Wastewater Treatment Scuffle Grows Murkier
by Jack McCurdy
Excessively higher sewer bills for homeowners. Sanitation short of the best possible. More environmental impacts than justified. Construction costs beyond what they need be, placing an even greater burden on the city of Morro Bay's budget, which is expected to confront a daunting deficit in 2010-11 and possibly beyond.
All these big pocketbook items face Morro Bay and Cayucos rate and taxpayers as elected leaders of the two communities wrestle with newly-emerged political, ethical, and legal questions surrounding their joint plan to undertake an estimated $27 million upgrade of their jointly-owned wastewater treatment plant on the Morro Bay waterfront.
On top of that, charges of improprieties in the handling of preparations to undertake the upgrade construction have surfaced, which apparently deprived those leaders of significant information about alternatives that might well save rate and taxpayers a lot of money, make Morro Bay's jeopardized supplies of drinking water more secure, and result in an upgrade that would provide better protections for the health of residents and the marine environment.
After obtaining numerous waivers to allow continued operation of the old, existing wastewater plant over the years, the city of Morro Bay and the Cayucos Sanitation District are up against a deadline to upgrade the plant and meet state and federal environmental regulations requiring the plant to produce cleaner, healthier, and more environmentally-protective processed wastewater, using what is called tertiary treatment of the wastewater. But their plan, agreed upon under their Joint Powers Agreement (JPA), has come under question.
They are deciding between a wastewater "treatment and ocean disposal" approach and a "treatment and recycle" solution, the pros and cons of which have not been aired for residents.
And this issue is expected to undergo greater scrutiny--much of it from the public for the first time--at the next JPA meeting on Thursday, April 8 at the Morro Bay Community Center starting at 6 p.m.
Recognizing that residents are expected to make many comments about the project at that meeting, Morro Bay Mayor Janice Peters said "there is a lot of concern out there" about the upgrade, and it "needs to be addressed . . . there are public concerns." If the JPA doesn't address the doubts that have arisen in the community, "it looks like we are hiding something. And we are not." "We need to show we are not ignoring it." She made her comments at a meeting of the JPA Technical Committee on March 26.
Just six months since the JPA board approved an overall plan to upgrade the wastewater treatment plant, and in February chose a consultant to prepare engineering studies for the upgrade at a cost of $2.7 million (plus a 10% contingency if the consultant seeks to raise the price along the way), the project has become mired in controversy, although much of it beneath the surface until now. With the engineering contract finalized, the next step would be for the JPA to select a contractor and start construction, but that key move now faces uncertainty. The engineering contract provides it can be cancelled at this point. Bruce Keogh, the city's water division manager, who is overseeing the upgrade process, said.
The reasons for the debate is that the following potential hurdles have just appeared:
JPA's upgrade engineering consultant, Montgomery, Watson and Harza (MWH) Engineers, has been accused of improprieties in New Orleans, LA, where it is in charge of repairing and rehabilitating city infrastructure damaged by Hurricane Katrina. On March 12, the New Orleans Times-Picayune reported that the city's inspector general had issued a report that the newspaper described as saying the "dubiously-awarded contract" to MWH "has allowed it to over-bill the city repeatedly even as the bricks-and-mortar recovery work it oversees has lagged." In addition, the Times-Picayune reported, the city's capital projects administrator resigned after complaining about what he called a pattern of excessive billing by MWH. City officials also reportedly plan to reassign projects under MWH to other departments or other management contractors. Since the New Orleans contract with MWH expired on Dec. 31, the city should "invite competition" for a new contract, rather than extend the one with MWH, the inspector general recommended. MWH has reportedly said it "reject(s) any suggestion that we are profiting unfairly."
Here is the way that the newspaper described problems involving MWH that it said were cited in the inspector general's report:
__MWH "never submitted a fee schedule or other cost information" in proposals for the solicitation it won, or for two other project-management contracts that city officials abandoned upon inking the MWH deal;
__The company didn't assign employees identified in its proposal as having key infrastructure experience to work at City Hall;
__The MWH contract calls for the firm to be paid based on hours billed, rather than work completed, offering little incentive for efficiency. City officials also "did not exercise adequate oversight to protect against overpayment";
__The deal allows the company to tack 23 percent onto the cost of expenses, a policy that in the 18 months ending June 30, 2009, accounted for nearly $250,000 of $1.3 million in billed expenses;
__MWH's bills don't specify what recovery projects are associated with its work, an oversight that "could jeopardize FEMA reimbursement." (Federal law requires FEMA (the Federal Emergency Management Agency) to reimburse localities for repairing disaster-damaged assets, including administration costs, provided certain rules are followed, the newspaper said.)
A company that specializes in what it calls high-quality and lower-priced recycled wastewater for reuse for irrigation by local farms and city parks and other outdoor facilities has recently approached the City with a new solution to the wastewater needs. PERC Water Corp asserts it will save the city money on construction costs and the operation of a "new" plant, produce better sanitized processed water that would be more effective in protecting public health and generate significant amounts of recycled water. The plant would occupy a small part of the land required for the current facility and the one currently slated to be designed by MWH. The city arguably could also save money by using its superior recycled water for irrigation, thereby alleviating that need to use state water, which is increasingly in short supply. That shortage has resulted in the city declaring "emergency water conditions" and imposing "mandatory water conservation" measures on residents that started on Jan. 1, 2010. Experts have voiced concerns about public exposure to treatment-immune, antibiotic-resistant pathogens that breed in traditional wastewater treatment facilities, but PERC Water officials say that the upgrade they design could provide effective protections. In addition, use of recycled water for irrigation in the area would help feed underground aquifers and make wells that the city draws on a more useful resource for its water supplies.
