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Lodi City Council rejects privatization of water plant

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Posted: Wednesday, November 23, 2011 12:00 am | Updated: 6:59 am, Fri Dec 30, 2011.

In a 3-2 vote, the Lodi City Council decided to have city staff — not outside contractors — operate the new water treatment plant now under construction.

Council members Larry Hansen, Alan Nakanishi and JoAnne Mounce said they did not feel comfortable turning over the plant's operation to one of two private companies that specialize in running water and wastewater plants.

While Nakanishi said he is for private business, he is more comfortable with city staff running the plant because they report directly to the council, as opposed to an outside company.

"My first responsibility is to provide citizens safe drinking water ... It's a $36 million facility. If you don't maintain it, the capital costs come down to us," Nakanishi said.

This is the city's first water treatment plant and one of the first times the council has considered outsourcing city operations on such a large scale. The plant is scheduled to open in August 2012.

The decision came after the council spent hours at two previous meetings evaluating and questioning the bids from Veolia Water North America and SouthWest Water Company. Throughout the process, the council expressed frustration that the staffing plans and bids were so different and difficult to compare.

According to a staff report prepared by the city, it will cost Lodi $2.19 million to run the plant during the first year. Veolia estimated it would cost $2.20 million.

SouthWest estimated it will cost them $2.19 million after the city forced them to draft up a bid that included more personnel. The company still stands by its original bid of $1.92 million, said William Schwarz, business development manager for SouthWest.

The council was hard-pressed to figure out who was going to run the plant because the future employees need to learn about the new technology before the plant west of Lodi Lake opens in 2012.

Providing water to Lodi residents should be considered a public safety issue, said Public Works Director Wally Sandelin.

"Our customers rely on us to provide the highest-quality drinking water that we can. ... I don't think that the council would ever consider contracting out the police and fire departments," he said.

At first, local developer Dale Gillespie said he was in favor of the city privatizing the plant because he is a proponent of small government. Gillespie is the developer of Reynolds Ranch at Highway 99 and Harney Lane, where Costco is located.

"I started thinking more, though, and as I read the staff proposals I started to come to the conclusion that water is an extremely precious commodity and important to sustaining life," Gillespie said.

Both companies said the city will have to worry about rising public pension costs, workmen's compensation and health obligations if they keep the operation in-house.

A representative from Veolia Water said there would be a fixed cost and no surprises if the city selects the company.

"This is especially important in the current economic climate where starting a new city department will burden current and further ratepayers with expensive public pension and health obligations," wrote Shilen Patel, business development manager for Veolia.

Lodi resident Ed Miller brought up the idea of outsourcing months ago when City Manager Rad Bartlam was discussing options with the council to cut rising employee benefit costs.

City staff is underestimating the cost of salaries and benefits, Miller said. That results in the staff also underestimating the amount of money the city would save by going with a private contractor, he said.

"Outsourcing the management of the water treatment plant would provide a significant reduction in the city's operating costs while providing funding opportunities to do other things such as upgrading the city's wells," he said.

But Mounce said she does not want the council to "demonize" the city's employees, because without their willingness to give up benefits and salary recently, the city would not of been able to balance its budget. She said it was the best option to keep the plant operations in-house.

"I want safe water, and I want to be able to flush my toilet and turn on the light. These are core services," Mounce said.

The council questioned if a private company would be responsible for any problems at the plant. In other cities, fines from the state have pitted cities and private water companies against each other and ended up in lawsuits, said City Attorney Steve Schwabauer.

"Whoever is handling the issue that draws the regulatory response would be responsible for it. But the devil is in the details," he said.

One of the main concerns with the private contractors is that they would also be in charge of the 28 wells in the city, which are highly regulated because of groundwater contamination problems the city has had in the past, Sandelin said.

The water from the treatment plant will go through a transmission pipe down Mills Avenue to Elm Street and enter the city's water distribution system, where it will be combined with water from the wells.

Schwarz said he is frustrated that he was not able to meet with all of the council members before the meeting Tuesday. He also said city staff should not have been allowed to review the private companies' bids before submitting the city's cost estimates.

"This was supposed to be a level playing field. We think it's not been a level playing field," Schwarz said.

He also felt that city staff unfairly included information about the company's history, including a $1.2 million settlement with the State Water Resources Quality Control Board over a series of violations at several wastewater plants.

Schwarz said his company never admitted guilt, and settled the suit because it was in the best interest of the business and the state as opposed to a long, drawn-out legal battle. He said the company has renewed nine of its contracts during the past three months.

But Hansen said the company's history is important.

"You received fines from multiple jurisdictions over multiple years from multiple occurrences ... There are some serious concerns at least from my perspective in how you operate your plants," Hansen said.

Contact reporter Maggie Creamer at maggiec@lodinews.com.

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  • Jim Kay posted at 6:10 am on Sat, Sep 22, 2012.

    jim kay Posts: 1

    the best thing you can do is run this plant in house. it would be a terrible mistake to give it to a company klike veolia. look at the mess they made in richmond. and with so called add ons, their cost would skyrocket. always kick these private schmucks to the curb when they come sniffing around.

  • Jackson Scott posted at 9:13 am on Wed, Nov 23, 2011.

    Jackson Scott Posts: 381

    "Both companies said the city will have to worry about rising public pension costs, workmen's compensation and health obligations if they keep the operation in-house."

    Having done many RFP's all of these above costs should be accounted for in the City's estimate, not just salaries. I sure hope these costs were projected in the city's bid.

  • roy bitz posted at 7:43 am on Wed, Nov 23, 2011.

    roy bitz Posts: 489

    The cost of operating this plant is significant but it is only a fraction of the total cost involved with this massive project. I believe the city owes rate payers an overview of all the costs and all the benefits of this project.
    Unlike our ground water, river water is loaded with pathogens and every drop of it must be heavily chlorinated before it can be used safely. Ground water ( except for the central plume which is shut down)--- is of much higher quality and is generally safe to drink though it may need to be lightly chlorinated from time to time.
    I would like to be proven wrong but I believe this project will cost about two hundred million dollars over the life of the plant and the water contract. I do not believe it is needed at this time and I don't believe it will do much to reduce overdrafting.



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