Since early May, the city of Modesto and the Modesto Irrigation District have haggled over a stalled water treatment plant expansion and what should be done to finish the $75 million project.
According to a sometimes heated exchange of letters between the two agencies, the city and MID have made no progress resolving the dispute. The Bee obtained the correspondence from the city last week through a public-records request.
In a one-page letter June 18, MID General Manager Allen Short summarily rejected the city's proposed terms for having ratepayers fund what could be $27 million in repairs to construction defects. Mayor Garrad Marsh had suggested that the city assume ownership of the Modesto Regional Water Treatment Plant.
"I have been asked to respectfully decline all of the city of Modesto's proposed terms, including the sale of the … plant facilities," Short wrote to City Manager Greg Nyhoff.
That decision removes a prime motivation for a City Council action to start a process to raise water rates to pay to finish the Phase II expansion. Marsh has said the city should own the plant if ratepayers are expected to pay for allegedly shoddy work done by contractors hired by MID.
City water customers are paying for the expansion and paid for the Phase I facilities built in the 1990s.
In other letters, top officials debated whether the city or MID is responsible to pay for the repairs to piping, valves, treatment basins and concrete walls. In addition, Short commented on Modesto's legal concerns about the district's proposed water-sale contract with San Francisco.
The district has started to pass the repair costs to Modesto, citing an agreement signed before work on the expansion started in 2007. The project was supposed to be finished in 2009.
Nyhoff, in a July 2 letter, agreed that repairs are needed to complete the facilities, but said the agreement clearly makes MID responsible "for the costs and expenses from the negligence of MID's contractors."
This letter is part a heated exchange over an MID decision to keep an $885,000 city overpayment for treated water for the year ending April 30. Modesto buys up to 30 million gallons daily of treated Tuolumne river water and, in June, Nyhoff learned MID was applying the overpaid funds to the cost of Phase II repairs.
"The city understands that in this situation MID would like the ratepayers to pay for the project a second time," Nyhoff wrote to Short. "But, as you know, the ratepayers have already given MID $65 million to complete the project. In addition, (city ratepayers have) paid almost $9 million in debt service on an expansion" that has not produced any water, and may not for years to come.
Nyhoff wrote that the city would deduct $885,000 from water purchase payments due to MID this month. He reminded Short that the city offered a way to fund the repairs, which the district rejected without discussion.
MID adds millions to budget
Last week, the MID board, over the city's objection, added $8.31 million to the budget for the water treatment plant expansion to cover some of the engineering, construction and legal costs that arose after the flaws were discovered in late 2009 and 2010. The district board also approved a contract with Manito Construction of Pleasanton to redo "roof-to-wall connections" in a plant building.
The MID and city have filed lawsuits in federal court seeking to recover damages from Kansas-based engineering firm Black & Veatch, which designed and managed construction of Phase II, and Western Summit Constructors, the general contractor for the project.
It's expected to take years to get a judgment to reimburse the agencies for the repairs. In the meantime, the city and MID have been deadlocked over what to do next.
Last Friday, Nyhoff and Marsh agreed to a face-to-face meeting with Short and attorney George Petrulakis to discuss Modesto's concerns about MID's proposed sale of 2,240 acre-feet of water to San Francisco. According to MID, it was agreed that attorneys would draft an agreement that satisfies the city.
Modesto and San Francisco both want to be first in line for MID water during drought years. An MID board vote on the initial sale to San Francisco is set for Tuesday.
Short wrote to Nyhoff, on July 9, that the district easily has 2,240 acre-feet of surplus water to sell. He recounted the MID's history of transfers. It sold 11,000 acre-feet annually for environmental purposes from 2000 until last year, a supply that's now available to the district. Since 1996, the MID has sold 10,000 acre-feet per year to San Francisco to help meet its obligations to the Federal Energy Regulatory Commission, Short stated.
"This transfer ends in 2016 and that water will then become available to MID," he wrote.
Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.
• Coming Sunday: The idea of a sale of MID water to San Francisco has been among the most emotionally charged issues in the area in recent years.
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