No formal presentation has been made by PERC Water to the JPA, making it doubtful that its board members are aware of all the potential advantages of its recycled water solution, compared to MWH's services, which some believe represent old technology. At the Morro Bay Business and Community Forum meeting on March 11, Steven Owen, PERC Water vice president for infrastructure development, made a power point presentation on his company's services and growing number of city and sanitation district customers, who are now using recycled water for the first time. Some members of the audience seemed enthusiastic for the JPA to look into what PERC Water has to offer, including a guaranteed cost, schedule and water quality that exceeds the highest state standards. Some also seemed nonplussed as to why the JPA had not looked into what PERC Water has to offer. Peters, who was at the meeting, asked Owen why he had not presented the information about his company's services to the city staff or JPA? Owen replied that PERC Water had tried numerous times by calling the city, leaving messages about scheduling a meeting and asking for an opportunity to make a presentation. "But we never got a call back." Someone asked, "You mean the city never invited you down?" Owen said that was correct.
In Los Osos, MWH is a leading candidate to build the proposed new community sewer system, a plan that has a wide range of critics, some of whom contend that the bidding process is marred by conflicts of interest, stemming from the candidates review panel being composed of some members who receive no-bid contracts from the county and have had business connections with MWH. In addition, a prior Los Osos Community Services District (CSD) contract with MWH was terminated in 2006 when a variety of accusations regarding alleged illegal and unethical activities were leveled at the firm. Investigation was hampered by the loss of auditable records. According to a New Times article in 2005, "Montgomery Watson Harza, project design engineers for the controversial Los Osos sewer, reported Monday that files and computers had been stolen from their local office at Sunnyside Elementary School. The theft coincides almost perfectly with an announcement from the CSD of a resolution to investigate activities pertaining to sewer contracts, spending, and design."
Lisa Schicker, former president of the Los Osos Community Services District, has filed complaints with the county containing such charges and has called for an investigation. But the county has taken no action, she reported. She also has noted that MWH designed the highly-controversial proposed downtown wastewater treatment plant, which District voters rejected. She claims MWH sought amendments to that contract that would have increased the cost of the project. (New Times)
The Tribune reported on March 25 that County Public Works Director Paavo Ogren said the county is aware of the MWH situation in New Orleans and is monitoring it. Ogren is overseeing the county's handling of the Los Osos sewer project that MWH is involved in. Ogren was quoted as saying that, as the newspaper put it, "what comes out of New Orleans could influence the county’s use of the firm."
In Cape Coral, Fla., MWH was awarded a contract for extension of public utilities and roads to new subdivisions in the city some 10 years ago, and an audit resulted in charges of bid-rigging, newspaper reports said. But that audit was never completed, and a followup audit found that MWH "has completed work according to standards of business integrity, and contractual obligations," a newspaper reported. The City Council cancelled the utilities expansion program last year, blaming the recession.
The selection process used in choosing MWH by the JPA has been criticized by some Morro Bay residents, who argue that the state code was misinterpreted and possibly violated when an internal review committee did not select the lowest bidder. (One city staff engineer who served on the committee is a former MWH employee, which some suspect may raise conflict-of-interest questions. The same employee also worked for MWH on the Los Osos sewer project.) Actually, MWH was the highest bidder among five firms seeking the JPA contract. A city staff report said the "contract award is based on professional qualifications and not the lowest bid." It also said the MWH bid for the engineering contract "represented the best overall combination of factors and value for this project." The report said not awarding the contract to the lowest bidder is acceptable under state codes.
However, some residents countered, the code cited in the report does not refer to "value" as a criterion for awarding contracts to other than the lowest bidder. In addition, the Morro Bay Municipal Code specifically requires contracts awarded by the city to be awarded to the lowest bidder, they argued.
PERC Water has pointed out that it guarantees its contracted services, which it says will be provided according to the document's requirements at the cost stated in the contract, a guarantee apparently not in the MWH contract with the JPA. PERC Water also has indicated it believes it could provide the engineering and construction of the upgrade at a cost of 20% to 30% less than estimated in the JPA plan. The facility developed by PERC Water, it says, would occupy far less land, would greatly reduce odor and noise associated with such plants and would produce water of higher quality for use in irrigation and other community allocations.
Additional piping would have to be provided to transport the recycled water from the treatment plant to farms up Chorro Valley and around Morro Bay. But PERC Water says developing the infrastructure and piping for water recycling is economically advantageous in the long term since it will create an additional revenue stream for the city and would alleviate its complete dependence on imported water. Additionally, a percentage of the funding for the infrastructure can be distributed among the various consumers as has been done in other cities. But even if it is not developed as soon as the recycled water became available, the resource would be invaluable to meet needs in the future when funding would be more available and the need for water is likely to have grown even more.
The question of how PERC Water--and perhaps other companies that specialize in more advanced wastewater treatment plant work--were not notified and given an opportunity to engage in the selection process remains unanswered. However, the city apparently did post an incorrect project schedule, which could have played a big part.
One city that switched to more advanced technology for its new wastewater plant was Santa Paula, just east of Oxnard. Three years ago, facing a compliance deadline of December, 2010, to replace an old and polluting plant, the City Council abandoned what the Ventura County Star called a "conventional" process of having the design and construction performed by seperate contractors. Instead, the Council chose to have one firm design, build, finance and operate the new plant www.santapaula.com. That firm was PERC Water, which the company says saved Santa Paula in excess of $20 million and saved five acres of land. This is the Santa Paula plant that PERC Water and some residents have been urging JPA officials to tour in order to see the kind of advanced treatment facility that PERC Water has constructed elsewhere.
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