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Assembly Approves $96.7M Blue Lake Construction Cost

By | September 12, 2012 - 3:11 pm

Blue Lake overflows its spillway Monday morning. The Assembly on Tuesday approved a $96.7 million contract to raise the dam 80 feet. (Photo: Ted Laufenberg)

Sitka’s Blue Lake dam expansion will move forward.

The Assembly on Tuesday unanimously awarded a $92.9 million contract to Montana-based Barnard Construction. With extra money built in for contingencies, the total cost comes out to $96.7 million.

That amount of money was well above engineers’ estimates of $50 million, and coming up with it will require a scramble on the part of the city.

Tuesday night might have been proof that, among members of the Sitka Assembly, unanimity and enthusiasm are not the same thing.

Thor Christianson: “If I had my druthers, we’d delay a while, but apparently that’s not really an option.”
Bill Paden: “We can’t cancel it. It’s not an option, in my opinion.”
Mim McConnell: “It’s a risky thing, and kind of a scary thing. Life can be uncertain like that.”
Pete Esquiro: “We’ve got a heck of a lot of work to do.”
Mike Reif: “The alternatives? There are none.”

Still, it was ultimately seven yes votes for one of the most expensive projects in city history – a boost to the Blue Lake dam by about 80 feet, increasing the amount of electricity Sitka can generate from hydropower.

The project’s cost grew by about $40 million, and the change will mean higher rates for rate payers in Sitka. Here’s Reif talking with utility director Chris Brewton.

Reif: “The rates are going to be somewhere around 15 cents a kilowatt (hour) in the year 2017, and when this project originally cost roughly $100 million, they were going to be roughly 2 cents lower than that.”
Brewton: “Correct.”
Reif: “So this is going to cost us – this extra $40 million – is going to cost the average consumer in Sitka $300 a year – the average resident.”

There wasn’t a whole lot of public testimony on the contract. Matt Hunter said he supported the Assembly moving forward – that it could pay for a dam or it could pay for extra diesel, but either way, it was going to cost money. And one person spoke out against the project.

“As I’m accustomed to doing, I’m probably going to take the minority opinion,” said former Mayor Marko Dapcevich. “Sometimes a good idea can turn into a bad idea. And I think that’s where we’re going. If you look at where the utility rates are going in this town, you’re going to find that the demand that you’re hoping from that dam is not going to be there. There’ll be less utility accounts, less people, less business, less a lot of things.”

Assembly member Phyllis Hackett said the need is acute and, despite the higher-than-expected cost of the project, it must move forward. The Assembly, she said, is not taking the decision lightly.

“We have asked the community once a month for four years to conserve, conserve, conserve, conserve. And we’re not getting it,” Hackett said. “So we have to provide energy – we have to do that – and the only other option is oil.”

Canceling the project would mean more diesel use in the future, and would be twice as expensive as expanding the dam, at least in the long run. That’s according to a report (PDF) prepared by consultants and city staff.

“One thing that wasn’t mentioned much in last night’s work session was the carbon footprint that we would be laying down if we had to go to a lot of diesel burning,” added Mayor Cheryl Westover.

Rebidding the contracts also won’t work, the report said, because costs are only going to go up. Asking for bids again would put the project off a year and probably not fetch a lower price.

Tuesday night’s vote locked in the price and awarded the contract, but nobody’s getting their shovel ready quite yet. In the world of big municipal projects, there’s a difference between getting the job and starting the job. The Assembly still needs to approve something called a “notice to proceed.” It’s the way a municipal government shouts “go.”

At least one Assembly member, Christianson, said he’s not promising he will. He says he’ll need to see real work done on lowering the cost of the project before he votes yes.

That was the other part of Tuesday night’s conversation about the dam, and it took place behind closed doors. The Assembly wanted to talk about how to negotiate with the contractor, Barnard. Alaska law allows closed sessions to talk about legal matters and matters that, if made public, would hurt the city’s finances. So the Assembly went into executive session with the municipal attorney and the panel of consultants and city staff who worked on the Blue Lake bids.

When the door opened, an hour and a half later, engineering consultant Paul Carson said the city will ask Barnard to sit down with city staff in the next two weeks and figure out ways they can save money. The goal is to have that done just after Alaska Day. The Assembly would likely vote on the notice to proceed at its Oct. 23 meeting.

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