JOHN DAY — Residents of John Day and Canyon City will see a dramatic rise in their water and sewer rates as the cost of a new wastewater treatment plant continues to soar.

The projected increases are in a rate study conducted by Donovan Enterprises, the results of which were presented at the Nov. 26 John Day City Council meeting.

The goal of the exercise was to determine how much water and sewer rates would have to rise to cover the cost of building the new wastewater treatment plant. The rates are not yet decided and would have to be approved by the council.

The study anticipates a 4% increase in water rates over five years to put base water rates at $41.36 per month by 2029.

Steve Donovan of Donovan Enterprises also factored in a steady increase to the city’s community development fee, which would rise from $6 per month to $7.30 per month by 2029.

The largest increase in charges would be to those who are outside city limits while using city water services.

Those costs would increase steadily from $68 per month to $82.72 in 2029.

The largest cost increases would cover sewer rates, however.  

Using the rate study, base sewer rates would steadily rise from $60 in 2025 to $145 in 2030. As a result, residents could expect a base water/sewer bill of $193.44 per month by 2030.

The city’s base water/sewer cost is $100 per month for those within John Day city limits. Customers are charged an additional per-gallon rate for any use over 4,000 gallons and a slightly higher per-gallon rate for any use over 20,000 gallons.

Those outside city limits who are using city water would pay a slightly higher per-gallon rate for usage beyond the 4,000- and 20,000-gallon thresholds.

Donovan said Canyon City’s water and sewer costs would rise just as John Day’s will, although no numbers were given for Canyon City at the meeting.

Donovan Enterprises is not conducting a rate study for Canyon City; instead, Donovan said the firm is hashing out what Canyon City’s water flow into the treatment plant is to determine how much the city’s contribution will be.

The estimated cost of the project has increased more than threefold from the initial figure of $10.3 million when the plant was first proposed in 2018. The number had ballooned to more than $20 million when the city authorized putting out a request for proposals for the plant’s final design in March of this year, and the estimated cost has since swelled to almost $33.5 million.

Jim Pex of Flagline Engineering said the increased cost of the project is the result of rising prices for labor and materials. The price of concrete has tripled while the price of electrical components has risen 55%, with lengthy wait times.

One unintended complication is the Build America, Buy America Act, or BABAA, which requires key elements of federally funded infrastructure projects to be U.S.-made. Few electrical components these days are made in America.

Pex said steps were taken to lower the cost of the project, from omitting the demolition of the old wastewater facility to slimming down the design of the new plant, the potential reuse of existing lagoons and alternative funding options to circumvent federal purchasing requirements.

The city’s wastewater treatment plant was built in 1949, received its last major upgrade in 1978 and is in a state of disrepair. The facility’s state operating permit expired in 1978 and cannot be renewed under regulatory guidelines.

Loans make up majority of funding

John Day’s grant manager, Nick Ducote, stressed the projected rates were not set in stone and could be lower if the city can procure additional grant funding. As it stands, the bulk of the project’s funding will come in the form of loans.

Ducote said the city will look for more grants search but is out of easy options at this point.

“We have used, unfortunately, every grant that’s easily available,” he said.

Grants make up $5.9 million, or 18%, of the project’s overall funding. The rest would be covered by low- and moderate-interest loans with 30- to 40-year terms.

The biggest loan is a Clean Water State Revolving Loan administered by the Oregon Department of Environmental Quality. The principal amount on the loan is $24,539,935 with a 30-year term at 1.55% interest.

The second loan is an Infrastructure Finance Authority loan administered by Business Oregon. That loan’s principal amount is $1,548,153 with a 30-year term at 1% interest.

The final loan the city will use to fund the treatment plant is a Rural Utility Service loan from the U.S. Department of Agriculture. The principal amount on that loan is $1.5 million with a 40-year term at 3% interest, which is subject to change.

Two of the three loans have BABAA and prevailing wage requirements. All of the loans require environmental assessments to begin construction and may be subject to single source audits. 

The three loans collectively would accrue $614,295 in interest during the project’s construction. The city would have to start repaying the loans as early as fiscal year 2028.

The Infrastructure Finance Authority loan’s annual debt service of $59,988 will begin in fiscal 2028. The Clean Water State Revolving Loan’s annual debt service of $1,029,080 and the Rural Utility Service Loan’s annual debt service of $64,894 will begin in fiscal year 2029.

The construction plan is to design the plant through the summer and fall of 2025, with 2028 as the goal for completing the project. Water rate increases would go into effect for John Day residents in January 2025.

A previous version of this story had inaccurately described the number of loans subject to Buy America, Build America requirements, environmental requirements and potential audits.