Cost overruns exhaust water plant project contingency

The contingency fund for Port Washington’s $21.5 million water plant improvement project is depleted, even though the work is only 60% completed, aldermen were told Tuesday.

Anticipating additional change orders for the project, the Common Council approved using another $1 million from the utility’s reserve fund to complete the work.

“I don’t like us being a million dollars over budget,” Ald. Dan Benning, chairman of the General Government and Finance Committee, said. “But these are two plants from the 1940s and 1960s or 70s. We found a lot of things hidden behind the walls, under the floors and in the ground that weren’t documented.

“That’s the nature of retrofitting a plant that we’re maintaining while we’re upgrading it.”

The water plant project was required by the Department of Natural Resources to bring the facility up to current standards regarding emergency power and the clearwell.

“The work at the water treatment plant has been very complex,” Finance Director Mark Emanuelson told aldermen.

The project had a 5% contingency fund, which he said was the minimum, adding, “In retrospect, additional financing contingency might have been a prudent measure.”

Emanuelson said that while some items are being deferred to 2027, including an east-side ramp and driveway to the emergency generator, others can’t be and need to be done now.

Using the water utility’s reserve fund to finance the remaining change orders makes sense rather than borrowing more money for the project, Emanuelson said, noting the money is intended for capital improvements and system maintenance.

“The utility does have sufficient funds available without having an adverse impact,” he said.

In a memo to the council, Emanuelson said there is about $2 million in the utility’s non-operating reserve fund.

The utility is projected to add $500,000 to the reserve fund annually, he said.

Benning said he and Ald. Jonathan Pleitner had significant concerns when they heard about the depleted contingency funds that have been addressed, saying he put the utility leadership “through the wringer” about them.

They’ve addressed those concerns, he said.

“From a financial perspective, I think this makes the most sense,” Benning said. “I went into this with a lot, a lot of questions and I came out in support of this.”

During the committee meeting, Benning questioned whether the $1 million is enough to complete the project.

“How confident are you that we won’t have anything else surprise us?”  he asked.

“I just want to be fairly confident we don’t have another change order coming,” Pleitner added.

Public Works Director Rob Vanden Noven said there is one large item that isn’t on the list that may require work but the contractors haven’t determined what the issue is so they don’t have a cost.

It could be minor or major, he said.

Ald. Mike Gasper, chairman of the Board of Public Works, told the Common Council that the overages are a combination of items that were missed in the design process and issues that weren’t expected.

“The last couple change orders we were concerned about running up against the budget,” he said. “Having these extra funds will allow the project to be completed.”

Gasper noted that the items being financed through the reserve funds haven’t been endorsed yet by the Board of Public Works, which will review them.

Emanuelson told the General Government and Finance Committee that he wanted to make sure the use of the reserve funds was “an appropriate financing option” before the Board of Public Works approves any more change orders for the project.

Gasper also asked what would happen if more money is needed to complete the project and was told that would have to come back to the Common Council for financing approval.

Ald. Mary Lou Mueller, a member of the Board of Public Works, questioned some of the items that require additional funding, saying she wanted clarification before voting on using the reserve fund.

“I want to know tonight what it is I’m voting for,” she said.

When told it was to spend as much as $1 million to cover change orders, Mueller, who voted against the use of reserve funds, said, “I don’t even want to go that high. It comes down to why wasn’t this thought about previously.”

Mayor Ted Neitzke asked if the project would benefit from the city hiring an owner’s representative to keep an eye on the costs even though the work is well underway, noting it has been effective on the public safety building project.

The water plant project is expected to be substantially completed by June 30 and totally done in August.