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HomeMy WebLinkAboutMinutes 09/22/1997September 22, 1997 Vo1.31, Page s~ o ~ ~ 5 / i~ ~ ~iNU~~s ~, `~ 3 2 OF A itEGULAIt MEETBNG q~ ~ 3 PETAL,~JMA CITY COiJNCIL ;~~ Q.D o/~ a MONI)AY, SEPTEIVIBER 22,1997 C'" ~ 0 7" ~ s ROLL CAI,I. 7:00 p.m. 6 Present: Read, Keller, Stompe, Torliatt, Maguire, Vice Mayor Hamilton, Mayor Hilligoss 7 Absent: None s PLEDGE O~' ALLEGIANCE 9 Dan Libarle, member of the Citizens Wastewater Advisory Committee, led the Pledge of io Allegiance to the Flag. ll MOMEN'T OF SI~,ENCE ia PUBLIC COlVI1VIEN'I' i3 Lawrence Jaffe, 4220 Walker Avenue, Santa Rosa - a small farmer who uses treated ~a wastewater for his crops urged the Council to consider the U S Filter/EOS proposal because ~ s they assured that treated wastewater would be available for reuse. Water reuse is the only ~6 new supply of water that is available. He also said that he was concernecY about SCWA's » involvement in wastewater treatment since that would give all water power to one agency. ~ 8 CO~JNCIL COIVIIYIENT i9 PT thanked Acting Police Chief Pat Parks for writing the letter to the~ Editor in the Press ao Democrat clarifying the costs of the storefront Police presence at Washington Square. 2~ JH also thanked Acting Police Chief Pat Parks for his response on requests for traffic 22 enforcement. z3 MS - the Kenilworth Master Plan has been reviewed by Parks and Recreation Commission za and she wants it on an agenda in October for review, attended the Heritage Homes Annual zs Awards on Saturday evening would like to thank this organization that really contributes so z6 much to our community, the Citizens Police Academy which she is attending is going very z~ well and would like to thank our Police Department for the effort that they have put into this, Zs request that each Councilmember disclose who they have met with regarding wastewater z9 including US Filter, Montgomery United Water and Sonoma County Water Agency. I know 3o that Councilmember Read, Torliatt and I have made disclosures at the last meeting. 3i DK thanked our Parks Department in advance for repairing the water fountain at McDowell 32 Park playground, if we could get that on the schedule, City Manger. Thank you. ~***~******~****~*~************ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeClj - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II- Schematic of existing Sewer Ponds - Page 63 . - ~~~ ~ Page 2, Vol. 31 September 22, 1997 ~ 1VIINUTES ~ 2 The minutes of the September 8 meeting were approved as arnended: Page 21, Line 20 - 3 Suzanne Wilford, and she worked in Santa Rosa. 4 CONSENT CALENDAR s The following items which are noncontroversial and which have been reviewed by the City 6 Council and staff were enacted by one motion which was introduced by PT and seconded by ~ MM. 8 Ayes: Read, Keller, Stompe, Torliatt, Maguire, Vice Mayar Hamilton, Mayor Hilligoss 9 Noes: None lo Absent: None i i ~SO. 97-257 NC'S ~2 ~OIVIPLETION WE~~ A~A'TEIVIEN'T CON'~'ItAC'I' - ~3 Resolution 97-257 NCS accepting completion of weed abatement contract work. Keystone ia Tractor Service completed all the work to the satisfaction of the Fire Marshal. ts * * * * * End of Consent Calendar * * * * * i6 DISCUSSION OF PROPOSALS FOR » NEW SEWER PLANT ~a MM noted that the September 8 staff report - Wastewater Facilities Project-Consideration ~9 of Pro~osals shows the evaluation score of the City staff evaluation of the merits of the two Zo proposals and the Citizens Wastewater Advisory Committee (CWAC) report. He asked for 2~ a copy of the minutes to be included in the information packet. U S Filter/EOS had 22 guaranteed a bond rating and a note from MUW and someo~le left that out of the report. 23 Let's not drop stuff from staff report to staff report. za City Engineer Tom Hargis noted the evaluations are a snapshot in time, based on the Zs proposals as submitted. It is still a dynamic process. As information comes in from the 26 vendors, it is being forwarded to you. You will hear fro~n City staff on evaluations, z~ consultants about technology, agreement terms and financing. These are essentially the aa same presentations that were made to the CWAC. So you will have the same information z9 they had to base their evaluations on. C~1VAC will maYc~ a report on their findings. ~o Staff ~resentation 3~ Mike Ban, Utility Engineer, reviewed staf~s evaluation of the proposals. In December, 3z 1996, Council charged staff with evaluating the proposals for the Wastewater Facilities 33 Project. The quality of the proposals has set a very high standard for this process and 34 reflects the professionalism and quality of the two teams that produced them. They also 3s reflect the City's effort to create a fair, open and competitive proposal process. ********************************* - Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-tl~layor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt t1~IM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~;~.,;~. September 22, 1997 Vo131, Page 3 ~ 6 i The staff used the Evaluation Methodology adopted by the Council in December, 1996. z This evaluation is based entirely on the information submitted by the proposers. They were 3 evaluated on two criteria, "pricing" and non-price, or what has been called "Performance a Criteria," s The Performance Criteria evaluation was divided into five sub-criteria: Technical - 30%, 6 Financing Approach 10%, Financing Capability 15%, Company and Staff Qualifications ~ 25% and Agreement terms 20%. The methodology required us to assign scores for each s criteria based on our evaluation of proposals. Then the scores were averaged to determine 9 the score to be assigned to each proposal. Then the respective scores for each criteria were ~o totalled. The proposal with the highest score was assigned the Highest Rank of "1" for 11 Performance Criteria. ~2 The evaluation methodology also stated that Pricing be evaluated based on the Net Present ~3 Value ar Total Life Cycle costs over the 30 life of the contract. ~or Pricing Criteria the ia lowest Net Present Value cost to the City was assigned the rank of #1 Pricing Criteria. ,~ ~ ; is Pricin~ ~t-iteria ~:~ Pea~foa-rr~ance Criterga ~6 #1 U.S. Filter/EOS #1 U. S. Filter/EOS i~ #2 Montgomery United Water #2 Montgomery United Water i8 Performance Criteria i9 A~reement Terms - both companies propose changes to the City's draft wastewater Zo privatization agreement. In the RFP, we told both proposers what our vision of the service 2~ agreement was going to be. Both proposers suggested revisions to the agreement. We 22 compared the proposed revisions, and used the revisions of the agreement for our evaluation 23 of agreement terms for both proposers. Over all the changes proposed by U. S. Filter/EOS za were evaluated to be of more benefit to the City than Montgomery United Water. Zs Three examples of the differences in the proposed Agreement Terms follow: 26 1. Interim Services which covers the period of time when the proposer would be operating z~ the City's existing treatment facility and designing and constructing the new facility. In the 2s RFP we stated the City would like the proposer to be responsible for payment of any 29 replacement and repair of equipment at the facility up to a cost of $5,000. 3o U. S. Filter/EOS has agreed to this provision. 3~ Montgomery United Water did not accept this provision, no suggested alternatives. 3a 2. Project acce~tance - in the draft privatization agreement, we stipulated that before the 3s City would accept the new treatment plant, that it had to operate continuously for a period of 3a 60 days. This provision helps the City ensure that the treatment plant is operating in proper 3s conditionbefore we accept it. 36 U. S. Filter/EOS has accepted this provision in the contract. 3~ Montgomery United Water proposed that this period be reduced to 30 days rather than the 3s 60 days required by the City. ~~*~***********~*****~********~ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13 - Ferric-Chloride C1~AGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appen~ix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~~ ' Page ~4; Vol. 31 September 22, 1997 i 3. Project development - this is the period when the proposer is designing the new treatment 2 plant. The City's privatization agreement states that during tlie design of the new facility, 3 the City shall review the design prepared by the company at the 30%, 65% and 100% levels. a This provision allows the City to monitor the progress of the project and also to participate s in the process. 6 U. S. Filter/EOS accepted this provision. ~ Montgomery United Water did not accept this provision. s Karen Hedlund of Nossaman, Guthner, will address the agreement terms in more detail later 9 in the meeting. ~o Com~anX and Staff ~ualifications - our evaluation of the persannel and companies that will ~- be responsible for implementing the proposals. The primary members of each term. i2 For Montgomery United Water their operations team is JMM. The firm that would be i3 responsible for designing the facility is Montgomery Wats~n. The construction team is ia Hoffman Construction Company. ~s For U. S. Filter/EOS their operations team is U. S. Filter/E(~S. The team responsible ~6 for the design of the facility Ys Carollo Engineers. Their construction team is i~ Kaweah Construction. is Both U. S. Filter/EOS and JMM are leaders in the contract operations and maintenance field. i9 Both operate over 100 water and wastewater treatment plants. Both have a wide range of zo experience in operating plants, both smaller than Petaluma's proposed plant and up to 15 2i times larger than Petaluma's proposed plant. Za The Engineering firms of Montgomery Watson for Montgomery United Water and Carollo 23 Engineers for U. S. Filter/EOS have extensi~e experience in the design of wastewater 2a treatment plants. ~ zs The respective construction firms of Hoffman for Montgomery United Water and Kaweah ab for U. S. Filter/EOS also are very experienced in the construction of wastewater treatment 2~ plants. Za Overall staff rated the ~ualifications of the com~anies and ner~onnel proposed ~ each team 29 to be eaual. We did note a few differences. 3o Project Mana ers for both teams have been following this process for many years, and 3i through that have indicated their interest with this project. Montgomery United Water's 3z project manager has more finance, design and construction experience and is more 33 experienced in the management of large projects. Whereas, LJ. S. Filter/EOS's project 3a manager is more experienced in the operations and maintenanc~e area. ************~*~********~*~******* Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Pdtricia Hilligoss, MS-Cou~zcilmember Mary Stompe DK- Counci/member David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCI j- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~'il' .~F~ . . `' ': .:. ^~iCs.: September 22, 1997 Vo1.31, Page 45` ''c ~~ i Construction - the construction teams proposed by both companies have the experience and 2 qualifications to do this project; however, our analysis found that the personnel and 3 experience of Hoffman Construction (Montgomery United Water) were more experienced in a the construction of large scale wastewater treatment plants. s O~erations and maintenance - both of the construction teams and both of the operations and 6 ynaintenance teams have the experience and qualifications to do this project. Staff s 7 evaluation found the team of U. S. Filter/EOS included more certified wastewater treatment s plant operators for interim operation of the existing facility and long term operation of the 9r.new treatment plant, than did Montgomery United Water. lo ~ In addition to reviewing the information provided in the proposals, we also spoke with ~ i former and existing clients about each team member, the primary team members. We also ia conducted site visits at wastewater treatment plants operated by both teams, met with i3 operators at these treatment plants and also met with the clients. In each case we found the 14 treatment plants they are operating to be very clean and operating efficiently, and that the ~s contract operators were meeting the obligations of their contract. In all our reference checks ~6 the clients gave positive feedback on both team members. i~ Financin~ a~~roach and capabilities - Financial ca~abiTities - this criteria requires us to ~ s determine whether the companies have the financial strength to meet the obligations of the 19 project and the agreement. Both United Water Resources, which is the parent company for ao Montgomery United Water, and U. S. Filter/EOS are very successful companies. Back in 2~ May, when staff's evaluation was completed, both companies had assets of over $700 Zz Million, yearly revenues of over $300 Million and yearly net income of over $20 Million. 23 Since then, both companies have shown growth. 24 What does this mean? Our evaluation of the financial capabilities of both teams indicated as that they both have the financial strength to meet the obligations of this project. You can see zb in our report both companies were rated equally for this criteria. a7 Financin~a~~roach - At the time that staff did the evaluation of the proposals, the financing Za approach of both companies had many similarities. Both companies were proposing a 29 combination of company equity (10% Montgomery United Water) (20% U. S. Filter/EOS) 3o combined with debt financing that relied on the strength of the project and the agreement. 3i However; in evaluating the differences, staff determined that U. S. Filter/EOS's approach 3z was of more benefit to the city, including greater debt security protection. Later tonight Pat 33 Gallagher will be discussing the financial approaches of both teams in more detail. A 34 moment ago, I mentioned that the financing approaches of both teams were very similar 3s initially. Recently U. S. Filter/EOS has proposed a financing approach which differs from 36 their original approach. Karen Hedlund, attorney in the law firm of Nossaman, Guthner, 3~ Knox & Elliot, and Pat Gallagher, of Camp Dresser & McKee, will be discussing brieflv 3s how the new approach differs from their original approach. In addition there is a letter in 39 front of you from U. S. Filter/EOS indicating that they will be providing us more ao information about their approach this week. **~**~*~*~***~*~*******~******* ICey to abbreviations: JH- vice Mayor Jane Hamilton, NR-Councilmeinber Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Ke!ler, PT-Councilmember Painela Torliatt MM-Councilmember Matt Maguire FeClj - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ,. ~o ~ Page 6, Vol. 31 September 22, 1997 1 Technical a~~roach - this is the area that our evaluation found the most difference. The 2 city's request for proposals did not specify how the proposers were to treat the community's 3 wastewater. The Request For Proposals (RFP) told them what the wastewater would look a like coming to the plant, and we told them what we wanted it to look like when it left the s plant. But, we didn't tell them how to treat it. We wanted ta use their ingenuity in doing 6 that. ~ A summary of Mont~omerv United Water's approach is to take'the raw sewage coming from s the City's pump station which is located off of Hopper'Street by the Corporation Yard and to 9 treat it completely. In the RFP we requested that the wastewater be treated to what is called io an "advanced level," meaning it has to be filtered and disinfected and available for i~ unrestricted use. They have abided by that and are providing the facilities to do that. All of ~2 their treatment facilities are located in Pond 2 adjacent to Lakeville Highway. i3 After the community's wastewater has been treated by the facility, Montgomery United ia Water's approach then discharges the wastewater into Pond 3. Pond 3 is directly below ~s Pond 2, which is where Montgomery United Water is going to locate their treatment r6 facilities. So when the wastewater is completely treated, it is going to be discharged into » that pond right below. After it is discharged into the pond, the treated wastewater is going to ~s go through the oxidation pond system. We have 10 oxidation ponds off of Lakeville ~9 Highway, comprising of about 160 acres. Once the water has passed through all the Zo oxidation ponds, it will either be sent to the River, to the City's reclamation facilities, or to z~ the city's wetlands. Za A summarv of U. S. Filter/EOS's technical a~~roach - U S Filter also takes the raw sewage z3 from the City's pump station, and they give it what is called a`secondary treatment' what I za am referring to here as `initial treatment.' Their secondary treatment facilities are located Zs adjacent to Pond 1, which is also located near Lakeville Highway. After the wastewater has a6 been treated to a secondary level, U. S. Filter/EOS then discharges the wastewater into the a~ ponds. Wastewater travels through the pond system much.like Montgomery United Water's za approach, but before the wastewater is sent either to the river or to the wetlands or to the 29 City's reclamation facilities, U. S. Filter/EOS's approach gives the water another final 3o treatment. This is where the water will be disinfected and filtered. So immediately prior to 3~ being discharged, either to the river or to the wetlands or to the reclamation facilities, the 32 water will again be treated. They locate their tertiary treatment facilities or the filters in Pond 33 10. 