Residents can sound off Tuesday on the largest loan order in Gloucester’s history: a $206 million upgrade to the Water Pollution Control Facility on Essex Avenue.
City Council’s Budget and Finance Standing Committee voted 3-0 Thursday to recommend a $205.9 million loan authorization to add secondary treatment to the plant. The loan authorization must be approved by June 30 so the city can be eligible for funding through the Clean Water State Revolving Fund this year.
A plan to pay back the loan without deluging sewer ratepayers with huge bills has yet to be finalized.
Councilors questioned Thursday how the city is going to pay for the project with just about $15 million in grants in hand.
The public hearing on the loan order is scheduled during City Council’s meeting Tuesday at 6:30 p.m. in the Kyrouz Auditorium in City Hall, 9 Dale Ave.
“In a nutshell, this is something we have got to do. Not a pretty sight,” Mayor Greg Verga said of the project’s cost. It’s by far the largest loan order in the city’s history.
“It’s something we need to do to stay in compliance,” he said. “Our goal is to try to keep the sewer rate to a reasonable amount once this project gets underway.”
The city needs to upgrade the facility by a 2028 deadline to comply with a consent decree the city entered into last year with the U.S. Environmental Protection Agency and the Massachusetts Department of Environmental Protection to resolve discharging pollution into Massachusetts Bay.
The upgraded plant is intended to bring the city into compliance with the federal Clean Water Act.
Paying the cost
Council President Tony Gross, the subcommittee’s vice chair, wondered how the bond would be paid.
“I do not envision it being on the ratepayers,” he said.
Verga and Chief Administrative Officer Jill Cahill said it was too soon to say just how the city would pay off the loan, though Verga said he thought the project would benefit the entire city.
The city budget, approved June 18, used $175,000 to offset the sewer rate this year. The council voted 6-3 for a fiscal 2025 sewer rate of $19.50 per 1,000 gallons, an increase of $1.34, 7.38%, over the fiscal 2024 rate of $18.16 per 1,000 gallons.
Asked what would happen if the project’s entire cost were plugged into the sewer rate, Chief Financial Officer Conor MacCorkle estimated it would double. Verga said the city does not have the highest sewer rates in the state, “but they are significant.”
Councilors noted that Gloucester provides sewage services for Essex and a small portion of Rockport.
If the sewer rate alone carried the project, Essex and Rockport “would be impacted proportionally,” Councilor at-Large Jeff Worthley said.
He asked what would happen if the project were paid for by putting it on Gloucester’s tax rate or a debt exclusion of Proposition 2 ½.
“Is there a mechanism to assess Essex and Rockport?” he asked.
“If the burden is going to be borne just by Gloucester folks,” Verga said, “just because of the way this mechanism is set up, you know, we will find a way to get our fair share from our neighboring communities that are participating.”
The Essex town administrator is anticipating the town would be on the hook, Verga said.
Financing through grants
Project officials told councilors they are seeking state and federal grants to reduce the project cost and lessen the effect on the sewer rate.
Eric Kelley, principal with the city owner’s project management firm Environmental Partners, and Senior Project Manager Bob Parsons with Tetra Tech, the firm designing the wastewater plant, updated councilors on the project.
The preliminary design is complete, they said, and project officials are going through a regulatory review.
In outlining the project’s funding, project officials said $15 million is available now for project design and construction costs, including $10 million in American Rescue Plan Act COVID-19 relief funds.
The city has been awarded two EPA-administered grants. Consultants are finalizing the first $2 million grant through congressionally directed funding to cover preliminary design, while Kelley said there is a second $3 million grant along the same vein.
Last week, the city applied for a $500,000 Community One Stop Grant from the state, with a possibility of reoccurring annual requests, he said.
Project officials are looking to apply to FEMA for a grant for resilient infrastructure to cover both design and construction, and are looking at the federal Bipartisan Infrastructure Law to identify other funding opportunities.
Project officials also outlined financing under the State Revolving Fund program.
The loan term is negotiable for up to 30 years. The term has yet to be decided.
The program is attractive to communities because it locks in a rate at 2%, Kelley said.
But as a Housing Choice Community, the city is getting an interest rate of 1.5%.
It will also receive a minimum 3.3% in principal forgiveness as a state-designated Tier 1 disadvantaged community.
Ethan Forman may be contacted at 978-675-2714, or at eforman@northofboston.com.