Loan would cover cost of new water treatment plant with a lower interest rate
By Kellen Olshefski
Editor
With unanimous approval of submitting an application for the Wisconsin Department of Natural Resource’s Safe Drinking Water Act Loan, the City of Elkhorn Common Council took one more step forward toward the construction of a new water treatment plant at the northeast end of town.
The Safe Drinking Water Act Loan from the DNR would cover the cost of the project with a lower interest rate, around 2 percent according to Jerry Groth of Baxter & Woodman, the engineering firm handling the northeast water treatment plant project.
Though the application is a step forward, it does not commit the city to completing the project or accepting a loan from the DNR at this time, according to City Administrator Sam Tapson. However, if bids for the project come in at or below the estimated project cost from Baxter & Woodman and the city chooses to not move forward, Tapson said it comes with a price.
Based on an agreement with Baxter & Woodman for a re-design of the plant, Jerry Groth said if the city chooses not to move forward with the project, it would cost the city $35,000 to cover the engineering costs associated with the redesign.
According to information included in the council’s packet Monday night from Groth, the projected opinion of probable construction cost comes to about $9 million, about a $1 million less than the original bid amount proposed in 2014.
Groth said in a memo to the council using 2014 bid breakdown values and allowances, the estimated cost was about $2.7 million less than 2014 costs.
However, Groth said adjusting for inflation and adding 20 percent to insure the city complies with the American Steel Act – a requirement of the DNR loan which would require the city to use American made steel in construction – greatly reduces those savings, coming in at about $9 million. For budgetary purposes, Groth said the firm also recommends adding 10 percent to the cost before finalizing all design components and allowance provisions, bringing the project’s total cost to about $9.9 million.
If the provisions of the American Steel Act were not a requirement of the loan, which could result in costs as much as 40 percent more for piping, Groth said costs would fall to just over $7.6 million for the project.
Alderman Jim D’Alessandro asked Groth Monday night how prevailing wage law might affect the cost of the bid. Groth said in pursuing the Safe Drinking Water Act Loan, the city would have to follow the Davis-Bacon Act, a federal law that would require the city to pay workers a wage higher than the state prevailing wage law would anyways.
By not taking the DNR loan – thus avoiding the American Steel and Davis-Bacon acts – and removing the utility garage at the new plant from the bid for the time being, Groth said he thinks he could get the project cost down to around $7 million.
Groth said both he and even the DNR recommend bidding the project with and without the DNR loan, giving them both sets a numbers before deciding to officially move forward with the project or not.
“I promise you I’m going to give you the best information I can as an engineer at the beginning, and I can’t cut $10.7 million out without the adjusting for inflation and adjusting for the American Steel Act,” Groth said.
Tapson clarified that if the city doesn’t take the DNR loan, yet continues with the project it would not incur the $35,000 cost from Baxter & Woodman, noting that Monday night’s vote was simply to determine whether or not to submit an application for the loan.
Groth said the project wouldn’t be bid until likely December of January and when it is, the city can determine to bid it however it so chooses as it doesn’t have to accept the loan until spring of 2016.