34 The majar difference between these two ~ro~osals is the wa,y in which thev use the ~onds. 3s Montgomery United Water's approach uses the ponds for storage. 36 U. S. Filter/EOS's uses the ponds for storage and treatment. 3~ By way of com~aring and contrastin~ the two apnroaches I'd like to focus on a couple of 3s parameters: (1) the quality of the water produced, (2) the environmental sensitivity, and (3) 39 bio-solids management. As I stated earlier, Montgomery United Water 's approach ao discharges all the treated water into Oxidation Pond 3. From there it travels through the a~ oxidation pond system. Once it has made it through the ponds, the treated water is then sent az. either to the river, to the reclamation facilities or to the wetlands. ~************~********~**~******* Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II- Schematic of existing Sewer Ponds ~`~~ p ~.~"~"4:Pitin'i'~ . ~ ~ ';.r=' ~ ~ e 1~ ~ ~ September 22, 1997 Vo1.31, Page 7 i A couple of things happen in oxidation ponds. There is a lot going on there, but a couple of 2 things we do know is that oxidation ponds aid in the removal of trace metals from the waste s water. We also know that oxidation ponds have the capacity to degrade the quality of the a water through the growth of algae and other factors that happen in the ponds. By treating s the wastewater to a tertiary level, advanced treatment, and then putting it into the ponds, 6 Montgomery United Water's approach doesn't take advantage of the pond's ability to further ~ aid in the removal of trace mezals and their approach does not provide an opportunity to treat s the water that may degrade`while going through the oxidation pond system. ~. 9 U. S. Filter/EOS's approach is to treat the water to a secondary level, give it initial ~o treatment, and then discharge it into the oxidation ponds. After the water has traveled ~ i through the ponds, the water is given what I am calling "final treatment" through filtration i2 and disinfection, immediately before it's sent to the river, or to the wetlands, or to the City's i3 reclamation facilities. U. S. Filter/EOS's approach takes advantage of the treatment 14 capability of the ponds. Their approach also addresses the degradation of the water that may ~ s occur in the ponds. Under their approach, there is an opportunity to retreat the water that i6 may degrade as it goes to the ponds before it's discharged. » What does all this mean? It means that U. S. Filter/EOS `s approach will likely provide a ~s higher level of reliability for producing higher quality water. i9 The second item is environmental sensitivitv. In addition to a plant that produces high 2o quality water, we want a wastewater treatment plant that doesn't smell. Control of raw zi sewage odors can be a very serious problem for treatment plants. The greatest source of aa odors at treatment plants typically is the headworks, which is where raw sewage first enters a3 the treatment plant. za So I am going to talk about how each pro~osal handles raw sewage odors. Montgomery Zs United Water's approach is to destroy odors at their source by adding a chemical called 26 ferric chloride (FeC13 ) directly to the wastewater before it reaches the treatment plant. The z~ addition of ferric chloride to the wastewater would be done at the City's pump station Zs located on Hopper Street. z9 The U. S. Filter/EOS approach is to remove the odors at the treatment plant by scrubbing the 30 odorous air in a soil bed filter to ensure that no odors escape at the headworks, U. S. 3i Filter/EOS completely encloses its headworks. We believe that Montgomery United Water 3z and U. S. Filter/EOS have both taken proactive approaches to controlling raw sewage odors, s3 but that the U. S. Filter/EOS approach offers some advantages. 34 First the U. S. Filter/EOS approach doesn't rely on chemicals. In contrast the Montgomery 3s United Water approach relies on the use of ferric chloride (FeC13 ), which is a hazardous s6 chemical. Managing the ferric chloride will require installation of equipment to store and 3~ contain this chemical, both of which are not included in the proposal. 3s Secondly, Montgomery United Water does not enclose their headworks, so any odors that 39 are not destroyed by the ferric chloride (FeCl3 ) will likely be released at the treatment plant 4o through the headworlcs. In contrast, the U. S. Filter/EOS approach completely encloses the a~ headworks which prevents the odors from escaping from the treatment plant. ****************~*****~***~**** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeClj - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix lI - Schematic of existing Sewer Ponds - Page 63 . :.at,~.' S2 Page 8, Vol. 31 September 22, 1997 ~ Finally, we believe that the U. S. Filter/EOS approach to scrubbing the odors will be more 2 effective in controlling the odors than the Montgomery United Water approach of adding 3 ferric chloride (FeC13 )to the wastewater. a The third item, bio-solids management - in the RFP we strongly encouraged the proposers to s institute a beneficial reuse program for the bio-solids. In order for bio-solids, which is the 6 sludge produced by the wastewater treatment plant, to be beneficially reused, they must meet ~ Federal regulations, commonly referred to as Class B. Now for both Montgomery United s Water and U. S. Filter/EOS they are going to have to do additional stabilization of the bio- 9 solids on site in order to meet these regulations. ~o Bio-solid Stabilization - I'm going to talk a little bit about how they both stabilize the ~ i biosolids. The Montgomery United Water approach to stabilizing their biosolids is to store iz the biosolids in the sludge drying area and windrow and mix the biosolids. The sludge i3 drying facility is located adjacent to Lakeville Highway. In addition, this facility is open to ~a the atmosphere, so that stabilization can only be done during the warm weather months and is is estimated in Montgomery United Water's proposal that this would encompass about 7 ~6 months of the year. The other five months out of the year, bio-solids from IVlontgomezy i~ United Water's facility would have to be taken off site for additional stabilization or taken to is the landfill. Since the sludge drying area is located near Laiceville Highway, there is the 19 potential for odor impact. Zo The U. S. Filter/EOS approach to stabilizing the bio-solids in contrast is to use sludge z~ lagoons, which are located approximately one half mile away from Lakeville Highway. This z2 system is not weather dependent. The sludge lagoons can be used year-round. Therefore, a3 this facility has the potential to produce bio-solids that meet the Federal requirements for za beneficial reuse. In addition, by locating their bio-solids handling facility a half mile away Zs from Lakeville Highway, that facility mitigates the potential odor problem caused by bio- z6 solids. 2~ Summary -To summarize our evaluation of technical a~proaehes, our evaluation indicated Zs that U. S. Filter/EOS's facility will ~likely produce a higher quality water, will be more z9 effective in battling raw sewage odors, and will provide more opportunity for beneficial 3o reuse of the biosolids. It is for these and other reasons outlined in our staff report that staff 3i rated U. S. Filter/EOS's technical approach higher than Montgomery United Water. 3a Councii Questions: 33 I'T - on the flow charts that you have for can you show me where both of the proposals meet 3a °Title 22, and let me know in your opinion whether or not you believe that they meet Title 22, ~s and the other thing that I'd like to know from those flow charts is where is the flow for 36 billing purposes calculated in the process? *~****~*~******~~**************~~ ICey to abbreviatfons: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilrrtember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember- Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater.4dvisory Committee SCWA - Sonoma Counry Water ,4gency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds , , _ ,:. . ~. .,., ~: September 22, 1997 Vo131, Page 9 i Michael Ban - on the first question, look at Montgomery United Water's proposal. The 2 point for Title 22 compliance for Montgomery United Water will, we don't know where it's 3 going to be until the Regional Water Quality Control Board tells us, but it's likely to be after a the filters and before it goes into the ponds for Title 22 compliance. For U. S. Filter/EOS s their Title 22 compliance is going to be the same location, right after the filters. Does that 6 answer your question? ~ PT - do you believe that both proposals will meet Title 22 requirements, do they have the a capability of doing that? 9 Michael Ban - the information provided in the proposals indicates that at those locations, if ~o the effluent is monitored for Title 22 compliance at those locations, that both facilities will i i meet Title 22. `~ ~~ ~a JH - When you said that U. S. Filter/EOS"retreats the water before releasing it, and that you i3 either said it would or it could produce a higher quality water, and I am unclear on whether ia that's conditional is Michael Ban - we're basing our analysis on the information that is provided in the proposals, ~6 and from all we know about what happens in oxidation ponds, we think that U. S. » Filter/EOS's approach will produce a higher quality effluent. is JH - so you are saying it will produce the higher quality? i9 MM - on that similar point, Mike, you said that the ponds are good and helpful in removing Zo trace metals. The faet that the effluent is moving from pond to pond is that what allows it to 2~ drop out, do you know what the mechanism is? Zz Michael Ban - I should really defer to Bill Faisst on that, if you'd like him to come up and 23 answer that. za Bill Faisst, Brown and Caldwell - Councilman Maguire, the best information we have is that Zs it's being adsorbed onto the particulate material, mostly onto the algae that grow on the z6 ponds. 2~ MM - it's doing what? ZS ~ill Faisst - it becomes attached to the surface or incorporated into the algae and the other 29 things that grow in the ponds. And in fact since we did the proposaY evaluation, we did 3o some additional testing where we actually took secondary effluent from the I-Iopper Street 3i plant and filtered it, and we also took effluent from the ponds and filtered it. If we took the sz pond effluent, we got something like 80% trace metal removal for copper, and copper was 33 the principal trace metal we were looking at, and we didn't get nearly the substantial 34 removal from the secondary effluent from the Hopper Street plant. So it's predominantly 35 adsorption onto the algae. Some of it may be settling out on the bottom, too, as some of the 36 algae dies in the ponds. 3~ MM - and then so we're to expect more algae growth on the U. S. Filter/EOS? you are 3a saying? 39 Bill Faisst - material that is going into the ponds ~in both cases is going to be what `s called a ao "nitrified" and a"denitrified" secondary effluent,. which means that most of the nitrogen a i that *********************~:**~****** Key to abbreviations: JH- ~ice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Tordiatt MM-Councilmember Matt Maguire FeClj - Ferric-Chloride CWAC-Citizens Wastewater Advisory Committee SCWA-Sonoma Counry Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~3~ ~~ Page io, Vol. 31 September 22, 1997 i comes out of human waste and industrial waste that go into the ponds is going to be taken 2 out in the biological biolac treatment process. 3 So the quality of the effluent going to the ponds in each case, as far as nitrogen and probably a phosphorus, is going to be very similar. So we would expect comparable growth of algae. s The fact that Montgomery Umted Water is filtering ahead of it, they may take a little more 6 material. But for the purposes of looking at it, we think we are going to get approximately ~ the same amount of algae growth in both cases. s MM - would there be the same amount of trace metal removal on both cases? 9 Bill - If you take the effluent from the ponds and discharage it directly, without additiorial ~o filtration, you will have more trace metals in the discharge than if you coagulate and filter i i the effluent prior to discharge. The trace metals and other trace constituents adsorb onto i2 (stick to) the algae and are removed when you remove the algae. So if you take the algae ~ 3 out, you have less trace metal than if you leave the algae in. ia MM - so if you take the algae out what happens to that? It goes into the biosolids? ~s Bill Faisst - it goes into the biosolids process. So it is probably going to end up out on the ~6 land. i~ PT - Michael, my other question was about the billing process. is Michael Ban - where the pay meter is going to be located - In both cases, the pay meter will i9 be located at what is called the "headworks" and that would be really right at the point where Zo the raw sewage comes into the sewage treatment plant. Zi MM - Mike, when you said that U. S. Filter/EOS retreats the water after the ponds, you're a2 talking about the final treatment process? z3 Michael Ban - right I'm talking about filtration and then... Za MM - it's the final step, not actually a reiterated step? Zs Michael Ban - right, they won't be retreating in the same manner that they did previously. 26 It's the next step. When it goes into the ponds, it'll be treated at what's called the 2~ "secondary level." When it comes out of the ponds it will be treated to a"tertiary" or "third zs stage treatment." Does that help? zs M1V1 - more or Yess. You said also that you believe that on the headworks and odor control 3o that the earth scrubbing will work better, is that what you said? 3~ Ban - that's correct ~*************~*****+****~*~***~* Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Pdtricia Flilligoss, MS-CouJZCilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3= Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency ' Appendix I- Flow Schematic for both proposals Appendix lI - Schematic of existing Sewer Ponds . . '44i .~ . ' . .. " ' ~ ~ ~ . . ~ O . ~ ~ September 22, 1997 Vo1.31, Page 11 ~ MM - better than using ferric chlaride to destroy the odors and based on what belief, would 2 you elaborate. 3 Michael Ban - we think that there is a potential that destruction of the odors won't be a complete with the ferric chloride, and to elaborate on that I'd like to defer to Bill Faisst s again. 6 Bill Faisst - as part of our technical evaluation, I went to a gentlemen named Perry Schaefer ~ who's with Brown and Caldwell, a nationally recognized expert on odor control in a wastewater treatment plants, and I said, "Perry, there are the two systems they are proposing; 9 with the ferric chloride addition remove all of the odor?" And his assessment, based on ~o some caleulations he did, was that you were still going to have some residual Hydrogen i~ Si~lfide (H'ZS); rotten egg gas smells in the sewage as it comes into the headworks and at the iz Montgomery United Water facility and the processes that they are proposing right there, ~3 particularly their screens, their flow metering facilities and some of the other structures there ~a are going to create a lot of turbulence. That residual Hydrogen Sulfide (H2S) is going to be is released so there is going to be an odor release. i6 In contrast to that the U. S. Filter/EOS approach will also have turbulence there doesn't have i~ the chemical to either destroy or sequester the Hydrogen Sulfide (H2S). You'll get a lot of is release, but if you pull off all the gas off the top of the wastewater that has this Hydrogen i9 Sulfide (H2S) or stinky compounds and take it through a soil bed filter, the soil bed filter zo destroys or sequesters the odor producing compounds. 2~ MM - so the way you are explaining is that with the soil scrubber, it's in the enclosed 22 structure there's turmoil, the stink essentially is sucked off and run through he scrubber. Do z3 you really think if the bad smells are going stop when it gets to a certain gate or filter? Za Bill Faisst - two things are happening, first of all you are getting some turbulence, you're Zs pulling off a lot of the smells and then once you've gone through the headworks both the 26 Montgomery United Water and U. S. Filter/EOS proposals are going to take the raw sewage z~ and mix it underwater and dilute it rapidly in the biolac process. Any residual odors that 2s could be released as it goes into the biolac process are going to be taken up and controlled, a9 diluted, destroyed in the biolac process. 