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Is Reverse Osmosis Plant Swamped?

By Terry Reilly, posted Dec 15, 2017
A packed audience showed up for H2Go’s Nov. 28 meeting, during which outgoing board member Carl Antos made the surprise announcement to hand the utility over to the town of Belville. (Photo by Terry Reilly)
Having lost re-election by just 19 votes, H2GO board member Carl Antos delivered a swan song that resonated throughout the Cape Fear region. At November’s H2GO meeting, Antos told several hundred customers that H2GO planned to hand over the utility to Belville.
                                
The transfer of ownership, if successful, would allow the construction of a controversial reverse osmosis (RO) plant to continue. New board members who were to be seated Dec. 19, according to board chairman Bill Browning, took control Dec. 4 and immediately passed a resolution reversing the transfer of assets to Belville.
 
But local and state officials might halt that measure.
 
The town of Leland obtained a temporary restraining order to stop the transfer. The court agreed with Leland’s claim that the transfer would “strip the elected representation of the voting residents and allow the construction of a new, unnecessary and expensive water treatment plant to proceed.”
 
A reverse osmosis plant pumps untreated water under high pressure through membranes to remove impurities. The new plant would have an output of 4 million gallons per day (mgd) with an option to expand to 8 mgd. Current average demand is about 1.7 mgd, according to H2GO officials.
 
Brunswick County Commissioner Frank Williams condemned H2GO’s overall process. “Such a major change should be enacted with greater transparency than what we have seen here,” he said. Williams added that “transferring assets of a utility does not happen overnight but typically takes six months or more.”
 
Those assets are considerable. A 2016 audit reported H2GO’s net worth as nearly $54.7 million.
 
Sharon Edmundson, fiscal management director of the State and Local Government Finance Division, warned officials about the need for approval of any debt transfer from H2GO to Belville before the transfer resolution was passed.
 
“The actions may cause the debt to go into a default status,” she said.
 
Tyler Wittkofsy, H2GO spokesman, stated in an email that longterm debt stands at about $6 million. Debts include a $4,792,152 Sun- Trust bond, $296,780 for a Brunswick County transmission line and $850,668 for a Brunswick County wastewater treatment plant.
 
Whatever the future holds, almost exactly half of H2GO’s customers will be pleased. In November’s election, 51 percent of the 10,914 votes cast were for candidates supporting the H2GO plant.

THE HISTORY

The journey to today’s controversy started innocently enough in 2011. H2GO purchases treated water from Brunswick County, which in turn purchases raw water from the Lower Cape Fear Water & Sewer Authority (LCFWSA). Concerned that proposed county and LCFWSA multi-million dollar projects could significantly increase the cost of water, H2GO initiated a study comparing future costs of water from the Cape Fear River and a new reverse osmosis plant.
 
In 2013, officials from Belville, Leland and H2GO took a field trip to a working RO plant on the Outer Banks. Perceptions seemed positive as the RO plant was found to be quiet, odorless and benign to the surrounding environment.
 
Then things changed. Plans to build the plant in Leland were nixed. In the fall of 2014, the Leland Town Council voted to rezone the parcel, preventing future construction at the site. But H2GO is expected to come out ahead on the property, which it had purchased for $250,000, because according to Wittkofsky, part of the site is now listed for sale for $880,000.
 
Belville officials stepped in and offered town property for the RO plant adjacent to Magnolia Greens in early 2015. The new location sparked strong opposition from the community. Adding to the plant’s headwinds, two new H2GO board members, Jeff Gerken and Trudy Trombley, were elected who both strongly oppose the RO plant.
 
Opponents are concerned about the plant’s $34 million price tag and the debt payments spread over a small, 10,000-customer base. They also believe an alternative water source is not needed and that the county can meet future water needs.
 
The RO plant would generate an extra $9.4 million in cash surpluses over a 22-year period, according to a study by Raftelis Financial Consultants for H2GO in 2016. Gerken criticized the report’s assumptions including a 3.7 percent customer growth rate. “If the growth rate dips to 2.1 percent or less, the equation changes and not building the plant is the better option,” he said. The report also used assumptions regarding plant construction costs, plant maintenance, future Brunswick County wholesale water rates and bond interest rates.
 
In June, opposition accelerated when a petition challenging the plant, spearheaded by Gerken, was presented to county commissioners. Moved by the petition’s hundreds of signatures, the commissioners unanimously adopted a resolution asking H2GO to postpone further action on the RO plant until after the November election. But H2GO officials pushed ahead, awarding multi-million dollar contracts.

LATEST ON CONSTRUCTION

Earlier this year, contracts totaling $27.6 million were approved by a 3-2 vote. Several contracts are contingent on H2GO obtaining a $25 million bond. To date, 42 percent, or $14.1 million, of the plant’s $34 million dollar budget has been contractually committed or spent.
 
As for actual construction, Wittkofsy said, “Crews are doing site work on the plant site, including removing unsuitable soils and leveling. Four of the five lower Peedee aquifer wells are in, and two of the five Black Creek aquifer wells are completed.”
 
Although legal obstacles and a new board threaten to sink the plant, a “Pro-RO” movement spawned by the GenX crisis is fighting for the facility. H2GO customer Rick Schoch told the H2GO board, “The plant being built by H2GO is the best and most timely solution we have for this area. We need clean water now – nothing else is acceptable.”
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