GLENWOOD SPRINGS, Colorado - The City of Glenwood Springs received word Tuesday that it will have to include a prevailing wage provision in the contract for the Wastewater Treatment Facility project.
Glenwood Springs City Manager Jeff Hecksel received clarification in a memo from the Environmental Protection Agency dated Nov. 30, addressed to Water Management Division Directors, which stated that "this law, [the 2010 Interior and Environment Appropriations Bill] provides appropriations for both the Clean Water State Revolving Fund and Drinking Water State Revolving Fund for Fiscal year 2010, while adding new requirements to these already existing programs."
One new requirement is the application of Davis-Bacon Act, the memo stated. The Davis-Bacon Act was established by the federal government to protect workers from getting paid less than an area's prevailing wages and benefits on similar projects.
Glenwood would essentially be using funds from the revolving fund programs to pay down the interest rate on the loan, which would require the city to include Davis-Bacon in the contract. Glenwood did not include the wage requirement in the bid documents that were sent out on Oct. 23, because the provisions were not required at that time.
The bill was signed into law on Oct. 30 by President Barack Obama.
The latest news was not what Hecksel had hoped to hear.
"We were hoping for better news," he said.
Colorado Water Resources and Power Development Authority Finance Director Mike Brod indicated that Glenwood - as well as 22 other similar projects around Colorado - is caught between approval of a loan agreement by City Council and securing the loan agreement with the Authority. Glenwood City Council approved the loan agreement on Oct. 15, before the law took affect, but still had to secure the financing with the authority, according to Brod.
"We were hoping that if we had already committed funds, then we wouldn't have to include the requirements," Brod said.
That would have allowed Glenwood to proceed with the project without including the wage requirements.
"But it did not go that way," Brod said.
The water and power authority was scheduled to begin the bond sale on Nov. 17 to fund the Glenwood project, but did not proceed because they were uncertain of how the new provision would effect the project.
"At least we finally have an answer and we can say, let's deal with it and find a way to move forward," Brod said.
Now, the city just has to determine how to proceed with the project.
"We need to talk with the [Colorado Water and Power Authority] and come up with a list of what our options are," Hecksel said. "Then determine what the risks are associated with the options, and which is the best in terms of where we go."
Hecksel said that he was hoping for a meeting with the authority this week to discuss the city's options.
Brod said that the city could offer a municipal bond program to side step the new provision, however, it would increase the cost of the interest on the loan.
Brod said previously that the addition of the provision could increase the cost of the project by between 5 and 20 percent, depending on locations and current average wages. He said also that additional administration and reporting requirements could potentially increase the cost as well.
Glenwood administrators were pleasantly surprised with the bids for the contract all coming in well under the estimated $27 million project. The low bid from Arizona-based Archer-Western Construction came in at just under $23.5 million, or about $4 million below estimates.
According to the EPA memo, construction completed prior to Oct. 30, 2009, even if it is to be funded by the same agreement, will not be required to include the new provision because the work has already been done. So, the $6 million in work that has already been completed on the Glenwood project, including installation of a force main and access road to the new facility, will not be affected.
City Council approved design variances, building and land use permits associated with the project on Nov. 19. City Council was scheduled to award the contract at the same meeting, however, the award was pulled from the agenda, awaiting clarification of the legislation.