TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Stephanie Katsouleas, Public Works Director
Steve S. Charelian, Finance Director
Prem Kumar, City Engineer
Anastasia Seims, Senior Civil Engineer
SUBJECT:Title
A) Consider the Following Regarding Underground Utility Assessment District (UUAD) 19-12:
1) Approve a Budget Adjustment of Estimated Revenues for $6,013,519 and Appropriate that Amount from the Utility Underground Assessment District Fund for the UUAD No. 19-12 Project.
2) Adopt a Resolution:
a. Approving an Agreement with Hot Line Construction (Hot Line) for $1,177,327 for Construction Activities for Frontier Communications Infrastructure;
b. Authorizing the City Manager to Execute the Agreement;
c. Authorizing the City Manager to Approve Additional Work, if Necessary, for up to $238,460 (4.5%); and
d. Approving the Plans and Specifications.
3) Adopt a Resolution Approving an Agreement with Charter Communications (Charter) and Hot Line Construction, in a Form Approved by the City Attorney, for Payment to Hot Line of $93,730 for UUAD 19-12 Construction Activities and Authorizing the City Manager to Execute the Agreement.
4) Adopt a Resolution Approving an Amendment with NV5 for $56,940 for Construction Inspection Services for UUAD 19-12 and Authorizing the City Manager to Execute the Amendment.
5) Adopt a Resolution Approving an Agreement with Southern California Edison (SCE) in a Form Approved by the City Attorney, Authorizing an Additional Payment to SCE for $201,783 for UUAD 19-12 Construction Activities, and Authorizing the City Manager to Execute the Agreement.
6) Authorize a Payment to Frontier Communications (Frontier) for $13,200 for Construction Inspection Services and up to $315,474 for Cabling Services.
B) Consider the Following Regarding Utility Underground Assessment District (UUAD) 19-14:
7) Approve a Budget Adjustment of Estimated Revenues for $6,081,152 and Appropriate that Amount from the Utility Underground Assessment District Fund for the UUAD No. 19-14 Project;
8) Adopt a Resolution:
a. Approving an Agreement with Hot Line Construction for $1,472,923 for Construction Activities for Frontier Communications Infrastructure;
b. Authorizing the City Manager to Execute the Agreement;
c. Authorizing the City Manager to Approve Additional Work, if Necessary, for up to $348,429 (6.5%); and
d. Approving the Plans and Specifications.
9) Adopt a Resolution Approving an Agreement with Charter Communications and Hot Line Construction, in a Form Approved by the City Attorney, for UUAD 19-14 Construction Activities for Payment to Hot Line of $84,766 and Authorize the City Manager to Execute the Agreement;
10) Adopt a Resolution Approving an Amendment with NV5 for $56,940 for Construction Inspection Services for UUAD 19-14 and Authorize the City Manager to Execute the Amendment.
11) Adopt a Resolution Approving an Agreement with Southern California Edison (SCE) in a Form Approved by the City Attorney, Authorizing an Additional Payment to SCE for $191,788 for Construction Activities, and Authorizing the City Manager to Execute the Agreement.
12) Authorize a Payment to Frontier Communications for $13,200 for Construction Inspection Services and up to $288,518 for Cabling Services.
(Public Works Director Katsouleas).
a) APPROVE BUDGET ADJUSTMENTS
b) ADOPT RESOLUTION NOS. 20-0067, 20-0068, 20-0069, 20-0070, 20-0071,
20-0072 AND 20-0073
Line
_________________________________________________________
Recommended Action
RECOMMENDATION:
Staff recommends that City Council approve the 12 actions identified above under the Subject heading, which will allow Underground Utilities Assessment Districts (UUAD) 19-12 and 19-14 to proceed with construction activities.
FISCAL IMPLICATIONS:
The Southern California Edison (SCE), Frontier, and Charter construction and cabling-related fiscal implications for UUADs 19-12 and 19-14, which were included in the Final Assessment Engineer’s Report presented to City Council on October 1, 2019, are as follows:
Category District 12 District 14
Utility Construction $4,690,836.16 $4,827,087.57
Utility Cabling $ 618,996.90 $ 518,743.90
Total $5,309,833.06 $5,345,831.47
In December 2020, payments were made to Frontier for its portion of the construction and cabling projects for UUAD 19-12 in the amount of $1,831,421 and for UUAD 19-14 in the amount of $2,189,270. These amounts were subsequently refunded in full and can be put toward the following new expenses as recommended above and summarized here:
Recommended Action District 12 District 14
Approve Agreement with Hot Line $1,177,327 $1,472,923
Approve Agreement with Hot Line/Charter $93,730 $84,766
Approve Amendment with NV5 for Inspection $56,940 $56,940
Approve Payment to Frontier for Inspection $13,200 $13,200
Approve Payment to Frontier for Cabling $315,474 $288,518
Approve Payment to SCE $201,783 $191,788
Total $1,858,454 $2,108,135
Frontier Residual Balance ($27,033) $81,124
Original Contingency Balance $265,492 $267,292
Contingency Balance Remaining $238,469 348,416
BACKGROUND:
Bids for construction for UUADs 19-12 and 19-14 were originally solicited by SCE on behalf of all three utilities, on a competitive basis, from SCE’s list of prequalified contractors in May 2019. Hot Line was identified as the lowest responsible bidder for both districts. Hot Line’s bids to SCE, Frontier, and Charter for construction were forwarded with overhead fees, to the City for inclusion in the Assessment Engineer’s Report for each district. The total district costs for UUADs 19-12 and 19-14 were then apportioned out and presented to property owners. Voting to form the districts commenced in August 2019.
