THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, April 27, 1995 TAG: 9504270338
SECTION: FRONT PAGE: A11 EDITION: FINAL
SOURCE: BY TONI WHITT, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 71 lines
At $242 million for the Lake Gaston pipeline, legal fees and water treatment, Virginia Beach residents will pay a hefty price for the new stream of water, but the city has been setting aside money for a long time.
Virginia Beach has saved $88 million for the project from connection and water fees that have been placed in special accounts since 1986.
The total cost of the pipeline - including legal fees - will be $142 million, most of which Virginia Beach will pay. Chesapeake will pay one-sixth and will receive one-sixth of the water.
Virginia Beach already has paid $36 million in legal fees and construction costs. Chesapeake has paid nearly $6 million.
Currently the average residential customer in Virginia Beach, which has the highest water rates in the region, pays about $25 a month for city water. Chesapeake customers pay $10 less for the same amount of water. However, Chesapeake residents use more water, so the average customer pays about $20 a month.
Virginia Beach officials said they have been prepared for the final settlement on the pipeline, so it won't be an immediate burden on water customers, although water rates may increase over the next five years.
Rate increases are uncertain in Chesapeake.
``I don't know cost-wise what it means,'' said Chesapeake Public Utilities Director Amar Dwarkanath. ``That will cost $35 million on our part. That would mean a rate increase, and right now we are studying it.''
In last year's capital budget, the Chesapeake Public Utilities Department estimated the project would require three rate increases of 10 percent each.
``But we also said we need to do a rate study to find out what we really need,'' Dwarkanath said.
Chesapeake is counting on Lake Gaston for its future water needs and will continue its contracts to buy water from Norfolk and Portsmouth, Dwarkanath said. Currently Chesapeake uses about 13.2 million gallons a day.
In addition to the $142 million pipeline, Virginia Beach must pay $100 million to expand and improve Norfolk's water treatment plant so that it can process the additional 60 million gallons of water a day from Lake Gaston.
In 1986, Virginia Beach began raising funds for the Lake Gaston project through $1,500 fees for connections to new homes and businesses or for bathroom or kitchen renovations or additions. Two years later, the city raised water rates and began setting aside money for pipeline construction.
In 1988, Beach voters approved the sale of $200 million in special bonds for the project. The bonds are low-interest loans to be repaid with revenue from the sale of water to residents and businesses.
The bonds will be issued when they are needed for the construction and when the interest rates are most favorable for the city, said Thomas M. Leahy III, the Lake Gaston project manager and a Virginia Beach city engineer.
Norfolk officials said their city should break even on the changes. When the pipeline is operational, Norfolk will lose a paying customer. Virginia Beach now buys about 30 million gallons a day from Norfolk. But Virginia Beach will continue to pay for a large portion of the operations and improvements to the Norfolk water plant.
``We have a partner to help share the cost of the facilities,'' said Louis Guy, utilities director for Norfolk.
Virginia Beach will end up with between 43 million and 45 million gallons of water a day. That will serve the city for the next 20 years, Leahy said. After that, he predicted, the city will need about 55 million gallons a day. ILLUSTRATION: Graphic
What the agreement says
For copy of graphic, see microfilm.
KEYWORDS: LAKE GASTON PIPELINE VIRGINIA BEACH NORFOLK WATER by CNB