The Santa Paula City Council decided Monday to approve a final contract for its new sewer plant after the cost was slashed by $24 million.

In a continuing 3-2 split on the issue, Mayor Bob Gonzales and Councilmen Ralph Fernandez and Ray Luna voted for the contract, while Councilmen Gabino Aguirre and John Procter voted against it.

Earlier in the day, City Manager Wally Bobkiewicz said he was comfortable with recommending that Costa Mesa-based PERC build, operate and finance the plant after the company made several key concessions in the final deal. Thanks largely to a new financing plan calling for Santa Paula to make an $8.4 million upfront payment, the cost has been lowered from $149.7 million to $125.5 million over 30 years.

"It's always come down to the financing," Bobkiewicz said. "We really challenged them."

The new deal is now $2 million less than competitor Veolia Water had proposed in its final offer. Last month, the deal from the multinational French company was priced at $127.4 million over 30 years, with PERC's at $149.7 million.

Bobkiewicz acknowledged that Veolia might have lowered its price if the company had gotten the nod. He said, though, that once the council told him to enter into final negotiations with PERC, that was the deal he pursued.

Veolia officials have continued pitching their offer, including an appeal made in a full-page ad that ran Sunday in The Star. Monday night, Veolia Vice President Robert Ashfield told the council that his company still offered the cheaper, more reliable choice.

"You know all about us," he said. "There is no issue about who is investing in the deal."

A week ago, City Attorney Karl Berger said he had major concerns about PERC's plan to create a new entity "about which the city knows very little" to guarantee that the plant would get built. That new company, called National Water Inc., would have owned 90 percent of the company responsible for the contract, with PERC holding the remaining 10 percent.

"We didn't know anything about National Water, it had not yet been created, it would have been created for purposes other than servicing this contract," Berger said in an interview. "My concerns had to do with the assets of that corporation and whether it had the means to guarantee the contract."

In subsequent negotiations, PERC dropped that idea. The company responsible for the contract will now be directly owned by PERC and its financing partner, Alinda Capital Partners.

The company also agreed to be responsible for all damages and to submit any claims related to the city's termination of its contract to a judge.

The deal approved Monday would result in lower monthly bills for the working-class community than originally predicted. At the most, they would begin at $51 a month in 2009, then climb gradually to just over $100 a month by 2038 for an average single-family home. The rates presume that the city would buy back the plant in five years.

The $57 million facility, planned for a site near the existing plant south of Highway 126 on the city's western edge, would replace a 1939 plant that discharges treated effluent into the Santa Clara River.

The existing plant is incapable of meeting federal clean water standards and sometimes emits foul odors. Santa Paula faces penalties of several thousand dollars a day if the new plant is not built and meeting pollution standards by the end of 2010.