Status Of The Holiday Hideaway Water System 2003

May, 2003

PURPOSE: Provide a factual report on an independent review of the Guemes Island Water Company’s System (System). The review considered several key aspects of the System, including; 1) Regulatory Compliance, 2) Operations and Maintenance Considerations, 3) Status of Improvements and Capital Financing and 4) Future Capital Needs. This report was intended to be a factual review of issues, and was not intended to include a “pro and con” comparison of acquisition of the System by the property owners versus Skagit PUD. The acquisition discussion should occur amongst the affected property owners, based upon a review of facts as well as opinions on what is in the “best interest” of individual owners and the overall community.

The review was conducted by Mark Spahr, a retired water system manager and professional engineer, including 30 years experience with water system operations, management and engineering. The review included contacts with the State Department of Health (DOH), County Health Department (CHD), State Department of Ecology (DOE), Public Works Trust Board (PWB) of the State Department of Community Trade and Economic Development and State Utilities and Transportation Commission (UTC). In addition, all System facilities were visited and planning/engineering documents were reviewed.

1. REGULATORY COMPLIANCE: Currently, the System is subject to regulation by three state agencies, DOH, DOE and UTC. DOH is responsible for design standards and review/approval, operations and maintenance and drinking water quality. DOE reviews and issues water rights which include provisions relative to sea-water intrusion. As a “for-profit” corporation, the System is also subject to regulation by the UTC relative to its water rates and “rate of return on investment” or profit. If the Homeowner’s Water Association were to assume ownership of the System, the UTC would not be involved since it would be operated as a “non-profit” corporation.

DOH Status: The System has a “Green” operating permit from DOH which means the System is in compliance with all health-related water quality sampling and water quality regulations, that it is operated by a state-certified operator and that required planning is up-to-date and approved (including an engineering plan, wellhead protection and sea-water intrusion plans and studies).

The System’s wells contain levels of dissolved iron and manganese which exceed DOH’s “secondary” standards, however secondary standards relate to “aesthetic” issues (fixture and laundry staining), which do not directly affect human health. DOH recently approved (March 18, 2003) the use of Well 4, and with that DOH has approved the System to serve up to 217 residential and 50 recreational service connections (an increase of 42 connections, since the System was previously approved for 175 residential and 50 recreational service connections).

DOH regulations have the most direct impact on day-to-day operations, maintenance, water quality sampling and design/construction of new or replacement facilities. These regulations would continue in effect regardless of future ownership.

DOE Status: DOE has issued water rights for the System which include specific “sea-water intrusion” conditions which include; 1) Wells 3, 4, 5 be equipped with automatic shutoff equipment that would turn the wells off if water level in the wells declines to within 0.5 feet above sea level, 2) test for chloride and conductivity and static water level quarterly, submitting results annually to DOE (which has been done), 3) if pumping of the wells causes “. . . chloride concentrations to show an increasing trend in any of the wells, immediate action shall be required . . . actions include, but are not limited to reducing the . . . withdrawal rate . . . lowering the annual quantity removed from the wells, rotating pumping cycles, or turning off certain wells. . . If corrective measures fail to prevent chloride concentrations from staying at or below 35 mg/L, the water right holder shall relinquish the option to perfect additional allocated quantities regardless of the stage of development.” and 4) Complete construction of a 100,000+ gallon storage tank prior to March 1, 2017 (the added storage would allow peak demands to be met during “3-day” summer weekends without having to “over-pump” the wells, thus minimizing the threat of sea-water intrusion).

In addition, DOE requires metering of all water sources to insure that withdrawals are in conformance with water rights. These requirements would continue regardless of ownership. Note: Since water rights are “real property”, ownership of the water rights must be transferred as part of any ownership transfer.

UTC Status: The UTC regulates “for profit” utilities such as the Guemes Island Water Company (GIWC) to insure that service rates are reasonable and justified. In March 2000 an average rate increase of 44% was approved to cover the cost of system operations and a $5 monthly surcharge was approved to partially finance the cost of capital improvements discussed in Section 3 of this report. In addition the system generates revenue from new connections through a “Facilities Charge” of $4,500 for all new connections and a service connection charge of $620 (these fees were instituted in 1994). The UTC would not be involved if a non-profit water association was formed which gave all customers a voice in establishing future rates and policies. Likewise, the UTC would not be involved if a public agency such as the PUD were to assume ownership.

