

The interest rates are set by RD and once the loan is approved the rates become fixed for the entire term of the loan and is determined by the median household income of the service area. For Cavalier County, the median household income according to the most recent census data available is $55,904.

Additional requirements of note for financing from the USDA-RD is the applicants must be unable to finance the project from their own resources and/or through commercial credit at reasonable rates and terms. The project must also demonstrate substantial community support.

With the information provided please consider the proposed options thoroughly and contact the City of Langdon to share your opinions at:

Langdon City Hall

324 8th Ave. Langdon, ND

58249

By phone: 701-256-2155

or by email: city@cityoflangdon.com