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Water Treatment Plant Controversy

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Put WTP4 on hold?

As cost gets tallied, those closest to project chime in

Premium content from Austin Business Journal by Cody Lyon , ABJ Staff

Date: Friday, August 5, 2011, 5:00am CDT

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Commercial Real Estate

It’s the biggest construction project in town — bigger than F1 — but some city leaders and environmentalists said Austin’s new water plant is unneeded. It’s halfway done, and city officials are looking at the cost to put it on ice.
Nick Simonite

It’s the biggest construction project in town — bigger than F1 — but some city leaders and environmentalists said Austin’s new water plant is unneeded. It’s halfway done, and city officials are looking at the cost to put it on ice.

Putting construction of Austin’s water treatment plant No. 4 on hold for several years — an idea being considered in City Hall — would be costly, risky and just plain difficult to execute, said many people faced with the possibility.

It’s unrealistic to think the project “could be mothballed, and construction resumed seamlessly and efficiently in five or 10 years,” said Larry Laws, project manager for MWH Global Constructors Inc., the contractor for the contentious water plant. He said there are 500-foot deep tunnels and massive amounts of concrete and steel that could need protection, and caring for the complex equipment installed on site would be challenging.

“I’d rather not consider what would happen if the site shuts down,” he said

Laws’ concerns are prompted by the City Council’s action on July 30 to evaluate the possibility of freezing construction and preserving the site to continue construction later. On Aug. 18, staff is expected to provide an estimated price to do so, after which the council could choose to halt the project or delay it for five or more years. If a delay costs the city “8 million, then that’s something we ought to consider,” said Council Member Bill Spelman. “If it’s $100 million, then nevermind. We’ll say ‘that didn’t work out so keep going.”

The council’s pause comes despite having authorized MWH in November to negotiate $299 million in subcontracts.

Others involved in the project, including Austin Water Utility and the American Society of Civil Engineers, said mothballing a large infrastructure project such as water treatment plant No. 4, especially this far along in construction, would not only be unwise, but especially odd.

Risks of stopping

There’s a risk that the plant will be more expensive to build later than it is today. The estimated cost for the project, $508 million, is based on today’s inflation and assuming completion in 2014.

And there are extra costs that come from having to pay more for the same work, said Patrick Hudson, a commercial real estate lawyer with McLean & Howard LLP. That’s because a contractor on an indefinitely halted project will likely seek compensation for lost profits along with completed work, while a second contractor when the project resumes will seek pay for the remaining work plus profit.

“The city will be paying for the base project, costs of stopping and restarting, and project profits for two contractors,” Hudson said.

Perhaps a greater risk is the possibility of the city’s infrastructure failing it in the future.

“The new plant is a systemic approach and helps us manage the risk associated with aging infrastructure,” said Greg Meszaros, Austin Water Utility director. “Technically, we only have two operational plants. … We’re running Davis at 95 percent capacity, which worries us just a bit, taking an old plant like that to full capacity.”

The plant, which is being built near Lake Travis at RM 2222 and RM 620, is the city’s first in over 40 years. It’s expected to produce up to 50 million gallons a day after phase one and up to 300 million gallons a day after all phases are finished.

Austin Chamber of Commerce leaders said it’s essential to attracting big businesses here — especially technology manufacturers.

Water treatment plant No. 4 meets the city’s anticipated demand for 50 years, Meszaros said, adding that despite being the city’s most complex project, besides the airport, “it’s on schedule, and it would come in at or under budget.”

The latest report card on the nation’s infrastructure from the American Civil Engineering Society gave drinking water infrastructure, including water treatment plants, a D-minus.

“Now is the time to invest in drinking water infrastructure, especially in a state like Texas with its drought-like conditions and an economy where construction prices are favorable towards municipalities,” ASCE national spokesman Jim Jennings said.

There are intangible costs to mothballing the construction site, Austin Mayor Lee Leffingwellsaid, in terms of the city’s reputation.

Pulling the project’s plug would “raise questions about the credibility of governance in Austin” and might send a message to industry that the city is planning for the future, he said. “When you’re a growing city like ours, and new companies are looking at Austin every day, one of the things they consider is the water supply. It’s one of those things that goes together with other factors, creating a favorable business environment.”

Besides the risk to the city’s reputation, legal experts said halting the project exposes the city to lawsuits from contractors and others involved.

“Contractors want to receive their expected profits on a project, even if the owner decides to suspend the project midstream. Most construction contracts contain a provision specifically addressing termination or temporary suspension,” Hudson said.

It’s that scenario the mayor wants to avoid.

“Shutting down the plant would be hugely expensive,” Leffingwell said. “It just seems like the absolutely wrong thing to do.”

Economic impact

Another cost may be the boost to the area’s economy that such a public infrastructure project brings.

The construction industry is still battered by the recession, and the water treatment plant is a “huge jobs creator,” Leffingwell said. “A lot of people are dependent on this project as their prime jobs for the next few years.”

Overall, the project is expected to generate $60 million to $80 million in payroll for workers at the site.

So far, the city of Austin has committed to more than 208 subcontracts totaling about $250 million, which have created 150 jobs.

Austin Water has issued more than 800 security badges for personnel working on the plant site. The number of workers on the site ranges from 130 to 200. That number is expected to peak in the fall and remain at about 250 to 300 through 2012 for the next phases.

The utility said those numbers don’t include indirect jobs created off-site for suppliers and local businesses such as gas stations, restaurants and lodging for out-of-town workers.

Smokey J’s Barbeque near the work site has felt the project’s impact deeply, owner James Cliftsaid. The restaurant has been selling a lot of beef brisket to construction workers, city personnel and contractors hauling materials to and from the site.

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Written by codylyonreporter

January 28, 2012 at 1:19 am

Posted in Uncategorized

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