I’m going to use my editorial space to answer Bob Stroh’s letter. Bob is the Katzenjammer’s unofficial propaganda go-to guy. He spiels what he is fed without properly digesting it.

Space is particularly short this Thanksgiving week so my answers have been inserted after each question, in italics.

A few facts should be noted: PERC did not bid for the Fillmore job. There are significant geological differences between Santa Paula and Fillmore sites. Both plants were mandated by Sacramento. Both plants treat water for the same result, very differently.

Much of Bob’s letter expresses his own uninformed opinion. Much of it is simply false.

A letter from PERC relates to this subject and is included at the end of this editorial.

Re: Gazette Editorial (11/11/2010) To address incorrect information and clarify issues.
By Bob Stroh
“Gazette: Construction Costs” “The total capital cost of the Fillmore project is $82 million.” Fillmore’s complete cost will be published before the end of this year, it will come in at about $76M, Santa Paula has never published its complete project cost. This includes $26 million for effluent disposal. So if the plant was only $39 million, where did the other $17 million go? The Santa Paula plant is twice the size of ours and their plant capital cost was $44 million with $8 million for effluent disposal. These numbers are incorrect: Santa Paula’s bid price was $57M. Their buyout price from PERC is currently $85M or Fair Market Value, whichever is greater, just for the plant. Fillmore’s prices include construction bid price, land, legal, environmental, RWQCB costs, consultants, etc. Santa Paula’s prices are only the construction bid price.

“The truth is that the extreme costs of this sewer plant are due to the plan (undisclosed and unknown until recently) for ratepayers to subsidize the Business Park. The cost of the land, the levee and River Street extension would not have been incurred had the City used another site on land we already owned. In addition, the extended sewer mains, utility infrastructure and storm drains (from D St. to Plant) increased costs. THE MAIN REASON THE PLANT WAS SITED AT ITS CURRENT LOCATION WAS TO FACILITATE AND SUBSIDIZE THE BUSINESS PARK. KDF is NOT helping the City, the City and taxpayers are helping KDF. The question is whose plan is this?” The reason the plant was built where it is was so it would be in the downstream corner of the City for long term system efficiency. The old analogy that “stuff” runs downhill holds true. The City made the location decision before it knew that the plant’s future neighbor, KDF Communities would contribute $3M to pay for 50% of the levee and for all of River Street from C Street to E Street. Partnering with the Business Park was a bonus to building the plant in the correct location. Business Park owners have helped reduce costs to Fillmore rate payers, not increased them as Mr. Stroh would have readers believe.

Gazette: “Fillmore owns its plant outright while Santa Paula has a buyout clause”
“Fillmore does not own its plant outright because it carries a 40 year bond debt of $57 million principal plus $77 million in interest, ($134 million). This does not include $19 million taken from the Redevelopment Agency. Plus whatever debt service is associated with that.” It’s naïve to think that Santa Paula is not paying interest on the cost of the plant. Their rate payers are paying interest for the financing of the plant only they’re paying for it through the monthly payments to PERC. If the City of Santa Paula desires to buy the plant, at any time, even 30 years from now, they’ll have to pay $85 M or Fair Market Value whichever is greater. Some say it’s the same as leasing a car for 3 years then buying the car at original sticker price plus dealer mark ups.

Gazette: “In every way Fillmore’s plant is far superior in cost and efficiency.”
“Santa Paula's plant has a much smaller footprint, saving millions in land costs. (Fillmore paid $2.4 million just for land purchase.) Santa Paula's plant can be operated by 3 operators. Fillmore requires 6. Both plants have won awards and are recognized as state of the art.” The Fillmore bid included a credit if the contractor used less land. This would have given PERC a $1M advantage had they bid the Fillmore project but they chose not to. How much did Santa Paula pay for the land for their plant? I think it was about $5M. Fillmore’s 6 member staff maintains not only the plant but the collection system throughout the city as well as well as the recycled water system. Santa Paula’s 3 member staff only runs the plant.

