HomeMy WebLinkAboutCOM 0597.001 2004-2006 V'~
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Harry Kim Dixie Kaetsu
Managing Director
Mayas
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+~ti•oi.d'.r~ Peter L. Hendneks
Deputy Managing Drtedor
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25 Aupum Street, Room 215 • Hllq Kowa?i 96720-4252 • (808) 961-8211 • Fax (8OR) 961-65j3
KONA. 75-706 Knakinf highway, Suite 103 • Kailue-Kona, HawaPi 96740
(8O8)3Z9-iZ26 • F'ax (808)326-3663
January 2006
Che Honorable Virginia Isbell, Chair, and
Members of the Finance Committee
Hawaii County Council =
25 Aupuni Street
Hilo, Hawaii 96720
Rc: Bill 190- Additional Funding for Reload Facility
Dear Chair Isbell and Committee Members:
Thank you for your consideration of Bill 190, which would provide the additional funding
authorization necessary to allow the County to proceed to award a contract to construct the
urgently-needed solid waste Reload Facility at the proposed Sort Station Complex. We are
grateful that the Council has already funded a total of $62 million to be used for this Reload
Facility, which was based on consultant engineers' estimates of the cost of this part of the
proposed complex. The actual bids, however, exceed the funds available.
I humbly ask for your consideration in passing Bill 190 out of the Finance Committee to
the full Council today. Because bids are only valid for a limited time, we are working
against the clock, and although the low bidder has agreed to an extension, we only have until
March 7, 2006 to award the project. We hope to be able to answer all of your questions today.
but any unresoh~ed issues can be further discussed at first reading on January 20.
If I were sitting in your seats on the Council, I would have questions about why this additional
funding is necessary, and why the urgency on time. 1 will try to cover some of the main
points below, and other more technical issues are covered in material provided to you by
Public Works Director Bruce McClure and the Technical Services Staff of the Department of
Environmental Management.
Why is more money needed?
Universal cost overruns. Public Works Building Division, which oversees building
construction contracts for the County, is seeing cost overruns on bids coming in from ] to
78°/n higher than engineers' estimates. In the case of the Reload Facility, the bid of $9.3
million is 50% higher than the estimate of $6.2 million, which is within the range we are altso
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January 4, 2006
The Honorable Virginia Isbell and Members of
the Finance Committee
Page 2
seeing on other projects. "f his reflects the large amount of construction work happening now,
with contractors needing to make it worth their effort to deal with yet another project. Higher
fuel prices also have an impact on material manufacturing/transportation, equipment
operations, mobilization, etc.
What is included in the bids'?
Reload Facility. As the Council directed, we went out for bids for only the Reload Facility,
which includes the actual reload building, necessary site work and infrastructure, and ancillary
items such as scales and sniff support facilities. In the very optimistic chance that the bids
would come in at amounts less than the available funds, other proposed Sort Station Complex
components were included as optional additives. These included the public recycling center,
bottle bill redemption center, fats/oils/greases receiving area, and a vehicle impound yard. No
additives are under consideration at this time due to the bid amount.
Cost allocation. Of the $93 million cost of the basic bid, about $3.7 million is directly for the
Reload Building itself, not including the general site work for the building site. General site
work is the next largest cost, at $2.4 million. Utilities are estimated to cost $1.1 million, and
the balance ofthe bid cost is for smaller ticket items.
Attached is a diagram showing the Reload Facility. The gray shaded area is what was
approved for funding by the Council. The additional funding requested will allow the County
to proceed with construction of the components shown in gray.
is all of the infrastructure necessary'?
To be operational, all of the planned infrastructure is necessary. Roadways are needed to
access the Reload Building; electric power is required for lighting and operation of electrical
equipment used at the facility; potable water is required for sanitary reasons as well as a
source of water for fire fighting. Sanitary sewer systems are necessary to service toilet
facilities as well as dispose of wash-down water from the facility.
Can we cut the costs on the project?
"there are two options to cut costs. First is deductive alternates in the bid, and the second is
negotiations with the low bidder.
• Deductive alternates. A number of items were included in the bid as deductive alternates,
which would allow the County to cut out certain items if necessary to meet available
funding. However, the bid amounts for these items do not make any significant
difference in the funding shortfall. Also, eliminating them would have a negative impact
on operations of the Reload Facility. For these reasons it is recommended at this time
that the base bid be the basis for the award of the contract. (Information on deductive
January 4, 2006
The Honorable Virginia Isbell and Members of
the Finance Committee
Page 3
alternates was included in the December 9, 2005 transmittal letter to the Council with Bill
190.)
