Levelland City Manager provided the Levelland City Council a presentation that included an overview of where the City stands financially for the Wastewater Treatment Plant Project during their April 28 regular meeting.
Fisher provided a brief timeline of the events that led up to the meeting.
In September 2022, the Council voted to increase the monthly sewer improvement fee by $6 for 2022-2023, an additional $6 increase for 2023-2024 and a final $6 increase in 2024-2025. This decision was intended to pay for the anticipated debt moving forward on the current plant project.
The current plant that is being utilized was built in 1983 or 1984 and has reached 40 years of age which is the average lifespan for wastewater treatment plants, according to Fisher.
In addition to the price increase in September of 2022, the Council was also presented with an Opinion of Probable Cost for the project construction and related cost for roughly $16,045,251. The engineering and related cost was approximately $3.3 million with a total opinion probable cost of $19,350,000.
In October of 2022, the Council approved a Notice of Intent to issue Certificates of Obligation (CO’s) for the wastewater treatment plant. In December of 2022, the Council approved an ordinance authorizing the issuance of the certificates for the wastewater treatment plant in the amount of $19,650,000 and then in early 2023 authorized the engineers to begin signing and getting the plant ready to go out for bid.
In March of this year the City went out for bids and received the bids that came in significantly higher than City staff had anticipated.
At the April 7 meeting, the lowest bid was from MH Civil Construction which totaled $26,265,000 and the proposed bid for Brown McKee Contractors totaled $32,818,965.
“This is where we are at today,” said Fisher. “We are looking for options in our wastewater or sewer improvement fund; we are looking at our wastewater reserves and we are looking everywhere we can to find some dollars to bridge the gap,” Referring to a Powerpoint during his presentation, Fisher explained that the funding mechanism when they originally started was to increase the sewer improvement fee. Fisher added that $1 of the sewer improvement fee generates about $62,400 per year.
Additionally, the City does sell their effluent water and return water to HET Levelland. This was done through a contract that was approved in June of 2022. The City receives roughly $320,000 per year in a minimum payment. Due to the current plant not operating efficiently and effectively, both parties are operating on the minimum payment per year.
Looking at how to fund the project, from August 2021 to July 2022, the city had approximately 4,700 accounts in the sewer department and as of September 2024 there are approximately 5,270 counts.
Funding mechanisms that were listed in this slide shows the fund balance in the wastewater improvement fund utilizing funds from the effluent sale and utilizing utility bill revenue.
Fisher did add that staff are still chasing down some of the presented numbers in some of the mentioned categories to make sure that they understand everything clearly.
This is to allow the City to move forward in looking at how they are going to fund the project along with giving the Council clear and solid advice.
The current debt services the City is under is about 1.5 million a year currently and debt service on the proposed wastewater treatment plant. Fisher noted that this is for an issuance of $19,650,000 With the lowest bid at $26,265,000, there is a construction contingency of 5% at $1,313,250. Fisher called the situation “nerve-wracking” because of where the market is today.
“Just in normal times 5% is very low and usually you will be at a 10 to 15% contingency,” explained Fisher. “We're looking at that very carefully.”
The engineering design and bidding services which have been completed and paid is approximately $2,045,000. Construction services are still being had with Parkhill but are sitting around $965,000.
The sub-consultants for survey testing geotechnical services are approximately $290,000 and the projected cost of this wastewater plant is $30,878,250, significantly over opinion of probable cost.
“This is where we are at this time of trying to navigate through this,” stated Fisher. “We have expended about $2,335,000. We know right now funding dollars available that we have identified right now is approximately an extra $2 million. Part of that is interest that was generated by the bond money sitting there and part of that is dipping a little bit into the actual reserve fund to utilize those funds which leaves us approximately $7 million that are necessary to continue to move this project forward.”
Emphasizing the goal of the meeting was not to come to a conclusion but to go over options, Fisher highlighted two options that were not good but the only viable ones. One of those options was rejecting the bids.
“Right now, I'm not recommending this,” said Fisher. “If we do this, we're probably looking at a late summer or early fall before we would actually see the new bids come in. The cost could be significantly higher and we had a low bid of $26 million and the next bid was $32 million. We would probably see the lowest bid on the next go around at $32 million and work our way up.”
The other reason for opposing the re-bidding process is the lack of time.
“This project is 41-years-old and we're three years from the day that we pretty much authorized this thing to get busy moving forward,” stated Fisher. “It is critical that we keep moving forward. The challenge is figuring out how and where we find the additional dollars.”
With the second option of considering additional debt financing, Fisher noted that this would delay the implementation of the City’s 2023 Infrastructure Master Plan. Fisher highlighted the need for a new animal services facility, a new SCADA System due to the current one failing and the possibility of fully financing a new roof at the fire station. For the fire station roof, Fisher and City staff are currently awaiting a TML Risk Pool report which will determine if they cover the roof or not.
Fisher explained that the City is potentially looking at an additional $7 million in debt. With Hughes making his presentation for the Council, the amount of debt he considered is roughly $6.7 million. Fisher added that the $6.7 million was the hard number provided prior to talking with engineers. While the number sits at $7 million, Fisher hopes the number will drop.
“It is not a great situation for us to be in,” stated Fisher. “I am not happy, and I know the Council is not happy. I apologize to the community that this project has gotten out of hand, but we have no choice but to move forward and try to find the additional dollars.”