3o MM - is that enclosed? 3 i Bill Faisst - it is enclosed. You are going to bring the bad stuff in under water in a very 3z diluted and oxidizing environment which is going to essentially destroy the residual odor. 33 MM - with the ferric chloride, if there is turmoil there is that going to act as a thorough 34 T111Xlrig b1S1S~ 3s Bill Faisst - the question is what happens, the critical thing for odor release is what happens 36 in the headworks. Have you destroyed all the odor before it gets to the headworks? And in 3~ our assessment just adding ferric chloride is not going to do it. So you're going to have 3s some residual odor. Once you get into the headworks in the Montgomery United Water 34 case, the odor is going to be released and there is nothing to control it. ao MM - what do we have going in there now. We don't have that kind of treatment at the ai headworks. ~~*~~*****~*~**~*~***********~~ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13 - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma Caunty Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 `. . ~: ~~ Page 12, Vol. 31 September 22, 1997 Bill Faisst - at Hopper Street? z MM - well at Hopper Street or at the ponds either. 3 Bill Faisst - at the ponds as they exist now, you are taking the flow in under water to an a oxidizing environment . You don't have to go through the screening process and the s metering process that you are adding now, which can be od~r releasing systems because 6 you've done those things upstream of the ponds. ~ MM - so what's going on at Hopper Street right now? s Bill Faisst - at Hopper Street right now, I haven't done a detailed ~study on the odor control 9 systems. io MM - maybe Mike can answer that. >> Tom Hargis - Madam Mayor, we have a odars at the exiting headworks. iz MM - We don't have odor control at this point i3 Tom Hargis - No, we have tried some masking chemicals, we've tried some additions of ~a chemicals industrial grade, and we have done some things trying to enclose part of the ~s headworks for some of the worst odors are handled from the grit removal. We have made ~6 some improvements. 17 18 19 Zo 21 Zz 23 24 25 26 2~ aa 29 30 31 MM - but it's incomplete at best. Tom Hargis - we're looking at proposals that are much better than what we have now for the COri1rilUrilty. MM - the mix as proposed, it's going to be going into the headworks I believe it is going to be a milder mix than what goes into the headworks now, is that correct? Michael Ban - you mean, what's the wastewater going to look like at the new plant as compared to what it is right now? It's going to be raw_ sewage in both. MM - its both the same? NR - 1et's make sure that we address during the financing approach the write the check in the approach and how that's now different than it was in May when you evaluated it Please somebody answer that tonight. Also you said about 6 words regarding Montgomery United Water in the technical approach regarding adding the chemicals ferric chloride, and I want to know about the city involvement, because you stated that that is not included in the proposal, and it would be done at the Hopper Street, and would the city be liable or a partner or have to fund the purchase of the chemical and the place to store it? _ *:~*~**~*************s************ Key to abbreviations: JH-Vice Mayor .Iane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency Appendix I- Flow Schematic for both propos~ls Appendix II- Schematic of existing Sewer Ponds ~-~ e~ :.~ ~ 7 September 22, 1997 Vo131, Page 13 1 If it's caustic, do we have to get approvals by EPA or something? And you only said a a couple of words about it, and I think that's crucial to know. 3 Michael Ban - Ferric chloride cost - Public Works Agreement - Montgomery United a Water is proposing that ferric chloride addition be handled under the Public Works s Agreement, so the cost for the chemical is not included in the Service Fee for the wastewater 6 treatment plant . Montgomery United Water is proposing that the ferric chloride addition, ~ since it is occurring at the Hopper Street facility, that it be done under the Public Works a Agreement. So it's not included in the privatization agreement. 9 NR - who would then shoulder that cost? it would just be added? ~o Michael Ban - that wou~Cl~~be shouldered by the city as part of the Public Works project. ~~ i i NR - and is this a large amount, a small amount, to buy this chemical? I don't know what's i2 involved, but it certainly seems like a major difference in approach to treating the odors, and i3 I would like to know a little bit more about it. ia Michael Ban - Councilmember Read would like to know about the cost? is JH - I'd also like to know, not just about the cost, but the containrnent of that chemical. iIow ib much would it cost us? I'm not familiar with the chemical myself. i~ PT - what my question was is how much do you use per million gallons or what's the ratio? ~a Are you adding a gallon to a million gallons, or are you adding 100,000? r9 Michael Ban - I'll talk about the cost and I can talk a little bit about the facilities. As far as Zo the dosage rate, I'm going to defer to Bill Faisst on that. We asked Brown and Caldwell to 2~ take a look at this and they estimated that would cost, when the plant reaches its treatment Zz design of 6.7 million gallons per day (mgd) that would about $120,000 a year for the 23 chemical. za MM - Mike, I thought we had a discussion at the committee level, I thought this was the as cost, although it was proposed as being in the public works part of the project was actually z6 factored into the net present of their proposal. Wasn't it? z~ Ban - No, it was not figured into Net Present Value. Za MM -okay, because I mean we had some discussion about that at the committee leveL It 29 seemed to me that there was some something like that some resolution. 3o Michael Ban - my recollection is that when we start talking about the numbers that we 3~ would footnote numbers and indicate that this number does not include the cost of ferric 3z chloride because it is in the Public Works Agreement. We would do that in an effort to 33 compare apples to apples. And so right now the Net Present Value does not include the cost 3a of FeC13 . 3s MM - now, does it include the cost of containment? 3~ Ban - no, it does not include the cost of containment. 3~ MM -you say that it doesn't include any of the ferric chloride treatment cost. 3s Michael Ban - that's correct. **************************~**** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3 - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 Lr . 5 8 Page 14, Vol. 31 September 22, 1997 ~ Michael Ban - as far as for equipment for containment storage we would need storage z vessels. Since it is a hazardous chemicai, you need to put a sPcondary containment system 3 around it to prevent any leakage in case the storage facility were to break and leak the a chemical. We've not done a cost analysis on that. It is something we could do if the s Council would like us to figure out the capital cost for those facilities. 6 NR - is this, I don't know anything about this chemical, the only thing that flashes in th~ ~ back of my mind is the movie Ghos~ ~usters where they c~ntained all the ghostse E?s s walked in the door and pulled the lever and everything, so are ~alking a big thing or a little 9 thing? What are we talking? ~o PT - maybe the proposer might want to respond to it as well if there are any questions. ii NR - somebody give it to us, it doesn't have to be a quick answer. this is just seems like a ~2 major difference between these two proposals and me not being a chemist, I'd like to have it 13 explained to me what this really means. ~a Bill Faisst - I didn't bring all the numbers from the calculations or from the proposals but is you typically add this chemical at anywhere from 10 to 30'milligrams per liter. So at a 6 to i6 7 million gallon a day plant, you are looking at maybe 400 gallons a day, roughly, that's just i~ ballpark. ~ a DK - and delivery is by truclc? t9 Bill Faisst - by truck in loads of 5,000 gallons, so you would typically have probably have 2o something on the order of 10,000 gallons of this material in storage at any one time. So you Zi would be looking at a chemical delivery on the order of once every two weeks, roughly. 22 MM - Bill is that in a liquid form? a~ ~ill Faisst - It's a liquid form, it's hazardous. It can burn you because it's an acidic Za compound, it stains very heavily, and it's messy to handle, so you need if you were handling Zs you would look far things like face protection, minimum of rubber gloves, some protective a6 clothing. It's not like dealing with z~ MM - how does it compare to hydrochloric acid or something? Zs Bill Faisst - well, you might look at similar safety precautions, I'm not a safety expert. If you 29 have dealt with a swimming pool or spa, you might be dealirig with muriatic acid (aka 3o hydrochloric acid). You would use probably similar safety precautions to that, only you are 3, dealing with a lot more liquid at any one time. You have to be careful that nobody mixes 32 any other chemical with it, because you can get reactions with it. ~s DK - do the handlers require respirators or enclosed breathing apparatus for filtration? ******~*******~***********~*****~ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Courtcilmember Pamela Torliatt MM-Councilmember Matt Maguire FeClj- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix 1- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~ . ~'i:•'.' . . ~ ~ . ~ ~ September 22, 1997 Vo1.31, Page 15 i Bill Faisst - Pd have to research that, at a minimum you would probably need face a protection with it. DK - you don't see anything about breathing assistance or filtration? 3 Bill Faisst - these facilities would typically be located outside, so you have a lot of natural a ventilation. s DK - I was wondering about the transfer operation from tank truck to storage whether 6 anybody who was doing that was required to wear a mask. ~ Bill Faisst - I'd have to research that Councilman Keller. s PH - is there somebody from Montgomery United Water that could talk about it? 9 Don Goodroe, Montgomery United Water - I couldn't be here last week I'm pleased to be ~o here tonight. I'd,like to, taik to you a little bit about our approach about the ferric chloride. >> What our basis `pn%;;that was, is that typically when you are looking at odor control for ~2 facilities you have a basis of data you look at to determine whether the odor control is 13 necessary, what type, how big of a problem odors are. Because this is a new facility, and ~a because of the nature of the wastewater is going to change slightly because you are going ~s from a mixture of raw and partially treated sewage to essentially raw sewage coming to the i6 plant. ~? We really don't have the base line data to determine how big a problem odor control is going ~ a to be. What the approach is to use FeCl3 upstream to destroy any odors that could be ~9 released through any relief valves in the force main. FeC13 is a chemical which is commonly zo used in the wastewater industry. Is used commonly in water treatment plants for additions Zi of coagulant to drop sediments out of the water. It's used in large quantities through out 22 California and throughout the United States and the rest of the world for that matter. It's 23 considered a mildly hazardous material because of the low pH (i.e., acid). Our approach to it aa has been since we don't really know for sure whether odor control is going to be a problem as and many facilities this size with this type of configuration are out in the open, the bar 26 screens are out in the open, you don't have odors, and so we just didn't have the data to 2~ know how big of a problem that was going to be. Rather than putting a lot of money in our 2s proposal for a facility to capitalize, a facility which may not even be needed, our approach 29 was to go with the chemicals which you can use if you need them or you don't, T'he cost for 3o the chemical itself we included in our public works service agreement price. The price that I 3 i put in there was based on a dose of about 20 mg per liter which is considered relatively 3z conservative. Also I considered that we would the volumes that we would use would be 33 used all year round. I don't believe that even if you have to use it that odor is going to be a 34 year round problem. It is typically mare of a problem in the summer when the temperatures 3s are warmer. During the winter when you have a lot of rain, the water is colder, odors 3~ typically aren't very much of a problem. And the cost for the chemicals is included in the s~ public works and our approach is that typically when you are buying chemicals on a five 3a year contract or potentially a longer what you do is you wind up the cost for leasing the 39 chemical storage tanks in your price of the chemicals. The chemical vendors commonly do ao that. So my approach was to and our approach of our team was to include the cost of ai chemicals and the cost of the actual tanks which you lease from the chemical supplier and a2 there's probably some minor cost associated putting a foundation in for the double 43 containment. But that's really about it and any cost associated with that, we would pick up. aa So that was our approach. **~*~******~********~***~***~** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt ~t~IM-Councilmember ~I~latt Maguire FeC13 - Ferric-Chloride CWAC-Citizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~ .~ . ~~ Page 16, Vol. 31 September 22, 1997 i I don't think it needs a building or you know or anything like that. And the material is very z safe you don't need a respirator ar anything like that. You need to exercise the same degree 3 of care you would using bleach at your house. a JH - So are you saying Montgomery United Water would pick up the cost of the chemical? s The cost of the chemical and the cost of the storage of the chemical would be your 6 responsibility? ~ Don Goodroe - yes, and it's wound up in the leasing arrangement for the tanks and the s present worth analysis for the privatized facility, then there is a five year public works rolled 9 up and then the interim services for the two and a half years rolled up and those prices and io those costs are included. ~ i Michael Ban - thank you for correcting me on that. Don is correct, in the Public Works ~z Agreement what we did is we assumed that the public works facilities would be operated for ~3 a period of five years. There's five years of public works operation. ~a MM - I thought it was something like that and I couldn't quite put my mind on what it vvas i s but when he said it I remembered that. ~6 MS - point of clarification, for the additiona125 years? i~ Michael Ban - excuse me Councilmember,.. ts MS - it's 5 year Public Warks Agreement, and then I'm referring to the cost of the chemical, i9 I'm still unclear on what happens in year 6 exactly? zo Michael Ban - what we did in our Net Present Value is that the public works agreement only 2~ allows the contract to go for five years, so we don't know what happens after the fifth year. Za So in our Net Present Value calculation we only calculated the life of the Public Works z3 Contrac~ which is five years. Za MM - Mike, what kind of odors are typically associated with the biosolids approaches that zs we are seeing in both cases. Give me Montgomery's first, first they have windrows. How 26 much odor is typically associated with those, I know, I think Marin Sanitary does that down 2~ at the recycling center in San Rafael, don't they? Zs Michael Ban - it's difficult to gauge how much odor you are going to have when you put 29 biosolids on the ground. What's going to happen is the sun's going to bake a crust on it, 3o then they're going to come in there with a front end loader and mix it. Once that crust is 3i broken off, there will be a release of odors. And we can't really say how much odor is going 32 to be released. If you have ever been near a sludge drying area, there are odors associated 3s with it. And a lot of facilities that have sludge drying areas are doing other things, so that 34 they don't have to have them, because they can be a nuisance. ******~****~******«*******~*****~ Key to abbreviat~ons: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, IL1S-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt ~l~1t11 Councilmember Matt Maguire FeClj- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix 1- Flow Schematic for both proposals Appendix II- Schematic of existing Sewer Ponds -~ ~ r3~ ;a,:..