UPDATED 6/6/2012 9 a.m.

For the second straight budget, a sewage treatment project is a major source of friction between Mayor Peter Carlisle and the Honolulu City Council.

Only this time around, it looks like the fight’s going to last even beyond budget season. And one of Carlisle’s challengers in the mayor’s race is trying to capitalize on the brouhaha.

Last year, the council drew Carlisle’s ire after nixing $26 million from his budget that had been earmarked for a second egg-shaped sewage digester at the Sand Island Wastewater Treatment Plant.

Within weeks, Carlisle said the plant was dangerously over capacity, and decided to start trucking sludge to Ewa despite community objections. The council shot back that Carlisle hadn’t clearly communicated the seriousness of the situation during budget deliberations.

Fast-forward nearly 12 months and a similar situation has been brewing.

This year, Carlisle asked for $24.5 million for the project in his proposed capital budget and the council quickly sliced that request to a fraction of what it had been. But with the budget up for final vote Wednesday, most of the money is expected to be reinstated — with major conditions.

Council members don’t want to throw good money after bad on a technology that they’re not convinced is best for the city. They argue that alternatives should be considered before any construction begins.

Carlisle’s proposal landed in council chambers back in March. In April, two-thirds of the project funding — $16.5 million of $24.5 million — was removed in an amended draft. In May, the bill was amended again, and $4 million was restored, putting the funding level at about half of what Carlisle had requested.

On Wednesday, most or all of the rest of the funding could be reinstated. Nestor Garcia has floated a draft that would give the Carlisle administration the entire $24.5 million it originally proposed, while Council Budget Chair Ann Kobayashi has floated a draft that would restore an additional $9.5 million, bringing the total funding up to $21.5 million.

But the money could come with a catch. The current version of the bill and Kobayashi’s draft both contain a proviso that would prevent the administration from spending on construction until the council is satisfied that all alternative sewage treatment technologies have been vetted. Garcia’s draft does not include the proviso and would award the funding without condition.

Here’s the text of the proposed proviso:

No funds may be expended for construction until 1) the department has provided the Council with a detailed and impartial feasibility analysis that compares the viability and cost-effectiveness of constructing a publicly-funded second digester over a privately-financed thermophilic operation/project; and 2) the Council’s convening of a public hearing to be informed of the Issued Request for Proposal and to accept or reject the feasibility analysis. Should this analysis be rejected by the Council, no funds may be expended for this activity.

That essentially means the real decision is being put off for months while the administration tries to convince the council that the second digester is the right course of action.

Carlisle is still gently pressuring the council to fund the project without condition, but the operative word is gently.

“Oahu’s future depends on building infrastructure that encourages smart growth and sustainability,” Carlisle said in a written statement. “That is why I have always proposed and supported full funding of a second digester at the Sand Island Wastewater Treatment Plant and building it as soon as possible.”

UPDATE Earlier Tuesday, the mayor sent a letter to the council raising a legal concern about the conditional approval, but said he’s “willing to abide by the proviso for one fiscal year in the spirit of cooperation.” (Read the full letter in the Inside Honolulu blog.)

Environmental Services Director Tim Steinberger said he’s “satisfied” with the council’s latest funding proposal. But he has “some issues” with the proviso because it would create new hoops to jump through before any money could be spent.

“We all recognize the need to construct an additional digester at Sand Island to increase capacity and create redundancy to support future development,” Steinberger said in the statement provided by the mayor’s office.

Everyone might recognize the need for additional capacity at Sand Island, but not everyone agrees on what technology should be used. Members of the council — Kobayashi and Romy Cachola in particular — have criticized the fertilizer-pellet-producing egg-shaped digester built by Synagro.

They’ve raised health concerns about the pellets and mainland cities’ problems with Synagro’s ethics. They’ve also complained that the company didn’t come through on its promise to sell the pellets for revenue for the city.

“They keep insisting on making these little pellets that we take to H-POWER,” Kobayashi told Civil Beat last week. “I’m just wondering about this department. I’m going to ask that an audit be done of them.”

Despite those concerns and threats from the council as well as a proposal from a rival company, just two months ago the Environmental Services Department decided it would not cancel its contract with Synagro.

“Given that we are satisfied with their performance, we see no valid reason to cancel this contract,” Steinberger told the Executive Matters and Legal Affairs Committee.

