DOWNRIVER UTILITY

WASTEWATER AUTHORITY (DUWA)

From Advisory Role to

System Ownership

MWEA Wastewater Administrators Conference

January 2019 | Frankenmuth, Michigan

SPEAKERS & OUR AGENDA

I. Downriver Sewage Disposal System Overview (DSDS)

II. History: Major Milestones

III. DUWA Standup for System Transfer

IV. System Ownership

V. Lessons Learned

VI. Next Steps

2 Vyto Kaunelis, PE

Principal

Lambrina Tercala, PE

Project Manager

Downriver SewageDisposal System Overview

DOWNRIVER COMMUNITIES

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Allen Park* Riverview

Belleville Romulus*

Brownstown Township* Southgate

Ecorse Taylor

Dearborn Heights* Van Buren Township*

Lincoln Park Wyandotte

River Rouge

* Denotes those Communities who are partially served by the Downriver System

SERVICE AREA

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DUWA & THE SYSTEM

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• Constructed Downriver Sewage Disposal System (DSDS) in 1938

• DSDS’s service area includes more than 350,000 people

• Communities fund the system construction and O&M via rates and taxes

THEN NOW

DSDS ASSETS

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• Downriver Wastewater Treatment Facility (DWTF)

• 38 acres, 30+ buildings

• 7 Interceptors (46 miles)

• Downriver Tunnel System (wet weather flow)

• Equipment including: pumps, inventory, rain gauges, etc.

FLOW CAPABILITIES

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• DOWNRIVER WASTEWATER TREATMENT FACILITY (DWTF)

• Flow, Avg = 50 MGD

• Flow, Peak = 125 MGD (full treatment)

• Wet Weather Capabilities = 225 MGD

• TUNNEL STORAGE

• 15 MG

TREATMENT SYSTEM

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• Influent Pumping (225 MGD)

• Preliminary Treatment

• Primary Treatment (150 MGD)

• Secondary Treatment (125 MGD)

(high-purity oxygen activated

sludge with secondary settling)

• UV Disinfection

• Dewatering by Centrifuges &

Belt Filter Presses

HISTORY: MAJOR MILESTONES

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• Late 1930s: Constructed & In Service

• Constructed under Federal Public Works grant; in service in 1939

• Serviced Wyandotte, Lincoln Park, Allen Park, Ecorse, and River

Rouge

• Sized @ 30 MGD

1930 1940 1950 1960 1970 1980 1990 2000 2010 NOW

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• Early 1960s: 50-Yr Service Agreement Approved in 1962

• Between Wayne Co. and Downriver Communities

• Wayne County managed System, but Communities were solely responsible for costs

• Each Community purchased maximum flow capacity

1930 1940 1950 1960 1970 1980 1990 2000 2010 NOW

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• Late 1980s: Federal Consent Judgement

• U.S.EPA sues Wayne Co. alleging unlawful pollution of Detroit River by DSDS

• County successfully petitions Court to add all 13 Communities as Co-Defendants

• Must comply with 1972 Federal Clean Water Act

• Mid 1990s: Entered Consent Judgment

• Required >$250M in Capital Improvements

• Cost was fully financed by the Communities

1930 1940 1950 1960 1970 1980 1990 2000 2010 NOW

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• Early 2000s: Created Joint Management Committee

• Communities desired to oversee the management and administration of DSDS

• Provided a mechanism for Communities to give input on critical issues

• Such as, rates and budgets, financing of capital improvements, staffing, and

management issues

• Successfully performed CAMPP (Comprehensive Assessment and Master Plan

Project) to become competitive with private operations

• 2006: Capital Improvements Complete

• Consent Judgement terminated

1930 1940 1950 1960 1970 1980 1990 2000 2010 NOW

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• 2010: 1962 Service Agreement Lapses

