Costs for Columbiana water plant increasing
COLUMBIANA – Costs are going up on the new water treatment plant project and those costs will need to be factored into utility rates somehow, according to Chris Ryman of Arcadis and Wayne Canon of the Ohio Rural Community Assistance Program (RCAP).
Ryman gave City Council an update on the plant project Tuesday, and his presentation was similar to the one he gave in December, when he advised the bids received for the project were higher than anticipated due to increased manufacturer’s costs for specific equipment.
“We re-evaluated and regenerated a new estimate for the project that we believe is more in line with the bids we expect to receive,” he said.
The firm had to come up with a new cost estimate after the city recently rejected construction bids from interested contractors that were all over the 10 percent maximum threshold of the original estimate.
The new estimate is $17.4 million – up from the original estimate of $12.6 million. Those figures are based on construction costs alone. The total overall project cost is estimated at upwards of $22 million, Ryman said, and that includes land acquisition, legal fees, engineering and contingencies.
“It is a significant increase, and we recognize that. It was quite surprising to us that the numbers came up as high as they were,” he said.
He added, however, that once the city rebids the project he believes the construction cost will come down some.
But the project needs to be bid soon or costs will continue to escalate, he cautioned.
The city has already been approved for federal funding in the form of a $10.2 million loan and $4.09 million grant through the United States Department of Agriculture (USDA) Rural Development Water and Waste Disposal Program.
The funding will cover a majority of the cost of the project and the two-percent interest loan must be paid back over 40 years.
Ryman said Arcadis is waiting on the final approval from the USDA regarding the cost increase.
“They previously suggested the additional funding is there, they just need to give us the final OK on that. They realize that we need to move forward quickly. They are working toward getting us an answer this week,” he said.
He added there is an option of allowing contractors to bid on the project as a lump sum as opposed to five different contracts, which was done the last go-around.
If a company can bid that way it could reduce the project cost, he explained.
Contractors were bidding on general, mechanical, HVAC, plumbing, tank and electrical work.
“What we have heard from the previous bidders is they are all still very hungry for this project,” he said.
Council approved a motion to authorize City Manager Lance Willard to request bids pending USDA approval of additional funding and the lump sum procedure.
The city is currently in the process of conducting a water rate study to demonstrate to the USDA it has the ability to repay the loan, and Canon presented that study during the meeting.
He said that, to date, the city has already spent $1.47 million on the project that it will not get back.
With regards to the study, he said he made the assumption the city would enact the rates necessary to sustain the plant “right now.”
“I thought it would be best if you did do a rate increase that you only do it once,” he said, noting that if they enacted the increase during the construction phase it would reap $800,000 to $900,000 alone.
The study included the additional project costs and preventive and predictive maintenance costs.
The city has the following options according to the study:
– Increase rates from the current price of $6.54 per 1,000 gallons a month to $12.25 per 1,000 gallons for all customers within city limits.
– Keep rates at $6.54 per 1,000 gallons a month while adding a $21 a month user charge for all customers.
– Increase residential rates to $15.25 a month and charge commercial and industrial users based on meter size, with a 2-inch meter priced at $122 per month.
Canon said raising rates will promote water conservation and personally recommended taking the additional project cost and building it into a base or minimum bill.
He and local businessman Rob Struharik were not fond the option to charge based on meter size.
“I look at that like you’re punishing the businesses for getting the bigger meters for using more water. It should almost be the opposite. How do you compensate these extra costs by increasing growth?” Struharik said.
He suggested the city conduct a study to see if there is potential to sell water to surrounding businesses.
Council members offered alternative solutions, including moving some of the costs out of the water plant project into permanent improvement projects that could be funded through other sources.
No action was taken.