Fees rising every year to repair crumbling system
When drawn up 11 years ago, Baton Rouge’s sewer rehabilitation program had an estimated price tag of $618 million and was scheduled to be done by Dec. 31, 2014. Since then, the cost has more than doubled and the deadline for the work is being extended.
The sewer rehabilitation, known as the Sanitary Sewer Overflow program, is the largest and most expensive capital project in city-parish history. Baton Rouge residents are footing the bill with a combination of sales taxes and sewer fees — the latter of which average $500 a year annually for homeowners and rise every year.
The working price tag now for the rehabilitation is $1.455 billion, but the true cost to taxpayers is $2.9 billion once the $137 million for program management firm CH2M Hill and $1.3 billion in interest payments over 35 years for the bonds are factored in.
Fixing the crumbling sewer system is federally mandated.
City-parish officials say that while paying for sewer work is never popular with taxpayers, the end result will be a safer, more efficient and properly maintained sewer system that will protect the well-being of parish residents.
Baton Rouge’s sewer system has been in disrepair for decades, hampered by leaky pipes and a lack of capacity.
Heavy rain often overwhelms the system, causing sewage to spew from street manholes and back up into homes through toilets and bathtubs.
“I had a sewer back up in my house years ago and I wouldn’t wish that on anybody,” said Baton Rouge Metro Councilman Joel Boé. “Anyone who experiences it, it will change their attitude dramatically. It gives you a whole new perspective when it comes in your house.”
Boé said sewer backups rank among the most common constituent complaints his office receives and fixing the system is a major priority of the city-parish government.
But for some, the financial burden imposed by the expensive repairs has been a tough pill to swallow.
Maintenance of the sewer system and debt service are paid for with a dedicated half-cent sales tax and with sewer fees.
An average household in Baton Rouge with an income of $46,838 spends $45.36 a year in half-cent sales taxes dedicated to the program, according to a city-parish estimate.
The average sewer user fee for a homeowner, based on monthly usage of 8,600 gallons of water, is $42.23 per month, or $507 a year.
The fee, based on water consumption, increases 4 percent on Jan. 1 every year. The annual increases, which began in 2004, have no sunset.
Damon Levy, owner of Cyclone Laundry and Internet Cafe on East Boyd, said the rate increases are effectively tax hikes that burden homeowners and business owners alike.
He said utilities — especially water, since he runs a laundry service — are his largest annual business expense, adding that next year’s 4 percent increase will cost him an additional $2,000 for the year.
“It’s like a toll road — they put the tolls up and the road eventually gets paid for, but then they never take the tolls down. They can always find use for the money in other ways,” Levy said. “There has to be an end game. There has to be accountability.”
Metro Councilwoman Tara Wicker, who is chairwoman of the East Baton Rouge Parish Sewer Commission, said she’d like an end date for the annual increases, but not without some study.
“I want to see at what point we could terminate it,” Wicker said. “I don’t know what’s needed for us to keep up with the maintenance and upkeep, but personally I’d like to see it sunset and give those dollars back to the citizens.”
Lee Schalk, state affairs manager for National Taxpayers Union, a nonpartisan national watchdog organization, said the city-parish needs to place a deadline on the fee increases.
“Without a sunset, essentially the city is trying to write themselves a blank check from taxpayers,” Schalk said. While it’s important to have a well-functioning sewer system, he said, “at the same time balancing the finances of taxpayers is just as important.”
Without the sewer user fee increases, the city-parish would not be able to pay its bond debt, said Mark LeBlanc, assistant director over finance at the city-parish Department of Public Works.
“Hopefully by 2020, maybe increases will drop to 1 percent or zero, but I can’t say at this point,” he said. “Until this program is finished, I couldn’t in good conscience recommend to the council that we cease this at a specific day because there could be issues that come up.”
LeBlanc noted that other cities completing sewer system rehabilitation projects have run into financing problems and were forced to impose staggering fee increases to cover their costs.
Next January, the average household’s bill will increase about $1.70 per month.
“It’s a very small amount if someone looks at their bill,” LeBlanc said.
Councilman Buddy Amoroso said he has concerns about the sheer cost of the program. He said he wants to ensure the city-parish can pay down its debts but is afraid ever-increasing fees are burdening people.
“Mathematically you can’t keep increasing fees 4 percent every year — that’s a faster rate than inflation,” Amoroso said. “But we’re caught between the reality of what people can pay and what our federal obligation is to the EPA.”
