Reconciliation of DEEP Costs to OLS Costs for Sewers

[Martin Merritt]

Please find attached a reconciliation between DEEP's estimated costs per EDU of $44,416 to our estimated costs of $96,726 for sewers 

(The difference of the overall estimate of approximately $132,000 to the $96,726 above is due to the fact that this analysis doesn't include the $25,780 estimated costs for Roads and Stormwater costs and the estimated $10,000 costs to connect)

The primary reasons for the differences are:

• Firstly, with regards to DEEP's presentation of the $44,416 per EDU costs, their analysis did not include operational costs and interest costs.  We believe this was an oversight on DEEP's part, as all of the information we have, states clearly that DEEP does in fact include operating costs and interest costs in their assessment of affordability.  If the State had properly included those costs, their $44,416 per EDU figure should have been $62,927. 
• DEEP's figures included a construction contingency of 10% , and we provided a 23% contingency in our analysis (although our contingency isn't just for project overruns, it also considers a contingency for potential admin and legal costs and hiring a project manager and other variables).  We absolutely hope, that we would not have to utilize that full contingency.  But it is included, so that if the overruns are above the 10% threshold that the State suggests, that we wouldn't have to go back to homeowners for further bond approval.   Also, one of the complaints of previous WPCA analysis was that the WPCA was not being realistic in suggesting that the project will only have a 10% overrun, and that the figure should be closer to 20%, which is routinely used in many construction estimates.  
• Our 2025 Bid estimate provides for a 40% increase from the 2021 bids.  This 40% comes exactly from the the bid differences that Old Colony, Sound View and the Shared Project received from their 2021 bids, to the bids they received in February 2025.  The State only used a 31% difference.  We believe our estimate represents the current market.  I'm not sure why the State believes our bid will be 9% lower than the bids the other beaches received in February?
• We also include a 5% inflation of the bids.  This is for two reasons.  The first is that we will be going out to bid in June or July, and we believe the market is not improving, but getting more expensive.  Hopefully we are wrong, but it would appear there are signs of increasing costs.  Also, two of the bidders on the shared project have stated that they will continue to hold their bids open past the 120 day requirement, but that they are not going to commit that there will not be cost increases on their bids.  So out of caution, we are utilizing this 5% for their bids also.
• The three contingencies above, are clearly cautious in nature.  If the OLS community believes we are being too cautious and want to vote for a lower bond authorization amount, then that should be brought up in this forum, and in discussions and on May 20th.  The dollar value of the additional contingencies we have in our estimates, compared to the State are $3.3 million of the overall bond authorization.  
• Also, DEEP suggested that the operating costs would be $450 per year, and we have estimated at $1,192 per year.  The major difference in our estimates, is that DEEP has not considered any funding for future capital expenditures on the project.  This funding is specifically required in the CSA.  The difference here is $2.6 million.

Marty

[GS Man]

Jay or Paul Yellen are you planning to share this analysis with DEEP representatives, to get their response as it relates to the sewer cost element of this analysis. 

Obviously they could care less about the roads and the storm water elements.

I think it would be great if we could get Carlos, and team to look at it and either acknowledge that Marty’s assessment is correct or if they have a counter viewpoint, let’s hear it.    

eom- gss 

On May 15, 2025, at 11:55 PM, Martin Merritt <mjmerr...@gmail.com> wrote:

Please find attached a reconciliation between DEEP's estimated costs per EDU of $44,416 to our estimated costs of $96,726 for sewers 

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<OLS DEEP reconciliation of costs for sewers.docx>

[Jay Moynihan]

Happy to convey later today 

Thanks 

Jay

Sent from my iPhone

On May 16, 2025, at 9:00 AM, GS Man <greg....@oldlymeshores.org> wrote:

Jay or Paul Yellen are you planning to share this analysis with DEEP representatives, to get their response as it relates to the sewer cost element of this analysis. 

To view this discussion visit https://groups.google.com/a/oldlymeshores.org/d/msgid/bond2025.g/1100E858-9F6B-4E03-A948-3CE1E1B9EB80%40oldlymeshores.org.

[Alfred Roy]

Marty-

Thanks for putting this comparison together.

Please see my comments in BLUE.

From your email dated May 15:

Please find attached a reconciliation between DEEP's estimated costs per EDU of $44,416 to our estimated costs of $96,726 for sewers 

(The difference of the overall estimate of approximately $132,000 to the $96,726 above is due to the fact that this analysis doesn't include the $25,780 estimated costs for Roads and Stormwater costs and the estimated $10,000 costs to connect)

The primary reasons for the differences are:

• Firstly, with regards to DEEP's presentation of the $44,416 per EDU costs, their analysis did not include operational costs and interest costs.  We believe this was an oversight on DEEP's part, as all of the information we have, states clearly that DEEP does in fact include operating costs and interest costs in their assessment of affordability.  If the State had properly included those costs, their $44,416 per EDU figure should

•  have been $62,927. 
  DISAGREE. DEEP is only obligated to consider, as restated during their presentation, the total cost of construction for eligible components of the sewer infrastructure.
  
  

• DEEP's figures included a construction contingency of 10% , and we provided a 23% contingency in our analysis (although our contingency isn't just for project overruns, it also considers a contingency for potential admin and legal costs and hiring a project manager and other variables).  We absolutely hope, that we would not have to utilize that full contingency.  But it is included, so that if the overruns are above the 10% threshold that the State suggests, that we wouldn't have to go back to homeowners for further bond approval.  

