Thursday, January 30, 2014

Oops! $30 Million of Further Ogden City Water Infrastructure Repairs Needed - Updated

Old projections now obsolete, yet council members seem unconcerned

By Dan Schroeder

Less than two years after they approved a comprehensive master plan for upgrading the city’s water infrastructure over the coming decade, Ogden City Council members were told Tuesday night that the plan needs major revisions. Water Department manager Kenton Moffett and consultant Cliff Linford of Sunrise Engineering stated that many of the city’s water pipelines are in worse condition than they had thought, and recommended adding more than $30 million of further repairs and upgrades to the ten-year plan.

Sunrise Engineering developed the current water master plan in cooperation with the city administration during 2011. The plan called for $26 million of infrastructure upgrades during the first five years, $19 million over the next five years, and about $4 million per year thereafter for the next 30 years.  The city council debated the plan for dozens of hours during many meetings in the winter and spring of 2012, finally approving the plan, with only minor modifications, in May 2012.

At the same time the council also approved a 10-year financial plan for its utility systems, developed by consultant Lewis Young Robertson Burningham (LYRB).  The financial plan included significant water rate increases for the first few years and more than $22 million in bonding to fund the most urgent water projects: the replacement of one of the city’s pipelines in Ogden Canyon and the replacement of the water treatment plant near Pineview Dam.

Now, however, it appears that the 10-year financial plan will need a major overhaul to include another $30 million of projects. There was no discussion on Tuesday of whether another water rate increase would be needed to pay for the projects, and there was only a passing mention, by Linford, of a possible additional bond. Council executive director Bill Cook stated that more information on the financial implications of the new master plan will be provided to the council in late February. However, he and his staff are pushing the council to approve the master plan itself (though not actually commit any funds to the projects) this coming Tuesday, February 4.

During the discussion Tuesday night, no council members expressed any alarm or unhappiness about the massive increase in planned expenditures, or asked who was responsible for the apparent $30 million error in the 2011 master plan and the resultant waste of everyone’s time. Moffett and Linford explained that the new revisions came out of a detailed analysis of recent leaks in the water system, and that they were unable to prioritize pipeline replacements two years ago because they hadn’t yet put the leak data into a convenient format. They did not comment, however, on their failure in 2011 to accurately estimate even the total cost of pipeline replacements that would be needed during the coming decade.

The good news is that, with careful planning, the city should be able to cover the additional $30 million in expenditures without any further bonding or rate increases. This is the conclusion of my own financial analysis, which incorporates the city’s newly released financial data from fiscal year 2013. As I predicted in 2012 and pointed out again last summer, the LYRB financial plan significantly under-estimated water revenue and over-estimated operating expenses. The rate increases approved in 2012 were higher than was needed to cover the infrastructure repairs planned at that time, but seem to be just enough to cover another $30 million by 2024. I predict, though, that “just enough” won’t be good enough for the city administration or LYRB, so they’ll be asking the council to approve yet another bond and rate increase in a few years.

The proposed master plan revision actually calls for a reduction in spending after 2024, because many of the pipe replacements formerly planned for after 2024 would instead be done sooner. Logically, you would think this would mean that Ogden residents can expect a water rate reduction at around that time, or that the city could accelerate its debt payments for a few years after 2024 and then reduce rates even more. However, there seems to be no way to predict when the administration will unveil yet another surprise in the form of more urgent water system repairs. Also, it seems to be a general rule that utility rates and public debt are on a ratchet that can go only up, not down.

Most of all, the lesson from this fiasco is that the city’s consultants and bureaucrats can make as many errors as they please, and nobody will hold them accountable. The city will keep hiring the same consultants, the bureaucrats will keep their jobs, and the council members themselves will continue to follow along like sheep, doing whatever they’re told, never even complaining about the hours they spend listening to excruciatingly detailed presentations of data that are often misleading and sometimes flat-out wrong.

Update 2/1/14 7:45 a.m.:  The master plan does not appear on the agenda  for this coming Tuesday's council meeting, so it appears that the council leaders and/or staff have changed their minds about the timing. This may or may not be a result of my communications to the council members. - Dan S.

Update 2/3/14 8:00 a.m.: Better late than never, the Standard carries its own Cathy McKitrick story on this topic this morning:
"I can't comprehend how the consultants could have missed as much as they did. Nor can I understand why the city administration and city council didn't insist on higher standards of accuracy," says Ogden City government watchdog Dan S., in the lower S-E comments section. 

So many questions... so few answers.

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