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HomeMy WebLinkAbout04-14-17 Agenda PacketTHE FULL PACKET IS POSTED ON THE WEBSITE www.mwmcpartners.org MWMC MEETING AGENDA Friday, April 14, 2017 @ 7:30 a.m. City of Springfield City Hall, Library Meeting Room 225 Fifth St., Springfield, OR 97477 Please Turn Off Cell Phones 7:30 – 7:35 I. ROLL CALL 7:35 – 7:40 II. CONSENT CALENDAR a. MWMC 3/10/17 Meeting Minutes Action Requested: By motion, approve the Consent Calendar 7:40 – 7:45 III. PUBLIC COMMENT Request to speak slips are available at the sign-in desk. Please present request slips to the MWMC Secretary. 7:45 – 7:55 IV. FY 2017-18 USER RATES, PUBLIC HEARING, AND ADOPTION: RESOLUTION 17-04. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Katherine Bishop a. Staff Presentation b. Public Hearing c. Discussion and consideration of adoption of Resolution 17-04 Action Requested: To conduct a public hearing on the proposed schedule of regional wastewater user rates, consider adoption of Resolution 17-04, and recommend to the appropriate governing bodies for implementation. 7:55 – 8:05 V. FY 2017-18 REGIONAL WASTEWATER PROGRAM (RWP) BUDGET & CAPITAL IMPROVEMENTS PROGRAM (CIP), PUBLIC HEARING, AND ADOPTION: RESOLUTION 17-05. . . . . . . . . . . . . . . . . . . . . . . .Katherine Bishop a. Public Hearing b. Discussion and consideration of adoption of Resolution 17-05 Action Requested: To conduct a public hearing and consider adopting Resolution 17-05 adopting Regional Wastewater Program Budget and CIP, and forwarding it to the governing bodies for ratification consistent with the MWMC Intergovernmental Agreement (IGA). THE FULL PACKET IS POSTED ON THE WEBSITE www.mwmcpartners.org 8:05 – 8:35 VI. EXECUTIVE SESSION: Brown Lane Property and O&M Contract Action Requested: Adjourn regular session and convene Executive Session for the purpose of consulting with legal counsel pursuant to ORS 192.660(2)(e) to conduct deliberations with persons designated by the governing body to negotiate real property transactions and pursuant to ORS 192.660(2)(h) to consult with legal counsel regarding MWMC’s rights and duties with respect to likely litigation issues. Adjourn Executive Session and convene Regular Session Note: Memos presented in Executive Session are confidential and must be turned in at the end of the meeting. 8:35 – 8:40 VII. BROWN LANE PROPERTY Action Requested: By motion, provide direction to the MWMC General Manager regarding entering into an agreement for the purchase of real property. 8:40 – 9:00 VIII. BID RESULTS OPERATIONS & MAINTENANCE BUILDING IMPROVEMENTS PROJECT (P80085) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mark Van Eeckhout Action Requested: Discussion and direction 9:00 – 9:20 IX. RENEWABLE NATURAL GAS SALE PROPOSAL SELECTION AND PATH FORWARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Josh Newman Action Requested: Discussion and direction 9:20 – 9:30 X. BUSINESS FROM COMMISSION, GENERAL MANAGER, AND WASTEWATER DIRECTOR 9:30 XI. ADJOURNMENT ________________________________________________________________________________ The meeting location is wheelchair-accessible. For the hearing-impaired, an interpreter can be provided with 48-hours-notice prior to the meeting. To arrange for service, call 541-726-3694. All proceedings before the MWMC are recorded MWMC MEETING MINUTES Friday, March 10, 2017 @ 7:30 a.m. Water Pollution Control Facility, Willamette Room 410 River Ave., Eugene, OR 97404 President Pishioneri opened the meeting at 7:30 a.m. Roll call was taken by Judy Castleman. ROLL CALL Commissioners Present: Bill Inge, Doug Keeler, Walt Meyer, Joe Pishioneri, George Poling, and Faye Stewart Commissioners Absent: Peter Ruffier Staff in Attendance: Meg Allocco, Steve Barnhardt, Jolynn Barker, Katherine Bishop, Dave Breitenstein, Lillian Breitenstein, John Bonham, Ivan Campbell, Judy Castleman, John Casto, Randy Gray, Brent Haxby, John Huberd, K.C. Huffman (attorney), Laura Keir, Tonja Kling, Shawn Krueger, Barry Mays, Troy McAllister, Tom Mendes, Todd Miller, Michelle Miranda, Sharon Olson, Loralyn Spiro, Matt Stouder, Dan Trujillo, Mark Van Eeckhout, Matt Vohs, and Greg Watkins Guest: Jeff McGraw, MWA Architects ELECTION OF OFFICERS Matt Stouder, MWMC General Manager, thanked Commissioner Pishioneri for serving as President for the last year. He explained traditionally the Commission rotated between the agencies the responsibilities of President and Vice-President with the Vice President becoming the President. So if they stick to tradition, Commissioner Inge would become the President and a Eugene representative would become the Vice President. President Pishioneri opened the floor for nominations. MOTION: IT WAS MOVED BY COMMISSIONER KEELER TO APPOINT VICE-PRESIDENT INGE AS PRESIDENT AND COMMISSIONER RUFFIER AS VICE-PRESIDENT. THE MOTION WAS SECONDED BY COMMISSIONER PISHIONERI. THE MOTION PASSED UNANIMOUSLY 6/0. PUBLIC COMMENT There was no public comment. MWMC Meeting Minutes March 10, 2017 Page 2 of 11 CONSENT CALENDAR a. MWMC 02/10/17 Meeting Minutes MOTION: IT WAS MOVED BY COMMISSIONER PISHIONERI TO APPROVE THE CONSENT CALENDAR. THE MOTION WAS SECONDED BY COMMISSIONER STEWART. THE MOTION PASSED UNANIMOUSLY 6/0 OPERATIONS AND MAINTENANCE BUILDING IMPROVEMENTS PROJECT UPDATE (P80085) Mark Van Eeckhout, Civil Engineer/Project Manager introduced Jeff McGraw from MWA Architects. Mr. Van Eeckhout then reviewed the project background and the estimated schedule. He stated that the goal of the project is to provide flexibility in supporting the ongoing treatment of wastewater now and 30 years into the future. The upgrade would provide added and improved space for safe, efficient, and environmentally sound management by current and future staff. The scope would include the following: Construct additions and remodel the Maintenance and Administrative/Operations (Admin/Ops) buildings, construct a new water quality laboratory, and relocate process utilities to make room for the new buildings. The bidding process started on February 1, 2017, and will wrap-up on Tuesday, March 14, 2017. Mr. Van Eeckhout said as they have moved along through the design process, the market has changed and the estimated costs keep climbing; he stated he would know more after the bids are received. Because of increasing costs, it was decided to include two deductive alternatives in the bidding package. Deductive Alternative 1 will remove the new conference room space in the Admin/Ops building. Deductive Alternative 2 will affect about one-third of the scope by removing the conference room space in the Admin/Ops building as well as the Admin remodel, but keep the Lab and the additions to the Maintenance building. Based on current engineering costs estimates, with Deductive Alternate 2 we are still within the original budgeted amount. To do the entire project, additional funding will be needed. Mr. Stouder said that at the August 2016 MWMC meeting the Commission asked staff to move forward with the design of the whole package, recognizing that the bidding climate would control the costs. He said that until the bids are received, we do not know what the costs will look like. Commissioner Keeler asked if Mr. Van Eeckhout could mail out the bidding results to the Commission. Mr. Van Eeckhout replied yes. K.C. Huffman, MWMC Legal Counsel, added that sharing the results is okay as long as there is not a discussion amongst the Commission outside an official meeting. President Inge asked about the bid package, how it would work with the alternative deductibles. Mr. Van Eeckhout replied that contractors would submit costs for the entire project and for the whole package minus the deductibles. MWMC will have 30-60 days to decide which submission to use after the contract is awarded to the lowest bidder. Commissioner Meyer asked if the bid package includes asbestos removal and if so, how is it treated in the estimates. Mr. Van Eeckhout answered it does include asbestos removal. A survey of the buildings was done prior to the completion of the bid package, so there are drawings that show where the asbestos is in the Administration building and the Maintenance building. MWMC Meeting Minutes March 10, 2017 Page 3 of 11 Commissioner Meyer said the Commission has known since last October that if we want to build the whole thing we are looking at a price tag more than what is in the current Capital Improvements Plan. Once the Admin/Ops building is gutted, it will not be very useful unless the