Oak Harbor asks Navy to pay $39 million to connect to city sewer system

If the Navy wants to connect toilets and sinks on the Seaplane Base and surrounding housing to Oak Harbor’s new sewage treatment plant, it’s going to cost many millions of dollars.

The city is proposing a $38.5-million buy-in fee and about $2.35 million or more a year for maintenance and operation, to be exact.

Connecting the Navy to the $149-million plant will reduce city customers’ rates, city officials have said, but the amount of the reduction is unknown.

The rate is currently at $102 a month, and city leaders projected it to increase to $110 in 2021.

City Administrator Blaine Oborn said in an email that there are many variables on how the Navy’s participation could affect rates.

“At this time it is premature to make a projection,” he said.

“The rate analysis will happen when the city has a better idea of what a contract with the Navy will look like.”

Last week, the city council voted to authorize the city to submit a connection fee and rate proposal to the Navy for the treatment of wastewater. The proposed fees and rates are based on work done by consulting engineers.

Shawn Koorn of HDR Engineering, the city’s consultant, said during a presentation to the council that the numbers represent an equitable allocation of costs based on a generally accepted methodology.

Last summer, the Navy asked the city for quotes for cost and rate information under four scenarios for hooking Navy housing and property into the city’s sewage treatment system.

The city had asked the Navy to partner on the construction of the sewage treatment plant five years ago, but Navy officials declined, citing financial and acquisition regulations.

A statement from the Navy five years ago said it could not make lump sum payments for new infrastructure unless authorized under specific legislation.

At that time, city officials predicted the Navy would want to hook into the city’s treatment facility in the future, but that the cost to the Navy would be significantly higher if it connected after the plant was built.

The city and the Navy had been partners for many years in treating sewage at the aging Crescent Harbor lagoons, which are in the middle of an environmentally sensitive area.

The city stopped using the lagoons last fall when the treatment plant came online, but the Navy still employs them.

During the presentation, Koorn explained that the Navy wanted cost estimates on four different scenarios.

One scenario has the city maintaining and operating sewage conveyance on Navy property and another has the Navy owning and operating the pipes and pumps; also, the Navy asked for numbers on an up-front payment for the connection cost and payments spread over 20 years.

Koorn said the yearly rate the Navy should pay for sewage treatment is $2.35 million if it maintains its facilities and $2.725 million if the city takes over.

The $38 million connection fee is the value of the capacity the Navy will utilize multiplied by 1.5 to reflect a latecomers fee, Koorn said.

“This is really there to reflect the value of what the city’s customers have been paying for the last eight-plus years on the system,” he said, explaining that there have been costs for more than just capacity.

It’s the same idea as the hookup fee a new house would have to pay the city to get sewer service, but on a much larger scale, Koorn said.

Brett Arvidson, the project manager for the treatment plant, explained that the numbers Koorn presented are a starting point and the city will still need to negotiate with the Navy to finalize the costs.

Also, he said actual costs, which may change, will be written into the final contract.

Councilman Rick Almberg told city staff that the city has the stronger negotiation position and reiterated that city ratepayers should not subsidize the Navy.

“The Navy needs the city’s wastewater facility more than the city needs the Navy in this situation,” he said.

The city gave the Navy a deadline of Sept. 1, 2020 to reach agreement on the connection fee and rate proposal.

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