Treatment plant litigation may soon be over
By WENDY STIVER
LOCK HAVEN — The city has a proposed settlement in its litigation with its sewage treatment plant contractors.
The City continues to work toward a resolution, City Manager Richard W. Marcinkevage said Wednesday, and the involved parties are reviewing the numbers to work toward a settlement.
The contractors are general contractor Layne Christensen Co. and electrical contractor HRI Inc.
The new $32 million treatment plant came on line on Oct. 1, 2014, the first day of a new water year. The plant serves about 6,800 customers throughout the region and was built to handle up to 2 million gallons of wastewater per day.
But it was originally planned to open earlier than it did. Construction delays set things back and resulted in added costs for the city.
The first day the plant went into operation, the state Department of Environmental Protection lifted its Consent Order and Agreement on the city. The COA had required the city to meet the latest, more stringent standards for filtering bio-nutrients (nitrogen and phosphorus) out of the wastewater stream before the treated water is released into the Chesapeake Bay watershed. The old treatment plant could not remove the nutrients, so new treatment processes were provided and new buildings were built to hold them — essentially a complete new plant.
Until the new plant came on line, the city bought “nutrient credits” from other places, to meet the DEP discharge permit limits on nitrogen and phosphorus. Nutrient credits are available from sewage plants that remove those nutrients in excess of the amounts required by their permits, and also from some agricultural sources, according to Marcinkevage.
Delayed completion of the new plant’s construction meant the city had to spend more money on nutrient credits.
Once construction was completed, the plant contractors asked to be reimbursed for delay claims, costs they incurred because of the delays in completing construction. A mediation session was held but did not resolve the issues. The city, to protect its interest, filed litigation against the contractors in the form of a claim for liquidated damages to recoup costs it incurred due to the delayed completion, Marcinkevage said.
The litigation process has continued, with the latest step being a meeting in March 2016, during which settlement amounts were discussed. The settlement would result in final payments to the contractors (which have been held pending resolution of the litigation) and reimbursement to the City for costs incurred due to the delays.
The plant has been meeting permit limits, and nutrient credits have not been required since start-up.
The new plant involves newer, different technology and processes, and the operating staff has had to adapt to a different operating protocol, the city manager said. The city engaged the consulting firm of Gwin, Dobson & Foreman Inc., of Altoona, to help eliminate start-up issues and optimize the treatment processes. This took “a little while,” the city manager said, but the operators are comfortable with running the plant now.
The city received a $4 million grant from the Commonwealth Financing Authority and a $10 million grant and a low-interest $18 million loan from PennVest to fund construction. A $6 million bank note was issued for cash flow, and sewer rates were raised for Lock Haven customers. The treatment and debt service costs are reflected in increases in the amounts the City bills other municipalities that send their wastewater to the plant. (Municipalities pay for treatment based on the amount of their flow.)
The other communities the plant serves are Flemington and Mill Hall boroughs, and Bald Eagle, Castanea, Lamar, Porter, Walker and Woodward townships.
The costs of operating the plant are higher than the costs at the original plant, due primarily to the finer degree of treatment, which is more energy intensive and requires additional chemicals for the removal process, Marcinkevage said.
“The more major increase in costs is due to the debt service, with respect to the PennVest loan and temporary borrowing for cash flow,” he stated.
The last sewage rate hike for Lock Haven customers came in November 2011. At the time, the city talked about the possibility of another increase in the future, once all the costs of the new treatment plant are known and reviewed.
If the proposed legal settlement is accepted, Marcinkevage said, those costs could be known by the time city council starts planning its budget for 2018.
Mayor William E. Baney III said the city’s sewer fund is solvent at this time.
“With the former rate increase, the sewer fund runs very well,” he said. “I’m hopeful we don’t have to revisit a rate increase anytime in the near future.”