rehab is done. Commissioner Meyer indicated his reaction would be if the bids are reasonable within the scope of work, to move ahead with the project. President Inge stated he generally concurs with Commissioner Meyer; that the Commission has talked about the project and decided that these are the things believed to be needed. He asked why wait for 5-10 years to do it; it won’t be less expensive then. President Inge asked what the amount is that we are talking about in regards to the difference between the whole project and the project minus deductibles. Mr. Van Eeckhout said it is budgeted at $14.9M and the current estimate is $19.1M. The range is projected from $18–$21M. Commissioner Pishioneri said that before he could get behind what Commissioner Meyer was saying, he would need to know the impact to the rate payer. Katherine Bishop, ESD Program Manager, replied there are many factors that put an impact on the rate. In general a 1% rate change brings in about $320,000. For this project, we are talking several million dollars. The question is, could the timing of other projects be re-phased. Issues have come up since the last budget including the electrical distribution system which is an additional $5–$6M. Also when the equipment replacement list was updated, $8M worth of equipment was added. That means a greater amount will need to be contributed to the reserve. Ms. Bishop’s recommendation would be to see what the numbers are when the bids come in on Tuesday. Commissioner Poling said that he understands Commissioner Pishioneri’s point and it is a very good point however, based on his experience with trying to build a new city hall, the longer it gets drug out, the more it is going to cost. Trying to do it piece-meal is not a good way to go. It is better to do it all at one time than to say you will come back in five years. Mr. Stouder said that the impact to the rate payers would not be immediate. We are trying to build back MWMC’s Capital Reserves and that process would become a little bit longer. Also we are trying not to take on future financing; this wouldn’t help that but wouldn’t hinder us horribly. There would not be a rate increase to cover this cost. It would come out of Capital Reserves. Commissioner Keeler said that depending on where the bids come in, maybe we don’t do the project at all. We will see what the bids are and what we have to spend on it and then make our decision. Mr. Van Eeckhout thanked the Commission for their input and stated he would send out the bid results to all the Commissioners. President Inge stated what he doesn’t want to see is we budget $21M and start the process and then the contractors says, “Oh it is going to be $30M.” He would like a safeguard that says the MWMC will not go above a certain amount or percent of the total. Mr. Huffman replied that the contract starts out that way and any change orders that go over the contract amount would need to have the Commission’s approval. President Inge said that the MWMC has been in that position before where the change order came in and the Commission did not have a choice other than to approve it. MWMC Meeting Minutes March 10, 2017 Page 4 of 11 Commissioner Poling said that he appreciates Commissioner Keeler’s comment on putting in the “No Build” option but he would be hesitant to do that. It is obvious that the facility needs upgrades and changes need to be made. He said that one of the suggestions that were tossed around in regards to the city hall discussions was, “this is how much we have to spend, make your bid fit.” Mr. Van Eeckhout said, in regards to the risk factors mentioned by President Inge, there are risks with construction. The one thing that the MWMC has in its favor is that this is a long project and it is phased because the plant needs to stay operational. If a problem arises with one of the buildings, the scope that is further out could be looked at to potentially tailor in order to bring the project closer to the budget. President Inge replied that if the bids come in at $21M he would like to budget $23M so we stay within the scope. He thinks it is important to have the full base covered and to not to go outside of the scope unless something really significant and completely unforeseen happens. Mr. Stouder stated that we usually do a Supplemental Budget for the cost of the project. We do our best to control costs. If it is absolutely necessary and there is reason to seek additional funds, staff would have a conversation with the Commission and do a Supplemental Budget request. Mr. Huffman asked, at what point do you have the most control over what the price is going to be; he answered that it is right now. If the initial bids come in where you are uncomfortable, you have the right to reject all of them and go back to the drawing board and talk to the designer and ask why are the bidders seeing this project higher than you are. You could possibly redesign more and find different ways to do it to see if it would help to bring the bids in lower and then send it out again. It isn’t convenient but it is a way to guard against potentially starting off higher than you wanted to and running into the trap of additional funds. President Inge asked if there is a way to put a not-to-exceed scenario together other than change orders. Mr. Huffman replied not the way it is currently written. It is not that type of contract, although there are ways to add a not-to-exceed issue in but he would have to look at it more closely. President Inge asked Mr. McGraw if there was anything that he thinks the Commission should be taking into consideration through this process. Mr. McGraw replied that we have seen three bids come in the last six months that are in the plant environment. The ones that are pure process, like the digester process, are coming in very competitive. They are on engineer’s estimates. Anything that contains administrative spaces, specifically mechanical, electrical, plumbing, and HVAC, we are competing with a really busy market. Those have been volatile. This project is administrative space and lab and it is specialized. It is good that you have a lot of competition but in terms of confidence in what we have right now, he doesn’t think we have it. The good thing is that Mr. Van Eeckhout has set up deductive alternates, so we have a safety net, but you can’t predict it. PRELIMINARY FY 2017-18 REGIONAL WASTEWATER PROGRAM BUDGET Mr. Stouder went over the budget schedule, stating that the public hearings for the budget and user rates will be held at the MWMC’s April 14 meeting. The MWMC’s budget will be going out for ratification starting with the Springfield City Council on May 1, to the Eugene City Council on May MWMC Meeting Minutes March 10, 2017 Page 5 of 11 8, and to the Lane County Board of Commissioners on May 9. It would be back to the Commission for final adoption on June 9, 2017. Mr. Stouder stated that the MWMC’s work plan and budget are driven by MWMC’s key outcomes. Two additional short-term indicators were added to the key outcomes at the request of Commissioner Ruffier. One was on Outcome 2 Fiscal Management; System Development Charges update was added. The other was on Outcome 4 Maximize reliability and useful life of regional assets and infrastructure; an asset management (AM) processes and practices review and development was added. Capital Program Budget: The planned Capital Budget is $35.5M in FY 17-18. Much of that is carryover money. It also includes the Equipment Replacement & Rehabilitation and the $14.9M for the O&M project as well as some significant money for the Digester project. Mr. Stouder went over the 5-year Capital Program. In regards to the Plant Performance Improvements, Commissioner Meyer asked why there is a little over $1M budgeted for the Thermal Load Mitigation Implementation for this coming fiscal year. Todd Miller, ESD Management Analyst, answered there is the pilot riparian shade projects that are on-going as part of the cost and then there is some money for the thermal load implementation. If some of the pilot/ demonstration projects (i.e. the Eugene Street Tree Watering) prove successful, the MWMC would be able to start doing some Class A production. Capital Budget Comparison: Mr. Stouder showed the Capital Improvement Programs 5-year comparison (page 18 of the budget document). Commissioner Meyer stated that the comparison would be more meaningful if it was the actual capital expenditures. He stated the first three years would be