Water and Wastewater Issues in Indiana and Beyond … PowerPoint - Water... · Water and Wastewater Issues in Indiana and Beyond October 8, 2015 ... Off-take Technology EPC and O&M

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Water and Wastewater Issues in Indiana and BeyondOctober 8, 2015

Welcome!Scott Chinn, Partner

Faegre Baker Daniels

Updates from 2014: Clean Water Act Consent Decrees and MoreScott Chinn, Partner | Faegre Baker Daniels

Max Kelln, Associate | Faegre Baker Daniels

Recap of Last Year’s Presentation

► Identified tactics employed by EPA to press CSO communities to enter into “develop-and-implement” consent decrees

►Discussed length of LTCP implementation schedule as having been principle focus of Consent Decree negotiation

►Challenged assumptions about agencies’ leverage (and willingness) to litigate in the absence of municipal POTW’s “capitulation”

Financial Capability Assessment

►EPA-required guidance causes challenges

► Promotes focus on “affordability” (not just how much is needed to be in compliance, but how much ratepayers can afford)

► 2014 FCA Guidance purported to permit inclusion of more factors

► Example of failure of Guidance (or EPA’s interpretation):

► service territory issues

Does Any of the This Matter Now (The “No” Case)

►EPA information shows that there are only 8 CSO communities left unaddressed

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►Consent decrees currently entered into by approximately 92% of required communities in Indiana


►One major Indiana City is ahead of schedule in completing LTCP improvements

► The City of Fort Wayne agreed to a consent decree approved in 2008 with an estimated plan cost of $250 million

► The City is reportedly four years ahead of schedule and under budget with respect to its improvements

Does Any of the This Matter Now (The “Yes” Case)

►Two major communities are not under a consent decree

► Hammond Sanitary District

► Gary Sanitary District


►One major community has a consent decree but not an approved long-term control plan

► City of Evansville executed a CD in 2011

► LTCP Costs $540 million over 28 years

►EPA rejected Evansville’s plan in 2014

►What will EPA approve? What will the costs be?


►The State’s largest community successfully lowered its total projected LTCP costs through modification

► The City of Indianapolis originally had an approved plan in 2007 estimated to cost $1.7 billion

► By 2010, the City had sought and received approval for major modifications to the plan, the estimated result of which is potential savings on the order of $740 million


►One major Indiana city is in the midst of a plan reassessment designed, like in Indianapolis, to reduce implementation costs

► The City of South Bend had a consent decree approved in 2012 with an estimated plan cost of $627 million

► In 2014, the City initiated a reassessment of its LTCP with a goal of finding cost savings compared to the original estimated cost

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Additional Context

►Local governments are squeezed for revenues

► Effect of tax caps

► AV declining or flat in many urban centers

► Greater reliance on income tax revenue causes fluctuations

► Public safety cost increases

► Non-POTW infrastructure needs

► Recognition of need to adapt future infrastructure and programs to quality of life goals (e.g., Regional Cities Initiative)

Final Cut

►CD and LTCP costs will become a larger percentage of local government budgets as other budgets flat-line or are cut

►Sewer rates will continue to increase, likely eclipsing in many communities any relief afforded by tax caps

►So . . . is it worth revisiting CD requirements and LTCPs for potential cost savings?

Waters of the U.S. (WOTUS)

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► Final Rule: June 29, 2015

► Tributaries: Defined as any water with a bed, banks and ordinary high water mark which contributes flow directly or through other water bodies to a traditional WOTUS, but excludes certain types of ditches.

► Adjacent Waters: Provides a more detailed definition of “neighboring” based on whether the water is within 100 feet of an ordinary high water mark, within 1,500 feet of high tide line, or within 100-year flood plains areas, up to 1,500 feet from ordinary high water mark.

► Significant Nexus: Now includes all waters “where they are determined, on a case specific basis, to have a significant nexus” to a traditional WOTUS and within 4,000 of an ordinary high water mark.

► Current Litigation:

► 14 cases filed in various courts of appeals consolidated in the Sixth Circuit.

► EPA requested 9 cases pending in 7 different district courts be consolidated in the district of D.C.

► On August 27, 2015, District of North Dakota blocked implementation in 13 states: Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota and Wyoming.

Clean Water Act Updates

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► Judicial Review - When can you get to court?

► Sackett v. EPA (2012) – An EPA unilateral compliance order issued without a hearing under Section 309(a) of the CWA can be challenged in federal court under the Administrative Procedures Act.

► Agency Deference – Increased chance of success in court?

► Perez v. Mortgage Bankers Association (2015)(Scalia, concurring): “The agency is free to interpret its own regulations with or without notice and comment; but courts will decide—with no deference to the agency—whether that interpretation is correct.”

► UARG v. EPA (2014)(Scalia): “In the Tailoring Rule, EPA asserts newfound authority to regulate millions of small sources—including retail stores, offices, apartment buildings, shopping centers, schools, and churches—and to decide, on an ongoing basis and without regard for the thresholds prescribed by Congress, how many of those sources to regulate. We are not willing to stand on the dock and wave goodbye as EPA embarks on this multiyear voyage of discovery.”

► Rapanos v. United States (2006)(Scalia in 4-1-4 decision): “[R]espondents and many amici admonish that narrowing the definition of ‘the waters of the United States’ will hamper federal efforts to preserve the Nation’s wetlands…. In any event, a Comprehensive National Wetlands Protection Act is not before us…. What is clear, however, is that Congress did not enact one when it granted the Corps jurisdiction over only ‘the waters of the United States.’”