~ • ~.~ _.„ - ..:"r. ' ' - " R d a ,~. . September 22, 1997 Vo1.31, Page fl7 i MM -so we haven't looked at any other existing nearby examples to get some benchmark 2 OP 3 Michael Ban - when we evaluated the odor problem associated with the biosolids, we a basically assumed for the base of our evaluation that they would be similar for the sludge s drying area and the sludge lagoons. But we noted that one facility was located further away 6 from Lakeville Highway and so any odors associated with those facilities would have less ~ chance of impacting the public. s MM - that certainly makes sense, but we don't know if there is going to be a lot of smell or a 9 little smell. Is it going to blow 5 miles? Are people going to smell it if the wind's in this ~o direction? 11 Michael Ban - we're~~nalcing estimates. iz MM - then on the sludge lagoons, you said those are impervious to weather and why is that?. ~3 Michael Ban - they are actually a contained facility. 14 MM - roofed over? ~ s Michael Ban - not roofed over, they are an open facility, but if rain comes or in the case of ~6 the sludge drying areas if it does rain, the sludge is just going to run off. It's just straight on i~ the asphalt. There is no containment around it. In the case of the sludge lagoons, and we is have sludge lagoons over at the treatment plant, they actually are a depressed facility and ~9 they are a true storage facility, so that if there are rains, those facilities can absorb the Zo additional rain. The material is not going to run off site. But the sludge drying area, if you 2~ have inclement weather, there is a potential that material can run off site. az MM - so you are saying basically that the difference is in run of£ It's not that the sludge a3 lagoons are impervious to weather. If it rains you are not obviously not going to cart soggy za sludge somewhere. You are going to leave it there until it dries. Right? as Michael Ban - you mean as far as what impact does the rain have on the process? z6 MM - You're saying it's an all weather process, well if you're drying it if it rains, you've z~ just lost time. It's not really that it's impervious to the weather, it's contained so there's not 2g a threat of sludge run off somewhere. You know you're not going to have it rain on the a9 sludge lagoons and then haul it away for land. application. That would be prohibitively 3o troublesome and expensive, have your sludge all rewatered. 3~ Michael Ban - the sludge lagoons are a part of the stabilization process, but they are not a 3a drying process. The sludge drying beds are a drying process. 33 MM - so the sludge lagoons are before the drying process? 34 Michael Ban- that's correct. MM - It's a stabilization and then they go into the centrifuge? 35 Michael Ban - yes. 36 Tom Hargis - I thought Councilman Maguire had an interesting point, referencing one item 3~ back to the existing treatment plant, and I think that might be good to do here with sludge, 3s because we do sludge drying and sludge handling at the existing plant at Hopper Street, and 39 we also do it at the pond site down on Lakeville. ************************~****** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3 - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~ ~ ~~ .~ 62 Page 18, Vol. 31 September 22, 1997 i And it's not a major source of odor, but it sometimes does contribute odor. But our treatment z plant has enough odor, usually sludge isn't our problem. Part of this evaluation and our s interest in these two proposals is making sure in the future when we have a treatment plant a that it is not producing odors also. The sludge handling and all those things are not a source s of a potential problem. I think it is important to note that as staff did their evaluations, we're 6 somewhat in the position of comparing the two, you know you try to look at each proposal ~ independently and score them, but it's very hard not to make that kind of comparison where s one might be slightly better or slightly worse or slightly different. I think that's what Mike is 9 trying to point out some of those kinds of subtle areas of both proposals. We are very ~o cognizant of the need to address odor control, They have different approaches, and they t i have some different methods, but I think both of them deserve the credit for have been i2 proactive about how to address the issues. i3 DK - if I could follow up on the sludge storage, you said something that indicated that if the ~a sludge is piled, lined up on asphalt, you have storms, you have runof£ Is there enough to be ~s required to be contained and recirculated? I mean you can't let that run off into the river. ~6 Michael Ban - That's correct and that's what would be done under Montgomery United t~ Water's proposal. Are you talking about just rain anytime? ~ s DK - anytime. ~9 Michael Ban - There would have to be measures taken to prevent the run-off from leaving ao the plant, and the way that they've done it is they've actually got a plantwide drainage Zi system so that any rainfall that does come onto the site stays there and gets pumped back zz into the treatment plant. 23 MS - for the sake of the public can you let us know the members of the Staff Evaluation aa Committee, where are their areas of expertise, and then before we hear from our wastewater Zs consultant team, can you just quickly review the three different experts we used in 26 technology, agreement, terms, and financing and their recommendations. 2~ Michael Ban - The Staff Evaluation committee was composed of Warren Salmons, myself, Zs Jennifer Barrett, David Spilman, and Director of Engineering Tom Hargis. We broke up z9 responsibility of our evaluations with respect to the Performance Criteria. Would you like 3o me to go through this? For agreement terms - the evaluators were myself, Warren and David 3~ Spilman. For technical approach the evaiuators were myself, Tom Hargis, Jennifer Barrett. 3z. For financial approach and financial capabilities the evaluators were David Spilman, 33 Jennifer Barrett and Warren Salmons. For the last and fifth category, company and staff 34 qualifications, the evaluators were myself and Tom Hargis. With respect to your second 3s question on the consultants. Our Consultant team consisted of Brown and Caldwell, Bill 36 Faisst is here from Brown and Caldwell. They helped us on the technical approach. The 3~ law firm of Nossaman, Guthner, Knox, and Elliott and Karen ~Iedlund is here from that firm. 3a They helped us evaluate the agreement terms. Pat Gallagher irom Camp Dresser & McKee 39 helped us evaluate the financial capabilities and approach and also the agreement terms. ~ ************~*******~~*********** Key to abbreviations: JH-Vice Mcryor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Porrds , .. ,;:iyz .,J' :J ~~~ - ~ i-' = • ~ ~ r - . _ ~.3:. September 22, 1997 Vo1.31, Page 19 ~ And the firm of Public Financial Management, Inc., assisted in evaluating the financing z approach and financial capabilities. Ted Richie from Public Financial Management is here. 3 So we brought them here in hopes you will have good solid questions for them. They are a available for the Council. s PT - To follow up on that, were your evaluations done separately and then you put each of 6 the three or two together, and then you made an average from that? ~ Michael Ban - That is correct s PT - and did you receive those individual evaluations or we just have a staff compilation? 9 Michael Ban - we provided the individual evaluations just to the committee. We would be ~o happy to provide those to the Council. >> DK - Michael or Bill Faisst could you comment on couple of questions based on the kind of ~z back and forth discussion that went on that vendor presentations. One is on the pond linings ~3 and the suitability of both approaches, and the other is on the filtration meaning of Title 22 ia requirements whether or not the LJ. S. Filter/EOS sizing is sufficient to reduce turbidity prior is to discharge, because there vvas the contention that it was not from ~Yontgomery LJnited ~6 Water. i~ Ban - I'm going to defer to Bill Faisst on those. I've got one more section. Bill Faisst is ~ s going to address many of those in his presentation. If there are any other questions I would i9 be happy to answer them before. Zo DK - I just have one question on Appendix O, attachment O and I appreciate both companies 2i providing revisions to that. It's an item of great importance, and I am still not clear U. S. zz Filter/EOS's language on this indicates that it's probably incomplete. There language is 23 "request we have updated this portion of the RFP to include all of U. S. Filter/EOS Za companies not just EOS. It has been difficult to collect information as U. S. Filter/EOS has zs undergone a tremendous growth phase in the last several years and each acquired company 26 had its own method of managing recording compliance actions and the final line these a~ represent the full disclosure of all known violations. Is it complete? ar is it still difficult to za collect? Pd like to know does this include all U. S. Filter/EOS related companies? or not? 29 and if there are companies who have not yet been researched, Pd like to know when we are 3o going to get that information. 3i Ban - would you like U. S. Filter/EOS to respond to that? 32 DK - yes, thank you. 33 U. S. Filter/EOS all the companies are included, David. All the U. S. Filter/EOS companies 3a and all the ones that have purchased. 3s I~K - said something with the microphone turned off. 36 U. S. Filter/EOS - that's mainly because I didn't write it, my lawyer wrote it (room full of 3~ laughter) 3s DK - said something with the mike off. He would like the language to be corrected, so it , 39 would read explicitly that it would include all U. S. Filter/EOS companies. Thank you ao U. S. Filter will follow up. ********************~********** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe I)K- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCI j- Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sanoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 :. - ~~ Page 20,1/0l. 31 September 22, 1997 ~ JI~ - I still need to go back and revisit the difference in treatment and what those differences 2 are. I want to zero in on what the differences mean to us, and I want to go over one more 3 time the difference in cost to the city; or what hard costs to the city would be for the use of a FeC13 as a pretreatment, and then I want to know if using that will affect the odor and the s sludge, and will it reduce the odors up front and the sludge presumably have less odor is 6 that correct or not correct? ~ Michael Ban - the first question was with respect to the difference between the two s treatments. 9 JH - you know I think I understand some of the basic differences: I want to know the cost ~o to the city, what is it going to cost the city to use the FeC13? ~ i MM - isn't it going to be if you took a 30 year term, you calculated in five years term, .it ~z would be 25 years and $120,000 you said Bill substantially we could.. i3 Michael Ban - we could factar that into the Net Present Value and run it out for 30 years if ia the Council would like us to do that and factor that into the Net Present Value cost. Is that is PT - maybe I'm not clear, is the cost of this included in the service agreement or not ib included in the service agreement? i~ 1Vlichael ~an - we are talking about two different agreements here, one is the public works ts agreement and one is the privatization service agreement. The cost for the FeC13 is included i9 in the Public Works Agreement, Zo MM - talked with microphone off a~ Michael Ban - 25 years worth with respect to the Net Present Value calculation. Za MM - because we only looked at five years of the public works, the proposal in both cases 23 so since they've got something that's a recurrent cost in there if you really wanted to know Za for the life of the project, we should have the staff do a Net Present Value on the full 30 zs years. 26 Michael Ban - we could go back and do that 27 JH - okay, and um I also just want to go over one more time the difference in effluent given Zs the two different types of treatment the end product. 29 Michael Ban - I'll let Biii Faisst do his presentation, if you have questions after it, please 3o ask. 3i Michael Ban - My last topic was Performance Criteria l'm going to briefly fialk about the 3z pricing and how we came up with the Net Present Value. The proposal evaluation 33 methodology which was our guide for evaluating the proposals was also our guide for doing 34 the Net Present Value cost. ***~*****~~********~*~****~****** Key to abbreviations: JH-Vice Mayor Jane ffamilton, NR-Councilmember Nancy Read PH-Mayor ~l~f. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds -. ~ ... •9r _.. . 4l ' . lJ~ September 22, 1997 Vo1.31, Page 21 ~ The methodology stipulated that the pricing of the proposals was to be based on a Net z Present Value analysis of the pricing terms proposed by each company. What the Net 3 Present Value analysis allowed us to do is to compare the terms, the pricing terms proposed a by each team in a fair and objective manner. We did this by applying the pricing terms s contained in their proposals to the 30 year life of the project, and then we converted the totafl 6 30 year life cycle cost of the project today's dollars. So, what the Net 1'resent Value analysis ~ tells us, is if we could write a check today for the whole thing what would it cost? Both s proposers have been given the opportunity to review our calculations. In doing the Net 9 Present Value analysis, our analysis determined that U. S. Filter/EOS proposal was of lower io cost to the city. >> In summary, I'd like to reiterate and stress that we have two very good proposals before us. ~z However, our evaluation of the proposals identified that the area of greatest difference was 13 i~ their respective technical approaches and that U. S. Filter/EOS's approach offers more 14 12~~nefit to the city. ~s Applying the proposal evaluation methodology resulted in U. S. FilterlEOS's proposal being ~6 ranked first for Performance Criteria and identified U. S. Filter/EOS's proposal as having a i~ lower Net Present Value cost to the city. ~ a DK - do we have some order of magnitude on the costs we talked $10., $10,000, i9 $10,000,000? They ranked one and two but it doesn't mean anything. Zo Tom Hargis - we're prepared to discuss that under Agenda Item 3 tonight. There are some 2~ alternatives that we could provide to the City Council that are pure numbers, relative z2 numbers, relative percentages. So there are options that we had planned on discussing this 23 evening. Za DK - but independent of how that discussion goes, is there any way for this Council and zs public to judge what kind of difference there is in price between, because that discussion 26 may go down in flames, and we won't get that information. So I am wondering if at this z~ point in the discussion where we are trying to compare the ranking of these two proposals, zs how do we compare the ranking on the Net Present Value other than money? z9 Tom Hargis - that's what City staff did under the methodology. i~Ve did the calculations for 3o what the Net Present Value was. The one with the lower cost.. 3 i DK - I have no idea if it's a quarter percent difference or a thirty percent difference and 3z that's extremely frustrating. s3 NR -1'm willing to let the night go on and discuss that at item #3 but I don't want to lose it 34 off the table. 35 ######~# 3~ Presentation of Bill Faisst, Brown and Caldwell 3~ Michael Ban - I'd like to turn it over to Bill Faisst from Brown and Caldwell and he is going 3a to talk about our technical approach evaluation. 39 PT- I'd like to thank staff again for providing copies of the viewfoils. It is extremely ao helpful. **~***~***********~~*********** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-il~layor tt~l. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt Mh~I-Councilmember Matt Maguire FeClj - Ferric-Chloride CWAC-Citizens Wastewater Advisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ; , , U ~C- Page 22, Vol. 31 September 22, 1997 i Bill Faisst - Mayor, Councilmembers, staff, citizenry, and proposers, my name is Bill Faisst. 2 I am with Brown and Caldwell consultants. I headed up the technical evaluation. Basically, 3 we based our technical evaluation on the proposals that were submitted as well as a supplemental information that the proposers provided. We were assisted on the technical s review by Camp, Dresser and McKee, represented tonight by Mr. Ed Fernbach who has 6 worked through this process in parallel with us. My presentation today, I believe, ~ consolidates both our reviews. I will focus on some major differences and go on to elaborate s about some of the specifie questions that the Council has already raised. 