HomeMy WebLinkAboutStaff Report 2503-4327CITY OF PALO ALTO
CITY COUNCIL
Monday, May 19, 2025
Council Chambers & Hybrid
4:30 PM
Agenda Item
10.Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering
Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced
Water Purification System project (WQ-19003); Authorization of Contract Contingency in
an Amount Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First
Amended and Restated Contract No. C059999 Between the City of Palo Alto and the City
of Mountain View; CEQA Status - Addendum to the 2015 Environmental Impact Report
for the Palo Alto Recycled Water Project (SCH 2011062037) Item Reordered to be Heard
Under Consent Calendar, Supplemental Report added
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: May 19, 2025
Report #:2503-4327
TITLE
Approval of Construction Contract No. C25193197 with Anderson Pacific Engineering
Construction, Inc. in the Amount Not-to Exceed $47,282,100 for the Local Advanced Water
Purification System project (WQ-19003); Authorization of Contract Contingency in an Amount
Not-to-Exceed $4,728,210; and Approval of Amendment No. 2 to the First Amended and
Restated Contract No. C059999 Between the City of Palo Alto and the City of Mountain View;
CEQA Status - Addendum to the 2015 Environmental Impact Report for the Palo Alto Recycled
Water Project (SCH 2011062037)
RECOMMENDATION
Staff recommends that City Council:
1. Approve and authorize the City Manager or their designee to execute construction
contract No. C25193197 with Anderson Pacific Engineering Construction, Inc., in the
amount not-to-exceed $47,282,100, for the construction of Phase I of the Local
Advanced Water Purification System project (WQ-19003);
2. Authorize the City Manager or their designee to negotiate and execute one or more
change orders to the construction contract with Anderson Pacific Engineering
Construction, Inc., for related, additional, but unforeseen work which may develop
during the project, the total value of which shall not exceed $4,728,210; and
3. Approve and authorize the City Manager or their designee to execute Amendment No. 2
to the First Amended and Restated Contract No. C059999 Between the City of Palo Alto
and the City of Mountain View.
EXECUTIVE SUMMARY
Staff recommends that the City Council approve the proposed construction contract and
amendment to the existing Recycled Water Agreement between Palo Alto and Mountain View
to construct, operate, and maintain Phase I of the Local Advanced Water Purification System
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project.1 The project will reduce the salinity of recycled water produced at the Regional Water
Quality Control Plant. This project has been in the planning and design process since 2017, and
project objectives are consistent with Palo Alto’s Recycled Water Salinity Reduction Policy and
Sustainability/Climate Action Plan. The total project cost is $59.9 million, and the lowest bid is
12% lower than the Engineer’s estimate. Funding to cover capital costs is a combination of
direct contributions from Mountain View and Valley Water, a federal grant from the U.S.
Bureau of Reclamation obtained by the City of Palo Alto, and a loan from the State Revolving
Fund to be repaid by Mountain View. Palo Alto is not contributing additional resources other
than staff time.
Palo Alto uses recycled water for irrigation at the Baylands Golf Links and Greer Park. However,
the majority of the blended enhanced recycled water produced by this facility will be used by
City of Mountain View. The amendment to the Recycled Water Agreement defines cost-sharing
responsibilities between Palo Alto and Mountain View associated with the construction costs
for the Local Advanced Water Purification System. Operating costs of this facility will be
allocated based on recycled water usage.
Mountain View City Council is scheduled to discuss and act on the amendment on May 13,
2025. Following Mountain View City Council’s action, staff will publish the draft amendment as
a late packet supplemental report on May 15, 2025.
BACKGROUND
The Regional Water Quality Control Plant (RWQCP) treats wastewater from a total of six
communities (Partner Agencies) and produces approximately 230 million gallons per year of
tertiary-treated recycled water for beneficial reuse.
On January 25, 2010, City Council approved the Recycled Water Salinity Reduction Policy,
including a goal of reducing the recycled water salinity as measured by total dissolved solids
(TDS) to under 600 parts per million (ppm).2 In the following years, the City and the other
Partner Agencies completed several projects to reduce infiltration. The repairs reduced the
salts entering the RWQCP but not by enough to reach the target. In 2017, City Council approved
the Preliminary Conceptual Design Report for a phased Local Salt Removal Facility (Local
Advanced Water Purification System or Local AWPS).3 The Local AWPS will improve the recycled
water quality by reducing its average concentration of TDS from 800 ppm to 450 ± 50 ppm by
1 Local Advanced Water Purification System (Local AWPS) Project C25193197;
https://www.paloalto.gov//files/assets/public/v/1/public-works/rwqcp/contracts/c25193197-
apec_cc_5.19.2025_staff-report.pdf
2 City Council, January 25, 2010; Agenda Item #9, SR #111:10,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=72156
3 City Council, May 16, 2016; Agenda Item #6, SR #6458,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=78649
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blending reverse osmosis product water with the existing recycled water. The highly treated
water will enable the City as well as Mountain View to expand non-potable recycled water use
and/or provide a first step toward small-scale direct or indirect potable reuse in the City.
