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Water safe, but $54M facility not producing supply promised

By Steve Wideman
Post-Crescent staff writer July 8, 2006

APPLETON — The city’s water-filtration plant, billed as state-of-the-art when it went on line five years ago, is failing to produce at promised capacity, and taxpayers and water customers could face expensive fixes.

The project’s $54 million budget has nearly run dry, The Post-Crescent has learned, and city leaders are considering spending millions more in improvements, increasing water rates and taking potentially costly legal action against companies involved in the project.

Safety of local drinking water is not at issue, officials insist. And there have been no shortages.

However, the problem is contributing heavily to slumping revenues and climbing expenses for the city-owned water utility.

Meeting minutes, e-mails and interviews with key people tied to the plant paint a picture of city leaders prodded by engineers and consultants to change the plant’s original design and use a new technology despite warning signs.

One former alderwoman, who voted for the project, said Appleton officials “failed the community” by not thoroughly scrutinizing the plans, and now taxpayers and water customers are going to pay the price.

“It’s leadership’s responsibility to ask the right questions, especially in response to large red flags,” said Jo Egelhoff, who served on the Common Council from 1993 to 2003.

Mayor Tim Hanna said the city is working diligently to fix the problems as well as assess financial responsibility for the plant’s failures.

“We are committed to continue optimizing operations to produce what we paid for at the plant,” he said.

Ald. Jeff Jirschele, head of the Utilities Committee since April, said the matter is urgent. “We have a challenge to meet that doesn’t leave a lot of time for casting blame and pointing fingers. We have a multimillion dollar investment.”

Capacity questions

The water plant, south of the city in Menasha, was designed to filter 24 million gallons of water each day during summer and 18 million gallons a day in winter.

Water is pumped from Lake Winnebago to the plant, where it runs through various treatment and filter processes, then flows through millions of pencil lead-thin straws. Those straws, packed into large canisters, are key to the so-called ultrafiltration or membrane technology.

From early in the operation, however, many of the straws broke.
Through various additional pre-treatment processes and ongoing replacement of straws, utility operators gradually have brought today’s summer capacity to near 24 million gallons, according to Utilities Director Mike Buettner. Last winter, however, capacity was measured at less than 10 million gallons a day, about half of the design, even with extra pre-treatment.

Although the lower capacity has not created a water shortage for existing customers, it is preventing the city from selling water to neighboring communities to help offset costs, said city Finance Director Lisa Maertz.

And the costs for pre-treating the lake water have spilled over the original budget, meaning any additional dollars will have to come from taxpayers, be borrowed or be compensated by those responsible for construction of the plant.

The council recently approved spending $200,000 for consultants to recommend the best course of action. Among possible answers are pre-treating water with a sand filter at an unknown cost or adding more of the controversial straws at a cost of more than $5 million.

For more than a year, the council has met in numerous closed sessions to discuss possible legal strategies, Hanna said. City officials also have met with the plant’s designers, technology supplier and project manager, who have willingly helped address the problems.

The goal is to reach an amicable long-term solution, Hanna said. “The bottom line is litigation is the avenue of last resort.”
Nicholas Powell, vice president for municipal business at Koch Membrane Systems, which provided the technology, contends that the plant produced the promised supply of water during its first couple of years.

“It was not until the end of (2005) that the plant was not able to do what the contract calls for,” Powell told The P-C recently. “We have some ideas why and the city has some ideas.”

Powell said his Massachusetts-based company stands ready to help Appleton.

“We are very committed to the city and have never stopped working with them,” he said. “Eventually, this plant will be just what it is supposed to be.”

Risky technology?

The ultrafiltration technology was not included in initial plans for the plant, which aldermen approved in August 1997 as a two-phase project.

The facility was to help the city meet upcoming deadlines for water quality standards set by the state Department of Natural Resources. It was to help produce enough water to meet growth in Appleton as well as potentially neighboring communities, which would buy from the plant.

The plant would replace a 1914-era facility along the Fox River that had reached a capacity of 23 million gallons per day.

Plans for the new plant called for using ozone, a form of oxygen used commercially as an air freshener and water disinfectant, as a final treatment step.

In early 1998, the city hired McMahon Associates Inc., Neenah, and Carollo Engineers, Boise, Idaho, for design engineering work, and The Boldt Co., Appleton, as construction manager.

The project’s price tag grew from an original estimate of $54.3 million to $62.7 million after engineers determined more filtering was needed.

Soon after, then-utilities director Duane Leaf, his staff and the consultants recommended the project be done in a single phase, at the original lower cost: $54.3 million, and that ultrafiltration be used.
Among the technology’s promised safeguards was blocking of cryptosporidium, a parasite that slipped through water treatment facilities in Milwaukee in 1993, killing more than 100 and sickening 400,000.

The tragedy lingered in the minds of Appleton officials, Hanna recalled.

“Absolutely it became a factor (in the decision). How could it not be?” he said. “Ultrafiltration filters out anything left in the water after pre-treatment.”

In a report to the council in July 1998, consultants concluded that the technology was “reliable, mature and cost effective.” A month later, council members unanimously signed on.

“It was presented as an innovative system and that we would probably be the first to use it,” Ald. Walter Kalata recalled. “The city spent a lot of money on studies, the reason being to get the brain work to help us make the right decision.”

