Sticker shock on Waynesville sewer plant rebuild could impact thousands

Jan. 18—Waynesville is facing an $8.5 million conundrum after bids for the rebuild of its sewer plant came in far more than what the town's loan for the project will cover.

The town got approval from the state to borrow up to $19.5 million for the long overdue rebuild of its sewer plant. But when the town opened three bids from contractors last month, the lowest one came in at $27 million.

"I joked with you that opening the sewer plant bids might be a day that lived in infamy, and unfortunately, it seems I was right," Town Manager Rob Hites said when breaking the news to the town board last week.

The higher cost potentially spells bad news for sewer customers.

The sewer plant rebuild won't come out of town tax coffers. Instead, it will be paid for with sewer fees from some 10,000 customers — not only those in Waynesville, but also with Junaluska Sanitary District and the town of Clyde, which send their sewer to Waynesville's plant.

The town has been incrementally raising sewer rates the past four years so money coming in from sewer bills would be enough to cover the loan payments. But the rate increases will have to be much higher than planned barring another solution to close the gap.

The higher-than-expected cost is largely due to rising material costs.

"Ductile iron has gone up 330% in the last three to four months because only U.S. steel can be used in projects that involve federal money," Hites said.

The influx of billions of dollars in COVID stimulus money to local governments across the country has led to thousands of public works projects being paid for with federal dollars, in turn sending demand for U.S. steel through the roof.

Meanwhile, the price of concrete has gone up about $200 a cubic yard.

"And frankly, all a sewer plant is is motors, concrete and steel," Hites said.

Since the infamous bid opening in December, the town's sewer plant engineer has met with the lowest bidder three times in an attempt to shave costs, a process known as value engineering.

"The contractor has been very creative. We believe there may be up to $3 million in potential savings," Hites said. But even then, "it would still be $5 million higher than our loan."

Meanwhile, the town has gotten preliminary state approval to increase its loan amount from $19.5 million to $21 million. That closes the gap further, but still leaves the town a few million short — and would still put an undue burden on sewer customers.

Long shot solution

There's one potential avenue for salvation: tapping a state pot of federal COVID stimulus money being doled out in grants for local water and sewer projects.

But there's a big catch. The money has been earmarked for so-called distressed communities.

"And we're not on the distressed list," Hites said. "I find this offensive."

The Division of Water Quality unilaterally decided to set aside the stimulus money for projects in distressed communities. The legislature didn't have a say in it.

"I see no reason why the money should go to a handful of distressed communities to the determinant of folks like us," Hites said. "I don't think there's any fairness in that."

Hites said Waynesville's sewer customers would see a huge increase in their sewer rates to cover the higher cost of the project without some sort of solution.

The average monthly sewer bill for Waynesville residential customers would have been around $45 a month to cover the annual loan payment for the sewer plant rebuild — under the original cost estimate. But under the new higher cost, monthly sewer bills would be upwards of $70.

And that's too high, even by the state's own reckoning, Hites said. State regulators claim monthly sewer bills shouldn't exceed $50.

While it may be a long shot, town leaders plan to lobby for a rule change. Hites is hoping the legislative delegation that represents Haywood could intervene to make the stimulus money available to a larger subset of local governments than just those labeled as distressed.