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BOZEMAN - Bozeman city officials underestimated by millions of dollars the cost of a new wastewater treatment plant and the amount of money the city would have available to pay for it.

To make up the difference, city commissioners are looking at scaling back the treatment plant and increasing residents' sewer rates, which have increased by 25 percent over the past three years to help pay for the plant.

The new wastewater treatment plant, to be built over the next three years, is expected to triple the city's capacity to handle wastewater. It was intended to be financed by user fees, impact fees and loans.

But the estimated cost of the project increased from $38 million in 2007 to $51.9 million this fall. The lowest bid came in at $65.7 million.

"Our (consulting) engineer does have some explaining to do, and he's going to be here on Monday to do that," city engineer Rick Hixson said.

The city had planned to cover 67 percent of the plant's cost with sewer customers' payments that had been set aside over the years. The other third was to be covered with impact fees charged on new construction. But the city expects to have collected only $13 million from impact fees, $4 million less than expected.

"It's clear that impact fees won't be covering all of the eligible costs of the plant," said Anna Rosenberry, city finance director. "What impact fees don't cover has to be covered by the utility fund, the ratepayers."

The average residential customer in Bozeman pays $24.80 a month for sewer service, up from $19.70 three years ago. The city is looking at increasing that amount to $39.22, but that still won't be enough.

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Tom Adams, superintendent of the city's wastewater treatment plants, said the planned energy-recovery systems that were included in the project will have to be scrapped. City officials said the cost of the project needs to be scaled back to $53.8 million.

Rosenberry said the city will also have to borrow some money to keep the project on track. It can't be put off because of state environmental regulations that take effect in 2011.

"We have to be in compliance with nitrogen and phosphorous limits by 2011," Adams said.

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