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Home / Articles / News / News /  Squatters' Rights
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Thursday, September 2,2010

Squatters' Rights

Eldorado Springs says county is passing the buck on new sewer system

By Jefferson Dodge

A new sewer system installed in Eldorado Springs has clogged relations between Boulder County and local homeowners who say they shouldn’t be on the hook for cost overruns caused by county mismanagement.

The sewer project, which was managed by county officials, is costing more than the $1.8 million bond approved by Eldorado Springs voters in 2004.

County officials argue it was clear from the start, based on county commissioners’ discussions at the time, that the $1.8 million would not be enough to cover the entire cost of the project, and that the homeowners should be the ones who pay for the new system in its entirety, since they are the only ones benefiting from the sewer plant.

But the property owners say their 2004 ballot language clearly stated that their debt for the project was “not to exceed” $1.8 million, and that the additional costs should be borne by the county, since county officials approved the overruns. If anything, they say, the debt amount should be reduced by the $400,000 in grants received for the project.

They say their situation is a cautionary tale to homeowners in the county’s subdivisions who are considering forming a local improvement district (LID) to fix their roads, since those people may end up paying more than the $130 a year for 15 years that they have been promised.

“I want to wave a red flag to the whole county about this,” says Alan Brown, a member of the Eldorado Sewer Advisory Committee (ESAC). “For some reason, they didn’t feel like they needed to be responsible to budgets. … Can the county do this again?” During an October hearing, the county commissioners are expected to approve how much each property owner will have to shell out to pay for the project — and what amount the county is responsible for paying.

A storied community

One thing most agree on was that Eldorado Springs was in serious need of a new sewer system a decade ago.

David Jones, a longtime resident and ESAC member, paints a picture of the community’s colorful past while driving the winding dirt roads connecting homes tightly perched on steep hillsides.

Artifacts show Native Americans occupied the area, and the town has been a destination for white folks for more than 100 years. Artesian wells and a resort are situated at the rocky crevice, where a railroad line to the Western Slope slips into the Rockies. Its historic swimming pool was built in 1905, and the resort was frequented by the likes of former President Dwight Eisenhower, Jimmy Durante and Jack Dempsey. Glenn Miller reportedly played in the resort’s ballroom. During the early 1900s, Ivy Baldwin thrilled crowds with his tightrope walk over the canyon, 582 feet above its floor.

The place is still a bit eccentric, a bit funky, and diverse, with million-dollar renovated houses sitting next to mobile homes. And in the early 2000s, most of the structures did not have suitable waste diversion systems.

Many houses had systems that were more than four decades old. Some had homemade septic pits filled with gravel. Ken Sheldon, another ESAC member, says one home had a sewage pipe leading to an old car that had been buried in the ground — but not before being riddled with bullet holes to let the sewage seep out into the earth. There were reports of effluent leaking into the groundwater, if not into South Boulder Creek.

State and county health officials were threatening to begin evicting residents if something wasn’t done.

Sheldon was one of only 11 out of 95 Eldorado Springs homeowners who had installed individual septic systems that were up to code. Still, he became a major proponent of installing a sewer plant that could accommodate the entire community’s needs.

“I feel embarrassed in some ways, because I championed it, and now people are disappointed in me,” Sheldon says.

The disappointment comes from the fact that now, with the project nearly complete, the property owners are being told to pay more than they originally thought. The community narrowly voted to reject an original sewer plant proposal that would have cost about $2.2 million. Then, in 2004, the voters approved a bond “not to exceed” $1.8 million, with a maximum repayment cost of about $3.1 million. Both amounts, the ballot said, were, if anything, to be reduced — “to the extent projected costs or loan rates have been overestimated, or to the extent additional sources of funding, if any, are secured.”

Picking a price tag

Longtime Eldorado Springs resident David Levin, an ESAC member who successfully helped lead the opposition against funding the sewer system in the first vote, acknowledges that the $1.8 million figure was not a scientific estimate of what the project would actually cost. He said a group of about 15 residents held a meeting, offered their estimates on the price tag, added those up and divided by 15.

“It’s a dumb way to do it, and $2.2 million was too low, so for sure $1.8 million was too low,” he says.

County Commissioner Will Toor echoes that sentiment.

“That number did not come from detailed engineering studies,” he says. “It came from the community, based on what they thought.”

