10 - Wastewater Treatment Plant Project and presentation of bids

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We opened bids on Thursday, September 8, 2022. The bid totals will be shared in Garver Engineering's presentation tonight. In short, we only received two bids and they were much higher than expected. Garver Engineering will provide a presentation tonight that explains the bidding process, the review process, the analysis of the bids, working with city staff and the lowest bidder to negotiate final pricing, the reasons for why the bids are higher than expected, and the timeline going forward. Garver Engineering and City Staff have worked hard these past several weeks to dissect the bid and see if there is anything that we can cut in order to shave the costs down. Unfortunately, the economy is driving prices up and the condition of our WWTP is such that we must move forward with taking out another $26 million bond to support the approximate $60 million bid. This will have a rate increase associated with it in order to cash flow our increased debt service. In addition, we will still have Phase II to implement in a year or so that must be prepared for and done. I must stress that "phase I" is incomplete without "phase II". We only divided this project up in to two phases because of arbitrage issues and a goal of easing residents in to rate increases over a period of years given debt payment can only be delayed so long. It could become easy to incorrectly think that "phase I" will give us a product that will suffice. When asked point blank, our staff and Garver have stressed that "phase I" will not suffice. What we have done is taken the full project, pulled out elements that can hold out long enough to allow us to build "phase I" elements. But once "phase I" is complete, the remaining aged elements scheduled for "phase II" must start. Basically, "phase II" elements can hang in there longer than "phase I" elements. It is strongly recommended that, despite the unexpected increase in bid, we do not delay in proceeding. This project has been in the works for nearly 10 years; had it proceeded earlier in that timeline, it would have cost much less. Our research shows that our economy is only going to increase pricing over the next year, so we have concluded that rebidding is not in our best interest. And given there are projects all over Texas exceeding cost estimates, not only will we see a higher price but we are not likely to see more bidders. This is a very challenging issue we are facing, but unless any other options can be brought forward, we believe our only way is forward. Our next steps are to award a bid on Monday, October 24, 2022, amend our rate increase program to account for the needed increases in rates to cash flow our debt, and issue new debt in the approximate amount of $26 million to cover the added cost for the project. BUDGET: The total bid for the lowest contractor is now approximately $60 million. This will require an additional $26 million in bonding to cover the added cost. To support this, we must unfortunately expedite our rate step increase program and increase the planned amounts. We are currently in the