$60 million offered to run water system

By BRIAN MEYER
Buffalo News Staff Reporter
4/5/2002

A California company wants to give Buffalo $60 million and rebuild the city's water treatment plant, in return for operating the city's entire water
system.

U.S. Filter of California also would plant the seeds for a "regional
approach" to water delivery, advocates said Thursday, and become
a partner with the Erie County Water Authority, which would provide
water in outlying parts of Buffalo.

"They want to rebuild our entire treatment facility," said city Public
Works Commissioner Joseph N. Giambra. "They're saying to us,
"We'll build you a plant, we'll give you an upfront fee and we'll
operate the system for 20 years.' We're certainly going to take a
good look at it, but we haven't even started to digest the plan yet."

The concept is one of four proposals the Water Board received this
week. The city's five-year contract with American Water Services
expires Aug. 31. That company has submitted a plan to continue
operating the system, as has United Water. City officials said they
have just started evaluating all four proposals and are not expected
to release further details until next week.

The county Water Authority has also submitted an alternative plan,
but county officials made it clear that they support U.S. Filter's
concept.

"This is a very innovative and creative solution to the city's
infrastructure problems," said Robert A. Mendez, executive director
of the county Water Authority. "And when you have the world's
largest water company eager to make an investment in Buffalo, that
says something."

What makes the deal attractive to U.S. Filter? Project Vice
President Richard Johnson said the company is convinced it can
slash operating and repair costs. U.S. Filter is owned by Vivendi
Water, a global company with 215,000 employees and operations in
more than 100 countries.

"The reason it works so well is that when you put engineers,
contractors and operating staff all on one team, it can result in lower
costs," Johnson said. "We think we can operate it for less, repair it
for less and provide some strong guarantees."

Under a plan that would be negotiated, the city would pay an annual
service charge to the company, with the money coming from fees
paid by city property owners. The Water Board - with its seven
members nominated by the mayor and confirmed by the Common
Council - will continue to set water rates, regardless of which entity is
chosen to operate the system. The rates could depend on the deal
negotiated with U.S. Filter and how much savings the company
could achieve.

Johnson said the county's proposed involvement would be a major
benefit because the city's current water treatment facility is too large.

"Your plant is designed for almost double the size that is needed,
and it's a plant that needs substantial rehabilitation."

New plant, smaller capacity

Under the proposal, U.S. Filter would redesign or build a new plant
with smaller capacity, allowing the county to provide water service to
some Buffalo neighborhoods that are on the outskirts of the city,
including parts of the University District. The county already has
relatively new pipes near some of those areas, meaning the city's
dilapidated pipes wouldn't have to be repaired.

"It's definitely a more regional approach to water-service delivery,"
Johnson said. "The county's involvement in this concept is the real
secret. Everyone benefits."

Because the U.S. Filter plan is a so-called "design/build/operate"
agreement - as opposed to a simple operating agreement, like the
other three proposals - it would require state legislation and then
formal bids, Giambra said. That means the city would not be able to
implement it immediately, he added.

Preliminary figures released by U.S. Filter emphasize that
engineering evaluations must still be completed to determine the
exact amount of savings that could be derived from its plan. But
officials estimated that the city could receive a $60 million upfront
payment or an annual $5 million payment over 20 years.

Budget gap is a factor

City officials have been struggling to close an $8.9 million shortfall in
the current year and a $20.7 million gap in the new fiscal year that
begins July 1.

"Tell them to write the $60 million check," quipped Giambra, before
explaining the requirements for state approval and bidding.

The city's water system contains about 780 miles of pipe, more than
11,000 valves and 7,430 fire hydrants. Most of the water lines were
installed during the 1880s and the 1920s.

Johnson, who once served as mayor and city manager of two
municipalities in Massachusetts, said the company's commitment to
make repairs to the aging system would relieve the city of major
long-term financial headaches. He said U.S. Filter's sophisticated
technologies and preventative maintainence programs make it
feasible for the company to absorb such costs. Also, by having the
county assume responsibility for water service in some parts of
Buffalo, the costs of repairing the city's aging water lines will be
reduced.

"We don't do these things unless we can make at least some
money," he said.

Johnson said he recently talked with Mayor Anthony M. Masiello and
city public works officials about the proposal. He acknowledged that
one looming concern involves the jobs of the 134 workers who are
currently employed in the water division. He said U.S. Filter could
commit to guaranteeing employment for all workers for at least three
years, possibly longer.

Giambra said officials will review the four separate proposals and
likely make a recommendation to the Water Board by the end of the
month. The Water Board and the Council must approve a new
operator.