TRAVERSE CITY -- Grand Traverse County's septage treatment facility faces millions of dollars in losses in coming years, and local taxpayers and septic tank owners could be forced to bail it out.
The county-operated septage facility will lose $3.4 million by 2014, according to a new, independent analysis crafted by accounting firm Plante & Moran and engineering firm URS.
Analysts call for wholesale changes in the way the plant is funded, and recommend annual fees be levied on septic tank owners.
But that won't stop the bleeding for a plant built to treat sludge from septic tanks throughout the county. The plant still could lose anywhere from $580,000 to $2.2 million over the next six years, unless the county also implements a special property tax assessment.
"People can look at the report and think it's completely negative," said Chris Buday, manager of the county's Department of Public Works, which oversees the plant. "I just think it gives us some realistic opportunities we should give serious consideration."
The report, a draft of which the Record-Eagle obtained last week, represents the latest blow for a public works project that showed serious structural and financial flaws, almost from the day it opened in May 2005.
Taxpayers in Peninsula, Garfield, Acme, East Bay and Elmwood townships are on the hook for its financial failings. But the pain could spread elsewhere, because the county board sold bonds to finance the facility, and worried officials from the member townships want the county to take it over.
"It is our bond rating, and if at any time the townships cannot pay for this facility ... we would have no choice but to take it over," said Grand Traverse County Commissioner Larry Inman.
Incapable of long-term sustainability
The basic problem, said Jan Hauser, vice president at URS, is the plant doesn't receive nearly enough septic and holding tank waste to operate efficiently.
The plant is "incapable of independent, long-term fiscal sustainability" under the current funding plan that charges 12 cents a gallon to treat septage, according to the report.
Continuing to fund the plant through the current system would require boosting the average cost to pump out a septic tank from $344 to $895 by 2014, according to the report. At the current 12 cents a gallon rate, the plant would need to take in 19 million gallons of septage annually to remain solvent.
The plant currently accepts about 4.5 million gallons of septage each year.
Reaching 19 million gallons is not a "realistic expectation," the report concluded.
Hauser recommends the county strongly consider charging septic tank owners an annual fee ranging from $40 to $50, but possibly as high as $80. He said it will create a steady, consistent revenue stream and encourage regular pumping of septic tanks.
The major recommendations are:
-- Generate $850,000 each year by replacing the current per-gallon charge with an annual fee on septic system owners;
-- Cover annual debt payments of about $675,000 per year by creating a special assessment property tax district;
-- Save $240,000 by shutting down the plant's processing equipment in 2009 and shipping all waste directly to the city wastewater treatment plant;
-- Save $29,000 in electric costs by purchasing new pumps to improve plant efficiency;
-- Bid out the current no-bid contract to operate the plant or consider staffing with county employees;
-- Strongly consider the feasibility of integrating a proposed new sewer treatment plant at the septage treatment facility, instead of developing a treatment plant at a separate location;
-- Pursue long-term contracts to take such special wastes as groundwater leachate from landfills, industrial washwater or food processing waste.
Comprehensive solution needed
The report does not include a preferred solution to the plant's financial woes because it's a draft, but Hauser said officials will need to adopt most of the recommendations.
"It has to be a comprehensive, integrated approach to deal with it from all the angles," he said.
Wayne Kladder, Acme Township supervisor and chair of the county water and sewer committee, said current efforts to find special waste to treat at the plant hold "real promise."
Kladder received the septage plant draft over a week ago, but said he hadn't read it.
"It's a county thing and we're waiting to see what the county does with it," he said.
Analysts agreed that attracting special waste customers is vital, but said it won't solve the money problems.
"Special waste is icing on the cake," Hauser said. "It's not a steady, reliable revenue source, but we need to be doing everything we can to attract that waste."
Most special waste is not compatible with the plant's treatment system and would require new equipment that could cost from $1 million to $3 million. The report also notes producers of such waste are extremely price-sensitive and are quick to bolt for a cheaper alternative.
"It is not advisable to rely upon special wastes as a central strategy in attaining long-term financial sustainability," the report states.
It recommends a $1 million investment in order to generate about $200,000 a year in revenue from special wastes.
Plant 'oversized'
Buday and analysts agree the plant, designed by the Traverse City engineering firm Gourdie-Fraser Inc., is "oversized" for the amount of septage available in the region.
The report lists the average flow of septic and holding tank waste at 19,414 gallons a day, "far below the anticipated design capacity of 90,000 gallons per day."
"Starting at 20 to 25 percent capacity is OK if you have out-of-control growth," Hauser said.
Analysts project that by 2030 use of the plant will more than double. Even then, it would use just 43 percent of its capacity.
An ATAD tank that uses mechanical and biological means to turn septic tank sludge into compost has a capacity of 10,000 pounds a day. It processes an average of just 700 pounds, 93 percent below capacity. It's also a component of the plant that uses the most electricity.
Gourdie-Fraser said it surveyed septage haulers and projected the plant would take in over 11 million gallons of holding tank waste, septic tank waste and grease in its first year and grow between 5 percent to 10 percent a year thereafter.
Volumes have grown but the initial projection of 11 million gallons was faulty, Hauser said.
More than three full years after opening, the plant is expected to take in just 7.5 million gallons. The lack of volume makes the plant inefficient to operate.
"(The plant) may have been well-designed, but it was well-designed for more gallons than we are getting," Hauser said.
It costs the septage facility an estimated 8.6 cents a gallon to treat waste, 57 times more costly than the city wastewater treatment plant.
The report recommends shutting down the costly processing part of the plant until 2010, when state law outlaws land application of septage from septic tanks located within 25 miles of a facility. The report estimates the law change will boost the amount of septage coming to the plant by 58 percent, slashing its treatment cost to 5 cents a gallon.
County officials are expected to meet with the analysts this month to go over the report before producing the final copy.