9 Basically ( Shows the Flow Schematic slide ) a similar flow schematic to the one that 1Vlike ~o Ban presented. The important things to note here again are partieularly the FeC13 addition. i i The boxes give some indication of what's included within the different treatment systems. ~z So it shows you clearly how the in the Montgomery United Water case the filtration and is disinfection -- this additional tertiary treatment step occurs prior to going into the ponds, ta whereas in the case of the U. S. Filter/EOS approach the filtration and disinfection are being rs provided before the water is discharged either to the river to the wetlands or pumped back i6 ~ for reuse. t~ Tom, if you could point to the lower chart right at the where we come out af the treatment ia boxes. One of the critical things to consider here is to consider that point because there is a i9 term called "the Point of Compliance" in dealing with the' regulations regarding discharge Zo permits. For the purposes of this facility to this point, the Regional Board has said the Point Zi of Compliance will be right ahead of discharge or reuse. The point of compliance far z2 discharge for the NDPES permit is going to be right where it goes out and heads into the 23 river to the outfall. We've already discussed the Title 22 point which will be after the za filtration and disinfection which is different in both proposals. as MM - so, Bill, you are saying there is a Title 22 Point of Compliance and there is a 26 discharge permit Point of Compliance z~ Bill Faisst - exactly, there are two different points. Tom, if you would put up the next slide. Za DK - excuse me Bill on ?? on the U. S. Filter/EOS the Point of Compliance for NPDES and 29 ~'itle 22 is the same? so Bill Faisst - exactly. 3~ JH - so, if Montgomery United Water were to just switch that end stage of the ponds and the 3z filtration they would basically be the same? 33 Bill Faisst - except for the chemical addition. 34 3H - except for the pretreatment of the odor, pretreatment in the beginning, if they just 35 reversed the order of their ponds and filtration and UV disinfectant.. ******~*****~**~*******~~***~**** Key to abbreviations: JH-Vice Mayor Jane Flamilton, NR-Councilmember Nancy Read PH-Mayor M. Pufricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water.4gency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds :y,~ „~j,s '.,;s "~, . j. September 22, 1997 Vo1.31, Page 23 i Bill Faisst -~rom overall the big engineering points, both proposals are very similar. In fact z in many cases they are using the same technology at the same locations. 3 MM - Regarding to that last point of JH, Montgomery United Water has said in the past that a they have felt that there is no demonstrated working model, as for U. S. Filter/EOS the what s they proposed doesn't have, they can't point to working existing plants that are using that, 6 that the plants have to retrofit additional filtration equipment which not included in their ~. proposal of course but may, Bill Faisst, you'd like to talk to that point? s Bill Faisst -Tom go to the next slide, I need to make a couple points, and I'll talk a little 9 further. io MM - that's one of the areas that the committee disagreed with staff on. i i Bill Faisst - first of all, regarding the NPDES permit discharge limitations, these are ~2 limitations that flow out of Federal Law related to what one can discharge to waters in the `~~~ -~ i3 United States and State of California. The Regional Water Quality Control Board goes ~a through a process and sets the permit limitations. is And what we've done here is recognize the existing permit limitations and also some input ~6 from the Regional Board about how they are looking at rewriting the Petaluma permit in i~ relation to the fact that the Petaluma permit is up for renewal in the near future and this is ia going to be new treatment facility. The Title 22 requirements that the City is focused on are i9 part of the California Code of Regulations, and they are loolcing for a classification that is Zo called "Unrestricted Reuse," which means that one could put it onto say City park land ai where children were going to play shortly thereafter, or you could use it on crops, say, you ?2 could irrigate carrots with it, pick the carrots, wash them, and eat them and it would be 23 deemed to be safe to use the water for that kind of irrigation mode. And the final point that I 2a want to make relates to the effluent reuse system operations and maintenance. This is not zs something that's regulated by the State of California or the Federal Government but rather 26 it's concerns about how you operate the system. For example, if the City is looking at 2~ unrestricted reuse, which would take this material and put it into irrigation systems, perhaps Zs Casa Grande High School. So you could take this material, if you're taking it directly out of z9 the ponds without filtering, it you have a concern about your impact on the operation .. 3o MM - doesn't that mean then that there would be essentially the same amount of trace metal 3 i removal in both cases? 3z Bill Faisst - If you take the effluent from the ponds and discharge it without filtration, you 33 will likely have more trace metals in the effluent, even if you filtered the secondary effluent 34 before you put it into the ponds. Filtering the effluent after the ponds should remove more 3s trace metals which are attached to the algae. To do an irrigation system you have to provide 36 additional protection for the irrigation system. For example, if you look at Adobe Creek 3~ Golf Course, they take the water that comes from the existing pond system, they put it into 3s ponds on their site, and then they have to have a filtration system, ahead of their irrigation 39 system, to get out the debris and stuff that is growing and the stuff that has fallen in the ao water. So if you filter the water immediately before it goes out into the distribution system a~ your requirements far doing something downstream, and perhaps maintenance requirements az on the distribution system and the irrigation system stuff, we believe would be substantially 43 less. ***************~*************** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hi[ligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3 - Ferric-Chloride CWAGCitizens Wastewater Advisory Comm ittee SCWA-Sonoma Counry Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~ 0 b:: ' ~ " ~ ~ Page 24, Vol. 31 September 22, 1997 i So we believe there is an operational benefit to putting the filters where U. S. Filter/EOS has 2 placed them. 3 DK - if I remember correctly from the presentation on either, well particularly on this a concern anyway with Montgomery United Water's proposal, water could be piped off site s after the filtration, UV disinfection prior to be being released to the ponds for other reusers. 6 Bill Faisst - It could be, but that's not part of their basic proposal, and we are evaluating the ~ proposals based on what was included, components that were guaranteed as part of the price. s By the same token, you could say Montgomery United Water move your filters into 9 DK - well that gets to my next question which is the sizing that U. S. Filter/EOS had ~ o wouldn't work. t i Bill Faisst - in our technical comparison, we've been discussing this point for about an hour iz now, but the final treatment Montgomery United Water is before the ponds. We believe this ~3 is going to create discharge permit compliance issues, based on the indications we have had ~a thus far with the Regional Water Quality Control Board staff. ~ s It is also going to provide some limitation in how the city can use the ponds for irrigation ~6 volume. For example, if you can't discharge directly from the ponds into the river because » of a discharge compliance program, means you've got to irrigate the water so that means ~ s you've got more water to worry about. i9 In contrast, using the ponds as U. S. Filter/EOS proposes to use them will maximize the Zo treatment benefit you can get, the additional treatment you can get from the ponds, and it Zi provides a buffer against process upset. Even in the best run wastewater treatment plant, 2a sometimes something goes wrong. In the case of the U. S. Filter/EOS approach, if 23 something upsets the treatment process, you are going to have a buffer of additional Za treatment that could occur in the ponds. So from a purely operational standpoint, that's a Zs concern. 26 Based on those comparisons, in our judgment the U. S. Filter/EOS system offers greater 2~ flexibility and reliability in meeting the discharge requirements. ~ za Mr. Keller, you had a question about the Title 22 requirements? There are a couple of issues z9 that were raised, I believe by Montgomery United Water, one relates to the quality of the 3o water going onto the filters. In our judgment, there are two things going on here, first of all 3~ there are some existing regulations, but then the State has been in the process for about the 32 last 3 years or 5 years of updating the regulations, and so we are trying to look at the existing 33 regulations and also look at the proposed regulations. As we read the regulations, we do not 34 see a problem in the U. S. Filter/EOS approach meeting the regulations. There might be 3s some interpretation involved, but in our judgment, from purely the standpoint of have you 36 met a certain criteria at a certain point, the answer is, Yes. 3~ MM - that's for Title 22? ******~****************~********* Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Courzcilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Tor[iatt 11~IM-Councilmember Matt Maguire FeClj- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency ~ Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds . _ t pl',; ~;.. ~ . . ~. ~ , . ~ _ , r,a September 22, 1997 Vo1.31, Page 25 ~ Bill Faisst - that's for Title 22. In our judgment and the best reading we can get on the new z regs from the state. 3 DK - so the question that was raised about the loading a Bill Faisst - the filter loading rate, the other question relates to the maximum loading rate on s the filters. And by putting the filtration after the ponds, I can devise an operational scenario 6 for U. S. Filter/EOS: if they have to take a filter off line for whatever reason to do some ~ maintenance on it, their plan is to store water in the ponds. So, theoretically, you can reduce s the number of filters you have available. It's going to limit the amount of output you can get 9 from the filters, but you could meet the requirement of the filter loading rate which is the io principal concern in Title 22. ~ i DK - they would just be storing more water at that point. ~2 Bill Faisst - that's our best judgment based on what we have been able to get from the ~3 regulators in relation to the regulations. ia PT - so you are talking about the new regulations._..Does it meet the old regulations? is Bill Faisst - in our judgment the best information`we have on the old regulation and the i6 proposed regulations is it should meet both sets of regulations. » PT - okay because if the regulations don't get adopted, they have to go by the old ones, so is it's both. i9 Bill Faisst - right - both in relation to the NPDES permit and to the Title 22, it does create a Zo dilemma for the proposers, because certain items are not cast in concrete yet. And I think 2~ they have done a good job of trying to address the regulations, in our judgment, as is 22 presented tonight as far as compliance goes. a3 We've already talked a bit about bio-solids. Mike Ban has reviewed the windrow storage z4 approach by Montgomery United Water. Basically, they are going to dispose of the material 2s on land in bulk, what is called "bulk land application" or they are going to haul it to the zb Redwood Landfill. U. S. Filter/EOS is going to have lagoon storage year-round, further z~ away from Lakeville Highway, and they are proposing to take all the biosolids for offsite za bulk land application. In our judgment, U. S. Filter/EOS's approach offers more flexibility 29 and reduces potential odor problems. All solids meet 40CFR Part 503 regulations before 30 leaving the site. 3 i Basically windrows are rows of long lines that you can set up with agricultural equipment or 32 conventional hauling equipment so they are piles above grade. One of the risks that you run 33 into with these, as an example, this summer we had an inch to two inches of rainfall. ~'es, 34 you can get some runoff from these. 1Vlontgomery LTnited Water is proposing a good ss strategy for containing the runoff on site so that shouldn't be a problem, but the other thing 36 is that if the solids get wet, you've already dewatered them and they get wet again, you have 3~ some additional handling problems and some additional potential for odor generation. 3s JH - would the biosolids going into the windrows have less odor problem because of the 39 pretreatment with FeCl3? ****************************~*~ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember Davld Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3 - Ferric-Chloride CWAGCitizens Wastewater Advisory Committee SCWA-Sonoma County Water.4gency Appendix I- Flow Schematic of both proposals - Page 62 Appendix ]I - Schematic of existing Sewer Ponds - Page 63 6~ .. 7~ Page 26, Vol. 31 September 22, 1997 ~ Bill Faisst - it may have some impact, it's hard to carry through and.run that estimate all the 2 way out, so we're not sure at this point. It would be speculative on our part, we don't have s enough information to make judgment about that. The FeC13 would be tying up sulfides and a once the sulfides get into the biolac system, which has a long retention time, th~ sulfides s may be converted to sulfates and oxidized in the biolac syste~ri, so there some of that sulfur 6 is going, the iron (ferric) is still there, which could help to tie up some more odor in the ~ system. So there is some possibility of some benefit there. a The other thing that I might point out, at the bottom in a lagoon system first of all the 9 lagoons tend to be anaerobic (without Oxygen) on the bottom but they tend to develop an ~o aerobic (with Oxygen) on the top. And what usually happens when you have a sludge i i lagoon is that any odors tfiat you generate on the bottom are destroyed before the odors can i2 get off the top of the lagoon. The other thing that happens is if you dump some more water is on the lagoons, it doesn't make any difference. So that's a comparison of the two systems. ~a PT- is there the same amount of storage in both of these proposals for the sludge? is Bill Faisst - the sludge lagoons provide significantly more volume of storage. With the i6 windrows there just is a considerably smaller area for the windrowed material. r~ PT - approximately how much are we talking about? ~a Bill Faisst - I don't have those numbers with me this evening, but we can produce those for i9 you. Zo MM - Bill, so in this case, so the windrows the bio-solids are piled up for final drying after zi they've gone through the belt press and the other example, U. S. Filter/EOS, they are in the 22 lagoon for stabilization, then they go into their centrifuge and then what? Zs Bill Faisst - they are immediately hauled offsite. za MM- so centrifuge on out. zs DK - in terms of the volume, which is going to produce less volume for trucking purposes, 26 for trucking off site? 2~ Bill Faisst - you've got two competing things going on: one, when you run the bio-solids, Zs through either one of the treatment processes you are going ta wind up with about one part 29 of solids per four parts of water. You get about 20% solids. You put the material in 3o windrows and turn it, you get some drying that goes on. By the same token, when you go 3~ into a lagoon, you get additional decomposition of the materials and some of the additional 32 organic materials break down and rot away much like the material that you put in the 33 compost pile at home. You fill the compost pile and it degrades. There is a possibility, 3a depending on the kind of centrifuge they use, some of the newer centrifuges tend to dry the 3s sludge better than the belt presses do so there might be a difference there. ,~ *************************~******* Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds . ^ La . , ~ ~ September 22, 1997 Vo1.31, Page 27 ~ We haven't worked out the numbers, but we could take a first guess or estimate of those and z get those for you. s DK - so you are guessing there is probably not a lot of difference. a Bill Faisst - not a huge difference. s DK - trucks going off site. 6 Bill Faisst - No, we'll work up some numbers for you in response. On the raw sewage odor ~ control, Montgomery United Water's approach is to add the chemical addition at the pump s station costing about $120,000 a year in additional cost. And the other thing that hasn't 9 come up is the question of solids. You're going to, on a dry basis, you're going to get about io a 1,000 pounds a day of solids from the, at least a half a ton a day, of material e~ra because ii you are adding the chemical and the chemical reacts with the water or the other materials and i~ it's going to generate more solids. U. S. Filter/EOS encloses their headworks and odor i3 control cost is in the Service Fee. Mike Ban has already addressed that. And with a soil ia scrubber, they are not talking about any hazardous materials, not talking about any chemical is handling. So in our judgment, U. S. Filter/EOS's approach is simpler, more reliable, less i6 costly and more effective. i~ DK - going back one step on the bio-solids, after the materials are centrifuged, they still have is to be stored for a short period of time? i9 Bill Faisst - typically, one way to handle centrifuged solids is you have a truck right Zo underneath and a drop box. 2i DK - box and it just gets loaded as it is dry? 22 Bill Faisst - right. z3 JH - did I hear Montgomery United Water say at the last meeting that they would cover the 2a headworks, if that was important to the Council so the open headworks is not zs Bill Faisst - it is not part of the basic proposal. 