The San Antonio Water System (SAWS) board approved a second amendment to the Vista Ridge water pipeline contract with Garney Construction on Tuesday which will allow utility President and CEO Robert Puente to declare financial close in the next few days.
The financial close documents, which signal that Garney can meet the financial and logistical requirements to undertake the project, are en route to Puente’s desk, SAWS Vice President of Water Resources Donovan Burton told the board on Tuesday. Once signed, construction can begin on the 142-mile pipeline that could deliver up to 16.3 million gallons of water to SAWS customers per year starting in 2020. Officials expect construction to start in January or February of 2017.
“Financial close means that Garney, the banks, and SAWS together are comfortable that we are ready to move forward with this project and invest significant money in bringing it to reality,” said SAWS board Chairman Berto Guerra. SAWS and its customers will only pay for the water that actually makes it to San Antonio. After 30 years, in 2050, SAWS would own the pipeline.
The second amendment to the contract, approved by a unanimous vote, relaxed several of the timeline requirements for three elements of the project: future operations, water transportation permits, and endpoint infrastructure. Article 4 also was modified to move groundwater well locations. (Read details about these changes below.)
None of the changes, stressed Burton and Puente, change the price or quantity of water that would be piped from Burleson County and therefore will not need approval from City Council.
“The risk stays on the other (Garney) side of the ledger,” Puente told the Rivard Report on Monday. “The construction risk, the regulatory risk, the financial risk, the endangered species permitting issues – all of that stays on the other side.”
Nine out of the 10 citizens signed up to address the board on Tuesday spoke out against the contract change and the Vista Ridge project as a whole. The 10th citizen spoke on a personal meter-reading issue. The others argued that expansion of other water sources like rainwater catchment, desalination, and enhanced conservation initiatives would allow the City to avoid the cost.
Several members of the Alamo Sierra Club, including its Conservation Committee Co-chair Wendell Fuqua, were in attendance.
Fuqua called the project a “tangled web” and adjusting the contract means “taking more risk to help Garney pass financial close.”
He also questioned if there would even be water to pipe to San Antonio 30 years from now – when the region becomes more desperate for water. “It’s possible that we will build a pipeline and won’t have enough water to fill it.”
Mayor Ivy Taylor, who sits on the SAWS board, is confident in the deal.
“I appreciate those who have been skeptics and challenged us along the way, because they have pushed us to ask more questions and provide more information to the public,” Taylor said.
Vista Ridge is needed, however, in order to sustain the coming growth – an estimated 1 million people by 2040 – to San Antonio and the region, say many City leaders, and SAWS representatives. At capacity, the pipeline would be the largest non-Edwards Aquifer water source.
The project was approved with a unanimous vote from City Council in 2014.
What Has Changed?
The first amendment to the Vista Ridge contract came in May, right after Garney assumed control of the project from financially-troubled Abengoa, the former owner which retains a 20% equity in the project as a silent partner. The contract was changed to require that Garney only control 35 miles of the pipeline in order to reach financial close, rather than “substantially all.”
It’s not that Garney “needed” the second amendment, Burton told the Rivard Report during a Monday interview. “(Rather) the amendment recognizes the structure that’s in place now. As they have been working through this we recognized that they are in a better position.”
Since Garney is a construction company, SAWS will take advantage of its expertise in developing the site where the pipeline connects to SAWS’ infrastructure near Stone Oak.
Potentially millions of dollars could be saved if they postpone finalizing the design plan, Burton said, and work alongside Garney to figure out the exact layout.
“Garney is much easier to work with then Abengoa,” Puente said. “And they’re a construction company. They’re looking at us, like, ‘Dudes, we can build that sucker cheaper than y’all can. If we’re already there building our stuff, let’s talk about this.’”
Hence the opportunity to save money.
Garney will not carry out the day-to-day operations of the pipeline once it’s complete. That will fall to a third party entity. Under the contract, Garney has 18 months before water flows to submit that entity to SAWS for approval. This was already in the contract, Burton said, but the amendment puts this in the right section, Article 4.
Groundwater Well Sites
Half of the 18 groundwater well sites, which will draw from the Carrizo-Wilcoz Aquifer, needed to be moved to a different location.
For their own reasons, Puente said, many landowners have requested to move the well on their land.
“Under the contract, you can’t unless you change the contract,” Puente said. “So we’re accommodating Garney, but most importantly land owners over in Burleson County.”
Water Transportation Permits
While operation permits have been acquired, Garney also needs to secure permits from the Post Oak Savannah Groundwater Conservation District to transport water.
These transport permits last through 2034, but the original contract was to have them through 2044.
“It doesn’t impact SAWS until further down the line,” Burton said, but they’ve built in some incentives for Garney and the banks to get them extended.
“If they (are able to change the date on the transport permits), we’ll give them a small incentive payment,” he explained. If it’s not changed by 2031, “then we get a water credit of up to $50 million.”
Either way, the water will still flow to San Antonio, he said. “A lot of the changes that we’re doing in this amendment is just recognizing the changing structure that Garney is taking. … It’s not something they need necessarily but it’s something to recognize this new structure.”
Councilman Ron Nirenberg (D8) said he was “blindsided” by these changes, and called for better communication between SAWS and City Council in previous conversations with the Rivard Report and an emailed statement sent on Tuesday while traveling in China.
“City Council has the responsibility to approve major changes, especially those that fundamentally alter the conditions under which the project proceeds,” stated Nirenberg, who asked that City Council be briefed. “Taxpayers shouldn’t be on the hook for a project that doesn’t deliver or a company that can’t meet expectations. That concerns me and I’ll be paying close attention to the explanation that SAWS leadership gives us on why this is happening.”
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Nirenberg – along with Council members Roberto Treviño (D1), Rey Saldaña (D4), Shirley Gonzales (D5), and Cris Medina (D7) – asked in February for Council to consider a resolution that would require SAWS to come back to Council before making substantial changes that would shift any risk onto rate payers including “all major developments.”
The request was killed in committee.
Puente maintained that he and SAWS staff have been readily available to Council members and Mayor Taylor, is routinely updated.
“I have been and will continue to be always ready, willing, and able to brief our City Council members individually or formally in front of B Session or A Session,” he said.
A meeting meant to update Nirenberg on the Vista Ridge contract amendments, Puente said, was cancelled by Nirenberg on Oct. 12.
But Nirenberg’s staff said the intent of the meeting was miscommunicated.
“A cancelled meeting is not a good reason why I nor any of my colleagues should have been blindsided by this major change,” Nirenberg stated. “It is incumbent upon SAWS, as the municipally-owned utility managed by City Council and responsive to San Antonio residents, to ensure that we get this information in a timely manner.”
The financial close authorization will be available online at www.saws.org/vistaridge, where the contract also is available for download.