Last month, the Lake Lanier Islands Development Authority was awarded more than $4.4 million in state “direct investment” — not loans — to rehabilitate a Flowery Branch well to supply water to the area that plays host to one of Hall County’s biggest tourist draws.
The money is allocated through Gov. Nathan Deal’s Water Supply Program, an initiative headed by the Georgia Environmental Finance Authority aimed at developing new sources of water to meet future demands in the state.
The development authority plans to use the money to tap into the well; install, if needed, the infrastructure associated with the transmission of water; and to purchase the appropriate property.
The well is being tested to see if it will prove to be a stable water source. If those tests — which are scheduled to wrap up by Nov. 1 — prove the well is stable, then it is slated to become the resort’s primary water source.
Currently, the resort’s water provider is the city of Gainesville. The well could mean the city will lose one of its biggest accounts.
“Would this be the primary source? The answer would be yes,” said Bill Donohue, the executive director of the development authority. “Would it be completely independent of anyone else? Possibly not. It could be — that’s one option. The other option is to work in concert with one of the existing water providers in the region.”
For fiscal year 2012, the city billed the islands nearly $320,000 for around half a million gallons of water, at about 6 cents a gallon, according to the city.
Bob Hamrick, a longtime councilman, said the potential loss of one of the city’s biggest accounts is a concern.
“I can appreciate the thought of finding additional sources of water to serve the future,” Hamrick said. “But I would hope that the governor would consider the effect that it would have on the Gainesville water system in that suddenly you remove $300,000 in revenue certainly would affect our financing of the extensions that we’ve made.”
Hamrick said, for example, the city took out loans in the neighborhood of $50 million to build a water treatment facility in South Hall County. Losing a $320,000 account could hurt the city’s ability to repay those loans, some of which were taken from the state.
“To suddenly remove that large segment of water from there, I would question the effect it might have on our bottom line in repayment of the loan,” he said. “If it does go through how would you replace that amount of money?”
But Donohue said it’s not guaranteed that the islands would discontinue using Gainesville’s resources, or that of another municipality.
“(The well) will be the water source, but one of the things being discussed, for example, is working with one of the current water providers in the area, whether it’s Flowery Branch, city of Gainesville or Buford,” Donohue said.
As an example, he said the islands may work out a deal where existing suppliers would treat and deliver the well water to the resort.
Gainesville Mayor Danny Dunagan Jr. said losing the account would require some “adjustments” from the city’s side, but it would not affect the bottom line to the extent that the city could not repay loans.
“I don’t know that one account would affect our ability to pay back a loan, I’ll tell you that,” he said. “Lake Lanier Islands is a big account, but I also know what the governor and everyone else is trying to do is trying to acquire all the water in the state of Georgia for future growth that they can possibly get their hands on.
“If we lose the account then we’ll have to make some adjustments to incorporate that $300,000, but, you know, it’s a pretty big operation the city of Gainesville’s water, so we’ll just have to absorb it go on about business.”
And it’s not out of the question for those municipalities, including Gainesville and Flowery Branch, to pull water from the well.
According to Kevin Kelly, water resource division director for the environmental finance authority, part of the development authority’s application was an estimate that the well could produce more water than the resort needs.
“There’s a possibility if those communities are interested in participating, it would probably be through a wholesale contract and they could get water from the well,” Kelly said.
Gainesville and Flowery Branch officials said such conversations likely will not begin until testing of the well is completed.
“At this point it would be premature to have conversations of future uses for that water until we know what the supply is and that supply will not affect our current wells,” said Mike Miller, Flowery Branch mayor.
“I think what we’re waiting to do is to see what the results are that come back from the well, then we’ll sit down and see,” said Dunagan. “There’s not much sense in talking with us or any other municipalities if the well doesn’t test out like it should.”
The Governor’s Office says the well could provide a million gallons a day to the region.
“If that’s the case, this is a great investment for the state and it will pay dividends for many years to come,” Brian Robinson, spokesman for Gov. Deal, wrote in an email.
Robinson said if tests do not prove the well capable of that supply, the state will pull its funds.
“If studies show that it’s not what we think it is, the state can and will walk away from the deal,” Robinson wrote.
Lake Lanier Islands Development Authority was one of two organizations to receive more than $9 million in direct investment from the state for well projects.
The development authority applied for the money after the program was announced in January 2011.
Donohue said there were two main draws to the project: a long-term supply of water and a cost savings for the islands.
“I think there is a savings there,” he said. “Primarily from the current water rates from the city of Gainesville. We pay the out of city rate, which is probably the highest rate they have. I mean, we should pay that – it is an out-of-city location. I’m not suggesting it’s not the rate they should be charging us.
“The challenge we have at Lake Lanier and what’s different about Lake Lanier is the water storage tank, for example, is a million-gallon storage tank, that’s owned by Lake Lanier Islands Development Authority, as well as the transmission lines all through the resort.”
Donohue said the resort is charged with maintaining all of the infrastructure on the property, more so than other water customers.
“Anything that happens inside the meter (at my house) is my problem and anything that happens on the other side of the meter is the city of Gainesville,” said Donohue. “In this case, the meter and water valve for the islands is right there at the entrance. So what happens on the islands is all the infrastructure LLIDA maintains. So, we think it’s a little different infrastructure and cost.
“You’re paying a full rate, but you’re really incurring the capital cost and the maintenance cost for a lot of the distribution system that normally a water utility, in this case the city of Gainesville, but anywhere would normally provide.”
He said the well would allow the islands to “reflect more of an accurate billing.”
On top of that and a long-term water supply for the area, the well could ease the resort’s dependency on Lake Lanier for water, as well as recycling water back into the lake.
“Because it will draw up ground water and it will go through the Lake Lanier Island system, it will then be discharged through their treatment facility into Lake Lanier,” said Kelly. “Most of that water that’s drawn up from that well will end up as surface water for Lake Lanier.”
The tests are scheduled to wrap up by Nov. 1. If they show the well can be rehabilitated, Donohue said the work would take at least 18 months to complete.