Constructing In A Recession

Oak Lodge Sewer District (OLSD) provides sanitary sewer and surface water management services to 32,000 people residing in a 6.5-sq-mile urbanized unincorporated area near Portland, Ore. The district is incorporated under Oregon Revised Statutes Chapter 450 as a Special District—a single-purpose enterprise that generates revenues from services provided.

OLSD’s wastewater treatment plant was commissioned in 1962 and was the first wastewater facility on the Willamette River to provide secondary treatment. Although the facility received several upgrades over 47 years, it became functionally obsolete and unreliable. The district focused on delivering service with the lowest sewer rates and did not make needed capital upgrades and improvements.

In 2002, Clackamas County began a process to regionalize wastewater treatment. OLSD, with its deteriorated facilities, participated in this regional effort; discussions favored abandoning the Oak Lodge treatment plant. The communities served by Oak Lodge, however, had a history of mistrust of the county. Through an initiative process, they demanded regionalization be approved by a vote. In April 2005, district voters sent a strong message to their own board and the county, voting overwhelmingly to not participate in regionalization. OLSD would maintain local control of its facilities and future.

With few permit violations and little contrary evidence, community leaders believed the OLSD wastewater facilities were in good condition. In actuality, the facilities were near the end of their useful life and the $4-million capital savings account was woefully short of funds needed to upgrade the facilities. In late 2005, the OLSD decided a master plan was needed to identify necessary facility upgrades.

Community Advisors
Among the first steps in planning was formation of the Master Plan Community Advisory Committee, with 18 interested customers and treatment plant neighbors. Committee members would become a potent voice for the community and trusted advisors to the board.

The committee developed values and a cohesive mission statement and expressed its preferences on everything from good neighbor issues (e.g., odor, noise and aesthetics) to technology (e.g., ultraviolet disinfection, membrane bioreactor technology and biosolids processes). Adopted with strong committee support, OLSD’s 2007 Master Plan called for an $80-million treatment facility upgrade.

Value Planning
A new general manager hired in January 2008 was given responsibility to deliver the treatment plant upgrade—and to keep it affordable for the community. A Value Planning team was assembled, convening well-respected senior engineers and industry experts to review the master plan. The team provided the board with recommendations for potential project savings.

The project design team took the value-planning recommendations and conducted a series of “whole-plant” cost evaluations. Through an evaluation that considered capital costs, life-cycle costs, analysis of carbon footprint and community values, the activated sludge process with Cannibal solids reduction was selected. Value planning reduced the total project cost from $80 million to a little more than $50 million.

With the advisory committee’s support, the new project moved smoothly through predesign. At the end of predesign, the district selected a construction management/general contractor to deliver the final constructed project.

Bond Financing Amid Market Turmoil
With board and advisory committee support, a project defined and designed, and construction method selected, the remaining challenge was financing the project affordably.

The board initially authorized selling up to $55 million in revenue bonds, but the recession changed bond markets profoundly. Bond insurance was no longer available, and bond holders required significant “coverage” as well as 10% reserves to assure that borrowers had adequate revenues to cover bond payments.

The district’s financial consultant determined that general obligation (GO) bonds would impact sewer rates less than revenue bonds, saving ratepayers $22 million over the life of the bonds. This translated on average to $8 per month per OLSD ratepayer.

Convinced the priority was to save ratepayers money, the board decided to proceed with an election to gain approval for the sale of GO bonds to be repaid with sewer rates. If the election failed, the district retained the ability to sell revenue bonds at a higher cost.

Quest for Community Ownership
The challenges of today’s economy necessitate building a closer-than-ever relationship with customers. In these times, utilities must strive to instill a sense of ownership and pride among customers and the entire community. In Oak Lodge, this process of transforming ratepayers into owners—shareholders—has taken a few years. It has been necessary to try new ways of doing business and to take some risks.

The driving force behind this transformation is the district’s five-member elected board of directors. As customers have learned, the district “is led by volunteers who are your neighbors.” To succeed with the GO bond measure, the board set out to build on the advisory committee and other community involvement activities to educate the community about the advantages of GO bond funding.

The committee had become a source of community leadership, advising and reinforcing the OLSD’s decision-making and spreading the word to ratepayers. Now it joined other volunteers to provide grassroots leadership for the GO bond campaign.

An expanded communication program—including a redesigned district newsletter, utility bill inserts, other timely publications, briefings for community groups, media outreach and an updated website—sought to educate every customer about the wastewater facilities needs and GO bond savings.

The district commissioned two focus groups and a telephone poll to gauge the prospects for ballot measure approval. With the election just two months away, polling showed 32% voter support for the proposed bond measure. Lacking time to educate the community, Oak Lodge tried a new approach.

Noting that focus group participants found the district’s communications tools and spokespersons to be credible and informative, a 7-minute video was produced to explain key messages about the planned treatment plant project and GO bond measure. Copies of this professionally produced DVD were mailed to every household and business in the district at a cost of less than $1 each.

Meanwhile, a small band of community leaders collected testimonials, signed endorsements and contributed cash to tell the story in the official Oregon voters pamphlet. This team also launched a grassroots campaign that planted yard signs along major traffic routes.

Results
On election day, the district board members were gratified to learn they had won over nearly everyone. The $44-million bond measure was supported by 85% of voters despite the poor economy and short campaign cycle. The OLSD’s experience shows it is possible to finance and construct public infrastructure even in difficult economic times.

Today, customers of wastewater utilities across the U.S. are being urged to make significant investments to replace aging infrastructure. Oak Lodge learned to respect its customers as investors/owners. District leadership helped customers experience the value and responsibility of ownership. The payoff for this new relationship with customers has been decisive. It includes strengthened community leadership, good relations with plant neighbors, a project that is on schedule and cost savings in millions of dollars.

J. Michael Read is general manager for Oak Lodge Sanitary District. Read can be reached at jmread@olsd.net. David Green is principal project manager for CH2M Hill Inc. Green can be reached at dave.green1@ch2m.com. Clark Worth is principal for Barney & Worth Inc. Worth can be reached at clark@barneyandworth.com.

Leave A Comment

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

More information about formatting options

By submitting this form, you accept the Mollom privacy policy.