Veolia attorneys contact city, latest chapter in saga of wastewater plant

April 30, 2008
Santa Paula News

Attorneys for Veolia Water contacted the city April 16, the day after the Council made a controversial 3-2 decision to forego a lower bid and stay with a company that has no experience in the technology of the city’s new plant, the largest public works project in city history.

By Peggy KellySanta Paula TimesAttorneys for Veolia Water contacted the city April 16, the day after the Council made a controversial 3-2 decision to forego a lower bid and stay with a company that has no experience in the technology of the city’s new plant, the largest public works project in city history. City officials won’t divulge the nature of the letter from Veolia, other than to state that it questioned the selection process used for the city’s new wastewater treatment plant.The Council on a 3-2 vote approved PERC as the vendor to oversee the team to design, construct and operate the plant, which will cost about $58 million. City staff and consultants had recommended several times that the Council select Veolia, a multi-national company based in France, for the plant, which must be online by December 2010 for the city to avoid $8 million in fines from more than a decade of polluting discharges.Financing was the key that Mayor Bob Gonzales, Vice Mayor Ralph Fernandez and Councilman Ray Luna - the latter who had visited several PERC plants in Arizona in April 2007 - said locked in the contract for PERC. But it is financing that is still being studied to see if PERC can match the lower rate increases offered by Veolia - who offered a public private financing partnership - that will be borne by Santa Paulans for three decades.PERC’s initial proposal utilizing private investors would cost $149.7 million over 30 years, and Veolia’s $127.4 million. The average monthly bill for a single-family home will total $51 by 2010 under either Veolia or PERC, city estimates show, but in later years PERC’s plan would cost more. Bills would reach $71 by 2013, $7 more than with Veolia, and average $120 by 2040, $50 more than with Veolia.PERC’s private financing through investors offers fixed rates and no surprises, said Gonzales, Fernandez and Luna at the April 15 hearing. PERC’s lack of experience in MBR technology - Veolia has 15 such MBR plants in the nation and PERC has none - did not warrant as much discussion.But Councilman John Procter said on the day following the meeting that further meetings between staff and PERC to discuss lowering rates could fall back on the private public partnership model offered initially by Veolia. “At the end of the day they’re going to plagiarize Veolia’s financing,” said Procter.
Veolia’s offer included upfront money to be repaid by municipal bonds, a common route taken by many cities to fund large projects. Municipal bond interest rates - as of Monday at 4.88 percent - are locked in once bonds are approved.PERC first approached Councilman Ray Luna early last year during talks about using NORAM’s Vertreat deep shaft process, according to a May interview with Luna published in the Santa Paula Times that detailed his visits to several PERC plants in Arizona.According to the PERC April 10 cover letter accompanying the final contract offer, “Over the past 16 months, PERC has been tremendously committed to this project and have attended numerous Council meetings over that time,” and in February 2007, “prior to the City’s issuance” of the Request for Proposal, PERC provided a quote for design-build of 4.2 MGD MBR facility only at an estimated cost of $45 million and $35 million for a smaller, 3.4 MGD MBR facility only to meet the city’s present needs.As reported by the Santa Paula Times last year, PERC offered to make a deal with the city at a July meeting, and Vice Mayor Ralph Fernandez made a motion to negotiate exclusively with PERC - represented by Vice President Steve Owen, who promised a $35 million plant and ratepayer bills probably averaging $45 a month - for 30 days. Owen urged the Council to negotiate exclusively with PERC, and distributed a memo from a Los Angeles law firm that Owen said would allow same.Although Luna leaned toward supporting the motion, it died after City Attorney Karl Berger said if the Council proceeded they would break a 1996 state law mandating competitive negotiation. Ultimately four companies made the cut to bid on the contract, but two dropped out in December, citing time constraints. Gonzales stated at a December meeting that the bidders who withdrew felt the process was fixed, which made him angry.The road to the contract has been littered with some misunderstandings, most notably over who would act as PERC’s contractor. At the July meeting Owen told the Council that PERC is not a contractor, and at the April 7 meeting a representative of Blois Construction - who would be working with PERC - spoke at length about the company and its experience.Staff and the consultants reported later that Blois did not have the wherewithal to handle such a large contract, which resulted in some sharp comments from Luna at the April 15 meeting after PERC stated they would be the contractor and Blois the subcontractor. It was an assumption easy to make: in the April 10 final offer prepared by PERC there is a more than 50-page insert from Blois Construction, about half of the entire supplemental document.

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