Lodi officials are facing a choice. They have to staff the nearly completed water treatment plant, and soon.
"It's a $36 million, highly technical facility, and it needs the best people to run it," Mayor Bob Johnson said.
The landmark decision is set to be made today. There are millions of dollars a year in operating costs and up to five full-time jobs at stake. But with three proposals on the table, comparing the options isn't easy.
One is SouthWest Water Company. They're based in California and date back to 1946, with 350 clients across their home state, Alabama, Mississippi, Oklahoma and Texas.
SouthWest pitched the lowest overall cost at $2.107 million but comes with a history of canceled and non-renewed contracts, along with a $1.25 million settlement with the state water board over a series of violations.
The city of Lodi has never run a full-scale water treatment facility. But city staff want to keep the plant's operation under their own umbrella. Lodi already has experience running utilities, including the transit system, the intricate system of wells, a wastewater plant and an electric utility. Adding one more, they figure, is manageable, according to Wally Sandelin, public works director. Their anticipated price tag is $2.196 million a year.
"We think our people will have a greater inclination to maintain the facility," said Sandelin.
Another option is Veolia Water North America, based in Chicago. They've been around about 40 years and offer a range of water services, from municipal and industrial water services across the nation in about 650 communities.
The price tag is slightly higher than the SouthWest proposal at $2.205 million, but their reputation appears a little less troublesome. Internationally, the company has run water facilities for 150 years, with plants in Germany, China and elsewhere around the globe.
The city council's decision
Months ago, Lodi resident Ed Miller, a regular at council meetings and a representative for Lodi's Tea Party chapter, Citizens In Action, proposed looking into a public-private partnership to staff the water treatment plant in order to save the city money as pension and medical costs for public sector workers keep rising, he said.
"Can the city justify running the system, from the economic side, or is it a better value for Lodi citizens if the work is outsourced?" Miller said.
The city council is divided on the issue.
"I don't want to give it to another private entity," Councilman Alan Nakanishi said. "Keeping it in Lodi means I know who the workers are, I know who the plant manager is, and I trust them."
Councilman Phil Katzakian said he's noticed a big jump in the cost of benefits for public sector workers, so he's reluctant to add more to the city payroll.
"We have fewer and fewer employees all the time. Consequently, you do go out for more things," he said.
For a new major project like the water treatment plant, Katzakian said it might be a good time to consider the possibilities of privatization.
Councilman Larry Hansen said it's important to consider not only the cost of each proposal, but also efficiency, effectiveness and long-term sustainability of a contract that must hold up under close state scrutiny.
"My thought process, number one, is to make sure we have safe clean drinking water for the citizens," Hansen said.
At the Oct. 19 city council meeting, city council members postponed the vote on staffing the water treatment plant. The council asked SouthWest, Veolia and city public works staff to review their proposals and address concerns.
Sandelin is recommending the council keep the plant's operation in house instead of using an outside contractor. Should the council insist on privatizing the management of its water treatment facility, Sandelin is more comfortable moving forward with Veolia's contract proposal.
But officials from SouthWest claim the staff report released on Thursday doesn't tell the whole story.
In a memo to council members, William Schwarz, business development manager for SouthWest, stated that the city's cost comparisons and estimates aren't accurate.
According to the memo, the city undercut their prices by thousands of dollars and provided incomplete information about SouthWest's proposal. Another issue was that city staff acted as both a bidder and bid evaluator in the process, and were able to use information from submitted proposals to revise their own.
"A true Request for Proposals (RFP) process calls for competition based on bids prepared separately from each other," Schwarz stated in the memo.
There are two ways in which private firms contract with city plants. A company may come in and purchase the facility and run it themselves.
Should the council choose a private contract, one half of a full-time city employee is needed to manage the contract.
In the contracts, the outside firms would hold all responsibility for running the plant, maintaining the machinery and ensuring compliance with state and local codes. In layman's terms, if anything goes wrong, they deal with it.
While it is more expensive to contract out, it can save headaches in the long run. Southwest or Veolia would be in charge of the hiring, firing and plant management. Any midnight calls for repairs are the responsibility of the contracting firm.
Throughout California, SouthWest has had situations in which problems arose with city contracts and they denied fault, saying the problem stemmed from the city's failure to pay for necessary improvements.
The largest of these resulted in a settlement with the State Water Resources Control Board in February. ECOResources, a former subsidiary of SouthWest, was cited for alleged misconduct associated with operating several wastewater plants around the state.
The discharge violations were presumably due to poor maintenance, inadequate staffing and a lack of properly certificate operators, according to a report by the state board. According to the state, ECOResources did not admit to the violations or the liability.
"Sometimes partnerships or marriages don't work out," said Schwarz, who didn't address specific violations.
Sandelin said they haven't found any violations with Veolia.
The city hasn't had any penalty violations related to their potable water systems for 10 years.
Staffing the plant
To manage the plant, the city proposal combines the duties of the currently vacant wastewater treatment superintendent with the new water treatment superintendent into one position. A deputy public works director-utilities could be recruited within a few months. The double-duty job will save $56,000, according to the city's staffing plan.
Public works proposes to staff the plant with four operators along with a superintendent.
SouthWest's staffing plan raised eyebrows with city staff. The company objected to the city's request to approve a plant manager selection. Schwarz said he was unable to answer the question as to why.
The plan includes five operators along with a plant manager, which Schwarz indicated could drop to as few as three when the plant reaches the optimized operations stage.
Also, a second staffing proposal deleted operation of well facilities. This was a red flag for city staff, according to their report, indicating that SouthWest might not be comfortable dealing with Lodi's extensive well system.
SouthWest disagrees. They offered the second proposal without well operations because they felt the city staff indicated they could handle it. Schwarz said his company operates systems with more than 100 wells, while Lodi has 28.
Veolia staffing plan calls for three operators and a plant manager. The company will allow the city to review and approve potential manager candidates.
"When we can, we try to hire locally," said Jim Good, Executive Vice President of Veolia water. "Regardless of where they're from, they are responsible for the project."
One concern among the council was how each proposal handled maintenance. Lodi has agreed to reimburse maintenance costs up to $50,000. Any particularly specialized work, regardless of the contractor, would require a subcontract.
The city proposals include a half-time maintenance worker, a full-time combination well operator and plant and equipment manager, as well as a half-time electrician/instrumentation mechanic. When replacements are needed, staff is already on hand to do the work.
Veolia's proposal includes one full-time electrician/instrumentation mechanic. If maintenance is needed, the cost of the actual parts will be reimbursed, but Veolia covers its own personnel costs.
There are several other Veolia facilities in the Central Valley, located in Atwater, Arvin, Lathrop, Richmond and Rialto. If an urgent repair need were to arise, there are plenty of other technicians close by to support the Lodi plant.
"We think it's a great model," Good said. "You can call it a public-private partnership, you can call it privatization, you can call it whatever you want. The bottom line is that it's beneficial to cities."
SouthWest's proposal includes no maintenance staff. If work was needed, they would subcontract that project and bill the city for costs of parts and labor.
"They have people sitting around waiting for things to break," he said.
At such a new facility, intense maintenance isn't anticipated.
Despite the challenges, Schwarz thinks SouthWest still has a shot at winning the contract.
"We certainly hope so. That's why we'll be there Tuesday," he said.
Contact reporter Sara Jane Pohlman at email@example.com.