In December 2019, the City, Mountain View, and the Santa Clara Valley Water District (Valley
Water) signed an Agreement to Advance Resilient Water Reuse Programs in Santa Clara
County.4 As part of that agreement, Valley Water will provide $16 million toward the cost to
design and construct the Local AWPS. On March 8, 2021, City Council approved a contract with
Black & Veatch to provide design and engineering services for the Local AWPS.5
In October 2023, City Council approved a Financing Plan for the Project and directed staff to
secure financing and to solicit bids for a construction contract and a construction management
services contract.6 Under the Financing Plan, the City of Mountain View will cover the
remaining capital cost aside from federal and local funding.
In May 2024, City Council approved an application for a Site and Design Review and Design
Enhancement Exception to allow construction of this Project following the recommendations of
the Planning and Transportation Commission (PTC) and the Architectural Review Board (ARB).7
In June 2024, City Council approved Amendment #5 to Contract C21179265C with Carollo to
provide Construction Management services and in December 2024, City Council approved two
resolutions to formalize an Installment Sales Agreement with the State of California for a State
Revolving Fund Loan to fund a portion of the Local AWPS capital costs.8,9
Background: Amendment No. 2 to the Recycled Water Supply Agreement
The RWQCP produces and supplies recycled water through the terms of the first Amended and
Restated Contract C059999 between the City of Palo Alto and the City of Mountain View
(Recycled Water Supply Agreement or RWSA). In 2016, City Council approved Amendment No.
4 City Council, November 18, 2019; Agenda Item #17, SR #10627,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=2147
5 City Council, March 8, 2021; Agenda Item #3, SR #11782,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=2229
6 City Council, October 16, 2023; Agenda Item #10, SR #2308-1863,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82521
7 City Council, May 13, 2024; Agenda Item #11, SR #2404-2760
https://recordsportal.paloalto.gov/ElectronicFile.aspx?docid=6459&repo=PaloAlto&pdfView=true#page=153
8 City Council, June 10, 2024; Agenda Item #8, SR #2404-2881
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82882
9 City Council, December 16, 2024; Agenda Item #7, SR #2411-3772
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=83163
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1 to this Agreement to extend the original term from 2035 to 2060.10 Amendment No. 1
included an authorization to pay the incremental cost of producing recycled water and stated
that the costs to increase recycled water production capacity or quality would be absorbed by
the requesting agency, which would then own the rights to the additional recycled water
produced. Proposed Amendment No. 2 addresses the Local AWPS project and the parties’
respective funding obligations for the project.
Historically, the RWQCP has produced tertiary treated recycled water for non-potable uses to
meet volumetric discharge limitations to Lower San Francisco Bay set in the RWQCP’s effluent
discharge NPDES Permit. The RWQCP’s marginal operating and maintenance costs of recycled
water production and distribution (Marginal O&M Costs) have been negligible. However, the
operation and maintenance of the Local AWPS project will increase RWQCP’s costs to produce
enhanced recycled water. Amendment No. 2 explains this, and clarifies that Mountain View and
Palo Alto will bear the O&M costs in proportion to their respective recycled water usage.
ANALYSIS
Analysis: Award of Construction Contract to Anderson Pacific Engineering Construction, Inc.
On November 27, 2024, a notice inviting formal bids for the Local AWPS project was posted on
OpenGov, the City’s eProcurement platform. The bidding period was 78 days, as summarized in
Table #1. Bids were received from six contractors on February 13, 2025. The bid details are
listed on the attached Bid Summary (Attachment A).
Table #1: Summary of Invitation for Bids
Project Bid Name/Number Local Advanced Water Purification System IFB #193197
Proposed Length of Project 1078 days
Number of Bid Packages Downloaded by Contractors 133
Number of Bid Packages Downloaded by Builder’s
Exchanges 1
Total Days to Respond to Bid 78 days
Mandatory Pre-Bid Meeting Yes
Number of Companies Attending Pre-Bid Meeting 12
Number of Bids Received 6
Base Bid Price Range $46,801,100 to $72,835,495
Public Link to Solicitation https://procurement.opengov.com/portal/palo-alto-
ca/projects/133236
10 City Council, April 4, 2016; SR #6691
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=79037
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Staff reviewed the six bids received and all of them were deemed responsive. Bids were
evaluated by RWQCP Engineering staff as well as by the project’s Construction Management
staff (Carollo Engineers) and RWQCP Program Manager (Woodard & Curran).