2016 Legislative PreviewSenator Ed Charbonneau, District 5, Chair, Senate Environmental Affairs Committee

Vince Griffin, Vice President of Energy and Environmental Policy | Indiana Chamber of Commerce

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Water and Electricity Are The Backbone Of ANY

Economy

NO Water OR Electricity = NO Economy

Global Water Footprint (use) ≈ 1,970,000 Bgal/yr≈ 330,000 gal/yr/person

Water Resources

An Economic Attractor?

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Indiana Vision 2025 Released in 2012

Vision 2025 is a comprehensive, multi-year initiative to provide leadership a long-range economic development action plan for Indiana.

Sets a high bar for our state.

Indiana Chamber Vision 2025 “Water” Statement

Traditional thinking should be challenged as it is essential to preserve and protect this valuable resource and recognize that national and global competition requires broader cooperation across the state. Communities must work together to utilize Indiana’s advantage and realize potential economic growth. The result of narrow, local planning is that resource sharing and economies of scale are missed. Indiana must rethink the way it plans, regulates and utilizes its water resources.

Water is essential for our state’s economic

development.

•Keep business,

•Grow business and

•Attract business

2014 Legislative Utilities Study Committee

“For the next 100 years, water will be the number one item for site

selection”

(Larry Gigerich, Ginovus – international site selector)

Indiana Chamber

Vision 2025

Water Study Release

August , 2014

CHALLENGES• Barely adequate local supplies in

Central Indiana

• Limited groundwater in some areas

• Infrastructure investment in the South

• Regional planning is needed

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Recommendations

• Create awareness for the need for water supply planning: talkto people around the state

• Create capacity to coordinate efforts: establish a planning lead and fund water research

• Create a robust system for monitoring water resources: ~100 new monitoring wells and track low-flow

• Create a systematic approach for data analysis: determineaquifer sustainability and yield

• Create a framework for cooperative management: modelreservoirs and streams to optimize

• It takes at least three years to prepare for implementation: this needs to be done by an entity that will do this right.

2015 Legislative Action

SB 473 “Voluntary monitoring of water resources”

• IDNR to:

– Receive voluntary ground and surface water data

– Train the volunteers

– Identify locations

– Ensure adequacy

– Verify thru independent sampling

SB 474: Analysis of water utility planning and needs

• IFA conduct an analysis of the planning and needs of water utilities of:

–The 15 most populous cities in the state

–Five other cities with < 10,000 people

–Identify and assess state agencies involved in water related activities

SB 312: Tank reporting and water threat minimization

• Affects ONLY surface water intakes (<40)

• Register tanks upstream 25 miles X ¼ mi.

• Develop a surface water quality threat minimization and response plan

• ERB to develop rules related to registration and the “Threat Plans”.

GOOD NEWS!

–We can invent our water future.

–We do have the water resources.

–But – we must take charge NOWand make smart decisions.

–We must all work together!

WATER

“WHISKEY’S FOR DRINKING

AND

WATER’S FOR FIGHTING”(Mark Twain upon returning from California)

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P3 Part 1: General Overview and Financing ModelsRich Hill, Partner | Faegre Baker Daniels

John May, Managing Director | Stern Brothers & Co.

October 8, 2015

Key Aspects of Project Investing

What are the major risks?

Site

Feedstock

Off-take

Technology

EPC and O&M

How are the risks mitigated?

Which stakeholder is in the best position to mitigate specific risks?

What is the source of cash flow? Is there a contracted stream of cash flow from credit-worthy

source(s)?

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Key Aspects of Project Investing

Site – Control of project site– Ingress/egress, utilities, etc.

“Feedstock” – Control of the commodity – Water and/or wastewater

Off-take – Source(s) of cash flow to investors– Debt service, equity returns

Technology – Any technology risk to be mitigated?– Credit enhancement

EPC – Experienced EPC– Credit-worthy balance sheet

– Single point of responsibility

– Full wrap, GMP with LDs

O&M – Experienced operator– Responsible for quantity and quality of output

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California WTE Projects (2011)

Stern financed, on a non-recourse basis, the installation of fuel cells, fueled by gas captured from waste sludge at two regional wastewater treatment plants, to generate 1.40 MW and 2.80 MW of power. The plants signed twenty-year PPAs for the purchase of 100% of the electricity generated.

Site – Wastewater treatment plants controlled by power purchasers

“Feedstock” – Control of the waste sludge (gas)

Off-take – 20-year PPA with site hosts credit-worthy entities

Technology – Fuel cell technology risk

EPC – Experienced developer and EPC

O&M – Experienced operator

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Sources of Cash

New fees

User

Concession

Reduce costs Operations (review existing practices)

Find a cheaper provider (substitute)

Avoided costs (fix violation and eliminate fine)

Reduce costs (eliminate hazard and reduce insurance cost)

Refinance existing debt Reduce debt service and redeploy leverage for other uses

Incentives Grants, guarantees

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Municipality Needs to Find Solutions

Need: New source of water

Develop water resource (drought)

Need: Reduce use of existing asset New means to dispose of MSW (disposal site is full)

Need: Provide new infrastructure Develop storm water infrastructure (reduce flooding)

How much does it cost? Short-term vs. long-term cost?

Who makes the investment?

How does the investor make a return?

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Spectrum of Infrastructure Models

Design-Bid-Build Traditional structure Public agency owns, operates and maintains the asset Balance sheet financing of the municipality or public agency

Design-Build-Finance-Operate-Maintain The private sector takes on two or more of these functions The public sector continues to own the asset

Design-Build-Finance-Operate-Maintain-Transfer In this model, the private sector owns the asset for the term of the PPP after which

the asset is transferred to the public sector

Concession Model Public agency sells to the private sector the right to operate and maintain an

existing asset (e.g. toll road) Private sector receives user fees (e.g. tolls) to operate and maintain the asset Public agency continues to own the asset. Control reverts to the agency at the end

of the concession term.