“It seems like the Santa Paula paper is keeping its citizens informed. If the Gazette did, citizens would know about the issues with Fillmore’s plant. Including; the delays to get an APCD permit, that W. M. Lyle’s took all of the “open book” funds(intended for cost savings sharing), and the 21 change orders, some of which were implemented prior to Council approval. In Santa Paula, this is what caused their Public Works Director to be fired.” The confusion expressed in Santa Paula concerning rates and interest is quoted from the Santa Paula Times, with permission. The City of Santa Paula has not said why they terminated their Public Works Director and all the rest of the Public Works staff other than for budget cutting reasons. Can Mr. Stroh produce evidence from the City of Santa Paula stating that his statement is fact based? All of the change orders were implemented with proper City Council Approval. Of the 21 change orders 16 were requested by the City, 3 were requested and paid for by business park neighbors, 2 were requested by the contractor for changed conditions. All of the 21 change orders amounted to 7.7%, the contractor requested change orders were about 2%, a normal construction project budgets 10% for change orders.

“Santa Paula’s current sewer rates are lower than Fillmore’s sewer rates.” Santa Paula = $77, Fillmore = $82. Santa Paula is twice as big as Fillmore and should have an economy of scale and pay less per gallon treated. Santa Paula has twice as many customers to divide the cost over and they are not recycling the water. Santa Paula’s rates should have been $20 per month lower than Fillmore not $5. Santa Paula like Fillmore could not afford to discharge to the river because it was too expensive. Santa Paula’s geology enabled them to utilize percolation ponds at a cost of $8M while Fillmore had to implement a water recycling program at a cost of $13M. All of these reasons should have given Santa Paula very low sewer rates. How much higher would Santa Paula rates be if they had poor geology and had to recycle the water?

- “Santa Paula’s monthly “all-in” costs of the facility is $19 per resident (including all capital replacement reserves), while Fillmore’s “all-in” cost of their facility is at least $31 per resident (excluding all capital replacements reserves).” The standard cost comparison is in the sewer rates themselves and the population of the city. Who knows what formula for “all-in” is?

- “Santa Paula will own their facility at no transfer cost at the end of the 30-year contract whereas Fillmore will have an additional 10 years to pay off their bonds in order to own their facility unencumbered.” This statement ignores the Santa Paula Agreement with PERC. In 2010 the purchase price starts at $85M for the $57M plant and reduces each year thereafter down to $0 on December 31, 2040, provided, however, that the Fair Market Value of the Facility is not higher. So the buyout fee in year 2040 will be $0 if PERC has run the plant into the ground due to lack of maintenance (not a realistic scenario) or it could be the sky’s the limit Fair Market Value if PERC takes good care of the plant. So Santa Paula’s cost in 2040 will be $0 for a plant that needs work or perhaps sky’s the limit for a plant that is in good condition. During the next 30 years Santa Paula is paying for the debt service on the plant through the monthly service fee to PERC but at the end of the 30 years they would have to pay again if they want to own their plant (see Santa Paula Times article 11/18/10). Fillmore on the other hand owns their plant from the start. The comments provided are for demonstrative purposes only and should be used to illustrate the terms of the Santa Paula contract only. PERC is a reputable company providing a critical service to the citizens of the cities they serve.

- “Santa Paula does not have an interest rate or any interest rate risk for 30-years.” Fillmore does not have an “interest rate risk” as the city secured a fixed rate for the life of the loan.

- “Both American Water and PERC were hired to provide critical infrastructure and operations services to their respective cities. The specifics of the decision making process for each city is not transferable to the other city. Citizens of both cities are paying a high price to meet the State Mandates which originated under the Clean Water Act.”

Mr. Stroh suggests that the plant could have been built somewhere else but he neglects to state where. He wants readers to believe that the new plant could have been built on the old plant site as a cost saving measure. Ventura County found out that building a new plant on top of an existing operating plant yields higher costs, hence the reason they shifted focus and bought land to site the new plant after they rejected the first round of bids for the Piru plant.

It’s Stroh’s belief that the plant was built to help KDF and the business park! This sort of outrageous slur typifies Katzenjammer propaganda. The plant was built were it was because it was logical, appropriate, achievable and the least cost option. The plant had to be built regardless of any developer or development now or into the future. The plant was built to comply with a State Mandate, not to help developers. There is no point demanding proof from Stroh, he has none.

