Municipal Corporation of Cape Charles Cape Charles Gazette
Publication Date: February 4, 2009
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Welcome to the official Town of Cape Charles Newsletter. This publication is available by submitting your email address to gazette@capecharles.org or by contacting the Town Office at 757-331-3259 x10.

The purpose of this electronic newsletter is to pass factual, informative and timely information to the citizens of Cape Charles and to any other individuals who have a business, property, travel or historical interest in our Town.

The information contained in this newsletter is considered to be the "official word" on the Town’s activities as noted by our Town Manager. The Cape Charles Gazette is a news source which reports upon weekly events, upcoming Town activities, articles of interest to our citizens, Town projects, safety & security issues, and emergency announcements.

We hope that you will enjoy receiving the Cape Charles Gazette.

For additional information please visit the Town’s website at http://www.capecharles.org/or contact us at gazette@capecharles.org.

References to external websites are for information purposes only. The Town makes no representation as to the accuracy of information on such sites, and reference to such sites is not intended as an endorsement by the Town of any materials or opinions expressed on such sites.

Another Perspective on the Webtide Op Ed

February 3, 2009

Mr. Joe Corrado of Webtide expressed his views on the decision by the Town of Cape Charles to reject their unsolicited proposal in the January 31, 2009 edition of the Eastern Shore News. What follows is another perspective. In some cases, we have not been able to address the issues as directly as we would have liked since Webtide designated Volume 2 of their proposal as "confidential". That volume contains almost all of the relevant information.

The opening paragraphs:

1. Allege that we are following a path that would result in an "outmoded wastewater system that ignores the latest "design-build" technology".

The facts: The technology has nothing to do with "design-build". There are only a few major manufacturers of wastewater membrane filtration technologies and other system components. The Town’s bid packages will specify a manufacturer and allow the bidders for the construction project to propose alternatives. The technology upon which both the Town and Webtide designs are based is quite similar.

2. Imply that we are doing something extraordinary as the decision "sets Cape Charles apart from the transparent, PPEA process."

The facts: The PPEA provides an alternate public procurement process for needs that may not be wholly satisfied by existing methods of procurement. The PPEA contains certain criteria as a basis for making that judgment. We believe that normal public procurement procedures, which are fully transparent, will satisfy our needs.

The following is keyed to the numbered paragraphs of the Op Ed:

  1. Omits required financial statements. "If the town believed that important information was missing, they had only to pick up the phone and advise us; we would have been more than happy to supply whatever was requested."

The facts: The Town notified Webtide of this missing information by letter of January 6, 2009.Webtide responded, via their attorney, on January 8, 2009. They did not provide the information. Please click on the links above to view copies of the two letters.

  1. Omits significant elements required for a functioning regional system. "What elements? Our proposal was complete and specific … Every aspect of our complete and functioning wastewater and water treatment system was detailed in Volume 2 of our proposal."

The facts: The proposal does not include the following elements that are necessary for a functioning regional system:

    1. A sewage collection system for Cheriton and Northampton County.
    2. A water distribution system for Cheriton and Northampton County.
    3. Reject and off-season storage required for effluent reuse.
    4. Operation of the existing Cape Charles water treatment plant which must remain to meet projected peak demand.
    5. Operation of the existing Cape Charles water distribution and sewage collection systems (including pump stations).
  1. Contains significant capital cost risk.  "The Webtide proposal, in fact, has no capital cost risk whatever for the public entities. As the private partner, Webtide assumes all capital cost risk on a fixed fee basis for the design and construction of both the water and wastewater treatment systems. The proposal from Webtide actually reduces the capital cost risk to the municipality by guaranteeing a fixed price."

The facts: The proposal does not offer a fixed price at this time. Volume 1, section 2.7, states "A Guaranteed Maximum Price (GMP) will be offered based on final negotiations with the municipalities as defined by the agreed-to Scope of Work." In that regard, there are several significant undefined items, in addition to the items above, which are likely to add considerable cost:

    1. There is no agreement with the proposed effluent reuse partner and significant obstacles remain.  Webster has previously stated that the alternate reuse scenario addressed in the proposal would add 15% to 20% to capital cost.
    2. The municipalities are responsible for purchase of the required easements needed for the pipelines.
    3. The estimated "fixed price" contained in the proposal does not include the cost of the land which must be purchased to build the two plants.
    4. The estimated "fixed price" presumes an undefined continuing stream of capital payments to Webtide even after the municipalities pay for construction.
  1. Contains significant operating cost risk. "What risks? … Cape Charles would have complete control of operating costs, because they will set the impact and user fees to be included in a set fee schedule contract with Webtide."

The facts: The proposal offers a twenty year operating contract from Tidewater Utilities, a company in the Webtide consortium. This proposed operating contract:

    1. Contains a man-year rate almost three times our current average for plant operating personnel.
    2. Offers additional services at a significant mark-up.
    3. Contains price escalation provisions with a floor that exceeds the change in the CPI experienced in all but four of the last twenty years.

Additionally, the proposal leaves the cost of raw water supply as an undefined item.

  1. Contains significant schedule risk.  "There is no schedule risk. The Webtide proposal specifies a 24 to 36 month timeline for plant design and construction, but makes it clear that we can complete the work sooner; even ahead of Cape Charles stand-alone project schedule."