• Communities form DUWA to assist with negotiations with Wayne County on new

Service Agreement

• Negotiations led to development of tentative 20-year service agreement

• 2015: Wayne County Announced Phase Out of Wastewater Services

• Communities decide to purchase System from Wayne County and take over

responsibility for management and operation

• 2016: DUWA Issues Letter of Intent to Purchase DSDS

• DUWA issues intent to purchase, and Wayne County accepts purchase

1930 1940 1950 1960 1970 1980 1990 2000 2010 NOW

SYSTEM PURCHASE IS WIN-WIN

• Wayne County

• End Ownership & Operation

• Reduce Financial Exposure

• Reduce Debt

• Eliminate Liability Exposure

• Accommodate Local Desires

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• DUWA

• Manage Local Infrastructure

• Eliminate County Overhead Charges

• Pursue Desired Level of Service

• Control Liability Exposure

• No Legacy Costs or Judgement Levy

• Ensure Continued Optimal Operation

DUWA STANDUP FOR SYSTEM TRANSFER

GOVERNANCE & BOARD MEMBERS• DUWA is a public body corporate organized pursuant to Act 233

• Comprised of 13 primary representative members, consisting of Mayors or

Supervisors; primary members have alternate commissioners

• Members exercise all powers of DUWA

• Members meet once per month for Board meetings to discuss and agree or

vote on direction of Authority’s operations

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SYSTEM ORGANIZATIONAL CHART

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TECHNICAL FINANCIAL

DUWA BOARD

LEGAL

OPERATIONSDNS FINANCIAL SERVICES

PURCHASE CRITERIA• Cost Implications: Goal is to be ‘Rate Neutral’ – this does not mean ‘no

rate increases’

• Rate Neutral to factor in:

• Deferred maintenance

• Personnel costs with depleted staff

• Pension & Health Care costs looming

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0%

1%

2%

3%

4%

5%

2018 2019 2020 2021 2022

6%

7%

RATE NEUTRAL

• Transactional Costs, and

• System Improvements

NEGOTIATED TRANSFER FEE

• Transfer Fee: $57,500,000

• Considerations included Pension, OPEB Liabilities, SRF capital debt

• DUWA acquiring ~$38M in reserves from Wayne County

• To be used by DUWA to:

• Finance Purchase Price of System

• Defease Wayne County’s 2007 Revenue Bond

• Fund Reserve Account

• Pay Cost of Issuance of Bond

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MAJOR TRANSITION TASKS• 2016:

• Approved a Service Agreement & Sewer Use Regulations

• Selected Veolia as Contract Operator

• 2017: Secured System Manager

• 2018:

• Secured Veolia as Contract Operator w/ 20-yr Contract

• Resolved Financial Hurdles

• Sold Revenue Bond to generate cash for the purchase

• Transfer (limited) Debt from Wayne County to DUWA

• Adopted Rates & Charges

• Approved Definitive Transfer Agreement

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SYSTEM TRANSFER OCCURRED ON

SEPTEMBER 27, 2018

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LESSONS LEARNED

PATIENCE IS A VIRTUE

• It took 3 years to effectuate the deal. Why?

• Relationship between DUWA and Wayne County was weak; significant

distrust and skepticism in each other's abilities to perform

• Legal Agreements

• Historic site lacked adequate papers, especially regarding real estate

• Lack of Dedicated Resources

• Wayne County announced desire to leave WW business in 2015; Staff

numbers decreased since that announcement; remaining staff helped

achieve transfer

• Target closing assigned as September 27, 2018. This was assigned based

Wayne County on financial needs and CEO directive. Holding to the target

helped force action.25

IDENTIFY THE KNOWN UNKNOWNS

• Need to resolve ‘as is’ data gaps

• Condition Assessment of Wastewater Treatment Facility

• Inspections of Interceptors (3%) for ‘Due Diligence’

• Real Estate

• Collecting Easements

• Performing Boundary Survey/ Adjacent Drainage District facilities

needed to be ‘carved out’

• Phase I/II ESA

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BE THE MASTER OF THEIR DESTINY

• Will the Communities be better off in the

future if the County owns and runs the system

or if they own it?

