The Austin Chronicle

http://www.austinchronicle.com/news/2012-11-30/then-theres-this-water-for-sale/

Then There's This: Water for Sale

WTP4 has to pay for itself, by hook or by crook

By Amy Smith, November 30, 2012, News

If you're among the "small but vocal minority" of people who questioned the wisdom of building Water Treatment Plant No. 4, you must be feeling somewhat vindicated by now, what with the latest financial revelations.

Next week, Dec. 6, offers yet another opportunity to tell the City Council how the albatross known as WTP4 is economically and environmentally flawed, and how it will continue to drive up rates and force the city to sell more water in order to pay off the debt. An item on that day's agenda calls for consideration of the Austin Water Utility's request for an additional $15.5 million to finance WTP4's completion so the plant can be up and running in 2014.

Council has seen this proposed budget adjustment coming for many weeks, but a city auditor's report released Nov. 19 solidified the utility's warning signals and clarified some other fine-print details. (See "WTP4: Running on Overruns?," Oct. 19.)

Construction of the plant, the city's biggest public works project in decades, was given the green light in 2009 on a narrow 4-3 vote. The project was billed by the business community as a much-needed jobs booster at a time when the economy was down and construction materials were cheap. Even though one of the four "yes" votes has been replaced by an ally of WTP4 opponents, don't expect a council majority to outright reject staff's request for more money. The project is too far along to back out now, the argument goes, so council has little choice but to approve the requested funding for the three remaining construction contracts. (The same too-far-along argument was applied last year when a new council majority toyed with the idea of temporarily halting construction.)

As critics see it, "throwing good money after bad" will bring the project's cost-overrun tally to nearly $60 million; this includes the $44 million that was shaved off over the summer to bring costs closer to the $359 million mark that council set (again on a narrow 4-3 vote) in November 2010 as part of a "construction cost limitation" agreement with MWH Constructors Inc., the council-approved manager at-risk firm hired to oversee the contracts.

Now we're told, and the auditor's report verifies, that the "structure of the agreement" of that $359 million did not guarantee a firm cap. At the time, however, key staff members – in their hurry-hurry rush to ink a deal – assured council that the blank-check approval would simply provide some wiggle room in the event of unexpected costs. Most of the council members – along with the rest of us – seem to remember that the $359 million was supposed to be the stopping point. Staff made the case that with funding in hand and a construction manager at-risk on board, the contract packages could be negotiated and awarded quickly and efficiently, without council having to review each package individually. Which is another way of saying they didn't want the public to see where and how the $359 million was being spent.

Don't Ask, Don't Tell

"One of the disturbing things for me is that when I voted for this [$359 million], I thought that was the number," said Mayor Pro Sheryl Cole at the Nov. 19 meeting of council's Audit and Finance Committee, where the WTP4 overruns were front and center. The four council members on the committee – Cole, Laura Morrison, Bill Spelman, and Kathie Tovo – all expressed surprise that what they had believed to be a spending cap in 2010 had just been an estimate all along. Staff neglected to mention that in its original pitch for approval.

"Because we didn't ask you that explicit question, you and other city staff who were present at the [2010] meeting did not give us that answer," Spelman told Austin Water Director Greg Meszaros. Spelman said he had even gone back and reviewed a video of the meeting to make sure he hadn't glossed over a key piece of information.

Morrison said there were lessons to be learned from the overruns and called for greater transparency and scrutiny of future high-dollar projects. She was among the three who voted against the blank-check deal, arguing that the council, and the public for that matter, should be able to review the contracts before they were awarded. She pointed out that nine of the 11 contract packages have gone well over their so-called guaranteed maximum prices. "That sounds like a pretty bad guesstimate record," she said. In a statement later, she added, "All along, the contract sounded too good to be true and now we're finding out that it was."

Cole, for her part, seemed mystified by how a major omission in a financial agreement managed to escape council's radar for two years. To be fair, the words "construction cost limitation" do carry a ring of a spending cap, and staff should have told them up front that the amount they were asking for was only an estimate. But then, that would have just raised more questions and postponements, and hey, we need jobs, don't we?

Opponents warned that while the project itself should never have been approved, handing over a $359 million check to build the thing would cast an even greater shroud of secrecy within the utility department. They were right.

Chamber-of-Commerce-driven boondoggles seldom prove skeptics wrong.

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