On October 1, 2019, a Proposition 218 hearing was conducted to count ballots for UUADs 19-12 and 19-14 in consideration of forming utility undergrounding assessment districts. The votes tallied from both districts showed majority support (62% and 64% respectively) for undergrounding, and City Council subsequently adopted resolutions forming UUADs 19-12 and 19-14. Following the 30-day cash collection and sale of bonds for the remaining assessment balances, in December 2019, SCE, Frontier and Charter were paid in full for their respective portions of the undergrounding projects. Shortly thereafter, both SCE and Charter executed agreements with Hot Line, with an anticipated construction start date of January, 2020. However, Frontier did not execute a construction agreement with Hot Line.
In February 2020, City staff learned that Frontier was preparing to file for bankruptcy, and that execution of Frontier’s construction contract with Hot Line for UUADs 19-12 and 19-14 would be delayed indefinitely. On April 15, 2020, Frontier filed for Chapter 11 bankruptcy. Because the construction portion of these two undergrounding projects is a “joint trench,” the projects cannot proceed without the full participation of all three utility companies. And, because SCE and Charter had already executed construction agreements with Hot Line, it became clear that the City’s Public Works Department would need to assume Frontier’s portion of the work for UUAD 19-12 and 19-14 in order for construction in both districts to proceed. Staff immediately began working with Frontier to obtain reimbursement of the funds the City paid for both districts, inclusive of both construction and cabling costs. Full reimbursements for UUADs 19-12 ($1,831,420.56) and 19-14 ($2,189,270.19) were subsequently received on March 18, 2020.
Realizing that assessments had already been levied at fixed rates, staff reached out to Hot Line and began negotiations to assume Frontier’s portion of the work at the same bid ($1,515,947) Hot Line had provided Frontier. Hot Line was agreeable to this arrangement, and provided the City with the quote it had given Frontier, as further discussed below. However, because the construction projects were not bid at prevailing wage rates, staff requested that Hot Line adjust its costs to include standard prevailing wage rates so that the City could award a contract in compliance with Labor Code requirements. The City is also insuring that Hot Line pays prevailing wage rates for work on the Charter, and SCE portions of the projects. Hence additional funds are needed to cover the difference between the original bid and increased costs due to prevailing wage rates, for both districts. SCE has agreed to amend its contract with Hot Line to cover that additional cost increase and has provided an invoice to the City for the difference. Charter has indicated that reissuing or amending its contract with Hot Line would prove to be extremely cumbersome (taking six months or more), and instead has requested to enter into tri-party agreements with Hot Line and the City to cover the difference between the bid rates and the prevailing wage rates for UUADs 19-12 and 19-14. Fortunately, Frontier’s original markup on the invoice it provided to the City included a substantial contingency for both districts. This contingency nearly covers the prevailing wage differential for UUAD 19-12 and more than covers the additional prevailing wage differential for UUAD 19-14, when also considering the additional construction inspection expenses that will be incurred by the City in overseeing construction activities.
On March 17, 2020, City Council awarded a construction management and inspection services agreement to NV5 for the City’s own UUAD19-4 construction project. Given the firm’s expertise in undergrounding construction and inspection management, and because it’s representatives will already be onsite for UUAD 19-4, staff requested that NV5 provide a quote to the City to add oversight of Frontier’s portion of the construction work for UUADs 19-12 and 19-14. NV5 provided a quote of $61,950 for each district, for a combined total of $113,880.
DISCUSSION:
The City requires that UUAD projects in Manhattan Beach be constructed as joint trench projects, which means that the utilities to be undergrounded must be placed in the same trench (at various depths) wherever possible. This requirement ensures that minimal cuts are made into a street, thus protecting the long-term integrity of the roadway’s structure. For any resident-initiated UUAD joint trench projects that involves SCE, SCE requires that it’s infrastructure be placed in the deepest position within the trench. SCE also requires that it be the lead on bidding these joint utility projects, regardless of the number and type of other utilities participating, in order to ensure that only SCE’s list of prequalified bidders is invited to participate. SCE has this requirement to ensure that only well-qualified contractors work on its system, thus safeguarding the safety and integrity of its infrastructure given the risks associated with electrical lines. Lastly, due to how joint trench projects are designed and constructed, construction work for all three utilities must be awarded to a single bidder. Any other approach is technically infeasible to coordinate and administer. In this case, SCE provided the bid solicitation to the prequalified contractors, and Hot Line was the low bidder for all three utilities.
