The Portland Water Bureau is making lasting improvements to the Bull Run water system to help secure cleaner, safer water for generations of Portland customers. We completed construction of improved corrosion control and are planning a new water filtration facility and pipelines that will be key components of a more reliable and resilient water system.
To help maintain water rate affordability while we make these long-term improvements, we secured federal financing through the Water Infrastructure Finance and Innovation Act (WIFIA) program that will significantly lower the cost of investment for our ratepayers and provide at least $247 million of debt-service savings over the loan term.
Managing project decisions to balance performance, reliability, and affordability
We’re managing the Bull Run Treatment Projects closely to make the best use of every dollar. Our project decisions are guided by community values, including balancing consideration of public health and water quality benefits with affordability for current and future customers. For the Bull Run Filtration Project, this includes completing a robust, third-party value engineering process to evaluate cost-control opportunities in the design. The resulting scope adjustments are part of our proactive approach to cost management and include reducing the amount of new pipeline planned for the project and identifying ways to optimize the site grading and onsite soil reuse for the water filtration facility.
Working towards guaranteed maximum prices
The current cost estimate for the Bull Run Treatment Program is $2.134 billion. We're using a construction delivery method for the Bull Run Treatment Projects where contractors are involved early during the design and prepare a guaranteed maximum price for construction once the project design reaches a certain level of completeness.
The first project, Improved Corrosion Control Treatment, was completed on schedule in April 2022 to help make our water less corrosive to lead that can be found in some home plumbing. The final project cost of $20.6 million included a construction guaranteed maximum price of $17,989,637 from MWH Constructors with more than $4 million of hard construction costs contracted with minority and women-owned firms.
Construction guaranteed maximum prices for the Bull Run Filtration are planned water filtration facility and pipelines expected from our contractors in 2024. As design progresses, we're continuing to track changes in the construction economy—such as labor shortages and supply chain issues—and take steps to actively manage project costs and risks. This includes using value engineering to identify cost-control opportunities in the design and maintaining a project contingency for additional cost escalation given the uncertainty of the construction economy.
Maintaining rate affordability for current and future customers
To help maintain water rate affordability, we secured a low-interest WIFIA loan that allows us to smooth water bill impacts from the Bull Run Treatment Projects over time, so bills increase slowly over a longer period. The Bureau will also be applying for a second WIFIA loan
We use very conservative assumptions in our financial planning and rate projections as part of our fiscal responsibility to customers. The projected bill impacts include project cost escalation over the multi-year Bull Run Filtration Project and more than $100 million in project contingency to help manage risks and uncertainty in the current construction economy.
Forecasted annual water rate increases cover three main investments
Notes: Forecasted annual rate increase is updated annually. The rate increases for the three main investments are estimates. Actual rate increases are subject to Portland City Council approval annually.
Using WIFIA’s flexible terms to maximize benefits for ratepayers
We locked in a 1.89 percent interest rate for the WIFIA loan—below the current rate of inflation—that will save millions in debt-service repayment and help protect Portland ratepayers from the risks of rising costs. WIFIA’s flexible terms also allow us to spread repayment over many years so more future ratepayers who are getting the benefits of the projects help share in the costs.
Our total loan amount for the Bull Run Treatment Projects is $726.6 million. The loan covers direct project costs, indirect costs, inflation, bond reserves, and interest costs—plus a project contingency. We're using the project contingency to help manage potential risk of additional cost escalation given the uncertainty of the construction economy.
Continuing to provide low-income bill discounts and other financial assistance
Keeping water rates affordable for our customers is important to us. We offer a variety of financial assistance programs to be responsive to community needs, including bill discounts and crisis vouchers to qualifying low-income customers. We will continue to explore opportunities to help keep project costs low and bills affordable.