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EPA: No federal money used for Ryan Creek project

By Beth Kevit

Concrete pipes that now make up the Ryan Creek interceptor project sit in a farm field in March 2012 in Franklin. An EPA review of the project found no federal money was used. (File photo by Kevin Harnack)

Concrete pipes that now make up the Ryan Creek interceptor project sit in a farm field in March 2012 in Franklin. An EPA review of the project found no federal money was used. (File photo by Kevin Harnack)

A U.S. Environmental Protection Agency review of Franklin’s Ryan Creek interceptor revealed the sewer project’s $27.5 million Clean Water Fund Program loan was not federal money.

The EPA’s Office of the Inspector General in March 2012 began reviewing the project’s eligibility for federal money. OIG spokesman Jeff Lagda acknowledged Aug. 8 that the office had halted that review.

The results of OIG reviews can lead to formal investigations or audits.

“They had stopped work on this,” Lagda said, “because it was determined there were no EPA funds in it.”

Lagda refused to comment further on the review’s results.

The Ryan Creek interceptor is a roughly 5½-mile sewer section beneath what is mainly undeveloped land between South 124th Street and the intersection of West Ryan Road and South 60th Street.

According to an intergovernmental cooperation agreement between the Milwaukee Metropolitan Sewerage District and Franklin, the district’s 2020 Facilities Plan had the interceptor listed as a potential MMSD project. But Franklin’s access to the Clean Water Fund Program loan let the city pay for the interceptor and get it done sooner than MMSD had planned.

The MMSD, according to the agreement, plans to buy the interceptor for the loan’s principal and 20 years of interest. The loan has a roughly 2.5 percent interest rate, so MMSD’s estimated total cost is $35.3 million, according to a loan repayment schedule provided by the city of Franklin. The district, according to the agreement, will make its first payment in 2015.

The Ryan Creek project’s $27.5 million loan comes from the state’s Clean Water Fund Program’s leveraged-loan subprogram, said Michael Wolff, finance programs administrator for the Wisconsin Department of Administration. The money in that subprogram, he said, comes from the sale of state revenue bonds.

About $23.7 million of the loan had been disbursed to Franklin by Aug. 1, according to a DOA loan account history report.

The EPA pays into the Clean Water Fund Program, Wolff said, but federal money is kept in a revolving-loan subprogram, which means the federal money is separate from the state money used for the Ryan Creek project.

boxitIn 2011, the year Franklin applied for the loan, the EPA gave the Clean Water Fund Program $39.9 million, according to a state Legislative Fiscal Bureau paper.

Franklin’s application for Clean Water Fund Program money included two forms necessary to be eligible for the EPA money.

But Robin Schmidt, chief of the state Department of Natural Resource’s environmental loans section, said those forms are a formality and do not guarantee federal money will be awarded.

“We write the loan agreements,” she said, “then DOA decides what pot of money.”

Wolff said he decided to use state money for Franklin’s loan. He said he remembers Franklin’s project looked like the type of “good risk” the state wants to back with bond revenue.

Franklin, Wolff said, probably never was told whether the loan was made with federal or state money. The distinction, he said, would matter to recipients only if they receive more than $500,000 in federal money in a given year.

Cal Patterson, Franklin’s treasurer and director of finance, said he did not know and never was concerned about the loan’s origins.

“The source of it,” he said, “was not the significant factor.”

And, he said, the EPA never told the city the results of the OIG review.

According to the state’s Clean Water Fund Program rules, loans cannot be used to build “public sanitary sewer mains, interceptors and individual systems which exclusively serve future development.”

The restriction applies regardless of whether a loan is state or federal money.

John Bennett, Franklin’s city engineer, said the main reason Franklin wanted the Ryan Creek interceptor was to promote development on the farmland near the sewer. But, he said, neighboring Muskego could connect to the new sewer line to get a second link between its system and Franklin’s, meaning the project was not intended only to promote development.

David Simpson, Muskego’s city engineer and director of public works, said the second sewer connection should at least partially relieve basement backup problems. However, he said, he wants data from a few 100-year storms before gauging the interceptor’s effect on the backups.

“It will help,” Simpson said. “It just won’t eliminate. There’s no magic button to eliminate basement backups.”

Bennett said the Ryan Creek interceptor went into full service June 3 and came in about $750,000 under budget.

“We needed Muskego for the water quality end of it,” he said. “If Franklin had just applied by itself, I don’t think we could have met the water quality portion.”

Schmidt agreed. The DNR was comfortable making the loan, she said, because of the predicted benefit to Muskego.

“If you look up the definition of the word ‘exclusive,’” she said, “that means the only thing that it’s doing.”

Including Muskego in the project, Schmidt said, made Franklin eligible for the loan according to the Legislature’s intention by including the word “exclusively” in the program rules.

“If they would have said ‘majority,’” she said, “I think we would be having a different discussion.”

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