Over the past couple months the primary focus has been on-going close coordination with MC Engineering on managing the USDA Project completion and closeout as effectively as possible to reduce further schedule delays and/or cost impacts. Based on weather delays, construction manpower issues and multiple attempts to get the new pump station working properly, the construction project completion was extended from 10/16/20 to 11/20/20 and the estimated USDA closeout date extended from 11/17/20 to 12/20/20. We were recently informed by USDA that the closeout process could not be completed prior to their holiday break and would be delayed until Jan. 5th or 6th, 2021. The cost impact of these delays resulted in a decision to complete an additional scope task for Boro Court outside of the USDA Project in 2021, with a credit back to the project. This decision was made to avoid a schedule extension further into January 2021 with a significant increase to interim loan interest.
The USDA construction project was initially scheduled for 19 months. Based on some of the delays mentioned above, but to a significant extend due to 9 new scope tasks that were added to the project at the request of BLSMWC, it ended up taking 28 months. On the positive side, the 9 new scope tasks valued at close to $700K were all completed within our total USDA allocation. In addition, although the construction project took 9 months longer than initially planned, the estimated interest on our interim loan will end up being approx. $90K less than initially budgeted. This is a result of (1) our board decision early on to fund nearly 50% of the USDA engineering work and all USDA purchased meters, transmitters and PRV’s from our operating budget for 2+ years (to be reimbursed at the close of the USDA Project); and (2) the reduced interest rates which initially started at 4.51% and were expected to increase each quarter throughout the life of the loan, but instead decreased over the period to 2.15%. As we approached the completion of the USDA construction contract, it was determined that a few project tasks, including Boro Court mentioned above, could not be completed within our funding allocation. These tasks, along with our approved Reserves Fund and a couple capital asset purchases, will be funded from our USDA eligible reimbursements, which will still result in healthy bank account balances and not impact our 2021 Operating Budget.
The LRPC also weighed in on the development of our 2021 operating budget and rate structure. The LRPC recommended no changes to the overall rate structure principles from 2020 to 2021, as listed below:
- Rate structure will continue to be cost-based
- Rates will collect fixed costs from fixed charges and variable costs from volumetric rates
- There will be no change in the base rate water allocation of 350 CF per month
- There will be no change in the metered rate for usage greater than the base allocation
- Adjustments to metered rates will be analyzed and adjusted if necessary after collecting usage data for several months once 100% of the meters are connected
- The USDA loan repayment will be included in each shareholder’s overall rate
- Rates will fund the required level of system maintenance and capital replacements
There are a few expense and income changes in 2021 that had to be taken into account. The most significant being expenses related to personnel replacements and additions, and having to make adjustments to account for an income reduction of approximately $32K resulting from the transition of 430 additional residences from non-metered to metered rates. In an effort to keep 2021 expense and rate increases to a minimum, the board approved (as mentioned above) funding a few remaining unfinished USDA tasks and needed capital purchases (i.e., backhoe and work truck) with our eligible USDA reimbursements, so as not to impact our operating budget.