Clean Water Atlanta

Panel members in attendance are Bruce Beck, Wayne Clough, John Hall, Jeff Hilliard, Cecil Lue-Hing, Mike Marcotte, Larry Roth, Billy Turner and Nancy Wheatley.

Dr. Clough called the meeting to order and asked Joe Basista of the PMT to introduced Mr. Henry Wise of the Atlanta Chapter of the Appraisal Institute and to put asked him to explain his work findings regarding land cost appraisals in the Greensferry basin in context of the plan refinement process. Mr. Basista explained that . Mr. Wise’s work has been to review the cost estimating approach for land costs associated with implementing the stormwater quality improvement and greenway projects. As has been previously described, these improvements are related to stormwater management being considered outside of the requirements of the CSO consent decree. These improvements are not part of the Authorized Plan and refinement options being analyzed and thus any adjustments in land costs will not affect these evaluations of CSO options to meet the consent decree. In fact, even if the cost of land were free, there would still be a very significant cost, several hundred million dollars, to implement stormwater management and greenway projects. Mr. Wise began by stating that the assessments performed for the purpose of this meeting were done pro bono. He then began his presentation and said they reviewed the methodology the City’s consultants HDR/WL Jordan (HDR/WLJPMT) used to make the land acquisition cost estimate. He said that the Appraisal Institute believes it is important to pay attention to market value because lands that would be acquired (for greenways) can be acquired for market value. The City has the right – under the use of eminent domain – to take the parcels that they need after paying just and adequate compensation. In Georgia, the “just and adequate rule” means fair market value for the part taken, plus any damage to the remainder property. So, any potential pond or storage facility that requires all of four parcels and part of three other parcels, has to be examined to determine if the part taken from three parcels damages those properties to the extent that it diminishes their value. If so, you have to pay for the balance.

The methodology initially used by the PMT was to estimate a price per acre. Mr. Wise said that this concept works well only when discussing vacant land. Most of the affected parcels in the Greensferry Basin are .10 or .15 acres – these are long, skinny “garden” parcels. For example, if most of these tracks currently sell for $10,000 per parcel for a vacant tract, then it is reasonable to say that $100,000 for a vacant acre is the expected acquisition cost. When you put a house on the parcel, it’s selling for $80,000 to $160,000 – most of them in the $125,000 range. That is still for .10 of an acre, but now you have a $250,000 per acre cost. This process of trying to find a per acre price introduces an upward bias to the entire methodology used by the consultants.

The methodology initially used by HDR/WLJthe PMT was to estimate a price per acre. According According to estimate a price per acre. Mr. Wise, this concept works well only when discussing vacant land. Most of the affected parcels in the Greensferry Basin are .10 or .15 acres – these are long, skinny “garden” parcels. For example, if most of these tracks currently sell for $10,000 per parcel for a vacant tract, then it is reasonable to say that $100,000 for a vacant acre is the expected acquisition cost. When you put a house on the parcel, it’s selling for $80,000 to $160,000 – most of them in the $125,000 range. That is still for .10 of an acre, but now you have a $250,000 per acre cost. This process of trying to find a per acre price introduces an upward bias to the entire methodology used by the consultants. Wise, the second problem they addressed was that the PMT used the Fulton County assessment in order to get a reasonable price per acre or acquisition price. The assessor’s job is to make a judgment about market value – 100 percent value – and then 40 percent of that is the assessed value. The PMT paid attention to the market value on the parcels that must be taken. For each BMP, they identified it using a GIS system and they superimposed the tax map on that and identified the parcels that would be affected. They know the assessed value of each parcel, but because the assessment may not be correct, their method was to draw a group of sales data in each of the drainage basins and they compared the sales price to the assessed value and applied a factor.

According to According to Mr. Wise, the second problem they addressed was that HDR/WLJthe PMT used the Fulton County assessment in order to get a reasonable price per acre or acquisition price. The assessor’s job is to make a judgment about market value – 100 percent value – and then 40 percent of that is the assessed value. HDR/WLJPMT paid attention to the market value on the parcels that must be taken. For each BMP, they identified it using a GIS system and they superimposed the tax map on that and identified the parcels that would be affected. They know the assessed value of each parcel, but because the assessment may not be correct, their method was to draw a group of sales data in each of the drainage basins and they compared the sales price to the assessed value and applied a factor. Wise said that there was a mathematical problem in the most recent revision by the PMT because they divided by the sales price instead of the assessed value. In Greensferry, the reported 34 percent factor should have been a 76 percent factor. Redoing the calculation using the average of 176 percent is about $1.2 million upward from what was previously thought for Greensferry acquisition. The beginning point, after correcting the math, was $5,410,000 to acquire about 16 acres and 16 BMPs in Greensferry. The PMT estimate, once you fix the math, was $5,410,438.