actual expenditures, the current year estimated, and the fifth year projected. Mr. Stouder said staff could modify that and get the estimated actual numbers for the Commission. Regional Operating Budget: Mr. Stouder stated that the proposed FY 17-18 operating budget plan includes an increase of 3.3% or $587,570 when compared to the prior year. This is an estimate and the actual expenses at year-end are less. When looking back at the operating budget trend and comparing the recent 4-year trend, the average annual budget increase is 3%. The Regional Operating Budget Summary – Springfield and Eugene Combined: Eugene staffing remained level at 77.40 FTE. Springfield staffing allocated to the regional program is adjusted up by .10 FTE, from 15.46 FTE to 15.56 FTE to support the capital program. Personnel costs primary driver is PERS changes and the amount of money the two cities have to pay to PERS. The other driver is the regular changes from wages and benefits associated with union contracts. Budget Summary – Springfield: Tonja Kling, ESD Management Analyst, went over the 5-year MWMC Budget Comparison, Springfield Administration. Ms. Kling stated that the proposed FY 17- 18 operating budget plan for Springfield includes a budget increase of 3.7% or $140,977 when compared to the prior year. When looking back at the Springfield operating budget trend, over the recent 4-years, the average annual budget increase is 2.1%. Personnel Services has an increase of 4.6% ($79,910) due mainly to PERS at 18.2%, wage and overtime increase 2.5%, and health insurance went up 1.3%. Materials and services increase of 2.9% ($61,067) and is mainly from MWMC Meeting Minutes March 10, 2017 Page 6 of 11 the computer software license - Constructware’s 3-year contract (Constructware is the on-line project management tool). It will be paid this year ($55,900) and will not be in the budget the next couple of years. Materials and Program Expense increased due to the NACWA (National Associated of Clean Water Agencies) membership ($12,300) transferred from Eugene’s budget to Springfield’s budget. (Exhibit 9, page 30 of the budget document shows the whole picture.) Eugene Operations and Maintenance Budget: Dave Breitenstein, AIC Wastewater Director, stated that the Eugene Operations and Maintenance budget has a 3.2% increase ($446,593) from last year. When looking back at the Eugene operating budget trend and comparing the proposed FY 17-18 budget to the FY 13-14 budget, the recent 4-years combined reflects an 11.4% increase, resulting in an average annual budget increase of 2.8%. Personnel Services for Eugene has an increase of 4.8% ($413,946) from last year. Of that Personnel Services, more than half is due to PERS and the rest is from regular wages (2.4%) and a 5% increase in health insurance. President Inge asked if the Cities had looked at getting the same insurance provider since Springfield’s only increased 1.3% and Eugene’s increased 5%. Mr. Stouder replied that it is handled by the Cities and it would be up to the City Managers and the City Council to do that. (MWMC does not have employees.) Ms. Kling stated that she believes Springfield’s health insurance is less because Springfield implemented a health center at City Hall that allows employees to see a health care provider at the center at no cost. Consequently, claims under the City’s health care have gone down. Mr. Stouder added that Springfield also made the decision to become self-insured a few years ago. Mr. Breitenstein said that Materials & Services had a total increase of 1.7%. Of that is Indirect Charges at 1.9% increase, Contractual Services at a 15.8% net decrease, and Materials & Program Expense at 13.8% increase. Commissioner Meyer said he noted that Exhibit 11 on page 36 of the budget document, showed an increase of 10% in utilities; he asked what the driver is. John Huberd, Finance and Administrative Manager, answered that the amount of flow that the plant has to pump has gone up this year and a larger projection was planned for next year. That impacts the amount of electricity we buy from EWEB. Greg Watkins, Operations Manager, added it was also taking into consideration the amount of time the co-generator would be off line for the Digester project; which is about $1,000 per day. Mr. Breitenstein said for each month the co-generator is off-line; it cost $22,000–$23,000 in power costs. Mr. Breitenstein went over the combined operating budget comparison, stating that the actual expenses at year-end are less. For example, the current fiscal year we estimate regional operating expenditure savings at year-end to be about $1.3M or 7%. User Rates: Ms. Bishop stated at this time there will be no change to the Mobile Waste Hauler – Septage fees. The proposed rate change to the regional wastewater user rates is 3% to take effect July 1, 2017. Based on 5,000 gallons of wastewater treated it would equal $25.84/month or a $0.75 monthly increase. Eugene’s average residential usage is currently 3,800 gallons which equals $22.75/month. Springfield’s average residential usage is 4,500 gallons which equals $24.56/month. MWMC Meeting Minutes March 10, 2017 Page 7 of 11 Financial Plan Strategy: Ms. Bishop said that we will continue to use the SDC revenues for debt service; we are trying to replenish the Capital Reserves after having a big payout to pay down Revenue bonds. This year we are planning to transfer $14M from the operating budget to the Capital Reserve. Last year it was $11M. The Insurance Reserve is currently at $515,000 and we plan to maintain the Rate Stability Reserve at $2M. In terms of rate increases, we have been focused on getting to the point of pay-as-you-go capital investment and trying to avoid financing costs in Revenue Bonds and loans. With the upcoming permit, we want to be positioning ourselves to have a little bit more replenishment of our Capital Reserve and be positioned financially for the future permit renewal. Financial Work Plan: Ms. Bishop recalled that the MWMC paid off the 2006 Revenue Bonds and refinanced the 2008 Revenue Bonds. The SDC fees were updated to reflect the current Capital Project List. Both the Cities of Eugene and Springfield implemented those fees effective today. In the upcoming year, staff will be working on the Financial Plan policies. Beyond that, staff would like to do a Cost of Services Analysis; take a look at the base fee and user volume and strength fees based on the discharge. Ms. Bishop said the plan is to bring to the Commission a couple of policies per meeting, starting later this year. Proposed Rates and Optional Scenarios: Ms. Bishop stated FY 16-17 adopted rate change was 2% with a projection of 3.5% increase in FY 17-18 and then 4% increase thereafter. Staff is proposing 3% rate change for FY 17-18, 3.5% in FY 18-19, and 4% thereafter. Optional Scenario A: 2.5% rate change, 3% change in FY 18-19, and 4% thereafter Optional Scenario B: 3.5% rate change, 4% change in FY 18-19, and 4% thereafter Commissioner Meyer asked if staff had an estimate of what the Consumer Price Index has increased for the year. Ms. Bishop said according to the Engineering News Cost Index it was 3% for this past year. Commissioner Stewart asked about the interest that was saved by paying off the bonds, if the rate change would be higher if the bonds hadn’t been paid off. Ms. Bishop replied that there was a substantial savings but now we are trying to replenish the Capital Reserve and there are some Capital projects that were not anticipated back when the bonds were paid off (electrical distribution system for example). When we went through the equipment replacement model there was another $8M worth of equipment into the 20-year reserve. We don’t know what the situation is with the O&M Building Improvements. There was also some discussion with the Commission about the SRF loans about what we might want to do in the future such as pay more on the one with the highest interest. Commissioner Stewart said it sounds like the interest has been saved and although we have had to put more back into the Capital Reserve, but it has probably reduced or kept the rates at a minimum because we have had additional costs that would have probably increased the rates. Mr. Stouder said that is correct. Ms. Bishop mentioned that on the comparison rates to other communities, some communities had as high as a16% increase. There were also some with 10% increases. Mr. Stouder added that they ranged from 4.5% to 16% with the average being