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Design – Bid – Build

Design

GovernmentOwner/ Operator

Debt Service• User Fees

• Taxes

Build

Bond Financing

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P3 Model with Concession

Senior DebtDebt Service

Trustee

User Fees/ Availability Payments

Private EquityOperating Cash

Municipality

Government• Incentives• Guarantor• Grantor

Operational Savings

Hold Co

Concessionaire

D/B/O/M

Dividends

Concession

FeeContract

FinancingCash Flow

Financing

Fee

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63-20 Model

User Fees/ Availability Payments

Government• Incentives• Grants• Guaranty

Tax-exempt Debt

Private Equity(as needed)

Operational Savings

Municipality

63-20 Corporation(non-profit)

Project CoD/B/O/M

Operating Cash

$

Operating CashCash Flow

10

Trustee

Blocker Corp

$$

Dividends

3rd Party ServicesD/B/O/M

FeeContract

DebtService

P3 Project Considerations

Risk Transfer Limit liability, transfer to private sector

Reduces Government Debt Increases flexibility, maintain higher rating

Budget Relief Frees up funds

Cost Savings Eliminates cost of multiple contracts

Better Performing Assets

Leverage Private Sector DBOM Expertise

Technical Expertise

Better O&M of the Project

Avoids Underbidding Avoid Design - Bid process

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P3 Project Considerations (continued)

Shorter Construction Periods Able to fund larger projects

Minimizes Waste More transparent process

Monetize Projects Upfront concession fee and ongoing fee

Transaction Costs Higher upfront costs

Financing CostsHigher financing cost if tax-exempt funding not possible

Reduce Ongoing Revenue Loss of revenue offset by reduced operating costs

User Fees User fees may be higher, more visible

Reduced operational control Extensive public agency auditing and monitoring

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Project Finance Structure

SPE / Project Company (Borrower)

Off-take Agreements

Feedstock Agreements

O&M AgreementEPC Contract

(construct)

Technology License

Agreements

Sponsor’s EquityProject Level

Equity InvestorsSenior Project Debt Providers

Equity Investors

Site - Control of Project siteIngress/egress, utilities

Control of the commodityi.e., Water and/or

wastewater

Source(s) of cash flow to investors

Debt service, equity returns

Any technology risk to be mitigated?

Credit Enhancement

Experienced EPCStrong Balance Sheet

Single point of responsibilityFull wrap, GMP with LDs

Experienced OperatorResponsible for quantity

and quality of output

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Sources & Uses of Funds – Financial Close

Sources of Funds Senior debt

Subordinated debt

Equity

Uses of Funds Project construction fund

Capitalized interest (interest during construction)

Debt service reserve fund (1-yr of principal + interest)

Reserves – operating, maintenance

Project soft costs (third-party reports, site engineering, etc.)

Legal costs

Investment banking fee

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Sources & Uses of Funds – Ongoing

Sources of Funds Shared cash flow / Concession fees

Uses of Funds Ongoing services provided by municipality to project

Audits and performance monitoring

Obligations to provide ongoing capital improvements

Obligations to stakeholders (employees, current contractors, etc.)

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Stern Brothers’ Financing Role

Stern Brothers

Equity Investors• Private Equity• Infrastructure Funds• Family Offices• Specialty Funds

Indicative Terms:• Rate • Tenor• Covenants

Indicative Terms:• Equity Returns• Governance

ProjectEngagement

Debt Investors:• Bond Funds• Insurance Companies• Pensions• Hedge Funds• Socially Responsible

Institutions (SRI’s) /Green Funds

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John May, Managing Director

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John MayManaging DirectorCo-Head of Alternative Energy Finance Group

8000 Maryland Ave.Suite 800St. Louis, Missouri 63105Ph: 314.743.4026Fax: 314.727.7313

E-Mail: [email protected]

John M. May, Managing Director, is Head of the firm’s Renewable Energy Practice, which he founded in 2003. He is a seasoned project financeinvestment banker who has financed over $11 billion in loan and par values for over 100 clients in his 25-year banking career. In the past tenyears, he has become one of the top renewable energy bankers in the country, having developed a national practice in renewable energy financefocusing on biofuels, biomass, biochemical and bio-products. He is credited with having pioneered the use of bonds as a form of project financedebt in the renewables market. He is financial advisor to numerous renewable companies and has placed senior and subordinated debt financingfor new projects, expansions and acquisitions. He has also been placement agent to companies raising debt through the issuance of tax-exemptand taxable bonds. In 2003, he underwrote the country’s first tax-exempt bond issue to fund a landfill gas-to-electricity project. In 2005, he wasresponsible for developing one of the first tax-exempt bond structures sold to major U.S. institutional investors to fund ethanol projects. He wasthe first banker to use a State guarantee of debt for a biofuel financing. In 2006, he secured a $15 million full faith and credit guarantee from theState of Illinois for a biodiesel project. Also in 2006, he introduced the use of bonds as a complement to syndicated bank debt in large biofuelsfinancings. In 2008, he was placement agent for bonds used to finance the first U.S. ethanol plant with an off-take agreement from a majorinternational oil company. In 2010, he created the bond finance structure adopted by the USDA in its Bio-Refinery Loan Guarantee Program; thisresulted in the Agency’s adoption of a new Interim Final Rule for the program in 2011.

In 2012, John led the investment banking team that closed the first project financing for a biochemical company in U.S. history, for MyriantCorporation. The deal was awarded “Deal of the Year” by Biofuels Digest Magazine for 2012. He currently represents approximately 30 biofuels,biomass and biochemical and biorefinery technology, development and feedstock companies worldwide. John has been involved in financingrenewable projects in ten states in the U.S., and is currently at work on financings for clients seeking to develop projects offshore in Canada, LatinAmerica and the EU. He has developed Stern Brothers’ international practice into one of the most recognized brands in the financing of biofuels inthe U.S.

