Panel wants $51m for sewer upgrade

NASHUA – In a step forward for one of the costliest projects facing the city, the aldermen’s budget review committee voted Wednesday to recommend borrowing $51.3 million for improvements to the combined sewer system.

The committee’s vote followed a special meeting of the Board of Aldermen that was held to conduct a public hearing on the proposed bond.

No resident spoke at the hearing, but the issue generated discussion from aldermen on how to reduce the amount that the city would have to borrow.

The bond resolution named two specific projects: a wet weather facility adjacent to the city’s wastewater treatment plant, and a screening and disinfection facility that would be built off Bridge Street along the Nashua River.

The wet weather facility is already operating, and the money would be borrowed to replenish cash in retained earnings and capital equipment reserve accounts. Those accounts were drawn down to pay for the construction of the facility, city officials said.

The bond would be used to complete the $70 million project, which federal environmental officials have required the city to undertake to reduce pollution flowing into the Nashua and Merrimack rivers.

According to the federal Environmental Protection Agency, combined sewer systems are sewers designed to collect a mix of rainwater, household sewage and industrial wastewater in the same pipe.

Most of the time, the systems transport all of the wastewater to a sewage treatment plant, where it is treated and then discharged into a body of water – in Nashua’s case, the Merrimack River. During heavy rain or periods of snowmelt, however, the volume in a combined sewer system can exceed the capacity of the treatment plant.

For this reason, combined sewer systems are designed to overflow occasionally and discharge excess wastewater directly into water bodies, according to the EPA.

However, the overflow in Nashua has exceeded the amount allowed by the EPA, causing the agency to require the city to lessen the amount of pollution entering the Merrimack and Nashua rivers. The EPA has been working with the city on a timeline for the improvements.

The combined principal and interest costs would total $38.8 million for the wet weather plant and $37.5 million for the disinfection facility, according to Mike Gilbar, the city’s chief financial officer.

Since the wet weather plant has already been built, Alderman-at-Large Brian McCarthy, the committee chairman, asked if the city could borrow less and pay back the depleted retained earnings and capital equipment reserve accounts gradually.”The problem is, you don’t have enough cash flow to get through the other projects at this point,” Gilbar said.

Alderman-at-Large David Deane said the city had waited too long to borrow money for the combined sewer overflow project.

The sewer system’s operating expenses outpaced sewer fee revenues beginning in 2005, causing the city to dip into cash reserves. The deficit is partly because the Board of Public Works approved a 30 percent rate cut in 2003, when operating revenues were about $2.5 million more than expenses. Now, operating expenses exceed revenue by more than $700,000.

Furthermore, in 2003, the estimated cost for the mandated combined sewer overflow project was $43 million. Now, the cost of the project has topped $70 million.

Deane said the shortfall happened because required financial analyses weren’t done at a time when cost of the sewer overflow project skyrocketed.

To bring the operation back into the black, aldermen have approved a 15 percent increase in sewer fees for next year and may consider additional rate increases in future years.

McCarthy asked Gilbar to explore whether the city could delay borrowing all the money at once.

“I think there is an opportunity to at least pull a few million out of the cost of the bond, and therefore probably another million out of interest paid on the bond, without destroying the cash flow in the retained earnings account,” McCarthy said.

While the sewer project is designed to reduce pollution spilled into the rivers, it doesn’t address another problem with the system – sewage that backs up into residents’ yards in some parts of the city after heavy rains.

City officials have said other improvements must be done to alleviate that problem.