Mr. Wise said that there was a mathematical problem in the most recent revision by HDR/WLJthe PMT because they divided by the sales price instead of the assessed value. In Greensferry, the reported 34 percent factor should have been a 76 percent factor. Redoing the calculation using the average of 176 percent is about $1.2 million upward from what was previously thought for Greensferry acquisition. The beginning point, after correcting the math, was $5,410,438 to acquire about 16 acres and 16 BMPs in Greensferry. The HDR/WLJPMT estimate was $4,591,503.

The next aspect the Appraisal Institute questioned was the PMT’s method of averaging within a BMP. HDR/WLJ identified parcels that would be affected, applied a factor that would turn the assessor’s value into market value – so now the group of properties is inflated by 176 percent. HDR/WLJ averaged those prices, used the average and multiplied by the size of the acreage, and that gives the foundation of their judgment. We now have an average of properties – some of which are improved, some of which are vacant, some of which are taken in full, some of which are barely nicked – and the process of averaging adds another layer of error between market value and the statistic that has been calculated.

Mr. Wise said his most important point is that land’s value is based on its function and utility. If we were in any typical neighborhood, the most desirable land to the marketplace is land that is generally level and has good access. The type of land that is most suitable for storm drainage control structures is low-lying land, and their research shows that it is rare that an acre of low-lying land has the same value as the land with the highest function and utility. Often it is 5 to 25 percent of the value of the good land. They looked at actual transactions and characterized them by type of transaction – vacant land, fixer-uppers, a typical house, and a high-priced house. They wanted to see whether or not the factor that one might apply to the assessed value was the same. He said it is okThe Appraisal Institute suggests using general appraisal methodology. A group of volunteers from the Appraisal Institute looked at the various parcels for each BMP and typed them in broad categories. Then they did the same thing with a group of sales for that neighborhood. According to Mr. Wise, if you can determine the typical price of a vacant lot that is like the type of property you are going to acquire – in three or four big categories – then you can see what it is that has to be acquired and apply that price to it. You don’t need to use assessed values if the assessor’s “error” is constant but, if you lookdata at the data, the assessors generally overestimated the value of vacant land by about 22 percent. They overestimated fixer-uppers by 43 percent, underestimated the typical house by 78 percent and underestimated the high-priced house 169 percent. If you average all of these, you have no reason to believe a single factor can be applied to the assessed values to lead you to a reasonable conclusion of market value. There was nothing they found in their research to say that it is possible to rely on the assessor’s valuations as a foundation for market value. all. You don’t need to divide by size; you just need to know what a vacant lot is selling for. Vacant land divided by acreage is a very useful tool to work with per square foot prices. Once you are dealing with improved parcels, the price of the entirety is a good variable to use because most houses are likely to be very similar to each other. You will be able to see the expected price for a typical house, a fixer-upper, and the most expensive houses. Then you need to do the same thing for commercial property because some of the BMPs were designed in areas where the property’s highest and best use is commercial. The Institute volunteers looked at each BMP, the properties that affected each BMP and identified the character of the property that was affected and a reasonable estimate of what it is likely to sell for.

The Appraisal Institute suggests using general appraisal methodology. A group of volunteers from the Appraisal Institute looked at the various parcels for each BMP and typed them in broad categories. Then they did the same thing with a group of sales for that neighborhood. Mr. Wise said, if you can determine the typical price of a vacant lot that is like the type of property you are going to acquire – in three or four big categories – then you can see what it is that has to be acquired and apply that price to it. You don’t need to use the assessor’s data at all. You don’t need to divide by size; you just need to know what a vacant lot is selling for. Vacant land divided by acreage is a very useful tool to work with per square foot prices. Once you are dealing with improved parcels, the price of the entirety is a good variable to use because most houses are likely to be very similar to each other. You will be able to see the expected price for a typical house, a fixer-upper, and the most expensive houses. Then you need to do the same thing for commercial property because some of the BMPs were designed in areas that the property’s highest and best use is commercial. The Institute volunteers looked at each BMP, the properties that affected each BMP and identified the character of the property that was affected and a reasonable estimate of what it is likely to sell for.

Mr. Wise gave examples of BMPs where he thought HDR/WLJ’sthe PMT’s estimates were seriously flawed either with estimates that were too high or too low because they were based on the assessor’s valuations. For the acquisition of 16 parcels in Greensferry, the Appraisal Institute’s methodology would estimate $2.7 million... That is compared to the $5.5 million estimate from HDR/WLJthe PMT. They only studied Greensferry, so they cannot comment on the other basins except to say that HDR/WLJ’sthe PMT’s methodology has no foundation that would allow you to come to a market value or acquisition price estimate. ButHowever, they think it would be possible to do that by typing the properties that are affected and generating basic sales data to find the market value. He also suggested that they talk to land acquisition experts with the Department of Transportation (DOT) to get an idea of how much overhead cost there is when property has to be acquired by imminenteminent domain.

