#3 Discussion and direction on East Janesville water tower
DEPARTMENT OF PUBLIC WORKS MEMORANDUM
August 3, 2009
TO: City Council
FROM: Daniel L. Lynch, PE, Utility Director
SUBJECT: Discussion and Direction to Staff on Proceeding to Bid an East Janesville
Water Towerand Related Large DiameterWater Mains
Summary
The City of Janesville has experienced residential growth to the northeast. This growth
has increased the demand on the water distribution system creating a need for
additional eastside water storage. The City’s Engineering Department, Water Utility
staff and AECOM, the engineering consultant for this project, have prepared the
necessary reports, plans and specifications for the water tower and transmission main
portions of this project. This project has been approved by the Wisconsin Department
of Natural Resources (WDNR) and is ready to proceed to the bidding process.
Unfortunately, the Janesville project is not presently on the WDNR’s list of funded
projects, but it is the next major project eligible to receive funding. To remain eligible for
WDNR funds (possibly up to $2.5 million in a grant) the City should continue with this
project through the bidding process, but hold off on awarding any construction
contracts. Completing the bidding process will help keep this project eligible for WDNR
funds if they become available. The WDNR will award available funds to projects which
are the most ready to proceed. Obtaining bids does not obligate the City to award
contracts and if the WDNR funding does not materialize, the City can reject all bids.
Department Recommendation
Utility staff support proceeding with this project through the bidding process. Obtaining
bids is the best step the City can take to maintain its eligibility for federal stimulus
grants. Although this project did not make the initial WDNR funding list it still has an
extremely good chance to receive a significant grant, but only if we continue through the
bidding process. Regardless of the funding issue, this project will still need to come
back before the City Council before it can proceed to the construction phase.
Suggested Council Action
Move to direct that staff bid the construction of an eastside water tower and related
infrastructure and bring it back before the City Council prior to the award of any
contract.
City Manager Recommendation
The City Manager understands the Utility Director’s desire to move forward with this
project in the event that Stimulus funding is awarded. In looking at the issue, I looked at
the following factors:
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Moving forward with the project in anticipation of receiving Stimulus funds will
have minimal impact on user rates since we assume that only $2 million would
be eligible for funding.
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The elevated tank project is estimated to increase rates 9% without stimulus
funding in today’s dollars versus increasing rates by 7% with stimulus funding.
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Based on my review, growth slowing may have an impact on the perceived
immediate need for the elevated water tank.
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The fact that it creates an additional water rate increase in one year time frame
concerns me during these economic times.
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The City does not currently own land for the project, and I would recommend
against bidding any project without the necessary land and easement already
being procured by the City.
Based on the above factors, I would recommend the Council proceed with caution on
this project or defer the project until we receive further information from WDNR on
whether we are eligible to receive funds.
Analysis
The purpose of this section is not to discuss the need for this project; rather it is to
explain why the City should continue with the project at this time. The project’s need
was discussed in the City Council memorandum dated April 17, 2009. Additional
information concerning the need for this project, including an analysis of storage options
is also available.
Reasons to continue moving forward with this project essentially relate to maintaining
the City’s eligibility to receive two million dollars or more in a federal stimulus grant. If
we halt the process now, any funds which become available will go to a drinking water
project in another community. If we go through the bidding phase, we continue to stay
eligible; we will hold our place in line. While this project barely missed making the
WDNR’s Project Priority Funding List, it is the next major project eligible to receive
funds. The following is a list of reasons to let this project continue to the next step:
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There is an identified need for this project and the City has expended a great
deal of effort both in terms of staff time and consultant effort (cost) to keep this
project eligible for a stimulus grant.
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The tower project is ready to bid and can proceed to the bidding phase without
much additional effort by City staff or additional cost to the City.
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The tower project is the next major project on the WDNR Priority Funding List
and still has a very good chance of getting a grant. ($40 million in grants are
available.)
The Janesville tower project is number 48 on the funding list; the first 46
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are proposed for funding. (The 47 project is only for $35,000.)
These types of projects are already being bid in Illinois and the bids are
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coming in lower than the estimated amounts. If this trend continues and
the actual bids are 10% less than the project estimates, an additional
$4,000,000 will be available from the projects ahead of the water tower for
reallocation.
Cost estimates for projects included in the Priority Funding List use a 10%
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project contingency. When the project is bid, the WDNR reduces the
contingency to 5%, which equals about $2,000,000 for the projects ahead
of the water tower.
It is unlikely that the first 46 projects will all bid without a problem. If a bid
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for any of these 46 projects is contested or for any reason cannot be
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awarded by October 1, that project loses its funding. There will not be
time to rebid the project and that community will lose its grant.
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To remain eligible for American Recovery and Reinvestment Act (ARRA) funds,
construction contracts must be bid and ready to proceed on or before October 1,
2009. While the City will not award any construction contracts for this project
without Council approval, by proceeding through the bid process at this time, the
City will be in a position to move very quickly if funds become available.
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Receiving bids to construct the tower or the water mains does not obligate the
City to award those bids. The bids will be preconditioned to make it very clear to
the bidders that the City does not intend to award these projects without
significant financial assistance. Only the Council will determine if a financial
assistance offer is adequate.
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The project will only get more expensive if it is delayed; both in terms of
escalating construction costs, but also in terms of grant availability. It is unlikely
that grants of this magnitude will be available in the future.
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The same engineering consultant will be providing construction-related and
inspection services for both the water tower and the wastewater treatment plant
projects allowing for some savings in construction-related engineering services.
There will be a financial impact of this project on the community. Even with a major
stimulus grant, this project will still cause water rates to increase. If this project receives
a grant of two million dollars it will increase water rates to the average residential
customer by approximately seven percent or $3.21 per quarter. However, without any
stimulus grant, the water rate impact will be even bigger. Without any financial
assistance this project will increase water rates by nine percent of $4.13 per quarter.
cc: Eric Levitt, City Manager
Jay Winzenz, Director of Administrative Services