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’re building improved corrosion control treatment and 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. Every project decision is guided by community values, including balancing consideration of public health and water quality benefits with affordability for current and future customers. As design of the Bull Run Filtration Project progresses, we’re taking steps to actively manage costs including using value engineering and contractor input to identify opportunities to refine design and control costs.
Working towards guaranteed maximum prices
In 2019, Portland City Council approved Resolution 37460 and a recommended Bull Run Filtration Project option estimated to cost $820 million (with a -30% to +50% accuracy range). The 2019 estimate of $820 million is currently forecasted to equate to an escalated value of approximately $950 million when the project is completed in 2027. Escalation accounts for increases over time in costs of construction labor, materials, and equipment. As detailed design progresses through 2022, the project estimates will be refined. In 2023, we expect to have guaranteed maximum prices from the contractors for the filtration facility and pipelines.
In 2020, City Council approved the guaranteed maximum price of $17.9 million for construction of the Improved Corrosion Control Treatment Project. We are currently building the improved treatment at our Lusted Hill facility to make Bull Run water less corrosive to lead that can be found in some home plumbing. The total cost when this project is completed in 2022 is estimated to be $24.4 million, which includes both design and construction costs.
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. With the benefits of WIFIA financing, we’re able to lower the projected water bill impact from the Bull Run Treatment Projects for the typical residential customer from $18.34 to just $12.85 more per month in 2028 when the new filtration facility comes online.
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 $410 million in project contingency to reflect the very early stage of facility design. We’ll continue to update these preliminary estimates to incorporate new information and more precise assumptions.
Forecasted Bull Run Treatment monthly water bill impact with WIFIA financing through filtration facility construction*
|Typical residential customer||$1.43||$2.62||$3.90||$5.33||$6.92||$8.70||$10.66||$12.85|
|Extreme low-income customer||$0.28||$0.50||$0.79||$1.04||$1.37||$1.73||$2.11||$2.56|
Forecasted Bull Run Treatment monthly water bill impact with WIFIA financing after filtration facility is operating*
|Typical residential customer||$14.29||$15.94||$17.21||$16.86||$19.20||$21.47||$23.67||$25.34|
|Extreme low-income customer||$2.84||$3.18||$3.43||$3.36||$3.82||$4.29||$4.72||$5.06|
*Previous rate estimates without WIFIA included escalation but did not include a contingency. Forecasted Bull Run Treatment monthly water bill impacts with WIFIA financing include the escalated Bull Run Filtration project cost and $410 million contingency. Estimated bill impacts will be lower if less contingency is used.
Using WIFIA’s flexible terms to maximize benefits for ratepayers
We locked in a 1.89% 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. As we learned from the EPA, if we don’t use the project contingency, the WIFIA loan can potentially cover more than 49% of the project costs.
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 help keep project costs low and bills affordable.