Egelhoff said her vote for approval was based on the less-costly option and she does not regret it.

“The issue was presented having nothing to do with the ultrafiltration technology, but rather with the efficiencies of a one-phase versus two- phase approach,” she said.

Egelhoff said she repeatedly raised concerns in 1998 and 1999, a claim backed up by meeting minutes and e-mail records.

The city ended up taking too big a risk on unproven technology, she said.

“I pointed out that Koch had no experience with public water plants, much less with a huge 24 million gallon-a-day plant,” she said. “And the mayor, Utilities Committee and council were shown ample evidence that the system absolutely could not operate as promised.”
Powell said the technology was a decade old when Appleton approved it.

And Leaf said much of the plant was designed to use treatment processes standard to the industry, like traditional clarifiers, charcoal filtering and lime for softening the water.

“There was nothing prototype or experimental about the plant,” Leaf said. “Technology is technology and it is always changing. Anything that involves computers has the possibility of becoming obsolete. That doesn’t mean the system doesn’t work.”

Trouble surfaces

The first mention of membrane trouble to the Utilities Committee came in April 2002, according to meeting minutes.

Leaf told the panel the straws were breaking but that Koch was providing free replacements. Later meeting records indicate the breaks peaked at more than 2,000 per month.

In summer 2002, Leaf told the committee the project could have been completed by early that year but that there was a “significant risk in that the membranes had not been tested by themselves under a high flow water condition,” according to the minutes.

“That would have meant whether we accept the project or not there was still a chance that it would not really work quite the way it was supposed to.”

Koch stands behind its product, Powell said. The company has dozens of plants in operation that use technology similar to Appleton’s, but each plant and water source is unique, he said.

“If you look at water plants that don’t use membranes you’ll find they have issues, but mostly with water quality and not capacity. Membrane plants do have issues with water capacity and not water quality.”

Egelhoff said the city should have been open to more bidders. She cites another membrane supplier, USFilter, then based in Illinois, that raised concerns early in the project that the plant was being designed specifically to fit Koch’s membranes.

“Single-source bidding gives carte blanche to one company and is expensive to taxpayers,” Egelhoff said. “When designers insist on technology that only one company can provide, that’s always a huge red flag to decision-makers.”

Hanna said USFilter simply could not provide what the city needed.
“Their filters would not tolerate the use of chlorine, and Appleton uses chlorine to treat its water.”

Winnebago’s quirks

One culprit for Appleton’s water capacity issues is Lake Winnebago, where algae and sediment are plentiful, Buettner said. Both spell trouble for the membrane filters.

“Lake Winnebago water really changes and those changes can be very extreme. … You need to have a facility capable of treating water on the worst days.” Buettner said.

Leaf, who resigned in 2004 partly due to the plant problems, according to Hanna, is convinced something other than Mother Nature is at fault.

Koch was chosen to supply the membranes only after tests in which consultants concluded that the firm’s technology could most effectively address Winnebago’s water conditions, said Leaf, now a plant superintendent at the Three Rivers Regional Wastewater Authority in Longview, Wash.

“That (decreased water flow in winter) was all part of the design. We knew about the differences between warm and cold water,” Leaf recently told The P-C. “There is not a scientific reason it shouldn’t be producing up to 18 million gallons a day in winter. Something is not right and I’d sure be surprised to find out it was the cold water.”
Hanna said much has changed since Leaf left.

“We are finding out,” Hanna said, “there are scientific reasons (the plant is not producing to specifications).”

Customer costs

Regardless of the long-term outcome, Appleton water plant customers — including Grand Chute and the Waverly Sanitary District — are likely to foot the bill for added expenses to date.

The draft of a water rates study distributed to aldermen Friday proposes overall increases of 33 percent, including 25 percent for typical households. That would amount to about an extra $80 a year, according to Maertz, the finance director.

She said that since 2002, water utility revenue has dropped by $1.2 million (about 8 percent) while expenses have jumped by $2.8 million (33 percent).

Some of the lost revenue is due to the closure of significant industrial customers. Maertz attributes $1.8 million or about two-thirds of the added costs to the increased use of lime, used to soften the water to make it easier on the membranes, and a change in accounting that charges disposal of the lime wastewater to the utility.

Maertz said if water capacity could be improved so the city could sell water to neighboring communities — as originally hoped — “financially that would help us tremendously.”

The rate increase, which ultimately would need approval from the state Public Service Commission, would be bad on two fronts, said Mike Spurlock, an Appleton resident and business owner.

“Residents of Appleton face a double-whammy because businesses will have to pass on any water cost increases to consumers,” he said.

Grand Chute Town Administrator Mark Rohloff said the town, the city’s largest customer, would likely contest any rate hike.
“Obviously, this is something we are going to closely scrutinize,” Rohloff said. “We’ll probably testify before the PSC, because they (Appleton) are passing problems with their water plant on to the ratepayers.”

Hanna said the city, like all parties involved in the creation of the plant, shares in the responsibility. But he hopes finger-pointing as well as court action can be avoided.

“Litigation is very expensive,” Hanna said. “The outcome is unknown and it does nothing to improve operations at the plant.”

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