The Lake Oswego City Council plunged ahead Tuesday night with the biggest public works project in the city’s history, accepting permit conditions requiring a $5 million payment to the city of West Linn, approving work that will allow construction to start this year, and pledging to look at ways to rein in potential rate increases expected in the future.

The decision emerged from several split votes at the end of a four-hour-long meeting attended by about 75 people at city hall.

The first vote, on a $10.6 million contract that will allow construction of a new Clackamas River pump station to begin this year, was approved 5-2. Mayor Kent Studebaker and Councilors Jeff Gudman, Jon Gustafson, Donna Jordan and Skip O’Neill were in support, while Councilor Karen Bowerman and Council President Mike Kehoe were opposed.

Studebaker preceded his vote of support with a disclaimer of sorts.

“I come here tonight with some unpleasant news, at least for Lake Oswego ratepayers,” he said, noting the council is “bound legally with decisions made prior to our term of office.

“West Linn took advantage of our predicament and has added $5.2 million to our cost. ... We can either accept their conditions or we can reject them and effectively breach our contract with Tigard.”

West Linn’s recent approval of Lake Oswego’s proposed water treatment plant expansion and related pipeline work was conditional, requiring not only the $5 million payment but also funding for a new West Linn pump station and water lines and for a neighborhood community center.

However, delaying the projects now would waste dollars already spent and risk losing millions more, he said. At the same time, Lake Oswego needs to replace its water infrastructure regardless of Tigard’s needs.

“There are going to be some additional costs to our ratepayers, and this council will do all we can to minimize those,” Studebaker said. “We are trying to act in the best interest of our entire community.”

In all, the council approved more than $13 million in water partnership contracts.

The Lake Oswego-Tigard Water Partnership plans to double the amount of water Lake Oswego draws from the Clackamas River, replace an existing river intake facility in Gladstone, replace its water treatment plant in West Linn, build a new water reservoir in Lake Oswego and expand a Tigard pump station, in addition to installing bigger water pipes. The goal is to have the new system online and serving Tigard by July 2016.

The estimated $250 million in projects is being funded through higher water rates in both cities.

The council on Tuesday heard new scrutiny of some of the numbers and ideas driving those VERN UYETAKE - Auditor and accountant Tiffany Couch, presents findings of an analysis commissioned by private citizens. She told the Lake Oswego City Council on Tuesday that the city's water rate projections have been underestimated.

A group of private citizens hired Tiffany Couch, an accountant and forensic auditor from Vancouver, Wash., to review project data and information about water rates. Among her concerns, Couch said: She believes Lake Oswego has underestimated the city’s costs of taking on debt to finance its share of the projects.

After the meeting, Couch said that regardless of justifications from project team members, the city’s rates and rate projections “are in serious question and will likely need to be higher” to compensate for lower-than-expected revenues in the city’s water fund and higher overall project costs. She said she wasn’t sure how much higher rates might need to be.

Lake Oswego Finance Director Ursula Euler, who received Couch’s report at the start of the council meeting, said she hadn’t yet fully reviewed it.

“But many of these policy issues have been discussed,” she said, explaining that issues such as debt terms were deliberated on by the prior council, which decided to “smooth” utility rate increases and avoid bigger hikes up front. However, Euler added: “It doesn’t hurt to revisit.”

Jordan said she wasn’t surprised by anything in Couch’s report. However, she was surprised by public skepticism about the partnership’s work.

“The public seems to think a lot of the value engineering — the oversight — that nobody has checked it,” Jordan said during a break in the meeting. “A lot of the things people have asked for have been in place since the beginning.”

O’Neill said he had read a 400-page portion of the partnership’s value-engineering work. He urged citizens to think about the savings in replacing Lake Oswego’s water infrastructure with help from a partner.

“We’re doing this project because we want to deliver clean water to our citizens; it’s not about volume,” he said. “We have to repair our plant ... to deliver clean water. It costs a contractor the same amount of money to put in a big pipe as it does a small pipe.”

But Kehoe said some remaining “unknowns” worried him. West Linn residents were in the process of filing an appeal of the water treatment plant expansion this week, and the partnership is defending Lake Oswego’s ability to tap all of its water rights on the Clackamas River in order to serve Tigard.

“I believe we’re elected to challenge assumptions and to challenge research and facts,” Kehoe said. “Why not wait until this is decided?”

He added that he wants to work on revising the city’s agreement with Tigard, reallocating costs to reduce the burden on Lake Oswego’s water users.

Tigard Mayor John Cook said the Tigard City Council has not voted on a proposal to take on 4 million to 5.5 million more of the expanded, 38-million-gallon-a-day water treatment capacity, but the group has discussed the idea.

“The consensus was we would probably be able to do it,” Cook said. “I didn’t see any problem.”

Gudman proposed drafting a request for proposals from firms that might offer ongoing performance review services in addition to those already in place. Both councils would have to approve it before anyone could be hired. Lake Oswego councilors supported the concept 4-3, with Studebaker, Gudman, Jordan and O’Neill in support and Bowerman, Gustafson and Kehoe opposed.

Couch hasn’t yet billed the Lake Oswego citizens who hired her to conduct her analysis but initially estimated about 25 hours of work would cost $4,500 to $5,000.

Jim Bolland, co-chairman of the Lake Oswego Neighborhood Action Coalition, said LONAC contributed $300 toward the analysis.

After Tuesday’s meeting, Bolland said he felt council members had missed the point.

“What they neglected to discuss is that the rates are going to be significantly higher than what they’ve told us,” he said. “The impact on the ratepayers is the rates are going to be higher than expected.”

by: VERN UYETAKE - Lake Oswego City Councilor Jeff Gudman, left, and Mayor Kent Studebaker listen Tuesday to a presentation by Tiffany Couch, an accountant and auditor who reviewed Lake Oswego's water rates and projects.

Contracts approved Tuesday for water infrastructure work

  • $10.57 million to Slayden Construction Group for construction of the river intake pump station project

  • $2.39 million to Mitsubishi Electric Power Products Inc. for a water treatment plant ozone system

  • $399,677 to FKC Co. to provide screw-press equipment at the water treatment plant

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