• .'i~eQOtiations. In a further effort to determine if costs can be reduced, the County is
presently in negotiations with the low bidder, Isemoto Contracting Co. Ltd., to explore if
there are ways to retain the functionality of the facility but cut the County's costs. We
expect to complete these negotiations within two weeks, before this bill would be up fbr
first reading. If any cost-saving changes are negotiated, the amount of funds requested
can be amended at that time.
What else is under consideration for solid waste disposal?
It has been stated that the trucking of East Hawaii solid waste to the West Hawaii Landfill at
Pu`uanahulu is not acceptable. A firm strategy must be established now to minimize the
chance of such trucking becoming necessary. We are proceeding with the following:
• Waste reduction techrro/oQy. You have been receiving monthly updates on the progress
of the preparation of a Request for Proposals for a waste reduction technology, so you are
aware of the ongoing progress on that project. The present time line calls for a contract to
be executed by January 2007 with a company to provide a waste reduction technology.
Optimistically, the soonest a facility could be operational would be 2010.
• Off-island s~ment. We have met with representatives of two companies who propose to
ship our solid waste to the mainland for disposal, one company to eastern Washington
State and the other to Idaho. Shipment off-island is a real possibility to be considered for
the interim time before a waste reduction technology can be fully implemented. Several
major unresolved issues remain, the primary one being that no permits have been granted
to either company for shipment out of state, and it is difficult to predict how long it might
take either company to obtain needed permits and resolve other shipping issues.
However, it is felt that combined with the expansion of the Hilo Landfill, off-island
shipment will help guarantee that trucking of trash to Pu`uanahulu will not be necessary.
• Fxpansion oflhe caz~acily ofthe Hilo Lairdfll. The County of Hawaii has submitted an
application for an extension of the life of the Hilo i.andfill to the State Department of
Health. This extension application is a request to steepen the side slopes of the landfill,
staying within the current permitted footprint and height limits. We feel confident that
the application is thorough, and expect eventual approval by the Department of Health.
Why build the Reload Facility now when a private company might be willing to build it
for free?
• Cost. As you all know, there is no such thing as a free lunch. The County can borrow
money through general obligation bonds at an interest rate well below anything available
January 4, 2006
The Honorable Virginia Isbell and Members of
the Finance Committee
Page 4
to any private company, so our financing costs are lower than what private entities can
receive. A company that constructs a building "for free" will obviously expect to recover
its capital costs through ongoing operational charges. That means that over time, we will
be repaying the private company for its financing costs, which will be higher than the
costs if the County constructed the facility and repaid its costs over time through debt
service on bonds. It does not make fiscal sense to go this route in the absence of
exceptional circumstances, such as if the County's financial condition did not allow it to
borrow funds for the purpose proposed or the capital costs were so large that the County
did not want to commit its debt capacity for a project.
• Timin .Time is another important factor. We are ready now to award a contract and get
construction under way. As mentioned in other information provided to you, the Reload
Facility is needed as soon as possible to make it easier for commercial trash haulers
during the times when they are no longer allowed to dump their loads on the face of the
landfill because of safety issues related to steeper slopes. Additionally, constructing the
facility now will make it possible to begin shipping trash off island sooner, if that is a
disposal method selected as feasible and desirable.
Will this Reload Facility be abandoned if trash is shipped off island, or when a waste
reduction technology is implemented?
Muhi-use facility. The Reload Facility is a very plain, generic tipping floor that can be
adapted to the specific needs of companies that are later contracted to handle our solid waste.
At least one of the companies proposing to ship waste to the mainland has said it would build
a facility for its use at no up-front cost to the County (but see response to previous question.)
However, the same company has said that if the Reload Facility has been constructed, it can
use that facility for its purpose with only minor modifications. Also, the Reload Facility has
always been seen as the fi'ont end of any waste reduction technology adopted. Since it is very
plain and generic as designed, it can be adapted to different uses as necessary.
Conclusion
I apologize for the length of this letter, but 1 did want to try and answer some of the very
understandable questions you may have about this request for funds.
To summarize, I ask that you please pass Bill 190 out of Finance Committee today because oC
time constraints:
Bids are only guaranteed through March 7, 2006;
The Reload Facility is needed as soon as possible because commercial haulers will not
be allowed to dump on the landfill face during certain operations when slopes are
being steepened;
January 4, 2006
The Honorable Virginia Isbell and Members of
the Finance Committee
Yage 5
The Reload Facility is the planned front end for other solid waste disposal options,
including shipping rubbish to the mainland and implementation of a waste reduction
technology. This facility is needed now, and constructing it now will make it faster to
implement other options such as shipment off island.
Thank you for your consideration and support of this request.
Al a,
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MAYOR
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