John is a frequent speaker at national conferences and webinars in the industry for such sponsors as: ACORE, Infocast, Advanced BiofuelsAssociation, BIO, Platts, Projects and Money CDFA, Midwest Energy, GreenPower, The National Governor’s Association and the American BarAssociation. He has provided counsel on financing options and the credit markets to such government and association industry stakeholders as theUSDA, the Staff of the U.S. House Agriculture Committee, the U.S. Department of Energy/NREL, and the United States Congress Joint Committeeon Taxation. He has been featured in recent articles on biofuels finance authored or sponsored by Biofuels Journal, Biofuels Digest, BiorefiningMagazine, Renewable Energy from Waste Magazine, and Waste Advantage Magazine and published on Grainnet.com.

In 2011, John was elected to the Advisory Board of the Rockefeller Brothers Fund’s Climate Prosperity Partnership. In 2012, John was voted one ofthe “Top 100 People in Bioenergy 2012” by the readers of Biofuels Digest. In November 2012, John was featured on the cover of BiomassMagazine in an article entitled “Meet the Biobanker”. Mr. May is also a member of the Board of Directors of the Donald Danforth Plant ScienceCenter's BRDG Park.

In early 2013, John was named the 50th most influential person in the world in Bioenergy by Biofuels Digest. On March 17, 2013, John wasfeatured on the Platts Energy Week Sunday morning television broadcast which aired on selected PBS and CBS stations in major markets in theU.S. He was invited to speak as a global leader in the field of bioenergy and biochemical/product project financing.

At the World Biofuels Markets conference held in Rotterdam in March, 2013, John's credit enhanced bond financing for Myriant Corp wasshortlisted with two others for the World Biofuels Deal of the Year.

John begun serving on the Power Generation & Infrastructure Advisory Committee of the American Council on Renewable Energy (ACORE)beginning in 2013.

Prior to beginning his investment banking career, John practiced law at two national firms in Kansas City and Dallas. He received his J.D. andM.B.A. (with concentration in Finance) degrees from the University of Kansas, and his B.A. with Honors Cum Laude from Brown University.

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Water and Wastewater Issues in Indiana and BeyondLunch

P3 Part 2: Water Supply Issues & Models for Successful Water CollaborationSkip Stitt, Senior Director | FaegreBD Consulting

Patrick Miller, Partner | Faegre Baker Daniels

Agenda

►Diverse set of 2015 Projects

►Momentum for P3

►Creating Real Value

►Generating Savings

►Transactional Barriers

►Other P3 Opportunities

►Questions and Discussion

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Case Study No. 1 – Water and Wastewater

►About 10,000 residents

►Sits within a larger metropolitan area

►Very small water and wastewater system

►Wholesale water and sewer customer of the metropolitan water and sewer department

►Numerous operational challenges

►Significant issues with meter repair, installation, and management

►Significant challenges regarding billing and collection

►Moved to a private O&M contract in July of 2015

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Case Study No. 2 – Water and Wastewater


►Adjacent to a large metropolitan area

►Suburban water and wastewater system

►Well run and fully staffed

►Significant new infrastructure investments in recent years

►Multiple opportunities to grow and expand its customer base

►Explored both a sale and a concession-lease model

►Project currently on hold as a result of a Council-endorsed voter referendum

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Case Study No. 3 – Sewer System


►Free-standing mid-sized city

►Sewer system facing substantial Consent Decree mandates

►A separate Authority

►Serves an older community that is struggling with large pension debt as well as smaller adjacent communities

►Explored O&M contracting, a sale, and a concession-lease model

►A focus on long-term rate mitigation

►Will move forward with a preferred transaction model

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General Themes Driving P3 Projects

►Overall worries about cost-effectiveness and efficiency

►Concerns about user rates and the trajectory of rate hikes

►Consent Decrees and Long-Term Control Plans

►Environmental compliance

►Capital, capital, capital

►Need to generate funds for other purposes

►Access to industry-leading subject matter expertise

►Desire to innovate or transform

►Velocity and focus

►Risk sharing/mitigation

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Creating Real Value

►Transactions include sales, leases, and long-term management contracts

►P3s are sometimes viewed primarily as a financing strategy

►Financing-focused transactions may not capture full value

►The best value for public officials occurs when creative financing and better operations merge to produce enhanced results for the public

►Operational excellence increases value in several ways

► Increases total transaction value by monetizing long-term cost savings

► Improves service quality for the government entity and citizens

► Protects and preserves valuable infrastructure assets

► Drives innovation which results in additional long-term benefits

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How are Private Partners Generating Savings

►Value engineering and capital investment efficiency

►Consolidated procurement

► e.g., chemicals, equipment, supplies

►Energy management

►Labor efficiency over the long term

►Technology

►Green infrastructure

►Global best practices around operations and maintenance

►Back-office consolidation

►Geographic consolidation and related efficiencies

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Transactional Barriers

►Employee and labor issues

► No lay-off policies

► Comparable pay, benefits, and pensions

► Union recognition

►Control

► Stronger contracts

► Legal and third-party advisor parity

►Environmental compliance

► Transfer appropriate risks

► Transfer liability for fines and penalties

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Transactional Barriers

►Asset preservation

► Rigorous contract management

► Improved tools for measuring

► Hand-back requirements

►Rate hikes

► Retained authority, contractual guarantees, or PUC (IURC in Indiana)

► Rate mitigation as a strategy

►What’s Not a Barrier

► Lack of interest/qualified contractors

► Lack of savings and/or service improvements

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Other Areas of P3 Opportunity

