Review Estimated Project Costs, Funding Sources, and Construction Schedules for Proposed Water Treatment Plant Improvements

Purpose:
The purpose of this case is to receive City Council consensus for Staff to request City Council approval of plans and specifications and authorization to advertise bids for the Water Treatment Plant project on September 27, 2022. 
 
Background:
Feasibility Study
Attached is a copy of the Feasibility Study dated March 4, 2021 for the proposed municipal water treatment plant improvements prepared by SEH, Inc. This study documents the City’s existing water supply source, quality and quantity, existing water supply system infrastructure and proposed trunk watermain improvements, proposed water treatment process options and recommendations, water treatment plant site evaluations and recommendations, estimated costs, alternative funding sources, impacts to water rates, and a proposed project schedule.  This study identified estimated project costs for both the necessary trunk watermain improvements and a centralized gravity filter water treatment plant at $28.67M.
 
Water Treatment Plant Trunk Watermain Improvements
On March 9, 2021, the City Council awarded a contract to SEH Inc. to prepare plans and specifications for Improvement Project #21-08, Water Treatment Plant Trunk Watermain Improvements.
 
On October 26, 2021, the City Council approved plans and authorized bids using both a base bid and an alternate bid. The base bid specified a combination of open trenching and directional drilling the watermain, whereas the alternate bid specified directional drilling watermain across as much of the project area as feasible, and open trenching the remainder. As the time, the bidding environment for utility pipes was extremely volatile due to an overall shortage of pipe and appurtenant materials for various material types caused by supply chain disruptions due to extreme weather events, a shortage of drivers, shipping lane blockages, etc. These issues resulted in increased pipe costs and long delivery times between the time materials were being ordered and the time they were being delivered. On average, pipes were being delivered to project sites generally 3 to 6 months or more from the time they were ordered. Staff therefore recommended bidding this project as soon as possible, allowing an extended bidding window of 2 months, and allowing bidders as much time as possible to substantially complete the work in hopes of receiving the best bid prices possible.
 
Construction costs for the trunk watermain improvements per SEH’s Feasibility Study were estimated at $3,424,750.  Construction cost estimates based on SEH’s final plans and specifications were $4,875,068.50 for the base bid, and $4,916,194.50 for the alternate bid.  The lowest base bid for construction costs was $6,737,287.45, and the lowest alternate bid received was $7,059,102.16.  Due to the significant cost increase, the two bids received were rejected by the City Council on January 25, 2022, and Staff was directed to work with SEH to revise the approved plans to reduce costs and monitor the bidding environment to identify the most favorable time to re-bid the project.
 
SEH has been working to reduce project costs by exploring alternate construction materials and methods, reducing watermain depths, reducing the amount of directionally drilled watermain, and exploring the viability of the City pre-purchasing watermain materials to avoid sales tax.  However, SEH has also been working to incorporate numerous proposed improvements required to switch chemical treatment processes from individual pump houses to the Water Treatment Plant before the plant is commissioned, which significantly increased project costs.  Based on SEH’s current revised plans, the engineer’s project cost estimate is $8,950,000.
 
The anticipated construction schedule for this work is 3 to 4 months, depending on weather and material availability.  Work on this project can therefore start well after the Water Treatment Plant improvements are under construction.  However, keep bid prices as low as possible Staff is proposing to re-bid this project this Fall to allow bidders to order materials many months before construction needs to start.     
 
Water Treatment Plant
On May 20, 2021, the city issued a Request for Proposals (RFP) for Design/Bid/Build services for a centralized Water Treatment Plant.  Five firms submitted proposals and the firm of AE2S was selected based on experience in designing water treatment facilities, proposed work plan, ability to meet construction time lines, and proposed fees for services.
 
AE2S recently completed the final plans and specifications and Staff is preparing to present the plans to the City Council for approval on September 27, 2022, and to request authorization to advertise bids for the Water Treatment Plant project.
 
The engineer’s Preliminary Opinion of Probable Total Project Costs for the Water Treatment Plant is $38,648,644.
 
Funding
Total estimated project costs for both the Water Treatment Plant and the Trunk Watermain Improvements total $47,598,644.  It is worth noting that these costs include indirect costs for administrative, engineering, finance and legal fees so several hundred thousand dollars in engineering fees were previously paid.
 
Funding for these improvements is proposed to include a mix of internal funds and bonding.  Staff will explain the proposed funding sources and amounts in more detail at the work session.  
 
The 2022 - 2031 CIP identifies a total project cost of $32,000,000 based on the SEH Feasibility Study. 
 
Project Schedule
This project is intended to reduce Manganese concentrations in our water supply system.  In 2019, the Minnesota Department of Health (MDH) recommended that the City of Ramsey develop short and long-term plans to reduce manganese concentrations in our water supply system. In April of 2019, the City began supplying water to municipal water users using only the three wells with the lowest manganese concentrations to make sure manganese concentrations throughout the water supply system would not exceed the MDH Health Based Value (HBV) for manganese of 0.100 mg/L, which addressed the City’s short-term plans. The City’s long-term solution requires construction of a water treatment plant to remove manganese from the municipal water supply system.
 
Since the Spring of 2019, the City of Ramsey has been collecting water samples from random locations and has had the samples tested for Manganese.  In general, these test results have indicated that utilizing municipal wells with the lowest historical Manganese concentrations has allowed Manganese concentrations in the City’s water supply system to remain below 0.100 mg/L the vast majority of the time, and no tests to date have exceeded 0.300 mg/L, which MDH has identified as the highest concentration of Manganese fit for adult consumption. However, the City is planning to construct its next municipal water supply well (well #9) within the next few years and it is not known how much Manganese will be produced by that well.
 
Originally, the intent was to have the WTP operational before the high-water use season started in the Summer of 2024. However, due to current supply chain issues, Water Treatment Plants are now averaging approximately 2 years to construct. Bidding the WTP project in October/November 2022 will allow the plant could be operational by the Summer of 2025.  

Staff estimates this case will take 30 minutes to present and discuss.  

Dependent on discussions.  

City Engineer Westby will present the case.  Finance Director Lund and City Administrator Hagen will be available to assist in responding to questions.  

Receive City Council consensus for Staff to request City Council approval of plans and specifications and authorization to advertise bids for the Water Treatment Plant project on September 27, 2022.