The $40,000,000 Zombie Awakens for the New Year

Water is life.  Nothing is more important.  Yet when it comes to water supply, we have a great example of city planning run amok.  On the agenda for the council study session on January 3 is a discussion of the plans for the new water treatment plant, just in time to greet our new city manager.  You can read the agenda item here:

There are two important things to note here.  First, what is NOT here: the question of whether a new treatment plant is in fact necessary or the optimal way to meet our needs.  The Water Mater Plan of 2012 assumed that it was necessary, but a lot has changed in the subsequent decade.  The Talent-Ashland-Phoenix Intertie (TAP) has finally been completed.  Climate change and therefore rain and snowfall patterns have changed drastically, and are virtually guaranteed to accelerate in the future.  Although we have seen an unusually high level of precipitation so far this water year, we are still in the midst of a multi-year drought.  There is no way of knowing if the watershed will continue to be a reliable source of water, and if more capacity would ever be utilized.  In addition, our water consumption has decreased by about 15% since 2012.  And last but certainly not least, the city has finally started to come to grips with its dire financial condition.

Second is a realistic examination of the costs.  The new WTP was included in the latest CIP at $40.7M.  On page 7 of the HDR document (page 15 of the agenda item), it is claimed that construction cost inflation over the past ten years has been 33%.  It notes that current annual construction cost inflation is expected to be 4 to 6%.  Anyone who has been watching construction projects over the past year knows that anecdotally, cost inflation is possibly much higher than that. 

Also puzzling are the cost estimates on page 6 of the agenda item. They have fluctuated between $45.3M and $32.8M.  The scope of the project remains to be defined.  Quoting from the report: “Since the last formal cost estimate developed was in fall of 2020, staff and HDR expect the costs to change moving forward towards the 90% design/cost iteration due to inflationary factors and labor issues affecting the economy currently.”  That could be the understatement of the year.

So here are the remaining questions, according to Public Works (p.7):

Does the Council agree with the new optimized sizing plan for the Water Treatment Plant?
Does the Council have any recommendations on Envision program implementation parameter for the final design?
Does the Council have any request for additional information to be provided as part of the design process?
Does the Council have any general direction or comments to provide staff?

As noted before, the first basic question that is not asked here and that must be answered is: do we NEED a new water treatment plant?  Public Works makes that assumption.  I suggest that it is NOT a foregone conclusion.  A careful analysis of the advantages and disadvantages of replacement versus refurbishment of the existing facility is in order.  The climate has changed, the water supply and demands have changed, and the city’s financial position has changed.  In fact they have all changed drastically.   A rush to judgment at this time would be a mistake.

And here are additional questions that must be addressed.  Do the cost estimates include decommissioning the current plant?  Do they include cost of auxiliary infrastructure needed to integrate the new plant into the distribution system?  Has any consideration been given to the greenhouse gas emissions associated with the new construction and decommissioning?  Are the cost comparisons of continued use of the existing plant versus a new plant realistic?  Is the assumption that the existing plant has only a 25 year life expectancy realistic?  Does it make any sense for the city to embark upon a project that could easily approach $60M when it has not been shown to be necessary?

Here is the bottom line, according to Public Works (p.7):

Next steps include moving forward with finalizing the value engineering associated with the 60% design phase along with the final recommended Envision program inclusions and completing the 90% and 100% design phases. Additional actions include finalizing the rate model forecast and developing a recommended course of action for complete project funding.

Completion of this project is a foregone conclusion for Public Works.  Of course, engineers and project managers want to build new projects— that’s what they’re trained to do.  But the engineers in the city Public Works department should have a higher priority: helping decide what is the best course for the city when considering our infrastructure needs.  Can the current plant be utilized longer and at a lower cost than is estimated?  Could an expansion of TAP be a better, more reliable, more cost effective solution than a new plant?  Should we be concentrating on expanding our water rights in Lost Creek Lake and upgrading the TAP infrastructure?  These are questions that need to be explored.

Here is a surprising fact to consider.  There is a common misconception that TAP water is very expensive; at least that is what we’ve been led to believe.  In fact, the opposite is true.  If you examine your water bill, you will notice that the city charges $0.028 per cubic foot of water at the lowest consumption level, and $0.0348 at the next level for a residential tap.  Some of that charge covers the cost of distribution.  But in addition to the cost per unit, the city adds a customer charge which also presumably covers distribution and future infrastructure.  That’s an additional $13.33 per month on my bill.  It’s difficult to make exact comparisons since distribution costs are mainly previous costs of infrastructure and pumping costs.

According to Director Fleury, the current cost of TAP water to the city is $0.007 per cubic foot. That means that the cost of TAP water is approximately 20-25% the price that the consumer is charged for treated water.  In other words, we pay 4 to 5 times as much for water as it costs to source it from TAP.  The city uses approximately 1 billion gallons of treated water per year.

So here are more questions to consider.  Is the Rogue River and Big Butte Springs a more reliable source of water than Ashland Creek?  If we removed less water from Ashland Creek, would the fish benefit?  How much would it cost to expand our capacity on TAP to meet more of our needs?

We should not replace infrastructure before its utility is exhausted, before it is no longer cost effective.  I do not have confidence in the conclusions in the packet regarding the costs of building new versus refurbishing the old.  They say the current WTP has a projected lifespan of 25 years; that should be considered a worst case scenario.  Given the number of unknowns regarding this project in the next 25 years, it is premature to discard our current plant at this time.  It is not only a matter of finances, nor of efficient utilization of resources, nor of providing essential services—it is a matter of ALL of the above.

This project has been in the planning stages for more than ten years.  The current plant is not in imminent danger of failure.  There is no reason not to pause and reexamine the question from the start, from all perspectives.  There is no urgency to move forward at this time while the city grapples with funding current operations.  The city cannot afford to spend more money on engineering studies at this time for something that may not be the optimal solution.

Dean Silver