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For Immediate Release
January 24, 2006
Contact: Jenny Hagan, Public Relations Manager |
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Charleston Water System Board approves $155.5 million Capital Improvement Program
Program includes critical water and wastewater infrastructure needs; Funding will require bond issue and rate increases
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(January 24, 2006)—Charleston Water System’s Board of Commissioners today approved a $155.5 million Capital Improvement Program (CIP) consisting of 45 critical water and sewer infrastructure projects needed to ensure the utility can meet smart growth demands, maintain compliance with regulatory requirements, and replace aging infrastructure.
To fund the CIP, the Commissioners approved the staff’s recommendation to borrow up to $180 million by issuing revenue bonds. Charleston Water System plans to go before Charleston City Council in February to request approval of the bond issue, as the utility is required by law to receive Council’s approval to incur debt. The proposed bond issue will be as much as $180 million, depending upon borrowing costs, capitalized interests, and other related expenses.
If approved, the bond issue would require Charleston Water to increase water rates by an average of 4% and wastewater rates by an average of 7% each year for the next three years, beginning December 1, 2006. For the typical residential water and sewer customer in the City of Charleston who uses 6,000 gallons of water per month, this amounts to an average $3.68 increase on the monthly bill each year. The Board approved these rate increases during Tuesday’s Board meeting.
In addition to borrowing up to $180 million for the CIP, Charleston Water will request Council’s approval to refinance up to $110 million in existing debt, which could save Charleston Water as much as $4 million in interest payments based on current market conditions. “We’re exploring several different refinancing options to take advantage of lower interest rates, and the money we save will be used to either pay down our existing debt or reduce the amount of the proposed bond issue,” said Director of Financial Services Wesley Ropp, CMA.
Charleston Water System provides water to 400,000 people and wastewater service for 180,000 people in the Greater Charleston area. Storm water drainage is a separate system from Charleston Water’s wastewater infrastructure, and is managed by the City of Charleston. Charleston Water System is one of the largest utilities in the state and operates one water treatment plant, two wastewater treatment plants, approximately 1,500 miles of water mains, 500 miles of wastewater mains, and nearly 200 wastewater pump stations.
“Reliable water and wastewater infrastructure is one of the foundations for economic development, public health, and quality of life in our community,” said Charleston Water System CEO John Cook, P.E. “Charleston’s historic charm is part of what makes this city a wonderful place to live and visit, but it also means that we have aging infrastructure that needs to be updated or replaced. Combined with the fact that we’re experiencing tremendous growth and facing new regulatory challenges, that creates a critical need for investment in new infrastructure.”
All the projects included in the Capital Improvement Program (CIP) were derived from four master plans completed earlier this year, which identified infrastructure needs for the treatment plants, water distribution system, and wastewater collection system based on population growth projections, anticipated regulations, and the remaining service life and/or capacity of aging infrastructure. “We did the master plans to give us an overall idea of our capital needs over the next twenty years,” said Director of Design and Construction Mark Cline, P.E. “We then prioritized projects based on our most urgent needs in terms of growth, regulatory requirements, and aging infrastructure, and those priority projects make up the 2006 Capital Improvement Program.”
The CIP includes 45 projects, such as new water storage tanks, a new filter building at the Hanahan Water Treatment Plant, new wastewater infrastructure to serve the Red Top area, and replacement of old water mains on the Peninsula. A complete list of projects is available at www.charlestonwater.com.
Charleston Water System is not unique in the position of facing significant capital improvement needs. Utilities across the nation are bearing large cost burdens associated with updating aging infrastructure to accommodate growth and meet new regulations. In its 2005 Report Card for American’s Infrastructure, the American Society of Civil Engineers (ASCE) gave the nation’s water and sewer infrastructure an overall grade of “D-.” The ASCE also noted that a lack of federal funding is placing the financial burden of updating infrastructure on municipalities and ratepayers. (To view the report card online, visit http://www.asce.org/reportcard/2005/index.cfm).
Charleston Water last issued revenue bonds in August 2003. The $98.5 million was an emergency issue to fund replacement of the aging sewer tunnels in downtown Charleston and homeland security improvements recommended by the US Environmental Protection Agency (EPA) after 9/11. “That bond issue was atypical in that it funded two unusually costly projects which were urgent, so we had to delay other capital improvements,” said Cook. “Our last bond issue for routine capital projects was in 1998, so we’ve gone eight years without any significant funds to address system growth and regulatory requirements.”
Charleston Water was able to fund some projects using revenue from impact fees and retained earnings, but the cost of the 2006 Capital Improvement Program far exceeds the revenue generated by fees and retained earnings. Charleston Water System does not receive tax revenues; all operations are funded by water and wastewater rates and fees.
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