►Parking

► Metered on street, parking lots, garages

►Streetlights and utility poles

►Golf courses and other revenue producing recreation assets

►Public and/or higher education housing assets

►Airports

►Toll roads and bridges

►Landfills and waste-to-energy facilities

►Gaming and lotteries

►Billing and collections

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Other Areas of P3 Opportunity

►Fleet operations and management

►Solid waste operations and management

►Abandoned vehicles operations

►Document supply chain management

►Facilities management

►Street maintenance

►Back office/administrative services

► Call center, IVR, print/copy

►P3 can include almost any recurring public sector business activity

►Public shared services co-ops are also viable options

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Discussion Questions and Answers

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Design & Construction Source Selection

►Part 1: Project Delivery Models

►Part 2: Case Studies

Project Delivery Models

Advantages Disadvantages

► Reduced team integration, innovation and qualification (for construction)

► Slower delivery time

► Change Order risk

► Simple, known process

► Lower front-end transaction costs

► Provides lowest initialconstruction costs

GovernmentDesigner Contractor

Design-Bid-Build

Contract 1 Contract 2


► Increased administrative burden for Government during procurement

► Number of qualified teams may be limited

► Potential loss of control over design process

► Full team integration and innovation

► Single point of responsibility

► Less complex than a PPP

Government Design-Builder

Design-Build

Contract 1



► High front-end transaction costs

► Increased complexity by adding VfM and O&M factors

► Higher political risk – few U.S. transaction examples

► Maximum risk transfer including long-term O&M

► Maximizes alternative finance options

► Potential long-term cost savings

Project Co.Government

Equity Investor

Design-Build JV

O&MContractor

Lender

Public Private Partnership

Contract 1


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Case Study No. 1 – Drinking Water Treatment Plant

►Drinking water plant on one of the Great Lakes

►Plant design & construction team selected using design-bid-build (competitive bidding)

►Membrane supplier (water plant used membrane filtration) selected separately using design-build

►Membrane Contract:

► Performance Guarantee = 17 million-gallons-per-day

► 10 year warranty on membrane performance

► Listed acceptable strainer manufacturers (but not specific make and model with strainer sizing)

► Raw water characteristics were described generally (but not guaranteed)

► Capped liquidated and consequential damages at 15% of the contract price


►Start-up:

► Membrane filtration system failed within hours

► Plant could not produce water

► Investigation:

► Short term (from supplier):

► Water quality was different from data in contract

► Specified manufacturers did not make proper strainer

► Long term (independent):

► Water quality was known

► Supplier elected to use small filters within selected strainers to protect membranes


►Dispute:

► Owner demanded a new system capable of meeting performance guarantee

► Supplier denied claim; argued that manufacturer was specified and municipality had “superior knowledge” of water quality (that was not disclosed)

►Lessons learned:

► Be careful when procuring your team and selecting your delivery model

► When using design-build of PPP models, utilize performance criteria and disclose all information about the facility

► Do not specify or allow reliance on design criteria unless the criteria has been independently verified

► Be wary of caps on damages

Case Study No. 2 – PPP for infrastructure

► Long term DBOM for highway asset► PPP Agreement

► Government retained risk for certain pre-existing environmental issues and design defects

► Construction Phase:► Environmental conditions prohibited planned design solutions

► Pre-existing bridge structures contained major undisclosed design flaws

► Private partner filed claim

► Lessons learned:► Thoroughly understand retained risks and corresponding risk transfer

provisions

► Do not specify or allow reliance on design criteria unless the criteria has been independently verified

► Understand market conditions and whether private sector can adequately manage and price risks

Industry Spotlight: A Discussion with Jeff WillmanJeff Willman, Vice President, Water Operations

Citizens Energy Group

Faegre Baker Daniels2015 Water Conference

October 8, 2015

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Discussion Topics

• Drinking Water

– Source and Supply

– Long-term Planning/Vision (Citizens Reservoir)

– Aging Infrastructure

– Regional Collaboration

• Wastewater

– Consent Decree/Long-term Control Plan

– Tunnel Storage System

• Benefits and Challenges

• Discussion79

Citizens Water Background

• Customers– Retail (320,000)

– Wholesale (8)

• Resources– Surface Plants (4)

– Groundwater Plants (6)

– Well Fields (10)

– Reservoirs (3)

– Central Canal

• Demand– Average (130 MGD)

– Peak (232 MGD)

80

Citizens Water Source and Supply

1 2 3 4

Water Source:White River and Canal

Fall Creek Eagle Creek

Ground Water

Reservoir Storage: Morse Geist Eagle Creek NA

Storage Capacity: Bil/gal 7.4 6.2 6.7

Treatment Plants: White River North

White River

Fall Creek

TW Moses 5 Plants

Annual Production: 60% 15% 9% 16%

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Summer Peak Demand (2012 Drought)

0

50

100

150

200

250

1-Jan 1-Feb 3-Mar 3-Apr 4-May 4-Jun 5-Jul 5-Aug 5-Sep 6-Oct 6-Nov 7-Dec

Con

sum

pti

on

(MG

D)

Primarily Lawn Irrigation

Objectives:1. Serve Peak2. Reduce Peak

Growing Peak Demands

83

68

69

70

71

72

73

74

75

76

77

150

160

170

180

190

200

210

220

230

240

2000 2002 2004 2006 2008 2010 2012 2014

Ave

rage

Te

mp

era

ture

, M

ay t

hru

Au

gust

(d

eg F

)

De

man

d (

MG

D)

Max Day Demand for Year May-August Avg Temp

Water Resource Planning

• Purpose

– Unrestricted Water Supply during Moderate Drought Conditions (1 in 10 yr. event)