• County has stated if deal does not close:

• Private Operator will be hired and costs

passed along, and

• Pension & Health Care costs for retirees will

be factored into the rates

• Savings to come from good management and

prudent long-term decisions – strong technical

basis and foundation of trust27

Romulus Sink Hole

YOU CAN’T OVER COMMUNICATE

• Unanimity desired for approval of Service Agreement and Definitive

Transfer, however, bylaws only required Super Majority Vote

• Focused on educating communities on DUWA’s history, agreement on

transfer fee, and approach for future operations w/ Veolia

• Conducted a Town Hall Meeting

• Roadshow at Local Board or Work Group Meetings

• Tour of Treatment Facility open to Local Community Board Members

• Even skeptics had to concur there was no reasonable alternative

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TEAMWORK MAKES THE VISION WORK

• Wayne County lacked deep bench of resources, but dedicated staff focused on

critical path items that effectuated the deal

• DUWA does not have employees. DUWA developed Legal, Technical, and

Financial teams to push transition forward

• Veolia participated in meetings for 2.5 years from selection to contract. Veolia

helped provide guidance based on their experience.

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KNOW THE TRUE COST OF

DEFERRED MAINTENANCE• Wayne County staffing levels at Downriver Wastewater Treatment

Facility were very low. This caused:

• Deferred Maintenance

• Reduced sludge handling

• NPDES Permit Compliance:

• TSS Exceedance at Transfer Date

• Sludge hauling volumes down by 30% from previous year; too much

solids in process units

• The system realized increased reserves which transferred to DUWA,

but now system has several critical equipment procurements in process30

A CASE FOR PRIVATIZATION

• Veolia brought extensive experience to the process

• Strong resources brought in to handle problems uncovered during

transition

• 20-yr contract sets-up long-term focus for success

• Large network of resources

• Experience and standards based on many similar facilities versus single

facility

• Limiting Factor:

• Stigma of for-profit

company’s markup policies

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CULTURE IS A STRATEGY

• Length of process most difficult on DWTF employees

• Skeleton crew remained (38 FTEs); Veolia Contract includes 48 FTEs

• Environment bred uncertainty

• Procurement process for maintenance parts stalled; couldn’t do the job

they desired to achieve

• Union negotiations were extensive; Contract Operator prevented from

recruiting existing staff until system transfer was eminent (<30 days)

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DWTF PERFORMANCE PRE-TRANSFER

Flow Staffing Permit

YEAR MGY # violations

2014 20,158 50 10

2015 18,755 50 0

2016 19,280 45 2

2017 18,933 40 10

2018 (7 months) 13,789 38 10

• Ultimate authority for decision making is by the 13 member Board

• Unanimity is always the goal, but when that doesn’t occur, need to

respect the collective decision

• DUWA’s Mechanisms:

• Engage committees to help advised on specialized matters, including

legal and technical

• Note taking is key, as is collaborative forums

• Utilizing BaseCamp to log conversations & increase engagement

outside of meeting dates33

AGREE TO DISAGREE

KEEP CALM AND CARRY ON

• Bonding required ‘all hands on deck’ and ‘one voice’ to Board

• Challenges:

• Board membership turned over – hard to focus on forward

progression while getting new members up to speed on previous

decision making (ie negotiated transfer fee)

• DUWA lacked credit, even though communities always funded the

system’s expenses

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NEXT STEPS

THE TRANSITION CONTINUES

• DUWA remain in Transition Stage

• Utility splitting

• Implement decentralization of SCADA

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• Stand Up

• Develop Master CIP

• Assess rates

• Perform critical repairs

• Focus on AMP

FUTURE GOALS

• Make better decisions to control long-term costs

• Increase transparency to increase knowledge by the communities

• Focus on peer collaboration

• Address basement flooding proactively

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OPEN FORUM

QUESTIONS, ANSWERS, DISCUSSION