Every change order was approved by the city council. Yes, Fillmore is dealing with another regulatory agency in securing a permit (APCD, county air quality, but this involves simply education about our new state-of-the-art monitor. Our plant has zero harmful emissions – one reason for its many awards). This is not even an issue.

Bob seems to live to diminish Fillmore’s achievements. He and the Katzenjammers continue to do the same with regard to the lawful, beneficial, and completely moral sales tax controversy. The Katzenjammers are shameless.

Both communities were faced with an imposing unfunded mandate from the State of California. Elected officials in both cities met the challenge of complying with the mandate. Each city took a different path to achieve its goal. Fillmore has met the all the challenges and has a facility that will serve it well for decades to come.

Martin Farrell

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Letter from PERC

Santa Paula’s Water Recycling Facility: The Facts
At the conclusion of the reprinted Santa Paula Times article “SP Council Forum: Cost of new water recycling plant sparks comments” by Peggy Kelly from the November 10th edition of The Fillmore Gazette, a misleading editorialized comparison of the Santa Paula and Fillmore Water Recycling Facilities was added to the end of the article. The facilities cannot be compared without demonstrating the difference in their procurement, capacity and process.
PERC Water believes the City of Fillmore should be applauded for its innovative selection of the DBO delivery method for its new facility. Here are the facts about the Santa Paula Water Recycling Facility:
- The Fillmore facility was contracted as a Design-Build-Operate (DBO) project, requiring the City of Fillmore to fund the full capital cost to design, build and commission the facility.
- The City of Santa Paula used the Design-Build-Operate-Finance (DBOF) delivery method and was not required to fund any capital costs to design, build and commission the facility. The City of Santa Paula pays a set monthly Service Fee effective the commencement of operations, which includes the following components:
o All capital for the design, construction and commissioning of the facility
o Interest during construction (two years)
o Equipment replacements and capital expenditures for 30-years, including risk
o Interest rate risk for 30-years
o O&M costs and power consumption risk for 30-years
o Future expansion from 3.4 MGD to 4.2 MGD
- Santa Paula does not have an interest rate or any interest rate risk for 30-years. All risks associated with interest rate fluctuations are assumed by Santa Paula Water LLC.
- Santa Paula residents currently pay for a 4.2 MGD facility, whereas Fillmore’s residents currently pay for a 1.8 MGD facility. Fillmore’s cost to expand the facility from 1.8 MGD to 2.4 MGD is not included in the DBO cost.
- Santa Paula’s current sewer rates are lower than Fillmore’s sewer rates.
- Santa Paula’s monthly “all-in” costs of the facility is $19 per resident (including all capital replacement reserves), while Fillmore’s “all-in” cost of their facility is at least $31 per resident (excluding all capital replacements reserves).
- Santa Paula will own their facility at no transfer cost at the end of the 30-year contract whereas Fillmore will have an additional 10 years to pay off their bonds in order to own their facility unencumbered.
- Santa Paula’s facility was completed seven months in advance of the mandated regional deadline for completion.
- Santa Paula’s facility was recognized as the most energy efficient and cost effective MBR facility by Dr. Shane Trussell, a leading expert in Membrane wastewater treatment process technology.
- Santa Paula’s facility reduced the expected wastewater treatment power consumption costs by at least 15% as a result of design enhancements made by PERC Water – a savings they are splitting with the City of Santa Paula.
- Santa Paula’s facility uses 70% less land (5 acres) than the City had anticipated.
- Santa Paula’s facility financing structure has been recognized internationally by Global Water Intelligence as a “ground-breaking transaction, which can be emulated across the United States.”
- The City of Santa Paula selected the DBOF delivery method instead of a PERC Water DBO proposal that considered City financing.
- Santa Paula’s facility is in full compliance with the Regional Board’s waste discharge permit for what the Facility is intended to treat.
- More than 85% of the construction hours worked on the facility were from local union workers.

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Read Stroh’s letter here http://www.fillmoregazette.com/letters/november-25th-2010