• Planning Framework

– Citizens Retail & Wholesale Territories

– Timeline (25 yrs >> 100 yrs)

– Peak Demand Plus 5% Reserve

– Demand Growth Rate (.65% annual)

• Project Evaluation

– Lowest Cost/Diverse Resource Mix84

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15

Citizens Resource Requirements (100 Yrs)

85

Water Resource Options/Screening

* Not Cost Effective

Resource Options MGD Est. Cost $ $/MGD

Conservation/Water Wise 22 $5 M $230,000

System Optimization 38 $20 M $520,000

Water Reuse 26 $30 M $1,200,000

New Storage Capacity 65 $156 M $2,400,000

New Supply Capacity 166 $485 M $2,900,000

Regional Reservoir (Mounds)* 50 $450 M $9,000,000

Regional Pipeline (Wabash or

Ohio Rivers)*

50 $400 M $8,000,000

Total 417 $1.5 Billion

Integrated Water Resource Plan (100 yrs)

87

0

100

200

300

400

500

600

0

100

200

300

400

500

600

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

20

65

20

70

20

75

20

80

20

85

20

90

20

95

21

00

21

05

21

10

21

15

Pea

k D

ay S

up

ply

/ D

em

and

(M

GD

)

IWRP Supply Plan

System Capacity Target (Demand Forecast + 5%)

Projected Available Supply (MGD)

Water Wise Initiatives

System Optimization

New Surface and Groundwater SuppliesNew Water Storage

Water Reuse

System Yield 2012 (Moderate Drought)

Citizens Water Wise Plan

• Education/Awareness

• Rate Structure

• Drought Planning

• Conservation Ordinance

• Irrigation Standards

• Leak Detection

• Main/Meter Replacement

• Pressure Management

• Water Recovery/Reuse

• Designated Hydrants

• Bulk Fill Station

• Monthly Meter Reads

88

Declining Base Load Consumption

89

• Schedule: Complete

• Capacity: 6 MGD

• Cost: $16 million

• Cost: $2.7 M/MGD

• Details:

– Near Morse Reservoir

– Plant Site Re-Use

– Activate Well Fields

– 6 Existing Wells

– 2 New Wells

90

Harbour Groundwater Treatment Plant

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16

• Geist Well Field – Schedule: Complete– Capacity: 3 MGD– Cost: $1.5M– Cost: $500k/MGD

• White River/Fall Creek– Schedule: 2016-2017– Capacity: 5 MGD– Cost: $3M– Cost: $800k/MGD

• Waverly/South Well Fields– Schedule: 2018-2019– Capacity: 10 MGD– Cost: $20M– Cost: $2M/MGD

91

Expand Existing Well fields Citizens Reservoir Project

Privileged and Confidential92

93

Citizens Reservoir Project

• Overview:

– 88 Acre Quarry

– 235 FT Depth

– 3.2 Billion Gallons

– 50% Geist Capacity

• Raw Water Storage:

– Schedule: 2018-2020

– Capacity: 25 MGD

– Cost: $20-25M

– Cost: $800k/MGD

94

Citizens Reservoir Project

Privileged and Confidential95

New Surface Water IntakesSystem Optimization/Redundancy

• Fall Creek-to-Canal Intake– Schedule: 2016

– Capacity/Yield: 20 MGD

– Cost: $3M

– Cost: $150k/MGD

• White River-to-Canal Intake

– Schedule: 2018


– Yield: 10 MGD

– Cost: $16M

– Cost: $1.6M/MGD96

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17

New Surface Water Supply South of Indianapolis

• Waverly Riverbank Infiltration

– Schedule: 2075-2085


– Cost: $60M

– Cost: $2.4M/MGD

• Paragon Well Fields

– Schedule: 2090-2095


– Cost: $115M

– Cost: $3.8M/MGD

97

Pipeline to Existing Army Corps Reservoir

• Example - Cagle's Mill

– Schedule: 2100-2110


– Cost: $75 million

– Cost: $3.8 million/MGD

98

Stream AugmentationWater Reuse

• Schedule: 2025-2035

• Capacity: 30 MGD

• Cost: $50M

• Cost: $1.7M/MGD

• Details:

– Low Flow Strategy/Benefits

• Stream Quality

• Water Supply

– Pump Belmont Effluent Upstream (Down Stream of Surface Water Intakes)

– Not Toilet-To-Tap

– Pipe in Tunnel System

99

Regional Collaboration

100

LOGICAL WATER PLANNING REGIONS

• North

– Excellent Water Supply

– Population/Agriculture

• Central

– Good Water Supply

– Population/Industry

• South

– Excellent Surface Water

– Limited Groundwater

– Targeted Growth

101

COLLABORATIVE PLANNING

102

Boone County Example• Who:

• Advance, Jamestown, Lebanon, Thorntown, Whitestown, Zionsville, Citizens

• Why: • Rapid Growth (I-65 Corridor)• Limited Groundwater• Lost Opportunities

• What:• 20 Yr Demand Projections• Evaluate Supply Options

• Groundwater• New Reservoir• Wholesale Purchase

• Coordinated Solution

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18

REGIONAL UTILITIES (2015)