around 7.8%. Commissioner Meyer asked if Medford was on the comparison chart. It was not but Ms. Bishop said she could add it to the list for comparison. MWMC Meeting Minutes March 10, 2017 Page 8 of 11 Ms. Bishop continued with the rate scenarios stating that if there was no rate change in FY 17-18 it would reduce the amount of capital that could be transferred and would have a negative fiscal impact to forecasted base revenues. It would lessen financial position to replenish capital reserves, reduce ability to respond to customer/usage changes, and may require greater increases in future years. DISCUSSION: Commissioner Keeler said that he always pushes for the lowest user rate that we can do and appreciates the zero percent analysis. He thinks what is proposed (3%) is fine especially considering the climate around the Willamette Valley and the western part of the state. Commissioner Poling agrees with Commissioner Keeler it is better to keep the rates reasonable than have a zero percent increase and have to spike the rates later on. President Inge asked if there was an estimate of time to replenish the reserves. Ms. Allocco responded that Finance was looking at about seven years. NPDES PERMIT UPDATE ISSUES REVIEW Todd Miller, Environmental Management Analyst, made the staff presentation. The National Pollutant Discharge Elimination System (NPDES) permit has been under administrative extension since 2007. There are challenges in operating under administrative extension. Operating plans become stagnant because we cannot update our Plans such as the Recycled Water Use Plan or Biosolids Operating Plan. The monitoring recording requirements are not able to stay up with federal changes. For example, the Pretreatment Program streamlining process is not allowed under the administrative extension. New facilities do not get authorized under the administrative extension. The main problem with not having an updated permit is uncertainty for capital planning. The MWMC is not alone in administrative extension. Oregon faces a long backlog of expired permits. The reason for this is complex, new water quality issues and legal challenges that were prolonged in the courts. As of right now, DEQ’s best indication to us has been that we will get our new permit in 2019. They do have a permit issuance plan that list permitees. The MWMC is not on that list yet but the DEQ expects it will be in 2019. Mr. Miller then summarized three key issues related to MWMC’s pending permit: Temperature: The biggest issue is the Total Maximum Daily Load (TMDL) that provides a calculated waste load allocation to permitees. In 2006, a TMDL was put out by the DEQ and was based on the Natural Conditions Criterion (NCC). NCC had specific temperature limits set to protect the salmon species such as 13 and 18 degrees Celsius (depending on season). Since then, the NCC has been challenged in court and struck down. So we have a TMDL based on invalid temperature standards and the DEQ contends that those TMDLs still exist and waste load allocations still apply. This has caused a lot of consternation state wide. That is why MWMC is working closely with ACWA; trying to get more certainty. Staff is anticipating more stringent limits, regardless how this eventually falls out. ACWA is working on a temperature management guide for permitees that are in a position like the MWMC for how we should proceed. It will be reviewed by the DEQ so we will know if it will be something they support. There may also be more efficient ways to achieve temperature compliance such as the Willamette River Alliance Project. We are looking at that with multiple permitees in the entire Willamette basin. MWMC Meeting Minutes March 10, 2017 Page 9 of 11 Toxics: Oregon’s Toxics Standards are driven by aquatic life and human health protection criteria, primarily fish consumption rates (human consumption of fish). Oregon has the strictest toxic limits in the country. Treatment plants are finding some of the toxic limits impossible to meet with traditional treatment operations. The options are to either adopt very expensive and energy intensive technical treatment or go for other solutions (such as a mercury minimization plan). A minimization plan is where you have more of a pretreatment approach to try to reduce the source of the toxic pollutants. Certain things like mercury or the plasticizer family of phthalates are ubiquitous in the human environment. The minimization approach will have the most impact and be the most cost effective for permitees. It is being worked out at a state level and then will be subject to third party scrutiny to right size those to be resilient to challenge. There are data collection and monitoring issues associated with the toxics – the metals and chemicals. 1) The DEQ is requiring quantitation limits of laboratory detection of these chemicals at such a small, minute concentration that labs are not actually able to meet those. ACWA is working closely with the DEQ in trying to resolve this with labs state wide. There is also a data collection need. There are some chemicals that we just don’t understand yet and need more data on. For example, the copper standard requires us to collect ambient river data and effluent data at the same time for two years. We don’t have those data sets yet. Mass Loads: There is a 1992 rule that says if your treatment plant is deemed to have increased its treatment capacity, then your mass load would be calculated in a different way. The DEQ is revisiting how mass load calculations are determined and applied in permits. Depending on the eventual interpretation and application of that rule, some permittees could face more stringent mass load requirements, which could require operational changes or plant upgrades to meet. In summary, the outstanding issues are yet to be resolved and could be potentially costly and cumbersome until they are resolved. A permit renewal could lock us in, under the CWA anti- backsliding rules, to more stringent regulations. Given that the best known timeline is 2019 for permit renewal; staff concludes the MWMC should work within DEQ’s schedule regarding a new permit. DISCUSSION: Commissioner Keeler agrees that there is no urgency on the MWMC’s part with all these issues remaining undefined. He also appreciates what staff is doing to stay engaged at the state level and beyond. President Inge asked if there is a reason why we haven’t collected the data on copper already. Mr. Miller replied that it is a new rule; the new copper rules were just adopted last year. Michelle Miranda, Wastewater Lab/ISC Supervisor, stated that staff is collecting data every other month because we have a boat out on the river. To add it in every month would be a considerable program change. Mr. Stouder said we want to do the right things environmentally but that DEQ is the regulator and with all the uncertainty we should wait for them with respect to permit issuance. Commissioner Pishioneri stated that he appreciated all the work that Mr. Miller does on this topic. He is curious as to the baseline for the Willamette River and asked if we have a baseline for the McKenzie River to compare to the Willamette to see what kind of community influence we have on MWMC Meeting Minutes March 10, 2017 Page 10 of 11 the Willamette? Tom Mendes answered that staff is currently monitoring the Willamette River at multiple locations, both upstream and downstream from our outfall. We are in the process of collecting water quality data trying to better understand what toxics might be in the water body before it even comes to our location. Commissioner Pishioneri asked if there is already something in the water system that we are being required to clean up? Mr. Stouder replied this is the case, as with mercury for example. As Mr. Miller mention under the minimization plans, there is a limit on the amount of mercury that can be discharged into the river because it fails to meet the water quality standards for mercury (chiefly from atmospheric deposition from China). Commissioner Pishioneri said it seems the water that we are drinking is tested at a lower standard than what we are putting into the river for the fish. Is that right? Mr. Stouder replied that it depends on the contaminant. They are not the same standards. EXECUTIVE SESSION: Property Update The Metropolitan Wastewater Management Commission met in Executive Session pursuant to ORS 192.660(2)(e) to conduct deliberations with persons designated by the governing body