Staff recommends the base bid of $46,801,100 submitted by Anderson Pacific Engineering
Corporation (APEC) and addition of the two bid alternates included for a contract amount of
$47,212,100, and that APEC be declared the lowest responsible bidder. The base bid is 12%
below the Engineer’s estimate of $53,598,743. A contingency amount of $4,721,210 (10% of
the total bid price) is requested for related, additional but unforeseen work that may develop
during the project. Staff confirmed with the Contractor’s State License Board that the
contractor has an active license on file. APEC is currently working on two large projects at the
RWQCP (Secondary Treatment Upgrades Project and 12-kV Electrical Power Distribution Loop
Upgrade Project) and staff is satisfied with the work completed by the contractor to date. Staff
also contacted the listed references for APEC and found that they have performed satisfactorily
on past construction projects for other clients.
Analysis: Amendment No. 2 to the Recycled Water Supply Agreement
Amendment No. 2 to the RWSA defines the allocation of the capital and operating costs for the
Local AWPS project as approved by both Mountain View and Palo Alto City Councils in 2023.11
Amendment No. 2 is structured in two sections. Section 1 includes all subsections that are
replaced in their entirety. Section 2 includes all subsections that are added to the RWSA.
Section 2 also covers the terms of the Local AWPS capital cost allocation as described in the
Preliminary Finance Plan from 202312. Table 2 below summarizes these changes. RWQCP staff
identified and reviewed with Mountain View staff the following Local AWPS Operating and
Maintenance costs:
a)Disinfected Tertiary Treated Recycled O&M Costs: Costs related to the operation and
maintenance of the existing Recycled Water Plant. The production of recycled water is
one of the conditions to discharge treated effluent in the Lower South San Francisco Bay
and therefore all Partner Agencies will continue to be billed based on their wastewater
flow and load shares to the RWQCP.
b)Local AWPS Maintenance and Energy: Costs includes ongoing maintenance, repairs,
parts, and energy required for the Local AWPS recycled water equipment.
c)Local AWPS Labor Expenses: The RWQCP requires additional staffing to operate and
maintain the local AWPS. An additional operator, and a combination of laboratory staff,
mechanic, electrician, and SCADA staff is considered.
11 City Council, October 16, 2023; Agenda Item #10, SR#2308-1863,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82521
12 City Council, October 16, 2023; Agenda Item #10, SR#2308-1863,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82521
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Items b) and c) will be split between Palo Alto and Mountain View based on actual recycled
water use. The smaller RWQCP partners (Los Altos, Los Altos Hills, City of East Palo Alto and
Stanford University) are not currently connected to the recycled water distribution, therefore,
they will not contribute to the capital, operation, and maintenance cost of the Local AWPS.
Table #2: Recycled Water Supply Agreement Amendment #2 Changes
SECTION 1: Sections that are replace in their entirety
Section Description
1.1 - Project Narrative Describes 2009 Pipeline Project and include Local AWPS Project
1.2 - Scope of the Agreement Clarifies the Agreement only covers nonpotable uses using disinfected
tertiary recycled water (Title 22).
SECTION 2: Sections that are added to the Agreement
Section Description
3.5 Allocation of Capital Costs for
AWPS
Mountain View agrees to pay 100% of the capital cost difference after
adding external funding (USBR Grant and Valley Water)
3.6 Allocation of Valley Water
Funding for AWPS
Full allocation of $16M contribution plus interest to the design,
construction and construction management of the Local AWPS
3.7 Allocation of Grants for AWPS Full allocation to the design, construction, and construction management
of the Local AWPS
3.8 AWPS SRF Loan Loan requested amount is $57M. Rate is 1.7%. Mountain View to indicate
final amount. Delineates of SRF Loan Repayment process.
3.9 Mountain View Cash Payments Mountain View to provide $22M to cover total project costs.
4.1 (e) AWPS O&M Costs Description of AWPS maintenance, energy and staffing costs. Allocation of
costs based on use of enhanced recycled water.
7.4 Statewide General Order Definition of agency roles under new regulation
8.5 Meter MV flows Installation of a new City line meter to measure recycled water flow to
Mountain View
8.6 (e)Addresses total dissolved solids concentrations if demand exceeds Phase I
of Local AWPS capacity.
8.7 Includes Proportional Reduction flows language from 2019 Partnership
Agreement with Valley Water
8.8 Meet and confer Includes option to evaluate the need of AWPS Phase II expansion if flow or
TDS concentrations exceeds targets
9.3 Early Termination Language to address external funding or loan funding to the Local AWPS
Project.
