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The city of Portland is looking to take another step toward kick-starting a massive water filtration facility project by issuing bonds to finance a major portion of the work.

The City Council on Wednesday heard a first reading of an ordinance that would authorize the city to enter a loan agreement with the U.S. Environmental Protection Agency to provide up to $745 million for the Bull Run Treatment Projects, which include a state-mandated filtration facility and pipeline currently estimated to cost around $820 million.

Under the proposed legislation, water revenue bonds would be issued as a direct loan with the EPA under the Water Infrastructure Finance and Innovation Act (WIFIA), a program aimed at stimulating infrastructure spending, improving ratepayer affordability and creating jobs by offering extremely low project financing costs.

Speaking to the City Council during an electronic meeting on Wednesday, city debt manager Matt Gierach said that if the terms for a loan agreement were finalized that day, the city could borrow at a rate of about 1.15 percent for 35 years 鈥� a rate that, with inflation, would essentially mean the city was borrowing that portion of the project’s financing for free.

During that time frame, Gierach said, the city would benefit from the economic stimulus of constructing the project while deferring payments into the future. The WIFIA program allows for loans to be drawn out over time, and repayment to be deferred until five years after substantial completion 鈥� 2032, in the case of the Bull Run filtration facility, which by mandate must be in operation by 2027.

The project is being undertaken to treat the Bull Run watershed for cryptosporidium, a pathogen that was detected in multiple tests in 2017. As a result of the tests, the Oregon Health Authority revoked Portland’s variance from federal rules requiring treatment for cryptosporidium, and the city agreed to construct a treatment facility to be in operation by 2027.

The City Council in November 2019 voted to proceed with a recommended option for the filtration facility that will treat 145 million gallons of water per day using ozone and conventional filtration. The council also voted that month to authorize a $51 million contract with Stantec Consulting Services Inc. for design of the water treatment facility, which will be located on a 95-acre parcel in unincorporated eastern Multnomah County. A separate contract for design of the pipelines servicing the facility is expected to be issued this spring.

During Wednesday’s council meeting, Mayor Ted Wheeler and Commissioner Jo Ann Hardesty both said they’ve heard concerns from residents, businesspeople and others over the project’s cost and its impact on water rates. The Bull Run watershed provides drinking water for over 650,000 Portlanders and 300,000 additional residents of other Portland-area municipalities that purchase water from the city.

Hardesty said that while she supports the WIFIA loan, she is still not sold on the project as a whole.

鈥淢y biggest concern is smaller cities dropping out of our water program and deciding that they’re going to go their own way,鈥� she said. 鈥淚f that continues to be a major issue, we may need to think about whether or not this project makes sense. I just want to say publicly that my vote today for this in no way should imply that I’m on board 100 percent with us moving full-tilt ahead with this scenario.鈥�

Commissioner Amanda Fritz, who oversees the Portland Water Bureau, stated that the 2027 deadline for project completion means that it cannot be postponed. Further, she added, the timing is ideal for it to proceed because of the availability of a very low-cost loan and the opportunity to create jobs amid widespread unemployment.

鈥淭his project is expected to create 7,500 direct jobs,鈥� she said. 鈥淲e can put Oregonians back to work now, and spread the cost to a generation of ratepayers who will benefit from the improvements. At this time in the COVID-19 pandemic when so many people are losing their jobs, losing their health and losing their financial security, this opportunity is more important than ever to pursue.鈥�

Wheeler agreed, saying that there’s not going to be a better time in the next decade to finance projects through the issuance of bonds due to low interest rates being pushed by the federal government.

The ordinance will receive a second reading at a future council meeting. Upon approval, the city’s Debt Management Division and the Water Bureau will seek to finalize terms and execute loan agreements this summer. The filtration facility has entered a two-year design phase, while planning for the pipelines is under way and will move to a design phase next year.