to negotiate real property transactions. President Inge asked if any representatives of the news media were present or general public; there were none. Staff was allowed to attend the executive session. President Inge closed the executive session at 9:25 a.m. and opened the regular session. BUSINESS FROM COMMISSION, GENERAL MANAGER, AND WASTEWATER DIRECTOR General Manager: Mr. Stouder announced he had received a request from Heard Farms (Roseburg, OR) to dispose of partially treated effluent at the plant. They take hauled waste from different municipalities and vendors. The request was to take waste from March through May. Unfortunately we had to deny the request because the terms of the IGA only allow us to accept hauled waste from the governing bodies. Staff plans to look into a policy that would allow MWMC to accept hauled waste as well as talk with the Commission about septage rates. Accepting hauled waste from outside the area would potentially be an opportunity to generate revenue. We would need to write up a policy that the Commission would approve and take to the governing bodies for approval. Commissioner Keeler asked Mr. Stouder to differentiate between septage and hauled waste. Mr. Stouder said he is differentiating septage as domestic and hauled waste can be industrial and other sources, not just residential. Mr. Breitenstein said Heard Farms is receiving waste from about 17 community systems. Mr. Stouder said that staff is planning to update the Commission on the Communications Plan in May. One of the things that staff has been looking at is social media. The MWMC may potentially utilize social media such as creating a Facebook page. MWMC Meeting Minutes March 10, 2017 Page 11 of 11 Mr. Stouder welcomed back John Casto, Design and Construction Coordinator. He was with the MWMC for a number of years working on large projects and will be the chief inspector with the Digester project, the O&M Building project, and other CIP projects. Commission: Commissioner Meyer asked if the update on the Communication Plan is going to talk about the outreach program to the schools and what is planned for extending the program to the schools in Eugene. Mr. Stouder said it will be discussed in May. ADJOURNMENT President Inge adjourned the meeting at 9:35 a.m. M E M O R A N D U M DATE: April 7, 2017 TO: Metropolitan Wastewater Management Commission (MWMC) FROM: Katherine Bishop, ESD Program Manager SUBJECT: Fiscal Year 2017-18 User Rates, Public Hearing and Adoption ACTION REQUESTED: To conduct a public hearing on the proposed schedule of regional wastewater user rates and to consider adoption of Resolution 17-04 _____________________________________________________________________ ISSUE A public hearing is scheduled for the April 14, 2017 Commission meeting to review and discuss the proposed fiscal year 2017-18 (FY 17-18) user rates for the Regional Wastewater Program (RWP) and to solicit public comment. A public hearing notice was published in the Register Guard and the meeting agenda was provided to the standing list of parties interested in notification of the Commission meetings. The notice provides the Commission with the opportunity to adopt the schedule of user rates on April 14. Per the intergovernmental agreement (IGA), once the Commission takes action, the recommended schedule of user fees will be forwarded to the cities of Springfield and Eugene for adoption and implementation. BACKGROUND The Commission was presented with and discussed the components of the FY 17-18 Regional Wastewater Program Budget and Capital Improvements Program over the past three months, including: On January 13, 2017, the Commission reviewed the proposed Key Outcomes and Performance Indicators as part of the FY 17-18 Budget Kick-Off. On February 10, 2017, the Commission reviewed the proposed FY 17-18 Capital Budget and 5- Year Capital Plan. On March 10, 2017, the Commission considered the operating program budget, user fee rate scenarios and provided input on the Preliminary FY 17-18 RWP Budget. DISCUSSION Wastewater User Rates - On March 10, the Commission was presented with three multi-year user fee rate scenarios for FY 17-18 including a 3.5% user rate scenario (as previously forecasted), a Memo: Fiscal Year 2017-18 User Rates, Public Hearing and Adoption April 7, 2017 Page 2 of 2 proposed 3.0% rate change, and a 2.5% rate scenario. Based on discussions and input from Commissioners, the Commission provided direction to move forward with a 3% rate increase in FY 17-18 in order to maintain revenue adequacy to: (1) support the capital improvements program; (2) continue to replenish capital reserves; (3) meet debt service obligations, and; (4) continue to implement moderate rate changes annually to avoid future rate spikes. Fiscal Impact to the Typical Residential Monthly Bill - A 3% user fee rate change to the regional wastewater component results in a $0.75 increase monthly from $25.09 to $25.84 for a residential customer based on 5,000 gallons of wastewater treated. While 5,000 gallons is commonly used when comparing a “typical” residential monthly bill with other communities, the “average” residential usage varies by community. When considering the average single family residential monthly bill based on current usage trends in Eugene and Springfield and including the proposed 3% rate change, the average residential monthly bill would be about $22.75 in Eugene and $24.30 in Springfield for the regional wastewater treatment component. The average bill amount in Springfield is slightly greater due to an increase in the average usage (gallons) in Springfield which is attributed to a greater number of people per household (families) when compared to Eugene. With the proposed 3% increase in regional wastewater user charges applied to the base and flow charge, the FY 17-18 revenue from the increased rates is projected to meet the covenants of the Revenue Bonds and SRF loan requirements, and to maintain or exceed an unenhanced credit rating of A (as required by the IGA) by adequately funding operations, administration, capital financing and reserves as proposed in the FY 17-18 Regional Wastewater Program Budget and CIP. Septage Rates - Septage fees are charged to mobile waste haulers based on the volume of septage discharged. Septage fees remain at $127 per 1,000 gallons. There is no rate adjustment proposed for septage fees at this time. However, staff is reviewing septage services and fees and will return to the Commission with additional information. Staff plans to provide a brief presentation on the proposed user fees, to be followed by a public hearing. ACTION REQUESTED The Commission is requested to conduct a public hearing on the proposed schedule of regional wastewater user fees and to consider adoption of Resolution 17-04. ATTACHMENT 1. Resolution 17-04 METROPOLITAN WASTEWATER MANAGEMENT COMMISSION RESOLUTION 17-04 ) IN THE MATTER OF THE FY 2017-18 ) MWMC REGIONAL WASTEWATER SCHEDULE ) OF USER AND SEPTAGE RATES AND ) RECOMMENDING RATES TO THE GOVERNING ) BODIES WHEREAS, the Metropolitan Wastewater Management Commission (“MWMC”), pursuant to the Intergovernmental Agreement (“IGA”) between the cities of Springfield and Eugene, and Lane County (collectively “Governing Bodies”), is responsible for the administration and operation of the regional wastewater system; and WHEREAS, the IGA requires MWMC to recommend to the Governing Bodies a schedule of sewer user fees; and WHEREAS, MWMC’s recommendation must set forth: 1) the rates and amounts MWMC reasonably determines are necessary to meet MWMC’s bond covenants and to achieve and maintain an unenhanced credit rating of A from at least one nationally recognized rating agency (“Goal 1”) and 2) such additional rates and amounts MWMC determines are appropriate to adequately fund the actions necessary to perform MWMC’s functions under the IGA (“Goal 2”); and WHEREAS, on April 14, 2017, the MWMC held a public hearing on the levels of sewer user and septage rates necessary to meet the requirements set forth above for Fiscal Year 2017-2018; and WHEREAS, MWMC has determined the user rates proposed satisfy Goal 1 and that additional funds, such as would satisfy Goal 2, are not necessary; and WHEREAS, MWMC, to the extent such exist, have considered all written and/or oral comments made at the public hearing, the recommendation of staff, and being otherwise fully advised; NOW, THEREFORE, BE IT RESOLVED BY THE METROPOLITAN WASTEWATER MANAGEMENT COMMISSION that