Santa Paula: Center Stage Public Works

By Sheryl Hamlin

Update on Capital Improvement Projects (CIP) Projects

Public Works Director Brian Yanez described $10 million of active projects, either under construction, bid or design. Brian Yanez provided this list of projects:

Projects Under Construction:

Citywide Street Improvements (Pavement, Water, & Sewer)  $8 million

600 Zone Booster Pump Station  $3.3 million

Out To Bid:

Harvard Boulevard Improvement Project  10th to 12th Street (Bid Opening 9/22/16)

Virginia Terrace/Mckevett Heights Sewer Main Replacement (Bid Opening 9/22/16)

Citywide Railroad Crossings (Bid Opening 9/29/16)

Veterans Memorial Park Restroom Rehabilitation Project (Bid Opening 11/3/16)

In Design:

Tenth Street Bicycle and Pedestrian Improvements Project (100% complete and under review)

Peck Road and Faulkner Road Pavement Rehabilitation Project

Foothill/Hardison/Cameron Storm Drain Project

Palm Court Water and Sewer Mains Replacement Project

Harvard Boulevard Improvements Project Peck Road to Elizabeth Court

Railroad Depot Platform Safety Barrier Improvement Project

Studies:

Corporation Yard Feasibility Study

Upcoming Projects:

Santa Paula High School Neighborhood Traffic Improvements

Teague Park BBQ Shelter Improvement Projects

City Manager Fontes commented that this was the largest volume of capital improvement projects at one time since he has been with the city and congratulated the Public Works team.

Note that the CIP projects are primarily funded by bonds. It would be appropriate to include in the report of these projects the status of the bond funds given completion of all described projects.

SCADA System Replacement

The SCADA (Supervisory Control and Data Access System) Replacement (Item D) was included in the consent calendar, but was pulled at the request of Council Member Gherardi.

Council Member Gherardi asked if this was the device that failed which caused the Sewer plant failure and what is the backup? Brian Yanez replied that the only system involved in this bid is water. This bid will put all the water pieces onto one system, explained Yanez, including reservoirs and pumps. Council Member Gherardi asked about backup. Well 14, the main system, has a backup, he said, this is just communication lines running the SCADA program. Council Member Gherardi asked what happens when the SCADA system for the water goes down. Brian Yanez said the programs have triggers to a call center for staff to respond to problems, but he did not have the exact backup plan. Martin Hernandez thought there was a 12 hour batter backup existing now. The issue, according to Council Member Gherardi, is what happens when the communications lines go down. Council Member Procter asked about system redundancy such as the sensors. Brian Yanez will bring item back with more detail on the backup plan.

Brian Yanez

Brian Yanez

Item 12B Waste Water Treatment Facility Operations and Maintenance Contract

Pursuant to the city’s recent buyout of the Waste Water Treatment Facility, which involved the issuing of new bonds, a new O&M (Operations and Maintenance Contract) must be signed by November 2016. Note that since the recent bond sale, the city calls the facility a Water Recycling Facility (WRF). The O&M function is now being provided by PERC, one of the original partners in the DBOF (Design Build Operate and Finance). The three bidders for the new O&M contract are: PERC, Servern Trent and American Water.

From the staff report, the description of the RFP is as follows:

* Number of years providing relevant services

* Client references

* Experience with operations services at wastewater treatment or water recycling facility of similar capacity and process

* Number of projects or resources in proximity capable of providing technical and staff support

* Litigation, permit enforcement actions, and/or fines from similar projects

* Detailed project plan and budget

* Detailed corporate safety program addressing operations

* Identifies strategy for providing operations support: SOPs, operations and maintenance manuals, facility evaluation, maintenance management approach

* Provides in-house specialized support: process control, instrumentation and control, SCADA, and power management

* Corporate training programs

* Financial resources and stability

* Completeness of proposal

According to Brian Yanez, Public Works Director, respondents were ranked and American Water was ranked as best fit for the City of Santa Paula by a review committee (listed below) for reasons given in the staff report. The staff report did not provide the rankings, but provided the three bids for 24/7 service, a service which the city does not now provide for the facility: American Water $1,159,530, Severn Trent $1,278,876, PERC Water $1,285,600. Brian Yanez noted that Mayor Hernandez and Council Member Tovias were ad hoc members of this review committee.

review_committee

 

There was minimal information in the four page published staff report, according to Council Member Gherardi.