That decision came after a consultant evaluated alternate technologies and recommended that the city stay the course with the second digester at Sand Island. AECOM was hired to produce that report by the city after the council demanded further evaluation, but that the answer isn’t what council members wanted.

Sewage-to-Electricity Alternative

Members are keeping pressure on the administration because they want alternate technologies considered. One of those on the list of potentials is a sewage-to-energy system being pushed locally by a company called HRP 56.

The company would heat the sludge up and generate biogas, which it would then burn for electricity. It would make money by selling that electricity back to the city at a profit. That’s a “thermophilic” operation and would fit right into the gap created by the budget proviso, raising questions about whether the budget process is being used to give the company a leg up.

Earlier this year, HRP 56 flew Cachola, Kobayashi and Vice Chair Ikaika Anderson to San Francisco to tour a similar facility there. When they got back, the council members wrote positive reports about the trip.

The company is promising to build the $28 million system at no upfront cost to taxpayers — making it fit into the “privately-financed” description contained in the budget proviso. But the city would have to promise to purchase enough electricity to pay for construction, plus interest rates for financing.

The company did not disclose the list of local funders, so it’s not immediately clear who stands to make money off of the system if the city were to build it.

In April, Carlisle sent the council a memo saying HRP 56’s proposal was no good — and expressed his “dismay” at the council’s decision to remove funding for the second Synagro digester.

Caldwell: Carlisle Can’t Work With Council

That memo and another one Carlisle send two weeks later seemed to rub the council the wrong way.

In particular, the May 4 letter that raised concerns about funding for the Agricultural Liaison, Office of Economic Development and the Mayor’s Office of Culture and the Arts drew a hostile response from Council Chair Ernie Martin.

Martin dressed down Managing Director Doug Chin in a Budget Committee meeting May 10, telling him that the letter’s “threatening overtures” undermined the administration’s credibility. He said Carlisle should have communicated directly with council members instead of threatening vetoes or hinting at lawsuits.

Former Managing Director Kirk Caldwell, who’s challenging Carlisle in this year’s mayoral election, draws a straight line from the strained mayor-council relationship to the difficulty funding the second sewage digester.

In April, right around the time the council was first taking its blade to the budget, Caldwell chose the Sand Island Wastewater Treatment Plant as the backdrop for endorsements by the Hawaii Laborers Union Local 368 and Operating Engineers Local Union 3.

Not only would the unions benefit from the work on the digester itself, but the threat of a possible construction moratorium for the entire Honolulu basin is a terrifying prospect for those in the trades. Steinberger has said failing to fund the digester could put the kibosh on new developments.

“It goes back to the administration bringing the parties together so that there’s an understanding,” Pane Meatoga, district representative for the operating engineers union, told Civil Beat in an interview at Caldwell’s campaign headquarters a few days after the endorsement. “You bring the parties together and not wait until the 12th hour. That’s the problem. You don’t wait until the 12th hour.”

Caldwell said he would have gotten representatives of Synagro in a room with the frustrated council members to talk about past disappointments and how to move forward as partners. He also said he’d ask the council members to sit down with city lawyers and the Environmental Protection Agency to talk about how choosing new technology could cause delays and impact the global consent decree for the city’s sewage system.

Martin noted that Carlisle, in contrast with his predecessors, has no legislative experience. Before becoming mayor, Frank Fasi had served as a member of the City Council; Jeremy Harris as a member of the Kauai County Council; Mufi Hannemann as a member of the City Council; and Caldwell as a state lawmaker.

“They all understood and respected the right of the legislative branch to do our due diligence and to do our own analysis and make our own decisions for what we think is the best direction for the city,” Martin said.

Carlisle served as prosecutor for more than a decade before taking over as mayor two years ago.

But Martin said the second digester has been a source of consternation since before Carlisle worked on the third floor at Honolulu Hale. The mayor-council relationship, Martin said, isn’t what’s causing this particular debate.

“I wouldn’t say that it’s something new,” Martin said. “Irrespective of whether we have a cordial relationship with the mayor or not, that was going to be an issue that was important to this council. … The concerns have been that they’ve never delivered as promised.”

Carlisle on Tuesday acknowledged the challenges of the budget process and went out of his way to tread carefully and even praise the council.

“It takes a lot of work to pass the City budget — and that means some back and forth at times,” Carlisle said in the statement from his office, “but at the end of the day, I acknowledge the hard work and effort by everyone in the City and specifically the City Council throughout the budget process.”

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