HomeMy WebLinkAbout7/28/1999 - STAFF REPORTS (4) DATE: July 28, 1999
TO: City Council
FROM: Assistant City Manager-Operations
SUBJECT: WASTEWATER TREATMENT PLANT OPERATIONS AND MAINTENANCE
RECOMMENDATION:
It is recommended that City Council consider approval of a five(5)year Wastewater Treatment Plant
Operations and Maintenance Agreement with U.S. Filter Operating Services, Inc., or consider a
ninety (90) day extension of the existing short-term Professional Services Agreement for plant
management services.
BACKGROUND:
The City's Wastewater Treatment Plant,though meeting all discharge requirements,is very old with
a master plan that calls for millions of dollars of needed improvements. A first increment of
expansion called for in the master plan,requires approximately$13 million,which would require to
a rate increase to cover the debt service.
Palm Springs has been a leader in the Valley in privatization efforts.In many instances,the private
sector can bring higher technology and greater efficiencies to reduce the overall cost of a city
operation for its taxpayers. Across the country, one of the largest areas of privatization is that of
water and wastewater management. There are numerous municipalities that are finding that savings
from their privatized wastewater plants translates into lowered rates now,smaller rate increases for
future expansions and a return on the municipality's past investment to the benefit of the city.
For the above reasons,the City began a Request For Qualifications/Request For Proposal(RFQ/RFP)
process to find a firm with strong experience in operating wastewater treatment plants, and a track
record of reducing costs. To ensure that the local water agency could participate in the process and
to meet that agency's stated objective of buying the plant,that option was included. The only offeror
that proposed to buy the facility from the City and take over rate setting was the local water agency.
Following an exhaustive search and evaluation process, the City Council authorized the staff to.
negotiate a five(5)year operations and maintenance agreement with the most highly qualified firm,
U.S. Filter.
The proposed action is to approve a five(5)year operation and maintenance agreement which will
reduce costs by approximately$340,000 per year. In addition,staff was asked to negotiate the terms
of a long term lease so that the voters in November would know what the effects of a lease of the
plant would be. The attached memorandum of understanding outlines the financial parameters of
a fifteen-year lease of the plant. In summary they are:
1. City maintains ownership of the plant.
2. City sets rates for the plant (Note: these rates will be based on a lower overall cost of
operation and will be based on usage to comply with Proposition 218).
3. City leases the facility,collection system and the down and under drain systems to US Filter
for fifteen(15)years.
4. U.S. Filter operates and maintains the plant and collection systems.
5. U.S.Filter will carry out the first phase of plant expansion and modernization fora fixed fee
of$4.6 million instead of the master plan purported cost of$13 million. (This means the
expected rate increases due to expansion will be much smaller.)
6. U.S. Filter, at City option, may be responsible for billing and collection of the City-set
wastewater rates.
7. U.S. Filter will operate and maintain the wastewater treatment system so that the following
items will occur:
A. The City will have the ability to reduce overall sewer service charges collection
between 18%and 30%. (The City's rates are already among the lowest in the state.)
B. The City will be able to reduce the sewer connection fee, a major deterrent to
economic development, by 40%.
C. The City will have$100,000 annually to set aside for unplanned capital needs at the
Wastewater Treatment Plant.
D. The City will be reimbursed $350,000 for its employee severance cost.
E. The City will be paid$240,000 for the Wastewater Treatment vehicles/equipment.
There are no losers in the long-term lease:the City continues to control its expansion and rates;the
quality of the City's water will continue to meet or exceed the current high standards; rate payers
overall see savings now and will experience lower increases in the future due to far lower capital
costs; developers will find it more palatable to develop in Palm Springs and the local water agency
will continue to receive the 25%of the treated water so they can run it through their filtering system
to sell to golf courses.
Because of a ballot initiative designed to prevent the City from selling or leasing its wastewater
facility,except for "an existing governmental agency that is itself governed by a body in which the
majority of electors are voters of Palm Springs"(presumably the Desert Water Agency), the benefits
of the 15-year lease cannot be attained at this time. Consequently,the action requested at this time
is for City Council to approve the five(5)year Operation and Maintenance Agreement with U.S.
