NVDAILY.COM | Local News

Posted January 8, 2013 | comments Leave a comment

Strasburg: Cost-reduction ideas sought on wastewater plant

By Alex Bridges

Strasburg plans to seek advice from experts on ways to cut the cost of upgrading its wastewater treatment plant.

The town is advertising a request for information from interested firms or individuals who could provide ideas on how to reduce the cost of the project construction from the lowest bid price of $31 million to $20 million. Town Council had sought to spend no more than $24 million on the project, a price that included other fees and charges.

The request for information provides a way to collect input and possibly give staff, engineers and the low bidder any cost-cutting ideas not yet posed, Town Manager Judson Rex said after Town Council's meeting on Monday night.

Request for information responses are due in early February. Staff also expects to have a better idea about the results of cost-cutting efforts by the end of January.

Also on Monday, Town Council took action that would cut Strasburg a small break with a loan it received for engineering work on the plant upgrade project. Council voted 7-0 to approve an ordinance and a resolution authorizing a change to the current $1 million general obligation bond note for design fees associated with the wastewater treatment plant upgrade. The modification will allow the town to receive a lower interest rate on the loan.

Strasburg faced having to pay off the loan in February, according to Rex. Or the town, as council chose, could refinance the loan, modify the bank note with BB&T, and extend the maturity date with the anticipation of paying off the debt in its entirety through permanent financing.

"I know a lot of things are up in the air with the waste water treatment plant," Rex said.

Mayor Timothy Taylor noted that the town still plans to move forward with the project but council and staff hope to reduce the cost. The town already has received the $1 million and has disbursed most of that amount as payment for engineering services already provided, officials explained.

Town Attorney Nathan Miller, said, "If you didn't build this plant at all and didn't do anything, a year from now you'd have to pay off the million dollars."

Otherwise, he said, you would have to pay it off today.

As a result of the modification, the interest rate on the loan decreases from 1.89 percent to 1.16 percent, with interest-only payments due each month, according to Finance Director Dottie Mullins. The note allows for prepayment without premium as long as a 30-day notice is given, Mullins explained.

The director said she had asked the town's bond counsel about a stipulation in the note that stated Strasburg wouldn't borrow more than $10 million in the 2013 calendar year, in light of the fact the plant upgrade project likely would go over that amount. Mullins said that, according to the bond counsel, any funds borrowed through the U.S. Department of Agriculture Rural Development program qualifies as taxable debt with no impact on the $10 million ceiling.

The town will pay approximately $6,500 in fees to the bond counsel and to BB&T for an attorney to review the documents, according to Mullins. Fees exceeded $12,000 when the town closed on the same loan two years ago.

Councilman Scott Terndrup questioned what would happen if the town did not move forward with the plant upgrade project.

Terndrup also asked if the town, as stated in the resolution, would seek long-term financing for the project. The town anticipates receiving long-term financing to pay off the $1 million loan, Rex said.

The resolution also gives a project cost of $24 million. That amount represented the estimated cost of the project as presented to staff and council several months ago by the contracted engineering firm Malcolm Pirnie until bids from construction firms came in much higher, Rex explained.

Council's action included the adoption of post-issuance tax compliance procedures. Councilman Robert Baker asked staff members if they could meet the certain requirements as stated in the compliance documents.

Mullins said she did feel that they would be able to comply with them.

"Most of them we are complying with now," she said. "These procedures need to be in place. We actually have to have written procedures. We had them in the past; they just weren't written."

The Internal Revenue Service now requires written procedures instead of implied, Mullins explained.

In response to a question posed by Baker, Mullins and Rex said bond counsel would alert the town of any subsequent requirements issued.

Contact staff writer Alex Bridges at 540-465-5137 ext. 125, or abridges@nvdaily.com

Copyright © The Northern Virginia Daily | nvdaily.com | 152 N. Holliday St., Strasburg, Va. 22657 | (800) 296-5137