Dr. Clough then asked Greg Giornelli of the Mayor’s Office to discuss an independent review of cost data that was requested by the Advisory Panel. Mr. Giornelli reminded everyone that the Panel had asked at its last meeting for the City to conduct an outside, independent review of the cost estimates for sewer separation and tunnel construction—basically the capital costs associated with the CSO improvements – and an outside assessment of the water quality calculations under the various options proposed by the PMT.

Regarding the review of water quality impacts, the City has contracted with Dr. Michael Saunders, a professor of Environmental Engineering at Georgia Tech, to conduct that review. The review will be completed by September 25th and the results will be given to the Panel immediately upon completion. They will also make the results available to the public at that time.

The City has adopted a two-pronged approach to reviewing the cost estimates. They have contracted with a cost estimating firm – the firm of Atkins Hanscomb – an international construction management firm with expertise in cost estimates and value engineering. They have also issued a RFC (Request for Critique) and packaged all the information the City consultants used for their cost estimates and made it available to the public. They advertised that package and invited anyone from the public to review that entire set of information and give them a critique. Mr. Giornelli said it will be very useful to the City to have real world contractors look at the information and tell them how good that information is for coming up with a cost estimate. It is a little unusual, but they feel it is worth doing. The Mayor’s Office expects to have all the cost estimate information from the firm and the public by September 25, and they will getforward the results to the Panel. and make it available to the public.

Mr. Giornelli told the Panel that these reviews will not bring a different set of numbers or come up with an entirely new cost. The goal is to provide an independent opinion regarding the confidence level the Panel and the City should have with the process that came up with the cost estimates. They hope to come back with a report that says they either have a high degree of confidence in the PMT’s numbers, a reasonable degree or a low level of confidence.

Mr. Giornelli told the Panel that these reviews will not bring a different set of numbers or come up with an entirely new cost. They want to provide an independent opinion regarding the confidence level the Panel and the City should have with the process that came up with the cost estimates. They hope to come back with a report that says they either have a high degree of confidence in the PMT’s numbers, a reasonable degree or a low level of confidence.

Next, Joe Basista of the PMT, distributed a packet of information that contained estimated costs for all the sewer separation and tunnel options. He said that in the beginning of this process, he predicted that the cost of tunnels would slightly increase as they learned more about the risks associated with tunnels and the treatment technology. He also said that the cost of separation would likely come down as they better understood the physical layout of separate sewers. In general, both of those predictions came true. They are almost finished on the pre-design level; in fact, on the tunnel storage and treatment systems – the treatment plants and pump stations associated with these options – the pre-design reports are completed and submitted and those costs were incorporated in the packet he distributed. On sewer separation and stormwater management costs; that is still a very active process. They will get more plans from the design consultant next week, so the numbers he haspresented today are still extrapolated. The City staff still has a good deal of confidence that the numbers are being refined in the right direction and that they won’t change drastically.

Next, Joe Basista of the PMT, distributed a packet of information that contained estimated costs for all the sewer separation and tunnel options. He said that in the beginning of this process he predicted that the cost of tunnels would slightly increase as they learned more about the risks associated with tunnels and the treatment technology. He also said that the cost of separation would likely come down as they better understood the physical layout of separate sewers. In general, both of those predictions came true. They are almost finished on the pre-design level, in fact, on the tunnel storage and treatment systems – the treatment plants and pump stations associated with these options – the pre-design reports are completed and submitted and those costs were incorporated in the packet he distributed. On sewer separation and stormwater management costs; that is still a very active process. They will get more plans from the design consultant next week so the numbers he has today are still extrapolated. The City staff still has a good deal of confidence that the numbers are being refined in the right direction and that they won’t change drastically.

Mr. Basista explained that he would not go over all the costs estimates but would select those in which they have seen changes from previous estimates. He began with the authorized plan and said that it had been priced at $953 million in July 2001; and today it would cost about $989 million. The cost of refinement Option 1 (27 percent separation with a one mile extension to the existing tunnel system) has gone down recently because of extending the existing tunnel system instead of constructing a new tunnel system. It also eliminates two CSO facilities – Greensferry and McDaniel. The cost for that is $834 million.

Mr. Basista explained that he would not go over all the costs estimates but would select those in which they have seen changes from previous estimates. He began with the authorized plan and said that it had been priced at $953 million in July 2001 and today it would cost about $989 million. The cost of refinement option #1 (27 percent separation with a one mile extension to the existing tunnel system) has gone down recently because of extending the existing tunnel system instead of constructing a new tunnel system. It also eliminates two CSO facilities – Greensferry and McDaniel. The cost for that is $834 million.

