Ann Arbor officials planning to spend $100M-plus to rebuild 1930s-era wastewater treatment plant

The Ann Arbor City Council is being asked Monday night to tentatively approve a $92.9 million construction contract with the Walsh Construction Co.

The council already took action on Jan. 23 to approve a $10.8 million contract with Malcolm Pirnie Inc. for engineering services to support construction. The firm has been under contract with the city since March 2005 to assist in designing the project.

Due to the aging and deteriorating facilities, the city is undertaking the renovations to ensure long-term treatment capacity and reliability.

Construction is expected to extend over five fiscal years, and it must be done without impeding the flow of wastewater to the plant.

The Ann Arbor Wastewater Treatment Plant takes in nearly 19 million gallons of wastewater per day from the city of Ann Arbor and Pittsfield, Scio and Ann Arbor townships.

The overall site actually consists of two plants — an older West Plant constructed in the 1930s and a newer East Plant constructed in the late 1970s.

The work about to get under way includes demolition and complete replacement of the older West Plant, improvements to newer East Plant and replacement of the plant electrical grid and stand-by generators. The Ann Arbor City Council recently approved a notice of intent to issue up to $120 million in sewage disposal system revenue bonds for the project.

Earl Kenzie, the city's wastewater treatment services manager, said it's more likely the project will come in somewhere between $100 million and $110 million.

Kenzie appeared before the City Council recently to explain the project, along with Mike Amicangelo, senior utilities engineer at the plant. They were joined by two consulting engineers — Tom Porter and Chris Englert — from Malcolm Pirnie Inc.

The renovations to the West Plant include rehabilitating existing flow control structures, complete demolition and replacement of primary and secondary treatment equipment, and construction of new buildings. Other improvements include installation of a new electrical distribution system and two new emergency power generators, utilities relocation, replacement of stormwater collection system equipment, installation of new roadways, and replacement of aeration systems with energy efficient blowers.

Kenzie said the opening of contractor bids on the project took place Jan. 11 and there were six proposals submitted.

Lakeshore TolTest Corp., with offices in Detroit, was the lowest bidder at $83.3 million. The highest bidder was Southfield-based Barton Malow at $102.9 million.

Other proposals came in from Granger Construction ($90 million), Walsh Construction ($92.9 million), Walbridge Aldinger ($95.4 million), and Hunt/Colasanti ($100 million).

The three lowest bidders were brought in for interviews in January and the city's staff recommended the council approve a contract with Walsh.

To put it in perspective, the work being done at the wastewater treatment plant will cost more than the combined total of two other large capital projects the city has taken on in recent years — the $50 million underground parking structure still being built on South Fifth Avenue downtown, and the nearly $50 million Ann Arbor Municipal Center project.

The wastewater treatment plant is located just east of the city limits and US-23, off Dixboro Road along the Huron River, mostly in Ann Arbor Township.

The plant, which runs continuously and is staffed 24-7, serves about 130,000 people in the city of Ann Arbor and portions of Ann Arbor, Pittsfield and Scio townships.

The plant's permitted capacity is 29.5 million gallons per day, while the average daily flow is about 18.5 million gallons. The maximum hydraulic flow is 48 million gallons per day.

Amicangelo said the East Plant was built between 1977 and 1981 and has a permitted capacity of 20 million gallons per day. The older West Plant, which is being replaced, was built in 1936 and saw upgrades through 1964. It has a permitted capacity of 9.5 million gallons per day.

"The plant is in such poor condition at this point that it was taken offline in 2006, so that old West Plant is no longer operational," Amicangelo said.

An old photo from July 29, 1936, shows the original administration building for the West Plant, the same building that's still standing today, though it's structurally unsound now.

Based on the condition of the plant, Amicangelo said, the city developed a facilities master plan that was completed in January 2004. Recommendations that came out of the master plan included complete replacement of the West Plant and upgrades to the East Plant.

Amicangelo said it's been a long and complex process to come up with a design. The original contract with Malcolm Pirnie dates back to March 2005.

"One of the reasons why the project took so long is because of the regulatory requirements that we had to meet," Amicangelo said, tracing the preliminary site plan review back to 2009.

The city also had to get what's known as a "conditional letter of map revision" from the Federal Emergency Management Agency, also known as FEMA. That process lasted from November 2009 to August 2010 and involved revising maps to take the plant out of the floodplain.

The city also needed approval of a stormwater management plan from Washtenaw County and Ann Arbor Township, a process that lasted from November 2009 to September 2010.

The city went through the final site plan review process with Ann Arbor Township from August 2010 to December 2010 and then sought a construction permit from the Michigan Department of Environmental Quality, which took from May 2011 to October 2011.

Amicangelo said there are a number of site limitations that prevent the plant from being able to expand beyond its existing footprint, as it's bordered to the north by the Norfolk Southern Railroad, to the west and south by the Huron River, and to the east by Fleming Creek.

"Everything we do within the facility — every upgrade, every equipment replacement — has to be done within that footprint," he said. "The site's fully utilized."

Adding to the logistical challenge is that utility connections to the East Plant pass through the area being demolished.

Another challenge has been the embankment separating the plant from the river. Although it has effectively provided flood protection to the plant for decades, it does not meet current FEMA standards and the plant is considered in a 100-year floodplain.

Without improvements there, the plant would be required to meet building standards that include flood proofing all new buildings to provide protection against damage from a 500-year flood, and that would add significant costs to the project.

The city instead petitioned FEMA to readjust its maps and move the floodplain lines south to remove the plant from the flood-prone zone.

The city had to agree to make improvements to the embankment to get FEMA to go along with the map revision. Those improvements to protect the plant from the Huron River and Fleming Creek floodwaters are now included in the facilities renovation project.

Amicangelo said it'll take about nine months to complete the embankment work before the city can proceed with actual construction of buildings. He said the contractor on the project can dig utility trenches and do demolition work in the meantime.

The newly constructed facilities are expected to include more-efficient, computer-controlled technology that will allow the city to treat wastewater using less energy while reducing phosphorus and nitrogen, according to project officials.

"When we're done with this project … there'll be areas for future use — future tanks and facilities — in case the plant ever has to expand its capacity," Porter said.

The city has been approved for a $109 million loan at 2.5 percent interest rate from a revolving fund managed by the DEQ.

By financing the project that way, the savings to the city over the 20-year life of the loan will be about $35 million, according to the city's consulting financial advisor.

Additionally, the city is able to receive $2.2 million in loan principal forgiveness for green project features, which essentially equates to grant money.

Englert said the city expects to save another $1.5 million from a sales tax exemption for contractor purchases on the project through the Michigan Department of Treasury.

The DEQ approved the project plan on Jan. 6. A final order of approval for the revolving fund loan is expected on March 12, with the loan closing on April 10.

Tom Crawford, the city's chief financial officer, said the fact that the city is embarking on such a major project is the reason why utility rates have steadily increased, and why the city's utility funds show surpluses year after year. That money is being stockpiled for projects like this.

Even while undertaking a nine-figure project, Crawford pointed out the rate increases have been kept to typically less than 5 percent over a number of years so there isn't a sudden rate shock to users. All of the city's utility funds — water, sewer and stormwater — are performing capital projects and need the funds in order to make improvements, he said.

"There's been a long ramp-up with the rates and our rate adjustments have been very modest when compared to other communities," Mayor John Hieftje said.

"And last time I looked at the DNR numbers, Ann Arbor was in the bottom 10 percent as far as our rates, and that's a good thing," he added. "That's some of the lowest rates in the state, and hopefully we'll be able to continue that even as this contract goes forward."

Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's email newsletters.