$151 million construction deal for Graham Hill Water Treatment Plant upgrades

In plain English

The City Council is being asked to green-light construction of a major rebuild of the Graham Hill Water Treatment Plant, which was built in 1960, expanded in 1968, and largely not upgraded since the 1980s. A yes vote approves the final design, signs a Tenth Amendment with the AECOM/W.M. Lyles Joint Venture of Fresno setting a guaranteed maximum construction price of $151,194,799.22, hires Carollo Engineers, Inc. of Walnut Creek for $10,699,078 to oversee construction and environmental compliance, and lets the City buy its own insurance for the job through a multi-agency insurance pool run by Public Risk Innovation, Solutions, and Management. The rebuild includes new pre-treatment basins with high-rate clarification, a new ozone treatment facility, new biologically active filtration, new washwater tanks, a new chemical handling building, upgraded electrical systems, and new operations, maintenance and filter buildings.

The plant supplies most of the drinking water for City water customers, who will repay the roughly $232 million through water rates, loan payments and future water revenue bonds; neighbors of the plant face several years of construction, including noise the environmental study found could be significant and unavoidable at certain hours.

Key facts

Phase 2 construction price with AECOM/W.M. Lyles Joint Venture: $151,194,799.22, bringing the total design-build contract to $163,365,290 for Phases 1 and 2 combined.
Carollo Engineers, Inc. would receive $10,699,078 for construction management and environmental services from January 2027 through late 2031.
Total estimated project cost is approximately $232 million, funded by a $113.7 million WIFIA loan, a $50 million Drinking Water State Revolving Fund loan, a $25 million state water quality grant, and $43.3 million in future water revenue bonds and pay-as-you-go reserves.
Schedule: construction notice-to-proceed in January 2027, state grant disbursement deadline of December 31, 2029, substantial completion September 2031, final closeout November 2031.
The City-controlled insurance program is estimated at $3,018,400 over five years, plus $2,375,000 for builder's risk, pollution liability and owner's protective professional coverage, totaling $5,393,400.
The rebuilt plant would reliably treat up to 18.2 million gallons per day across a broader range of water-quality conditions, including higher-turbidity winter flows.

Reasons to support

The upgrade is meant to keep treatment working when source water quality degrades after wildfires, severe storms and droughts, and brings the plant up to current seismic, building, electrical and fire code.
The added capacity and flexibility supports regional water transfers and aquifer storage and recovery, letting the City and partners bank water in wet years for use in droughts under the Securing Our Water Future policy.
The progressive design-build method let the City weigh design, cost, constructability, schedule and risk together and lock in a guaranteed maximum price, and buying insurance directly is expected to save money and give the City more control over claims while covering all subcontractors equally.

Reasons to oppose or change it

Water customers ultimately carry the cost: debt service and ongoing operations and maintenance will be paid from Water Enterprise funds, and $43.3 million is expected to come from future water revenue bonds and reserves.
The environmental report found construction noise impacts that are significant and unavoidable, since noise thresholds may not be met at the plant parcel between 5:00 PM and 8:00 AM during activities like plant shutdowns, or at the temporary construction easement between 7:00 AM and 8:00 AM during daily employee muster.
The complete 100% design documents are being withheld from public release as security-sensitive drinking water infrastructure, so the public sees only a high-level summary of what Council is approving.
The motion also lets the Water Director approve future change orders and contract amendments without returning to Council, so long as they stay within the approved project budget.

Official wording

Graham Hill Water Treatment Plant Facility Improvements Project (c700025) (WT) LOCATION: Citywide Motion to: 1) Approve the plans and specifications for the Graham Hill Water Treatment Plant Facility Improvements Project on file with the Water Department; 2) Authorize the City Manager to execute the Tenth Amendment to the Graham Hill Water Treatment Plant Facility Improvements Project (FIP) Progressive Design-Build Agreement, in a form to be approved by the City Attorney, between the City of Santa Cruz and the AECOM/W.M. Lyles Joint Venture (Fresno, CA) in the amount of $151,194,799.22, and authorize the Water Director, or designee, to approve future construction change orders that are within the approved project budget; 3) Authorize the City Manager to execute an agreement in a form approved by the City Attorney with Carollo Engineers, Inc. (Walnut Creek, CA) for construction management and environmental services during construction for the Graham Hill Water Treatment Plant Facility Improvements Project (c700025) in the amount of $10,699,078, and authorize the Water Director to execute future contract amendments within the approved project budget; 4) Authorize the City Manager to execute a Joint Powers Agreement (JPA) and Memorandum of Understanding (MOU) in a form approved by the City Attorney for an Owner-Controlled Insurance Program (OCIP) for the Graham Hill Water Treatment Plant Facility Improvements Project; and 5) Authorize the Risk Manager to execute applications and related documents necessary for the JPA to design and market insurance programs pursuant to the Agreement, as applicable, and that the Risk Manager is authorized to purchase and bind insurance coverage for the Project.

Official agenda

Summary written by claude-opus-5 from the agenda and the Staff report (agenda packet, pages 412-441). It can contain mistakes. The official documents govern.