The consultant from MKN, Michael K. Nunley, the firms principal, presented a slide showing features and functions the committee wanted in the operation.

functions

Note the line: implement replace, repair, and cap ex projects ($10,000/$50,000/out of scope). This means that the bid requires replacement ($10,000), repair ($50,000) and capital expenditures (out of scope) presumably.

There was no attempt to compare the above chart to the current services provided by PERC and the existing O&M contract. In the Notes to Financial Statements dated June 30, 2014 for the City of Santa Paula, the auditors note the following about the service fee to the Waste Water Treatment Facility operator:

The service fees payable to the Company are for the operation and maintenance of the facilities in addition to capital recovery, return on capital and repair and replacement.

With the purchase of the plant the items capital recovery and return on capital disappear, but the repair and replacement component of the service fee continued through PERC. There was nothing in the staff report to identify the exact nature of the repair and replacement items to which the new bids could be compared, thus it was impossible for the council to understand how the costs of the new O&M contract would compare to the existing PERC O&M contract.

In the new arrangement, says the consultant, the city will be required to pay for power, laboratory testing and analysis, groundwater testing and analysis. Different than current agreement, he said, His theory is that it would be less expensive for the city to provide these items, but provided no justification. Here are current costs, per the slideshow, which was not included in the public handouts.

costs_now

 

In the April 14, 2015 Bond Prospectus published by FirstSouthwest Securites, page 17, there is an explanation of the Wastewater Enterprise Operations as follows:

The City is currently contracting with American Water Operations and Maintenance, Inc (American Water) to operate, maintain and inspect the Citys wastewater collection system pursuant to a Maintenance Agreement, dated January 20, 2014 (the Collection System Maintenance Agreement)…….the City pays American Water approximately $278,450 per year…. 

It is possible that this amount is in Other WRF fees, but it could be another aspect of the operation. Was the collection system included in the RFP? Will the city need another contract for such? The bid and consultant should include this in a matrix of comparisons between existing conditions and bid conditions. This item was mentioned by the consultant, but it did not appear to be in the bid.

The consultant mentioned the $826,625 buyout fee, but did not explain how this was factored into the three bids, if at all. Consultant said he understood that this termination fee had been included in the city’s financing.

Council Member Gherardi quested the Public Works director about the need for 24/7 staffing when it is not provided now, to which he said it was a consensus, but might through negotiations it might not be needed. Council Member Gherardi asked about the order of the RFP process, indicating that the requirements should have been in the RFP and the results yielded apples and oranges. Council Member Gherardi questioned the significantly higher DBOF contract and its effect on the citizen rebate program promised the public.

Representatives of PERC and Severn Trent were in the audience and spoke. Brian Cullen said he was equally confused about the numbers and said that the proposals do not compare existing to new. The $1.3 million PERC gets now is a full service, all inclusive, Mr. Cullen said. He said there would be at least $550,000 of additional costs. BAFO (Best and Final Offer) should include a comparison to todays contract, he said. Cullen noted rule 97-13 which states that municipal contracts cannot exceed 20 years for bond purposes, which is why the new contract had to be offered, however, he said that PERC would be willing to reduce the remaining 23 years and other terms as needed in order to fit within that 20 year window of rule 97-13 and the termination fee would not be required, thus lowering all costs.

Council Member Tovias asked about the $1.5 million bill for the 2015 water spill. Mr. Cullen said that this was an equipment failure issue. Council Member Tovias said PERC should have been monitoring the equipment and claimed that this money represented the citizen rebate which was not given. Council Member Procter asked if PERC has volunteered to reduce this pre-payment fee, to which Mr. Cullen said yes.