•  Also, one of the complaints of previous WPCA analysis was that the WPCA was not being realistic in suggesting that the project will only have a 10% overrun, and that the figure should be closer to 20%, which is routinely used in many construction estimates.  
  MAYBE. However, while it may be prudent for the full WPCA to consider these costs, DEEP, as per past practices, is focused on core project construction costs.  Construction oversight is embedded in the F&O contract.
  
  

• Our 2025 Bid estimate provides for a 40% increase from the 2021 bids.  This 40% comes exactly from the the bid differences that Old Colony, Sound View and the Shared Project received from their 2021 bids, to the bids they received in February 2025.  The State only used a 31% difference.  We believe our estimate represents the current market.  I'm not sure why the State believes our bid will be 9% lower than the bids the other beaches received in February?
  

• MAYBE. It seems your estimate may still be within the margin for construction-only costs. Bids will tell.
  
  

• We also include a 5% inflation of the bids.  This is for two reasons.  The first is that we will be going out to bid in June or July, and we believe the market is not improving, but getting more expensive.  Hopefully we are wrong, but it would appear there are signs of increasing costs.  Also, two of the bidders on the shared project have stated that they will continue to hold their bids open past the 120 day requirement, but that they are not going to commit that there will not be cost increases on their bids.  So out of caution, we are utilizing this 5% for their bids also.
  

• SEEMS LOGICAL. However, DEEP may not be sympathetic to this.  They seek to determine whether the bids for the core construction costs come in under the bond cap.
  
  

• The three contingencies above, are clearly cautious in nature.  If the OLS community believes we are being too cautious and want to vote for a lower bond authorization amount, then that should be brought up in this forum, and in discussions and on May 20th.  The dollar value of the additional contingencies we have in our estimates, compared to the State are $3.3 million of the overall bond authorization.  
  

• GOOD POINT.  From DEEP's likely perspective is this approach is overly cautious.  Taken in total, presenting $96 or $132K, may be consider a scare tactic to drive a no vote, giving DEEP ammunition for enforcement action.
  
  

• Also, DEEP suggested that the operating costs would be $450 per year, and we have estimated at $1,192 per year.  The major difference in our estimates, is that DEEP has not considered any funding for future capital expenditures on the project.  This funding is specifically required in the CSA.  The difference here is $2.6 million.
  

• DISAGREE: Based on my previous involvement and early research, the estimated $1.2K/year is indefensible.  Please refer to my responses elsewhere in this forum.
  
  

Marty

[Martin Merritt]

Al,

With regards to your notes, thanks again for your thoughts:

• With regards to the costs that DEEP considers, you are actually incorrect on what DEEP considers in their calculation.  I have e-mail from them stating specifically that they consider interest costs and operating costs in their evaluation of affordability.  Further, I have read the 100 page EPA guidelines that they referred to in their August 21, 2023 letter, and this guidance also states that operating costs and interest costs should be considered in evaluating affordability.
• Again, if anyone believes our costs are too conservative, then we should reduce the bond authorization.  However, if we approve this level of bond authorization, then everyone is agreeing to capital costs of $81k per homeowner, plus interest and operational expenses.  As mentioned, it would be nice if our estimates are conservative and we don't spend this much.  But a yes vote is stating that you are ok with spending, and you approve spending, the amounts in our projections.
• Yes I agree, if we receive bids, this will provide us with actual figures, and we will know which estimate, ours or the States, is better.
• I think our discussion of the operating costs moving forward can continue in our other conversation.  This needs further analysis.  Personally, I believe these costs will be much closer to our $1,192 per year, instead of the State's $450 per year, but it would be great if we can continue the conversation and build out these estimates better. 

Marty

[Alfred Roy]

Marty-

Please see responses in BLUE.

My plan is to now return to retired status.  

Al,

With regards to your notes, thanks again for your thoughts:

• With regards to the costs that DEEP considers, you are actually incorrect on what DEEP considers in their calculation.  I have e-mail from them stating specifically that they consider interest costs and operating costs in their evaluation of affordability.  Further, I have read the 100 page EPA guidelines that they referred to in their August 21, 2023 letter, and this guidance also states that operating costs and interest costs should be considered in evaluating affordability.
  

• CAUGHT ME!  My intent was to demonstrate DEEP's focus is on capital construction and directly related financial obligations and I should have included reasonable and customary cost of operations based on industry experience.  DEEP is far better versed (and staffed) on all this than any of us.
  
  

• Again, if anyone believes our costs are too conservative, then we should reduce the bond authorization.  However, if we approve this level of bond authorization, then everyone is agreeing to capital costs of $81k per homeowner, plus interest and operational expenses.  As mentioned, it would be nice if our estimates are conservative and we don't spend this much.  But a yes vote is stating that you are ok with spending, and you approve spending, the amounts in our projections.
  

• DISAGREE.  The bond cap established in collaboration with fully knowledgeable and competent Bond Counsel should not be in question.  If the bids come in above the Bond Cap - game over (temporarily)
  
  

• Yes I agree, if we receive bids, this will provide us with actual figures, and we will know which estimate, ours or the States, is better.
  
  

• I think our discussion of the operating costs moving forward can continue in our other conversation.  This needs further analysis.  Personally, I believe these costs will be much closer to our $1,192 per year, instead of the State's $450 per year, but it would be great if we can continue the conversation and build out these estimates better. 
  

• WE'LL See!  But, I believe unlikely.  Besides, none of that is Germane to the vote we are required to conduct.