Missoula Water budget includes mainline replacements in 2018
Several leaking water mains, including a 1914 pipe that cuts through a Superfund site near Scott Street, may be the first in line for replacement under the management of Missoula Water, so long as the City Council approves the projects as part of its Fiscal Year 2018 budget.
As proposed, the 2018 Missoula Water budget proposes an operating revenue of $18.9 million and sets the stage for more than $3.8 million in capital improvements over the first three years.
The figures, which are part of the city’s five-year operating analysis, are paid for by the $112.9 million purchase of Mountain Water Co. and all operating revenues generated by system.
“The five year projection in our 2018 budget includes our personnel that we’ve hired from Mountain Water,” said Dale Bickell, the city’s chief administrative officer. “It includes all of the operating costs that we have anticipated based on prior history and the experience of our new employees. It’s a conservative estimate of our interest payments. The pro-forma continues to perform as we expected.”
The city’s purchase of Mountain Water, which closed on June 22, is covered by two bonds, including a $112.9 million Series A note that carries an interest rate of 2.87 percent.
That bond includes the $83.8 million purchase of Mountain Water, along with legal fees and other charges associated with the city’s acquisition of the utility.
“That’s about $1.3 million less than the amount that council approved back in February when we were getting financing arranged for this,” Bickell said. “But the Series B note increased a little because of the new property tax contingency that was out there.”
While the Montana Supreme Court ruled in the city’s favor regarding its property tax liability for acquiring the system, Bickell said it created a potential future liability, which the city will cover with a $25 million Series B note if necessary.
“We’re very confident that the contingency will result in the city’s favor, along with other contingencies such as interest and (The Carlyle Group’s) legal fees,” Bickell said.
Dennis Bowman, operating manager for Missoula Water, said several projects are already on tap this summer. All of them, he added, have been coordinated with the city’s street department to cut costs by eliminating unnecessary excavation.
According to the priority list presented Wednesday, the replacement of 1,500 feet of water main on South 4th Street tops the list. Once finished, Bowman said, the roadway would be left in better condition than it is currently.
“When we go to a neighborhood to do a main replacement, we want to make sure it’s in better condition than when we arrived,” he said. “When we leave, it will look much better than we got there.”
Extending 2,200 feet of water main on Scott Street ranks second on the list of projects proposed for 2018. That project would eliminate a main installed in 1914 that runs through a nearby Superfund site.
“You had me at replacement of a 1914 pipe and a Superfund site,” said Ward 1 council member Bryan von Lossberg. “I recall that it leaked 226 gallons a minute through contaminated soils.”
Other projects include water main work on Stoddard and Grant streets, along with Havre Avenue. Along with road improvements, the projects would also improve water flows for fire protection and add new hydrants, Bowman said.
“With the revenue that’s coming in, we’ll turn around and reinvest in the city and these projects and hopefully reduce leakage,” Bowman said. “My plan is, once the council approves everything, we’ll get started on putting new hydrants in this summer and a couple of the main replacements and engineer the rest in the winter.
“We’ll try to get some really good prices from the contractors before they get busy,” he added. “If we lock the price in, we save, the citizen saves and we’re able to reinvest more in the system.”
While the city set aside $3.8 million for capital improvements over the first three years, von Lossberg said the investment will go beyond that.
“It’s a supplemental amount in additional to funds that come through operations,” von Lossberg said. “Capital improvements are a critical part of why we did this acquisition, and I don’t want there to be any confusion that the $3.8 million represents the total budget for capital improvements in years 1-3.”