Lake Oswego continues discussion on public-private partnership for new wastewater plant
The Lake Oswego City Council showed interest in continuing to investigate the construction of a new wastewater treatment plant, which would be owned by the city through a public-private partnership (P3).
The current wastewater treatment plant was built in 1965 and needs to either be rebuilt or upgraded to meet regulatory requirements.
During a special City Council meeting July 14, staff presented an overview and update about the ongoing work surrounding the improvement of the Tryon Creek Wastewater Treatment Plant.
During a City Council meeting back in January, the council voted by a slim margin to move forward with seeking a public-private partnership to design, build, finance, operate and maintain a new wastewater treatment plant in the Foothills area, instead of upgrading the current wastewater treatment plant through the city's partnership with Portland.
Also during that meeting the council had authorized staff to spend $450,000 in consulting services to release a Request for Proposals (RFP) for three teams: EPCOR, Foothills Water, LLC and NW Natural.
Deputy City Manager Anthony Hooper said they've spent about $180,000 so far.
"We're going to use that to continue moving forward toward releasing the RFP in September," Hooper said.
The council had also requested a wastewater rate analysis.
"We're doing an analysis of whether it's better to replace or to invest in the old plant," Hooper said. "It's starting to look like it's very promising that it's better to go with this P3 project for our new plant."
Sergey Tarasov, senior project manager for FCS Group — the city received financial information from Portland, which allowed them to contract with FCS on a rate analysis — said historically the city increased the rate at a rate of inflation of 3% per year.
Wastewater rates would need to be increased to 3.9% per year for the next 15 years.
"The rates for the P3 project will need to be no more than 3.9% to be considered a financially viable project," the staff report read.
"That's about 70 cents more (if applied to the current year) than the 3% rate increase," Tarasov said.
This year, staff has been working with the city of Portland on an interim Intergovernmental Agreement (IGA) and will come before the council at the Sept. 1 meeting for approval.
"The interim IGA will stipulate what is to be included in a Project Agreement (PA) with a P3 team on a new site (two alternative future WWTP sites are being considered for P3 team investigation of suitability) and what would be needed in a future IGA with Portland when a third and final 'go' decision is made in September 2021," the staff report read. "This project does not consider the effect on other Foothills area redevelopment opportunities in its scope, as it is important that the new WWTP make sense on its own."
Jonas Biery, business services manager with the Bureau of Environmental Services (BES) in Portland, said he was initially skeptical about the P3 option but after more research and further discussion, he realized the city of Portland was underestimating the investment costs needed at the plant — and that a P3 appears to be mutually beneficial to both cities.
Biery said BES supports moving forward on the project.
Public financing would raise rates upfront, and private financing — which has the ability to be flexible and opt for a variety of debt and equity instruments — could smooth out rates over time and keep them lower.
"Staff from Portland and Lake Oswego believe it is in both cities' interest to continue to explore this project because of the potential to save both agencies money over the life of the new plant and to deliver a higher quality, more environmentally responsible service," the staff report read.
The City Council expressed desire for more information and more solidified cost estimates on everything including demolition and decommission of the existing plant.
There are still off-ramps prior to making an official decision on the project in September of 2021.
More information can be acquired after issuing RFPs and receiving proposals in late 2020 or early 2021.
For more information on the project and for more background, click here.
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