Filter as follows:
1. City Control: City owns, City sets rates
2. Term: 5 years, commencing August 1, 1999
3. Savings: Approximately$340,000 annually.
4. Obligation: Full operation,maintenance and repair of the Wastewater Treatment Plant,the
sewer collection system and the sewer plant rolling stock fora fixed fee with CPI escalators.
5. Capital Improvements: U.S. Filter will carry out the following activities for set prices:
A. Computerized monitoring& control system $158,111.
B. Ground water dispersion model 100,000.
C. Startup equipment& controls 50,000.
D. Reclaim water master plan 60,000.
6. Employees: U.S.Filter will employ all current employees at the plant with the eventual
staffing level to be dropped to thirteen (13) via retirements, buyout options, employee
transfers to other U.S. Filter plants and by attrition.
7. Long-term: If thevoters authorize the City to leasethe plant,the City mayterminate this
short-term agreement and replace it with the 15-year,lease.
Copies of the proposed five(5)year agreement are on file in the City Clerk's office and at the Palm
Springs Library.
Should the City Council decide to not enter into the five (5) year Agreement at this time, an
Amendment to the existing short form Professional Services Agreement with U.S.Filter to provide
plant management services is attached for consideration. This"First Amendment"would extend the
Agreement for an additional 90 days, allow for US Filter to temporarily assign fill-in employees,
should vacancies occur, at cost plus 10% and allow US Filter to proceed with the installation of a
computerized monitoring and control system. Total increase in this contract would be $214,112.
At the time of the writing of this report, US Filter had not consented to this Amendment.
Attached is a Minute Order for City Council consideration to approve the 5-year O&M Agreement,
or a Minute Order approving the "First Amendment" to the short-term Professional Services
Agreement for a 90-day extension.
9 ON
AIPBPROVED
❑ DECLINED
ALLEN F. S OOT, AA
Assistant City eratio
APPROVED:
City anager
ATTACHMENTS:
1. Minute Orders(2)
2. MOU A,
3. First Amendment to Agreement#A4114
0
FIRST AMENDMENT TO CONTRACT SERVICES AGREEMENT FOR
WASTEWATER TREATMENT MANAGEMENT SERVICES
THIS FIRST AMENDMENT TO THE AGREEMENT FOR CONTRACT SERVICES No. A4114
(herein "Agreement:"), is made and entered into this day of 11999,
by and between the CITY OF PALM SPRINGS, (herein "City") a Municipal Corporation, and U.S.
Filter Operating Services, (herein "Contractor"), is hereby amended effective 1999,
as follows:
1.0 SECTION 2.1, Contract Sum, is hereby amended to provide an increase of TWO
HUNDRED FOURTEEN THOUSAND ONE HUNDRED TWELVE DOLLARS ($214,112)
(broken down as follows:$26,001 -Additional Plant Manager Time,$30,000-Additional Fill-
in Contract Employees and $158,111 Design & Install Computerized Monitoring & Control
System) for a new total of TWO HUNDRED FORTY THOUSAND ONE HUNDRED
THIRTEEN DOLLARS ($240,113).
2.0 SECTION 2.2, Method of Payment, is hereby amended to read: Provided that Contractor
is not in default under the terms of this Agreement, Contractor shall be paid:
(1) $8,667 per month for Contract Plant Manager; and
(2) Cost plus 10%, up to a total of$30,000, for contractual substitute employees, to be
paid monthly based on actual man-hours provided; and
(3) Lump Sum of $158,111 for Computerized Monitoring & Control System, monthly
based on percentage of work completed.
3.0 SECTION 5.0, Term, is hereby amended to reflect a new end of term date of January 1,
2000.
4.0 Exhibit "A", Scope of Services, is hereby amended by adding the following.
"13. Contractor shall design and install a computerized monitoring and control
system for the Wastewater Treatment Plant as outlined in the U.S. Filter Proposal
Document.
