Fort Worth, TX

Categories: Utility optimization

Drivers: The City of Fort Worth, Texas, issued a Request for Information (RFI) to explore options for optimizing utility operations, decreasing costs for ratepayers, and improving the level of service. The RFI gave respondents broad latitude to propose a range of partnership options including a full system lease, P3 for construction of new assets, or contract operations on all or a portion of the system. Over $750 million of CIP was planned over the subsequent five years and rate increases were expected to pay for the costs of infrastructure investment, rising raw water costs, and regulatory mandates.

Partnership Analysis: Table Rock and its partners proposed a comprehensive partnership approach with substantial benefits to the utility and ratepayers. The proposed solution fully funded the 5-year CIP in the amount of $720 million, produced a $50 million upfront payment, and an annual payment of $50 million over 30 years. This would have required annual 4%-6% rate increases over 5 years. The team proposed to provide a performance guarantee covering upgrades and operations of the utilities with compensation only if a defined set of Key Performance Indicators were met. The analysis showed clear potential to optimize operations, increase financing capacity for capital projects, and decrease costs for ratepayers.

North Las Vegas, NV

Categories: utility optimization, restore general fund

Drivers: North Las Vegas had a major budget deficit that was filled in large part by transferring the majority of reserves from the water and wastewater utility to the city’s general fund. Up to $32 million per year was being transferred, and utility reserves declined from $179 million to under $20 million by the time of Table Rock’s analysis. The city was discussing going into receivership, under which the state would step in to manage the city’s budget.

Partnership Analysis: The proposed partnership included

  • $40 million upfront payment to general fund support reserves and address unfunded pension liabilities
  • $35 million in water and wastewater CIP funding
  • $150 million to defease existing utility debt
  • $60 million to replenish depleted utility reserves
  • Annual lease payment of $45 million to provide a disciplined solution to the city’s budget problems without bankrupting the utility

While the proposed partnership would have impacted utility rates, the increase remained under the critical affordability threshold of 2.5% of median household income. The rate increases associated with the proposed partnership were significantly less costly to the average household than other options for addressing the budget shortfall such as property tax increases or going into receivership.

Property Tax IncreaseWater & WW Partnership
Annual Revenue$46.6 million max$45 million
Additional Household Cost*$2,000/year$715/year

Simi Valley, CA

Categories: Pension liability, utility optimization

Drivers: Simi Valley had depleted reserves in its water and wastewater utility, significant capital improvement needs, and unfunded pension liabilities across the government. $72 million in investments were needed in the water and wastewater utilities including $24 million for recycled water projects, which was a high priority given the City’s heavy reliance on purchased water. Despite repeated water main breaks in the evening news, the city had continually underfunded its utilities, choosing to utilize reserves rather than implement the approved rate increases necessary to meet operating and capital expenses. Utility reserves had declined from $22 million in 2011 to $3.5 million in 2016. Pension liabilities were about 80% funded and retiree health benefit liabilities were between 3% and 75% funded. Simi Valley needed a structure that would ensure proper funding and help address pension issues.

Partnership Analysis: Table Rock’s proposed partnership solution funded an upfront lease payment to pay off the unfunded pension liability of water and sewer employees. The partnership invested over $70 million in water and sewer infrastructure (including a recycled water plant that would have reduced reliance on imported water), restored utility reserves, and created a $5 million – $7 million annual payment to address budget deficits and other unfunded pension liabilities. This proposed approach presented significant long-term savings for Simi Valley.

Potential Pension Savings over 30-Year Concession Life

WaterSanitationTotal
2013-14 Budget PERS Contribution$602,800$865,000$1,467,800
30-Year Savings Projections Low Range
30-Year Savings Projection High Range
$18,084,000
$30,150,000
$25,950,000
$43,250,000
$44,034,000
$73,390,000

Fresno, CA

Categories: Major project, utility optimization, general fund support

Drivers: Fresno faced multiple challenges when Table Rock performed its analysis. The city was still recovering from the recession, and facing potential bankruptcy. There had been a reduction in the number of city employees from 4,000 to 3,000, the city’s credit rating was downgraded, and the annual budget deficit exceeded $10 million for several years. To add to those challenges, the city need to make significant investments in the city’s water system including a major new water treatment plant to reduce the city’s reliance on dwindling groundwater resources.

Partnership Analysis: Table Rock tailored a partnership solution to Fresno’s needs that would provide an upfront payment of $50 million to restore the city’s reserves, an annual $8.5 million lease payment to stabilize the city budget, and $410 million in capital improvement project funding in the water utility. All of this could be accomplished for the same 97% rate increase that the city had previously implemented just to fund the water infrastructure improvements. In effect, the partnership provided over $300 million in additional value for the same rate increase.

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Wichita, KS

Categories: Major project, utility optimization

Drivers: Wichita faces a challenge familiar to many cities around the U.S. After decades of deferred maintenance, much of the city’s water and wastewater systems has passed the end of its useful life and deteriorated beyond the point of repair. By 2015, the city estimated that they needed to invest $1.6 billion in the water and wastewater systems. Most notably, Witchita’s water treatment plant is over 75 years old with many parts of it well past expected useful life. As the city’s only water treatment plant, this single point of failure presents a major risk that could leave 550,000 people without water for an extended period of time in the too-likely event that any number of deteriorating parts at the plant finally fail. The city also recognized the need to improve operational efficiency, enhance training and safety, and optimize staffing.

Partnership Analysis: Wichita is addressing this challenge head on by launching an innovative two-phased procurement that assesses system needs, prioritizes capital improvements, optimizes staffing, and identifies delivery and financing approaches that minimize lifecycle costs and risk. Table Rock and its partners were selected to work with the city in phase 1 to identify a number of strategies that can optimize utility operations, improve efficiency, and significantly reduce risk. While the city is not considering a full system P3, the team assessed a range of risk sharing approaches including alternative delivery and financing options for priority projects including a new water treatment plant. The value for money analysis Table Rock produced during the first phase demonstrated the potential to lower costs, reduce rate impacts, and greatly offload performance risk through a P3 approach.

Rialto, CA

Creating value for the community by improving infrastructure, putting people to work, and providing better services to residents.

Problem: In 2012, Rialto, California, a city of 110,000 residents located 40 miles east of Los Angeles, was facing aging water and wastewater systems in need of major upgrades. However, the recession was affecting Rialto’s ability to deal with the problem. The city did not have the funding to initiate a major infrastructure project, was in need of funding assistance on an economic redevelopment initiative, and was suffering from 14 percent unemployment but desperately didn’t want to file for bankruptcy.

To close its budget gap and responsibly administer to the business of the city without loss of local control (or jobs), Rialto needed a fresh approach.

 

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