Lancaster applies for $2 million water plant grant

LANCASTER — The Lancaster City Council has not made a firm decision about how to solve pending water capacity issues. But the city will pursue a grant to build a new water plant.

The council approved the city's application for $2 million in U.S. Department of Commerce, Economic Development Administrations funds at Monday's meeting.

"We are exhausting all options to make the best decision," Councilwoman Maggie Morris Mick said.
The EDA funds, which total about $34 million, are available to areas in Kentucky and Tennessee that were declared states of disaster during last May's flooding. Lancaster is eligible because Garrard County was classified as one of these locations, Mayor Brenda Powers said.

"We'll be trying for this, of course, we'll be trying for some more too, because we need $12 million," she said.

Council members have expressed the desire to build a new water plant at that estimated cost if fiscally feasible. But they also have discussed a multi-million-dollar pipeline project in partnership with Danville to allow Lancaster to buy water from Danville or selling the water and sewer plants to Kentucky American Water.

Danville City Engineer Earl Coffey said he will meet with Lancaster officials later this week to present a rate outlook for the Danville partnership, and KAW is currently conducting a study of Lancaster's plant to determine its interest.

Mick initially hoped the council would choose an option by July 1, but KAW did not ask to conduct its 60-day study of the plant until early June, she said.

The city hopes to send in it’s grant application by early August and hear a response from the EDA this fall, Garrard County Economic Development Director Nathan Mick said.

So, waiting to hear about the grant could further stall a decision.

Currently, Lancaster's water plant is operating at about 73 percent capacity. Most plants upgrade when capacity reaches near 70 percent, Water Plant Superintendent Troy Deshon said previously.

While multiple solutions to the capacity issues are on the table, each comes with its own set of pros and cons.

Constructing a new plant would allow the city to maintain local control of water rates. But the Bluegrass Area Development District predicted earlier this year that funding the project would require about a 34 percent rise in rates.

Pursing the pipeline project with Danville would cost the city millions of dollars less, but residents would be at the mercy of the Danville City Commission's rate decisions.

KAW President Cheryl Norton said in June the company would purchase the water and sewer plants for what their rate bases are worth, which should be enough to cover at about $4 million of debt the water plant has accrued though recent capital investment projects, including water line replacement. But, again, city rates would be in the hands of another entity.

Powers said the city will continue to consider each option, while searching for more grant opportunities to help fund a new plant.