The project is designed mainly to bring gas service to a number of poultry farmers who have been searching for a more cost-effective way to heat their chicken houses, especially during the winter months, when the cost of pro-pane can become prohibitive. A total of 38 chicken houses fall under the planned expansion area, and though the city would take heavy losses in the original construction of the project, it has high hopes to recoup the money over the long-term.
“The council originally looked at this last August and discussed the numbers of how many chicken houses and how many participants,” said LaFayette city manager Frank Etheridge. “At that time, you put it on hold to get more information and we also had a change of council.”
The city, with its three new council members, approved the project for the bid-taking process during its March monthly meeting. If a satisfactory bid is received, work would be completed by an outside contractor and the entire project would be financed by a low-interest loan from the Georgia Municipal Association. Officials estimate that it would take just three to four months to complete from the time the bid is awarded.
“This proposal is based on getting them natural gas by September,” said Etheridge.
An estimated project cost drafted in February carried a total price tag of $882,000. “That’s to do the entire pro-ject, to serve the whole 38 chicken houses,” said Etheridge.
Calculated at an estimated 2.75% interest rate, the total payback period on the large project amounts to 16 years – the first six of which represent a negative profit for the city. Furthermore, these numbers are a hopeful estimate contingent upon the participation of all 38 chicken houses in the designated service area.
“I think it’s an all or nothing proposition,” said Etheridge. “They either all participate to make it financially fea-sible.”
To make the numbers work, the city would have to charge a base service fee of $100 per chicken house per month for the first two years. “That number helps bring that payback period down,” said Etheridge.
The $100 fee would be on top of the standard eight-dollar base service rate per meter applied to all city of La-Fayette gas customers. Poultry farmers with more than one chicken house would only have one meter, and there-fore one eight-dollar fee per month.
“The goal was to make this make sense for the city,” said Etheridge. “The area of the county we’re talking about has been identified in the Service Delivery Strategy and in the Comprehensive Plan as part of our service area for gas. We don’t have gas that runs all the way down there, and you have poultry growers that are asking for you to provide service down there. They are currently on propane...the cost of propane is much more expensive than the natural gas that we provide.”
There is a concern that not all of the chicken houses would buy into the project, or worse, that not all would still be in business by the time construction was complete. Etheridge realizes the risky nature of the project and rec-ommended to the council that participation from all the chicken houses be guaranteed before bids are approved and ground is broken.
“The things that we would like you to recommend,” Etheridge advised the council, “one is an all or nothing ap-proach and that they sign a commitment with us for five years, and two, that we do the hundred-dollar month for two years.”
In addition to the chicken houses, there are 95 potential residential customers along the proposed seven-mile extension route. Officials have estimated that approximately half of those residents would choose to hook into city gas lines were they to be made available, thereby potentially shortening the loan payback time by a small amount.
Post a Comment