There have only been minor modifications to Options 2 and 3. Option 2 (40 percent separation) is separation of the entire East basin and that would eliminate the East tunnel altogether and still eliminate two CSOs and two regulators. Option 3 (50 percent separation) ofeliminates the Greensferry CSO along with the East basin tunnel. That eliminates three CSOs. Those costs are $912 for Option 2 and $906 million for Option 3.

The PMT just completed the evaluations and the worked out the costs for Option 4 (80 percent separation). Mr. Basista said he had hoped that this option would offer a different look at the ability to offer more separation including the urban core, for a lower cost, . Bbutut the costs did not move that way. He said that the problematic issue is that they can separate everything but the core, but they can only partially separate North Avenue, Tanyard and Clear Creek. That has been more difficult than anticipated. In this plan, the West tunnel is reduced but it cannot be eliminated and it still has to hold a volume of 95 million gallons. So this option means that we are faced with an expensive tunnel system and moving the combined sewage out of the core and to the CSOs. The estimated capital cost right now is $1.2 billion and that is at the high end of any costs they have looked at.

The PMT just completed the evaluations and the worked out the costs for Option 4 (80 percent separation). Mr. Basista said he had hoped that this option would offer a different look at the ability to offer more separation including the urban core, for a lower cost. But the costs did not move that way. He said that the problematic issue is that they can separate everything but the core, but they can only partially separate North Avenue, Tanyard and Clear Creek. That has been more difficult than anticipated. In this plan, the West tunnel is reduced but it cannot be eliminated and it still has to hold a volume of 95 million gallons. So this option means that we are faced with an expensive tunnel system and moving the combined sewage out of the core and to the CSOs. The estimated capital cost right now is $1.2 billion and that is at the high end of any costs they have looked at.

Mr. Basista’s packet of information included a summary sheet with estimated capital costs, pollutant load, quality of life factors and anticipated completion schedules. It also included estimated capital costs (with and without land costs) for stormwater management improvements. These costs continue to be reviewed and adjusted as the refinement process continues.

Mr. Basista was asked what contributed to the cost increase in the authorized plan. He said most of that cost increase is from water quality improvements in the plan. The PMT now has included a high rate clarification and a high rate filtration process, which he said gives significant water quality improvements at a modest price –about $20 to $25 million.

Dr. Clough allowed members of the audience to ask questions to Mr. Basista. The first question was about the inclusion of operating and maintenance costs (O&M) in the estimates. Mr. Basista said that in a week or two, the PMT would have O&M and life cycle costs for all the refinement options. They don’t anticipate that those costs will change any fundamental decisions.

Another question from the audience concerned disruption caused by the building of tunnels and the fixing of old, broken and leaking pipes (also required by consent decree, as part of the City’s Sewer System Evaluation Survey project).. Mr. Basista explained that the options with lower amounts of separation contain about $140 million of capacity relief and repairs that will be done on the combined sewer system. He agreed that will cause disruption.

Another audience member asked for a figure that shows the amount of pollution removed by using 100 percent separation with the greenways approach. Mr. Basista didn’t have those figures with him, but said he believed they were about the same or perhaps a little lower than those with the authorized plan. He also said that construction costs for the greenways approach are under review right now. The costs given in the information packet are for the pre-design consultant’s stormwater quality management plans. They have already developed a greenway plan for Greensferry. The capital cost for that is very similar to the capital cost of the stormwater quality management plan primarily because they saw cost savings associated with grouping smaller ponds together to make them bigger ponds. They are moving ahead with adapting the Stockade and Greensferry basins so they can extrapolate costs from those two basins.

Dr. Clough then updated everyone on the process ahead for closing out the activities of the Clean Water Advisory Panel. He said that the Advisory Panel may be meeting for the last time depending on the outcome of the final cost estimates. If those estimates change significantly, the Panel may meet again.

At this point, the Panel will begin writing its report while it is awaiting the final cost estimates. Their objective is to review the Mayor’s Administrative Order to make sure they are addressing the issues she asked them to address so they can give their best advice based on their experience and what they have heard throughout the meetings.

Dr. Clough said he does not think the Panel will have a final report until mid-October because of the information they are awaiting from the City’s reviews. He also said that the Panel does intend to include a section in the report on long-term issues the City needs to address. He said the City has a set of issues that needs to be dealt with today, but there should be a strategic, long-term view about how to address water issues regionally. Dr. Clough thanked Lynn Durham and Marla Rawls Hill for all the fine work they have done assisting the panel and handling the logistics of the meetings.

Councilwoman ClareClair Muller thanked the Panel for traveling to Atlanta so many times to help the City work through these sewer issues and she thanked Dr. Clough for his leadership.

With that, the meeting was adjourned.