the Metropolitan Wastewater Management Commission Schedule of Regional Wastewater Sewer User Fees for Fiscal Year 2017-2018 in the form attached as Exhibit A, incorporated herein by this reference, with the rates set forth therein increased by the amounts that are necessary to reflect an overall rate increase of 3% over the user rates currently in effect, satisfies Goal 1 and is recommended to the appropriate Governing Bodies for implementation. Septage fees, which are implemented only in Eugene, remain at $0.127 per gallon with no rate change at this time. ADOPTED BY THE METROPOLITAN WASTEWATER MANAGEMENT COMMISSION OF THE SPRINGFIELD/EUGENE METROPOLITAN AREA ON THE 14TH DAY OF APRIL, 2017. ______________________________________ Bill Inge, MWMC President ATTEST: __________________________________ Approved as to form: _____________________ K.C. Huffman, MWMC Legal Counsel ATTACHMENT 1 Page 1 of 2 Base Charge per Account (excludes septage)$12.96 Per Unit Per Flow-Based Fee (748 gallons) 1,000 gallons Residential $1.928 $2.577 Low Strength $2.590 $3.464 Medium Strength $3.775 $5.047 High Strength $5.356 $7.161 Very High Strength $6.942 $9.281 Super High Strength $8.524 $11.397 Septage (1,000 gallons)$127.00 Exhibit A Metropolitan Wastewater Management Commission Schedule of Regional Wastewater Sewer User Fees Fiscal Year 2017-2018 ATTACHMENT 1 Page 2 of 2 M E M O R A N D U M DATE: April 7, 2017 TO: Metropolitan Wastewater Management Commission (MWMC) FROM: Katherine Bishop, ESD Program Manager Tonja Kling, ESD Management Analyst SUBJECT: Fiscal Year 2017-18 Regional Wastewater Program (RWP) Budget and Capital Improvements Program, Public Hearing and Adoption ACTION REQUESTED: Review the Preliminary Fiscal Year 2017-18 RWP Budget, conduct a public hearing, and consider adoption of Resolution 17-05 _____________________________________________________________________ ISSUE The Preliminary Regional Wastewater Program (RWP) Budget and Capital Improvements Program (CIP) for fiscal year 2017-18 (FY 17-18) is attached for review and consideration. A public hearing is scheduled for the April 14, 2017 Commission meeting to solicit public comment. A public hearing notice was published in The Register Guard and the meeting agenda was provided to the standing list of parties interested in notification of the MWMC meetings. The notice provides the Commission with the opportunity to adopt the RWP Budget and CIP on April 14. BACKGROUND On January 13, 2017, the Commission reviewed the proposed Key Outcomes and Performance Indicators as part of the FY 17-18 Budget Kick-Off. On February 10 the Commission reviewed the proposed Capital Budget and 5-Year Capital Plan. On March 10 the Commission considered the operating program budget, user rate scenarios, and provided input on the Preliminary FY 17-18 RWP Budget. The Preliminary FY 17-18 RWP budget funds all operations, administration, and capital projects planned for the MWMC Regional Wastewater Facilities. Based on feedback received from the Commission during prior years, staff does not intend to make a significant presentation on the budget document at the April 14 Commission meeting; however staff will be prepared to support the Commission’s discussion. DISCUSSION Operating Program Budget – The total operating budget is $18,288,200, reflecting an increase of 3.3% ($587,570) in FY 17-18 when compared to the adopted FY 16-17 budget. Memo: Fiscal Year 2017-18 RWP Budget, Public Hearing and Adoption April 7, 2017 Page 2 of 2 Operations and Maintenance – The operations and maintenance budget for Eugene is $14,346,300, reflecting an increase of 3.2% ($446,593) in FY 17-18 when compared to the adopted FY 16-17 budget. Administration – The administration budget for Springfield is $3,941,900 in total, reflecting an increase of 3.7% ($140,977) in FY 17-18 when compared to the adopted FY 16-17 budget. Capital Programs Budget – The FY 17-18 capital programs budget is $35,544,000 which includes capital project carryover funding of about $27M. Based on the status and phasing of capital improvement projects, projects are fully budgeted in the fiscal year in which the contract is awarded. Projects and associated expenditures span multiple years. The 5-year Capital Program plan includes $80,333,000 in total. Wastewater User Rates – The Preliminary FY 17-18 RWP Budget and CIP document reflects a 3.0% user rate increase effective July 1, 2017. With the 3.0% rate change included in the preliminary budget, sufficient revenues will be generated to fund daily operations, planned capital projects, and debt service obligations while maintaining a positive financial position as we continue to replenish capital reserves. Next Steps – Per the MWMC intergovernmental agreement, once approved by the MWMC, the Budget and CIP will be referred to the City of Springfield, City of Eugene, and Lane County for consideration and ratification. After the ratification process is complete, the budget will be brought back to the MWMC for final adoption on June 9th. ACTION REQUESTED The Commission is requested to review the Preliminary FY 17-18 RWP Budget and CIP materials, conduct a public hearing, and consider adoption of Resolution 17-05. ATTACHMENT 1. Resolution 17-05 ATTACHMENT 1 Page 1 of 1 METROPOLITAN WASTEWATER MANAGEMENT COMMISSION RESOLUTION 17-05 ) IN THE MATTER OF ADOPTING THE FY 2017-18 ) MWMC REGIONAL WASTEWATER PROGRAM ) BUDGET AND CAPITAL IMPROVEMENTS ) PROGRAM AND RECOMMENDING THEM TO ) THE GOVERNING BODIES WHEREAS, the Metropolitan Wastewater Management Commission (“MWMC”), pursuant to the Intergovernmental Agreement (“IGA”) between the cities of Springfield and Eugene, and Lane County (collectively “Governing Bodies”), is responsible for the administration and operation of the regional wastewater system; and WHEREAS, the IGA requires MWMC to prepare an annual budget and Capital Improvements Program and recommend them to the Governing Bodies for adoption; and WHEREAS, MWMC’s annual budgeting process involves a number of public meetings in which the MWMC’s administrative and operational needs for the upcoming fiscal year are presented and reviewed; and WHEREAS, on April 14, 2017, MWMC held a public hearing on the proposed FY 2017- 2018 Regional Wastewater Program Budget (RWP) and Capital Improvements Program (CIP); and WHEREAS, MWMC, to the extent such exist, have considered all written and/or oral comments made at the public hearing, the recommendation of staff, and being otherwise fully advised; NOW, THEREFORE, BE IT RESOLVED BY THE METROPOLITAN WASTEWATER MANAGEMENT COMMISSION that the RWP and CIP for FY 2017-2018 as presented to the MWMC on April 14, 2017, are hereby approved and the General Manager is directed to refer them to the Governing Bodies for ratification in accordance with the IGA. ADOPTED BY THE METROPOLITAN WASTEWATER MANAGEMENT COMMISSION OF THE SPRINGFIELD/EUGENE METROPOLITAN AREA ON THE 14TH DAY OF APRIL, 2017. ______________________________________ Bill Inge, MWMC President ATTEST: __________________________________ Approved as to form: _____________________ Kevin Kraaz, MWMC Secretary K.C. Huffman, MWMC Legal Counsel M E M O R A N D U M DATE: April 7, 2017 TO: Metropolitan Wastewater Management Commission (MWMC) FROM: Mark Van Eeckhout, Civil Engineer SUBJECT: Bid Results Operations & Maintenance Building Improvements Project (P80085) ACTION REQUESTED: Staff Requests Feedback and Discussion _____________________________________________________________________ ISSUE This memo provides the bid results from the Operations and Maintenance Building Improvements project – P80085 (O&M BIP), conducted March 14, 2017. Bids were received from two contractors and were above the engineer’s estimate and current project budget. BACKGROUND The O&M BIP has been planned and designed to construct a new Water Quality Laboratory and additions to the Maintenance and Admin/Ops Buildings, adding approximately 20,000 square feet (SF), and remodeling approximately 17,000 SF of existing Admin/Ops and Maintenance Building space. In addition, several process utilities have been planned for relocation. The project has been planned to be phased over the three years to allow for continued access of the facilities. As the O&M BIP has progressed through planning and design, the economy in Oregon and specifically in the South Willamette Valley has continued to improve from the most recent recession. Although this is good news, it has provided the MWMC a less competitive bidding climate