NAUGATUCK — The borough and Veolia Water North America have reached a settlement that addresses many long-standing issues at the wastewater treatment plant.
Mayor N. Warren “Pete” Hess announced the agreement, which has been approved by the Water Pollution Control Authority and the Board of Mayor and Burgesses, last week.
Veolia, a private company that is under contract with the borough to operate the treatment plant, and Naugatuck have been tied up in a lawsuit over profit-sharing from Veolia’s private contracts. The two entities have also been at odds over how to address upgrades mandated by the Environmental Protection Agency to reduce the amount of phosphorous and other pollutants, such as mercury, emitted, and other issues including insurance.
Hess said the settlement answers many unresolved questions and described it as a positive for the borough.
“This is what I would call a global resolution where we are trying to get the incinerator up and running; we are trying to resolve our issues with Veolia in the litigation; we are resolving our issues to make sure we are fully compliant with water quality, and we also have a solution for air quality. In addition to working with Veolia we have been working extensively with EPA and vendors of equipment to make sure that this upgrade will work,” Hess said.
In April, Veolia turned off the incinerator at the plant for fear it was no longer in compliance with air quality standards set forth by the EPA. Since the borough owns the treatment plant it is responsible for the upgrades.
Prior to the agreement Veolia, which had been paying $4.1 million a year in rent to the borough, said it would no longer pay rent since it was unable to process the wastewater with the incinerator shut down.
This led officials to not include revenue from Veolia’s rent in the proposed 2016-17 budget. The loss in revenue was a major contributor to the 4.17 mill rate increase for the proposed budget, which is facing a referendum on July 12.
The incinerator was turned back on June 23, after the settlement was approved by the borough board.
“The incinerator is now up and running,” Hess said.
Hess said the settlement effectively adds about $3 million in revenue to the budget and will likely decrease the mill rate increase by approximately 2 mills. The budget, which has been adopted by officials, must be defeated at the referendum for the mill rate to be reduced.
According to the agreement, the borough will be responsible for the cost of the upgrades for the incinerator, which are not to exceed $6 million.
Hess said the money will be bonded and add approximately $400,000 a year to the budget.
“Bottom line is Naugatuck has a choice to pay for the bonding of $6 million, which will be about $400,000 a year. The alternative would be not to collect $4 million a year in rent. So we are going ahead with the upgrade so we can continue to collect the rent,” Hess said.
Hess said since the borough is under orders by the EPA to make the upgrades the bond will not go to a referendum.
Under the settlement, Veolia is withdrawing its claim that it has the right to terminate the contract and leave the borough, Hess said. Veolia has six years left in its contract.
“It is in the best interest of the borough that they remain in order so we can have stability and continue to receive rent,” Hess said.
The settlement makes two stipulations on rent paid by Veolia. The borough will reduce Veolia’s rent by $750,000 a year for the remaining six years of the contract. The borough will also receive a percentage rent, which is a portion of the distributable net revenue Veolia makes on incinerating wastewater sludge.
Under the settlement, the borough will receive 15 percent of the first $1.3 million of distributable net revenue, 20 percent of distributable net revenue between $1.3 million and $3 million, and 50 percent of any distributable net revenue above $3 million.
“Less sludge being processed by other facilities, so the price is going up. If the price goes up and there are profits in the future, those profits will be shared according to this formula,” Hess said.
The settlement also addresses how the borough and Veolia will move forward on the removal of phosphorus from wastewater. The removal of phosphorus was part of the federal mandate.
According to the settlement, Veolia will provide a solution that is designed to address the phosphorus issue and eliminate the need for any capital improvements at the treatment plant for phosphorus for the remainder of the contract.
Once it implements the solution, Veolia will receive an additional $100,000 reduction in rent for the first two years and $250,000 for the following four years.
Veolia will also pay the borough $3.5 million, spread out over five years, to settle litigation over past due rent. There are also stipulations in the contract regarding insurance, which makes Naugatuck’s share higher than it had been in the past.
An email sent to Veolia spokeswoman Karole Colangelo seeking comment was not returned.