With phase II of the Duck River Dam officially bid, city officials have released updated projections on how the massive water reservoir project will affect wholesale water rates across the area.

In a report presented at the latest Duck River Advisory Committee meeting Wednesday afternoon, Cullman city clerk Wes Moore confirmed wholesale water rates are now estimated to reach $3.28 per 1,000 gallons over the next four years as the full debt for the final phases of the project are rolled into the rate-setting formula. The current wholesale rate for 2014 is $2.10 per 1,000 gallons, so the weight of the project’s debt is expected to add approximately $1.18 per 1,000 gallons.

The new proposed rate is lower than previous estimates, which had hovered at $3.55 per 1,000 gallons. The slight decrease is due to the phase II bid coming in $3 million below initial estimates with Colorado-based ASI Constructors, Inc. winning the bid at $51.79 million for dam construction. Engineers have also trimmed expenses in other areas.

The next bond issue the utilities board anticipates making to fund the project will come in the first quarter of 2015 at an estimated cost of $43 million over a a 30-year term, with an estimated interest rate of 4.58 percent and annual debt service of $2.65 million. Officials hope to use low-rate State Revolving Fund (SRF) loans for the final $18.5 million phase of funding, which would allow for an approximate 2.45 percent interest rate and annual debt service of $1.2 million.

Moore noted that schedule should help keep water rates down for at least another two years, as the cost of the project is phased-in to the wholesale rate.

“The goal is to keep water rates as low as possible,” he said. “We’ve averaged less than a 1 percent increase over the past five years.”

Combined, the two final funding phases will add $61.5 million in debt service over the next four years — which accounts for the $1.18 per gallon wholesale rate increase. The wholesale rate is determined by a formula that combines operation and maintenance expenses and annual debt service costs, then divides that total by the number of thousand gallons of water sold.

As required by contract, the city sells water at that determined cost to local water systems. From 2010-2014 the rate has increased .09 cents, from $2.01 to $2.10 per 1,000 gallons.

Moore also noted the potential impact of the wholesale rate increase on retail water rates — i.e. the amount paid by local water customers — and said the increase should only affect retail rates by approximately 18 percent, though retail rates are set by the separate water systems independently and could vary. For the average customer, the increases should total around $5 per month.

But that amount could be higher for poultry farmers around Cullman County who use much more water than an average household, so the Alabama legislature is eyeing some incentives that could help alleviate some of those increases.

“We’re looking next session at doing some water rate incentives for the poultry industry,” Sen. Paul Bussman (R-Cullman) said. “Right now we’re looking at, maybe an incentive on the first ‘X’ number of gallons used. We think we could get that done next session.”

The total cost of the dam project is estimated at approximately $110 million, which is up approximately $40 million from initial estimates due to some unforeseen geological concerns at the site and higher-than-expected flood standards.

The dam project will create a 640-acre lake with a 32-million-gallon-per-day capacity in northeast Cullman County, which will work in conjunction with the area’s current sole major water source Lake Catoma. The design will be a hybrid, with roller-compacted concrete in the center and earthen wings.

The Duck River project has been in the works for more than a decade, after being permitted by the U.S. Army Corps. of Engineers than subsequently delayed by environmental challenges that have since been resolved.

* Trent Moore can be reached by e-mail at trentm@cullmantimes.com, or by telephone at 734-2131, ext. 134.