Walnut Grove receives two bids for sewer plant expansion; low bid exceeds current budget by about $600,000

Walnut Grove city staff told the council on [work session date] that two bids were opened for Phase 2 of the city's land application system expansion, and the low bid exceeded the project's current budget by roughly $600,000.

The most immediate facts: city staff said the low bidder was IHC Construction Services LLC at about $4,055,005 and the other bidder was Sol Construction at $4,718,000. Staff told the council the current project budget stood at $3,567,250 and that approved appropriated funds, grants and local funds available for construction plus contingency added up to $3,362,250, leaving the city short of the amount needed to award construction.

Why it matters: the Phase 2 expansion is intended to add treatment capacity the city has advertised and that prospective developers are waiting to reserve. A shortfall of this size affects whether the city can immediately award the work and proceed to construction, or must identify additional funding or reduce scope.

City engineer and staff briefed the council on options. Staff and the project engineer said options include: (1) re-scoping the project to reduce production capacity, which staff said the mayor viewed as undesirable; (2) seeking additional funding from the grant/loan program referenced in the meeting (staff said the program can provide a roughly 10% increase under executive director approval, and larger amounts require an underwriting process and more time); (3) drawing on local funds or money-market reserves the city has earmarked for sewer projects; and (4) adjusting sewer connection or capacity fees to raise revenue going forward.

Council members and staff walked through numbers on a spreadsheet staff provided. Staff said combined balances in dedicated accounts plus the 10% contingency the executive director can approve would still leave the city roughly $448,000 short (staff presented a calculation that reduced the gap after a potential loan top-up). Staff also said existing committed funds across project accounts left about $48,721.79 available to add toward the project immediately. The transcript included a staff summary of the city's current accounts and referenced a 02/2019 reserve account and funds expected in 2025.

Contractor and procurement issues were discussed. An IHC Construction representative, present at the meeting, told the council that material-price risk is typically borne by the contractor under a lump-sum contract and that his price reflects that risk: "Typically, material cost increases are all on me. That is why my price is where my price is," the IHC Construction representative said. The contractor and the city's construction counsel discussed contract terms that can grant schedule relief but do not usually change lump-sum price after award.

Staff and the city's engineering representative said the procurement timeline allows the council to place a notice of award and related documents on the next regular council meeting agenda for formal action. Staff committed to provide an information packet ahead of that meeting that will include the engineer's opinion letter, a notice-of-award draft, funding-source detail, and recommended motions so councilors can see where proposed funds would come from before a vote.

Council discussed policy alternatives to reduce risk: several council members and staff mentioned (a) selling or reserving sewer capacity with deposits or time-limited commitments, (b) increasing connection or capacity fees (some councilors noted the current $6,000 connection fee is several years old), and (c) borrowing or reallocating existing reserves with the plan to reimburse those reserves when additional grant or capacity revenues arrive. Staff said other Georgia communities have used capacity-resale and meter-size fee models; examples given included $10,000 residential fees in nearby jurisdictions and substantially higher fees for large commercial meter sizes.

Next steps: staff said it will prepare the engineer's recommendation and award package for the council's regular meeting packet, and the item will be placed on the next council meeting agenda for a formal decision to award or reject bids. If council awards the contract, staff said the city will follow routine preconstruction steps (insurance, bonds, preconstruction schedule) and pursue the additional funding options discussed if necessary.

Councilors and staff repeatedly emphasized the tradeoffs between delaying the project, which could increase contractor prices, and moving forward while arranging supplemental funding. No vote or final contract award was recorded during the work session.

Ending: Staff said the next council packet will include the notice of award and a breakdown of how the city would allocate funds for the contract so councilors can decide at the upcoming regular meeting.