Monetizing Spare Water Treatment Capacity for Transfers: What it Takes to Get it Done

Transcription

1 AWWA ACE18 Innovating the Future of Water Monetizing Spare Water Treatment Capacity for Transfers: What it Takes to Get it Done Paul Selsky Brown and Caldwell June

2 American River Pipeline Conveyance Project 2

3 Objectives Describe project Describe negotiation process Determine value of the spare treatment capacity Provide perspective of CWD elected director Valuable to others considering monetizing spare capacity negotiating water supply agreements

4 Carmichael Water District Location Map

5 The Participants Public/Private Partnership Carmichael Water District Declining water demands Has spare water treatment capacity American River diversion located downriver of remediated groundwater discharge Located across the American River from the area of need Golden State Water Company (GSWC) Needs replacement water supply Aerojet Rocketdyne Obligated to mitigate loss of water supply for GSWC Owns remediated groundwater discharged to the American River

6 Carmichael Water District s Situation 38,000 people $13 million/yr budget 10,000 acre feet /year demand Surface water and groundwater supply Bajamont Surface Water Treatment Plant built in 2000 $23.4 million for 22 mgd capacity Declining demands Stranded WTP capacity

7 Bajamont Water Treatment Plant On-line mgd capacity Microfiltration, 16 units Residential style building 2 mg clearwell underneath 3 Ranney collectors

8 Background Aerojet Rocketdyne groundwater contamination Since 1997, Golden State Water Company lost 15 wells Contaminants Perchlorate NDMA (N-nitrosodimethylamine) Two groundwater remediation systems in CWD Built by CWD Paid for by Aerojet Built confidence and credibility between parties - important

9 Contamination Plume Map

10 Key Features C WTP Remediated groundwater discharge Impacted GSWC water supply wells

11 The Project 4.5 mgd treated water supply/5,000 acre-feet per year Remediated groundwater discharged to the American River at Buffalo Creek 7,400 ft 24-inch pipeline 80 feet under the river bed Horizontal pressure drilling method under the river for 1,060 feet Environmental restoration of 1950s era infrastructure Removal of 400 feet of 33 inch steel pipe Removal of intake and pump station structures Awards Sacramento Environmental Recognition Award American Water Resources Association s 2017 Integrated Water Resources Management Award

12 Project Map

13 Project Overview CWD s WTP GSWC Connection

14 American River Crossing CWD s WTP

15 Construction

16 Financial Bonds Bond conversions Changing $8.1 million of Public Tax exempt bonds to private tax exempt bonds through the California Debt Allocation Committee. For Public Tax Exempt Bonds and sell capacity in your facilities above 10%. Sold 20.5% of capacity to GSWC. IRS settlement Agreement. We had to pay $86,000.

17 Project Costs Direct Administration Cost $ 29, Land Easement purchase $ 160, Planning/Design/Engineering $ 608, Environmental Documentation $ 208, Construction $ 5,687, Total $ 6,694,805.01

18 What it Takes to Get It Done Legal Economic Political Technical Community outreach

19 It Takes a Team Carmichael Water District General Manager Board of Directors Staff Consultants Legal Financial Engineering Environmental Golden State Water Company Aerojet Regulatory agencies 19

20 Board Process Goal: Achieve unanimous agreement by CWD Board of Directors Form committee Attend negotiation meetings Aerojet GSWC Debate what dollar amount to ask for/settle on Confer with overall Board Board of Directors General Manager Water Sales Committee

21 The Negotiation Approach Sales committee meetings With Aerojet With consultants Legal Financial Engineering Closed meetings with entire Board Open meetings Public meetings Public interest 21

22 Determination of Value of Spare Treatment Capacity Not like selling or leasing real estate Few comparable examples Different approaches Proportion of actual cost of WTP Cost to build new WTP CWD perspective Few opportunities to monetize treatment capacity Worst case is no one wants to use the treatment capacity, no revenue Aerojet perspective Difficult and expensive to construct water supply facilities Cost of other alternatives Time to put solution in place

23 The Small Things Matter Patience Give the other party time Ask for other things Drought water supply drought Curtailment CWD budget What to assume for revenue? Water rates Proposition 218 implications 23

24 Sequence of Events $10m to $12m for capacity cost - Aug AR- $4.5 million $13.5 million Sept AR - $5.4 million Final payment terms - $9.4 million - April 2016 Pipeline pulled under river - June 2016 Capacity sale agreement - August 2016 Approval by CWD Board August 2016 Environmental restoration September 2016 Dedication ceremony - October 2016 Water supply to GSWC Jan Initial discussions October 2012 WTP capacity analysis 4.5 mgd/$7.7 million AR - $2 million July $16 million

25 Firm Capacity Sale 4.5 MGD capacity is $9,400,000 Aerojet supply of remediated groundwater 5,000 ac-ft no cost 3,500 ac-ft - $85/ac-ft 2,825 ac-ft - $200/ac-ft Ownership of remediated GET water developed in the CWD service area Sale of remediated GET water split the revenue

26 Financial Agreements with Aerojet Funding for Capacity Study Funding for Design Funding for Environmental Funding for Construction Project and Construction Management Funding Capacity Sale to GSWC Three party agreement between CWD/GSWC/Aerojet

27 Financial Agreements with GSWC 20.5% capital cost contribution 20.5% membrane replacement cost Water treatment cost and delivery $180/ac-ft

28 The Results Three party agreements Use of spare capacity in CWD s treatment plant Treatment of remediated groundwater diverted from the American River Conveyance of the treated water to an adjacent water utility Costs paid by another party Ownership of remediated groundwater Transfer of remediated groundwater

29 Thank You 29