A water plant expansion that would double Clinton’s capacity and prepare it for industrial, residential and commercial growth will come with a much heftier price tag, with new estimates putting the full proposed project at roughly $7 million — more than $2 million over budget.
The expansion of the Parsons-Anders Water Treatment Facility has experienced some significant delays due to setbacks in well location and construction. Now it has a significant hurdle in total cost. City manager Shawn Purvis and Public Works director Jeff Vreugdenhil detailed the issues during the City Council’s regular meeting Tuesday night.
The construction of the wells was $200,000 over budget and the transmission line portion, at roughly $1.16 million, came in under budget. A low bid of $1,156,279.70 by Herring-Rivenbark Inc. was approved by Council. However, the expansion of the water plant is “significantly over budget,” according to estimates, Purvis noted.
“Unfortunately, we only received two bids for the plant expansion and have had to extend the bid period,” he stated.
USDA regulations require at least three bids or the bid period has to be extended. Recommendations will be presented to Council in September.
“We’re about a year and a half or two years behind,” Purvis said of the water plant expansion. “Drilling the wells was the first step. We identified well sites, but actually getting them to the production level we needed was problematic. We had significant overrun in testing new sites and now we have sites and we have the amount of water we require, however we’re two years behind.”
That two years has seen the economy improve and project cost escalate as contractors are not hard up for work.
“What we’re looking at is (an increase) from a $4.8 million project to a $7 million project,” the city manager said. “We are looking to expand our water resources to make sure that we are open for residential, commercial and industrial development.”
The project is being financed through a low-interest USDA loan. The city’s plan, first presented in 2012, was to increase capacity by 1.5 million gallons daily (MGD). The city currently can produce about 2.8 MGD and has an average daily demand of 1.6 MGD, but a maximum demand of 2.6 MGD. The full project would bring capacity to 4.3 MGD.
“We can do that but it will cost $7 million,” Purvis said Tuesday. “We can submit a request to USDA for another loan, and we’re pretty confident we will receive that, but there are long-term effects on our financial stability in doing that.”
He offered a few options, including expanding to 1 million more gallons instead of 1.5 million. That would put the estimate between $6.3-$6.4 million.
The most recent total cost estimate is $6,433,793. That amount will require additional financing and will increase the amount of the interim financing the city is required to acquire. USDA has a deadline of Aug. 12 to complete the process of requesting additional funding at the current interest rate they can offer, which is 2.25 percent, Purvis noted.
If the city wishes to secure that additional funding through USDA and proceed with the project in a timely manner, then an amended letter of conditions with USDA for an amount up to $6.5 million — an additional funding request of up to about $1,664,000 — has to be submitted so the city can file a Local Government Commission application for revenue bond interim financing on time and keep the project on track.
Purvis called the process “time sensitive” and City Council unanimously authorized the letter be signed. Council will still need to approve the bid award and final financing in September, at which time Purvis, Vreugdenhil and city staff will present updated financial models for review.
“At least we’ll have USDA working on it,” Purvis noted. “If not, we’re prolonging it.”
Planning for the project began in 2012, with construction of the wells coming in 2014. The overall goal is to provide the capacity to serve existing and prospective industries. City officials said it was “crucial” to maintain sufficient water supply in planning for Clinton’s growth.
After some roadblocks, wells are now built and the city has progressed to bidding for the final two phases — transmission lines installation and water plant expansion.
“We are working and massaging those numbers — we think it will be around $6.5 million, but can get it down to $6.3 or $6.4 million,” Purvis said.
Council members discussed the matter briefly, wondering aloud if the full capacity of a $7 million project was necessary at this point. Vreugdenhil said, if he were to offer a recommendation, he concurred with Purvis that increasing capacity by 1 million gallons was a positive move forward while lowering the bottom line.
Councilman Neal Strickland inquired as to how the $4.8 million original estimate was so low.
“Well our estimate is three years old and we drilled four wells looking for water, spent the money to look for water to develop the wells — it’s very expensive,” said Vreugdenhil. “I think our original estimate was very good, but the difficulty in finding water and relocating the transmission lines (factored in). That took time.”
“It obviously took longer than we anticipated,” Purvis added.
Vreugdenhil said the water expansion project is a good project, but one that only garnered two bids, which escalates the cost.
“Our transmission work is well under budget with a very good contractor, so that is a plus,” the public works director noted. “It’s not going to get cheaper later to put in the third well. We could do two-thirds of this and save some money and wait on a customer. The positive is we have permits in hand, the design is done. We would just have to renew the permits and we could develop them quickly at whatever cost later.”
The city currently has the capacity to send 2.8 millions of gallons a day, and actually sends about 2 million, he noted. That threshold is not great, Vreugdenhil conceded.
“There is some need to increase our capacity. The wells we finally have developed are very, very good,” he continued. “It would be much more comforting to management and to me if we had a customer looking for half a million gallons of water a day, but we don’t.”
Councilman Steve Stefanovich called the project and the change in the cost “a huge deal.”
“We don’t need to build and build if we don’t need it, but we don’t need to be strapped (for water). We also don’t need to be strapped financially too if we make the wrong call on this deal,” Stefanovich said, noting the need for a big-time industrial customer whose water needs would help offset the cost of the inflated project.
Clinton Mayor Lew Starling agreed.
“We just got these bids today,” the mayor said at the Tuesday meeting. “We just need to get into it. We have to think twice about spending $7 million if we don’t need it and we don’t have that customer.”
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