Pawtucket, RI approves Earth Tech contract for new water plant
-- In a vote that took four years and much controversy to reach, the Pawtucket Water
Supply Board Tuesday night voted -- though less than unanimously -- to approve a 20-year
contract with vendor Earth Tech to design, build and operate a new $47 million water
treatment plant to replace its ailing facility built in 1938.
Robert Markowitch, the
Earth Tech regional director who will oversee the project, said his company will execute
all its signoffs today.
That will leave the ball in the court of the City Council, whose dispute with the Doyle
administration over the choice of the vendor, beginning in January 2002, led to hundreds
of thousands of dollars in extra expenditures in a project that was planned to break
ground that April.
The council tonight is scheduled to vote on a resolution authorizing Mayor James E. Doyle
to apply for $119 million in funding from the Triple-A rated R.I. Clean Water Finance
Agency. The council Finance Committee last week voted to recommend the move.
The all-rolled-into-one funding plan includes "defeasing" (repaying and
canceling) bonds issued by the Pawtucket Building Authority, refinancing city general
obligation bonds issued for the water system, and financing improvements including the new
plant, plus debt service.
If all now goes forward as planned, construction would start in January, said Pamela
Marchand, PWSB chief engineer and general manager. The contract requires completion in 24
The dissenter in the 5-1 approval vote was board member and City Councilor Thomas Hodge,
who had favored rival vendor USFilter throughout the process. Hodge said changes in the
guarantees provided by Earth Tech and its parent company, Tyco International, changes that
Marchand and PWSBs outside experts said were improvements, left him uneasy.
"That concerns me greatly, that those had to be revised," Hodge said. "I
hope Im wrong for everybodys sake and I urge Earth Tech to prove me wrong. But
Im just not happy or comfortable (with the contract)."
But PWSB outside lawyer Sean Coffey, who negotiated the changes with Earth Tech, said they
were important improvements.
Coffey said a $2 million letter of credit to help finance the start of the project will
now be a $42 million performance bond from a Double-A rated company, which was not in the
original proposal documents and after Tuesdays vote will take effect as of today;
changes were made to satisfy bond counsel and be in accord with an IRS ruling "that
allows these types of bonds to be issued," with PWSB acting as the citys agent;
if Earth Techs credit rating falls below investment grade, "theyll be
fined for any failure to obtain a letter of credit" during that period; and if Earth
Tech is sold, PWSB can terminate the contract with a roughly $300,000 payout.
well short of the (prior) $2 million payment for termination for convenience," Coffey
Also, with the overall $100 million performance guarantee by Earth Tech is a $50 million
backup guarantee by Tyco. Should Tycos credit rating fall below investment grade, it
"must immediately post a $5 million letter of credit," Coffey said.
The performance bonds, PWSB consultant Paul Eisenhardt noted in a conference call from the
West Coast, are "over and above" the Tyco guarantee.
And if something goes wrong, Coffey told the board, "you have a full field of
alternatives to pursue" in litigation against Tyco and Earth Tech up to the $100
Markowitch of Earth Tech said an ongoing maintenance and capital equipment replacement
fund (factored in as part of their service fee), such as for replacing filters or for a
new roof years down the line, should keep the plant in optimum condition until the city
inherits it at the end of the contract. So at year 20, "youll still have the
same basic facility as on day one," and any unused monies in that fund would revert
to the city.
Eisenhardt said the maintenance schedule has already been laid out based on "when
such things typically occur," to prevent the plant from being run into the ground.
Ongoing maintenance will be "the vendors responsibility," subject to
ongoing PWSB inspections, he said.
The council resolution is needed to allow Clean Water, which like Earth Tech will have
officials at tonights meeting to answer questions, to hire bond counsel to start
that process, which includes getting a bond rating for the issue.
The city will now have 120 days to sign its side of the contract terms and put them into
Anthony Simeone, Clean Water executive director, told a council committee last week that
the bond process could be done within 90 days. Marchand said Tuesday that Earth Tech has
said it would immediately "get started in the permit process, at their own
risk," even as the bond process goes forward.
"Our hope is to have it started by Jan. 1, a new project for a new year,"