City eyes Navy utilities
July 3, 2008 · Updated 3:14 PM
Oak Harbor city officials have put about $350,000 on the line in answering requests for proposals to purchase Navy-owned utility systems, but it will likely be at least another six months before they know if they will get anything in return for the investment.
If city officials are successful in bidding, Oak Harbor will end up owning and running the sewage treatment system on both the Seaplane and Ault Field bases, as well as the Navys entire water system on Whidbey.
City officials hope that taking over the facilities will mean more capacity and lower costs for city residents in the long run.
City Administrator Thom Myers admits that entering into the costly, complicated process is a gamble, but he said the potential payoff is worth it. We believe there is a major benefit for us to run these systems, he said. We believe, quite frankly, that we are the Navys best bet. We are here, we have the operational components and we can do the job.
Whidbey Island Naval Air Station is looking into privatizing all its utilities sewage, water, natural gas and electricity in accordance with two different directives from the Secretary of Defense in the late 1990s, according to Dave Krause, engineering director at NAS Whidbey.
Christopher Floro, a utilities privatization program manager for Navy Region Northwest, said the philosophy behind the edict is that the private sector can likely run utilities better and cheaper than can the military.
The idea is that the military really ought not be in the business of owning and operating infrastructure... Floro said. The private sector can provide lower costs and better management, if you will.
Yet Floro stressed that the military will not privatize a system unless it will mean an overall cost savings. That means the Navy could end up rejecting all the bids. Some systems have been exempted from privatization, such as occurred at Bangor and Bremerton, because of security or other concerns.
While selling utilities to the city of Oak Harbor is not exactly privatizing, both Navy and city officials said it makes a lot of sense. Oak Harbor currently operates the sewage treatment system for the Seaplane Base, which handles both city and Navy wastewater. The city and Navy water systems are already inter-connected. The sewage treatment system at Ault Field could also be connected to the citys system in order to expand Oak Harbors capacity.
Bob Jarski, Oak Harbor public works operations manager, said it would be more efficient for the city to handle all the systems, along with its own, since there would be cost sharing benefits in staff levels and equipment. The city may be able to use Navy piping for sewage, for example, instead of building new ones.
Its an investment for the city, he said. It wouldnt be wise for the city not to pursue this. Theres a lot of potential gain.
The tough part is figuring out how much the systems are worth and negotiating a deal that makes both Oak Harbor and Navy officials happy. The complexities of the issues, along with bureaucratic requirements, have bogged down the bidding process. Myers said he was surprised by the sheer amount of paperwork necessary.
Its been a challenge for us, he said, because we dont necessarily speak the same language. But were learning.
Myers explained that the Navys request for proposals is not a straight-forward bidding process. A whole lot of negotiations occurs before anything is finalized, he said.
Its a big deal, said Krause. There are a lot of costs involved and its something the government is new at.
Jarski said the Navy and city first began discussing the privatization effort in 2000. The Navy offered the city a sole-source request for proposal on the Seaplane base sewage system in 2002. A sole-source request means that only Oak Harbor will be bidding on the system.
Oak Harbor submitted a proposal for the Seaplane Base system last December.
More recently, the Navy opened the water system and the Ault Field sewage system for proposals, which means Oak Harbor may be competing with private companies. A contracting company, Chugach Development, currently runs those systems. Navy officials wouldnt say whether any other entities have bid on the systems.
Oak Harbor submitted a proposal on the Ault Field sewage system last March. At the Dec. 9 Oak Harbor City Council meeting, the members approved a proposal for acquiring the Navys water system.
Bit totals top $350,000
To bid on the proposals, city council members agreed to hire consultants to handle the process, though city staff is also heavily involved. According to Myers, the council has funded $168,000 to prepare the bids and negotiations for the Seaplane base sewage treatment; $119,000 for bids on the Ault Field sewage system; and $65,000 for bids on the water systems.
Most of the money comes from enterprise funds, which are made up of the fees residents pay for utilities. About $68,000 comes from the general fund, Myers said.
The upcoming round of Base Realignment and Closure probably wont effect the privatization effort. Dave Krause, engineering director at NAS Whidbey, said the Navy has to make good on the contract, even if the base is closed down.
But there is always a possibility that the city wont win any of the bids, or just one or two, which means the money spent on consultants will be lost.
Myers admits that it would have been better had the city received an answer on the Seaplane Base proposal before bidding on the other two systems, but the timing didnt work out that way. He said the bidding process has taken a lot longer than city officials realized. Once in, you dont know how far you have to go, he said.
Ultimately, the the citys proposals for purchasing Navy facilities will have to be approved by Congress.
While Oak Harbor officials submitted a proposal for the Seaplane Base system a year ago, the Navy now wants the city to complete a $252,000 system analysis of the Seaplane Base lagoon system. Myers said the evaluation will determine what deficiencies exist in the system, as well as what needs to be repaired or replaced to get it up to city code.
According to Jarski, the Seaplane Base lagoons currently treats about 1 million gallons of sewage from the city and 400,000 gallons of sewage from the Seaplane Base and Capehart Housing a day. The system has a 2.5 million gallon capacity, plus theres room to build another lagoon. The system includes manholes, gravity mains, sewer pumping stations, force mains and industrial services lines.
The Navy will bear the cost of the system analysis and any necessary repairs if the city wins the proposal but the funding mechanism is complex. The Navy will end up owning Oak Harbor money for the system analysis and the capital improvements. On the other hand, the city will end up owing the Navy for the purchase of the systems.
City Finance Director Doug Merriman said these two-way debts will likely be wrapped into the monthly rate that the Navy will pay the city for utilities.
Theres a series of things that need to be dealt with, Myers said. Its a long process and legitimately so. We have big interest and they have big interest in this.
You can reach News-Times reporter Jessie Stensland at email@example.com or call 675-6611.