Council Opponents Concede on WTP4

The city auditor brings the latest numbers on a WTP4 shutdown

Stopping construction on the WTP4 project would be too costly for the city, council members say
Stopping construction on the WTP4 project would be too costly for the city, council members say (Photo by John Anderson)

As the Chronicle headed to press Wednesday, City Council's Audit and Finance Committee received an expanded report from the Office of the City Auditor on the costs of postponing completion of Water Treatment Plant No. 4. And after crunching the numbers, council members who had questioned finishing the plant on economic grounds begrudgingly concluded that "they will not press for a delay" of completion.

In late August, WTP4 contractor CDM released work-stoppage estimates that tabulated totals for a five-year and 10-year postponement at $138 million and $206 million, respectively, on top of the $367 million in currently remaining construction costs. In its estimate, CDM also included indirect but related costs, such as building new infrastructure (a pump station, pipelines, etc.), which it says would raise the current baseline cost of WTP4 construction ($508 million) by either $253 million (five-year postponement) or $486 million (10-year postponement).

An interim briefing doc from the OCA did not delve into any alternative infrastructure a WTP4 shutdown might require, but it did confirm many of the contractor's findings. CDM found $10.3 million in hard shutdown costs in both five- and 10-year scenarios ($3.7 million for engineering, $6.6 million for contract termination) instead of CDM's $79 million, but forecast a 3% inflation factor, adding $68 million and $135 million, respectively. CDM's predicted legal expenses ($12 million) and site protection costs ($3 million to $4 million) were said to "appear reasonable"; OCA also called roughly half of restart costs "reasonable" and said they were waiting for additional info from CDM before weighing in on the other half (engineering services, at $11.5 million). A $20 million mobilization/start-up expense for reinitiating construction was also still being analyzed, "pending additional information from CDM." Also, the OCA wrote: "We analyzed CDM and the WTP4 contractors to determine if there were any related-party issues that could present a conflict of interest [as has been charged by some critics of the project]. ... We found no evidence of any conflict of interest. We also determined CDM is a recognized engineering services firm."

At Wednesday's committee meeting, the OCA concluded that it found $100 million of CDM's five-year shutdown costs ($138 million) and $155 million of CDM's 10-year estimate ($206 million) "reasonable." (Their overall totals included operation and maintenance savings from postponing WTP4.) The numbers led Bill Spelman, who had pushed for the OCA's evaluation, to concede, "We're talking about numbers which are sufficiently large that all the nickel-and-diming in the world isn't going to change something fundamental." While he still feels the plant isn't needed, Spelman said, "I think we ought to get through it" and refocus energy on "more urgent needs," including conservation and stable water rates and fees – sentiments that were echoed by committee members Laura Morrison, Kathie Tovo, and Sheryl Cole.

After the committee accepted the auditor's findings, Spelman, Cole, and Chris Riley (who also sat in on the committee's meeting) issued a press release stating they sought no further postponement of the plant.

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KEYWORDS FOR THIS STORY

City Auditor, Water Treatment Plant No. 4, Office of the City Auditor, Audit and Finance Committee, CDM

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