Dear Neighbor,

Our water system infrastructure project is making headway, and we want to share the latest progress with you. Over the past few months we have completed the project bidding process and finalized a contract to start work later this summer. During this process, however, we have had to make some adjustments to the plan.

Our initial designs were based on feasibility and engineering cost estimates from 2023. As required by federal funding protocols, the Co-op put the project out for open, competitive, sealed bidding. Unfortunately, only a single bid was received. Due to extreme industry-wide price escalations over the past three years, that proposal came in significantly higher than our approved funding can support. For context, specialized utility construction costs in our region have risen dramatically - averaging 6% to 8% annually, resulting in a near 30% compounding market increase - which far outpaced our conservative inflation baseline.

Together with our project engineer and legal counsel, we have negotiated a phased execution with the contractor, Pape and Sons. This structure locks in the contractor and fulfills our federal compliance mandates, while reducing the initial guaranteed scope to fit within our existing USDA budget without any added borrowing. There will be no changes to billing or rates, and no new burden for our members.

Project Phasing:

• Phases 1 & 2 -  Fully USDA Financed - $2.3M combined: Construction will focus on the system's most critical elements. Phase 1 replaces the primary main trunk line from 115th down to the Burton Loop (primarily 6-inch asbestos-cement, to be 8-inch PVC), including a subgrade pressure-reducing valve (PRV) vault on 238th. Phase 2 extends the 6” PVC distribution line north on 107th down to the highway creating a loop to meet fire flow requirements.  It also includes a second subgrade PRV vault. Prorated mobilization and administrative overhead are bundled cleanly into these phases.

• Phase 3 - Co-op Funded - $280K: Distribution line upgrades to 6” PVC on Burton Peninsula, starting at Burton Drive and moving clockwise on 97th to connect to existing 6” PVC near 95th.  This will be funded by previously collected Co-op capital improvements reserves and any unspent USDA loan funds.

• Phases 4 & 5 - Future Capital Improvements: Completing the distribution line upgrades to 6” PVC from near Jensen Point to Camp Burton (Phase 4) and completion of service lateral installation and fire hydrant installations from Camp Burton to Burton Drive (Phase 5) will follow later. These projects are likely to be completed in-house by Co-op staff and local contractors, funded by revenue from operations and any available capital improvements reserves.

The critical improvements are moving forward.  We are aiming to complete Phase 1 ahead of the winter rainy season. Depending upon weather, Phase 2 is likely to target March 2027.  An additional $250,000 of capital improvement reserves have been budgeted specifically for upcoming wellfield distribution improvements outside of USDA financing. As construction on Phases 1 and 2 progresses, if we find that we are not exhausting our built-in financial contingencies, the Board will evaluate adding elements of the deferred Burton Peninsula loop scope back into the active construction contract.

We understand that some members may be concerned about changes to the timeline for improvements near their properties. Please rest assured that the full engineering plan remains intact; we are simply managing its execution in a phased sequence to navigate this challenging financial climate responsibly.

You can expect additional information in the next community newsletter, which we will be sending in late August to share the most recent construction news. If you have any questions or feedback, or would like to attend our next board meeting via Zoom, we welcome you to email us at [email protected].

Sincerely,

The Board of Directors

Burton Water Cooperative