Despite multiple bids for a large-scale sewer pipeline extension project, the Cotati City Council voted 5 to 0 in a special meeting last Tuesday, awarding the extensive project to the lowest bidder, Team Ghilotti Inc., which also authorized the issuance of several loans for the costly, over budget project.
The Laguna Bypass, also known as the sewer P-1 project, was initially identified in 2011 as a needed correction to the city’s sewer master plan since it would eventually need additional capacity for future city build outs such as housing and business projects.
Currently, the 21-inch pipe serves around 66 percent of local utility customers and would be able to bear the brunt of 34 percent more users; however, after a sewer capacity study was conducted in late 2016, it was determined that the pipeline would have no further capacity, even with weather flows (groundwater that flows through manholes to joint pipes in the system).
Initial construction drawings of the pipeline extension, which would go past the Highway 116 interchange east of Highway 101, were created and planned for installation prior to the interchange construction, yet there was no funding at the time to see it through.
Now, the project is projected to reach a cost of $4,801,843, which also includes $4 million for the construction contract, $229,765 for the construction management agreement and another $45,899 for design services.
A contingency budget is also planned for $400,000; however, the whopping cost is almost double the adopted project budget of $2,801,843.
Choosing the lowest bidder for the project still doesn’t help the budget, so to combat the budget deficiency, the city plans to use Interfund Loans, loans that come from other city capital funds, such as the Sewer Capital Fund, Sewer Operations Fund and the In Lieu Inclusionary Housing Fund.
According to Cotati City Manager, Damien O’Bid, the city has used this method to fund other projects and favors this method versus the idea of getting market financing to cover the costs.
“This is an option that we have done before — several years ago we had done the water meter upgrade project and an energy efficiency update project and had Inter-Fund Loans for those that the general fund budget had paid off,” O’Bid explained. “So, it is feasible to do this if there is unprogrammed funds available and we can do this if there are adequate reserve balances left and for large projects like this this type of debt financing is a pretty typical funding mechanism.”
$1,503,700 would be taken from the Sewer Operations Fund and another $1,000,000 would be taken from the In Lieu Inclusionary Housing Fund, which would benefit from a 3 percent interest rate. Assuming the full million is used, around $2.1 million would be left in the fund, according to O’Bid.
According to the City of San Jose, which like many other major cities uses Interfund Loans, the loan cannot be used as a way to solve structural budget problems and they must have an identified repayment source and date. In this case, items would be repaid by sewer impact fees and from the funds.
According to O’Bid, city staff decided to go with Ghilotti Inc., since they believed it was the best fit and the most cost effective. In April the city went out for bids for the project, but only received one measly bid which was rejected, so in May, the city went out for re-bids and decided to go with Ghilotti.
Council member Susan Harvey said while this project is an expensive endeavor, at least the lifetime of the pipeline would be long and provide many years of service.
“If you extrapolate that over 60 years, then it’s not as bad,” Harvey mentioned.
Mayor Mark Landman said he believes the project is a good idea since even if there wasn’t any build out the current capacity for the pipeline is close to reaching its comfortable capacity.
“I think this is a very prudent (project),” Landman said.
Only one public comment was heard on the matter, of which a Cotati resident said he approved of the project and said he believed it was a well thought out plan.
The project is estimated to take about 100 days, or five months, and will take place Mondays through Fridays from 8 a.m. to 5 p.m. near Redwood Drive and Highway 116 at Highway 101. Drivers will be encouraged to use alternative routes as there will be expected delays.