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Left in limbo

Montana governor uses limited options to ease some communities' pain

From the The cost of failure: Montana's unfunded infrastructure series
  • 5 min to read

Gov. Steve Bullock has tried to help communities pay for some infrastructure and building projects that were left without financial assistance from the Legislature this spring. But most remain unfunded and in limbo.

“We were able to provide some relief by the way we’ve been managing the money,” Bullock said, noting that his office reduced interest rates on some state loans and tapped into a few small pockets of discretionary spending. “In many communities, the core infrastructure has been paid for by the local ratepayers, for certain.”

Many have sought state assistance for years and not found it.

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Sidney

To accommodate anticipated development in a recently annexed part of Sidney, the city will have to replace a water tower to expand capacity.

That’s forced local leaders to compete for limited funding elsewhere — if their towns even qualify — as they continue to pay the increasing costs of deferred maintenance. Some have spiked sewer and water rates or created new fees to pay for the upgrades necessitated by failing components, increased demand, natural disasters or new federal environmental regulations.

Dan Villa, the governor’s budget director, said the failure to pass an infrastructure bill was a missed opportunity to leverage interest rates that often were lower than the cost of construction inflation.

“Those projects have to be funded from somewhere,” he said.

A few prioritized by the governor received help during the interim, but most lost the competitive scramble for cash.

In July, Villa offered Laurel a $1.2 million package of contingency funds, grants and loans as the state’s contribution to a water intake project, which is required for the town to access federal disaster funds authorized after a 2010 flood reshaped the Yellowstone River.

But the city didn’t accept the package quickly enough and the cash was spent elsewhere, including to help move clients out of the soon-to-be-shuttered Montana Developmental Center.

The failed infrastructure bill would have included $7.6 million for renovating one wing of the Montana State Hospital, which did secure $4 million from the Legislature to expand operations and staff to relieve pressure on the facility that houses dozens more mentally ill patients than its licensed limit. So that the appropriation wasn’t wasted, the governor’s office announced a deal in September to lease a nearby, 60-bed youth correctional facility that will be vacant once a federal contract expires.

Some towns with projects unfunded by the Legislature have turned to existing state programs for at least $120 million in assistance, primarily loans but also some grants, Villa said, ticking off totals from the fiscal year that ended in September. Some of those are funded by legislative appropriations, while others operate on the interest generated from endowments.

The governor’s signature move to help towns with infrastructure projects was to adjust interest rates and rules for the State Revolving Fund. The loan program, which was established 25 years ago, finances local drinking water and wastewater projects through federal grants that the state must match by 20 percent with general-obligation bonds authorized by the Legislature.

In mid-2014, Bullock announced interim, three-year interest rates of 1.25 percent for the construction phases of projects and a 2.5 percent long-term rate, both down from 3 percent. So far, the loans awarded add up to $17.25 million for drinking water upgrades and $72.6 million for wastewater projects. Over the course of the 20-year loans, the discounted rates are expected to save $31 million in interest payments for towns from Butte to Glendive.

But not all towns qualify for popular loans and grants. Either they don’t have enough low-income residents or their local water and sewer rates are set below state targets calculated from population and median income.

For example, even after almost tripling its rates in recent years, Sidney’s average monthly bill of $36.50 is just 56 percent of the target rate set for the city.

“I think they’re totally overwhelmed,” Anna Miller of the Department of Natural Resources and Conservation said of towns left without cash assistance in recent legislative sessions. “If they haven’t been saving money and raising their rates 50 cents a year every year then there’s sticker shock when their rates go up.”

At a downtown Sidney diner earlier this month, longtime residents Don Jensen and Rod Kalberer drank coffee before dawn and talked about the recent annual rate hikes that cut into their fixed monthly budgets.

“When you’ve only got so much money to get on with, even if it wasn’t a large bill before, still going up three times hurts,” Jensen said.

“And it’s those guys who might not be staying here that made it that way,” added Kalberer, referencing oil workers who came to the town, most temporarily, to work in the Bakken.

“But then we had it so good for so long,” Jensen conceded. “It didn’t cost us very much for (utilities) as it did other places when you pay a $20 water bill.”

Mayor Rick Norby estimates that the rate increases and property values pushed upward by the boom led at least 30 Sidney families, primarily retirees on fixed incomes, to sell their homes and move elsewhere.

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Sidney Mayor Rick Norby

Sidney Mayor Rick Norby, left, and public works inspector Greg Anderson visit Sunrise Village on Oct. 30. Sewer lines are being replaced at the subdivision because they weren't built to code and were installed before the city had a chance to inspect.

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Sidney

Sidney Mayor Rick Norby tours sewer lagoons that the city has to upgrade because of new federal environmental rules and growth driven by the Bakken drilling boom. The town had to almost triple its water and sewer rates to help pay for the project. Without funding assistance from the state, upgrades slated for their water treatment system could again increase rates.

Even if bills are lower than many places in the state, Sidney Public Works Director Jeff Hintz said it’s tough to convince residents who have lived in the community for decades to increase their rates to support new water and sewer demands driven by the oil boom.

In cities were population had long stayed stable or shrunk, local leaders did not see a need to include such costly expansions in long-term planning and were caught off guard when Bakken drilling spurred population gains.

Although new federal environmental regulations were a driving factor in Sidney’s ongoing $17 million sewer lagoon upgrade, Hintz said engineers for the project calculated that 34 percent of the costs can be attributed to population growth.

“It could have been that much smaller,” he said, noting that rates might have to increase again to upgrade their aging water treatment system and expand service to annexed areas.

Despite falling oil prices that have slowed drilling and, consequently, development in Eastern Montana, local leaders believe the lull is temporary, not a bust.

“If oil goes up even $10 a barrel, I can see another 1,000 wells coming online, just bing,” Glendive Mayor Jerry Jimison said, snapping his fingers.

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Glendive Mayor Jerry Jimison

Glendive Mayor Jerry Jimison inspects progress on the $18 million wastewater treatment facility. The plant was funded with a State Revolving Fund loan. Although grateful for the governor directing that interest rates be lowered, he would have preferred for the legislature to have returned some oil production tax collections to towns affected by the Bakken drilling boom.

Even if drilling doesn’t resume the breakneck pace of recent years, thousands of wells along the Montana-North Dakota border must still be monitored. It might take dozens of people to drill an oil well, but at least one person from an oil services company has to check storage tanks for producing wells, which also must be periodically inspected.

In part, that’s why local leaders say a chunk of the population growth is here to stay. Jimison also said that because Montana was on the fringe of the drilling frenzy, Glendive was a more desirable place to live for families with stable production and transmission jobs, unlike the drilling crews who were hit hardest by layoffs and filled now vacant man camps or rentals closer to their rigs in North Dakota.

“We’ve seen a 10 to 15 percent population increase that’s going to be here permanently,” Jimison said.

A new $18 million wastewater treatment plant will go online in a few weeks to manage that growth and to accommodate anticipated future development. The work, however, is not done. Glendive must now find $10 million to renovate and expand the capacity of their water treatment plant, parts of which are a century old.

“We better start raising rates now,” Jimison said. “The Legislature could have funded us six years ago at probably half the rate that it is now. But they kicked the can down the road. Well, Glendive is not doing that. We’re planning for the future and moving forward.”

Tuesday: Legislature leaves federal money on the table again. 

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