Agenda - 10-07-1991 - Laserfiche WebLink

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6 If OWASA agrees to sell the section of waterline requested by Hillsborough, contingent on satisfactory resolution of these questions prior to consummation of the sale, I believe all questions and problems can be resolved. I do not believe that Hillsborough will commit the funds necessary to answer the questions proposed by OWASA without some sort of conditional commitment from OWASA to make the sale. Hillsborough's engineer will have to take the design of Hillsborough's proposed system utilizing the existing OWASA main before OWASA's questions can be answered. The BOCC also asked if the construction of the water line between Hillsborough and Durham was more financially feasible than to continue buying water from OWASA. This question is somewhat more complicated than it appears, because it compels one to make a number of assumptions about future water rates, amount of water purchase, etc. These assumptions are based on existing conditions projected into the future. and this . procedure has a great deal of room for error. The basic facts that are used in making an economic comparison between the cost of constructing the Durham water line and buying water from Durham and the cost of continuing to purchase water from OWASA are as fellow: 1) the cost of construction of the entire water line and pumping station is approximately $800,000 - engineering costs are not included as this is already a sunk cost; 2) the water rates charged by the City of Durham to Hillsborough are $0.75 per thousand gallons, and the water rates will remain constant throughout the study period; 3) the water rates charged by OWASA to Hillsborough are $1.53 per thousand gallons, and the water rates will remain constant throughout the study period; 4) although the useful life of the water line may exceed 100 years. the payback period for this study is 20 years; 5) Hillsborough's water purchases will remain constant at three million gallons per week for sixteen weeks for a total purchase of 48 million gallons per year; 6) cost of operation and maintenance of the Durham line are not included in the costs of water purchases from Durham; 7) the additional labor costs in the purchase of water from OWASA are not included in the OWASA -rates.;_8) the rate of return calculated is 7.0% The assumptions above. when used in economic analysis calculations show that the annualized debt service of line and pump station construction is approximately $75,000 and the cost of water purchase from Durham is an additional $46,000 per year for.a total yearly cost of $111,000. This compares with a total annual water purchase cost from OWASA of $73.000. This analysis shows that the construction of the Durham pipeline costs approximately $38,000 per year more than purchasing water from OWASA. There is another facet of the construction of the Durham pipeline that is not shown in the analysis above.