Santa Paula: Wastewater Takeover

By Sheryl Hamlin

Public Comments

The topic of the meeting on Wednesday September 16, 2020, was the takeover of the plant by the city. However, in Public Comments, Sandy Smith of Sespe Consulting essentially refuted a major portion of the MKN Study which was previously provided to the Water Board. Read that MKN report here.

Mr. Smith, who along with Ri-Nu Environmental, is consulting with the purchasers of the Santa Clara Wastewater property, informed the council of the following:

1. The 12 mile pipeline was flushed in March 2015. The water resulting was clean and not hazardous and met Oxnard’s discharge requirements.
2. The pipe was pressure tested in 2016 where a leak on Woolsey road was found which was repaired. Water from that test was approved and declared non-hazardous.
3. All easements are in place and provided to Ventura County for the CUP (conditional use application).
4. According to Hull Engineering, the 12 mile pipeline could handle ALL of Santa Paula’s brine.
5. They would be happy to explore ways to help the city with its proposed RO project.

There was no discussion about this Public Comment by council and the council proceeded with the agenda item. However, the obvious benefits in reduced trucking and increased processing should be studied.

Plant Takeover by the City

The wastewater plant has always been run by contractors. Initially, PERC was the contractor who was in partnership with Alinda Capital in the DBOF. Then after the chloride lawsuit and subsequent buyout of the plant by the City of Santa Paula, the City issued an RFP for a new operator. Three bids were received: PERC, American Water and Veolia. The City chose American Water, which was the most expensive. Read about that decision. Subsequently American Water decided to exit this business and Veolia bought all of the California contracts from American Water. Report here. When the maintenance cost was recently escalated, this resulted from the American Water contract.

The City has decided it could run the plant cheaper and better than a professional contractor who specializes in wastewater, so has hired MKN to analyze the takeover.

MKN Conclusion

MKN concluded there would be a savings the first year of about $300,000, but most of this would be consumed by contractors during the transition. Note: MKN did NOT study more than one year in the future, so the 5% labor escalation rate and 15% CalPERS escalation projections annually were NOT modeled over time, so it is not clear at what point the breakeven will occur and all of the $940,000 annual savings (see chart) from the proposed bond refinance will be consumed by the staffing.

Ownership

The MKN justification for the takeover focused on the concept of “ownership”, which in MKN’s lexicon means “pride of ownership”, wherein city employees will feel compelled to do a better job and go the extra mile because they are part of the city.

The council discussed the possibility of this “ownership” but several members also reiterated that the city had become and still is a training ground for employees who come for a few years, work for the “low salaries” paid by the city and then move on to a higher paying job after having been trained by the city. No one refuted this. The answer, according to Mayor Araiza, was higher pay, but then, if the wastewater people were paid at the high end, all the employees would be paid at the high end, which was also noted by several council members.

There was no discussion as to where the wastewater employees would fit in the city’s organization chart. Would a highly certified plant manager who was used to reporting to a division manager report to a Public Works Director?

Vote

In spite of a non-existent financial model of future costs by MKN and only a theoretical concept of ownership, the council voted to proceed with the takeover. The Public Works director provided a schedule which included simultaneously negotiating with Veolia for a month-to-month contract or a three month extension, while MKN looks for contractors to fill the gap.

To download the materials for the meeting, click here.

To read about the author, click sherylhamlin dot com

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