103

CarmelCarmel

GEMGEM

Morgan County Rural

Water

Morgan County Rural

Water

PlainfieldPlainfield

Speedway

Danville

Brownsburg

PittsboroWhitestown

Lebanon

AndersonAnderson

Greenfield

Johnson CtyINAW

Shelbyville INAW

Noblesville INAW

Mooresville INAW

Citizens Water

Citizens Westfield

Citizens South Madison


CENTRAL INDIANA DRINKING WATER UTILITIES

Utilities Customers Utilities Customers

Citizens Water 315,000 Lebanon 6,200

IN American 50,000 Speedway 4,500

Carmel 27,000 Danville 3,000

Anderson 24,000 Morgan Rural 3,000

Lawrence 14,000 Fortville 1,700

Bargersville 13,500 Pendleton 1,500

CEG Westfield 11,500 Whitestown 1,300

Brownsburg 8,500 Pittsboro 1,000

Greenfield 7,300 GEM 600

Plainfield 7,000 Total 501,600

104

REGIONAL POPULATION GROWTH

105

REGIONAL LAND USE

106

2009 2035

REGIONAL WATER GROWTH (2035)

107

CarmelCarmel

GEMGEM

Morgan County Rural

Water

Morgan County Rural

Water

PlainfieldPlainfield

Speedway

Danville

Brownsburg

PittsboroWhitestown

Lebanon

AndersonAnderson

Greenfield

Johnson CtyINAW

Shelbyville INAW

Noblesville INAW

Mooresville INAW

Citizens Water

Citizens Westfield



CENTRAL INDIANA DRINKING WATER COLLABORATIVE

• Who:– All Drinking Water Utilities– 9 County Region– Strictly Voluntary– No Dues, Fees or Legal Commitments

• Topics/Issues:– Water Conservation– Drought Management– Long-term Planning– Well Field Management– Boundary Issues

108

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19

Aging Infrastructure

109

Water Main Breaks and ReplacementMains Miles Replacement $ Breaks Breaks/yr

Cast Iron 1,466 $ 1.9 Billion 78% 551

Ductile Iron 1,212 $ 1.6 Billion 14% 99

PVC 1,212 $ 1.6 Billion 5% 35

Other 432 $ 0.6 Billion 3% 21

Total 4,322 $ 5.7 Billion 100% 707

110

High Failure Water MainsPost War Era Cast Iron

111

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Pri

or

to 1

905

1906

-19

14

1915

-19

24

1925

-19

34

1935

-19

44

1945

-19

54

1955

-19

64

1965

-19

74

1975

-19

84

1985

-19

94

1995

-20

04

2005

-20

13

Nu

mb

er o

f F

ailu

res

Installation Period

Post War Era Pipe

Water Main Replacement

• Investment: $10 Million/year

• Replacements: 7 miles/year

• Replacement Criteria/Scoring:

– Reliability / Criticality

• Pipe Material/Age

• Main Break History

• Customer/Community Impact

– Water Quality - Water Age/Disinfection

– Hydraulic Performance - Pressure/Velocity

– Road Projects – Coordinate When Possible

Wastewater Utility

113

Citizens Wastewater (CWA Authority)

• Customers– Retail (230,000)

– Wholesale (7)

• Resources

– Belmont AWTP

– Southport AWTP

– 268 Lift Stations

– 3,200 Miles Pipe

• Capacity

– Peak 450 MGD

114

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20

Combined Sewer System

115

Consent Decree/Long-Term Control PlanTunnel Storage System

116

• Budget: $2.2 Billion

– $300 Million under

• Schedule: 2006-2025

– 2 years ahead

• Tunnel Storage System

– 27 miles (10 complete)

– 250 ft deep

– 20 ft diameter

• Treatment Plant Expansion

– 300 MGD >> 550 MGD

• Reduce Pollution by 2025

– 138 CSOs

– 5 Billion gal/yr

DeepRockTunnelConnector DeepRockTunnelConnectorPumpStation

DRTCTunnelLaunchShaft

39’Diameter

18’Diameter

60‘Wx100‘LX66‘H

119

SecondaryTreatment

Disinfection

Headworks

DRTCPumpStation

PrimaryClarifiers

SouthportAdvancedWastewaterTreatmentPlant

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21

121

Benefits and Challenges• Benefits:

– Safe and Dependable Utility Systems

– Support Community Growth/Quality of Life

– Cleaner Water Ways

• Challenges:– Significant Capital Investments

– Rate Increases/Affordability

– Achieve Authorized Revenues

– Rate Structure (Fixed vs. Variable)

– Growing Peak Demand/Declining Base Load

– Deleverage Utilities123

DISCUSSION

124

Tech Issues

Legislative and Regulatory Trends in Plumbing Products

Paul PattonDelta Faucet CompanySenior R & D/Regulatory ManagerResearch and Development

Plumbing Manufacturers InternationalBoard of Directors – Vice PresidentExecutive Committee

10/9/2015

22

Agenda

• Over View of Regulatory and Legislative Trends

• Water Conservation Challenges and Technological Advances

• Outlook for the Future

• Questions

Regulatory and Legislative Trends

Previously

• Codes and Standards

• Some State Plumbing Codes

• Minor Involvement of legislation


Previously


• Some State Plumbing Codes

• Minor Involvement of legislation

Today

• Legislative

– Federal Government

– State

– Local 40,000 +

• Lack of knowledge

• Environment Groups Impact

• Internet



Where are they Hiding?• Dodd–Frank Wall Street Reform and Consumer

Protection Act

– Title XV – Miscellaneous Provisions

• Disclosures on Conflict Materials in or Near the Democratic Republic of the Congo

• California

– Flow Rates were in the

water heater section


Green Programs

• Over five hundred programs with different requirements and labels

• Cradle to Cradle• Cradle to Grave


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23

Other national programs

• NAHB’s Model Green Home Building Guidelines

• EPA’s WaterSense Program

• Environments For Living® Certified Green

• Leed Program


Conservation

• Lower, Lower and Lower Flow Rates

– Are we considering end users

– Unintended consequences are not being considered

– Numbers game


Grey Water and Reuse

• Water Conservation vs. Medical Field

• Who owns the rights of water

– Catchment

– Ground


Involvement• Erin Brockovich – Hexavalent Chrome• Environment

– Matt Damon– Al Gore– Leonardo DiCaprio– Bill Gates

Independent Studies• Johns Hopkins - Legionella• Dr. Norman Pace – Bacteria in Shower Heads


