Mar. 30—MANKATO — Wanting to replace the Mankato Regional Airport's aging underground fuel tanks before they fail and create a pollution problem, city officials put out a call for bids in 2020.
When the bids were opened in January 2021, the lowest offer by contractors was nearly $2 million — 64% higher than expected. So the City Council voted to wait a few months and try again.
The cost in April 2021 was $1.63 million — better but still 36% above the engineer's estimate of $1.2 million. The council decided to roll the dice once more and hope for better luck in 2022.
"Maybe third time's the charm," City Manager Susan Arntz said.
Once again, though, the bids were far from charming.
"Unfortunately, due to market conditions, the bids came in 41% over," Public Works Director Jeff Johnson told the council Monday.
Minnesota Petroleum Services of Columbia Heights was the only bidder, offering to do the project for $1.7 million. And the strategy of trying again in a few months is becoming riskier because the current tanks were installed in June 1993, meaning their 30-year warranty will expire in about 14 months.
"Staff consulted with the MPCA regarding the ramifications of leaving the tanks in place past the 30-year warranty and were advised that the city would be responsible for all contamination cleanup resulting from any leaks that are past the manufacturers' warranty," a memo to the council warned.
Council member Jessica Hatanpa quizzed Johnson about whether there was time to seek another round of bids and still get the new tanks ordered and installed before the warranty on the old ones expires.
"I just wanted to know if that is an option if we wait," Hatanpa said.
Johnson said new bids could be sought and the work completed before the warranty deadline. But the warranty, even if it isn't fully expired, doesn't entirely eliminate financial risk for the city if the tanks fail in the next year and contaminate the ground with aviation fuel.
"It could happen at any time," Johnson said, explaining that tests are done each Sunday to ensure the tanks aren't losing fuel. "Next Sunday there could be a leak, and then we'll be scrambling."
As unpredictable as 30-year-old fuel tanks are, the cost of certain construction projects is similarly difficult to forecast, according to city officials. Particularly problematic right now are unusual items, such as aircraft fueling stations, that have components that need to be manufactured specifically for the project.
"I don't think anybody can really predict what will happen next year," Johnson said.
The decision for the council was further complicated by the fact that state and federal grants generally cover the bulk of the cost of most airport projects, with the city typically responsible for 30% or less. Representatives of the Minnesota Department of Transportation have indicated a willingness to increase the agency's contribution to $1 million for the fuel tank and related mechanical and electrical systems, but they also stated that the figure represents the maximum they can pay.
The result would be a 56% share from the state and 44% from the city. Instead of the $200,000 allocated in the city's 2022 budget, the local cost would be $793,000 to fill the funding gap. (The total cost of the project, when engineering and administrative expenses are added to construction costs, is nearly $1.8 million.) Airport reserve funds would be tapped to cover the increase.
Council members, while expressing discomfort with approving a project that received just one bid that was well over estimates, weren't keen to be responsible for a potential environmental mess if they delay the work further. By unanimous vote, the council accepted the bid and authorized the project to move forward on the condition that MnDOT commits to paying $1 million.
Johnson said discussions will continue with MnDOT about whether there is any possibility its share could rise.
"There is a chance we will get another $200,000 to $250,000," he said.
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