November 30, 2013

Our View: MID, city starting to find common ground on water

Some people are paid to throw around stern words. Lawyers, politicians and even editorial writers are in that category.

Some people are paid to throw around stern words. Lawyers, politicians and even editorial writers are in that category.

Others are paid to get the job done.

Fortunately, those responsible for getting the Modesto water-treatment expansion completed are getting their jobs done. And they’re calming the heated rhetoric being used since a lawsuit was filed in August by the Modesto Irrigation District against the city of Modesto. At the heart of the dispute was the thoroughly botched construction job and roughly $9 million in cost overruns and repairs on the $107 million project that could not be recovered from MID’s since-fired contractors.

“We’ve been meeting since not long after I got the job and it is amicable,” said Roger VanHoy, who became MID’s general manager in August, perhaps not coincidentally about the same time talks began to change in tenor.

“We’ve had some really good meetings over the past 30 to 45 days,” said City Manager Greg Nyhoff. “We’re going to get it done. The cost of not getting it done and fighting about it – it will only cost us more. We both agree that this project needs to get done.”

The two entities are on the verge of announcing a working resolution that will allow the fixes to be made, the construction to continue and the bills to be paid. That doesn’t mean all the details are settled. There’s still that $9 million gap. But the remaining issues will be taken before a reference judge in a process expected to be less contentious and faster than an actual trial. Such proceedings aren’t possible unless there is basic trust between the parties.

However it is adjudicated, that $9 million is unlikely to come out of ratepayer pockets, according to both Nyhoff and VanHoy. The city refinanced its construction debt, realizing roughly $500,000 in savings per year. Since the treatment plant is projected to be in service at least 30 years, the savings will more than cover any additional costs.

They’ve worked it out just in time. Part of MID’s settlement with the contractors requires that ongoing work not be delayed past December. Missing that deadline would mean the work would have to be paid for outside the settlement, possibly adding another $9 million to a project that has already cost $40 million more than anticipated. So there was a very real deadline facing both the city and the MID.

What lessons can we take from this “nightmare project”?

Perhaps the most important concerns the question of ownership. It’s OK to have a partner, especially one whose offices are just down the street and whose ratepayers are, for the most part, your residents. But when the city wants to build a vital piece of infrastructure, it should have some sort of operational and ownership stake. It might not keep the parties out of court, but it could give them better incentives and processes for working together. That’s how the job gets done.

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