With an estimated $12.5 million construction cost and $616,864 in annual operation and maintenance costs, a new sewer treatment plant for John Day and Canyon City poses tremendous liabilities for a community with declining population and a sagging economy.

But John Day City Manager Nick Green wants to turn those liabilities into an asset by producing 80 million gallons of reclaimed water that can be used by the city or sold to customers to help pay for the new plant.

It’s been 70 years since the sewer treatment plant for John Day and Canyon City was constructed at the confluence of Canyon Creek and the John Day River, Green explained at a special meeting at Grant County Regional Airport on Dec. 4.

The facility saw major additions in 1970 and 1978 to keep up with population growth. Today the plant’s aging concrete and plumbing handles wastewater from about 2,440 people in 1,036 households.

The treatment plant has been operating with an expired permit since 2007, and the state Department of Environmental Quality wants the plant brought into compliance, Green said.

A wastewater facilities plan completed by the consulting engineering firm Anderson Perry in 2010 found that sewer rates were too low and city reserves were insufficient to meet the major financial commitment.

Shortly after he was hired in 2016, Green proposed the idea of reclaiming the wastewater. A feasibility study was conducted using $70,000 in state grant funding, and a treatment plant design from Sustainable Water was approved by the city council in June.

The city purchased the former Oregon Pine mill site in 2017 with plans to build the new plant on land outside the floodplain on the north side of the river. The existing mechanical treatment plant, drying ponds and percolation lagoons would be eliminated and replaced by a more compact facility using hydroponic agriculture to treat the wastewater.

An income survey found that 57 percent of John Day and Canyon City households were classified as low to moderate income, which meant the project was eligible for up to $2.5 million in federal Community Development Block Grant funding. The Dec. 4 public hearing was a requirement for the federal funding.

An updated facility plan was submitted to the DEQ in August. If all goes according to plan, construction of the new plant could begin in winter 2019, and the facility could be operating by spring 2021, Green said.

A survey found uses for about 139 million gallons of reclaimed water, far more than the 80 million gallons the plant will produce. A problem is that virtually none of the potential uses exist in winter, leaving the city with a wintertime disposal problem.

Injecting the water underground for storage would require special approval by the DEQ, which could take time, Green said. The latest proposal is to bury perforated pipe between the frost line and the water table to disperse the reclaimed water underground at the Oregon Pine site, he said.

Green said the city’s goal is to fund the $12.5 million plant with 60 percent grants and 40 percent loans, but a 50/50 ratio is more typical. Since the plant will sell reclaimed water, alternative funding sources are possible, he said.

The sewer fund has manageable debt, Green said — a $500,000 loan to be paid off in four years and a $29,217 per year payment on a 30-year loan for the Oregon Pine property.

Operations and maintenance costs are expected to climb by 6 percent a year, but according to Business Oregon’s affordability index, a minimum sewer rate for the new treatment plant would be $34.66 per month. The current rate is $46 per month.

Green said he doesn’t expect a bond will be presented to the voters to pay for the project — what isn’t paid for with grants should be absorbed by the treatment plant’s ratepayers.

In other city news:

• The council approved a $110,000 contract with ECONorthwest and subcontractor Bell and Funk for help developing a comprehensive economic development strategy for the John Day area. Most of the funding will come from federal and state grants.

The contract calls for assessing potential growth in the hydroponic industry, digital marketing and branding, hosting meetings on tourism and recreation, supporting the city’s efforts to improve broadband access, assessing the local housing situation and offering suggestions, drafting a five-year action plan, and supporting the city when it hosts the Regional Economic Development Summit in John Day next spring.

• The city awarded a $74,924 contract to Alpine Abatement Assoc. of Bend for removing asbestos and lead from the city-owned Weaver Building on Main Street.

Most of the funding will come from a $65,300 DEQ brownfield grant. The 30-day renovation project was scheduled to start Dec. 10. The ground floor retail tenants can remain in the building during the renovation, Green said.

• The council also approved a series of budget changes that included funding for the Grant County Emergency Communication Agency. The city will provide $150,000 to the new intergovernmental agency to pay 911 dispatchers through the end of the current fiscal year. The city will also pay dispatchers $60,000 in accrued leave as they transition to the new agency.

• Coming up, the Grant County Digital Network Coalition will hold a town hall meeting on Dec. 18, and an open house for the Innovation Gateway project will be held Jan. 8.

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