CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 3 Section Name: {{section.name}} Account Number: File ID: {{item.tracking_number}} TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Public Works Department
MEETING DATE: February 18, 2025
SUBJECT:
Clean Water Program and Wastewater Treatment Plant Upgrade & Expansion – Update RECOMMENDATION:
Receive an informational update on the Clean Water Program and the Wastewater Treatment Plant Upgrade & Expansion project.
BACKGROUND:
The City is currently under a Regional Water Quality Control Board Cease and Desist Order requiring improvements to its sewer collection system and Wastewater Treatment Plant (WWTP) to eliminate sanitary sewer overflows and unauthorized discharges of untreated or partially treated wastewater to San Francisco Bay. The Clean Water Program (CWP) is a $1 billion program that started in 2015 to comply with the Cease and Desist Order. The CWP includes numerous capital improvement projects that have either been completed, are currently under construction, or are soon starting construction. The projects include improvements to sewers, manholes, and pump stations, the new Underground Flow Equalization System (located at the San Mateo County Event Center), and improvements at the WWTP. The WWTP Upgrade and Expansion Project (WWTP Project) is the largest of these CWP projects, which will result in new liquid treatment facilities for processing wastewater required to meet regulations.
Since the CWP projects were chartered, the CWP’s project budgets, including the WWTP Project, took into account the costs associated with administrative services, program/project controls, project management, preliminary evaluations, engineering services, procurement, construction contracts, construction management, permits, outreach, risk contingencies, and escalation. A strategic funding and financing plan to deliver the CWP was executed and included raising sewer rates over several years, issuing bonds, and pursuing loans. The CWP successfully received three low-interest rate loans from State and/or Federal programs. These loans were able to reduce the fiscal impact of the City’s investment in the sewer infrastructure on the San Mateo rate payers. In June 2023, Council approved annual 3 percent inflationary sewer rate increases for five years, starting in Fiscal Year 2023-24; without the low-interest rate loans, sewer rate increases would have been higher.
Currently, the Clean Water Program is scheduled to be officially complete at the end of December 2026. In 2017, the CWP’s project budgets were baselined and the CWP’s estimate at completion was $991 million. In February 2024, Council received an updated $999 million CWP estimate at completion, based on the best available information at the time. Due to risks, changes, delays, and unknowns identified over the past year, the CWP’s current estimate at completion has increased to approximately $1.028 billion. This increased estimate does not require an adjustment to the currently approved 5-year sewer rate increase schedule.
In February 2024, staff also provided Council with details of the WWTP Project, which included construction progress updates, causes for delays and budget increases, and updated schedules. At that time, the WWTP Project budget and
CITY OF SAN MATEO
estimate at completion was $572 million. Due to risks, changes, delays, and unknowns identified over the past year, the WWTP Project’s current estimate at completion has increased by approximately $25 million and is now $597 million, which is still subject to change. Construction has been challenging while still progressing forward. Since February 2024, the Project has required several significant changes, including changes related to the fuel storage system, the fire suppression systems in the Administration Building, the chemical piping system, the aeration piping system, piping in the Biological Nutrient Removal Basin due to dissimilar metals; and timing issues related to the completion of leak testing of the basins and remote monitoring system programing. In order to minimize the impact to the construction schedule of the Project, the Contractor has worked overtime and on Saturdays to complete additional work from these approved change orders.
As a result of the realized and potential change orders, as well as schedule challenges, construction expenditures are going to exceed the previously anticipated estimate at completion for the Project.
To ensure there is sufficient funding to complete the WWTP Project, staff will be proposing a $24.8 million budget in the coming Fiscal Year 2025-26 Capital Improvement Program to fund the completion of the project; this increase will align the budget committed to the project account with the WWTP Project’s estimate at completion of $597 million. This $24.8 million increase includes costs associated with the construction contract ($19.5 million) and extended soft costs ($5.3 million). The $19.5 million budget request associated with the construction contract is inclusive of known changes and risks, delay costs, potential future risks and changes, and contingencies. The $5.3 million budget increases associated with the extended soft costs include project management, construction management, specialty inspections, owner-controlled insurance program, and engineering services during construction. The $24.8 million budget increase is based on information known today and is subject to change as the project progresses closer to completion.
Based on the project cash flow estimates for the remainder of the current Fiscal Year 2024-25, there is sufficient budget and existing authorized construction contract contingency to keep the project progressing. Staff anticipates returning to Council after the Fiscal Year 2025-26 budget is adopted with a request to increase the construction contract contingency; the planned $24.8 million budget request is inclusive of the anticipated construction contract contingency amount; however, waiting to make this request in the new fiscal year will allow the construction management team to further review all the potential construction contract changes with the intent to mitigate as much of the risk as possible and hopefully reduce the overall request.
BUDGET IMPACT:
The budget information included in the update will be incorporated into the City's overall future Fiscal Year 2025-30 Capital Improvement Program, which will be presented to Council for approval later this fiscal year. There are sufficient funds in the Sewer Fund Reserves for the future budget requests associated with the Clean Water Program projects.
ENVIRONMENTAL DETERMINATION:
The City prepared a Final Programmatic Environmental Impact Report (Final PEIR) in accordance with the California Environmental Quality Act (CEQA) (SCH No. 2015032006). Council on June 6, 2016, certified the PEIR. In accordance with CEQA, the Final PEIR serves as the primary environmental compliance document for the implementation of the Clean Water Program. The City prepared Addenda to the Final PEIR that was approved on July 16, 2018 (Addendum 1) and April 15, 2019 (Addendum 2). This work is within the scope of the Project evaluated in the PEIR and Addendum.
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None
STAFF CONTACT
Deryk Daquigan, Deputy Public Works Director
[email protected]
(650) 522-7287