Wastewater treatment plant contract still not finalized

May 30, 2008
Santa Paula News

As of Thursday, the negotiations continue on the $125.5 million 30-year contract - a price lowered by an $8.4 million city contribution - for the city’s new wastewater treatment plant, about a month after the deal was declared technically done.

By Peggy KellySanta Paula TimesAs of Thursday, the negotiations continue on the $125.5 million 30-year contract - a price lowered by an $8.4 million city contribution - for the city’s new wastewater treatment plant, about a month after the deal was declared technically done. Ironically, if the city had continued down the path it had taken before a Council majority decided in July to switch to the Design/Build/Operate/Finance process, ground would likely have been broken in April on a new plant that would have topped out at a plant cost of about $58 million - or much lower, as the cost included an almost 20 percent contingency - financed through bonds then hovering a little above 4 percent.After two vendor teams dropped out of the process, a May 5 split Council vote resulted in the DBOF contract going to PERC/Alinda Capital Partners LLC, the former a builder of treatment plants for private developments and the latter an emerging international giant in private investments registered in the Cayman Islands. The 3-2 Council vote was the third time that the majority rejected staff recommendations that the new plant be awarded to Veolia Water Inc.The deal with the city to replace its existing polluting wastewater treatment plant has been the focus of legal action by the state, which agreed to waive about $8 million in fines if the city builds a new facility that must be fully operational and by December 2010. The original deadline was pushed back a year after an 18-month delay by the Regional Water Quality Control Board in crafting a new permit for the plant. Due to a court agreement, the city must break ground on the new plant by July 15.Alinda has a 90 percent interest in its partnership with PERC, and the proposed contract has been passed back and forth between the city and Alinda, with City Attorney Karl Berger telling the Council at the May 19 meeting that the parties were meeting “right now to hash out some substantive issues,” and would continue to do so.Councilman John Procter, who had opposed the PERC/Alinda contract, asked but did not receive an answer on whether or not the termination clause was still among the issues being debated. In a telephone interview Thursday, Berger said, “We just received Alinda’s changes back and now are evaluating them.”According to its Web site, Alinda offers infrastructure capital for “communities, businesses and governments.” The private investment firm is looking for “infrastructure assets in North America and Europe that have a strong operating record or are under construction and can demonstrate potential for: steady, growing and predictable cash flow; strategic competitive advantage; and limited commodity or merchant risk.”
Alinda has a particular fondness for roads, bridges, tunnels; airports, seaports and rail; water supply and wastewater treatment; and various other entities tied to energy. The company manages the “Alinda Infrastructure Fund, an unlisted institutional fund with $3 billion in capital and approximately $10 billion in purchasing power,” with investors predominately drawn from pension funds both public and private seeking steady long term management matching their pension liabilities.”Alinda has ownership interests in infrastructure businesses that operate in 14 states in the United States, all 10 Canadian Provinces, and five European nations, businesses the Web site notes that serve over 160 million customers annually. Launched in September 2005 by Chris Beale, the former global head of Citigroup, Alinda has offices in New York and London.As a relatively new venture Alinda seems to be on its way, but not without some bumps in the road, particularly in Alabama, where a recent boycott of the Emerald Mountain Expressway Toll Bridge was ended primarily due to record gasoline prices. According to the Montgomery (Alabama) Advisor, hundreds of tri-county residents began to find alternate routes on March 1, 2007, the day that Alinda raised the toll from $1 to $1.50, a large increase that, according to boycott spokeswoman Debbie Hough, spurred commuters into action by the way it was handled.The Montgomery Advisor noted that the increase was announced only weeks before it went into effect with no public input. State Rep. Barry Mask, a vocal supporter of the boycott, used strong language when he told the Montgomery Advisor that his experience with Alinda officials had “soured him” on any future joint ventures in such deals in the future that leave either state or local governments without oversight and at the “mercy” of others.Santa Paula’s wastewater treatment woes have been a priority of the Council’s since the city learned in late 2003 that multi-million dollar fines were looming due to polluting discharges into the Santa Clara River. A regional plant with Fillmore - also under the state gun for discharges - was studied and then rejected before the Council decided on MBR technology and approved the EIR in April 2005.A hold was put on the plant when spiraling costs became a concern, and a Value Engineering Report was ordered that whittled costs down by millions. When new Council members were seated in December 2007, alternate technology became a focus of attention and then the DBOF process.The Council is expected to discuss the wastewater treatment plant at Monday’s meeting.

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