from general contractors interested in doing commercial construction work. There has been concern (which has been confirmed) that general contractors working on architectural building projects such as the O&M BIP have ample work in the surrounding area that may limit competition and increase overall project prices. As a result, the project attempted to mitigate the risk of limited competition and increasing prices by bidding during the winter months and adding two deductive alternates to allow choices for the Commission to reduce scope and associated costs if necessary. Although this mitigation approach had merit, MWMC only received bids from two contractors and both bids were above the engineer’s construction cost estimate. DISCUSSION Two bids were received on March 14, 2017 from Wildish Building Company, and Corp Inc. (out of seven general contractors that attended the mandatory pre-bid meeting). Although staff believes Memo: Operations & Maintenance Building Improvements Project (P80085) April 7, 2017 Page 2 of 3 there was strong interest in the project, many contractors reported that they were either too busy with current work or more interested in pursuing work through alternative contracting mechanisms such as negotiated work or Construction Manager General Contractor (CMGC) work. Below is a summary of the bid results including the cost implications of accepting either of the two deductive alternates included with the bid documents. Project: P80085 - O & M Building Improvements Bids Due: March 14, 2017 @ 2:00 pm Bid Opening: March 14, 2017 @ 4:00 pm Engineer's Estimate ITEM UNIT Estimate Base Bid (10.2.5)LS $14,464,453 $16,225,309 $16,523,000 (10.2.6) Deductive Alternative #1 LS -$373,476 -$130,000 -$330,000 Base - Ded. Alt #1 LS $14,090,977 $16,095,309 $16,193,000 (10.2.7) Deductive Alternative #2 LS -$4,137,808 -$2,500,000 -$3,400,000 Base - Ded. Alt #2 LS $10,326,645 $13,725,309 $13,123,000 Corp, Inc. Salem, OR Wildish Building Co. Eugene, OR Metropolitan Wastewater Management Commission 225 Fifth Street Springfield, OR 97477 The base bid results are between 12-14% above the engineer’s cost estimate from the design. In addition, the two bidder’s deductive alternates were considerably less than was estimated. The O&M BIP currently has a total project budget of $14.9 million to cover costs related to design services, construction, and administration (permits, legal services, special inspections/testing, staff time, advertising, etc.). With both the increase in the base bid and reduced deductive alternates, additional funding will be necessary to move forward with the project, either with or without the deductive alternates, unless the Commission choses to reject all bids and repackage the work scope. The bid results also show that the decision to proceed forward with or without the deductive alternates, changes the outcome of the apparent low bidder. The apparent low bidder for the Base Bid or the Base Bid with Deductive Alternate #1 is Corp Inc. and is Wildish Building Company for the Base Bid with Deductive Alternate #2. These results are based on the specified Basis of Award which states, “The award of this Contract shall be made to the responsible Bidder with the lowest Total Base Bid or award will be made based on the Total Base Bid plus Deductive Alternate #1 or #2.” CONCLUSION The Commission has options regarding the O&M BIP and staff is interested in discussing these options and receiving feedback at the April meeting. The options include, but are not limited to: Proceeding with the full scope of work with a construction contract value of ~$16.2M and an estimated total project cost of ~$22.4M Proceeding with the work minus the operations building scope with a construction contract value of ~$13.1M and an estimated total project cost of ~18.8M, or; Memo: Operations & Maintenance Building Improvements Project (P80085) April 7, 2017 Page 3 of 3 Rejecting all bids and considering breaking the bid package into smaller packages for future rebidding. The March 14, 2017 construction bid pricing is firm for 90 days (June 12, 2017). With feedback from the Commission in April, staff will complete the necessary MWMC Resolutions, supplemental budgeting, and/or further information needed for the Commission to provide direction at the May 12, 2017 meeting. ACTION REQUESTED Staff requests feedback and discussion from the Commission. ATTACHMENTS 1. Memo dated March 3, 2017, Project Update for Operations & Maintenance Building Improvements Project (P80085) M E M O R A N D U M DATE: March 3, 2017 TO: Metropolitan Wastewater Management Commission (MWMC) FROM: Mark Van Eeckhout, Civil Engineer SUBJECT: Project Update for Operations & Maintenance Building Improvements Project (P80085) ACTION REQUESTED: No action requested, Informational Only _____________________________________________________________________ ISSUE This memo provides a brief overview and status of the Operations and Maintenance Building Improvements project – P80085 (O&M BIP), including design development, project schedule, construction cost estimating, and budget. BACKGROUND The existing O&M Buildings (support facilities), including the older portions of the Water Quality Lab, were constructed in the late 1970s and early 1980s and no longer provide needed flexibility due to limited space. Following studies by staff and PIVOT Architecture it was decided that a comprehensive review of the support facilities were needed leading to the eventual update of the facilities. The goal of the update is to provide flexibility in supporting the ongoing treatment of wastewater now and 30 years into the future. Architectural programming and design of the upgraded facilities was awarded to MWA Architects in 2014. The architectural programming conducted in 2014 helped support the decision to move forward with the design of the current project including a new Laboratory, additions and upgrades to the Maintenance Building, and remodeling of the Administration/Operations (Admin/Ops) Building (known as Alternative 2). Design of the additions and upgrades has taken place over the past year and a half including staff and subject matter expert review and comment resolution. The planned construction of the Laboratory and additions to the Maintenance and Admin/Ops Buildings will add approximately 20,000 square feet (SF), and approximately 17,000 SF of existing Admin/Ops and Maintenance Building space will be remodeled. In addition, several process utilities will require relocation. The project is planned to be phased over the next 3 years to allow for continued access of the facilities. Below is recent project history; further history is provided in Attachment 1: August 12, 2016: The Commission was provided an O&M BIP project update regarding design status and discussion of increasing cost estimates. ATTACHMENT 1 Page 1 of 3 Memo: Operations & Maintenance Building Improvements Project (P80085) March 3, 2017 Page 2 of 3 January 31, 2017: The P80085 project team completed design of the project. Design workshops were held March 17, 2016 and October 12, 2016; comment resolutions were completed January 31, 2017. February 1, 2017: Advertisements were sent out to the Register Guard and Daily Journal of Commerce (DJC), electronic versions of the bid documents were sent to plan centers, and the bid documents were placed at the City of Springfield’s front counter for sale. DISCUSSION The O&M BIP construction bid packages were completed and finalized in January 2017 and a mandatory pre-bid meeting was conducted on February 22, 2017. Seven interested general contractors, in addition to several subcontractors, were in attendance during the pre-bid meeting. We hope that this is indicative of strong interest in the project, and that all interested contractors will submit bids giving the MWMC strong competition for the work. Included with the final bid package was a revised cost estimate for construction. Construction cost estimates continued to increase over the 90% plans as a result of an unpredictable bidding climate. As previously discussed in April and August of 2016, staff has issued the bid documents with two deductive alternates to give the Commission options following the bids. The two deductive alternatives include removal of the central conference rooms in the Admin/Ops Building, and/or the elimination of the Admin/Ops Building Upgrade portion of the work. Below is an estimated schedule for bidding and construction of the project: P80085 Project Schedule DESIGN SCHEDULE O&M BIP Arch. (Programming) November 2014 to March 2015 O&M BIP (Design) October 2015 to January 2017 CONSTRUCTION BIDDING SCHEDULE O&M BIP Bidding & Contract Award February 2017 to March 2017 Bid Opening March 14, 2017 (estimate) Contract Award Date April 2017 (estimate) Notice to Proceed April 2017 (estimate) CONSTRUCTION SCHEDULE Utility Relocates and Temp. Housing May 2017 to July 2017 Maintenance Bldg.