Sewer

Crews work to replace a a 100-year-old sewer line on Tusculum Boulevard in the spring of 2020. The Greeneville Water Commission is considering borrowing money for necessary sewer projects.

Sewer

The Greeneville Water Commission may borrow money through a bond issuance to help pay for the numerous sewer projects it is having to tackle in the coming years.

The motivation behind the move comes from a study completed by Jackson Thorton, an accounting and consulting firm that presented its findings to the Water Commission on Tuesday.

The study shows that the sewer system will require more funding than it will receive in revenue in order to complete all the sewer line and sewage plant maintenance the Water Commission has planned.

According to the Water Commission’s five-year capital projects plan, it will need about $8.2 million in revenue each year to pay for the projects. However, the utility is currently only taking in about $4.1 million in revenue each year.

According to Greeneville Water Commission Superintendent Laura White, the projects that are scheduled to be funded in the future include the installation of a screw press at the wastewater plant to replace aging centrifuges and process solid waste, as well as sewer line replacement and rehabilitation across the Greenville sewer system, including downtown.

“The projects that we’re doing are things we cannot cut out. Sewer is just so expensive. It is stuff we have to do. We have a plant that is 38 years old and lines that are 70 and 80 years old, so maintenance costs are high. We are sort of having to play catch-up,” White said.

White noted that when she began working at Water Commission in 2010 there had not been a sewer rate increase in nearly 10 years, and there was no organized sewer line rehabilitation plan. This led to rates falling far behind costs, and older lines not being regularly maintained. According to White, in the past aging sewer lines were not well-maintained due to the lack of a line rehabilitation plan. Lines would just be patched up when they experienced failure and leaks.

Now, the Water Commission has been left in a tough position due to those years of low rates and low maintenance of aging lines.

A 15% water and sewer rate increase to be made over the course of three years was approved by the Greenville Board of Mayor and Aldermen in August, and that rate increase will be sufficient for the water system to be maintained, according to the study.

However, the gulf between costs versus revenue in the sewer system remains even after that recent rate increase due to the number of projects coupled with supply chain issues and inflation of material costs.

“Everything with sewer right now is just so much more expensive, even when compared to water,” White said.

The Water Commission has had to increase its budgeted amount for sewer rehabilitation each of the last two years in an attempt to keep up with the rising costs of materials.

The study from Jackson Thorton posited the possibility of borrowing money to meet funding goals, rather than stick sewer customers with a rate increase of up to 80% to meet costs.

The Water Commission is going to explore the idea.

Board members Johnny Honeycutt and Doug DeBusk asked White to reach out to Wiley Brothers, a Nashville-based company that deals with utility bonds, about the possibility of issuing a bond of up to $10 million.

White said that in preliminary talks with the company it was estimated that a 20-year bond could be secured at a relatively low 1.2% interest rate.

White believes that it makes sense to not pay for all of the projects up front, and avoid a massive rate increase.

“What we want to be able to do is pay for these projects and assets over the life the asset versus just paying for it all now. People are going to be benefitting from these rehabilitated pipes and improvements at the waste plant for 30 years and more. We don’t want to stick our current customers with all the cost of these things when future customers that move here are going to be getting the benefits,” White said. “We can spread that cost out.”

It is estimated by Jackson Thornton that every $1 million borrowed will cost about $60,000 in annual debt service.

“The things in this plan are things we cannot carve out. The sewer line replacements have to be done. When we fix one, there are 15 more lined up right behind it,” White said. “This is not some wish list. It’s stuff we have to have and do in order to operate.”