Oak Lodge bond on ballot

Plant GM says bond will actually save money for ratepayers

By Matthew Graham

The Clackamas Review, Oct 20, 2009, Updated Oct 30, 2009

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The sewer district that serves 32,000 people in and around Oak Grove is seeking $44 million in general obligation bonds in November to overhaul the nearly 50-year-old sewage treatment plant.

The plant, which also serves Jennings Lodge, Oatfield ridge and portions of Gladstone and Milwaukie, was commissioned in 1962. For the last few years the Oak Lodge Sanitary District has been fixing pieces here and there, spending $11 million in the last decade to keep it running.

“But now the plant has reached the end of its useful life and suffers from outdated technology, obsolete and outdated equipment, inadequate treatment capacity” and more, said General Manager Michael Read.

The project to upgrade the plant will go forward whether residents approve the bonds or not — if the general bonds don’t pass, the board has already authorized revenue bonds to pay for it. But approving the bonds would save ratepayers millions of dollars, Read said.

He said that while some portions of a water bill are based on consumption, the average user pays $31.46 now. If the general obligation bond passes, the rate will jump to $39; if they go with the revenue bonds, rates would be $47.

“The project has to proceed whether the general obligation bond is authorized or not,” Read said. “Here’s the hook — the difference between a revenue bond, which our board already authorized last May, and a general obligation bond is $8 a month (per household), on the average over the life of these bonds, 20 year bonds. It translates into $22 million in savings on a $44 million bond, essentially $100 a year for each and every customer.”

The reason there’s such a discrepancy is that revenue bonds require the district to maintain cash reserves and the interest rates are higher, whereas general obligation bonds don’t require cash reserves and the interest is lower.

The initial estimates for the plant upgrade were $80 million. But by reusing parts that have been replaced or upgraded already and seeking general obligation bonds, which have lower interest rates than revenue bonds, the district lowered its estimated cost to $50 million.

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