The Philomath City Council on Monday night approved an amendment to the state grant agreement that is paying for much of the city’s new water treatment plant. The change gives the city three more months to spend its federal pandemic relief dollars and moves more of that money into construction.
The council voted unanimously to direct Mayor Christopher McMorran to sign an amendment to the city’s Coronavirus State Fiscal Recovery Fund grant agreement with the state. The $12 million grant is funded through the federal American Rescue Plan Act and administered by the Oregon Business Development Department, known as Business Oregon.
The amendment pushes the project completion deadline from Sept. 1 to Dec. 1. According to an agenda item summary, the change was needed because of project delays, and all ARPA funds are expected to be spent and reimbursed to the city by the new date. The city originally signed the grant agreement on Sept. 27, 2022.
“This is just allowing us another couple months to spend the grant money we’ve already received,” McMorran said. “We’re not spending any more of it.”
The staff summary described the deadline as the only change to the agreement. However, City Manager Chris Workman told the council that the amendment also replaces the grant’s budget table. It shifts money out of the design and engineering and the permitting and regulatory fees line items and into construction.
“We’re changing some of the allocations between those three line items to make sure as much money goes to the construction line item as possible,” Workman said.
Under the new budget, $10,587,600 in ARPA money is assigned to construction, $1,277,400 to design and engineering, and $135,000 to permitting and regulatory fees. Workman said the city calculated that $135,000 is all it will need for permitting, so anything above that amount moves to construction. The agreement also lists $4,162,500 in other funds for construction, which brings the total budget covered by the agreement to about $16.2 million.
The motion to approve the amendment passed 5-0 with two councilors absent.
Earlier in the meeting, during a review of the city’s strategic plan, City Councilor Jessica Andrade asked about an apparent conflict in the report. It lists summer 2027 as the completion date for the water treatment plant, but it also cites a December 2026 deadline for the project’s ARPA funding.
Workman explained that the two dates refer to different things. The ARPA money must be spent by Dec. 1 and will carry construction to about 50% completion. A $7 million loan from Business Oregon’s Infrastructure Finance Authority will cover most of the remaining cost.
“We won’t be project complete,” Workman said. “Dec. 1 will just be done with ARPA dollars.”
According to the report, the loan contract is expected to take six to eight weeks to draft. After that, the council will vote on the loan and its terms.
During staff reports, Workman described a trip to Tillamook, where he, Finance Director Mike Murzynsky and Public Works Director Kevin Fear presented the city’s request to the Infrastructure Finance Authority board.
“Because our loan ask was so high, we got to go in person and dress up and talk to the bigwigs and give our presentation,” Workman said. “They asked a couple questions and then they voted and approved loaning the city $7 million for the water plant.”
According to the management report in the council packet, the city participated in a “One Stop” meeting with Business Oregon and the Department of Agriculture to determine the best financing package available from the state. It completed an application on Aug. 28 for a loan through the Special Public Works Fund, and city staff were then invited to present the request at an IFA board meeting.
The board approved interim short-term financing, which locks in an interest rate for three years. When market conditions are favorable, the state will sell bonds covering many projects statewide and refinance the city’s loan as part of that package. Workman said the state typically secures a bond rate somewhat lower than the guaranteed interim rate, though there are no guarantees.
“We’re set on the $7 million we need to borrow in order to complete the project, which is great news,” Workman said. “It means we don’t have to stop constructing the treatment plant.”
Workman said the water rate increases the council approved in April will cover the debt.
“The water rate increases that have already been approved will be sufficient to cover the costs of constructing the plant and paying that principal and interest payment,” he said.
In the management report, Fear said the plant’s raw water pump station wet well has been poured in concrete and a backwash bypass system has been installed. Work is continuing on the alum pond extension. Contractors have the pipe and fittings on hand and can begin installing the piping that runs under the plant floor.
The council approved new utility rates in April. Under those rates, the residential water base charge is rising in phases from $18 to $25 per month by July 1, 2027.
In late April, the council cleared the way for contract negotiations with Stayton-based ORR Inc., which submitted the low construction bid of $13.8 million. At that time, the total treatment plant project cost, including the $4 million water reservoir already completed, was estimated at about $24 million.
Philomath’s current water treatment plant has been in operation since January 1986.
