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Santa Paula hires builder for sewer plant on 3-2 vote Report shows another bidder would cost less
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An Orange County company has been selected to build Santa Paula's sewer plant, despite a city report showing that a competitor with more experience would cost $22 million less.
Voting 3-2 Tuesday, the City Council chose Costa Mesa-based PERC to design, build, operate and finance the plant. The city would be obligated to pay nearly $150 million over 30 years, compared with $127 million in a competing offer from Veolia Water, a multinational French company.
Rates would rise substantially under either proposal, as Santa Paula seeks to avoid millions in pollution fines from its 1939 plant, but they will be higher under PERC, city officials said.
The average monthly bill for a single-family home will total $71 by 2013, $7 more than with Veolia. Bills will average $120 by 2040, $50 more than with Veolia, estimates show.
The council rejected a recommendation from the city manager, the city public works director and the city finance chief to pick Veolia, praising PERC's guaranteed financing and a more attractive design.
PERC President Brian Cullen said the financing was key. He said he was "delighted" by the decision.
Mayor Bob Gonzales, along with Councilmen Ray Luna and Ralph Fernandez, voted for PERC. Fernandez said he did not want to take any financial risks.
"With PERC, we have a maximum cost, a guaranteed cost," he said.
Veolia proposed up-front financing for four months while the city secured public tax-free bonds.
Veolia operates 15 facilities in the nation with the technology to be used in the Santa Paula plant, but this would be PERC's first, city officials said.
Veolia Vice President Robert Ashfield said afterward that city councils normally accept managers' recommendations.
"Just for the record, we did provide the best deal for the ratepayers of Santa Paula," he said.
Councilmen Gabino Aguirre and John Procter voted against PERC, citing Veolia's record.
"Here's a firm with a lot more experience and less cost to the ratepayers," Procter said. "That's a very easy decision."
The council acted with no time to spare. Under an agreement with the state Attorney General's Office, the city had to select a design by the end of business Tuesday, a decision they reached a half-hour after the 5 p.m. deadline.
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Posted by Throttle13 on April 16, 2008 at 11:26 a.m. (Suggest removal)
I would rather the contract went to an in-county company, but barring that, at least the city voted to keep the funds in the state. Look at the huge AirBus Tanker deal that just went down. Do the French really need more of our money exported to them? Or would that money do more good being recirculated within the American economy during these tough times? I applaud Santa Paula's city council for their decision!
Posted by anom1985 on April 16, 2008 at 1:53 p.m. (Suggest removal)
strange decision. veolia was the safer choice (perc has no experience), and at lower cost --- especially for a smaller town like s.p. i dont think the council's reasoning makes sense, but we'll see. good luck, santa paula
Posted by justmeinsp on April 16, 2008 at 1:54 p.m. (Suggest removal)
finally!!! but will that 30min. over cost us in fines? and will this project be done by the 2010 deadline so we don't get fined again?? I can't stand waiting til the last minute on anything... The higher rates and fines get paid by the users of the system... including the councilmembers, as long as they continue to live in town...
Posted by bella93030 on April 16, 2008 at 2:59 p.m. (Suggest removal)
Council members must live within city limits to be nominated for city council so they will be paying the same fees as you. Good job Council members! Yes lets try to recirculate some money within our own economy. Perc offered a better deal with finance structuring and design.
Posted by forsantapaula on April 16, 2008 at 6:29 p.m. (Suggest removal)
Bob, Ralph, and Ray---Bravo!! You have truly shown decisive leadership and selected the best value, lowest risk sewrer plant for Santa Paula. You saw through the deceptiveness of the staff bid presentation and determined that the PERC fixed cost was indeed the lowest risk and the best value. There was never a question about PERK's technical capability to do the job. Regarding the argument that the Council should always should side with staff, if that were so,why have a Council? There in lies the difference between an executive and a bureaucrat. The executives have the intelligence and courage to make the tough decisions. The voters of Santa Paula applaud you. Keep up the good work.
Posted by johnnybonzo on April 16, 2008 at 6:48 p.m. (Suggest removal)
This was a truly bizarre decsion, as it is absolutely indefensible on any rational basis. Veolia was less expensive (by $22 million)and is far more experienced in MBR technology. In fact, PERC has no experience at all in building MBR plants.
On the other hand, we should not be surprised. Councilmember Fernandez even went so far as to suggest that the City negotiate with PERC exclusively. Since this would clearly have been illegal, the Council majority went through the charade of a fair and open process when, all along, the fix was in.
Open up your wallets, folks; this decision will cost each of us $7 per month in the beginning and $50 per month at the end of the 30 year contract. And I do not feel better about the fact that the money will be paid to a contractor in Arizona rather than a company in France.
Posted by B8R_N4MD on April 16, 2008 at 7:26 p.m. (Suggest removal)
Strange to go against staff recommendations. City staff has spent hundreds of hours investigating and going over both proposals with a fine tooth comb, yet the 3 council members do a quick overview (meaning alot less time than staff put in) and believes they are better informed to make the decision? I hope this decision doesnt blow up in their faces and their legacy becomes being the 3 that screwed the citizens. I find this sad that these 3 think they are smarter than the experts the city employs and contracts with. And one of their biggest cheerleaders and backers about this decision doesnt even live within the city limits. Amazing.
Posted by Q_E_Public on April 17, 2008 at 12:43 p.m. (Suggest removal)
No turning back now. Taxpayers be dammed, if we do not hold the "BIG THREE" accountable, in the end, if PERC fails us all!
Posted by SPGal on April 18, 2008 at 10:51 a.m. (Suggest removal)
Did anyone read the proposals? The Council kept citing how Veolia was basing its financing on assumptions and even the performance of the facility was not guaranteed. Perc made their proposal based on guaranteed numbers both financial and facility performance. Would you buy a car from a company that says they think it will run for 10 years or the company that says that they will guarantee it? The Council made the right decision.
Posted by C2ShiningC on April 19, 2008 at 7:55 a.m. (Suggest removal)
With PERC, the city will be getting a complete 4.2 MGD treatment plant with a 30 year warranty that completely encloses the process in an architectually designed building that fits on the proposed site. PERC is also financing all capital costs at a nominal fixed rate. Their offer minimizes the chance of nasty suprises later on.
Veolia, on the other hand, was for a 1/3 smaller capacity (3.1)plant, no back-up, minimal odor control, higher sludge disposal costs, space wasting layout with no more room for expansion. Veolia would have financed only a small fraction of the capital costs saying the city can get a better deal selling bonds.
The Staff report did not factor in the significant issuance cost of municipal bonds , nor an estimate of Veolia's undisclosed cost to increase the capacity to 4.2 MGDs.
A downside to revenue bonds is the "coverage factor" where sewer rates must be set 35% higher than needed to repay the construction loan. PERC's fixed rate financing does not need a "coverage factor".
There was not that much difference in operational costs. But by using a newer, improved MBR package that uses 50% less energy, PERC is able to include Aerobic digestors, dewater biosolids, and better air filtration with about the same amount of electrical energy
PERC VP Steve Owen has been at nearly every planning and council meeting for more than a year. Veolia's VP Bob Ashfield's involvement was far less and it showed when critical componants were not included in his initial BAFO.
Three of the council obviously were not satisfied with being spoon fed information. And after some due diligence on their own, came to a different conclusion than the City Manager's recommendation.
BTW, the existing plant was completed in July, 1938, not 1939. It was recently upgraded to a tertiary process. Other consultants indicated that it could be brought up to current discharge standards for about $10 million with virtually no increase in sewer rates.
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