26 JI~ - open headworks is part of their basic proposal, but that is something that is 2~ negotiatable? Okay, I'm just looking at what's negotiable. I just want to keep track of who Zs said that they would change what in negotiations. 29 MS - your evaluation was done on what was in the basic proposals that were provided to 3o you? si Bill Faisst - exactly. 3z MS - thank you. 33 Tom Hargis - If I could add what I said last time, that is it doesn't count unless it is in sa writing, as far as the evaluation, and we have sent letters out which generated the information 35 you have tonight. We are trying to confirm for you and for us that if there is something s6 different, then it is put on the table in writing so people like me with bad memories can go 3~ back and find that some time in the future. 3s PT - that is very good, thank you. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember MattMaguire FeC13 - Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schemat~c of existing Sewer Ponds - Page 63 ' :. . ~ ~ Page 28, Vol. 31 September 22, 1997 i DK - Just for clarification and Montgomery United Water letter of September 17 confirming 2 the oral presentation covering of the headworks is not included in the checklist. 3 Bill Faisst - Pond lining, a question that Councilman Keller had brought up, basically a Montgomery United Water is proposing to use a natural clay. These would be the s equalization basins and treatment units, in their case, in Pond 2. U. S. Filter/EOS is 6 proposing to use plastic liners in their equalization pond and in their treatment unit. The ~ plastic liner is basically less permeable than a clay liner and provides a higher degree of a safety, less risk to the city as opposed to using the clay liner. 9 MM - Bill, how thick is the plastic, what happens if when you are removing sludge io periodically, you damage it? i i Bill Faisst - the liner I think it's either a 30 or 60 mil liner. They are typically on the, I thinic ~z what the approach in the U. S. Filter/EOS was a liner first of all the ponds near the top they ~3 are going to have a double liner, which is the area where you would expect the most risk to ia be. As far as cleaning goes, the typical thing with a biolac unit is you don't have to clean it ~s but infrequently. If you puncture the liner, yes, you can create a situation where you have a t6 leak. The liner in the case of the equalization facilities is going to improve their ability to i~ use fire hoses or other monitors to wash the materials to the low point so they can pump it is out. ~9 MM - if they are damaged are they repairable? Zo Bill Faisst - it depends on the materials, that are used, I'd have to defer to the vendor on 2~ what they are proposing, the techniques available. Some of the plastic liners can be mended. az DK - that gets to a question I have, essentially, what's the life of the pond liner, what's the 23 life of the clay lining and is there within the proposals a guarantee of `x' number of years of aa service life at no cost to the city no cost to the rate payers? zs Bill Faisst - P11 defer to Tom on the economic cost. Anywhere from 10 to 20 years on the 26 life of the liner. 2~ DK - and then when replacement or renewal comes due, who foots the bill on it? Zs Tom Hargis - I think that is something we would have to ask the vendor to respond to. z9 DK - can we get that information? 3o Tom Hargis - Pat Gallagher says he would love to answer that question. 3i Pat Gallagher - the cost of liners or any capital asset for the full 30 to 50 years is included in 32 the Service Fee. So if the liner only lasts for 8 years and has to be replaced, you don't see a 33 change in price. *****~**~********************~*** Key to abbrevlations: JH-Vice Mayor .Iane Hamilton, NR-Councilmember Nancy Read 1'H-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeClj- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~:y~~~,,,: . ~7~~ September 22, 1997 Vo1.31, Page 29 i DK - likewise the performance of the clay liner is also warranted essentially to performance z job? s Pat Gallagher - well the company, of course, is responsible for meeting all the requirements a of the Service Agreement. To the extent that the liners last longer or shorter periods of time, s they have to deal with those costs and not pass those costs on to the city. But they don't 6 warrant the liner directly to the city. They own that risk and they own the responsibility. ~ DK - So essentially on this one, it's really irrelevant as long as the lining accomplishes its s intended task. - 9 Pat Gallagher - That is essentially correct. io PT - Mr. Faisst you said something about less of a liability for the city and responsibility ii Bill Faisst - Mr. Gallagher would have to address the question directly, but the question is if i2 something leaks out of the facilities and gets into the ground water, then the question is who i3 is responsible for cleaning it up. ;l ?~ ia PT - I'd like to have that clarified as to both of the proposals and if that situation occurs. ~s Tom Hargis - Karen Hedlund said she'd love to answer. i6 Karen Hedlund- part of the agreement the contractor is going to indemnify the city against i~ any cause or liabilities from those kinds of accidents or discharges so that they would be is ultimately responsible. Obviously, you want a proposal that gives you the highest level of i9 technical assurance that these tlungs are not going to happen, because it is not good when Zo they happen. Problems take a long time to resolve sometimes. So you want to avoid ever 2r getting into those situations to begin with. That's why you are going through the technical zz review. What we are trying to build into the contract is as much legal protection for you as z3 we can. 2a JH - which type of liner is most commonly used in sewage treatment systems in the country 2s today? 26 Tom Hargis - while Bill Faisst is thinking about that, did you want to hear from the vendor z~ on their design life for the liners? I didn't know ifthat had been adequately answered. 2a iJ. S. Filter/EOS - I think I have had eye contact but I can do the verbal. We've included in z9 our price replacement for the liners over the course, not only the double liner on top which so sees a lot of the sunlight, but also the lower liners. Those are all included in our cost and 3i built into the Net 30 year Present Day Value 3z MS - is it the type of liner that can be repaired? 33 U. S. Filter/EOS - yes, we can repair it. In fact the top part that is exactly how we are going 34 t0 (~O lt. 3s PT - what are your projections for the life of Key to abbreviations: JH-I~ice Mayor Jane Hamilton, NR-Councilmember Nancy Read PHMayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK Councilmember David Keller, PT-Councilmember Pamela Torliatt MNI-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCW~1-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schemadc of existing Sewer Ponds - Page 63 ~..~ 7~ Page 30, Vol. 31 September 22, 1997 ~ U. S. Filter/EOS - the liner below the water level probably is 20 to 30 years. It's the part 2 that's above the water where the sunlight hits it, the UV sunlight, so what we have actually 3 done is we are going to double line that. The word we use is "sacrificial," the top liner, a above the water line, will actually wear out. We'll actually pull that off, put a new one on s and remain the entire integrity of it. 6 MM - so that top, the sacrificial one is that like the visquine on my neighbors roof? ~ U. S. Filter/EOS - yes, it is the exact same material. s MM - so it breaks up when it gets old? 9 U. S. Filter/EOS - It can, you'd replace that. You would always have the one below it to Bill Faisst - before I respond is there somebody from the other Montgomery United Water to >> respond about the clay liners? ~a Pete Talbot with Montgomery United Water - just two points, as you know we relied on the ~3 clay material that's out there that has not caused any problems for some 15 years or longer ~a you've operated the plant. Also our proposal includes a concrete liner around the ponds at rs the water line to prevent erosion and so forth, much same as the double liner that was just ~6 discussed. So I think we're very comfortable with that system we proposed will perform i~ and give you the kind of facility you can be proud of and that will do the job. ~s Bill Faisst - Ed Fernback, Camp, Dresser & McKee, wanted to raise one point about one ~9 thing that can go wrong with the plastic liner is that if you develop a puncture in the liner zo you can get gas building up a little under the liner and the liner floats and the whole thing z~ fails. So there is a certain rislc associated with the plastic liner. As far as what's being used Zz today, historically, before the plastic liners existed, a lot of people built lagoons lined with z3 clay, and now, depending on the local situation, more and more people are going to plastic za liners because they provide an added level of safety. There is a question about whether or Zs not the Regional Board would require a liner, the question was, I believe, raised in an early 26 cornmunication with the Regional Board but never have followed through and said, they a~ suggested they might like to see it, but they've never followed ~hrough beyond that. Is that a zs pretty good reading of the Regional Board staff? So the short answer is more people are z9 using the plastic liners, but they are in most situations it hasn't been a regulatory 3o requirement. You may have seen, Councilman Maguire, or one of the other coun~ilman 31 seen them referenced in landfills. Liners are typically the heavy plastic liner. It is a little bit 32 different material. 33 We also went through a comparison of some of the other systems within the proposed 34 treatment and there are certain areas where we felt Montgomery United Water's proposal 35 was superior and there are other places where we felt U. S. Filter/EOS had a superior 36 proposal. An example, Montgomery United Water is providing 2 mechanically cleaned 3~ screens. *~~*~**~**~*~***~*~~*****~******~ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor ~l~l. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmem8er David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water.4gency Appendix I- F(ow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds , ~~ , `75~ September 22, 1997 Vo1.31, Page 31 i U. S. Filter/EOS is only providing one with a manually cleaned by-pass, so the you can call ~ that value added. Another contrasting area would be the grit removal system - Grit is the a sand and coffee grounds and things that your garbage grinder grinds up and that ends up in a sewage. Montgomery United Water is proposing to let that material accumulate in the biolac s plant basins and dredge it out periodically. U. S. Filter/EOS is going to try to get most of 6 that material out before it ever gets to the biolac process. So, that was another difference in ~ grit removal. s Montgomery United Water is providing larger secondary clarifiers which is a value added. U. 9 S. Filter/EOS's proposal preserves more of the storage capability in the ponds so it would be io valuable on an imgation project the city is going to run to the tune of about 190, our i i estimate, 190 acre feet. iz Our summary comparison based on the material in the previous slides: Overall in each of the is categories we feel that U. S. Filter/EOS has a better technical approach, so our overall rating ia an advar~t'age to U.,S. Filter/EOS. That was not based on any kind of a point reading that was is looking at the components and looking at what we thought were relative values. i6 That leads us to our final conclusion, that the U. S. Filter/EOS technical approach lowers i~ risks and offers better reliability and more flexibility to the city. I would be pleased to try to is answer any other questions. i9 MS - could we just ask for a summarization you went over each point that you looked at, 2o could you just give us a summarization of what you set out to do and obviously to look at ai each of these areas, how long the process took and then your conclusion. Once agam. 22 Bill Faisst - our approach in this was to look at each proposal on its technical merits, to look z3 for differences between the two proposals which is what we focused on. za For example, the biolac systems are very similar in the general mode of treatment, so we 2s would say well they basically are the same process with very similar parameters. So we a6 would say, all right, these two processes, they are equal. z~ We looked at the aeration system. The way that U. S. Filter/EOS is proposing to set up use 2s of deeper ponds for the biolac system means they can use energy more efficiently, and that 29 comes out in the size of the air compressors they are going to need to push air into this 3o system to mix it and to o~dize it, so there is an advantage which we believe shows up in the 3i energy. 3z If we do an energy comparison of the two alternatives it goes to U. S. Filter/EOS, so in that 33 respect we would rank the U. S. Filter/EOS proposal as better. sa In the headworks area we looked at flow metering. The flow metering approach in the U. S. 3s Filter/EOS proposal we felt was better. It's going to be inherently more accurate than what's s6 being proposed by Montgomery United Water, so we would rate that U. S. Filter/EOS better s~ in that area. 3s I mentioned the grit removal before, so we went through each process and looked for 39 differences. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeC13 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow SchemaUc of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ..~.M . ! . ~ Page 32, Vol. 31 September 22, 1997 ~ We were particularly concerned about for example the placement of the filters and the 2 disinfection processes, because based on our discussions with the Regional Water Quality 3 Control Board, we knew there was going to be a significant issue associated with now and a requirements becoming more stringent in the future so the requirement to take out trace s metals, trace constituents would be very important. When we saw what U. S. Filter/EOS 6 was proposing, and this was before we did any testing, we just, on the basis of our ~ experience on other facilities, we said, gee, this approach loolcs like it's a better approach. s And then, subsequent to that, we just part of getting ready looking at the supplemental EIR 9 and the work on the wetlands and concept of perhaps going to use some year round ~o discharge, th'ings that the Council directed the staff to look at. i~ Based on that analysis and some field work we believe that it c~nfirms our judgment that the ~2 U. S. Filter/EOS approach is going to do a better of job of getting trace constituents out. i3 MS - one more question - would you classify your evaluation of the two proposals as an ~a independent evaluation? ~s Bill Faisst - As independent of staff? ~'es, I would. ~6 DK - Do you have a sense, were any calculations done or estimates done on the energy i~ consumption of either of these two designs versus the energy consumption on the current IS plant? Say what kilowatt hours per mgd or ~ ~9 Bill Faisst - Tom, could you put up the extra slide on energy? I have part of the answer. We Zo did not receive information in the submittals from the two vendors to do a detailed zi evaluation of the energy use by process. However, we did loolc at their respective proposals 22 because their proposals included as part of, either, directly in the case of Montgomery 23 United Water, or, indirectly U. S. Filter/EOS, through their cost proposal, they indicated Za how much energy they were using and these are the numbers that they have guaranteed in as their two proposals. zb So that's the comparison I believe I am shooting from the hip here, but I believe that the z~ current plant is using something on the order of 7mW hours per year, 6.8 said Jennifer, for Za the current existing plant. So the bottom line is both of these facilities should be their new 29 facilities are designed with modern equipment, they should be energy efficient, and based on 3o the numbers the proposers have guaranteed in their proposals U. S. Filter/EOS claiming that 3~ they are going to get by using less energy. 