Williams on the LID, Part III

From the Sept. 29 North Coast News: Don Williams has been closely following the complex Street LID project of Ocean Shores. The North Coast News asked Williams to write a chronology on the project, to help people understand how it all happened. And now, Part III:

By Donald S. Williams

In last week’s installment of the Ocean Shores street LID project chronology, I covered the events starting with the release by the City on Feb. 6, 2007 of the preliminary special benefits and assessment report prepared by Macaulay & Associates.  Last week’s chronology took us through passage by the City Council of Ordinance No. 820 on March 12, 2007 which was the legal instrument officially creating LID 2007-01.  At that time the estimated cost and expense of the road improvements was $31,784,115.22 and the project’s cost-to-benefit ratio was 0.683 – meaning that for every dollar of benefit received only 68.3 cents would be spent.  In order to finance the project’s costs during the three years of street construction (this is called “interim financing”), the City sold two bond anticipation notes which would be re-financed by selling a 20-year bond after construction was completed.  The debt created by the 20-year bond would be paid off over 18 years by the property owners of Ocean Shores.
This week’s installment covers the first two phases of construction starting in the spring of 2007 and completing in the fall of 2009.  During this period there were several surprises announced by the City and these are covered below.

The Project Starts
Project construction started in the spring of 2007 with Phase 1.  Phase 1 consisted of three paving contracts totaling about $11.8 Million.  Streets were resurfaced south of Taurus Blvd. and west of Point Brown Ave.  Catala Ave. on the east side of Point Brown Ave. was included at the request of the Fire Department in order to improve access to the area by emergency vehicles.
October 8, 2007.    The first surprise.  The City Council was told by Finance Director George Rogers that the City had insufficient funds available to pay for the first year of construction. Remember from last week’s installment that the City sold the first bond anticipation note on July 26, 2007 in the amount of $7.615 Million. But the three first-year contracts totaled $11.8 Million.  The City was short by over $4 Million. The Council was given two options:  either borrow from a lender at an interest cost of 7.5% or borrow within the City’s financial structure using interfund loans.  For the latter type of borrowing, state law set the interest rate at 5.0%.  The least-cost approach was for the City to borrow the money from itself.  At Rogers’ request the City Council approved Resolution No. 573 authorizing one or more interfund loans not to exceed $6.5 Million that would be borrowed from up to nine City funds. These borrowed funds plus interest would be repaid no later than March 31, 2008 using a portion of the proceeds received from the sale by the City of a second bond anticipation note (which the City sold on Feb. 1, 2008).
Then came the next surprise. At this same Council meeting, Public Works Director Ken Lanfear told the Council that the street monument system consisting of 1,645 monument positions was in disarray and needed repair. A large percentage of the markers were found to be covered by asphalt or missing altogether.  Additionally, the elevation data was in error and could not be used to establish the precise elevations necessary for accuracy in future surveys.  Even though a large percentage of this problem had resulted from the City’s neglect over many years, the Council decided that this repair work should be charged to the LID and it approved a three-year survey contract with Chateau Land Surveyors, an Ocean Shores surveying company, at a cost of $188,375.
During Phase 2 of the construction, an additional 240 monuments were discovered to need resetting and also needed to be surveyed for elevation. At its Aug. 11, 2008 meeting, the Council approved Lanfear’s request for a contract amendment adding $37,200 which increased the total Chateau contract to $225,575.
(Author’s note:  At the Protest Hearing on Sept. 20, 2010 the City listed $233,690 as spent on “Monument & Surveying.” This is $8,115 more than the Council authorized for the Chateau survey. $20,000 was budgeted for “Monument & Utilities” in the $31.784 Million total cost estimate used by the City up to this point in the LID project.  Clearly, this additional survey work identified after construction started and then added to the LID cost – $233,690 vs. $20,000 -  must be considered as a cost overrun.)
Phase 2 of construction, in the summer of 2008, consisted of two contracts totaling about $8.9 Million for south of Albatross and east of Point Brown Ave. Phases 1 and 2 (during 2007 and 2008) proceeded smoothly with Public Works Director Ken Lanfear reporting on a regular basis at City Council meetings that the LID project was on track and on budget.
(Author’s Note:  There was no official project manager.  But because Lanfear appeared to be doing the tasks of a project manager, the North Coast News dubbed him “the de facto project manager”.  As far as this author knows, there never was an appointed project manager.  However, at the September 20, 2010 Protest Hearing, Lanfear in responding to a question stated that he was, in fact, the LID Project Manager.  True project managers have substantial control over a project including contract approval, overseeing the work performed and cost oversight responsibility.  But as discovered very shortly, no one person was in charge of the LID.)
At the conclusion of Phase 2, Mayor Bunkers also was of the opinion that the LID project was on budget. During the Mayor’s Report at the Oct. 27, 2008 City Council meeting Mayor Bunkers told the Council that the first five contracts were about $448 Thousand below estimates and that the project was within the initial $32 Million plan. All of this positive talk ended in March of 2009 just before the contracts for Phase 3 were to be bid.  Mayor Bunkers discovered that the City had insufficient funds to complete the LID project.

Next week: The biggest surprise of all.