Washougal nabs $10M loan for biosolids facility

The city of Washougal has received a $10 million Public Works Assistance Account (PWAA) loan for the construction of a new biosolids handling facility from the Washington State Public Works Board.

The loan was part of the $221 million in funding the Public Works Board awarded in early September to Washington cities, counties and special-purpose districts for local community infrastructure projects.

“This is very good news,” Washougal City Manager David Scott said. “The $10 million is the maximum available from this loan program. The interest rate for this loan is 1.72% for a 20-year term with no borrowing fees, and there is an opportunity after completion of construction to potentially extend the term. These are significantly better terms than what is available in the municipal revenue bond market currently.”

Sixty-two applicants submitted 85 funding requests totalling more than $312 million in PWAA funding for the 2024 fiscal year. The Public Works Board considered the rated and ranked applications, and awarded loans and grants to 51 construction projects for a total of $221,469,551, according to a news release.

“The Washington State Public Works Board is thrilled to award over $220 million to 51 communities across the state for critical infrastructure projects,” PWB Chair Kathryn Gardow said in the news release. “Since 1985, the (Public Works Board) has been proud to partner with Washington communities as a reliable and sustainable funding source to meet critical infrastructure needs. Infrastructure is fundamental to community resiliency and livability. This current funding cycle is over-subscribed by 29 percent, so we know the demand for infrastructure funding is significant. We look forward to opening another funding cycle to help meet this demand.”

The city of Washougal’s project was ranked third, behind the town of Concully’s $4.28 million request for bridge improvements and the town of Twisp’s $728,000 request for an egress project.

“Washington’s Public Works Board provides a vital source of funding for building infrastructure communities need to thrive and support economic opportunity,” Washington State Department of Commerce Director Mike Fong stated in the news release. “The significant gap between need and available state funds is an ongoing challenge. I’m thrilled to see a significant investment in this program to help support these critical infrastructure needs so our local jurisdictions can support their growing communities. As someone who has spent years at the local level, I understand just how important programs like these are and I will continue to push to ensure these resources are made available across the state.”

Loan could ‘positively’ impact city’s utility rates

Scott said the $10 million loan could “positively” impact the City’s utility rates, which Washougal residents have criticized as too high in recent years.

“Leveraging these low interest rate loan programs versus going to the municipal revenue bond market at current market rates provides a positive impact on utility rates,” Scott said. “Just like a mortgage or car loan, the loan payments will be less for a given amount of borrowing due to the lower interest rate. Lower loan payments mean less pressure on utility rates.”

The City is in the late stages of putting together a utility rate analysis report, which will inform rates for the next five years. A citizen advisory committee is working with city staff and consultants and will present its findings to the city council Nov. 13.

“The Council understands the challenges around utility rates,” Scott said. “We are actively pursuing all opportunities to leverage state and federal funding and preferred financing to mitigate rate pressures.”

The City has collected nearly $11 million in replacement reserve funding (RRF) — funds set aside by property owners or investors to cover the future costs of replacing or repairing major facility components and systems. Scott said this money also can be used for the biosolids facility project.

During utility rate adjustment reviews the City undertook in 2010, 2013 and 2018, the city council “gradually phased in RRF over time to balance rate impacts with prudent planning for the future,” Scott said.

“This choice meant that rates had to be somewhat higher than a different policy choice that would have reserved less cash over time,” he added. “The revenue generated by RRF may be used on a ‘pay as you go’ basis, applying the proceeds towards projects in the same year, or accrued over time and applied towards a larger project, such as the mandated treatment plant upgrades.”

Scott likened the city’s RRF policies to saving for a down payment on a home or a new vehicle.

“This allows us to borrow roughly $19 million to do the upgrades instead of $30 million,” Scott said. “If they had made a different choice, we would be needing to borrow … up to $30 million.”

Scott said city officials review city policies during every utility rate study update and “make modifications to balance rate impacts and the financial sustainability of each utility.”

New facility will turn solid waste into fertilizer

The city of Washougal is planning to construct a biosolids handling facility that can take solid waste from the City’s wastewater treatment plant and turn it into fertilizer.

The city estimates the biosolids facility will cost $30 million to build.

Scott said that now that the City has secured the $10 million loan, it will apply for a $9 million loan from the Washington State Department of Ecology’s Centennial Clean Water Program in the hopes of securing additional funding for the project.

Scott told the city council earlier in September that the City’s chances to secure the $9 million grant are “very good” if it submits an application similar to the one the state’s Public Works Board ranked third.

“(It) has to do with the technical merits of the project and readiness,” Scott said. “We are almost fully designed and ready to go out to bid very soon.”

In 2022, the City received a $1 million federal grant to support the installation of an anoxic selector at the wastewater treatment plant. Earlier this year, the City requested $3 million from the federal government for the biosolids facility and secured approximately $1 million in a spending bill that was passed earlier this year by the U.S. House Appropriations Committee.

“This is still pending because Congress has not yet passed its spending bills for the upcoming federal fiscal year,” Scott said. “We have not received anything yet under this request. (However), we are very grateful to Congresswoman Marie Gluesenkamp Perez for her support of our project, and we are hopeful that the almost $1 million will be included in the final spending package that Congress ultimately approves. There is a possibility that the appropriation could be increased up to the full $3 million that we requested.”