32 Bill Faisst - 6.7 33 MM - Bill, you haven't checked the, have you analyzed those figures? ***~*********~~**************~**~ Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds . .. ~ ~a . .-~.7 September 22, 1997 Vo1.31, Page 33 i Bill Faisst - We did not, there was no information in the proposals to back it up. There are a z couple of areas. The biggest use of energy in plant is the aeration system. And iVlontgomery 3 United Water is proposing to put in four 400 hp blowers or compressors and U. S. a Filter/EOS is proposing to put in four 250 hp or 300 hp, and that's going to be a big piece of s the difference right there. There are sorne other areas of the plant where we are estimating 6 that there are differences. If we can get the detailed input from the proposers, we can do a ~ detailed evaluation and decide if the numbers make sense. s DK - that would be important to me in looking at the long term managing consumption for a 9 the community, the object is to reduce as much as we can. One of the concerns that I have io looking back over the years is that the intent of having essentially a performance based RFP i i was to come up with a treatment system that was as a low tech as possible, that was as ~2 efficient as possible, that was as energy conservative as possible and what we have essentially i3 is two conventional treatment plants„ and that's kind of frustrating in the long run to the ia commuruty that wanted to see some other designs proposed. And this is certainly one area is where that will show, if we can actually do an analysis and see if those numbers tote up the i6 way that the estimate comes out of it. It would be useful information. ~~ NIM - we discussed that at the committee level there was a lot of discussion about how real is are these numbers, so I think that would be appropriate to get the nitty gritty on it. i9 PH - any other questions? Okay thank you. Zo Tom Hargis - Karen Hedlund of Nossaman, Guthner, Knox and Elliott will now make her 2i presentation. zz Karen Hedlund - Good evening, we are going to talk about the agreement terms for the next 23 twenty minutes or so. Just to begin with, I'd like to talk about what role Nossaman, Guthner 2a Knox and Elliott, my law firm, has been in assisting the stafF in evaluating the agreement ~s terms, changes that were proposed by both proposers, and what the process is that we have 26 engaged in to date. 2~ Both proposers with their proposals gave us marked revisions to the agreement. They gave zs us an entire agreement and they showed us what all the changes were from the draft 29 agreement that was prepared by the consultants last year. What we did was to undertake to so go through the agreements provision by provision and analyze what the nature of the changes 3~ was and what the distinctions were between the two proposers. We have not been, we are s2 not involved in assigning any points to any particular provision or in assisting the staff in 33 assigning points overall to one proposal as opposed to the other. sa Our role here was just to analyze the differences, give them some guidance, and give them 3s our best thoughts as to what the differences were, and also our thoughts as to where I think 36 we might ultimately come out where the proposers were coming from. Both proposers did s~ assist us in our evaluation by in their proposal explaining in many cases why they were 3s proposing a change, and I'll talk about this in some detail. As we go on a lot of these changes 39 were driven by the form of financing that was proposed by both proposers initially. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MNI-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAC-Citizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ,, . . ~ O Page 34, Vol. 31 September 22, 1997 ~ The process we followed was first of all to do this kind of detailed analysis of the agreement. 2 And in the course of it, there were some requests for clarification given to the proposers 3 along with the request for clarification on the technical terrns. We finally came down 1o the a end of the analysis towards May, and we were going into our meetings with the vvastewater s advisory committee. We identified with respect to each of the proposers, I don't recall what 6 it was, six or seven items that were real matters of concern to us that we thought would be ~ matters of very serious concern to you, if we had to come here and teli you this is what they _ g are proposing. We also thought that maybe there was a possibility that they simply didn't 9 understand where we were coming from, where the City was coming from. So we gave each ~o of the proposers a list of questions, We actually sat down with them and discussed those i i questions with them, explained what our concerns were, and then they came back with some ~ i2 clarifications on those issues in May, just before our meetings with the committee. Frankly, I ~3 think we made tremendous headway with them in the course of this sort of very limited ia mini-negotiation on sort of gut-wrenching issues. ~s The proposal evaluation methodology that was adopted in Resolution 96-339 NCS actually i6 helped organize our thinking and analysis of the agreement, and how we would go about i~ looking at it. The evaluation methodology, itself, identifies a number of issues and asks us to is specifically address these issues. They are force ma'eure; what is the definition or changes i9 in the definition that was recommended and how did they impact on risk allocation between Zo the city and the companies. Where you really want to come out with this kind of an Zt agreement is having the risk being borne by the party that can best control those risks, or if zz they can't be controlled, can best manage those risks. You don't want to pay too much for 23 shifting a risk that the other party can't do anything about, and can't even help manage, Za because then you are going to be paying too much. On the other hand. you want to reduce zs your risk as much as possible. That's the whole name of the game and a contracg to a6 design/build/operate/maintain for 30 years. 2~ We focused on the existin treatment facilities, what is the scope of responsibility with za respect to maintaining those facilities that the contractor is willing to assume. We are z9 looking at rb oject schedulin~. Here what we want to focus on is are the risks on the city of a 3o delay in the development or a delay in commencement of construction of the project. In 3~ terms of project acceptance, what are the conditions to accepting the facility. What are the 32 tasks? What do they have to do to demonstrate this facility is going to work, 33 notwithstanding the fact they are responsible for it for 30 years, you don't want to start 3a something out that doesn't work. 3s In terms of the new treatment services, again, what is the scope of responsibilities that this 36 contractor is accepting. With respect to the service fee, we are looking at the formula that 3~ we proposed to them which includes various kinds of economic adjustments, and what they 3s come back with in terms of recommended changes to those adjustment mechanisms, because 39 that is going to affect how the price is going to go up over the years. *~**************************~:~*** Key to abbreviations: JH-Vice ~1~layor Jane I-lamilton, NR-Councilmember Nancy Read PI-I-Mayor h~l. Patricia Hilligoss, MS-C'ouncilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds . . .~,.. ~~ September 22, 1997 Vo1.31, Page 35 ~ In terms of modification to the project, either those that are required by the City or those 2 proposed by the contractor over the 30 year term, how are those going to be handled. The 3 agreement contains specific provision with respect to insurance and bonds and a indemnification. Indemnification is typically in these kinds of contracts a very highly s negotiated, heavily lawyered set of provisions. We look at termination for convenience, what 6 would it cost the city to say, this really isn't the way we want to go five years down the road, ~ we want to buy you out, what is it going to cost. And then finally, we've also looked there is a another agreement that is very central to all this, and this is the Lease of the Land to the 9 Contractor. Tonight, I'm not going to talk much about the ground lease because issues ~o related to the ground lease really come up in the context of the Service Agreement itself. ii A couple of general observations about the approach taken by both proposers: They both i2 accepted the general terms and conditions of the agreement and general format. 'They have i3 bought onto "we will design and build a plant and we will guarantee that it will work for 30 ia years." If something goes wrong, whether it is due to a design flaw, a problem with the way is it was constructed or the fact that it just breaks sooner than they think it is going to break, i6 it's their responsibility to fix it at their cost unless one of those things is due to an act of force i? majeure, unless some changes, and that why.the definition of force majeure is so important. is The key thing about this contract is the fact that what you are getting is essentially a 30 year i9 guarantee. And it's only really when you put together design and construction responsibility zo on the same firm, and then you combine it with a long term operating guarantee that you get 2i this kind of benefit ~2 This is a very, very different approach from the traditional approach, where you have one a3 firm design it, another firm build it, and then perhaps a third firm operate it. In traditional za design/bid/build construction, if there is a problem with the design, the contractor is going to 2s ask for a change order, and if it breaks after the warranty period is over, which is typically in 26 most projects fairly short, one, two, three years, then it's the city's responsibility to fix it, s~ regardless of whether it was a design problem or a construction problem. So here we get all zs the responsibility for all of these things in one place. You don't have to ask why it happened, z9 you just have to tell them to get it fixed. That is the magic of this contract. 3o The changes that were proposed by both proposers were essentially driven by their desire to 3i finance it on what's called a"project finance" basis. They want a lender to come in, and the sz lenders are willing to take certain risks, and they not willing to take certain other risks. So 33 there are changes which they have identified to us as really being driven by the third party 34 financing. I am going to identify what these are tonight. ss As you know, U. S. Filter/EOS has proposed a different type of financing. They are willing 36 to finance it, as I understand, essentially on an internal basis. They have told the City in very 3~ general terms that they expect that they are going to show us a contract by the end of the 38 week that may look very different in some respects from the contract that we reviewed last 39 spring. ao MNT - excuse me, Karen, you bring up an interesting point because basically in terms of the a~ technological approach and stuff, we have had our consultants and staff and everybody look a2 at the proposals as submitted by the cut-off point. 1~Iow what you are bringing up is an issue 43 that is being subrrutted after that point. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK Councilmember David Ke!ler, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeC13 -Ferrio-Chloride CWAC-Citizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Sct-ematic of bott- proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ,,:.. ~~ Page 36, Vol. 31 September 22, 1997 i So I'd like to point out the distinction to the City Council here in that we have not yet had a the discussion as to whether or not we wish to entertain that a.t this point. And I think, we 3 will be interested to hear what you say, but we have a discussion to have as yet where we a look at the pros and cons of seeing what's been offered, what's been offered after the fact, s and see what we want to do in terms of considering other offers after the fact, particularly, 6 when it comes to discussion from Farnkopf, our rate payer analyst, when we get his input. ~ Karen - the point I wanted to make about the potential for seeing changes in the agreement at s this point is tonight I am going to identify some issues that the proposers identified to us as 9 being finance driven. You did not assume that you are going to necessarily on those specific io points get a different result from U. S. Filter/EOS next week. I hope we will see a lot of >> different changes, but we may not. There are any number of factors that can go into a ~2 specific proposal. So my comments about something being finance driven, don't read too i3 much into it, we have to suspend our judgment, and if you want to consider their changes, ~a we are prepared to come back and describe those next week or whenever we have an ~s opportunity to come back and talk to you about it again. ~6 On the issue of force majeure, this is an issue and the drafting of the original approach and i~ our agreement that I know we spent a lot of time with the staff and the CWAC getting input ~s and we drafted a very narrow, very tight definition of force majeure. What the proposers ~9 came back with, and this is not untypical in these kinds of negotiations, is they wanted a zo force majeure definition that was much broader, that took into account a lot of other risks. Zi There are kind of two different approaches. One is to say force majeure is to say "anything zz that is outside of our control" and then list a number of things as examples. The other way is z3 to say force majeure is onlvi certain identified items. We have talked to both prospective 2a contractors about the approach to force majeure. Montgomery United Water has indicated to zs us that they think they could live with the defined list, but we have not gotten to the point of z6 actually determining what that list is going to Iook like. U. S.. Filter/EOS said, well, we're z~ not real comfortable with the defined list, but we'll certainly give you a long list of things Zs that it's not. And there are certain things that U. S. Filter/EOS said are definitely not force 29 majeure that franlcly were on Montgomery United Water's list of things that were force 3o majeure. So we do have some differences there. 3~ I~K ... Force majeure used to be know as Acts of God plus. 32 Karen - Acts of God plus a lot of people call it "uncontrollable circumstances." 