The City is typically required to comply with various requirements in the Public Contract Code regarding competitive bidding for the procurement of contracts for public works projects. In these circumstances, compliance with those requirements is not possible. The City Attorney has advised that, if the City Council determines that compliance with the standard Public Contract Code requirements for public works projects is impractical and will not achieve the public purposes of competitive bidding, the City Council may enter into the proposed contracts with Hot Line. In this case, unless the City assumes the bid submitted by Hot Line for Frontier’s portion of the projects and contracts with Hot Line for completion of that work, the projects cannot proceed. If Council makes those determinations, it may enter into the construction agreements with Hot Line for Frontier’s portion of the undergrounding work without complying with the competitive bidding procedures applicable to typical City public works contracts.
Moving forward, in order for UUADs 19-12 and 19-14 to proceed with construction and cabling, a series of actions must be taken to compensate for the bankruptcy filing by Frontier. City Council must:
1. Approve two construction agreements with Hot Line to complete Frontier’s portion of the construction work as follows:
a. $1,177,327 for UUAD 19-12
b. $1,472,923 for UUAD 19-14
2. Approve two tri-party agreements, in a form approved by the City Attorney, with Hot Line and Charter to cover the prevailing wage differences as follows:
a. $93,730 for UUAD 19-12
b. $84,766 for UUAD 19-14
3. Approve an amendment with NV5 for $113,880 for construction and inspection services to oversee Frontier’s portion of the work for both districts.
4. Authorize payments to Frontier for $13,200 for construction inspection services for each district.
5. Authorize payments to Frontier for future cabling services as follows:
a. $315,474 for UUAD 19-12
b. $288,518 for UUAD 19-14
6. Authorize agreements with SCE in a form approved by the City Attorney and an additional payment to SCE to cover the prevailing wage differences as follows:
a. $201,783 for UUAD 19-12
b. $191,799 for UUAD 19-14
The construction portion of the undergrounding project for UUAD 19-12 and 19-14 is expected to take approximately ten months to complete. Please note, however, that prevailing wages rates are expected to increase in 2021, and a price adjustment will become necessary for any construction work remaining at that time. The contingency amount available is expected to be sufficient to cover those labor rate increases. Following completion of construction, the utility companies will begin cabling their systems, and property owners will begin installing their private property conduit in preparation for receiving underground service. The entire project for both districts is expected to be completed by winter 2022.
CONCLUSION:
In summary, staff recommends that City Council approve the 12 actions listed under Subject above. Once the various agreements are executed, staff will immediately schedule a pre-construction meeting in partnership with SCE and Charter so that the project may commence.
PUBLIC OUTREACH:
No formal public outreach has been conducted regarding this issue, although staff has kept the district leaders informed of the events that have unfolded and our efforts to resolve them.
ENVIROMENTAL REVIEW:
The City has reviewed the proposed project for compliance with the California Environmental Quality Act (CEQA) and had determined that the project qualifies for a Categorical Exemption pursuant to Section 15302(d) and 15303(d) (Conversion of overhead electric utility distribution system facilities to underground and conversion of existing small structures to small new equipment and facilities in small structures) of the State CEQA Guidelines. A Notice of Exemption was filed with the Los Angeles County Clerk’s Office for the Projects.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Resolution No. 20-0067: Hot Line Construction Agreement for UUAD 19-12
2. Agreement - Hot Line Construction, Inc. for UUAD 19-12
3. Resolution No. 20-0068: Tri-Party Agreement for UUAD 19-12
4. Agreement - Tri-Party for UUAD 19-12
5. Resolution No. 20-0069: SCE Prevailing Wage Agreement for UUAD 19-12
6. Agreement - SCE Prevailing Wage for UUAD 19-12
7. Resolution No. 20-0070: Hot Line Construction Agreement for UUAD 19-14
8. Agreement - Hot Line Construction for UUAD 19-14
9. Resolution No. 20-0071: Tri-Party Agreement for UUAD 19-14
10. Agreement - Tri-Party for UUAD 19-14
11. Resolution No. 20-0072: SCE Prevailing Wage Agreement for UUAD 19-14
12. Agreement - SCE Prevailing Wage for UUAD 19-14
13. Resolution No. 20-0073: NV5, Inc. Agreement for UUAD 19-12 and 19-14
14. Amendment No. 1 - NV5
15. Agreement - NV5 (2020)
16. UUAD 19-12 Plans and Specifications (Web-Link Provided)
17. UUAD 19-14 Plans and Specifications (Web-Link Provided)
18. UUAD Nos. 19-12 and 19-14 Boundary Map
19. Budget and Expenditures Summary