The facts: The schedule in the proposal specifies construction starting eight months before completion of design and permitting. Virginia Department of Environmental Quality regulations specify approval of a Preliminary Engineering Report, completion of a Value Engineering Study and issuance of a Construction Permit. The proposed overlapping schedule does not allow for these regulatory requirements, even less so for a more accelerated schedule alluded to in the Op Ed. While the contractor may be able to accomplish this, ultimately it is the municipality that must assume this risk with the state regulatory and grant/loan agencies.

  1. Provides no financing advantages.  "In fact, a regional system provides significant financing advantages over a stand-alone municipal system and our proposal makes this clear. By including Cheriton, Bayview and others, we are generating a more compelling rationale for regional funding. Federal and state funding authorities have already signaled their preference for a regional system."

The facts: The Op Ed seems to confuse the issue of entering a public-private partnership with establishing a regional system; they are not one in the same. One of the basic tenets of the PPEA is to encourage investment of private capital in a project. The proposal does not include any private investment to construct the system.  Rather, it proposes that the municipalities finance construction, including application for grants of public money. The conclusion that the proposal "provides no financing advantages" is in the context of the PPEA. If the municipalities formed a regional system without a private partner, the same public financing and grant sources would be available.

  1. Delivers capability later than now planned. "Cape Charles is under a DEQ mandate to upgrade its existing plant, which discharges treated effluent directly into the Bay, by January 2011. However, town officials have persisted in trying to create a red herring around not meeting that date. The only consequence of a later date is that the Town will be restricted to present levels (250,000 gallons-per-day) of effluent discharge, which, by its own estimates, Cape Charles does not expect to exceed."

The facts: Cape Charles, like all municipalities in the Chesapeake Bay watershed, must meet a specified nutrient waste load allocation by January 2011. If we do not meet this date, our current waste load allocation, which is based on a projected discharge of 500,000 GPD, will be reduced by half. It is highly likely that this lower allocation would never be increased, giving rise to the following implications:

    1. Cape Charles would not be able to grow beyond 250,000 GPD without implementing effluent reuse. This is significantly more costly than surface water discharge.  The growth projections updated in October 2008 indicate that we would exceed 250,000 GPD in 2013. Given the current economic environment, this rate of growth is now unlikely. At 50% of the last growth projection, we would exceed 250,000 GPD in 2016. No matter the specific growth assumptions, except for virtually no growth, a reduction in the waste load allocation to that of a 250,000 GPD plant will bring with it the need for effluent reuse (and its higher cost) sooner than would otherwise be the case.
    2. The same quality of treated effluent is required for both discharge and reuse. Preservation of the higher waste load allocation provides significant cost savings when implementing effluent reuse, since a smaller volume of off-season storage would need to be built because of the ability to discharge some of the effluent.
    3. Preservation of the currently assigned waste load allocation may preclude the future need for significant effluent reuse. There is not a direct relationship between plant capacity and the pounds of nitrogen and phosphorous in the effluent. Our consulting engineers estimate that a properly functioning membrane bio-reactor plant would be capable of processing a bit more than 600,000 GPD within the assigned waste load allocation.  Even under the October 2008 growth projections, that would take us out to about 2027. It is conceivable that technology will advance over the next 15 years or so to allow even more nutrient removal at higher flows, thus precluding or at least deferring further the need for effluent reuse.
    4. Our current wastewater plant is incapable of meeting the nutrient waste load allocation associated with a 250,000 GPD plant even at our current flow of about 150,000 GPD.  Therefore, if a new enhanced nutrient removal plant, whether 250,000 or 500,000 GPD, is not on line by the deadline, Cape Charles will be subject to state enforcement action, including possible monetary fines.
  1. Provides no advantage over normal public procurement procedures. "In fact, a regional facility provides enormous procurement and project delivery advantages. In the PPEA, the private entity (Webtide) assumes all the procurement responsibility, for which it employs experts in the water and wastewater industry. This relieves the public entities of the responsibility for negotiating with subcontractors and other resources in a field about which they have no expertise."

The facts: Similar to Webtide’s consulting engineering capability, Cape Charles employs a consulting engineering firm.  This firm will prepare the bid documents and assist in evaluating and selecting a general contractor to build the facility. The town will not be negotiating with subcontractors – that is the general construction contractor’s role.  It is illogical to assume that a municipality would be relieved of all procurement responsibility in entering and managing a comprehensive agreement (contract) with a private entity. In fact, the PPEA requires otherwise (Code of Virginia, Sec. 56-575.9). For example:

  • Review of plans and specifications for the qualifying project by the responsible public entity and approval by the responsible public entity if the plans and specifications conform to standards acceptable to the responsible public entity.
  • Inspection of the qualifying project by the responsible public entity to ensure that the private entity’s activities are acceptable to the responsible public entity in accordance with the provisions of the comprehensive agreement.

Abandonment of oversight responsibility for contracted activities by a municipality would violate the public trust. To suggest otherwise is naïve at best and disingenuous at worst.

Joe Vaccaro
Town Manager
Town of Cape Charles, VA
757-331-3259 x20

All information contained in this publication is believed to be true and correct at the time of publication.
Not responsible for typographical errors.

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Municipal Corporation of Cape Charles
2 Plum Street
Cape Charles, VA 23310
757-331-3259

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