And, perhaps because of the lower price tag and the hope of grant money, the measure passed, setting up the expectation that $1.8 million would cover the entire cost.

“The county allowed us to grow without ensuring that we had a system for disposing of the wastewater from a larger population,” Levin says. “We knew we had to have a system, otherwise the county claimed they would start condemning our houses.”

As it turns out, Levin says, the thing that finally brought together opponents and proponents of the new sewer system was a common enemy: the cost overruns approved by the county.

“Eventually, we all became united in opposition to the county staff’s management approach,” Brown says. “Boy, that’s a sad story.”

The county decided to save money on the project by managing it in-house and hired Fischer Construction as the prime contractor.

Jones has a list of examples of what he says is county mismanagement of the project, from allowing the contractor to relocate grinder pumps and electrical substations at homeowners’ whims to having to buy additional land for the sewer plant. He also raises questions about construction problems he says haven’t been corrected in a timely manner.

Sheldon adds that communication was poor, and the committee found out about “change orders” — cost overruns — after the fact.

“We weren’t involved in the process,” he says. “We were the client paying the money, but we had virtually no control.”

Toor and Michelle Krezek, the county’s intergovernmental relations director, counter the perception that communication was lacking. Krezek notes that there were monthly meetings between the county and the advisory committee. Still, the committee wasn’t an official advisory board, which would have had a formal role and records, with bylaws and minutes. (A county request for applications to form such a group yielded no applicants.)

“That has added to the communication issues,” Krezek says.

‘Trial and error’

Brown calls the hook-up of the sewer system “trial and error” and says lines were installed in the winter.

“There were pipes that froze, and who’s going to pay for that?” he asks.

Levin adds, “We’ve already had 10 percent of the grinder pumps fail.”

Now, ESAC members say the project is at least $900,000 over budget and the county is balking at reducing the bond by the $400,000 in grants, as the ballot requires.

ESAC members took up a collection around town to hire attorneys to explore their options. Half the residents kicked in $100 apiece.

“That shows me the anger in town,” Levin says. What’s more, there have been isolated reports of residents who have refused to pay their sewer bill to the county and have even ripped out their new grinder pumps and electrical boxes.

On a more civil note, one of the attorneys representing Eldorado Springs, Adam Chase of Hutchinson, Black & Cook, wrote a letter to Leslie Lacy of the county attorney’s office on July 21 pointing out the binding ballot language and protesting the additional costs. (Lacy did not return calls by press time.)

Toor acknowledges that while the county is experienced in some areas, like road construction and maintenance, installing a sewer system was terra incognita.

“To be fair, this is very different than anything we’ve ever done before,” he says.

The county chose to go with a design-build contract, which Toor says means there was no hard cap set on the final price tag. (ESAC members say the agreement was, in fact, a fixed-cost contract, not open-ended. A copy of the contract obtained by Boulder Weekly lists the anticipated costs of engineering and construction at $1.86 million, and allows for change orders.)

If the county had decided to pay for a design phase first, Toor says, the scope of the project would have been identified, and there could have been a fixed-cost contract for construction. But he says the whole thing would have been more expensive.

“If it had been a fixed-cost contract, it would have been much higher,” Toor says.

“We went with design-build because you can save money with that,” agrees Sheldon, who is a general contractor.

Sheldon says he wishes the county had drawn the line and kept the contractor from exceeding the budget by so much.

“That’s why I’m so critical of the management, because that’s what I do,” he says. “Why couldn’t they have stood on the contractor’s toes more? It felt like they rubber-stamped it to keep the project going.”

(The county’s manager of the project, Jeff Callahan, did not return calls by press time.)

A boulder the size of a VW

The design-build model is much different from the design-then-build model, Toor says. You can’t have a fixed-cost contract on a design-build, he explains, because when you haven’t done the design phase in advance, you haven’t identified all of the issues and you have to deal with problems as they come up. And you can’t wait for the advisory committee to approve every change, Toor says, because it can be costly to delay the project for such decisions when a construction team is already in the field.

“You start trenching, and you find a boulder the size of a Volkswagen,” he says. “Once you start it, you’ve got to finish it. … There were decisions that were made on the fly while managing a very complicated project we had never managed before.”

Krezek adds that whenever the contractor encountered boulders, “there really wasn’t time to go to a committee meeting.”

Sheldon counters that excavation around boulders does not account for the hundreds of thousands of dollars in cost overruns.