2. OPERATIONS AND MAINTENANCE CONSIDERATIONS: The current System has five wells (four of which have been approved by DOH and are equipped for service). Wells 1 and 2 have a combined output of approximately 27 gallons per minute (gpm), and wells 3, 4 (and 5 which has been drilled but not tested, equipped or approved) will have a combined output of approximately 35.5 gpm (total water rights equal 62.5 gpm). Wells 3, 4 and 5 have concentrations of iron and manganese that exceed DOH standards, which can lead to staining of laundry and plumbing fixtures. All active wells pump water into the distribution system to meet customer demands and fill two 44,000 reservoirs which have an overflow elevation estimated at 235 feet above sea level. The distribution system is composed of approximately 3,600 feet of 2-inch, 19,000 feet of 4-inch and 800 feet of 6-inch PVC mains, including approximately 40 distribution system valves, three fire hydrants and a dozen “blow-offs”. The 2 and 4-inch pipe are “glue-joint” PVC which was constructed in two phases, the first phase was constructed in ---- (-- years old), the second phase was constructed in 1978 (25 years old), while the 6-inch pipe was constructed in 1994 (9 years old).

An automated control system has been recently installed to monitor and control wells 1-4, including recording the amount of water pumped from each. In addition, the water levels in wells 3 and 4 are continuously monitored and controls would turn off these wells if the water level drops to within 0.5 feet above sea level. The control system also starts and stops the wells based on the amount of water in the reservoirs, and it is designed to prevent the well pumps from running more than 16 hours per day, to minimize impact on the aquifer and to prevent sea-water intrusion.

A number of lots in the service area are at, near or above the elevation of the existing reservoirs, thus a booster pump station is needed to increase pressure to a “pressure zone” within a portion of Block 3. However, the booster pump station does not have the capacity to provide service for other “higher elevation” lots in Blocks 2, 3, 6 and 7, hence several dozen lots have “static” pressures of between 24 and 33 pounds per square inch (psi) (these pressures are calculated based on topographic maps, actual pressures may vary and will be verified by measurements in coming weeks). During periods of peak demand, water pressure in certain areas is reported to drop below the DOH-required minimum 20 psi as a result of “head losses” resulting from increased water flow (optimal water pressure should be between 40 and 80 psi).

There is no standby generator at the booster pump station, hence during extended power outages, lots served by that facility may be out of water. However recent electrical improvements have included a “plug” and a “transfer switch” to accept power from a future generator.

For its size (currently serving approximately 120 customers), the System is relatively complex. Routine maintenance should consist of a daily review of the automated control system including troubleshooting of any alarm or “out of bounds” conditions, a weekly visit to each pumping facility (including seasonal clearing brush and mowing as needed), monthly collection of required bacteriological sample(s), quarterly sampling for chloride and specific conductance (required by DOE), quarterly checks of the reservoirs to verify security and sanitation, annual “exercising” of distribution system valves, hydrants and blow-offs, periodic (every 2-3 years) “flushing” of mains to clear internal deposits (such as iron and manganese oxide), and occasional (every 5 to 7 years) pressure washing and cleaning of the interior of reservoirs. In addition the system should be monitored quarterly to evaluate whether leakage is a problem (comparing the total amount of water pumped to the amount of water sold through customer meters, current records indicate that leakage is not a problem), and develop on-going “trending” to track water pumped from wells (to identify unusual or unexplained increases in the amount of water pumped). It is estimated that this routine work could be accomplished with an average of 5 hours per week. As treatment for iron and manganese removal is added in the future, additional routine maintenance and testing will be required.

The status of proposed capital improvements to address deficiencies and enhance the System’s capabilities is discussed in Section 3.

3. STATUS OF IMPROVEMENTS AND CAPITAL FINANCING: The System’s capital improvement plan had the following overall goals:

  • Resolve all low water pressure problems, including during peak demands
  • Provide water treatment for iron and manganese removal
  • Enhance and automate management and control of the System, aimed at protecting the groundwater resource from sea-water intrusion
  • Increase the System’s capacity to serve more customers
  • Enhance fire protection in some areas.

A loan application in the amount of $243,476 was approved by the State PWB in 1999, which included a scope of work to accomplish these goals through the following efforts; a) perform aquifer tests on Wells 3, 4 and 5, b) acquire DOE’s approval of water right applications for change (approving withdrawal of a total of 62.5 gpm from all 5 wells), c) construct iron/manganese water treatment for Wells 3, 4 and 5, d) construct a 105,000 gallon reservoir, e) construct a new pump station to deliver water from the new reservoir to the existing reservoirs and distribution system, f) upgrade the existing booster pump station at the existing reservoirs, including increased capacity and distribution system improvements to resolve low pressure problems throughout the System, g) install an automated communication and control (telemetry) system and h) complete water system and wellhead protection plans.