14. Contractor may provide substitute employees should vacancies necessitate the
manpower needs, and should City request said employees.
5.0 Exhibit "B", Schedule of Compensation is hereby amended by adding:
"2. Cost of substitute employees to cover vacancies shall be reimbursed at cost
plus 10% monthly based on actual man-hours, total not to exceed $30,000.
3. Cost of design and installation of computerized monitoring and control
system for the Wastewater Treatment Plant shall be a lump sum of ���
$158,111, to be paid monthly based upon percentage of completion.
6.0 Corporate Authority The persons executing this Agreement on behalf of the parties hereto
warrant that (i) such party is duly organized and existing, (ii) they are duly authorized to
Y
execute and deliver this Agreement on behalf of said party, (iii) by so executing this
Agreement, such party is formally bound to the provisions of this Agreement, and (iv) the
entering into this Agreement does not violate any provision of any other agreement to which
said party is bound.
IN WITNESS WHEREOF,the parties have executed and entered into this agreement as of
the date first written above.
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By:
REVIEWED &APPROVED:
CONTRACTOR:
(Check One: individual, partnership,
corporation)
(NOTARIZED) By:
Signature
Print Name and Title
(NOTARIZED) By:
Signature
Print Name and Title
Mailing Address:
(Corporations require two signatures;one from each of the following:A.Chairman of Board,President,
any Vice President;AND B. Secretary,Assistant Secretary,Treasurer,Assistant Treasurer,or Chief
Financial Officer.)
End of Signatures
MINUTE ORDER NO. 6 I-
APPROVING A FIVE (5) YEAR WASTEWATER
TREATMENT PLANT OPERATIONS AND
MAINTENANCE AGREEMENT WITH U.S. FILTER
OPERATING SERVICES, INC.
I HEREBY CERTIFY that this Minute Order, approving a five (5) year Wastewater
Treatment Plant Operations and Maintenance Agreement with U.S. Filter Operating
Services, Inc., was adopted by the City Council of the City of Palm Springs,
California, in a meeting thereof held on the 28'h of July, 1999.
PATRICIA A. SANDERS
City Clerk
1 � �
MINUTE ORDER NO. u.
APPROVING MEMORANDUM OF
UNDERSTANDING FOR A WASTEWATER
SERVICES AGREEMENT BETWEEN U.S.
FILTER OPERATING SERVICES, INC. AND
THE CITY OF PALM SPRINGS, CALIFORNIA.
I HEREBY CERTIFY that this Minute Order, approving Memorandum of
Understanding for a Wastewater Services Agreement between U.S. Filter
Operating Services, Inc. and the City of Palm Springs, California was adopted by
the City Council of the City of Palm Springs, California, in a meeting thereof held
on the 28th day of July, 1999.
PATRICIA A. SANDERS
g City Clerk
GiY OF Pa.M SPRIAGS Y&_
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The Plant
• The Plant dates back to the 1930s.
• The Plant and percolation ponds sit on approximately 75 acres,
40 of which belong to the airport.
• The Plant is an award-winning mechanical treatment facility,
automation is minimal.
• The Plant design capacity is 10.9 mgd and average daily maximum
flows have reached 9.886 mgd.
• The draft Treatment Plant Master Plan calls for $13-$33 million in
improvements over the next few years.
• The Plant meets all water quality regulations as overseen by the
Regional Water Quality Board.
• Sewer service charges to the resident are $10.36/month — 41%
below the state average.
Central Operations Area
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Privatization Goals & Objectives
• Maintain high level of wastewater treatment.
• Reduce sewer service fees.
• Reduce sewer connection fees.
• Convert billing to consumption basis.
• Comply with Proposition 218.
• Maximize design-build opportunities.
Request for Qualifications (RFQ 07-98)
• Nation-wide solicitation of firms interested in a Wastewater
Treatment Alliance with the City of Palm Springs.
