The village of Lena has reached an agreement with Saputo Cheese, its largest water customer, to fund 90 percent of the estimated $3.2 million cost of a radium reduction plant now under construction, according to village officials.
“Saputo has historically used about 90 percent of the water consumed in the village and will contribute that amount toward the construction costs based on its level of consumption,” said Jon Cameron, an adviser with Ehlers Inc., the village’s financial consultant.
In 2013, Saputo used 101 million gallons of water, and the utility’s other 250 customers used about 12 million gallons.
The village has been using only one well since February 2013 when the Department of Natural Resources found excessive amounts of radium in Well No. 1. Radium is a radioactive element contained in many rock formations, usually in small amounts, according to a DNR brochure. Long-term exposure to high levels of radium in drinking water may result in increased risk of bone cancer, as radium accumulates in bones like calcium.
Relying solely on Well No. 2 caused fire protection concerns if the well pump should fail, and it could lessen the well’s future output, said Village President Steve Marquardt.
The village entered into a consent decree with the Department of Natural Resources in June 2013 to construct a radium reduction plant by July 2015, but the Wisconsin Public Service Commission did not want the village to build a plant to accommodate Saputo’s water needs without a financial commitment from the cheese maker.
Saputo did not want to make an upfront contribution toward the project but recently agreed to periodic installments, equal to its water usage during the loan’s 20-year life, Marquardt said.
“We finally got the agreement finalized in principle on August 18,” said Marquardt, although some of the amounts still have to be calculated.
The village will initially borrow $3.2 million from the state’s Safe Drinking Water Loan Program, at a 1.92 percent interest rate. The state has agreed to forgive $500,000 from the principal repayment which helps reduce the village’s rates and the amount Saputo would repay.
The loan has an approximate $166,000 annual principal and interest payment, of which Saputo will pay 90 percent, in addition to its normal water bill, Cameron said.
It has yet to be determined if the loan will close late this year or early next year, he said. Saputo’s payments will coincide with the loan’s closing, but neither Cameron nor Marquardt would specify if Saputo would make quarterly or annual payments on the loan.
A call and an e-mail to Montreal-based Saputo seeking comment on the agreement were not returned by deadline.
Negotiations with Saputo over its participation in the loan repayment had “dragged on since October,” Marquardt said, but the village now has an agreement that protects it if Saputo would close operations and quit buying water from the Lena Water Utility.
“There were some changes in (Saputo) management, but once that changed, the process seemed to speed up,” he said.
Lena has some of the state’s lowest water rates, but the village will seek higher rates next year to help repay its share of the loan.
“The increase should be significantly less than … the 135 percent we initially thought,” Marquardt said.
Cameron said a water rate application is being reworked to factor in Saputo’s participation and the principal forgiveness. The application could be submitted to the PSC early next year.
With the potential rate increase, the village finance committee will consider changing quarterly billing to monthly billing, Marquardt said.
“We have lots of elderly residents living on fixed incomes, and this could make it easier on them,” he said.
Concrete footings for the building that will house the radium reduction treatment equipment have been poured, and the walls should go up soon, Marquardt said.
The water mains to connect Well No. 1 to the new plant will be dug this year, and the entire project should be completed by the end of the year or early next year.
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