Inching closer and closer to its self-imposed deadlines for funding and construction bids, the city still has to obtain $2 million of short-term financing or settle the lawsuit with the Bainbridge Ratepayer Alliance, or face the potential of a delay.

The city wants to submit final paper work for grants from the state Transportation Improvement Board and the Federal Highway Administration by Oct. 23. With a week to process the grants, the city could then begin advertising for a construction bid on Oct. 30. That would allow the current council to award the bid before the end of the year.

But one small hiccup complicates that plan. The city’s current lawsuit with the Bainbridge Ratepayer Alliance over payment for upgrades to the Waste Water Treatment Plant has sucked the utility funds dry. For the city to obtain the state grant, it must first have the funds it projected for the reconstruction available or have a financing agreement in place, said Finance Director Elray Konkel.

“We need to have cash in the bank or show where the cash is going to come from,” he said.

Konkel said the city has been in touch with numerous banks and underwriters about financing.

Of the two grants, only the state grant requires the funding to be in place at the time of the agreement, said Deputy Planning Director Chris Wierzbicki.

To cover its part of the commitment, the city needs to have access to approximately $1.1 million in sewer revenue and $960,000

in water money.

Richard Allen, president of the ratepayer alliance, said he has met with four city councilors three times since August with another meeting coming up this week. The conversations are not official settlement talks, he said, because no lawyers have been present.

Should a quick resolution of the lawsuit not arise, the city also has the option of waiting on the lawsuit to play out. Wierzbicki said the latest the city could sign the state grant and have the project begin on time is by the second council meeting in January.

If the lawsuit continues to drag on, Wierzbicki said, an indefinite delay is possible. If the project does not start on time, it is unknown if the state and federal grants will be available.

“It opens up a whole new question if we delay a year,” he said.

This week, Wierzbicki and other officials spoke to an audience of 40 citizens and councilors about these possibilities, along with how much has been spent on the project and what remains to be done.

The tone of the meeting was mostly positive, with a large ovation for Wierzbicki after he finished a presentation to the audience.

The project began in 2007, when the city spent $1,108,000 in the form of a general fund bond to evaluate the condition of utilities and surface conditions.

The city concluded that both the utilities and surface conditions were extremely poor. Severe corrosion, misaligned joints, fractured pipes, and standing water all existed in the city’s utility systems. Cracked asphalt, sidewalk inaccessibility and other major problems marred Winslow Way. Electric poles were put on “death watch” by Puget Sound Energy, and the city’s water system had been recommended for replacement in 1985.

In summer 2007, the city produced a plan to reconstruct Winslow Way with a budget of $20.9 million.

The public responsed negatively to the initial plan, saying the budget was too much of a burden. The budget required $10 million in utility funds, which represented a potential 10- to 15-percent rate increase, and the other $10 million in taxpayer bond debt.

The public also said too much parking was lost, the design was too uniform, and that property owners should be footing more of the bill.

In 2008, the city spent a total of $274,000 on the project, $167,500 of which came from the three utilities. The project budget dropped down to $12.5 million and the design issues from the previous year were addressed.

This year, the budget for the project was $945,000 from the three utility funds and general fund, with another $300,000 to be reimbursed from the state grant. Wierzbicki said the city has spent 85 to 90 percent of the money allotted for the year.

For the final year of the project, 2010, the total budget is $7,284,633. Of that, $5,409,366 will come from the grants and a Local Improvement District of Winslow businesses. A hearing on the formation of the LID will be held sometime in November.

If it begins on time, construction will come in three phases, with each phase taking two to three months with a projected completion date of Nov. 2010.

During the construction phases traffic will be constricted but the roads won’t closed. Westbound traffic will remain open throughout construction, while two-way traffic will be permitted at the east and west end of Winslow Way West.