Water Conservation Challenges and Technological Advances

Water Efficiency• 70% of the earths surface is covered with water, yet

only 1% is available for human consumption

• The average family of four uses 400 gallons a day, 70% is used indoors

• EPA stated that by 2013 at least 36 states are anticipating local, regional or statewide water shortages

• In 2015 we have reached

40 states


10/9/2015

24

Water Usage in the US

U.S. Geological Survey Data 2010 Water Conservation Challenges and Technological Advances

Public-supply water is used for such public services (public uses) as pools, parks, and public buildings; or be unaccounted for (losses) because of system leaks or such nonmetered services as firefighting or the flushing of water lines.

California• 2010 onward, new flows impacted: California, Texas, Georgia,

New York city, Miami-Dade counties, Denver, and most recently Colorado (mandating WS compliance vs just flow rates)

• 2012 California enters its first year of drought.


Understanding Consumer Expectations is a Must for Conservation Success

• Waterless urinals– California EPA

Headquarters• Miami-Dade

showerhead giveaway– “Low Flow

Showerhead”

• EPACT 92– Toilets 1.6gpm

• 1st Generation electronic faucets– The bathroom

shuffle


Unintended Consequences of Lower Flows• Performance of anti-

scald valves– Numerous White

Papers regarding potential thermal shock

• Waste carry– PERC Study

• Bacteria– Potential Harboring

Areas• Water heaters

– Performance


The language we use does not align with consumer desires.

LOW FLOW


The Water Circle

ConserveReduction

in Revenue

Water Rates

Increase

Consumers Conserve

Further Reduction

In Revenue

Source: National Water Rates Summit, August 2012 AWE/Johnson Foundation Wingspread


10/9/2015

25

Water Savings cannot be a numbers game…

It must deliver a positive

WATER EXPERIENCE.


Technologies• High Efficiency Toilets (HET)

– 1.28gpf

• High Efficiency Kitchens

• High Efficiency Lavs

• Technologies Developed for

Shower Devices


Outlook for the Future


• Continued Influx of Legislation

• Increased Level of Local Jurisdictions in Requirements

• Continued Review of Materials

– The more we can measure the more we will regulate

• Focus by Environmental Groups in the area of Code and Standards

• Continued Focus on Water Use

• How to Deal with Our Declining Infrastructure

• Product vs. System Design


Thank you

Perspectives on Water Technology from FaegreBD Water SegmentBill Weimer, Partner


10/9/2015

26

Water Technology Developments and Challenges from the Perspective of a Manufacturer of Water/Wastewater Treatment Systems

Richard P. MannVice President, Sales

[email protected]

Tonka Water History

Tonka Water is a privately held company started in 1956 as Tonka Equipment Company

In the beginning, Tonka Equipment Company was a regional firm that gradually expanded its presence to establish itself as a national firm by the 1990’s.

In the last decade we started to grow internationally and received the honor of the 2014 Governor’s International Trade Award.

Today…

Tonka Water is a Treatment Process Specialist and Equipment Manufacturer with more than 2300 custom designed water treatment systems throughout North America and select international sites.

Tonka Water Experience Tonka WaterInnovations

Tonka Water experience spans applications in surface water, groundwater, reuse, environmental remediation, commercial and industrial projects , Innovations into the market include;

• Simul-Wash

• Tonka Zorb HMO

• Pur-IX

• Chrome-IX

• Package Treatment Plant

• BLEU underdrain

Role of Manufacturer

Educate

o National / State / Local

o Regulatory Collaboration- Biological Drinking Water Process Demonstration

Design

o University Collaboration- University of Florida EPA project for innovative small systems

o Intercompany Collaboration - Integrating new component technologies

Implement

o Bring to market

o Regulatory Collaboration- HMO approval in Texas

Role of Manufacturer

Support

o Regular follow up- Engineers / Owners / operators

o Pilot- Know the water

o Regulatory Collaboration- HMO approval in Texas

10/9/2015

27

Market Accelerators

• Demographics

• Population Growth

• Water supply needs

• Industry

• Plant infrastructure age

• Regulatory

• Emerging contaminants

• Enforcement of regulations

Market Decelerators

• Demographics

• Population loss

• Pipeline

• Regional / local

• Politics

• Re-use

• Reluctance of NEW

• Regulatory

• Acceptance speed

• Reluctance of NEW

• State regulations guidelines

• Funding

Integrating New Technology

One way to overcome reluctance to new technology is to add it to a known process.

Biological

Vertical Pressure Filters

NF Membranes

Calcite Contactor

O2 Generator

Pressure Aerator

Is it New Technology or Just New to you?

Tonka Water offers a broad range of ion exchange solutions

How Much??Membranes

Municipally the price point can and will determine what technology is selected, resulting in a slow down of innovation acceptance

NF & RO

Ceramic

Complete Systems

The rest of the Tonka Water product portfolio provides all the process solutions needed to provide a complete system to solve the most challenging water quality problems

10/9/2015

28

Process & Product Acceptance

Biggest Challenges Faced in the Municipal market

o The New Factor

o Cost

o Drinking water

o Regulations

Contact

Tonka Water 13305 Watertower CirclePlymouth, MN 55441

Main: 763-559-2837

Website: www.tonkawater.com

Closing RemarksScott Chinn, Partner


Documents

Water and Wastewater Issues in Indiana and Beyond … PowerPoint - Water... · Water and Wastewater Issues in Indiana and Beyond October 8, 2015 ... Off-take Technology EPC and O&M