Background for City-PTPC Water Lease Renewal

Now, in October 2020, the City of Port Townsend is actively engaging the public in discussing a new Water Usage Lease between the City and the Port Townsend Paper Mill and provides a process timeline.

The previous 1983 Lease expired on March 20, 2020. The following facts are drawn from Water Usage: City-PTPC Water Leases & Payment Schedule, 1928-2020. Additional reading can be found on PTAW’s blog entries.

Notes on a new Water Usage Lease between the City and Port Townsend Paper Corporation, 2020

What the Lease Should Be

A new lease should be written with a fee structure that is equitable to all other businesses and water customers; that encourages resource conservation; that reflects the actual value of the water and the increased infrastructure that are needed beyond the City’s requirements to accommodate the mill.

The City should be storing enough money from the Mill’s payments to cover future system maintenance, upgrades and repairs.

Q&A

How much water does the mill use?

Despite reported efficiencies, the mill uses 11-15 million gallons per day (mgd), or 330-495 million gallons per month. UMn reports that most U.S. pulp/paper mills have reduced down to 10 mgd (million gallons per day), and some as little as 8mgd. PTPC has little incentive to reduce when they are contractually assured of “at least” 14 million gallons per day, and are charged nothing for it.

All other users combined use 1/10 that much, at 1 to 1.4 mgd, or 30-43 million gallons per month.

How much does the Mill pay for its water use?

Since 1986, $zero. As noted below, PTPC supplies certain maintenance services, but that accounts for only a small fraction of the value of the water received plus costs of running an infrastructure that is much larger than would otherwise be needed.

The City has the Mill take care of some of the maintenance to the system, which the City estimated at $186,000 per year, far less than the value of the water received. The City also claimed that no records exist to pinpoint that amount, nor is it clear how the services provided parse out into City or Mill’s contractual agreements.

Repair, maintenance and upgrades

Except for damages due to Acts of God, the City seems to bear 100% of the costs for the system’s maintenance, repairs and upgrades according to the Leases. In the case of damaging Acts of God, costs are shared only on shared portions of the system at 5/18ths City: 13/18ths Mill. When requested in the 20-teens to contribute to upgrades that would also benefit the Mill, the Mill brought out its attorneys to argue down their contribution.

Did the Mill build the system?

No. The City issued (sold) bonds to cover the costs. Under the earlier leases, the Mill’s “rent” payments were applied to redeem the bonds, with the City providing credits, forgivenesses and write-offs to the mill as the City paid off the bonds. Further, the City applied interest it earned from its investment of the bonds toward the Mill’s rental obligations. Any further payment obligations were closed out under the last two leases (1956 and 1983).

How much has the Mill paid over the lifetime of the system?

The contracts specify a maximum total from 1928 forward, of $3,395,840.00, but also provides opportunities for credits and other considerations. When asked, the City claims no record of what was actually paid. And, not to emphasize it too much, nothing has been required since 1986.

How much would that cost if the Mill were charged like any other business?

The City’s schedule of water charges & fees is available online. A 30” diameter pipe supplies water to the mill, and it receives the above amount of water monthly, so we ask that the City provide an accurate estimate to the public.

It is assuredly much, much more than the $3,000 per month that is the average of what the mill paid out for water over the lifetime of the Leases. (And again, they have paid $Zero since 1986.)

In notable contrast, while the Mill uses 10x as much water as everyone else combined and is being charged nothing for it, around 2015 the City claimed that not charging the 60-90 poor folks being threatened with water shutoffs in any given month would bankrupt the system, even though they account for less than 1% of those who are being charged for water.

What other businesses get these breaks? None. Maintenance done by the Mill does not factor in since that is a separate contractual agreement.

What if the Mill can’t afford the water?

That is a sign of a flawed business model. By receiving free water, the owners are not encouraged to conserve or pursue efficiencies that could rein in costs, and the Mill is given advantages that are not afforded to other businesses that also struggle to provide goods and services to the economy.

Legal Issues

Direct metering is legally mandated. When we last investigated, even after the new water system upgrades went online in 2017, their water usage was not yet metered directly, but rather estimated from total water draw minus “everyone else’s” draw.

Giving away the City’s “product” is legally forbidden except to the poor, yet beyond a trade for maintenance that only offsets a small fraction of the water’s value, that’s what the City has been doing since 1986.

Size of system.

In order to accommodate the mill, the system was expanded from 6″ pipes to 30″ pipes. All other customers together use 10% as much water as the mill. If not for the mill, the system & infrastructure to support it could arguably be 1/10 the size.

Therefore

As stated above, a new lease should be written with a fee structure that is equitable to all other businesses and water customers; that encourages resource conservation; that reflects the actual value of the water and the increased infrastructure that are needed beyond the City’s requirements to accommodate the mill.

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