FISCAL/RESOURCE IMPACT
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Table #3: Summary of Project Capital Costs and Available External Funding
Item/Funding Source Anticipated Final Project Costs
Capital Cost for Local AWPS $59,947,000
Valley Water Funding1 $17,000,000
US Bureau of Reclamation Grant2 $10,447,730
Cash Contributions $22,000,000Remaining Capital Cost to be Paid by Mountain View
Covered by SRF Loan $10,499,270
1.Valley Water funding original amount was $16,000,000; with annual interest accrued, the amount is estimated at $17,139,227 as of
January 2025.
2.US Bureau of Reclamation Grant amount is $10,447,730. Per internal policy, US Bureau of Reclamation reserved the remaining
$2,420,145 for contingency.
The remaining capital costs allocated to Mountain View ($32.5 million) will be partially covered
by a series of cash contributions to the Wastewater Treatment Fund made at various intervals
depending on the construction progress (Table 4) and partially financed through the SRF
program. Financing terms for this loan are a 30-year repayment term with a locked interest rate
of 1.7%. Under these terms, the annual debt service payment is $449,676 and is to be allocated
to Mountain View. 13 The funding breakdown for this project is different than other typical
capital projects at the RWQCP.
Table #4: Capital Cost Cash Contribution from Mountain View
Time Amount
Within 30 days of issuing the construction Notice-to-Proceed $7,000,000
When 50% of total project costs have been incurred $10,000,000
When 80% of total project costs have been incurred $5,000,000
Total $22,000,000
Fiscal/Resource Impact: Local AWPS Operation & Maintenance Costs
Upon completion of the Local AWPS (currently estimated for FY 2028), new O&M expenses will
be incurred, with costs varying annually based on actual recycled water demand. Palo Alto will
be responsible for its proportional share of the annual O&M costs, estimated at $188,000 for
the first full year of operation.14 These costs will be evaluated and adjusted annually by the
RWQCP based on actual usage and will be split between Mountain View and Palo Alto
accordingly. Palo Alto’s portion of the O&M costs for the Local AWPS will be incorporated in the
future budget approval process; these expenses are anticipated to start in FY 2028. All Funding
13 City Council, December 16, 2024; Agenda Item #7, SR #2411-3772
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=83163
14 City Council, October 16, 2023; Agenda Item #10, SR #2308-1863,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82521
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for the Local AWPS will be subject to Council approval as part of the annual budget
appropriation process.
STAKEHOLDER ENGAGEMENT
In addition to the study sessions and regular meetings with City Council noted above, staff held
predesign and design workshops with project partners (Mountain View and Valley Water) to
obtain stakeholder feedback throughout the process. In parallel, staff has provided updates on
the project through Joint Recycled Water Meetings with Palo Alto Council Members, Mountain
View Council Members, and Valley Water Board Members. The staff report for the May 13,
2024, City Council meeting describes the full stakeholder engagement process.15
ENVIRONMENTAL REVIEW
The City Council previously certified the Palo Alto Recycled Water Project Environmental Impact
Report (EIR) to include implementation of the City of Palo Alto Recycled Water Project.16 17 A
Notice of Determination for the City of Palo Alto Recycled Water Project was filed on October 1,
2015. The Local AWPS was identified as a potential mitigation measure in the previously
adopted EIR.
An addendum to the EIR was prepared to evaluate the Local AWPS impacts; the addendum
determined that the Local AWPS would not result in new or more severe significant impacts
than those identified in the EIR (SCH 2011062037). The Notice of Determination for the Local
AWPS 1.125 MGD Project was filed on November 20, 2019.18
ATTACHMENTS
Attachment A: Bid Summary
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
15 City Council, May 13, 2024; Agenda Item #11, SR #2404-2760
https://recordsportal.paloalto.gov/ElectronicFile.aspx?docid=6459&repo=PaloAlto&pdfView=true#page=153
16 City Council Resolution 9548; 2015;
https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9548.pdf
17 City Council Resolution 9549; 2015;
https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/reso-9549.pdf
18 City Council, November 18, 2019; Agenda Item #17, SR #10627,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=2147
Local AWPS IFB 193197
Date Closed Feb 13, 2025 at 3:00pm
Bid Form ‐ A. Base Bid
Anderson Pacific Engineering Construction, Inc.
Anvil Builders Inc.
Bid Form ‐ C.
Anderson Pacific Engineering Construction, Inc.
Anvil Builders Inc.
C. Overaa & Co.
Mountain Cascade, Inc.
Bid Total + Add. Alternates
$47,282,100$46,801,100 $481,000
$2,017,900
$490,000
$956,000
$350,000
$360,000
$51,806,380
C. Overaa & Co.
Mountain Cascade, Inc.
Shimmick Construction Shimmick Construction
Construction Company II, LLCWalsh Construction Company II, LLC