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City utility to ask for more money to complete water treatment plant

Wednesday, September 12, 2012 by Michael Kanin

Officials with the Austin Water Utility will seek City Council approval to increase the funding for the construction of the utility’s Water Treatment Plant 4 project beyond its target of $359 million. Utility officials continue to maintain that the still-to-be determined funding increase does not necessarily mean that the project is slated for a cost overrun.


The news came in a Sept. 7 memo from City Manager Marc Ott to Mayor Lee Leffingwell and the other members of the Council. The document also included a memo from Assistant City Manager Robert Goode, who added a bit of good news: As part of a budget scrubbing effort, the utility was able to cut a little more than $12 million from the WTP4 project budget.


Along with the $12 million in construction savings, Ott also told Council members that the utility would sell a slice of real estate it had acquired as a backup to the current WTP4 site on Lake Travis. The 72.8-acre spread is near the intersection of FM620 and Anderson Mill. Ott said proceeds from the land sale would go toward offsetting debt incurred to purchase the site.


However, that was not enough to keep Ott from telling Council members that the utility would be back for more WTP4 funding. “The recommended cost reductions are not sufficient to keep the construction cost below the $359 (million) authorization,” he wrote.


Utility director Greg Meszaros noted that there was still roughly $10 million in a contingency fund slated for WTP4. “We can’t really reduce those until we get to the end of the project and we know exactly where we end up with contingencies and the like so we have to carry that money through roughly the end of the project,” Meszaros told In Fact Daily.


Meszaros added that a “peak in the cash flow” would bring the needed authorization in dollars for the plant over the $359 million already approved for the project. “I think in the end, when the dust all settles, the final construction costs will be slightly above $359 million – it will be less than the authorization we request – we’ll probably end up with a final construction cost about one-to-two percent above $359 million,” he said.


He put the final construction costs at 1 percent to 2 percent more than the initial authorization, or “in the $360s.” Though he did not want to speculate about the amount of the utility’s coming request, Meszaros put that figure in the range of an amount that would bring the total authorization to $365 “or maybe $370” million.


The potential need for another construction allocation first became public at a City Council Audit and Finance Committee hearing in late May. Though Meszaros was careful to make his point that the additional authorization did not spell a cost-overrun, Council Member Bill Spelman questioned that notion. Just after the meeting, he provided In Fact Daily with a breakdown of WTP4 costs that suggested the utility might be as much as $24 million over budget.


In Fact Daily subsequently reported that utility officials knew about the potential need for additional construction spending authorizations as far back as December, and that at least two high-ranking members of the city’s management team also knew about the potential issue (see In Fact Daily, June 12, 2012).


In his Sept. 7 memo, Goode attributed the need for an additional authorization to “several things in the project that could not have been foreseen during budget setting.” Goode noted, “We have invested millions of dollars to minimize community disruptions and to ensure that the project is protective of the environment.”


Goode specifically cited a decision to tunnel the entirety of the Jollyville Transmission main, as opposed to leaving one-third of it to open cutting. He also notes that “deepening the transmission infrastructure to minimize impacts on environmentally sensitive geologic formations” represented added costs.


“It is with great pride that we can look back on these decisions and know that Austin set the high bar for designing and constructing a heavy infrastructure project in a community sensitive and environmentally responsible manner,” Goode wrote.


Among the cost savings outlined by Goode are a redesign of the facility’s Medium Service Pump Station that will – to the tune of $6.4 million in budget savings – be scaled back to support only 50 million gallons per day of water supply. Though the WTP4 project has been designed to one day accommodate up to 300 million gallons per day, its initial operational capacity will be 50 million gallons per day. According to another section of Goode’s memo, any eventual ramp-up to even 150 million gallons per day could be as long as 50 years off.


The reduction of the capacity of the Medium Service Pump Station represents the largest cost savings identified by Goode in his memo. The second largest: a $3.8 million reduction in project contingencies.


After news broke of the utility’s need for an additional funding authorization, Ott initially placed a hard cap on the project at the original $359 million request. His memo represents something of a reversal of that edict.


The water treatment plant is on schedule to become operational by mid-2014, according to the water utility.

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