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BRWA moves forward with project

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By John Barnhart

    The Bedford Regional Water Authority (BRWA) held what its director, Brian Key, promised is the first of several public information meetings on a proposed water line plan.

    The plan calls for building a new water treatment plant on the site of the former Camp 24. It would draw 6 million gallons of water out of Smith Mountain Lake, with a potential of being expanded to produce up to 12 million gallons.
    The project calls for extending a line up Va. 122 to Bedford and then connecting with BRWA’s lines in Forest. This project will provide a back-up water source to Bedford, as required by the reversion agreement, and allow BRWA to supply its own water to Forest, rather than buy it from Lynchburg.
    The first meeting was held at  Trinity  Ecumenical Parish, on the Franklin County side of the Lake. This site was chosen because the meeting was intended to address Lake area resident’s concerns about the impact of drawing additional water out of the Lake.
    “That amount of water [up to 12 million gallons per day] coming out of Smith Mountain Lake is inconsequential,” said Chuck Neudorfer, a Lake area resident and former District 2 supervisor.
    The withdrawal’s impact on the Lake would amount to a drop in a bucket. Key said water flows into the lake at the rate of 650 million gallons per day. The first foot of the Lake’s depth holds six billion gallons. Even if water flowing into the Lake dropped to zero, the water treatment plant would have to suck water out for 100 days to lower the lake level by one inch.
    “We need water,” said District 2 Supervisor Curry Martin.
    Officials pointed out the reversion agreement requirements.
    “They’ve got to do it to fulfill the legal issues of providing water to Bedford,” commented District 4 Planning Commissioner Frederic Fralick.
    Fralick favors the project because it will eliminate stale, dead ends in water lines. He also believes a large, regional water system will be beneficial.
    “We don’t want to go back to the drought of 2002,” he cautioned.

Getting approval
    Drawing extra water out of the Lake requires approval from the Virginia Department of Environmental Quality (DEQ), the Federal Energy Regulatory Commission (FERC) and American Electric Power (AEP). Smith Mountain Lake is a hydroelectric impoundment created by AEP to hold water for its Smith Mountain Pumped Storage Project.
    Rhonda English, a civil engineer employed by BRWA, is working with Key to get these approvals. She is also handling the Requests for Qualifications (RFQ) that BRWA is sending out to find a design/build group for the project. Once it gets a design/build group for the project, it will then need to get Virginia Department of Health permits.       
    William Johnson, who has a master’s in engineering with a concentration in agricultural engineering studies and water and water treatment, is assisting English with the RFQs. He said he has 20 years of experience with similar projects. Johnson said they are looking for experience in building water treatment plants and major pipelines. He added that there are a lot of companies that have this experience.
    “We have been very pleased with the level of interest,” he said.
    According to Key, BWRA can make drinking water from Smith Mountain Lake water cheaper than it can buy water from Lynchburg. BWRA currently purchases water from Lynchburg for its Forest customers.
    “We have asked for a better rate [from Lynchburg],” Key said.
    Instead of a lower rate, Key said the reply BRWA got was a higher rate. He said BRWA can produce drinking water from the Lake for $2.43 per 1,000 gallons. Lynchburg currently charges $2.65 per 1,000 and its latest offer was for $3 per 1,000 gallons.
    Key predicts the cost of producing water from the Lake will go down. BRWA currently treats Lake water at its High Point treatment plant and Key said the cost of production at that plant has gone down for the last seven years. Key said that, unless BRWA gets a better offer from Lynchburg, it will need to proceed with the water line project.
    “We have until we sign a contract with a design/build team,” Key said. He expects they will do that at the end of the year. He expects the project to save the county $28 million over the next 50 years.
    Key said the project will cost $34 million and he expects to borrow the entire amount at once through the Virginia Resource Authority (VRA) in the spring. He said it costs less to issue bonds through VRS because VRS handles the administrative costs and issues the bonds in large groups, reducing administrative costs.
    “We aren’t looking for debt service support from the county or the town,” Key said.
    Key said debt service will be paid through charges to rate payers and he doesn’t expect water rates to go up because the water BRWA is providing will cost less.
    “This project is based on existing demand,” he said.
    Part of the demand comes from the Western Virginia Water Authority (WVWA). Key said WVWA buys water from BRWA to service its customers in Franklin County.

Some question project
    Bill Piatt, of Bedford Above Board, questions the economics of the project. Piatt has a master’s degree in business administration, finance and marketing from Duke. He was chief information officer for the private lending arm of the World Bank prior to retiring in 2010.
    Prior to that, he was chief information officer for the General Services Administration. Prior to that he was a principal at Booz Allen Hamilton Inc., a technology consulting firm. He was responsible for government electronic initiatives.
    According to Piatt, the project will cost more than BRWA’s $34 million estimate. He said a 2011 cost estimate put it at $33.9 million. A later preliminary review, issued on May 10, estimated the cost at between $42 million and $51 million.
    He said BRWA retains its $34 million figure by pulling some infrastructure out, which will still have to be built. As an example, he said a pumping station on Va. 122, with an estimated cost of $910,000 has been removed. He said BRWA also removed a waterline loop at White House which has an estimated cost of $4.1 million.
    The proposed treatment plant at Camp 24 uses the same filter technology as High Point and these filters must periodically be backwashed. The backwash must be disposed of, but the backwash disposal system for the plant has been eliminated from the project. Instead, the backwash will be sent to the Moneta sewage treatment plant, which has excess capacity. Piatt said that, at some point, BRWA will have to build a backwash disposal system at Camp 24.
    Piatt is also concerned that the bonds BRWA will issue are moral obligation bonds for Bedford County. He likened this to a situation in which someone cosigns for another person who has taken out a loan. If the original borrower defaults, the cosigner becomes obligated to pay off the loan. He said Bedford County has already cosigned for $27 million in debt which BRWA inherited from its predecessors, the Bedford County Public Service Authority and the city of Bedford Water Department.
    Piatt claimed, in a phone interview, that BRWA is currently getting a $2 million subsidy from Bedford County each year, which BRWA is booking as revenue. He said this is needed because VRA requires borrowers to have a revenue stream, after operating expenses are paid, of 1.15 times the cost of debt service. He said that, without this annual transfer from the county, BRWA would have a revenue stream, after operating expenses, of .47 times its debt service and it would default on its bonds.
    “That’s why the subsidy is not optional,” he said.
    Piatt believes the county’s subsidy to BRWA will have to increase to the point that it would consume 8 percent of all the county’s real estate tax revenue over the next 10 years if the project is built.
    He questions BRWA estimates that the difference between what it costs BRWA to produce water and what it will cost to buy it from Lynchburg are flawed because they anticipate costs of their own production to rise at 2 percent per year, while estimating that the cost of buying water from Lynchburg will increase by more than 3 percent per year. Piatt suggested that the 2 percent per year increase over 50 years is unrealistically low.
    He suggested that it would be better to provide Bedford with its back-up water supply by extending a water line down U. S. 460 to link up to Lynchburg.