San Diego Everett Dirksen seems to have said it best: "A billion here, a billion there, and pretty soon you're talking about real money." The late money." The late Senate Republican minority leader was talking about the United States defense budget, but he might as well have been describing the fix the city of San Diego's sewage treatment construction project may be in.
On the eve of a city council decision on whether to raise water rates to fund a $750 million reconstruction project comes word that the cost of another of the city's other huge public works projects - an attempt to build a "state-of-the-art" wastewater disposal complex - has now soared more than a billion dollars over original estimates and threatens to kick sewer rates into the stratosphere.
Less than two years ago, in October 1995, San Diego officials, including Mayor Susan Golding, estimated that the tidy sum of $1.5 billion would be enough to upgrade the city's maze of deteriorating sewers and subpar treatment plants. That was after the city and federal officials agreed that the city would not have to treat its sewage to so-called secondary standards before dumping it in the ocean off the main treatment plant in Point Loma.
At the time, Golding and other city officials claimed that getting rid of secondary treatment had saved local residents at least $1 billion - the cost, Golding said, of building an elaborate new plant on Point Loma. Without those savings, the mayor told a Union-Tribune reporter in September of last year, sewer rates "would be going up 100 percent, 200 percent, or even 300 percent."
What the mayor did not say was that even without secondary, the city's own internal forecasts showed that the cost of rebuilding the city's ailing wastewater infrastructure was then actually estimated to be $1.8 billion. As of last month, the current forecast had grown to $2.3 billion. And with costs expected to be added for projects such as a new water reclamation plant near Otay Mesa, the ultimate grand total is believed by insiders to be well on the way to $2.5 billion.
The figures are contained in a series of documents called "program cost summaries" maintained by the city's Metropolitan Wastewater Department since at least November 1994. None of the cost figures have ever been widely circulated, nor have they been referred to in any of the city manager's reports on the project provided to the city council and the public.
The summaries show that in late 1994, forecasts called for spending $1.4 billion on the project. A year later, in November 1995, costs had swollen to $1.5 billion, and by September 1996, when the mayor was claiming big savings, they were already up to $1.8 billion. In the eight months since then, the total has grown to $2.28 billion, although city officials maintain that the latest jump in costs has been due to the consolidation of sewer projects that had been scattered elsewhere in the city's budget. In any case, sources say the new grand total means that the city will have to go into debt far deeper than previously contemplated by most officials, at least in their public pronouncements.
The city has already issued about $750 million in a series of three bond issues beginning in 1993. Under the terms of the bonds, the city council has no choice but to raise sewer rates an average of 6 percent a year for the next decade at least. Any additional bonds would appear to require even steeper rate climbs.
So far, the city says it has spent more than $973 million on the sewage project, leaving a balance of at least $1.4 billion yet to be expended. According to city estimates, about $250 million of the project will be funded from state and federal grants. That means the bulk of the remaining $1.4 billion would presumably have to be shouldered by local ratepayers in the form of more debt, although just as the city council has never acknowledged the new grand total, they have never discussed a plan for financing it.
The new grand total, of course, would be in addition to the $750 million worth of bonds proposed to finance the city's water system repairs. And skeptics say that means the rate increases currently proposed for both sewer and water service will simply be inadequate to make the payments on the debt.
Ex-councilman Bruce Henderson, credited during his tenure on the council with lining up enough council votes to oppose the expensive secondary treatment option, says that the savings thus gained for sewer ratepayers by dropping secondary may evaporate in a torrent of cost overruns.
"History demonstrates that costs of these projects exceed all the estimates by huge amounts, so since the projected rate increases are based on 1995 cost estimates, history would suggest that those projections are quite unrealistic, in that rate increases will have to be substantially higher.
"The problem with all of this from the public's point of view is that there's no independent review. If this were the local gas and electric company or the local telephone company talking about raising rates, there would be a public utilities commission review, and there would be independent analysis of all the financial data. There would be public hearings, there would be full disclosure of financial documents. "Under those circumstances, the public has at least a chance at reviewing the numbers. Unfortunately, looking at past history, it's almost guaranteed that the true numbers aren't being presented publically. Moreover, no one on the council speaks up and demands an independent analysis. Every single member of the council meekly accepts the numbers brought forward by the manager. No questions are asked, period." What is costing so much? The city's wastewater program runs the gamut from sublime high-tech water "reclamation" plants to mundane sludge reprocessing factories. Big-ticket items include the North City water reclamation plant, soon scheduled to become operational, costing at least $250 million. That plant was mandated by a federal court order as part of the federal government's agreement to back off its secondary treatment requirement.
Water produced from sewage by the reclamation plants isn't good enough to drink, so it will instead be used for irrigation and possible industrial applications. That means it can't be mixed with drinking water, and thus a separate set of pipes must be built to transport the treated water to its would-be users. In North City, the costs of those pipes are currently estimated to be more than $64 million.
Down in South Bay, the city plans to spend almost $100 million on another water reclamation plant, set for construction next year, although insiders say that cost is expected to grow. Currently estimated costs for the separate water lines are $25 million, though many experienced observers feel those numbers are too low. A sludge processing facility nearby will set the city back at least $52 million, along with another $70 million for supporting pipes and new sewers. Nearby, the South Bay Ocean Outfall, a huge pipe being built to dump treated sewage into the ocean, is currently estimated to cost $172 million.
Then there's the "Metro Biosolids Center," a depot for processing the sewage sludge that is currently dumped on Fiesta Island after being produced from raw sewage at the Point Loma plant. It's costing at least $240 million to build. Add in the pipes, pump stations, and other support facilities needed to get the sludge up to the Biosolids plant, located at the Miramar marine helicopter base near Kearny Mesa, and the price tag totals almost $350 million.
City officials insist that the costs, rising as they are, are still reasonable considering the huge nature of the original undertaking, and they argue that the vast majority of the budget increases are due to the creation over time of new projects required to fix previously undiscovered problems in the system. "Our earlier projections were based on a time line out to the year 2000," says Metro wastewater spokesman Ron Kole. "Work on the overall project now goes out to 2006, and we've picked up new tasks along the way that need to be accomplished. This is an evolving program; it isn't static."
Henderson is not convinced. "The part of the deal from the bureaucracy is to make certain that there is always an excuse for the cost overruns, and they're never called cost overruns, they're called program additions, enhancements to the project. And the reason the bureaucracy is allowed to do that is, that again benefits the politicians, who then can say, 'Well, yes, the project is higher than we told you it would be, but that's because it's a better project, it's an improved project.' Therefore the politicians never ask any questions."
What should be done? Henderson for one says the entire program should be reviewed, especially the need to build a reclamation plant in the South Bay. "A lot of money has been lost, but there's a lot more money to be lost if we don't stop these projects immediately - all of the new reclamation plants, all of the new distribution systems. "We need to concentrate our money on repairing our existing infrastructure and wait for independent review of all of these new projects. Ultimately, the chances are that the reclamation facilities will have to be mothballed, because there are huge operating costs associated with them."
Ironically, Henderson's position on the South Bay plant is supported by Union-Tribune editorialists who have bitterly opposed his bid to place large public works projects on the ballot for public votes. In the case of the South Bay plant, though, the U-T claims the plant "is a luxury we can't afford and don't need."