State Revolving Fund Conference Tampa, Florida Jeff Hughes - PowerPoint PPT Presentation

YES SRFs can Participate in Financing Alternative Project Delivery Models (P3’s, DBO, DBOT), but its not always easy … State Revolving Fund Conference Tampa, Florida Jeff Hughes Environmental Finance Center at the University of North Carolina November 2, 2015 http://efc.sog.unc.edu @EFCatUNC

Supporting the fair, effective, and financially sustainable delivery of environmental programs through: • Applied Research • Teaching and Outreach • Program Design and Evaluation How you pay for it matters http://efc.sog.unc.edu @EFCatUNC 2

Acknowledgements Environmental Protection Agency The West Coast Infrastructure Exchange (WCX) promotes the type of new thinking The EPA Water Infrastructure and necessary to solve our infrastructure crisis. Resiliency Finance Center WCX is a unique regional platform designed provides financial expertise to to spur infrastructure innovation and communities that are financing drinking accelerate a pipeline of innovative water, wastewater, and stormwater infrastructure. infrastructure projects in California, Oregon and Washington. www2.epa.gov/waterfinancecenter westcoastx.com 3

Topics • Terminology basics • Traditional vs. Alternative Project Delivery Mechanisms • Water Finance Center Alternative Service Delivery Project • SRF Opportunities and Obstacles – California Experience

Alphabet Soup • DBB • Design Bid Build • DB • Design Build • DBO • Design Build Operate • DBOM • Design, Build, Operate, Maintain • DBOF • Design, Build, Operate, Finance • Concession • Giving up something • CMAR • Construction Manager at Risk • PPP • Private Public Partnership • P3 • Private Public Partnership

What is a P3? Traditional Procurement Manage Project Design Build Operate Maintain (D) (B) (O) (M) Finance Project (F) Own Project Own Land Public Sector Private Sector SLIDE SOURCE: Jonathan TruG, West Coast Exchange 6

My SRF program has had significant problems (cost overruns, poor project delivery etc.) with a DBB project in the past. 43% A. Strongly Agree B. Agree C. Neutral 18% D. Disagree 16% 14% E. Strongly Disagree 9% Strongly Agree Agree Neutral Disagree Strongly Disagree

My community has had significant problems (cost overruns, poor project delivery etc.) with a DBB project in the past. 42% A. Strongly Agree B. Agree 31% C. Neutral 22% D. Disagree E. Strongly Disagree 3% 3% Strongly Agree Agree Neutral Disagree Strongly Disagree Informal poll of approximately 30 utilities in California in October 2015

What is a P3? Alternative Delivery Method Options Manage Project Design Build Operate Maintain (D) (B) (O) (M) Finance Project (F) Own Project Own Land Public Sector Private Sector SLIDE SOURCE: Jonathan TruG, West Coast Exchange 9

Alternative delivery mechanisms reduce costs 40% A. Strongly Agree B. Agree 28% 26% C. Neutral D. Disagree E. Strongly Disagree 6% 0% Strongly Agree Agree Neutral Disagree Strongly Disagree Informal poll of approximately 30 utilities in California in October 2015

P3s reduce costs A. Strongly Agree 36% 31% B. Agree 25% C. Neutral D. Disagree 8% E. Strongly Disagree 0% Strongly Agree Neutral Disagree Strongly Disagree Agree Informal poll of approximately 30 utilities in California in October 2015

Example of Summary Sheet for Two Options: Source: Memo to Miami-Dade Sewer Department from PRAG 11/14/14

Example of display of variable Risk Cost: Source Deloitte Analysis submitted in report to Regina

Assessing Cost Impacts of Alternative Service Delivery Partnerships • 10 to 15 Financial Impact Assessments – Base case vs. alternative paths – Mix of models – Greenfield and upgrades – Geographic diversity • Simplified financial impact model • Findings, conclusions, lessons learned • Education materials

http://efc.sog.unc.edu @EFCatUNC

Name Service Procured Type of Contract AnLcipated Type of Savings Rialto (CA) Concession ????, Project cost, O&M, Full service water and wastewater retained risk Concession O&M, capital plan Bayonne water/wastewater collection/ (NJ) distribution and customer service Project cost Woodland Water withdrawal, treatment, Design - Build - Davis (CA) and bulk transfer Operate Wastewater treatment Retained risk, out of pocket Regina Design - Build - (Canada) funds, design/construcLon Finance - Operate - Maintain Wastewater treatment Project Cost, Capital Plan, O&M Santa Paula Design - Build – (CA) Operate Finance Own Desalinated drinking water Technology Risk San Diego/ Water purchase agreement Carlsbad (CA) Risk, Hedging Long Term Costs San Antonio Water rights, withdrawal, Design - Build - (TX) treatment, transmission Finance - Operate - Maintain Middletown Full service water and Concession Capital Plan, O&M (PA) wastewater

