Water agency and city officials can breathe a sigh of relief, as the one bidder left competing for the contract to build the surface water project treatment facility submitted a bid last month that is $10 million under the price cap the agency placed on the project’s overall costs.
Had the price tag come in higher than the maximum guarantee, capped at $151.5 million, the bidding process could have reverted back to square one and potentially put the water project on ice, resulting in costly delays in the project schedule.
The final cost of construction of the surface water plant, proposed by Colorado-based CH2M Hill, is $141.2 million, $10.3 million less than the cap and 25 percent lower than the original construction engineering estimates, according to water agency officials.
The cost breaks down to $66.4 million for Davis and $74.8 million for Woodland.
The overall cost of the project to Davis, however, including pipelines and administrative costs, will be about $106 million, down from $110.9 million. The estimated $9 million in annual operating costs will be split with Woodland.
“This kind of confirmed what we hoped, which was the bidding environment was very favorable for a project like this,” Mayor Joe Krovoza said Wednesday. “Saving more than $10 million off our already 19 percent below engineering cost estimates is spectacular, and welcomed, and does mean a lower cost to the ratepayers of Woodland and Davis for years to come.”
The Woodland-Davis Clean Water Agency surface water project, which was approved by Davis voters in March by a 54.1 to 45.9 percent margin, will pump water from the Sacramento River, treat it and pipe it to Davis and Woodland, largely replacing each city’s ground water supply.
To generate enough revenue to pay for the project, the City Council raised rates citywide in March that are expected to triple the average water bill over the next five years.
The water agency board is expected to award the contract to CH2M Hill at its meeting Thursday at 3 p.m. in the Community Chambers at City Hall in Davis, 23 Russell Blvd. If the contract is approved next week, construction of the facility would begin in March 2014.
“During the past three years, we systematically reduced the project cost estimate and set a maximum project cost for the regional facilities to be constructed by the design-build-operate team at $151.5 million,” Dennis Diemer, general manager of the water agency, said in a statement.
“We are very pleased that CH2M Hill was able to provide a proposal significantly below our maximum cost limit and in compliance with all of the agency’s requirements.”
For a time earlier the year, the bidding process seemed to break down, as both of the other two teams the agency had picked to compete for the project had withdrawn because of their respective inability to put forth a competitive proposal.
Concerns surfaced in the community that the agency would not be able to reel in the most competitive price from the only remaining bidder, CH2M Hill, as it could no longer pit teams against one another and drive down costs.
But Diemer maintained that because the agency set a maximum price guarantee and cemented in aggressive requirements for the technical aspects of the project, as long as CH2M Hill met those requirements, the competitive process would have worked and the cities still would be getting a great deal.
Meanwhile, even with the successful bid in hand, Davis city leaders still have to contend with the lawsuit lodged against the water rates, not to mention an initiative campaign to put those rates to a vote.
Both developments could significantly and negatively impact the financing the city must secure to begin paying off Davis’ share of the project. City Manager Steve Pinkerton and City Attorney Harriet Steiner both have said that ultimately would cost ratepayers in Davis more money.
Pinkerton and Steiner worry if the city approaches lenders with an unresolved lawsuit tied to the water rates, the interest the city receives on the bonds could rise dramatically. A ruling in the case is expected in December.
Krovoza says, however, the process to secure state revolving fund loans, which traditionally carry extremely low interest rates and shorter payback periods, is going well. Finance staff told the City Council earlier this year that if the city were to pay for a significant portion of the project with that type of financing, the overall cost of the project could be reduced by up to $60 million.
Ratepayers likely wouldn’t see the savings achieved by the state revolving fund financing until the project was paid off 20 years down the road.
— Reach Tom Sakash at email@example.com or 530-747-8057. Follow him on Twitter at @TomSakash