• Five firms responded:
— OMI "
— US Filter
— PSG _
— DWA
— United Water
• The submittals were reviewed and ranked with US Filter and
OMI rising to the top as most qualified.
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Request for Proposal (RFP 05-99)
• Sent to US Filter and OMI seeking response to the following:
— Optimization for present and future plant operations utilizing
automation where cost effective,
— Reliable, efficient, reasonably priced services to the public,
— Ongoing compliance will all applicable laws and regulations,
— Lowest reasonable operational costs,
— Prudent management and protection of public resources,
— Effective response to normal and emergency operating situations,
— An acceptable plan to increase plant capacity, and
— Utilization of design-build methodology for system expansion.
Qualifications & Proposal Ranking
• Proposals were reviewed and graded, two sets of interviews were
held and US Filter and OMI were ranked 1 and 2 respectively.
• The committee individually reviewed and scored the qualification
and proposal submittals. Firms needed to demonstrate previous
experience at:
— Operating a wasterwater treatment facility,
— Design-build projects involving wasterwater treatment facilities,
— Automation of wastewater treatment facilities, and
— Reducing costs at wastewater treatment facilities.
• Staff was authorized to begin negotiations with the number 1 firm.
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Plant Master Plan
• Montgomery Watson prepared a Master Plan that provided
for expanding the plant to a level of 16.9 mgd at a cost of
$33 million.
• The decision makers felt that growth projections were too
aggressive and asked for a phased approach.
• The first phase would now expand the plant by 3 mgd for an
estimated price of $24 million.
• If the administrative building were left out and the increase
limited to 2 mgd, the cost might go as low as $13 million.
• Such a large expansion would inevitably lead to rate increase!
THERE MUST BE A BETTER WAY!
The Traditional Approach
• The traditional approach to carry out most public works
projects in California is to:
— Hire a professional,
— Prepare Plans & Specifications,
— Bid and award to the lowest bidder, and
— Construction by low bidder with exposure to change orders
• The design professional is licensed, experienced and fully
qualified under state and federal law to design a plant but may
have never been involved with a plants operation and may not
know all the latest technology.
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An Alternate Approach
• A132660, known as the Privatization Act of 1996, allows municipalities
to develop through a "design-build" process.
• Through a competitive process, such as the RFO/RFP process, a firm can
be selected to design and build a public works improvement for a fixed
price.
• The firm must still have the proper engineering licenses, but will have
individuals with operational experience to help design.
• The design documents do not have to be developed to the level of detail
as in a regular bid process.
• There is no low bidder, and no change orders —just an agreed-upon fixed
price.
Traditional vs Alternative
• The following is a comparison of the steps required in each of
the approaches to complete a 2 mgd expansion:
Select Design Firm Select Design/Bid Firm
Award Design Contract Award Design/Bid Contract
Design Expansion Design Expansion
Develop Bid Documents Acquire Permits
Acquire Permits Oversee Expansion
Bid Project Start-up and Operation
Award Project
Construction Management
Change Order Activity
Start-up and Operation
$13 Million ESTIMATED COST $4.85 Million
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Privatization
Will it cost or save?
1
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Comparison of Financial Proposal
CH,Opantlon US FII1r US Filbr
S Yaar 15 Yur
Cog 1.Ciry
O'W.no A MaTnto'. n 2,163,175 1,0]9,91e 1.670,nM$
Ca1MA Re. ,Cl ,o 0 235,112 JIM 530
Possessory Weiest Tax 0 0 1W,W0
Sewer Blh, Fee 0 125,000 125,M
AtlMMot"'*Fees W0,517 15O.M 150,CW
GPdA Resero 112,500 1 W,000 1 W,000
lard lease PWMM to AiOnR 0 250,030 522]20
ConlnbMlon to Exlsft C U Sews 250,0."U 0 250,M
In Leu Ftt 11133,339 0 0
Amual Cost of Expsnsbn to 12.9 MO
Merest Rate 6M 560% 5SD%
Ann.I.M 13,00O,000 W1,372 7.500,000 1.761,142 1,pA5,000 1&5,093
TOYI Cog S,SM,931 4.SU1,8V ],50],1M
Rawnue to Clt,e
S 'Se, cn Cha o 1,50nM 1,5W,000 x,5W,0OS
Cone6n'Fees 500,0W 500,000 500,0W
Oltlel IS." ISM 15,W0
Talal Incom9 5.015,000 5,015.m 5,015,OW
Wt Can Flow(Avallable Mr R WRellao ($493,933) $510,198 $1,507,866
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Wastewater Treatment Fund Loans
• The City has loans from the Wastewater Fund to other City
agencies that are earning market or higher interest.
