By Brad Hicks
Erwin Utilities’ acquisition of low-interest loan funding to complete major infrastructure improvements is now official.
On Wednesday, March 22, Gov. Bill Haslam and Tennessee Department of Environment and Conservation Commissioner Bob Martineau announced that the Town of Erwin was among three communities and two utility districts to receive more than $14 million in low-interest loans for water and wastewater improvements through Tennessee’s State Revolving Fund Loan Program.
“The State Revolving Fund Loan Program helps citizens enjoy a better quality of life by assisting communities with current and future infrastructure needs for improved environmental health,” Haslam stated in a release issued by TDEC announcing the loan awards.
Erwin received two loans totaling $2 million through the SRFLP for a distribution system improvements and water meter replacement project. One of the loans is for a total of $1.5 million. This award is made up of a 20-year $1.125 million loan and $375,000 in principal forgiveness that will not have to be repaid. The second award is a 20-year $500,000 loan.
The interest rate of each loan is 1.24 percent.
Matthew Rice, Erwin Utilities’ director of water and wastewater, said the funding will be used by Erwin Utilities to replace approximately 26,000 linear feet of existing waterlines on more than 15 streets throughout town, as well as to install several pressure-reducing stations in different areas.
Rice said the lines set to be replaced have a history of failures and are small-diameter lines of galvanized metal that may be prone to leaks. The lines that have outlived their useful lives will be replaced with either PVC or ductile iron pipe, Rice said.
“We know that, ‘Hey, on this street we’ve had three or four leaks in the last five years, so there’s a history of problems on this street, so it’s time to go ahead and replace this pipe that is probably past its useful life because it’s 80-years-old or so,’” Rice said.
The goal of the project, Rice said, is to reduce water main breaks and leaks, which will in turn improve system performance and increase reliability.
“That is really the biggest thing – more reliable service for our customers,” Rice said. “The lines that we’re working on are streets where we’ve had kind of a history of leaks and line failures where customer service has been interrupted.”
Erwin Utilities maintains a GIS database of past leaks and water main breaks, Rice said. The data was used to identify the biggest priorities for water main line replacements. The ideal approach, Rice said, is to replace the most problematic lines first.
Erwin Utilities previously identified 35 waterlines as priorities in need of replacement, Rice said. The $2 million received through the SRFLP will be used to replace 20 of these lines.
The waterlines included in the SRFLP project are those located along: Old Highway Road, Temple Hill Road, Elliot Avenue, Brinkley Road, Martin Creek Road, Mountainview Road, Adams Street, Parker Street, Monroe Street, Norris Street, Fish Hatchery and Spring Street, Higgins Avenue, Love Street, Hill Avenue, Crosswhite Lane, Roberts Street, North Main Avenue, and Balsam Drive.
Rice said the lines included in the project were already included in Erwin Utilities’ five-year capital improvement plan, meaning the utilities provider was planning to use its own crews to replace them in the future. But, Rice said, Erwin Utilities has limited resources and would not have been able to replace all the lines at once.
“When we were offered this really low-interest money with a principal forgiveness, it’s actually more cost-effective for us to go ahead and put it out for bid and get a contractor in here to do it,” Rice said. “With the principal forgiveness grant money and such a low interest rate, it’s better for us to go ahead and get it done now rather than string it out over the next seven years or so.”
Rice said Erwin Utilities has essentially completed the line upgrades along Adams and Monroe streets, so one or two lines from the priority list may be moved up to be included in the SRFLP project. Erwin Utilities intends to use its own personnel or a different funding source to eventually complete improvements on the lines identified as priorities but not included in the SRFLP project.
“The way this project shook out, we kind of had to cut off somewhere,” Rice said. “We couldn’t fix all the lines in this project that were indicated as a priority. We’ll continue to work down our list and work on the other streets, but it might be in the next five to seven years before we actually get to all the streets that are on the list.”
Last year, Erwin Utilities submitted its project plan to the state. According to an assessment released by the state last year to garner public input on the proposed project, “no incremental increase” in the charges of Erwin Utilities customers would be required as a result of the project, as existing user charges are projected to be sufficient to repay the loans.
“That’s still where we’re at, and that gets back to we were already planning to do these projects,” Rice said. “We were just going to do them over a little bit longer length of time using our own crews, so we had already kind of budgeted for that. But when the loan and the grant money came up, basically, our rates are sufficient to pay the debt service for the project instead of just paying cash for it as we go along over the seven-year period. We’re paying the low-interest loan.”
Rice said Erwin Utilities hopes to put the project out for bid soon, possibly this week, and hopes to open the received bids in late April. Erwin Utilities officials hope to see construction begin in May.
A nine-month construction time is projected for the undertaking, Rice said.
“It’s very doable,” he said. “We want them to kind of get in there and get after it and not drag it out any longer than we have to.”
Rice said Erwin Utilities wants to make residents aware that the work will involve digging up streets.
“Certainly when we’re replacing these lines it’s going to be a little bit of a mess during the construction, so customers in these streets will be affected by the construction for the few weeks that the contractors are there,” Rice said. “But, then, the idea is that we won’t be back there for another 80 to 100 years.”
In January, the Erwin Board of Mayor and Aldermen approved resolutions authorizing the financing of the project. Last week’s announcement of the SRFLP awards was made after state officials reviewed submitted loan applications.
According to the release issued last week by TDEC, Tennessee’s Clean Water SRFLP has awarded more than $1.7 billion in low-interest loans since its inception in 1987. The state’s Drinking Water SRFLP has awarded more than $294 million in low-interest loans since its inception in 1996.
Through the SRF Program, communities, utility districts, and water and wastewater authorities can obtain loans with lower interest rates than most can obtain through private financing, according to TDEC. Interest rates for loans can vary from zero percent to market rate based on each community’s economic index. Loans utilizing Environmental Protection Agency grant funds can include a principal forgiveness component.
TDEC administers the SRF Program in conjunction with the Tennessee Local Development Authority. The EPA provides grants to fund the program, and the state provides a 20 percent match. Loan repayments are returned to the program and are used to fund future SRF loans.
According to TDEC, the funding order of projects is determined by the SRF Program’s Priority Ranking Lists that rank potential projects according to the severity of their pollutions and/or compliance problems or for the protection of public health.
“Drinking water infrastructure is a priority for TDEC and the residents of Tennessee,” Martineau stated. “This Program enables local communities to provide this vital resource year after year.”