WTP4 Work-Stop Costs Go Under a Microscope

WTP4 work continues (Photo by John Anderson)

Estimates from contractor Camp Dresser McKee tabulating the five-year and 10-year costs of postponing the ongoing construction of Water Treatment Plant No. 4 were released late last week, predicting stoppage costs stretching into hundreds of millions of dollars. But as City Council Member Mike Martinez tweeted when announcing the report: "Let the debating continue. No one will agree on [the numbers]."

The totals for a five-year and 10-year postponement are $138 million and $206 million, respectively. Both estimates contain $79 million in construction shutdown costs and $12 million in legal fees for litigation and settlements. Costs of protecting the site are respectively assessed at $3 million and $4 million, with the main difference coming from the estimates of what it would cost to restart the project and bring it to completion: either $44 million or $111 million on top of the $367 million in currently remaining construction costs.

CDM also separately noted additional expenses that could be incurred not directly at the WTP4 site, but as a result of the work stoppage. "WTP4's deferral requires that additional infrastructure be installed to supplement what WTP4 would otherwise be providing to the [city of Austin] water distribution system in 2014," CDM wrote, tabulating expenses for a new pump station, pipelines, and more as an extra $115 million or $280 million, based on a five- or 10-year postponement. "When combining the WTP4 contract costs with the treatment and distribution system ... costs, deferring the project 5 years is estimated to increase the overall contract costs by $253 million," CDM wrote, "while deferring the WTP4 project 10 years is estimated to increase overall contract costs by $486 million in actual dollars." If completed by its current 2014 deadline, the plant's estimated budget is approximately $500 million.

The result may appear to be a setback for WTP4 opponents on City Council, who have argued that it might be better to delay completion of the plant, but only if it made financial sense. Still, the release of CDM's report is only the first step in council's consideration of the matter. Council Member Bill Spelman called on the Office of the City Auditor to give CDM's estimates a thorough vetting, saying, "Five members of the audit staff are pretty much working full-time on this for as long as it takes ... poring over the assumptions and the methods used in that enormous document." (CDM's report came in at a whopping 388 pages.)

Spelman, among others, has argued that postponing WTP4 could "smooth out" the utility's planned series of rate increases – 66% over the next five years – and divert additional resources to conservation. (An accompanying document released by the city manager's office responded to a query from Mayor Pro Tem Sheryl Cole as to the costs of increasing Austin Water's reclaimed water results by 20%. The cost: $249 million over five years.) "There's other uses for the money – the most important one is to make sure our current pipe systems, water distribution systems, and our current water treatment plants are in top working condition," Spelman says.

But he also acknowledges there may be a point at which the auditor's office begins delivering diminishing returns. "How high does the number get that they can be relatively certain is accurate?" he asks. "My best guess is as soon as they get to a number, as high as $60 [million] or $70 [million] or $80 million" – roughly, when the costs of stoppage plus beefed-up conservation measures begin to outstrip the remaining $367 million in work to be done at WTP4 – "it's not gonna make sense for us to postpone completion; we ought to finish the thing now."

Council will undoubtedly discuss CDM's report at a meeting to be determined once the audit staff's work is finished; Spelman predicts that won't occur by week's end, but by then, "We'll have an idea for where this is going."