Morro Bay has one more phase to complete on its water reclamation facility, something city Public Works Director Greg Kwolek calls the "cornerstone" of the project.

The first phase—the Water Resources Center, pipes, and lift stations—started servicing city customers at the end of 2022/beginning of 2023, and the Morro Bay City Council voted to close out the construction contracts for that phase at its most recent meeting.

Next comes the recycled water portion of the project.

"The recycled water is the centerpiece," Kwolek said. "We won the grants and loans on the basis of the recycled water."

For the facility's second phase, the city aims to construct the wells that will be used to inject the purified water into the groundwater aquifer. Kwolek said Dan Heimel from Confluence Engineering Services out of Los Osos is the contracted project manager for the second phase, which the city is currently requesting technical and cost proposals for. The request for proposals period closes on April 18.

According to a fact sheet on the project, the city received $138 million in low interest (less than 1 percent) state and federal loans and $15.5 million in grants to fund the facility, which replaced the city's old wastewater treatment plant. The contracts with JBV Morro Bay Joint Venture (KS Overland Contracting and J.R. Filanc Construction Company), which constructed the plant, and Anvil Builders, which constructed conveyance pipelines and lift stations, closed out at more than $116 million.

Both contracts were more expensive more than originally penned, with unanticipated changes and their associated respective costs drawing out a long negotiation period with the city.

During the April 9 City Council meeting, Morro Bay Mayor Carla Wixom said it was a relief to get to the end of those conversations.

"Having to pay anything extra is hard for us," she said.

JBV asked the city to pay an additional $2.4 million on their initial $78.4 million contract to construct the water treatment plant. That would have put Morro Bay over its allotted $79.1 million budget for the project. The city objected to paying for two of those changes—including additional drinking water testing required by the Department of Water Resources and run-off ditches that were damaged in January 2023's storms. Negotiations between the two parties resulted in a $79 million agreement.

Anvil requested more than $4 million in change orders to the original $36.4 million contract to construct the pipes and stations that take wastewater from the old plant to the new plant and bring back discharge from the water treatment plant (which, for now, flows into the ocean). Last May, Anvil walked away from a negotiated settlement agreement, Kwolek told the council.

"We brought it back this spring," Kwolek said. "Anvil is OK resurrecting that deal."

That deal adds $880,000 to the original contract cost with an additional, separate $200,000 set aside as a retainer for one outstanding issue awaiting resolution. Kwolek assured the council and residents that it wasn't an ongoing defect.

On Jan. 9, 2023, during historic rains and flooding, Kwolek said "an oversight" caused a gaping hole that meant the system was taking on the entirety of the flood.

He told New Times that the city didn't have lids properly affixed to manholes associated with construction on the project, which mean a lot of water was flowing through the system. The wastewater treatment plant and its associated pipelines are supposed to have a maximum peak flow capacity of processing 8.1 million gallons a day. While the plant passed that unexpected trial on Jan. 9, the outflow pipe did not. It was only able to convey 6 million gallons a day.

The silver lining, he said, is that the extreme weather enabled the city to see an error it might not have caught otherwise, as Morro Bay falls well under the peak flow capacity. Daily, Kwolek said, it's closer to 600,000 gallons a day.

"Obviously something's wrong. ... We're ... trying to understand where the issue is and where the financial liability is," he said. "The city paid for the 8-million-gallon-a-day capacity, and the city intends to collect on that."

While Morro Bay and Anvil await further investigation into the issue, Kwolek told the City Council that it could close out the construction contract without resolution because it includes the retainer and contingencies for the future pipeline fix.

"This has been a long, hard-fought battle by the council and city team," Wixom said. "We inherited this issue, as you all know, so we're glad to be able to close it out at a lower amount than we initially thought." Δ