PORT ANGELES — A large loan that will generate higher utility fees was approved earlier this week, but not before one City Council member took a few shots at the state agency she says is responsible for the financial burden.

The $10 million loan from the state, which the Port Angeles City Council approved Tuesday, will help pay for the city’s project to nearly eliminate its sewage overflows.

The city is relying on state loans to pay for the approximately $40 million project.

The loans are being repaid through a wastewater utility fee, which is expected to cost ratepayers $179.40 in 2011.

City Council member Cherie Kidd at the Tuesday meeting criticized the state Department of Ecology, the regulatory agency overseeing the project, for requiring the city to pay for the expensive improvements.

“We are, in fact, forced to create a generation of taxes to support this large unfunded mandate,” she said.

“And these regulations are created by government agencies, like Ecology, who are not accountable to the taxpayers or to us as elected officials.”

Ecology is requiring the city to reduce the discharges to the “lowest level practical” in order to bring it in compliance with both the federal Clean Water Act and the state’s Water Pollution Control Act, said Greg Zentner, a municipal operations unit supervisor for Ecology’s water quality program.

Zentner, who supervises the city’s sewer overflow project, said the state agency drafts the regulations in accordance with legislation passed by state and federal representatives.

But Ecology does have some leeway in drafting the regulations, such as determining what “lowest level practical” means, he said.

That has been defined as no more than one overflow at each outfall per year. Port Angeles has four.

Zentner acknowledged that the project is expensive and said he does sympathize with the city.

“Nobody on the City Council right now created this problem,” he said. “They inherited it.”

Zentner also acknowledged that there is little grant funding available for Port Angeles or other cities facing the same problem.

The city is essentially left with 20-year low-interest loans as its source of funding.

The loan the city is applying for with Ecology would have a 2.6 percent interest rate.

The city has already received $13.35 million in loans for the project from the state Department of Commerce.

Those loans have an interest rate of 0.5 percent, said Leslie Hafford, Commerce client services representative.

But even with low-interest rates, the loans pack a punch for city ratepayers.

Utility customers currently pay $12.30 per month for the “combined sewer overflow” waste water fee, which is being used to repay the loans.

The fee, which the city enacted in 2005, increases $2 each year plus the rate of inflation.

Next year, the fee is expected to be $14.95 per month.

It will continue increasing until 2015, when it will reach $26.40 per month. The fee will expire after another 20 years.

The city plans to use a large tank on Rayonier, Inc.’s former mill site to temporarily store untreated sewage and storm water.

The effluent overflows during heavy rainfall because the city’s older sewer system also handles storm water and the pipes are undersized.

The city is negotiating with Rayonier for the purchase of the tank and approximately 12 acres of land needed for the project’s infrastructure and future expansion of the treatment plant.

The city hopes to buy both for $997,000.

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Reporter Tom Callis can be reached at 360-417-3532 or at tom.callis@peninsuladailynews.com.