Ken Webb, CU senior vice president and chief financial officer who earlier this month was named to succeed the retiring Tom Wheeler as the utility’s president and CEO, gave a brief update on the SRF initiative earlier this month during a session of the Cleveland Board of Public Utilities.
His comments were echoed by Craig T. Mullinax, vice president of CU’s Water Division whose wastewater engineers and technicians are leading SCOPE 10, a 10-year, $30 million sewer rehabilitation project well into its second year.
SCOPE 10 is an acronym for Strategic Commitment to Protect the Environment, a complex find-and-fix initiative that hopes to greatly reduce the amount of inflow and infiltration (I/I) seeping into CU’s sewer lines through cracks and breaks, as well as through damaged manholes. I/I is being blamed for much of CU’s manhole overflow issues that contribute to isolated flooding in some sections of the city, as well as potential sewer backups in private residences or businesses.
The unprecedented floods of Labor Day 2011, when the Cleveland area was deluged with 12 inches of rain in about 24 hours, prompted CU to launch the much more aggressive SCOPE 10 project. The utility was already in the middle of a gradual sewer rehab program, but the unexpected floodwaters of two years ago forced the company to rethink the urgency of its task.
In his SRF comments to the board, which meets again Thursday in the utility’s training center, Mullinax pointed to the next steps in the loan process.
“We did receive approval on our SRF [loan],” the longtime water and wastewater leader explained. “[Now] we’re awaiting documents that some of you [board members] will sign. As we work through the SRF project, we have to do some planning.”
The paperwork, plus continued SCOPE 10 detailed planning, means CU probably will be prepared to start using the loan funding by late this year or early 2014, Mullinax explained.
“We will not get things cranked up [until then],” he said. His reference was to physical work that will “make a difference” in CU’s wastewater collection system needs.
Over the next few months, CU will be learning a lot about how the SRF program works, Mullinax said.
“[But] we are grateful to get this approval and to keep this project moving,” he added.
Webb, the man who must find ways to pay for such expensive updates to CU’s infrastructure, might even be more thrilled with the SRF approval from the Tennessee Department of Environment & Conservation which operates the state fund in cooperation with the Tennessee Local Development Authority. The U.S. Environmental Protection Agency, which monitors and enforces the federal Clean Water Act, provides grants to fund the SRF program. The state of Tennessee provides a 20 percent match. Loan repayments — such as those CU will make to pay off the $10 million tab — are returned to the program and are used to fund future SRF loans.
Like Wheeler, Webb understood the urgency of SCOPE 10, but his challenge as chief accountant was to find a way to pay for it. He thanked utility board and Cleveland City Council members for their support of a 5 percent water rate increase that will help to pay back the SRF loan.
CU was so serious about keeping its place in line for SRF financing, that the utility took an unprecedented step of seeking the rate increase prior to the start of City Council budget hearings. The action was deemed necessary because TDEC was in the process of reviewing all TDEC applications, and needed assurance that government jurisdictions and utility districts were capable of repaying the loans.
In CU’s case, Webb’s budget projections had originally called for a 4.5 percent water rate hike over a four-year period to keep SCOPE 10 afloat. After reviewing the CU application for financing, TDEC recommended hiking the increase to 5 percent. This is the proposed rate Wheeler and Webb took to the utility board and to the City Council.
“I do not ever recall asking for approval for a change in rates outside of the budget process, but in order to keep this request for the loan moving forward, it was necessary to do so,” Webb told board members in the recent gathering. “Both the utility board and City Council were receptive to the idea and gave their support to our effort to address inflow and infiltration issues in the wastewater collection system.”
In his update, Webb repeated the SRF loan numbers. The funding package has two pieces.
“The first is a $1,826,000 loan with a debt forgiveness amount of $451,022, and the second is an $8,174,000 loan,” Webb cited. “Both loans are for a 20-year period at a fixed rate of 1.15 percent.”
In an earlier interview with the Cleveland Daily Banner, Webb and Wheeler pointed out the SRF loan should fund the SCOPE 10 project for the next few years.
A letter dated June 28, 2013, to CU from Sherwin N. Smith, SRF program manager, confirmed approval of the funding package, but he also cautioned “... the project must proceed expeditiously.”
In his correspondence, Smith said TDEC and the TLDA board members who approved the loan package established the following project schedule:
- Submit complete plans and specifications on or before July 1, 2013.
- Receive bids on or before Sept. 19, 2013.
- Start construction on or before Jan. 23, 2014.
- Complete construction on or before Dec. 5, 2016.
- Initiate operation on or before Dec. 5, 2016.
- Complete start-up services on or before Dec. 19, 2016.
The timeline is the reason Mullinax briefed board members on the “paperwork” and “planning” that CU must complete prior to the start of physical repairs to the wastewater collection system.
Smith’s letter pointed out that SRF representatives will keep an eye on CU’s work, which is standard TDEC practice for any projects funded through the loan program.
“The SRF Loan Program will monitor the progress of the project until the completion of construction,” Smith’s correspondence cited. “It is necessary that the Tennessee Department of Environment and Conservation and the SRF Loan Program be provided with access to the project site and to project records.”