Times Are Changing for Water & Sewer

(from Maine Townsman, April 2007)
By Douglas Rooks, Freelance Writer

For Maine’s water and sewer districts – more than 100 of them in all – recent decades have been times of rapid change. Largely as a result of federal legislation, especially the Clean Water Act of 1970, and the Safe Drinking Water Act of 1986, public utilities large and small have been required to meet increasingly stringent standards for avoiding water pollution, and providing pure water for customers.

There is little controversy, at least among water supply and wastewater treatment specialists, about the goals and most of the standards of the federal laws; in some respects, such as sewage discharge regulations, Maine has stricter state standards. Yet there is no question that the federal mandates have put a strain on the ability of utility districts, particularly the smaller ones, to provide services at a cost ratepayers see as reasonable.

Sometimes, the financial demands have reached crisis proportions. Buckfield’s water company came within one day of default – which would have been the first such event in a Maine public utility since the Great Depression – after the company had to spend $500,000 to relocate its main line during reconstruction of Route 117 through town. Although the road project was welcome, offering a much-improved connection to the Paris-Norway service center on the other side of Streaked Mountain, Maine DOT rules call for utilities to bear the cost of any relocation work. Since Buckfield has only 180 water customers, most of them homeowners, it took a hefty emergency rate increase from the Public Utilities Commission to stave off disaster.

In general, the federal government has been far more generous with money for sewage treatment plants than for drinking water, reflecting dramatic fiscal policy changes over the years. When the Clean Water Act was first authorized in 1970, the federal government paid for most of what it mandated, providing up to 75 percent of the cost of new sewage treatment plants; originally, states paid 20 percent and municipalities 5 percent, although grants have since been cut back.

By contrast, it took 10 years after passage of the Safe Drinking Water Act in 1986 for the federal government to provide any money to pay for its mandates. They were major, often requiring water utilities to switch from surface water to wells, or to provide advanced, and expensive, treatment of surface sources. Even then, the grant program that began in 1997 is relatively modest. Last year, Maine was to provide $1.7 million, which is usually in an environmental bond issue, to match about $7 million in federal funding.

Nor is that money always a lock. When the Legislature failed to authorize any bond issues at all in 2006, there was no matching money available for water projects, according to Roger Krause, who oversees the grants for the Maine Drinking Water Program at the Department of Health and Human Services. And the Governor’s $397 million bond proposal in March included only enough money for the 2006 grant cycle; fortunately for water utilities, the Appropriations Committee added money for the next two years in bonds that will go to the voters beginning in June, for a total of $6.3 million.

The state receives more federal money for sewage treatment projects – the upcoming bond provides $12 million, plus an additional $1 million for small communities – but also has larger projected needs. According to the calculations of Steve McLaughlin, who oversees a revolving loan for the Division of Engineering and Technical Assistance at DEP, Maine sewer districts face costs of $307 million in the next five years, and $402 million overall. Of those totals, a substantial portion is for combined sewer overflow (CSO) projects – federally required containment for sewer plant discharges during times of high runoff, mandates added when the Clean Water Act was reauthorized in the 1990s. These costs amount to $128 million over five years, and $168 million in all, more than a third of the total capital needs.

Paying The Freight

The five-year requirements for sewer construction range from a modest office project in Eagle Lake, priced at $104,191, to major CSO projects in Portland ($37 million), Biddeford ($15 million) and Augusta ($13 million.). Ellsworth, a much smaller city, faces the prospect of spending $15 million to replace its current treatment plant.

Water grants are managed somewhat differently. HHS compiles a “primary project list” each year listing items that can be funded under the current federal-state aid amounts (there is often a local share as well.) For 2007, the total is $14.7 million, with requested loan amounts ranging from $58,200 to reduce arsenic in the Island Falls system to $3 million to replace transmission mains in the Passamaquoddy Water District. Other loans include $1.5 million for Kingfield, $1.8 million for Newport and $1.4 million for Madawaska. Smaller systems are the primary designees of the federal-state aid program. Krause said that the “backup project list,” totaling $12.8 million, includes items that could be funded in the next annual round. These include $2.2 million to upgrade mains in the Boothbay Region and $2 million to refinance supply and treatment in Calais.

Can They Cope?

The scale of these investments is a daunting challenge, but one which water and sewer utilities – some of which are municipal departments, some regional non-profits, and, in one case, a for-profit national company – are responding to in diverse ways.

