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Skeptical Finance Panel OKs Higher Meinecke Project Costs

Huge project, growing year after year, comes in $5 million over budget – and $2 million over estimate. Aldermen ask department heads to reconcile those several discrepancies.

The Wauwatosa Budget and Finance Committee on Tuesday night unanimously approved spending $5.2 million more than was planned for the Meinecke Avenue sewer Project.

But despite the all-are-in-favor vote from the seven-member panel of aldermen, it was not exactly a rubber stamp or a hearty endorsement.

Ultimately, the uneasy feeling was that just had to go forward as designed and as bid, with no cutbacks or further holdups.

But aldermen wanted to know two things:

  • Why, after all the lengthy planning that has gone into this project, is it suddenly costing a full 50 percent more than anticipated? And,
  • Where, in these already difficult times, did Wauwatosa so easily find the "pot of money" to pay that extra 50 percent – more than $5 million – without any additional taxation (which it can't) or borrowing (which it won't)?

Fair questions, since $5 million is not chump change to a city the size of Wauwatosa, amounting to about 10 percent of the entire annual budget.

The answers to the two questions are arcane and complicated, interrelated and yet separated, worthy of incredulity yet wholly understandable if you take the answers on trust – which not everybody did, or will.

In short, , the largest public works program in Tosa's living memory, has turned out to be a huge hot mess – and one quite easily fixed.

That does call for some explanation.

Estimates, budgets, keep leapfrogging

In the matter of cost overruns, there are two important figures to keep in mind: $10.3 million, and $12.5 million.

The first, $10.3 million, is what had been budgeted for a project now expected to cost more than $5 million above that.

The second, $12.5 million, is what had been estimated as the project cost by the city engineer as of the letting of bids – which then came in at a low of $14.5 million, with total project costs pegged at $15.2 million.

Both are low, but one is far lower than the other. So, why was the city engineer's final estimate more than $2 million higher than what had been allocated, and why was it still $2-plus million less than the final cost?

According to City Engineer Bill Wehrley, his estimate of $12.5 million was based, as it had to be, on a combination of the experience of recent past project costs and consultants' predictions.

"I don't want to put it all on our consultants," Wehrley said, "but I thought they looked low" compared to his staff's own expectations.

Wehrley's figure also was current, the best estimate at the time bids were let in April, whereas the approved project funding figure was a year and a half old.

Wehrley did not claim that his own figures were on the money, but said they would have been closer to the accepted bid.

Why were they low at all?

Wehrley said that his cost comparisons from recent projects – there have been several smaller but significant sewer rebuilds since Meineke was conceived – came during epic bad economic times.

Contractors since 2008 have been willing to lowball bids just to get work, he said.

In order to keep key personnel employed and expensive machinery working while private projects were at a near halt, construction firms were eager to cut margins on public works projects.

Now, apparently, signs of a slowly recovering economy have put them in a mood to make money again.

Allocated funds lag as years, floods mount up

So, why is the bid cost 50 percent above the budgeted cost, as opposed to the estimated cost, and why are the budgeted and estimated costs so far apart?

As mentioned, Wehrley's estimated cost is fresh, based on the final design and most recent cost comparisons.

Bill Porter, who became Public Works director only a little over a year ago and had to learn the history of Meinecke, said that the budgeted costs of the project had been a moving and growing target for four years.

Meineke, Porter said, began humbly in 2008 as a street repaving plan. There was no thought then of rebuilding entire storm and sanitary sewer systems, along with water mains, street lights and everything else.

Money for repaving was being allocated in the capital budget, Porter said – and then the rains came, hundreds of basements flooded, and engineers looked again at the area and wondered if sewer work was needed, too. (It would make no sense to renew pavement only to turn around and break it up if sewers needed excavating.)

In 2009, the rains came again, another rip-roaring June flood that filled the same basements again, and more.

In response, the Meinecke Project started to take on a much larger shape, and more money was allocated. But as in 2008, the money set aside in the capital budget was not spent. Mother Nature was not done.

In 2010, before the expanded 2009 plan could be implemented, July let loose. The first flood was worse than the previous two. The next was worse than anyone had ever experienced or imagined.

On July 22, 2010, . (In some parts of north Milwaukee and the North Shore suburbs, there were reliable reports of 3 inches of rain in a half hour.)

Going back to the back-to-back floods of 1997 and '98, it was the sixth time homes in neighborhoods throughout Wauwatosa were severely inundated.

So, once again the Meinecke Project was expanded, this time, Porter said, into "a comprehensive infrastructure plan," basically rebuilding everything from the bottom up.

The project was ramped up, with new funds allocated on top of funds already budgeted but not spent.

The plan approved in late 2010 was so big that no work would be contemplated in 2011. It would take that full year just to design the thing. So again, money allocated was not spent.