Mr. Cotti, city attorney, responding to Council Member Procters question about the requirement for a new O&M contract, said that ironically this was “part of Obamacare” and the bonding provided sufficient funds to pay the buyout. This may have been included in the bond proceeds, but such payment reduces the bond proceeds for use in principal and interest payments, but this was not discussed at the meeting. Mr. Cotti insisted that the new O&M contract is a condition to keep the new bonds tax-exampt.

Bob Ashfield, Severn Trent, spoke and commented on the apples to apples. He said that 90% of the bid was staff and he was concerned that the staff bid from American Water might have included staff from Fillmore. He said his company has 13 facilities in California and American Water has only 1. Trent has the most experience operating PERC plants and has people who once worked for PERC. RFP was re-issued because it did not have pollution liability insurance. He was only given 3 minutes.

John from American Water said the biggest difference was 24/7 monitoring, and spoke about backup and monitoring. There is no sharing of resources with Fillmore. They run military bases in California and have access to emergency resources in California. Emergency resources are less than 20 minutes away, he said, and they already do the Collection System, so there are American Water resources already on site.

Vice Mayor Crosswhite spoke to the sparseness of the staff report and was unwilling to make a decision on something this important. Somebody has to pay the $825,000 buyout, so this should be explained, she said.

Council Member Procter observed that there is no information for the single shift operation. The costs between options is something the council must consider, particularly when they are trying to give rebates, he said. The jury is still out on the SCADA equipment failure in 2015 spill. He said the conditions of the RFP were weighted in favor of one proposer. Council Member Procter noted that the slide about City Responsibilities did not include the membranes, which are millions of dollars. Would the membranes be included in the bulk buying which the consultant described for American Water.

Council Member Tovias asked the consultant to explain why American Water was the best fit. The consultant said it was a team decision. The consultant said he viewed the RFP more like a professional services contract. The bids for the 24/7 were relatively close, he said. He said that American Water has more staff within a few hours which affects emergency situations positively. He also said the decision was unanimous, although he understood that the total costs are a problem, saying that the next step will involve a detailed budget. He said there is not enough time to negotiate with all three at this point, as suggested by Council Member Gherardi. Mayor Hernandez asked for the time to provide this negotiated proposal. Brian Yanez said that this might result in a Special Council Meeting due to the time constraints meeting the November 2016 deadline. Mayor Hernandez said we have to trust the consultants and should not be second guessing the consultants on the team. The Mayor reminded the audience that the same company, PERC, who built and chose the failed equipment, is now blaming the 2015 spill on one of its own suppliers, rather than taking any responsibility itself with no liability insurance giving the city the bill. The Mayor was ok with the recommendation and felt there was a level playing field, but we dont have time for the bidders to continue bashing each other, he said.

Vice Mayor Crosswhite said that the two council members who were privy to the information may feel comfortable, but to others there appears to be little transparency or information. There is too much trust me in the proposal, she said.

Council Member Tovias said it was unanimous decision made by five technical people and the time is drawing near. Council Member Gherardi noted that the unanimous decision was not even in the report, indicating that the four page report is not enough information on which to make a decision. Council Member Procter agreed with Council Member Gherardi and does not feel comfortable with the information, even though they have received more information at the meeting tonight. Council Member Gherardi said that staff should not be negotiating until the full council has received the adequate information.

The council moved to have staff return with more information on which they can decide. Mayor Hernandez asked for specifics of desired information. Items to be included: Single Shift versus 24/7, scoring, options for buyout, company profiles, safety, membrane costs, impact on sewer rebate program for all three proposals, real costs and details for each category, comparison to current costs to be used as a baseline.

Issues

Why was there no liability insurance in the original PERC contract? Who negotiated this contract? Who was on council when this was signed?

Why is staff unable to provide a comparison to the old and new financial conditions.

Why is the council not convened as the Santa Paula Utility Authority, the issuer of the bonds?

Will the wastewater collection system, now provided by American Water, be included or will it require a new bid?

 

For more information about the author, visit sheryhamlin.com

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