Sewer plant cost a shocker

Think gas prices are skyrocketing? You should see what’s going on with concrete and steel.

That’s the message in a nutshell members of the Chico City Council got Tuesday night (April 17), when they considered the proposed expansion of the city’s Water Pollution Control Plant, commonly known as the sewer plant, from a capacity of 9 million gallons per day (mgd) to 12 mgd.

The expansion is the second stage in a three-stage process designed to bring the plant from its 1997 capacity of 6 mgd to an eventual capacity of 15 mgd.

Back in 2004, when the council first considered the expansion from 9 mgd to 12 mgd, the projected cost was $30 million. It’s taken three years to get the design plans, permitting and such done, and in that time the estimated cost has inflated to more than $50 million. On Tuesday, the council had to decide whether to borrow the increased amount from the State Revolving Loan Fund and hike sewer fees to pay for it.

Councilman Larry Wahl grilled the city’s capital project services director, Tom Varga, about the jump in costs. Twenty million dollars is “a pretty huge increase in three years,” he noted.

Blame it on Hurricane Katrina, instability in the oil market and China’s voracious appetite for concrete and steel, Varga responded. “The cost of many raw materials has doubled in three years,” he said.

The annual payment on the 20-year loan will be more than $3 million, explained Tamara Miller, a principal with the Chico firm of MPM Engineering who has been serving as a consultant on the project.

Wahl noted that the expansion would serve both new and existing homes. How will the costs be divvied up between them?

Miller explained that the city has studied exactly what will be involved in the expansion and has distinguished the elements that will serve new users from those that will serve existing users.

The city has three funds for paying for sewer services, she explained. One is the capacity impact fee, another is the trunkline fee, and the third is monthly sewer service fees. The money will be directed from them into the separate accounts for new and existing users, she said.

“That’s a bit of an accounting nightmare,” Wahl commented wryly.

“Yes, it is,” Miller replied.

Only one of the three sewer fees will be increased to pay for the increase in the SRF loan, Varga noted. The capacity impact fee will be increased twice by about 10 percent. For residential units hooking up to the sewer system, the one-time cost will increase from $1,788 to $1,967 on July 1, 2007. On July 1, 2008, the fee will go up another $179. Cost hikes to commercial and other uses will be proportional.

The rest of the SRF loan, about $30 million, will also be paid for out of the other two existing funding sources.

The expansion and fee increases passed unanimously.

Varga later told the CN&R in a phone interview that the city was going out to bid on the project and expected to be finished with construction by the summer of 2009. With the skyrocketing costs, he agreed, “the sooner the better.”