10 - Wastewater Treatment Plant Project and presentation of bids

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No. 10 TO: Mayor, Mayor Pro Tem & City Council FROM: Grayson Path, City Manager Rob Vine, Assistant City Manager Doug Harris, Utilities Director SUBJECT: Waste Water Treatment Plant Project — Status Update DATE: October 10, 2022 BACKGROUND: On July 25, 2022, the City Council heard a status update on the Waste Water Treatment Plant (WWTP) Project. At that time, the City Council was informed that pricing over the summer was going up and we were expecting to see some significant increases in our bids. We have since then received, opened, and reviewed bids for the WWTP Project and have a presentation for you tonight on the results with recommendations for next steps. STATUS OF ISSUE: To provide some historical context, when we started this project two years ago, we were estimating a total project cost of $60-$70 million. Because of arbitrage issues with the IRS, and to help ease our rate increases for the residents, we took out a $45 million bond as a "phase I" to get us started. To support this, we worked with our financial advisor and rate consultant to craft a strategic approach for rate increases using a stair step method to allow residents to acclimate to increases. The key is balancing our ability to "cash flow" which is our ability to raise enough revenue each year to meet the debt payments when they come due. This is a true balancing act because we need money to fund the project, but the bond requires repayment of debt to the lenders which cannot be pushed off too far, all the while we want to ease in to rate increases for our residents. A plan was crafted and the City Council implemented it. With this, we incorporated rate increases to then allow us to take out the "phase II" of bonding when the time came, which was the balance of the estimated $60-$70 million project. That would be scheduled to occur in 2024 or 2025. As of today, I am told that our rate program has been very successful, fully capable to meet the growing needs of debt payment for our initial bond and foreseen to meet the needs of the second bond that was planned to come, all under the original cost estimates.