Don't Build It and They Won't Come

A Nattering exclusive, regarding the biosolids project featured on NBC last week.

Tip o the hat to our inside sources, especially PACO at City Hall.

1. Who sez they don’t run this town? The city needs a full set of the building, electrical, mechanical, etc. specifications as drawn up by MWH.

These are specifications, which would have resulted from the $4 Million est. in engineering fees already paid to MWH for the CC11 project.

Until they are officially eliminated by the city from the bid process, MWH refuses to hand over a set of the plans to the city on a project, which the city has paid $20 million to date. Funny how that works.

2. Anti Trust. In addition, until MWH are eliminated from the bid process, Andritz (equipment manufacturer) and Haskell (contractor) cannot bid on the project as neither wish to damage their business relationship with MWH by directly competing.

3. The Book of Mark Up. On the last open bid, MWH have placed a bid of $26 million, of which their subs bid $14 million to complete a new structure and install the new equipment.

This means that $12 million of profit margin has been tacked on by the manager “at risk”. At the peak of the construction boom, Bonita Springs built a facility half the size, for under $5 million.

The city can easily manage the project and build this building for under $14 million, probably closer to $10 million.

4. The Book of Mark Up II. The city has already spent $20 million on engineering fees and new equipment for the new revenue generating process, which requires a new building.

The new equipment would have cost under $10 million had it been purchased directly from Andritz. However, the manager “at risk” tacked on $4 to $6 million in profit margin and $4 million in engineering fees.

5. To be or NOT to be. If the city opts NOT to build a new building, then the $16 million in equipment would be sold, for pennies on the dollar, resulting in a net $19 million loss.

Oh, by the way, as for the equipment sitting and rusting, there was a factory acceptance test late last year, for ANOTHER 28 pallets of equipment YET to be shipped to the city.

6. Die Hard. The existing building and equipment have NOT had a major expenditure in over 17 years. The law of averages is overdue to bite the city with a major failure on this existing system.

7. Die Hard II. It will cost $5 to $7 million to repair and bring the existing biosolids system up to snuff.

This update will NOT add new process and the associated revenue streams that the new equipment and construction of a new building would provide.

8. New revenue streams: These would come from acceptance from other municipalities, and processing of liquid sludge and cake sludge into solid pellets. The solid pellets could be sold at a profit, as fertilizer or soil amendment.

Cape Coral could become a regional sludge waste center, this would be looked upon favorably by the county, state and federal government. This could open up possibilities for future grants or low interest loans.

9. Cost vs Revenue: Current annual cost to chemically treat and transport the dried sludge is $1 million. The new process would eliminate these annual costs and generate an additional $1.5 million positive annual revenue stream.

10. Breakeven: on the $20 million plus $10 million for the building is $30Million/2.5Million = 12 years.

11. Rates UP. The city has already built in a $30 million price tag for the new building and equipment into the 92% utilities rate increase.

In other words, taking a $19 million loss on the $20 million in equipment and fees will NOT be the only loss.

The $2.5 million revenue stream that in the future, would have offset the 92% rate increases, will be lost.

12. Rates UP II. In the next few years, requirements will become more stringent, and fewer municipalities will be willing to accept our dried sludge.

Thus, the current $1million per year cost to treat and transport our sludge will increase in years to come. Thus, causing more rate increases.

City Council Action Items

1. Stop wasting time, the city MUST find a way to complete this project and implement the new revenue generating process.
2. MWH needs to be officially eliminated from the bid process, this will allow Andritz and Haskell to submit a bid.
3. The city needs to take ownership of the bid process and the construction project.
4. If necessary, the city needs to borrow against future water revenue streams to obtain the necessary funds for the building.
5. If still employed by the city, the parties responsible for signing off on a $20 million equipment purchase without approval for the structure to operate it in, need to be terminated for their complete lack of competence and common sense.

The Nattering One muses... Talk about putting the cart before the horse, or buying oats for a nag you don’t own yet.

This is the mayor and city councils job, find a way to come up with the $10 million and get it done. Common sense tells you, don't be penny wise and pound foolish.

Otherwise, just write off the $20 million already spent, kiss $2.5 million is annual cash flow goodbye and get ready for more rate increases.