• Earnings from the loans are helping to offset current bond debt
payments.
• Continued earnings from the loans will help to offset the cost of-
future expansions.
• Some have suggested forgiving the loans: That would certainly
help the General Fund, but it would result in a rate increase to
sewer users.
Rate Making
• The existing sewer service charges, even though they are below the state
average, are not compliant with Proposition 218.
• Proposition 218 mandates that the rates must reflect consumption.
• The City has hired Integrated Utilities Group (IUG), a firm that specializes in
sewer rate studies, to carry out such a study for the City so the City Council
can set new rates based on usage.
• IUG will develop a cost-of-service consumption model that takes into account
quantity and quality of sewage produced by the various sectors; industrial,
commercial, single family, apartments, etc.
• Once quantity and quality levels are assigned amongst various users, the actual
cost of operating the system will be spread among the users.
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Water Purity
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• The existing operation meets all IGmAI,
regulatory requirements for water
/ I� UY fILTGIi O!'LIiAIINO SE"VICE9.INC
Purity.
CI'M Uk PALM SPIIINGY.CALIFGIINIA
• As much as 25% of the treated
water is sent to the local water
agency s tertiary filtering system for
processing and resale.
• Privatization of the plant will not
result in lower treatment levels.
• A private party operator will have
to meet all existing water quality
testing & regulatory requirements.
US Filter
• A Memorandum of Understanding has been negotiated with US
Filter as the basis for a 15-year lease to be considered following the
November election. The basic deal points will result in:
— The City maintaining ownership,
— The City setting rates,
— US Filter operating the plant in compliance with all laws and
regulations under a lease for 15 years,
— A fixed price of $4.845 million for the 2mgd expansion,
And
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• A first-year estimate of operating costs which will allow
for up to a 30% reduction, on the average, in overall
rates!
EXISTING
r
FUTURE'
• Sewer connection fees being lowered 40W
4014'
. 1
.ems
F2 408 <<
10
• The in-lieu tax will be eliminated!
(:!I TAX
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DWA's New Purchase Proposal
• At the July 6, 1999 DWA board meeting, an item was
discussed to prepared new study to develop a purchase offer.
Items from that meeting and the June 30" City Council
meeting that we were told are:
— 'Retire City's debt"
— "Eliminate the Utility Tax"
— "Sewer rates —effect of rehab and upgrade"
— "Proposition 218 compliance
— "Developer incentives — cutting hookup fees"
— "Integration of City employees"
Privatization
Will it cost or save?
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I AM RUTH LICATA, RESIDENT IN PALM SPRINGS SINCE 1946. I SPEAK FOR
MYSELF TONIGHT. I HAVE A LONG TIME INTEREST IN THE PUBLIC
PARTICIPATION IN THE DEMOCRATIC PROCESS, FOLLOWING EDUCATION OF THE
ISSUES INVOLVED. I WAS A FOUNDING MEMBER OF THE PALM SPRINGS
FACILITIES CORPORATION THAT FACILITATED THE BUILDING OF OF THE PALM
SPRINGS SEWER PLANT AND OTHER FACILITIES. MEMBERS WERE APPOINTED BY
THE CITY COUNCIL, AND I BELIEVE THE CORPORATION STILL HOLDS THE LEASE.
