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Sewer plan could hinge on state loan

The south-end sewer project, thought to be all but dead after the city rejected a half-million dollar subsidy to offset rising costs, may find new life through a low-interest loan program from the state.

A 20-year loan at 1 percent interest through the Public Works Trust Fund could drop annual payments well below $2,000 for even the highest-cost neighborhood, roughly half the amount projected under Local Improvement District bond financing.

“This could make or break the project,” said Kirsten Hytopolous, the Emerald Heights representative on a citizen steering committee from the four affected neighborhoods.

Public Works Director Randy Witt said the city will apply by a May 12 deadline. The trust-fund staff makes its recommendations sometime in the fall, he said, subject to legislative approval next spring.

“It’s a pretty rigorous process,” said Witt, who secured a number of PWTF loans when he was Bremerton’s city engineer. “But I think we have a really compelling story. The property owners petitioned for this, and it’s something the health district wants.”

Adverse soil conditions have reportedly led to septic failures in the south-end neighborhoods of Emerald Heights, Point White, upper Pleasant Beach and Rockaway Beach areas, a problem made worse in the waterfront neighborhoods by small lots and proximity to Puget Sound.

Those areas want to install sewers and connect to the Fort Ward treatment plant operated by the Kitsap County Sewer District No. 7, which the council has approved somewhat reluctantly, fearing that the presence of sewers might lead to higher-density development.

The original plan was to form a Local Improvement District consisting of those four neighborhoods, sell bonds to finance the cost of installing the sewers, then assess properties within the district to repay the bonds. Owners would have the option of paying off the obligation up front, or to make annual payments over the life of the bonds, generally 15 years.

If 60 percent of property owners protest, though, the LID cannot be formed.

And as per-home cost estimates have increased to as much as $35,000, doubts mounted as to whether the LIDs would pass, especially in modest-income Emerald Heights.

With a PWTF loan, the LID would still be formed, but no bonds would be sold.

Instead, owners would repay their share of the loan over as long as 20 years. The low interest rate and the longer repayment term dramatically reduce the annual payments for those who want to finance.

“It doesn’t change the cost of the sewers, but it almost cuts in half the annual Charles Hawk, the Rockaway Beach representative on the steering committee.

Bill Cairns, the Point White representative, agreed.

“With that kind of financing, more people will finance, and more people will connect,” he said. “For a lot of folks, it will make a difference in how they vote.”

The council is also considering an array of options that could substantially reduce the per-residence costs below current estimates, which approach $35,000 in Emerald Heights, into a range of $23,000 to $19,000, depending on the neighborhood.

The cost-reduction options, which were to be presented at Tuesday’s Public Works Committee meeting, would require the city to absorb certain expenses associated with the project, such as engineering studies and staff time.

That notion may run afoul of council policy that the neighbors wanting sewers would pay all the costs, including the formation costs.

Hytopolous said higher costs should make those policies moot.

“To hold people to a promise to pay for everything, when costs go from $18,000 to $30,000, seems unfair,” she said.

But the neighborhoods claim that some of those expenses aren’t sufficiently related to be included.

“We have a real problem with the city charging the cost of the comprehensive sewer plan to us,” Cairns said. “That covered the whole south end. This neighborhood didn’t commission it, and that item amounts to almost $700 per hookup.”

Another possibility is the city paying to run the sewer line from Emerald Heights down Lynwood Center Road, which would save each of the 43 homes in that neighborhood almost $9,000.

The logic is that the city’s refusal to allow properties along the route to hook on is a political decision for which the city should pay, not the Emerald Heights homeowners.

“That is a very emotional issue in this neighborhood, because people feel that someday, other properties will hook onto that line, which our neighborhood would have paid for,” Hytopolous said. “If the city has decided to draw the district boundaries very narrowly as part of its growth-management strategy, it should pay for that decision.”

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