–Const. of addition & upgrades July 2017 to July 2018 Lab Bldg.-Const. June 2017 to December 2018 Admin/Ops Bldg.-Demo and Const. of upgrades October 2018 to December 2019 Budget (MWMC P80085) Architectural Cost Consultants (ACC), who conducted the cost estimate for the project, has had recent success in accurately estimating projects in Oregon, including the southern Willamette Valley for 4J School District. However, communication from the consultant indicates a recent trend of increasing costs for similar projects given the overall improvement of the economy, supplier ATTACHMENT 1 Page 2 of 3 Memo: Operations & Maintenance Building Improvements Project (P80085) March 3, 2017 Page 3 of 3 inventory levels, and the fact that contractors are much busier now than they were a few years ago. The O&M BIP currently has a project budget of $14.9 million to cover costs related to design services, construction, and administration (permits, legal services, special inspections/testing, staff time, advertising, etc.). Based on the most recent consultant cost estimate for the project, the expectation is that construction costs will be above the current allocated budget. The degree to which the costs will be above budget will be dependent on actual bids and deductive alternates received. Given this information, staff intends to discuss options with the Commission at the April 14, 2017 Commission meeting prior to awarding the contract. CONCLUSION Project P80085 is moving towards completion of the bidding phase, with construction scheduled to begin in May 2017. Bid opening is anticipated to occur on March 14, 2017 and the Commission will receive an update regarding bid results, budget implications and a contract award recommendation in April 2017. ACTION REQUESTED No action is requested; this memo is for information purposes. ATTACHMENTS 1. Memo dated August 4, 2016, Operations & Maintenance Building Improvements Project (P80085) ATTACHMENT 1 Page 3 of 3 M E M O R A N D U M DATE: April 7, 2017 TO: Metropolitan Wastewater Management Commission (MWMC) FROM: Josh Newman, Managing Civil Engineer SUBJECT: Renewable Natural Gas Sale Proposal Selection And Potential Path Forward ACTION REQUESTED: Discussion and direction _____________________________________________________________________ ISSUE After evaluating three proposals for the sale of the MWMC’s biogas, staff has identified Trillium Transportation Fuels, LLC (Trillium) as the top proposer. Several challenges must be overcome before a Renewable Natural Gas (RNG) sales agreement with Trillium could be implemented, and are discussed below. Accordingly, staff now recommends working with stakeholders like NW Natural and others to resolve these challenges as a precursor to entering into agreement with Trillium. BACKGROUND In the fall of 2016, staff embarked on a Request for Proposals (RFP) strategy to identify and select a proposal for the sale of the MWMC’s upgraded biogas. This strategy is described in the March 17, 2017 Communication Packet item entitled Renewable Natural Gas Sale Proposal Review and Selection Process. Attachment 1 to that memorandum provides a comprehensive summary of recent biogas utilization staff efforts that led up to the RFP process. DISCUSSION Trillium is a member of the Love’s family of companies founded in 1964 and headquartered in Oklahoma City. Love's Travel Stops & Country Stores (Love’s) has more than 410 locations in 40 states and is one of the largest privately held companies in America with more than 17,000 employees. In addition to having a strong financial standing, advantages that Trillium brings to the table include: Over 20 years of experience in engineering, building, operating and maintaining both public and private CNG fueling stations They are not dependent on separate third party fueling agreements to capture the environmental attributes of the RNG. Factors specific to Trillium include: o Provide fuel for thousands of natural gas vehicles daily o Deliver more than 55 million gallons of CNG per year Memo: Renewable Natural Gas Sale Proposal Selection And Potential Path Forward April 7, 2017 Page 2 of 3 o A client base with over 160 CNG facilities, including over 60 public-access CNG stations and 95 private CNG fueling facilities o Delivers a market capable of using 100% of MWMC’s RNG at client facilities in California where high value LCFS credits are available. Flexible on duration term (5-20 years) Flexible on RNG production volume Business Case Scenarios The preliminary estimate of capital investment required to provide needed biogas upgrading and interconnection facilities is approximately $5,600,000. This estimate will be refined as more information becomes available. Return on this investment would be realized through revenues obtained under the RNG sales contract with Trillium. Contract terms and provisions (such as contract duration) are negotiable. Staff considers the continued viability of the federal RFS as the highest source of uncertainty in evaluating potential benefits of an RNG project. California’s and Oregon’s state fuel standard programs are believed to be stable into the foreseeable future. With this in mind, the following three scenarios were developed: Scenario 1 - Optimistic: This scenario assumes that the federal RFS continues in its current form with no reduction in the legislatively determined (and EPA adjusted) annual renewable fuel mandates. The state LCF programs are assumed to remain unchanged. Scenario 2 – Moderate Risk This scenario recognizes that while the federal RSF program is supported in the farm states, it is unlikely to go on completely unaffected under the current administration. This scenario assumes that RIN values drop to one-third of their current value and hold at that level. The state LCF programs are assumed to remain unchanged. Scenario 3 – Pessimistic Under this scenario, the federal RSF goes away and RIN values drop to zero. The state LCF programs are assumed to remain unchanged. Using the estimated capital investment of $5,600,000, current pricing for RNG, and the three RSF program scenarios described above, simple payback on investment was estimated. These estimated payback values are summarized in Table 1. Table 1. Estimated simple payback under three RSF program scenarios Quantity Description Annual Gas Sales (MMBTU/Year) Simple Payback Optimistic Moderate Pessimistic Flare Only (1) 23,000 6.9 12.7 22.1 Engine Off (2) 52,000 3.6 7.8 18.9 Engine Off plus NG for Boiler (3) 73,000 2.6 5.9 15.7 (1) Assumes a quantity equal to the amount flared annually is upgraded and sold Memo: Renewable Natural Gas Sale Proposal Selection And Potential Path Forward April 7, 2017 Page 3 of 3 (2) Assumes that all of the biogas produced annually, except an amount needed for meeting the plants internal thermal energy demand, is upgraded and sold (3) Assumes all of the biogas produced annually is upgraded and sold and internal thermal demand is met through purchase of utility supplied natural gas Challenges: In order for the MWMC to take advantage of revenue opportunities described above, the MWMC would first need to: Furnish facilities capable of meeting NW Natural’s specifications to upgrade biogas to pipeline quality RNG, Furnish pipeline and interconnection to inject RNG into the NW Natural gas grid, Execute a standard North American Energy Standards Board (NAESB) Base Contract for Sale and Purchase of natural gas with NW Natural, Execute a contract with Trillium for monetization of the RNG and associated environmental attributes These challenges will be discussed in greater detail at the April 14 2017 Commission meeting. RECOMMENDATION Recommended next steps include, among others, executing a non-binding Memorandum of Understanding (MOA) with NW Natural to work towards resolving identified challenges, continuing to develop an understanding of grid interconnection costs and monitoring requirements, and returning to the Commission at a future meeting for discussion. ACTION REQUESTED Staff requests input and direction from the Commission.