Roger Krause wonders how some of the smaller water districts will be able to cope with the federal requirements, and whether some kind of regional cooperation might be a better option.

Water utilities have two statewide associations that help look after their interests. The Maine Water Utilities Association, based in Waldoboro, has been around since 1925, and is currently headed by Jeff McNeely.

McNeely says that the association is a traditional trade group, which has its own newsletter, member committees and sources of advice and assistance for members, which span the gap from the smallest to the largest (the 11-municipality Portland Water District.) Its mission is “to represent the water works professional membership in advocating safe drinking water through education, legislation, policy and networking.”

The Maine Rural Water Association is newer, and has been headed since its inception in 1979 by Steve Levy. Based in Brunswick, it specializes in providing technical assistance to smaller systems, and has helped utilities around the state through sophisticated leak detection equipment and process controls. It also writes grant proposals and provides advice on such topics as maintenance, source protection, and budgeting.

MWUA represents water utilities only; MRWA assists both water and sewer utilities. Because it supplies direct technical help, MRWA has employees traveling all over the state for emergencies and problem-solving.

Levy points out that the criteria for state water and sewer grants are quite different. For water projects, the state uses a point system that ranks projects and makes it clear which will be funded. For sewer grants, “it’s pretty much first-come, first-served,” a process that can be “a little chaotic” at times, he said.

It is the direct assistance that MRWA provides that is perhaps most important to members, Levy says. The association helped Buckfield when it was under the gun for the water main relocation expenses involved in the Route 117 project. It was also there in Bethel when the utility’s main line ruptured at a stream crossing, leaving most of its customers suddenly without water.

Such emergencies are relatively rare; of perhaps greater concern is the ability of Maine utilities to keep up with federal and state standards while keeping costs reasonable.

Levy says that one answer to Roger Krause’s question about regional-ization may lie in informal cooperation, and in the services a statewide agency like his provides. “The local districts have a lot of volunteer help – in the form of the board of trustees – that keep the system running,” he said. “You can’t hire professionals and have the same cost efficiencies.”

He admits that the cost of major upgrades or construction for small systems, like Buckfield’s, may seem insurmountable, he doesn’t think the answer is simply to provide wells for current users, as is sometimes suggested. “Most of these systems have been operating for many decades,” he said. “There was usually a reason why a community system was seen as necessary, and that reason probably still applies.”

Southern Cooperation

One place where the regional challenge has been met with increased inter-municipal cooperation is in York and Cumberland counties, where the Southern Maine Water Coalition was organized two years ago. Norman Labbe, superintendent of the Kennebunk-Kennebunkport-Wells Water District, is serving as president this year, and says the coalition has moved rapidly to offer services to members.

It has seven members, representing the largest water utilities in Maine’s two southernmost counties, and has another 20 affiliate members, mostly smaller utilities in the same region.

The immediate impulse for forming the coalition was projected supply needs for the region over the next 50 years. Over that period, Labbe said, the existing water utilities will likely have to switch over to the two huge sources of fresh water in the region – the Saco River, currently tapped by Biddeford-Saco, and Sebago Lake, the source for the Portland Water District’s 11 municipalities.

The KKW’s current source, Branch Brook, is already proving inadequate in summer, when demand is highest and supply lowest, particularly during drought conditions. In summer, KKW regularly pumps 5-6 million gallons a day, with a peak of 7 million gallons. In July and August of 2002, KKW was buying 2 million gallons a day from Biddeford-Saco, and has since built a direct link to the York system, which also has surplus capacity.

But the coalition also discovered that there were many shorter-term opportunities to cooperate, extending what Labbe called a longstanding tradition of mutual aid. “Water providers are a close-knit community,” he said. “I can go to a meeting in Downeast or Northern Maine and we’re talking shop and sharing ideas in minutes.”

Coalition members, including affiliates, have been purchasing chemicals in bulk, for both wastewater and water treatment systems. It’s currently working on joint pipe purchases, particularly for copper and iron, which have seen widely fluctuating prices, and is exploring bulk uniform rentals. Not every item is susceptible to such agreements, Labbe said; attempts to buy fuel oil in bulk didn’t produce a great price. “We did better by going in with the school district, this time,” he said.

