Archive for Thursday, January 12, 2006

Council awards sewer contract

January 12, 2006

The city of De Soto has found the funding needed to start construction of the new wastewater plant in the West Bottom, and the good news for customers is that it won't require rate increases.

Last-minute adjustments to bring construction of a new wastewater plant into budget were needed when all bids to build the sewer plant were higher than the engineer's estimate of about $5.2 million.

Last month, the council agreed the low bidder, Walters Morgan Construction of Manhattan, would be the contractor for the project. But it didn't approve a contract.

That step was to be taken when the project was made affordable through a two-pronged attack involving cost cuts and exploration of other funding sources. If those measures didn't cover the deficit, it was agreed to borrow money from the city's $2.5 million electrical utility fund.

No loan will be necessary. Enough cost-saving measures were found in a value engineering effort with the contractor to shave $180,000 in construction costs, and staff identified $225,000 in funding sources to supplement construction revenue available in the $9 million bond issued for the project in September.

"We can fully fund the project, and that would include a $200,000 contingency," city engineer Mike Brungardt told the council.

The best news for present and future sewer customers is that the added revenue would not lead to any hikes in the schedules of user-rate charges or system development fees established last year to pay off the bond.

Of the newly identified money, $100,000 will come from the sewer fund, which ended 2005 with a balance in excess of $300,000. Interim City Administrator Mike Webb said the transfer would leave a balance healthy enough to maintain a minimum one-month operating and maintenance reserve while providing an adequate debt-service ratio.

Another $60,000 was found in the fund established from system development fees on new construction. City staff was aware the money was there, but was unsure if it was already figured in the bond retirement schedule.

Finally, it was learned that the cost of issuing the bond were lower than anticipated and $65,000 more were available for construction of the plant. This was in addition to the $200,000 in short-term interest the city will collect on the bond revenue.

With the project within budget, the council approved a $5.927 million contract with Walters Morgan to build the sewer.

Work on the wastewater plant could start in late January with the filing of needed paperwork for the bond. The plant should be finished in about a year.

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