Now, in 2012, the cobbled-together 2008 through 2010 budgets, totalling $10.3 million for Meinecke, proves to be around 33 percent, $5.2 million, under the actual current costs.

The real-time design is complete. Market forces have changed. The foreseen funds are inadequate.

Call in the reserves

So how do we pay for it?

Excepting some few hundreds of thousands of dollars here and there to be moved backward or forward, the lion's share will be paid in cash – from cash reserves.

John Ruggini, director of finance, like Porter just over a year in the job and hired from the outside, looked at the reserve funds of the storm and sanitary sewer utilities and felt that they were unnecessarily – even irresponsibly – bloated.

Nobody doesn't like having healthy reserves, but these two, at $6.4 million for storm sewers and $2.2 million for sanitary sewers, seemed overly healthy to Ruggini.

After all, that's taxpayer money sitting in a low-interest environment (a next to no-interest environment in this economy) doing nothing.

Ruggini said that those surplus funds needed to be spent down even if Meinecke didn't demand it – and the other options, raising taxes or borrowing through bonding, were impossible or unthinkable, respectively.

Ruggini had won applause in his first year for revamping the capital budget from a one-year to a five-year plan. Budgeting capital projects a year at a time was asking for trouble, he felt, because of just the sort of volatility being demonstrated.

Expect the unexpected, as you should – whether it's weather or some other emergency or a project coming in over budget – and you will find yourself short of funds mid-year and begging for new cash, if you budget year-to-year.

On a five-year plan, you have flexibility. You can move a project forward or backward based on real issues. As long as the bottom line comes out the same at the end of five years, you haven't lost – or necessarily won – anything by advancing or postponing projects, or by dealing with emergencies.

There's an end to that rainbow

Ald. Pete Donegan was uncharacteristically perplexed. A former business executive, and former chair of Budget and Finance, Donegan seldom admits to failing to understand a financial matter.

"I trust this," Donegan said to Ruggini, "but I don't understand it.

"I don't know where this pot of money is that we keep going to."

Donegan referred not only to Meinecke but to Covenant, the $8.5 million lawsuit loss last year that was paid out of reserve funds and the promise of future funds from the retirement of the Research Park TIF.

"We keep going to our reserves, which we have so carefully built up over many years," Donegan said. "There has to come a day, and I fear that day is coming."

