Agency OKs sewage plant for Mexico                           

Agreement signed with Bajagua LLC

By Mike Lee and Terry Rodgers
STAFF WRITERS
February 16, 2006

A U.S. border agency announced yesterday that it has signed an agreement allowing a San
Diego County company to build and operate a sewage treatment plant in Mexico.

The controversial and unusual project, expected to cost at least half a billion dollars over 20
years, is aimed at reducing sewage overflows that have fouled beaches in southern San Diego
County since the 1930s.

The contract was issued without the typical open-bid process. It leaves critical aspects of the project undefined, including the exact cost to U.S. taxpayers, what kind of technology will be used, and where it would be located.
The firm, Bajagua LLC, has said it wants to build the plant east of Tijuana at the confluence
of the Alamar and Tijuana rivers.

In addition, the project still needs permits and other approvals in both countries.
Officials for the U.S. section of the International Boundary and Water Commission said they
will convene a binational committee to work out unresolved aspects of the contract. Officials
for the Mexican side of the agency were not immediately available for comment.

Despite the uncertainties, Bajagua and the U.S. section of the commission said they can get
the plant running by the court-ordered deadline of September 2008.

“This . . . gives us an opportunity to solve a problem that has plagued us,” said Rep. Bob
Filner, D-San Diego, in reaction to yesterday's announcement.

Filner, who has received tens of thousands of dollars in campaign contributions from
Bajagua investors, made it clear starting about six years ago that he wanted Bajagua to get
the contract. He likes the company's hope to eventually recycle the water it treats and use it
for industry and irrigation in Mexico.

Under the contract, Bajagua will finance the project on the premise that the U.S. government
will reimburse the company as long as it meets federal water-quality standards.

But the payments are subject to future congressional appropriations. Bold letters in the
contract make it clear that “there is no full faith and credit of the United States pledged under
this agreement.”

Bajagua is required to have a 20 percent ownership of the plant. If the facility ends up costing
$170 million to build, Bajagua investors would contribute $34 million of their own money
and borrow the balance from their lender, Citigroup.

Bajagua managing partner Jim Simmons said the contract allows his firm a 10.5 percent
profit for constructing the plant and a 12 percent annual gross profit to operate it.
In addition, the company intends to make money on the virtually untapped market for
recycled water in Baja.

“The contract is a fair deal for both parties, and protects the taxpayers at the front end and
through the life of the contract, by us providing upfront funding for the design and
construction of the project,” Simmons said.

Prior estimates have pegged the treatment plant at about $600 million over 20 years,
although the commission said yesterday that no firm number exists. Instead, the agency
estimated that operating the Bajagua plant would cost up to $39 million the first year.
If this figure continues over the life of the contract, the project would be much more
expensive than previously figured.

The total bill will be determined by bids from subcontractors to build and operate the plant,
as well as expenses for ongoing maintenance, said Sally Spener, spokeswoman for the
boundary commission.

Bajagua plans to build a series of ponds to further treat Tijuana wastewater processed by the
existing international sewage plant in San Ysidro. That plant, which the commission built in
the late 1990s, produces effluent that has never met standards set by the U.S. Clean Water
Act. The partly treated wastewater is released 3.5 miles off Imperial Beach through a pipe.
Once built, the Bajagua plant would send its treated wastewater back across the border and
out the same outfall.

Yesterday's development was welcomed by the San Diego Regional Water Quality Control
Board, which in 2001 sued the boundary commission for discharging toxic sewage from the
San Ysidro plant.

Still, board Chairman Jack Minan said he won't be satisfied until he sees on-the-ground
reductions in sewage pollution.

Under a court order in 2004, the boundary commission was supposed to award its contract
for design and construction of the treatment plant in Mexico by Dec. 19, 2005. Yesterday, the
agency declined to specify what created the two-month holdup.

Bajagua spokesman Craig Benedetto said the contract satisfies legal mandates. But
Assemblywoman Lori Saldaña, D-San Diego, said the agreement was designed to create an
illusion of progress while simply paving the way for more negotiations.

“This is a lie to the public to make it look like they are complying with their court order,” she
said.

Also yesterday, the Imperial Beach City Council voted unanimously to adopt a resolution
opposing the Bajagua project. Among the people in attendance to support the resolution were
state Sen. Denise Ducheny, D-San Diego, and a representative for Assemblyman Juan
Vargas, D-San Diego.