New Year, new water project woes

It is a new year, with a new mayor, but some things never seem to change as problems with City of Malta’s water project persist.

At last Tuesday night's Malta City Council meeting — the first of 2018 and the first for new City Mayor John Demarais — the Council approved a motion to begin the process of raising water rates for the second time in 19-months (the first rate increase occurred in July of 2016 to help secure loans and funding for a city-wide water improvement project.)

Mayor Demarais explained that he and Malta City Clerk and Treasurer Lorie Bond recently had a conference call with Bear Paw Development (the firm who administers the loans for the water project) and were informed that there were two different numbers on one of the loan forms (specifically the State Revolving Fund Loan C form) one for $4,327,000 and the other $4,975,000 (a difference of $648,000.) Mayor Demarais said the City used the larger of the two numbers during spending on the water project though the lower amount was what the City actually had for the project. He said that if the loan had been for the higher of the two amounts, the City would have had enough money for the water project.

“With the lower amount, there was no contingency fee,” he said. “The City thought they had a contingency fee, which they didn’t. Since the City used the larger of the two numbers, we have a shortage.”

Mayor Demarais said that the City of Malta now has to borrow $750,000 to cover bills from the water project. Mayor Demarais explained that there was no cost overruns or money spent foolishly leading to the shortage.

“We just didn’t get enough money the first time,” Mayor Demarais said. “I wish somebody would have caught that and I could throw people under the bus, but I am not going to do it, but it was nobody in this office who did it …we accepted help from the loan administrator (Bear Paw) and somehow it got screwed up. We thought we had a $650,000 contingency fee which we didn’t so we were spending that to shore up the project and it just flat wasn’t there.”

Though the difference between the two loan amounts was $648,000, Mayor Demarais said that the City of Malta is looking to borrow $750,000 to cover any “worst case scenarios.”

Mayor Demarais said that work would begin to secure the new loan with Dorsey and Whitney (the City’s bond counsel) and it would take about a month to complete that process. Until that process is complete, the City of Malta will not know how much water rates will need to be increased to cover the new $750,000 loan. He said a public meeting will be held prior to any water rate increases where people can ask questions or voice their concerns.

“I am furious over this, but what can we do?” said Mayor Demarais. “We are going to keep (the increase) as low as we can. We owe the money and we have to pay for it.”

A member of the public asked Mayor Demarais if Bear Paw Development could be held responsible for the errors and another asked, “Why are we paying for their error? That is a big error.”

Mayor Demarais said every possible alternative would be looked at, but added that the cost for an attorney in such a case – errors and omissions – is about $300 per hour and according to the people he’d been in contact with, the attorney often pockets the lion’s share of monies in those types of lawsuits.

“But it is something we can look at,” he said.

In July of 2016 when the water rates were raised the first time, the increase affected both regular water users and people who owned vacant lots that have access to water lines and could someday connect to the water supply. Mayor Demarais admitted that he wasn’t sure if the rate increase would affect both types of water users again. Mayor Demarais said the “million dollar question” is how much this error will increase the monthly water bills in the City of Malta and the answer is:

“I just don’t know,” he said. “We asked (Bear Paw) and they can’t even give us a ballpark figure. Just as soon as we know, we will let everyone know and we will have another public meeting.”