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When I first wrote about the Bajagua Project LLC in 2006, the cost of building its sewage treatment plant in Mexico was estimated between $150 million and $200 million. Today, that hasn’t changed much. The company pins the cost at $194 million.
But the company says the annual costs of operations and maintenance have decreased. Once estimated at $20 million, they’re now $12 million. As a result, a plant once projected by the company to cost as much as $780 million over its 20-year life is now estimated at $539 million.
There are a lot of numbers there. Here’s why they matter: That $240 million gap has become a central focus after two government studies examining the proposal were released this week. The International Boundary and Water Commission says it isn’t convinced the project’s costs have declined.
“We’ve always felt the cost was much higher than what they’ve indicated,” said Sally Spener, a commission spokeswoman. The commission pins the project’s total cost at $742 million.
Craig Benedetto, a Bajagua spokesman, said the decline in costs is real and cited five reasons.
2 and 3. The project’s site and land acquisition. The site is closer to existing sewage infrastructure (meaning fewer miles of pipe must be laid) and can be obtained for less than expected. Total savings: $41 million.
4. The company believes it can finance its long-term debt at a lower interest rate. (This won’t be a certain source of savings, however, until the project gets off the ground because interest rates change.)
5. The company believes labor costs will be lower than it originally estimated. Total savings: $7.6 million.
“We didn’t cook the books. That’s the bottom line,” Benedetto said. “It was a different site in a different time. A lot has changed in the last three years since we put that estimate out there. And that was a worst-case scenario estimate to begin with. We put that out there because we didn’t want to be accused of cooking the books.”
Not everything has decreased. The cost of building the treatment plant itself — with no supporting infrastructure — has increased. In 2005, Bajagua estimated the actual plant would cost $44.4 million. That has increased to $72.9 million.
Federal officials question the increase.
“It’s very difficult for us to figure out how Bajagua came up with its numbers for capital cost,” Spener said.