Former Davis Mayor Bill Kopper, one of the regular members of the Water Advisory Committee (WAC) writes on the recent decision to go forward with the Woodland-Davis project, by hammering home the importance of the cost-sharing component of the agreement.
“Recently, the Water Advisory Committee voted to recommend that the city proceed with the Woodland-Davis project, provided that Woodland pay for 60 percent of the project and half of the Davis-Woodland treated water pipeline,” Mr. Kopper writes.
He explains that, while Davis will take in 12 milion gallons per day, Woodland will receive 18 million.
“Woodland should pay 60 percent of the project costs since Woodland will receive 60 percent of the water,” he argues. “The current proposal is that Davis will pay almost half the cost of the Woodland-Davis project, which will mean that Davis will pay 37 percent more per million gallons of water than will Woodland.”
While Mr. Kopper was a key vote in the compromise motion that was approved last week by the WAC and this week by the council, without this proportional cost arrangement for Davis, he writes, “I will not be able to support the Woodland-Davis project. Davis faces a $100 million expense for a new wastewater treatment plant in addition to the cost of surface water, and cannot afford to subsidize Woodland’s water. While Woodland is out of compliance with federal selenium standards and immediately needs surface water, Davis does not.”
“Davis has the choice of surface water from the Woodland-Davis project or West Sacramento,” he writes, though at this point it is far from clear that Davis does have a choice. The city pressed West Sacramento for a better deal, they got an offer and almost immediately declined that offer.
Mr. Kopper writes, “The West Sacramento option is less expensive than the Woodland-Davis project, but not that much less if Woodland pays a 60 percent share and half of the Woodland-Davis pipeline. The opportunity for local control and the greater certainty associated with the Woodland-Davis project make it the more desirable option if Woodland pays 60 percent of the project costs.”
He adds, “If Woodland will not pay its fair share so that Davis and Woodland each pay the same amount for water, Davis citizens should reject the Woodland-Davis project and obtain surface water from West Sacramento or continue to rely upon well water.”
As we note, it is not clear that the city has that West Sacramento alternative at this point.
As staff notes, Davis’ original negotiation strategy with West Sacramento hinged upon three key items: 1) a reduced connection fee of $6 million, down from West Sacramento’s original request of $12.656 million; 2) a long-term 30-year contract with clauses regarding renewability; and 3) input and control of O&M (Operation and Maintenance) and replacement costs allocated to the Davis portion of water use.
Staff notes that West Sacramento’s “counter offer resulted in an increase of the connection fee $6.744 million to $19.4 million instead of a reduction to $6 million. Also, West Sacramento’s offer to incrementally sell Davis supply at $1.6 million/mgd does not result in any cost savings, but does offer Davis an opportunity to purchase more capacity over time.”
“Staff does not consider this an advantage. Davis would still be obligated to install facilities to accommodate the full 12 mgd capacity, including booster pumps, pipeline and ozonation facilities,” they write.
Staff thus notes, “The negotiations with West Sacramento did not achieve the desired result and were terminated.”
Initially, both Davis and Woodland perceived that their needs were close to 50/50, and the 2009 general approach took that into account, but current capacity reductions do not correlate with a similar proportional reduction in cost.
Reducing the initial phase from 40 MGD down to 30MGD is a 25% reduction in capacity, but reduced the cost by only about 8 10 %. Changing the allocation to be 60/40 for the entire project, staff argues, means that Woodland’s costs would go up despite the fact that Woodland reduced its initial Phase 1 request from about 22 MGD down to 18 MGD.
Staff adds that there are number of costs that are not correlated with capacity.
At this point, the agreement is to keep existing percentages for completed work and commitments the same. And use a “50/50 on all remaining non-construction costs and that portion of construction which has no relationship to capacity. Use 40.8/59.2% on just the capacity related portion of construction costs for the DBO work at the intake, raw water pipelines, and the RWTP. This ratio is the result of taking the non-construction related costs for regional facilities being equally split between the Cities. For construction-related costs, it is assumed that 8% of the construction costs are not based on capacity and are split equally. The remaining 92% of the cost is based on capacity (40% Davis/60% Woodland) This equates to a 40.8/59.2% cost allocation to the regional facility construction costs.”
Does this get at the type of parity and proportionality that is fair? We will see what further analysis reveals.
—David M. Greenwald reporting
Proportionality – the Vanguard’s new favorite word.
In some cases proportionality=fairness=good (i.e., water rates) yet in other cases proportionality=unfair=bad (i.e., Measure E).
If I were Woodland, I’d reply that a 3:2 ratio of cost sharing should lead to a 3:2 vote structure on the JPA.
Whats the rush? There is none for Davis
“If I were Woodland, I’d reply that a 3:2 ratio of cost sharing should lead to a 3:2 vote structure on the JPA. “
Not sure if serious, but if you are, I’m a bit perplexed by your view here.
It was tongue in cheek. But just for discussion sake: if they were to agree to assuming 60% of the cost, why shouldn’t they get 60% of the control of the decision-making process?
i do see don’s point without it being tongue and cheek. i also would like to understand why woodland should pay for davis’s delivery pipe.
[i] if they were to agree to assuming 60% of the cost, why shouldn’t they get 60% of the control of the decision-making process? [/i]
In the legal and best practice definition of partnership, it is assumed that partners much collaborate and each consensus on decisions affecting the partnership even if there is inequality in expense or profit sharing.
Of course a partnership agreement could be structured so that decision authority is also inequitable. However, the courts tend to not like that in the case of conflict. Consider if that if decision authority is not equal, then the structure is a hierarchy and not a partnership.
[i]much collaborate and each consensus[/i]
must collaborate and reach consensus. Geesh… sorry.
[quote]i also would like to understand why woodland should pay for davis’s delivery pipe.
dlemongello
[/quote]
Donna, for Frank Loge and me the answer to your question is very straightforward, and that answer is the result of the events when the two cities decided where to locate the water treatment plant.
What characteristics shaped the decision of where to locate the water plant?
• The plant would have to be near a direct north-south line between the cities.
• No matter where the plant was on that north-south line, the total treated water pipeline distance would be eight miles.
• Three locations were considered: one near the northern edge of Davis; a second, equidistant from the two cities; and a third near Woodland’s southern edge.
• The raw water pipeline would be about ten miles long for the first location, six miles long for the second, and two miles long for the third.
• There was a willing seller of land at the third location. Willing sellers of land for the first and second locations had not been found.
• Though treated pipeline costs were identical in all three scenarios, the $41 million raw water pipeline costs would have been over $100 million in the second location, and close to $200 million in the first.
• The sole criterion to choose between the three sites was total cost.
The decision was clear, and the most cost-effective location was agreed to. However, when the subsequent cost-sharing was finalized, it bore no resemblance to the mutual nature of the location decision. The raw water pipeline costs were split at a ratio close to 50%-50%, but treated water pipeline costs were allocated 80% to Davis and 20% to Woodland. Why? The location chosen didn’t change the cost of the treated pipelines. Eight miles of pipe would be needed regardless of the location chosen for the treatment plant. A fair and equitable allocation of the treated water pipeline costs should be the same as the raw water pipelines.