Nick Schweitzer May 31, 2012 at 01:46 PM
I'm skeptical as well. Does nobody remember a few months ago when the City Council approved a $2 million loan to pay for a lawsuit against the School District, and then the district turned around and said they didn't need the money? (Story Here - http://wauwatosa.patch.com/articles/schools-to-repay-lawsuit-losses) How convenient... because now we suddenly need an extra $2 million for another project, and we now just happen to have it lying around. I smell a rat.
Alfred May 31, 2012 at 02:12 PM
And why am I paying for this when I don't live anywhere near that area?
Mein Ickies May 31, 2012 at 06:14 PM
. @Alfred - You are paying on this sewer for the community in general. Where is your sense of the common good? Meinecke Ave. needs your taxes. Attend the meeting at the Wauwatosa Library at 7pm Mon. and give the Meineke and the community your full support.
Tosa720 May 31, 2012 at 08:28 PM
I personally do not believe in just paying the money without finding out the entire story and accounting for every penny being requested or spent. Just because they are asking for the increase doesn't mean they should be entitled to it. Part of the responsibility of the contractor is to stay within budget and city officials should stay on top of things to make sure they are staying within budget as well.. I have lived at my current address for over 17 years. Whenever my basement flooded due to heavy rains, I was told there was "NO sewer problem". I repeatedly asked to have the area checked out after seeing numerous other homes with piles of water-logged items placed at the curb after heavy storms. I believe it was last yr or the yr before when a group of neighbors called our alderman and were again told "No sewer problems here".... We all know there were sewer problems and were helpless to get anyone to look any further or take action. Now every where you go things are dug up and larger pipes being installed. The costs today are higher than they were years ago. They city was being penny wise and pound foolish for too many years. Whoever made these decisions in the past were not being honest with citizens or themselves. Maybe now that we have a new mayor and hopefully a little honesty to boot we will stay on top of things. One can only hope.
alt ideas needed June 01, 2012 at 12:27 PM
What a joke of a city council. I can guess where they will get the extra money - roll it on down to the residents. You failed the citizens of Wauwatosa. From the residents who have had flooded basements, to the residents that will have to endure this project, and to all Wauwatosa citizens that will eventually have to pay the bill. This is what happens when then city does zero maintenance on city sewers over the last 80 years. This project is too big, costs too much, and is making Wauwatosa an undesirable place to live.
TJ Monday June 01, 2012 at 01:01 PM
One alderman became interim mayor, suddenly resigned and left town, and his aldermanic position has not been replaced. The other alderperson has not answered emails and appears poorly informed when phoned. That is the 2nd District, the Meinecke Project south of North Ave. The 2nd District is the only District of 8 Districts not represented on the powerful Budget and Finance Committee. The Mayor is supposed to appoint someone from each District from that Committee, but has not done so for the 2nd.. Was this aldermanic weakness planned so as to catch the 90th St. residents south of North Ave. underrepresented, and ram a monstous sewer corridor down their residential throats? Or was it just seeing a weakness and jumping at the opportunity? Will the rest of the City wake up to what is happening to their reserve funds, built up over the years? Why is City government so susceptible to emotional pleas and nagging from the Meinecke contingent, who by the way will reap handsome real estate value increases if this Project goes through? Why is there little concern for 90th St. residents, who will be burdened with a 20 ft. sewer line just a few feet from their foundations, lost trees, a huge loss of real estate value, and special assessments to help pay for it? Where is the fairness in that? Taxation without equal representation!
alt ideas needed June 01, 2012 at 01:19 PM
well said TJ
Alfred June 01, 2012 at 02:18 PM
The entire city council of Tosa is made of amateurs, failed business types and other malecontents who don't understand the simple concept of compound interest....yes, let's spend our rainy day fund for a few blabbermouths on one street, and if we need money, hell lets do a bond issue and our kids who aren't born can pay for it! Our neighbor to the east, mogadishu, is slowing destroying our east corridor and we all get excited when a bread factory opens! Fools electing fools. Its a shame what Tosa has become from what it used to be.
Alfred June 01, 2012 at 02:21 PM
The big mouths from Meinecke street got their way, if we had any leadership in this city the adult would have told the spoiled brat 2 year olds on Meinecke they can't have anymore candy. Hey Meinecke brats, can you at least say thank you for the long term residents who are lining your pockets when y'all move out for the next suckers to buy your homes?
TJ Monday June 01, 2012 at 09:14 PM
I am wondering about the tearful lady who brings the poster of photos of her flooded basement AND pulls the kids out of school and drags them to the City meetings. She bought the house on Meinecke with the collapsed basement wall, then kept her kids there, she says, through 5-6 basement floodings. Now they are permanently affected and lost their childhood battling the putrid basement situation.. I would have taken my losses and gotten the kids out of there.
alt ideas needed June 02, 2012 at 10:13 PM
What is the actual number of homes in Wauwatosa that have experienced sewage in their basements within the last 10 years? I have not seen any data to back up the claim that hundreds were affected. Wauwatosa will be spending over $15 million dollars to help a very small portion of people, and outrage a very large number of people within their community. Those directly affected by the construction of the 16 month estimated construction time are upset with their community and the chosen leaders of Wauwatosa. If the citizens of Wauwatosa become disgruntled, Wauwatosa will become an undesirable place to live. If Milwaukee can be compared to Detroit, then Wauwatosa can and will be compared to Flint. If the budget of this project is way more than expected, what will be the length of this newly budgeted project? My assumption is that the tearful lady with feces in her basement purchased their home at 86th & Meinecke within the last 15 years. I am sure either a state licensed inspector would have noticed the previous water problems in the basement, or that the tearful lady with feces most likely purchased the house below market value. Also, do not purchase a house in a flood plain.
TJ Monday June 03, 2012 at 11:22 PM
@alt - Very well stated!. Follow the money.trail Should have bought a few of the affected houses a couple years ago. Word has it that the City is in a panic and making rash decisions because they are afraid another 100-yr. or 500-yr rainstorm will get them a lawsuit from that area. Apparently, they are NOT figuring on a lawsuit from outraged homeowners in the path of the 25 ft. deep trench chewing up their trees and street, or getting voted out.
Laura June 16, 2012 at 11:43 PM
I purchased my home in 1991... the tearful lady... who is being provided hours of entertainment by you and your friends comments. Thanks for the laughs : )~
jbw June 17, 2012 at 01:17 AM
I experienced sewage in my basement within the last 10 years. The city confirmed it was not a city sewer problem. We paid an expert to examine our plumbing and found extensive root penetration and a partial collapse of the very old clay outgoing line within our property. They did a good acting as general contractor and replacing the line, including cutting a small piece out of the sidewalk and North Ave to access it all. I have to wonder how many of these flooded homes will discover as we did that these 30-60 year old clay lines (completely obsolete for decades) under their own property are the real cause of their problems. It will be an additional expensive lesson for them.
alt ideas needed May 30, 2013 at 08:58 AM
Jim Price, I need advice and a place to share this with my fellow residents affected by the construction project. My sidewalk was damaged by Globe contractors during this project in 2012. Joe Marks, city engineering dept. 414-479-8931, gave me verbal confirmation in Nov that the sidewalk would be repaired in the Spring of 2013. Now, Globe contractors has decided to hold off on any warranty problems for an undetermined amount of time. In most cities in the USA, this would be fine, but this is Wauwatosa Wisconsin, and they charge their citizens an assessment to repair the sidewalk in front of their property.

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