Spending $30,000 now could save Cleveland Utilities almost $431,000 later if the State Revolving Fund Loan Program approves a project plan and application package the local utility is putting together for the installation of some 17,000 automated water meters.
The $30,000 is the contract amount CU will pay J.R. Wauford Company, Consulting Engineers Inc. to oversee the proposed project development and facilities plan that will be submitted to SRF. The $431,000 is the amount of loan forgiveness the state program guarantees if the utility’s application is approved.
On a motion Thursday by Joe Cate and seconded by Cleveland Mayor Tom Rowland, the Cleveland Board of Public Utilities voted 5-0 to authorize CU and Wauford to complete the application package in the amount of $2,260,317. If approved at the state level, it would pay for Phase 1 of the AMI (Advanced Metering Infrastructure) project. A second phase would come later and would complete the 34,000-meter conversion.
Over the past few months, CU crews have already transitioned some 700 new AMI meters into existing customer homes or businesses in a pilot project.
If SRF officials approve the CU application — which must be submitted no later than Sept. 8 — it would put the water meter conversion project on a faster track, according to Ken Webb, CU president and chief executive officer.
It would also mark the second SRF loan Cleveland Utilities has received recently. Last year, the local utility was awarded $10 million in low-interest, fixed-rate loans to support the ongoing SCOPE 10 sewer rehabilitation initiative. That loan includes a $451,000 principle forgiveness, meaning it doesn’t have to be paid back.
Webb described the potential SRF support of the AMI water meter installation as a timely offer.
“It’s one of those opportunities that doesn’t come along very often,” he told CU board members.
The utility president said the SRF low-interest loan, if ultimately approved, would allow CU to condense the five-year project into 1 1/2 to two years.
“This project is really exciting from the standpoint that we had budgeted this over the next five years,” Webb said. “We have this opportunity that has presented itself to us. We have a real opportunity to gain some low-rate, fixed-rate financing with some loan forgiveness ... and we would be able to complete this project on a faster track than we had anticipated.”
Loan approval is not guaranteed, but the fact that SRF is seeking eligible projects for these leftover Fiscal Year 2012 funds puts Cleveland Utilities into a financing sweet spot.
Philip Luce, CU water and wastewater engineering manager, described the SRF funds as Green Project Reserves. Luce will be working closely with the Wauford group to complete the project plan and application package over the next three months.
GPR funding is for projects related to the environment, Luce explained. Automated meter reading qualifies because the whole concept of AMI technology is that meters — electric or water — can be read automatically without the use of meter readers who rely on gas-burning vehicles to run their routes. AMI technology supports the reduction of vehicle exhaust into the air because fewer are on the roads.
“They (SRF) can’t fund the whole project, but they do have the money for half the project ... with a loan forgiveness if we’re willing to cut the project in half,” Luce explained.
Hence, the AMIs will be rolled out in two phases — minus the 700 that have already been installed by CU crews in the pilot.
Once Cleveland Utilities became aware of the Green Project Reserves available funding, utility leaders — including Water Division Vice President Craig T. Mullinax, Controller Marshall Stinnett, Webb and Luce — agreed it is in CU’s best fiscal interest to pursue the financing plan.
Luce said the fact GPR funding will accelerate the AMI installation project, and that it includes a 20 percent loan forgiveness, were the tipping points in choosing to recommend the proposal to the full CU board.
The local utility has already received confirmation from the Tennessee Department of Environment and Conservation (Division of Water Resources, State Revolving Fund Loan Program) that CU’s current user rate structure would adequately pay back the loan without a need for accompanying rate increases.
As authorized by Thursday’s board vote, Luce will begin working with the Wauford Company to complete the project plan and application package for SRF review.