The San Antonio Water System board on Wednesday unanimously approved a takeover of the controversial Vista Ridge project by a Kansas City-based construction company — a move set in motion by the financial troubles of a Spanish firm the city had enlisted to build the 142-mile pipeline.
The financial standing of that firm, Abengoa, began eroding in mid-2014, around the same time the city council unanimously approved a contract between one of its subsidiaries and the city-owned water utility. Under the agreement, Abengoa Vista Ridge would've designed and constructed a project that city leaders believe is key to San Antonio's water future — but that environmentalists argue will hinder conservation efforts and damage local water supplies.
The pipeline is expected to deliver up to 16.3 billion gallons of water per year to San Antonio from a wellfield in Burleson County starting in 2020, expanding the city’s water supply by 20 percent.
Utility officials said the project was still a go even after Abengoa entered bankruptcy proceedings in the fall. But in February, Abengoa Vista Ridge's director informed the utility's governing board that the company was behind on payments to project vendors and was looking for an equity partner to take control of the project.
In late March, the company announced it had struck a deal to sell 80 percent of Vista Ridge — and all of its decision-making authority — to its primary construction contractor, Garney Construction. On Friday, the utility board quietly called a special Wednesday meeting to vote on the deal.
Vista Ridge opponents have argued that despite Abengoa’s deteriorating financial status, the firm has far more experience financing and executing large-scale projects than Garney, whose main focus is construction.
In a presentation to the board on Wednesday, Donovan Burton, the utility’s vice president for water resources and government relations, acknowledged prior uncertainties around Garney’s ability to take the helm.
“We had some, I guess, questions and concerns,” he said. “Can Garney make it with some of the added costs? Can they ... turn this into a project that works? And we’re here today to say that we believe that they have and we believe they can.”
Earlier this month, the board approved a recommendation to lock in interest rates on the project, something it had the authority to do under its contract with Abengoa. That brought the total project cost down half a billion dollars to $2.9 billion, but it also meant Garney would have to make up the difference if interest rates rose by the time the company locked down financing for the pipeline.
Garney has figured out how to “mitigate the interest rate” through short- and long-term financing, Burton told the board Wednesday. And Scott Parrish, Garney’s chief operating officer, praised the rate lock in remarks to the board before its vote.
“We’re excited to help you secure San Antonio’s water future,” he said.
Board chairman Berto Guerra praised Garney for its “willingness to step up in a time of need.”
“Sometimes that’s just the way the good Lord works,” he said.
San Antonio Mayor Ivy Taylor, who serves on the board, was more guarded in her comments on the deal, noting the obstacles and opposition the project has faced.
“In spite of the fact that it’s been difficult, I am still encouraged,” she said, thanking “the community folks who come out and consistently challenge us and ask questions.”
She added: “I’ll be more excited when we see some pipe in the ground and some water coming out, but it is again a multi-stage, multi-layer process and so everybody has put their best effort forward in order for us to get to this point.”
Vista Ridge opponents, meanwhile, argued that the utility violated open meetings laws by not posting the specifics of the meeting agenda until Monday. On Wednesday, they again urged the board to vote no on the deal.
“The perception of abundant water is a danger to San Antonio,” said Alan Montemayor, a member of the Alamo Sierra Club.
Disclosure: The San Antonio Water System has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.