In 2002, Baton Rouge entered into a federal consent decree by the U.S. Environmental Protection Agency to fix the sewer system.
City-parish officials initially planned to create 60 miles of deep tunnels beneath the current system that would hold the sewage and storm water until it could be processed by the South and Central treatment plants.
The estimated cost was $618 million. City-parish officials have said that figure was never considered an official cost and was made before construction revealed the severity of the underground problems.
In 2006, Mayor-President Kip Holden’s administration, calling the deep tunnel project too expensive, decided to abandon it in favor of the current plan, which focuses on repairing the existing pipe system.
When Holden’s administration changed course, no construction had yet begun.
But at least $7.9 million had been spent for design and engineering between 2003 and 2004 for the deep tunnel concept. DPW Deputy Director Brian Harmon said it was unclear how much of those funds went to waste, because they did receive some reimbursement.
The repairs in the current plan include fixing existing sewer lines, adding larger lines to increase capacity, expanding the South Waste Water Treatment Plant, fixing pump stations and building massive above-ground storage tanks to handle overflows.
The deadline is Dec. 31, 2014, but officials expect EPA to grant the city-parish at least an extra three years.
The city-parish requested the extension because the work has been interrupted by hurricanes dating back to Katrina and Rita in 2005.
An extension will also smooth out the busy construction schedule and provide time for funding to be accrued for the additional sewer work added to the schedule.
The sewer plan has 108 construction projects. At the end of May, 73 projects — or 67 percent — were either under construction or finished.
By the end of this year, more than 80 percent of the sewer program will be finished — representing $939 million of work.
As recently as 2010, public works officials estimated the project would cost $1.2 billion. But the price tag gradually increased by hundreds of millions of dollars.
Some of the increase is due to inflation and the rising costs of construction materials, said Harmon, the DPW deputy director.
The program has also been expanded in recent years to include $156 million of additional work. City-parish officials say the projects, while not mandated, are essential to the long-term viability of the sewer system.
One such project is meant to end sewage backups caused when pump stations lose power during storms. Officials budgeted $56 million to purchase emergency generators for the 450 pump stations that move sewage through the system.
Another addition allows pump stations to be monitored and controlled remotely. “We won’t need 20 workers running around looking for problems during a storm,” LeBlanc said.
Added to the bill are about $60 million of improvements at the North Waste Water Treatment Plant, where an odor problem has long plagued the neighborhood next to the plant.
After a protracted court battle between the city-parish and sewage plant neighbors, officials opted to tear down the neighborhood and plant a buffer of greenery to absorb the odor.
Using about $6 million dedicated to the sewer plan, about 44 families in the area will be relocated to comparable homes elsewhere.
The city-parish will have borrowed $1.1 billion by the end of this year to pay for the sewer program. Two more bond issues are scheduled to be sold over the next year that will total $216 million.
Selling bonds to fund the construction ensures the city-parish has money up front, which city-parish officials say is imperative because the sewer plan is operating under a deadline. But the interest on the loans also increases the cost of the project.
“You can’t do this on a pay as you go basis,” LeBlanc said. “It’s absolutely impossible.”
The interest on the $1.1 billion borrowed through 2013 is estimated at $1.3 billion over 35 years, with rates ranging from 0.95 percent to 5.33 percent.
As program managers, CH2M Hill is involved with every step of the project, from design and construction to processing payments for contractors.
But their services, from 2006 to 2018, come with a cost of $137 million — which is included in the overall cost of the sewer program.
Harmon said DPW staff could not oversee the sewer program alone.
So far, CH2M Hill has earned $91 million from the contract work. Fees are based on 9 percent of construction costs.
Josh Crowe, CH2M Hill program manager, said the firm also subcontracts with 12 partner companies that receive a portion of the funds.
Before Holden took office in 2005, the sewer program was managed by MWH Global, a Colorado-based firm. The Holden administration decided to change firms when it changed the direction of the project — going from deep tunnels to a system overhaul.
Councilman Boé, a project manager for Performance Contractors, said a 9 percent fee agreement is “in line with program management standards.”
“Don’t get me wrong — it is a lot of money,” Boé said. “But a program of that size needs a program manager. We don’t have the resources to do it in house or the expertise. So at the end of the day, it’s a reasonable cost.”
Editor’s note: This story was modified on July 1, 2013, correcting misinformation in the earlier version on the average household income in Baton Rouge. That figure should be $46,838, not $63,685, which is the national average. The Advocate regrets the error.