“The additional costs were not about a boulder,” Brown, an architect, says. “What costs more is the addition of piping, grinder pumps and other equipment that was not in the original scope of work. Things were dug three and four times because it was not done right.”

Toor points out that, in Boulder County, most homes are either hooked into a municipal sewer system and pay associated fees or have their own septic tank. He says that it would not be right to foot the bill for the Eldorado Springs system when the county does not do so for others.

Toor explains that he doesn’t have a problem with subtracting the $400,000 in grants from the $1.8 million bond, but that $400,000 would then have to be made up by the homeowners in Eldorado Springs. To have the county pay for it would not be fair to the rest of the county's taxpayers.

“We have money we hold in public trust for the rest of the county,” Toor says. “You can’t intentionally lowball it and then expect someone else to pay.”

But ESAC members are insistent that the amount they owe is $1.4 million, because of the $400,000 in grant money they received, and that the county should eat the rest, since it was their mismanagement that caused the additional expenses.

Toor acknowledges that the county should contribute something to the cost overruns, given its inexperience with managing sewer projects. The tally on the expenses that county officials feel responsible for is nearing $100,000.

“We probably could have shaved the cost down a bit,” Toor says. “There is some responsibility that the county bears. … We are still considering what portion was legitimately borne by the taxpayers of Boulder County as a whole. … We are sympathetic to the concerns that the project may have been more expensive than it needed to be.”

“We’re not good at building this type of infrastructure, because we don’t do it, but [the homeowners] didn’t have a lot of options,” Krezek says. “It was a real public health issue.”

Toor attributes a significant portion of the cost overruns to the inflation of building expenses that occurred after 2004. For example, he says, the price of Colorado’s FastTracks project has seen a 35 percent increase due to inflation.

Toor says the contractor made every effort to hold down costs, even ordering grinder pumps early because they were found at a good price.

In response to complaints that homeowners were allowed to change the placement of sewer-related equipment, Krezek acknowledges that, “in hindsight, we should have set the rules of engagement.”

“It probably would have gone more smoothly if we had hired a project manager,” Toor adds. “But there would have been a cost associated with that.”

Next steps

As for the county subdivisions considering the creation of LIDs to repair their roads, Toor says no bond will be issued without a formal vote approving that debt, and even a non-debt project will not go forward without majority support from the neighborhood.

The hearing before the county commissioners to set the new annual amount each Eldorado Springs homeowner will have to pay won’t occur until the first part of October at the earliest, since the county is required to give the owners at least 30 days’ notice of the meeting and the new rates they will be charged. (The current average payment for a one-bedroom, one-bathroom house is about $900 a year, Levin says.)

Toor and Krezek say the total cost of the project is $2.4 million, which is average for, if not less than, similar projects. Once the $400,000 grant is taken out — either from the bond amount or the excess costs — the price tag is $2 million. Remove the $100,000 the county is covering, and the cost is only $100,000 more than the $1.8 million approved in 2004, they say.

“We’re not going to be talking about a large difference,” Toor says. “Ultimately, the cost the community will be paying will not be much different from that $1.8 million.”

But ESAC members insist that there were also cost overruns related to a second LID created to pay for the sewer’s electrical system.

They have not ruled out taking legal action against the county, as a last resort. They have circulated fliers around the community in recent weeks calling for residents to raise a stink by writing letters to the county commissioners, state legislators and newspapers.

“Individuals with the county have abused their positions,” Brown says. “Our position is we shouldn’t be going to that hearing to increase taxation, we should be going to that hearing to decrease taxation. … If there was one mission of this volunteer committee, it was to control costs, and we failed. … It was easy for them to pass those costs on to [homeowners in] the LID.”

“How often do they go over their projects by 40 percent?” Sheldon asks. “When it’s their wallet, they’re watching it.”

Toor reiterates that county road projects are a different animal. They are much simpler, the county has experience doing them, they benefit many more residents, and changes can be made along the way to save money if needed.

“We have had multiple road LIDs, and they’ve all come in on budget,” he says.

Sewer systems, however, are another story. “Everybody in Boulder County pays for their own sewer system,” Toor says. “I think the facts are clear. The sewer needed to be built, and the people benefiting from it need to pay for it.”

But Brown counters, “This has been interpreted by novices who have no experience with design-build contracts. They have weaseled their way out of it.”

Respond: letters@boulderweekly.com

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