For a variety of reasons, the GIWC project manager’s estimate was not sufficient to accomplish the original scope of work. The work actually completed includes; a) aquifer test on Wells 3 and 4, b) awaiting approval from DOE regarding water right changes, c) constructed building to house telemetry and the future pump station and water treatment, d) constructed piping for future reservoir, pump station and water treatment, and d) telemetry installed to all existing sites (except Well 5, new reservoir and water treatment), e) upgraded existing booster pump station (but it does not have sufficient capacity to resolve low pressure problems beyond the existing pressure zone), f) completed comprehensive plan, sea-water intrusion study and well head protection plan, g) obtained approvals to use well 4 (March 2003).

On March 20, 2001, the GIWC requested that the scope of work for their PWB loan be changed from the original scope to only those improvements that had “been completed to date”. Both DOH and the PWB approved the change, and the project has been deemed “complete” (without the ability to use Well 5 and deletion of the 105,000 gallon storage reservoir, water treatment, pump station or improvements to enhance pressure). To date, GIWC has made 3 principal payments on the loan, totaling $31,663.32, leaving a balance of $211,813.12 at 5% interest. The next payment is due October 1, 2003 in the amount of $23,828.98 (principal and interest).

The Loan Agreement includes a provision that the PWB “reserves the right to demand payment in full of the outstanding principal balance of the loan” if there is any change in ownership of the System. The HOA has submitted a Financial Capacity analysis to the PWB, using anticipated income and expenditures (based on current rates and applicable GIWC expenditures). If the PWB deems that the HOA is financially viable, the loan would be transferred to the HOA. The PWB would have no concern over acquisition by PUD.

The GIWC project manager’s estimate (dated 3/15/01) to complete the original project’s scope of work is $209,955 (including testing and equipping Well 5, new reservoir, pump station and water treatment – no inclusion of measures to address low pressure problems) . As part of this study, several cost items were independently verified, and it appears that the current cost of completion is more like $250,000 (which will continue to increase with time).

Of the original five goals, only two have been completely accomplished:

  • Approval of Well 4 has resulted in the System’s capacity being increased to serve an additional 42 residential customers (from 175 to 217).
  • Provision of the telemetry system enhanced the ability to manage and protect the ground water resource from sea-water intrusion.

Partial progress was made towards other goals:

  • A building was constructed to house the telemetry system, and the future water treatment and pump station
  • Piping was installed for the future reservoir, water treatment and pump station
  • Wellhead Protection, Sea-Water Intrusion and Comprehensive Planning were completed and approved
  • DOE authorized revisions to water rights as requested

The Loan Agreement and Promissory Note includes 5% interest and the term is for 20 years, expiring in October 2018. Terms call for an annual payment of 1/20th of the principle ($12,173.80) plus interest on the declining balance. The GIWC has pledged their accounts receivable (revenue from customers) as the collateral for repayment of the loan.

Currently, the PWB has money to loan at 1% interest for projects. The 1% interest rate was not available in 1998-99 and can not be refinanced at the current rate.

4. FUTURE CAPITAL NEEDS: In addition to the cost of completing the identified capital improvements, investment in the existing distribution system should not be overlooked. The system consists of “glue-joint” PVC pipe which has a finite serviceable life (estimated in the range of 40 to 50 years). The service life of such a system could be significantly shortened through modifying (raising) service pressure even by as little as 15 psi. Currently the distribution appears to be in good condition (as indicated by a very low rate of leakage).

Much of the System was constructed in 19--, which means that the system is approach an age where prudent financial planning should anticipate systematic replacement. Replacement could be phased over a number of years (for example, replacing 2,500 feet every third year). The cost of replacement (using higher quality PVC pipe) would depend on a number of factors, but for planning purposes a replacement cost of $45 per lineal foot is reasonable (annually adjusted for inflation). Hence replacement of 2,500 feet of main would cost an estimated $112,500.

5. SUMMARY: The GIWC’s water system appears to be in good condition and is in compliance with applicable DOH, DOE and UTC requirements. Recent expenditures by GIWC have resulted in approval of planning documents, full utilization of water rights, an automated monitoring, updating the booster pump for the upper pressure zone, an automated control system, and capacity for an additional 42 residential connections. In addition, partial progress was made towards future construction of a new reservoir, pump station and water treatment; however completion of these projects has been estimated at approximately $250,000. In addition, the issue of low service pressure during peak demands needs further evaluation and planning for eventual replacement of pipeline facilities should be considered.

Tags: HHA Holiday Hideaway
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