IN MAY OF 1998, CITY COUNCIL ANNOUNCED THAT A CITIZEN COMMITTEE
WOULD BE FORMED TO LOOK AT THE PROPOSALS IN THE BIDDING PROCESS TO
TO TAKE OVER OPERATION OF THE WASTE WATER TREATMENT PLANT.
TO THE BEST OF MY RECOLLECTION THIS CITIZENS COMMITTEE WAS NOT
FORMED. MAY WE KNOW WHY NOT?
MAY WE KNOW IF THE PALM SPRINGS FACILITIES CORPORATION IS STILL IN
EXISTENCE AND WHO HOLDS THE LEASE ON THE WASTE WATER TREATMENT
PLANT?
ON JULY 7TH., THE CITY MANAGER SAID THAT THERE WOULD BE NO COUNCIL
VOTE UNTIL AFTER THE ELECTION IN NOVEMBER. WHY IS THERE THIS CHANGE?
THANK YOU.
CITY COUNCIL COMMENTS DULY 28 1999
Mr. Mayor,CITY COUNCIL MEMBERS...
FBC 2127 BRENTWOOD DRIVE RESIDENT FOR OVER 24 YEARS.
WE ELECTED YOU TO GOVERN THIS CITY. WE EXPECT YOU TO COME UP WITH IDEAS
WHICH YOU HAVE DONE,SOLVE PROBLEMS WHICH YOU HAVE DONE.WE
APPRECIATE HOW MUCH TIME YOU HAVE SPENT DOING ALL THESE THINGS AND I
FOR ONE REALLY APPRECIATE YOUR EFFORTS.
I AM NOT PLEASED WITH YOUR HANDLING OF THE UTILITY TAX EXTENSION
ALL OUR CITY EMPLOYEES HAVE EXTREMELY GOOD HEALTH BENEFITS, BUT
PAYING THEIR SHARE OF THEIR PENSION HAS LED TO EXCESSIVE EMPLYOYEE
RETIREMENT ON DISABILITY. WHICH MAKES THEIR ENTIRE PENSION BENEFITS TAX
FREE.DURING THE REDUC TION OF FORCE SEVERAL YEARS AGO. 42 Out Of 45 people
RETIRED ON DISBABILTY.MOST UNUSUAL I THINK!
YOUR LATEST PROPOASAL TO SELL OUR SEWER PLANT,SOMETHING OUR TAXES
PAID FOR,OUR BIG MONEY MAKER, WITHOUT A CITY WIDE VOTE IS NOT A FAIR
THING TO DO.WHAT IS NEXT.....MAYBE YOU SHOULD PEDDLE THAT 6 MILLION
DOLLAR LOSS LEADER ,THE CONVENTION,.CENTER OR THE GOLF COURSE, OR THE
FASHION MALL DOWN TOWN. SAVE THE AIRPORT,THAT SERVES THE ENTIRE
VALLEY! OUR PROPERTY BOUGHT AND PAID FOR BY OUR TAXES AND FEES
SHOULD BE NOT DISPOSED OF BY THREE PEOPLE.
SERIOUSLY,PLEASE RECONSIDER THE FIVE YEAR LEASE WHICH IS ONLY A
PRECURSOR OF THINGS TO COME
WE ALL KNOW THE SEWER HAS BEEN YOUR PRIVATE.BANK FOR MANY YEARS. ARE
YOU TRYING TO COVEE UP THE MILLIONS OF DOLLARS THAT YOU HAVE
BORROWED?
WE HAVE AN ELCTION IN NOVEMBER, ALL CITIZENS CAN VOTE ON THIS ISSUE IN
JUST A FEW DAYS OVER THREE MONTHS.
ANY MEMBER OF THE CITY COUNCIL VOTING YES TONIGHT: WILL NOT RECEIVE MY
VOTE IN NOVEMBER. IN CLOSING REMEMBER ALSO THAT THOSE CITIZENS WHO
SIGNED THAT PETITION MAY FEEL THE SAME WAYI
THANK YOU FOR THIS TIME.
FRANK COFFEY