Fort Smith deal with DOJ over Clean Water Act to cost at least $205 million

A possible agreement between the city of Fort Smith and the Department of Justice related to Clean Water Act violations with the city’s water and sewer system will require at least $205 million in capital improvements and could see a doubling of water and sewer rates for city residents and business owners.

It was just about two months ago that Fort Smith City Administrator Ray Gosack came to the city's Board of Directors and told them negotiations between the city and the United States Department of Justice over the city's continued violations of the federal Clean Water Act had broken down and the city should expect a federal lawsuit to be filed.

Gosack sang a very different tune Monday (Dec. 1) when he brought to the Board a proposed settlement agreement between the city and the DoJ that would have the city investing nearly $205 million in capital improvements to its sanitary sewer system while at the same time paying about $300,000 in fines for violation of the Clean Water Act.

The city administrator acknowledged the role of outgoing Attorney General Dustin McDaniel, D-Ark., in bringing both parties back to the negotiating table in Dallas last month, explaining that the terms of the agreement – which Gosack said are still being tweaked – came out of two days of meeting between the city and the feds facilitated by McDaniel's office.

Fort Smith Director of Utilities Steve Parke told the Board that two components made up the terms of the consent decree agreement proposed between the city and the DoJ – increasing capacity to eliminate wet weather overflows and addressing remedial defects to eliminate dry weather overflows.

On the issue of capital improvements for capacity, three different areas are proposed to receive financial attention – $12.5 million over eight years for collection system assessments, $115 million to design and construct specific solutions to the defects contributing to overflows and $77 million to specifically address capacity issues related to wet weather overflows.

The time frame outlined in the city's presentation of the proposed consent decree terms extend for 12 years, giving the city time to invest the needed funds to bring the sewer system up to standard.

And while much focus has been placed on the wet weather overflows, significant time Monday night was spent discussing dry weather overflows and the EPA's proposal for how the city could address the overflows in the future. First, the city will have to begin monitoring overflows in wet and dry weather situations and report all overflows to the Environmental Protection Agency. In addition, the assessments will focus on finding the dry weather blockages and intrusions in lines that cause overflows during dry periods. These can include grease blockages and roots that have grown into water lines over periods of years or decades.

The assessments will range from smoke tests of lines to CCTV inspection of lines in search of obstructions. On lines that are owned by the city, Fort Smith Utilities will replace the impacted lines as part of a regular operations and maintenance program to be established under the consent decree at a cost not yet determined, according to Parke.

But lines owned privately, say by a homeowner or a business owner, those individuals will be responsible for covering the costs of any deficiencies found within the individual or business's plumbing on private-owned land outside of easements. The costs, Parke said, could range from $1,500 to $3,000 per incident if property owners are found to have grease or root obstructions in their lines.

To address the high costs he said could impact as many as 200 residents per year during the 12 years the consent decree is expected to be in effect, Parke said a program was being set up to help low-income homeowners pay for the costs.

Gosack said the program is part of the settlement with the DoJ and basically will reduce the city's civil penalties paid to the federal government from $500,000 to only $300,000 and allow that $200,000 balance to be invested locally in property owners needing to make improvements to their privately-owned pipes that connect to the city system. The city is also throwing in an extra $200,000 in "matching funds" to fund the program at $400,000.

The amount, Gosack said, was a discount over what penalties the city could have faced if the matter would have gone to court and helps to keep money invested in Fort Smith versus sending it to the bureaucracy in Washington.

"They started out at almost $800,000 in penalties and we negotiated it down to the $500,000 with the allowance that we would pay only the $300,000 and use the other $200,000 for the service line program for the low-income households," he said. "So yeah, they started out at just over $800,000 in penalties.”

With a consent decree as large as the one proposed to bring the city into compliance with the Clean Water Act and eventually be out from under the thumb of the feds, Parke noted that city staff would need to be added over the next five years. In all, he said 82 staff – contract and regular salaried employees – would need to be added to implement the programs and goals laid out by the DoJ. Total costs, he said, were not yet known regarding staffing levels.

In order to pay for the $205 million in capital improvements and fund the other programs laid out in the consent decree, consultant David Naumann of Burns & McDonnell showed the Board proposed rate increases for sewer bills, which could double sewer rates as soon as next year. When coupled with water, combined water and sewer billings are projected to increase from $40 per month in 2014 to about $80 per month in 2019. The money would be invested in paying debt service tied to the projects, as well as investing in operations and maintenance going forward.

The DoJ has an affordability index stating that the city would not have to revisit the consent decree based on the city's ability to pay so long as bills do not surpass 2.5% of the median household income in the city. Even with rates going drastically higher by 2019, the average bill will only account for 1.8% of the average citizen's median household income.

The Board will meet again Dec. 9 to dig deeper into the financials associated with the proposed settlement, with Gosack saying the DoJ would like to have an agreement approved by the Board no later than its Dec. 16 regular meeting.