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Utilizing Public/Private Partnerships to Expand Your Collection System

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  • 1. Utilizing Public/Private Partnerships to Expand Your Collection System Presented by: Justin Brugger, City of Fort Wayne Brian Brown, D.A. Brown Engineering Consultants
  • 2. System Expansion- Challenges to Overcome: 1-Expansion of Collection/Distribution System is Expensive—and necessary 2-Bonding is becoming more difficult 3-Environmental Concerns taking front seat—and requiring system expansion in many cases 4-Rate payers are sensitive to rate adjustments Public-Private Partnerships-5 Cities-2009
  • 3. Definitions: ERU=Equivalent Residential Unit (310 gpd) Capital Surcharge Fee=Additional monthly fee invoiced to certain rate payers above and beyond normal rates Area Assessment Fee=Lump Sum fee typically paid by new users at time of connection to offset capital investment costs MOU=Memorandum of Understanding between the Investor Group and the Municipality-Precursor to Contract Public-Private Partnerships-5 Cities-2009
  • 4. Public-Private Partnerships: 1-Utilize Private investment dollars to fund the majority of the component cost 2-Investment Payback is through the user fees 3-Allows for more rapid system expansion 4-Minimize changes to existing user rates 5-Do not impact the bonding limit of a community Public-Private Partnerships-5 Cities-2009
  • 5. Public-Private Partnerships: Two major different types of partnerships: Investor and Developer Investors typically concerned with existing users only Investors typically at “arms length” with project Developers concerned with existing and future users Developers typically involved intimately with project Public-Private Partnerships-5 Cities-2009
  • 6. Indentifying a Project: 1-Not all projects are viable alternatives for this funding mechanism 2-Some critical projects don’t “pay” (SSO, CSO, etc.) 3-Must have predictable and sufficient revenue stream 4-Lower risk=Lower cost to utility 5-Tackle “low-hanging fruit” first Public-Private Partnerships-5 Cities-2009
  • 7. Preliminary Engineering Review: 1-Identify area to be served by proposed expansion and the number of users in area 2-Estimate future development in area 3-Pre-route system components with appropriate sizes 4-Develop any phasing alternatives that are available 5-Always keep an eye on the bottom line Public-Private Partnerships-5 Cities-2009
  • 8. Preliminary Cost Analysis: 1-Calculate the approximate completed system costs as designed in the PER 2-Analyze costs with no new development 3-Analyze costs with new development 4-Determine costs to rate payers and evaluate feasibility 5-Develop MOU with Investment Group/Developer Public-Private Partnerships-5 Cities-2009
  • 9. Example Loan Repayment Chart: Public-Private Partnerships-5 Cities-2009
  • 10. Example Project Size Limitation Estimate Chart: Public-Private Partnerships-5 Cities-2009
  • 11. Example Project Size Limitation Estimate Chart: Public-Private Partnerships-5 Cities-2009
  • 12. Example Project Size Limitation Estimate Chart: Public-Private Partnerships-5 Cities-2009
  • 13. Example Project Size Limitation Estimate Chart: Public-Private Partnerships-5 Cities-2009
  • 14. Final Design: 1-Complete final design plans and specification for the project 2-Acquire easements (as necessary) for the project 3-Complete new estimates of costs and compare to MOU 4-If costs appear to be in line, go to Bidding phase 5-If not, redesign or renegotiate MOU/Contracts Public-Private Partnerships-5 Cities-2009
  • 15. Bidding, Contracts, Repayment: 1-Secure bids from contractors to complete the project 2-Analyze bids and compare to the MOU 3-Finalize Investment and Construction contracts 4-Complete Construction 5-Begin repayment of Private Contract with proceeds from users as required in Contract Public-Private Partnerships-5 Cities-2009
  • 16. Private Re-payment options: 1-Area assessment fees from developing properties ($/ac, $/ERU, etc.)-One time Fee 2-Capital Surcharge rates for new users ($/month) 3-Debt retirement portion taken from existing rates paid ($/month taken from current utility bill) 4-Rate hikes for all affected users (politically unsavory) Public-Private Partnerships-5 Cities-2009
  • 17. Sample Public/Private Partnership Flow Chart Public-Private Partnerships-5 Cities-2009
  • 18. Conclusion This investment vehicle must be attractive to private investors for this partnership to work The contract terms must be attractive to the public partner for this partnership to work When done correctly, this is a stable investment with near- certain return that is attractive to many investors Public-Private partnerships can make necessary projects financially feasible in the near-term Public-Private Partnerships-5 Cities-2009
  • 19. Questions? Justin Brugger Program Manager-Long Term Control Plan City of Fort Wayne One Main Street Fort Wayne, IN 46802 Email: Justin.Brugger@ci.ft-wayne.in.us Brian Brown, P.E. Vice President D. A. Brown Engineering Consultants, Inc. 5419 CR 427, Suite “C” Auburn, IN 46706 Email: brianb@dabrownengineering.com Public-Private Partnerships-5 Cities-2009