For Information on this Project Subscribe to our Environmental Finance Blog efc.web.unc.edu Follow us on Twitter: @EFCatUNC

Advantages of SRF Financing Alternative Delivery Mechanisms • Potential reduced project cost • Potential reduced risks falling on public sector and eventually SRF • Lower cost of capital • Lower life cycle costs • Reduced segmentation

Going Beyond Savings • Higher quality of asset management or service delivery (contractually required) – Woodland Davis – Santa Paula • Tapping into Public Entity Equity (for water or other benefits) – Rialto – Bayonne – Middletown

We have funded a service delivery mechanism other than Design Bid Build within the last 5 years? A. Yes 49% B. No 41% C. Don’t Know 11% No Don’t Know Yes Informal poll of approximately 30 utilities in California in October 2015

We have participated in a • DB • DBO • CMAR • P/3Concession • Private owned utility debt

Davis Woodland Project • Service Provided : Raw water withdrawal, transport, and treatment • Service Delivery Mechanism : Design, build, operate • Estimated capital cost savings: 10 to 20%

30 mgd Project Costs Presented at April Board Meeting (Apr 2013 million dollars) Construction Costs (a) Capital Costs, 2009-2016 Cost Category Total Project Component Cost Agency Administration 3.56 Joint Intake (Agency Portion) (b) 14.52 Program Management 3.47 Raw Water Pipeline 23.76 Water Supply 1.71 Regional Water Treatment Facility 96.7 (RWTF) Environmental & Permitting 1.59 Woodland Treated Water Pipeline 5.70 Land/ROW Acquisition 4.30 Davis Treated Water Pipelines 23.35 Pre-Design 6.18 Permit Fees & Construction 2.89 Construction 166.91 Counsel Capital Contingency 7.79 TOTAL 166.91 (a) Includes DBO contract design and construction costs, Woodland and Davis Local Facilities 31.74 design-bid-build Joint Intake construction costs, and Agency design review, construction quality assurance Costs Expended 2009-2011 7.49 and contract compliance, engineering services during construction, environmental construction monitoring, TOTAL CAPITAL COSTS 234.75 environmental mitigation, permitting, and incidental costs. (b) Costs currently under discussions with RD 2035. Slide Source: Woodland Davis Clean Water Agency 25

SRF DBO Loans • Borrower: Woodland Davis Clean Water Agency • DBO Lead : CH2M • City of Davis/UC Davis $95.5 Million CWSRF Loan 1.7% over 30 years • City of Woodland $111.4 Million DWSRF 1.7875% for 20 years

Making it Happen • Proposition 218 rate process • Changes to state law (5956.10) • Project development services

We can’t fund a Design, Build, and Operate because • Finish the sentence..

What’s Included in Project Cost? Example from Rialto Concession

Can you? • Co-fund a project that has private equity funding part of the project? • Include concession payments in SRF funding?

We are likely to fund a service delivery mechanism other than Design Bid Build within the next 5 years? 45% A. Strongly Agree B. Agree 29% C. Neutral D. Disagree 13% 11% E. Strongly Disagree 3% Strongly Agree Agree Neutral Disagree Strongly Disagree Informal poll of approximately 30 utilities in California in October 2015

We are likely to use a service delivery mechanism other than Design Bid Build within the next 5 years? A. Strongly Agree B. Agree C. Neutral D. Disagree E. Strongly Disagree Informal poll of approximately 30 utilities in California in October 2015

I am more open to alternative delivery mechanisms than I was before this session? 44% A. Strongly Agree 36% B. Agree C. Neutral 17% D. Disagree E. Strongly Disagree 3% 0% Strongly Agree Agree Neutral Disagree Strongly Disagree Informal poll of approximately 30 utilities in California in October 2015