Cost projections replace 60% of Piedmont mains – but only 40% are left to complete –

The City has provided cost projections for Piedmont’s sewer replacement projects that show the “worst case” (maximum) spending in all 3 of the following separate categories for sewer main replacements:

• general sewer projects
  
•  EPA “set aside”
  
• Phases V, VI, and VII 

The City has offered these projections to voters to demonstrate the need for a new sewer surcharge, Measure A.  But together these worst case projections estimate the cost of replacing 60% of the City’s sewer lines over the next 10 years, while in fact the City has only 40% of its sewer mains left to replace. 

What is the difference between these 3 categories of sewer mains replacement work?  Not much except their timing and source of funds (state loans for phased work versus annual parcel tax revenues for general annual work).  As an example, planned FY 2011-12 Sewer Fund spending includes:

• $160,000 for Calvert Court/Dudley sewer main replacement before street re-paving is done;
• $150,000 for Beach School playground sewer main and storm drain replacement before new asphalt is installed with school bond monies;
• $300,000 El Cerrito/Hillside/Magnolia/Witter “emergency” sewer main replacement for unspecified reasons.

Annual work is primarily sewer mains replacement.  Historically, spending on yearly general sewer projects work has dropped to $0 when the City is spending state loan money for “phased main replacement”.  (See Chart. LINK)

Due to the timing issues of phased versus yearly work, the cost of sewer mains replacement is duplicated in recent Sewer Fund projections.   The projections include:

• phased work paid with state loan monies to replace 40% of lines for $10.5 million
• annual EPA compliance “set aside” work to replace 10%* of lines over 10 years for $3 million
• annual general sewer project monies to replace 10%* of lines over 10 years for $3 million

Note:  Also projected are additional budgeted monies for emergency repairs of $1.4 million over 10 years.

Together, these cost projections envision replacement of 40% + 10% + 10%, a total of 60% of the sewer system over the next 10 years.  But only 40% of mains are left to replace.

It would be impossible to incur the full $16.5 million of projected costs, which staff describes as “worst case,” since only 40% of old sewer mains remain.  The City will not need the full $10.5 million for phased work plus the full additional $6 million for annual work because the more annual work that is done, the less phased work is required, or vice-versa.  Ultimately, 40% of sewer mains will be replaced, not 60% as shown in the projections.

Looking at the City’s Spreadsheet

The cost projection spreadsheet prepared by staff (below) shows the 3 categories of sewer mains replacement spending: phases, EPA set aside, and general sewer projects.  ($300,000 per year for mains replacement is included under “EPA Compliance.”)  These projections assume the 3 final phases of replacement will be completed in 6 years, by 2018.  Surpluses of $1.8 million or more – greater than the proposed surcharge of $1 million – are projected after 2018.

These cost projections were provided to the 2011 Municipal Tax Review Committee.  The projections have also been cited in voter information to support a proposed 10-year sewer surcharge, Measure A. 

On January 17th the City announced plans for yearly sewer mains replacement spending of $600,000 in FY 2011-12.  Does the recently announced plan to increase sewer mains replacement spending to $600,000 show that EPA “set aside” costs represent an additional new cost to the City?  No.  If the City spends an additional $300,000 on yearly work now,  1% of sewer lines are replaced and will not have to be completed as part of future large phases.   Yet the cost of this section is still included in future phased work.

Ambitious cost projections may be intended to allow the City to start working on storm drain replacement, as well as sewers.  (For instance, under the Beach playground both sewers and storm drains will be replaced with sewer funds.)  If this is an intended purpose of the new surcharge tax, which specifically allows spending on storm drains as well as sewers, then it should be made clear to voters.

The proposed sewer surcharge, Measure A, which staff asserts is necessary to fund EPA Compliance costs, will be voted on February 7.

*The 10% figure comes from the City Consultant’s EPA 2011 AO-SO Cost Impacts report which indicate that yearly sewer mains replacement will cost $120 per linear foot and that $300,000 will replace 1% of the system.  Actual linear footage replaced during general sewer projects/emergency repairs is not generally provided in public staff reports or budget projections.  Actual price for yearly work paid by the City of Piedmont could exceed, or be less than, the City consultant’s estimate, impacting the yearly linear footage calculations.

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