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In Cedar County, water discharging from the city of Tipton’s wastewater facility contains traces of ammonia above the level allowed by federal water quality rules.
Efforts to reach compliance are underway, but facility upgrades have been estimated at roughly $5.6 million, a small fortune for the community of about 3,200 people. Unable to bond a project of that size, city officials said they have little choice but to raise every customer’s wastewater rate by $10 per month — an approximately 30 percent increase for the average customer — to cover the project cost.
“In our case, $5.6 million would have eaten up just about all our debt capacity,” said Tipton City Manager Brian Wagner. “We couldn’t afford to do anything else, so the other way is to put it on our wastewater rates. We want to be environmentally responsible, and we have been with the current regulations, but for a lot of towns, as regulations change, it becomes difficult to afford and therefore difficult to defend.”
Tipton is just one of many Iowa communities struggling to stay ahead of federal water quality rules through costly water and wastewater infrastructure upgrades.
“We’re talking 10-plus billion (dollars) in infrastructure needs across the state, with aging infrastructure and all other priorities that people need to meet,” said Dustin Miller, a lawyer with the Iowa League of Cities. “I don’t think people fully grasp this is an issue in every single community.”
FALLING OUT OF COMPLIANCE
Iowa water and wastewater systems are monitored by the Iowa Department of Natural Resources to ensure they meet federal standards set by the Environmental Protection Agency.
While it’s not rare to see federal rules adjust for contaminants, including phosphorous, nitrates or bacteria, it’s a recent change in ammonia rules that has several Iowa communities facing costly infrastructure upgrades, said Eric Wiklund, National Pollutant Discharge Elimination System program supervisor with the Iowa DNR.
Wiklund said federal standards for ammonia changed in 2006. But due to delays in the process, it took another five years before the state could reissue new permits.
“There’s a lot of facilities that are sort of sitting there with those older, less-stringent ammonia limits, and now they’re getting reissued permits 10 years later because we’ve finally gotten around to getting chewed through the backlog,” he said.
According to Iowa DNR data, the state is home to 711 minor municipal water facilities, or those with an average wet weather flow below 1 million gallons a day. Of those, about 26 percent are on a compliance schedule. Nearly 17 percent of the state’s small communities are on compliance schedules specifically for ammonia, which Wiklund said can be the most costly to address.
“And you can imagine, tens of millions of dollars to Burlington or Davenport is one thing, but even a $2 million upgrade to a town of 500 people, you basically can do nothing else and you’ll drive people out of the town,” Miller said.
FUNDING MAJOR UPGRADES
For many communities facing compliance schedules, low-interest loans such as those offered through the Iowa Finance Authority and U.S. Department of Agriculture, can provide a much-needed financial boost.
“Right now, literally our top priority is an all-hands-on-deck push, this is in Iowa and nationwide, to help as many rural communities as possible upgrade and rebuild their rural water infrastructure,” said Grant Menke, director of the USDA’s Rural Development state office.
The USDA Rural Development program invested $51 million in loans and grants to 23 rural Iowa communities in 2016. Last year, the program invested $48 million to aid another 36 communities. By the end of September, the program had surpassed $100 million this year.
Menke said such loans come with interest rates below 2.5 percent.
In addition to the USDA fund, Iowa Finance Authority distributes Environmental Protection Agency grants in a state revolving fund to also address water quality needs.
Lori Beary, community development director with Iowa Finance Authority, said the program distributed close to $200 million in wastewater and drinking water loans last year, which range from 2 percent to 3 percent interest.
The program has loaned more than $2 billion to wastewater projects and about $875 million to drinking-water projects over the last 30 years or so, Beary said.
Recipients range from small communities up to Des Moines, Beary said.
“We loan a lot out to these municipalities. By loaning it out at a lower interest rate, it allows ratepayers, who ultimately are going to be repaying this debt, to keep their rates lower,” Beary said. “Obviously, some of our small communities struggle anyway. They just don’t have enough ratepayers to spread across. There’s no economy of scale in some of those small communities.”
But while loans provide upfront funding and low interest rates, communities still have to pay for the projects.
For Tipton, temporary wastewater rate increases, which are expected to generate about $177,000 a year, will help cover much of the approximately $400,000 in payments for a 20-year loan. In a few years, the loan will expire for the city’s current wastewater facility, freeing up another $200,000 a year.
Brian Brennan, the city’s water and wastewater superintendent, said Tipton has a plan and expects to have a new wastewater system online by its deadline of March 31, 2021.
“It really does, as an employee, put you between a rock and a hard place,” Brennan said. “We want to be good stewards of the water and the land and to the DNR and regulations, but also we have an obligation to our taxpayers because there is that 90-year-old woman in the addition who is widowed and on a fixed income. So we have to take all things into consideration.”
A DIFFERENT APPROACH
While cities across Iowa spend millions to get in compliance with federal regulations, some Iowa officials are taking a proactive approach to water quality.
The idea started more than five years ago with the Iowa League of Cities, as officials began exploring the concept of water quality trading, which posited that it’s less expensive to keep nutrients out of the water upstream than it is to remove them at drinking water and wastewater treatment plants.
“Trading, the theory was, I can achieve similar or greater reductions in nitrogen or phosphorous by going upstream, at pennies on the dollar,” the Iowa League of Cities’ Miller said.
The program would have operated on an exchange of pollution reduction credits. In theory, a water treatment facility facing high costs of meeting water quality compliance rules could partner with farmers upstream, for example, and reduce pollution at a lower cost before it reaches the facility. In turn, the facility would receive regulatory credit for the effort.
Water quality trading ultimately hit a few snags, but the league’s efforts have evolved into the creation of the Iowa Nutrients Reduction Exchange.
Miller said the Iowa DNR earlier this year agreed to house the exchange, and the transition should be completed yet this year.
The exchange would not replace the need for water and wastewater infrastructure upgrades, Miller said, but rather could be used to provide regulatory flexibility or financial incentives for communities making a conscious effort to address matters within their watershed — such as flood mitigation or conservation — that also provide nutrient reductions.
“If somebody is making an investment in a wetland and the real goal is getting enough projects to slow water down, I don’t really care the intent of heart, whether it’s flood reduction, if we’re achieving a nutrient reduction and we can monitor that, verify that, then folks should get credit for that as well in the future,” Miller said.
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