Labbe said the reason the coalition has come together so quickly is that there were already strong relationships within the group. “If someone has a main break, and needs a particular fitting they don’t have in stock, they can call around and find it a lot cheaper, and faster, than working through a supply house,” he said.

The Southern Coalition’s seven full members represent nearly a third of the 750,000 Maine residents who are served by public water supplies – in turn, about half the state’s population. In terms of residential customers served, the Portland Water District is the largest, with 122,000, followed by Biddeford-Saco, 37,000; KKW, 28,000; Sanford; 13,500; Kittery, 12,000; York, 11,500; and South Berwick, 3,500.

Labbe said the coalition has applied for a planning grant for the regional water supply project from the state’s municipal efficiency fund, now being administered by the State Planning Office, and hopes to get started later this year. “It may take 50 years before it happens, but it’s something we need to start on now,” he said.

Labbe says that while a statewide expansion of the coalition isn’t a real possibility, he can foresee other regional groups springing up. In fact, the inspiration for the Southern Coalition came from the Bangor-Brewer area, where utilities have been doing joint planning for several years now.

Private Sector Consolidation

In addition to public regional-ization efforts, there has been a certain amount of consolidation through a company previously known as Consumers Maine Water Co. and now called Aqua Maine. It’s a subsidiary of Aqua America, a publicly-traded company based in Bryn Mawr, Pennsylvania, which serves 2.5 million residents in 12 states.

Aqua Maine has 16,000 customers representing 50,000 residents in Maine and, over the years, has acquired nine municipal water systems and provides services for a dozen more, ranging from testing to accounting and payroll.

Based in Rockport, Aqua Maine acquired the South Freeport Water Company in 1930 and added Camden and Rockport, its largest division, in 1959. It acquired water utilities in Oakland in 1968 and Kezar Falls in 1971, and then made four purchases in the 1990s – Greenville and Millinocket in 1992, and Bucksport and Hartland in 1996. It also manages water systems in Waldoboro and Tenants Harbor, and the wastewater treatment plant on Vinalhaven.

Some of Aqua Maine’s purchases were triggered by a decline in use by a major customer, such as paper mills, a trend that has been affecting water and sewer districts all over Maine. The Augusta Water and Sanitary District, recently merged, will soon pick up the Togus VA center’s wastewater lines, which will help compensate for the closure of the Statler Tissue mill and other industrial customers.

Judy Kelley, president of Aqua Maine, says it is possible to make money even from financially stressed utilities. Part of the secret is the efficiency that comes from shared operations. “Without much trouble, you could do all the accounting, all the payroll, and plan equipment purchases for an entire region from one location” she said. Some of the most recent contracts Aqua Maine picked up have been in back-office functions. “You can’t physically interconnect widely separated systems, but you can definitely gain economies by using centralized services,” she said.

While Aqua Maine has grown over the years, it doesn’t actively seek to acquire new systems, Kelley said. “We usually wait for someone to come to us. If we happen to know about a particular issue a system is having, we might call,” but quick growth doesn’t make sense for the company. “We don’t make a bid unless we think we can add value,” she said. “This is a stable, slow-growth industry. It has to be managed for the long-term,” she said.

100-year Replacement

The long time horizons all water system managers face are a frequent topic of discussion at association meetings. Most water pipe has a lifespan of up to 100 years, so replacing it can often be seen as a relatively low priority. On that topic, observers with as different perspectives on regionalization as Steve Levy and Norman Labbe seem to agree.

“Water trustees aren’t eager to increase rates,” Levy said. “So the tendency is to put things off so at least the increases don’t occur on their watch.”

Competing budget pressures can affect investment decisions, Labbe said. “I don’t know how the municipal departments do it,” he said. “I’d hate to be competing with schools or roads when it came time to do the budget. Water mains are kind of out-of-sight, out-of-mind.”

With a three-town utility that’s separately incorporated, KKW is relatively immune from competing with other budget priorities, Labbe said. The difficulty of assessing immediate water utility needs can be seen from the KKW budget. Amid $5 million in annual spending, $1.5-$2 million represents capital expenditures. “Nearly 40 percent of everything we do is for the long term,” he said.

Water utilities try to replace 1 percent of their pipe every year, and many are far behind, Labbe said. “We still have some ancient pipe, but most of our system is up to date now. I honestly think we’d be a lower priority if we were part of a town budget. This is a silent service industry that can get lost in the mix.”