33 DK - I thinlc this area of the force majeure definition is extraordinarily important, and it's 34 even a mystery to me at this point, absent a parallel list from both vendors, how we can 35 make reasonable comparisons between their bids. Because essentially we are saying you 36 insure the project for the next 30 years, so the list of risks is extremely important. # ~ * # * # # * * * # # * # # # # # * # # # # * ~k # # * # ~k * * ~ Key to abbreviataons: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read I'H-Mayor M. Patricia Hilligoss, MS-Couracilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeClj- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds - ,~a: ~1 September 22, 1997 Vo1.31, Page 37 i Karen - it is z DK - it's like going to a health insurance company and saying insure my health for the ne~ct 3 30 years, and you don't have a clear list of what that's going to cover. And at ttus point what a that means to me is I can't tell, I don't have a clue what the difference in cost between one s vendor and the other is going to mean absent some kind of standardized list. And it also 6 brings me to the next point that is by asking them essentially to provide, a shall we say a ~ health insurance policy for the plant for the next 30 years, that means they have to front load s all the costs into their proposal to cover those risks whether or not they happen. And this 9 comes to something that we'll get to later the which has been a problem for me all the way io along, which is the way that the fees are structured. We're paying that insurance whether or ii not it ever gets used, and I have a big problem with that because essentially their obligation as i2 corporationsus'to make sure that they make money and cover themselves for those nsks, our i3 obligation to the ratepayers is to make sure that the ratepayers don't pay unless those risks ia happen. And so it's a major discrepancy, I'm not happy with any of the explanations that I is have ever gotten from Camp, Dresser & McKee or from PFM, and frankly it seems to me i6 that we are saying fine, we'll give you guys a pile of money, you take the risks, see you later, ~~ it's predictable. That's not necessarily relevant toward related to actual incidents. is Karen Hedlund - Councilman Keller, as I said the allocating of risk under force majeure and ~9 coming up with a workable definition is an art, it is not a science. And you certainly do not Zo want to put risks on the contractor that they are going to charge a premium that is way out of 2~ line to what you would ever expect, reasonably expect to happen. So I agree with you, this is 2z a very, very critical issue. as A couple of the differences that you could tell in these lists that we identified. One was with za respect to labor disputes, I think Mont~o~ry United Water wanted to take a fairly broad Zs exception with respect to labor dis utes as well as the availabilitv of materials and sup~lies. 26 And those are two things that U: S. Filter/EOS said are off the list. We will take the full nsk 2~ of that Za MM - yes, that's true this was a hot discussion at the committee level and one of the reasons z9 that the committee recommended Montgomery iJnited Water was because Montgomery 3o LTnited Water said they would accept a"distinctified" list. Now there may have been those 3i two things that they didn't want to accept on their list they have indicated a willingness to 32 negotiate those things out, whereas U. S. Filter/EOS says well it's not these things, we'll give 33 you $25,000 towards each force majeure event. 34 Well $25,000 you know for a you know the typical Act of God is nothing and essentially this ss was one of the distinct reasons that we felt more comfortable with Montgomery United 36 Water's proposal because they were saying ok here's a list we'll accept the list yes we'll 3~ negotiate what is on that list. 3s The other side was saying, no. we want that list we'll tell you what isn't force majeure and 39 here's a little $25,000 you know sweetener for it but ah to me in the sense of a responsible ao decision and the committee's thinking it was definitely the Ivlontgomery United Water ai approach was more sound. az MS - could we ask the consultant to go on and get the CWAC report all at once? Thank as you. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt Mt1~I-CouncilmemberMattMaguire FeC13 -Ferric-Chloride CWAGCitizens WastewaterAdvrsory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~~ Page 38, Vol. 31 September 22, 1997 i MM - I'm going to feel free to comment on whatever issue I think that needs commenting 2 on. Thank you. s Karen Hedlund - in looking at the impact of force majeure anather item to consider is what a is the impact if there is a delay in construction. What d~es that mean? I~uring the s construction period, I think both proposals said what they wha~ would be looking for would 6 be essentially the cost of financing, if there was a delay during that period, and then L1. S. ~ Filter/EOS did indicate they would pick up the first $25,000 but at least that means they're s not going to be nickeled and dimed for every single potential delay. The one thing you don't 9 want is to encourage a contractor to issue a force majeure notice to you every other day just lo to protect themselves. >> DK - It's $25,000 of an annual cost of all force majeure events, so it's up to $25,000 per iz year, the way I read that, not per event. i3 Karen Hedlund - that's right. ~a DK- is that correct? is Karen - in terms of the rb oject schedule, both proposers have introduced this concept that ~6 there would be no obligation to commence construction until certain things occurred. One » of them is the receint of all necessarv ermits, the second one which was a departure from ~s the original agreement was the closin of the financin~. One of the proposers, in terms of i9 the closing of the financing, I think we've gotten more detail from one proposer than zo another, and this might include a third party engineering review for the benefit of the lenders ai for the city or for the company, but since there is a third party at the table they want Zz someone not associated with the city and not associated with the company to go over a3 everything that everybody has done and assure the lenders this thing is going to work and Za the city is not going to wind up with a project that doesn't work that they have to terminate. zs Another condition precedent that really goes to financing is that between the time ve si~n ab the ~rovisional contract and go off to th~ PUC and go off to the ra in agencies during that 2~ period of time, whatever it is, that there l~e no chan~e in the inanci 1 condition of the c~ 2s because the cost of financing is going to be very heavily dependent on the city's rating. a9 The agreements also address what the consequences are: if vou never get to financing, you 3o never get to the notice to proceed, and I think Montgomery United Water indicated their 3~ position is that thev would want the cit~ to ~a their cost incurred durin that ep riod, if they 3a couldn't close within 365 days. 33 In terms of r~ o•aect acce~tance, the key thing here is that both contractors will romise, 3a subject to force majeure, that the ~lant will be u~ and o~erating ~ what's called in the 35 agreement "a guaranteed acce~tance ate " and because the start date is fluid, we don't have 36 that "guaranteed acceptance date" yet because we don't know when we are going to sign the 3~ agreement, when they can expect to commence construction. # ~k # ~k ~k ~k # ~k * * ~k ~k -k # ~k ~k # # # ~k # # ~k ~k ~k # ~k ~k # :k # ~k # Key to abbreviations: Jf~- ~ice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~ ~s .. ~3 September 22, 1997 Vo1.31, Page 39 i But based on certain assumptions, Montgomery United Water thought that it would probably 2 be in September of Year 2000 and U. S. Filter/EOS I think gave an estimate of July 1 of the 3 year 2000. Then Montgomery United Water said well they could probably push it back. The a~ concept here, however, is that there is a date certain ~ which time this plant has to be s oUen. 6 The acceptance will involve a testing period over a period of time. We had proposed 60 days; ~ Montgomery United Water came back and suggested 30 days. Their explanation to us was s we don't think you need 60 days and if we shorten it to30 days we can shorten the financing ~9.~.costs. So it's a trade off between the cost, essentially the financing cost of that 30 days ~o 'versus~ the level of comfort that the city and their technical people feel they can get from 30 ii day test versus a 60 day test. What happens if you don't achieve acceptance within 360 days iz of the guaranteed acceptance date? U. S. Filter/EOS has made it clear that they will then, this is was on the original proposal assuming 3`a party financing, they would pay all debt service on ia the financing and they would pay any amount to fix it. Montgomery United Water detailed is that at that point the city would have an option to either acquire the facility at its fair market i6 value, whatever that is being a plant that doesn't work or doesn't work at full capacity, or the i~ city could just walk away from it and the company would be stuck with the debt. They also ia proposed an alternative of possibly a buy-down of the service fee if the facility was operating i9 adequately but at a lower service level. zo DK - to follow up on that, has there been any revision to U. S. FilterlEOS's approach on that Zi with the current financing scheme? 22 Karen - since we met with both proposers back in May and got responses to our set of sort of 23 critical questions, we've not had any detailed, not really had any discussion. I certainly have 2a had no discussions with either proposer since then. So in terms of zevisions to all this, we 2s expect to see a new draft agreement is going to be provided to the city by Friday by U. S. 26 Filter/EOS. 2~ DK - and then you would proceed to do the same kind of analysis again and revise this Za report? 29 Karen - right. In terms of new treatment services, there are two o~ ints that I think we need 3o to focus on. One is what happens if the notice to rp oceed is del~ed for one reason or s~ another. You're getting fixed prices; those prices depend on their starting construction on a sz certain date. If they don't start construction until a year later, obviously their costs are going 3s to go up. 34 If it goes beyond September of 1998, I think Nlontgomery LJnited Water's proposal was that 3s the cost would escalate at a certain percentage, and U. S. FilterlEOS said yes, it's going to 36 escalate and we'll sit down and negotiate with you what that's going to look like. The s~ important point, however, as I have said before is the contractor will be responsible to make 3s capital improvements over the life of the contract even in the event of a plant failure for s9 whatever reason. We do have a provision in the agreement that says if some event like that ao occurs, the city wants to be involved. We want to have some review over what the company ai is planning to do to fix it. U. S. Filter/EOS, I think was more accepting that at that point in az time the city would really want to play a role in ensuring that this thing was in fact going to a3 get fixed. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. Patricia Hilligoss, MS-CouncilmemberMary Stompe DK- Councilmem6er David Ke!ler, PT-Councilmember Pamela Torliatt MM-Councilmember MattMaguire FeCl3 - Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCW~1-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~~ Page 40, Vol. 31 September 22, 1997 ~ PT - maybe there is some way we can talk about a certain dollar amount of a fix or is there z anything like that that is proposed or that you may or may not recommend? 3 Karen - if it's broken and it's not due to a force majeure event, they have to fix it no matter a what it costs. It is their responsibility. If it is due to a design defect and they have to come s up with a new technology, if it's due to a construction defect and they have to rebuild it, or if 6 it just simply wears out five years sooner than they expected it was going to wear out, I ~ mean their price includes an estimate of what their cost of repairing and restoring the facility s and keeping it operating will be over a certain period of time, and if something wears out 9 sooner than they really thought it was going to, that is their risk. Does that answer your ~o question? ~ i~ PT - it answers my question to a certain point, but I am I am always in this constant fear of i2 we get to year 25 of a contract, you have something that breaks that doesn't necessarily t3 compromise the effectiveness of the sewer plant, yet it's a capital expense that if the cbty ~4 were to take the plant over in another five years, it would probably have to put the capital ~ s money into replacing that in order to get that up and running the same "level that it should ~6 be" and I don't know if there is a monitoring program in which the city is notified when i~ things do arise and when they are broken to a certain dollar level, but that's something that I ~s would like to see the city make sure that we know what's breaking and what the city would 19 have to incur as an expense later on down the road. 2o Karen - I don't recall the specifics of the reporting requirements in the agreement, but I will z~ take a look at that and come back to you and tell exactly what it says. zz Pat Gallagher - There are two aspects of the agreement that address that, one is the initial 23 term of the service agreement is for 30 years. The city has the unilateral right to extend that za for another 10 and 10 years. And you don't need to notify the company unti190 days before Zs the 30 years is up. So if they are in a position of letting things run down, they are going to ab be quite possibly operating that at the same price with inflation for another 20 years. So that 2~ gives them a real strong incentive and desire to keep that well maintained. The other thing Zs which we are going to talk about a little bit when I address financing is a fair market value 29 purchase term in the service agreement at year 30, which relates to the shape that the asset is 3o in and that's another incentive for the company to keep it well maintained. 3i PT - because maybe what I am looking is 25 years after we are into the contract they have 32 whoever our provider is has screwed up so many times that they know they are not going to 33 get the contract back and the city is going to buy this thing out. That's when we could run 34 into some real capital improvements costs. 3s I~K - I think that deserves more than a shrug, that's a very important point and I think that 36 we have to have some kind of inechanism in place to deal with that to get to that intent of 3~ that control and I appreciate that it is a problem but we need some kind of approach for a 3s solution on that. ****~*******~********~*******~*** ICey to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCI j- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency qppendix f- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds September 22, 1997 ~ ~~ ~ ~5 Vo1.31, Page 41 i MM - in defense of Pat he actually did explain it, he just didn't go into a lot of detail. What z.he is saying that at the end of the 30 years, we have a fair market buyout and if they let it run 3 down, we can essentially buy it back for what the fair market value ~s. Now if it's run down a that's going to be significantly less cost than if they are keeping it up. Now that would say s okay so you are buymg a plant that .is run down you are going to have to put money in it, but 6 we are also looking at it you know the discussion was that there will be major significant ~ components at the plant that will far outlast 30 years, just because of the nature of the s construction. Pat, do you want to add to that? 9 Pat - I think again that the renewal option, the 10 year extension, really goes a long way as io long as th~e company in year 30, and this is where the financial strength of the company is an ii importan't factor, ~there ~s also a performance bond that's going to be in place, but if that ~2 company in year 29 really starts to ignore the facility, the city is going to have a very strong is legal position to extend that agreement for another 10 years and recover any and all costs ia involved with having those requirements met and having the facility operate on a daily basis is to meet all the pernut requirements. If a company fails to do that, you've got the nght to i6 recover all of those costs and damages from the company. So it's not like they are trymg to i~ win the contract, they have that contract and you've got the right to extend it for another 10 is or 20 years, and they have a continuing obligation to keep that facility in tip-top shape. i9 PT - Councilman Maguire, I guess my concern of buying it out at fair market value you know zo and whether if it's a beat up plant and we buy it for less for fmv or if we pay a higher price, zi the difference is that the city would have to put additional capital costs in if the fmv were a zz lot lower. And at this point in time the city doesn't have a whole heck of a lot of money for as capital improvements or costs or we would probably be entertaining building our own facility, 2a so then and that's my concern zs MM - I understand that, but I was saying that the fair market buyout is a fallback position 26 what Pat is saying is that essentially since we have the right to impose two ten year z~ continuing terms on them on the vendor where they still have to operate and make good that 2s it meets compliance and everything at their expense, that gives us tremendous leverage over 29 them. Essentially what we are talking about is that we are putting them on the hook for a so plant that is going to operate correctly for 50 years. si PT - I just would like to respond to that, if we are put in a position where we don't want s2 these people to be maintaining to be operating the facility I don't want to have to feel 33 obligated to exercise my option for the additional 10 years just to get the capital cost out so 34 there is a give and take there and that is something that I am sure you'll be looking at 3s MS - just also another point of clarification if the fair market value is less because the plant 36 has not been maintained regardless, if we are going to end the agreement at the end of the 3~ term, it's turned over to us at fair market value, so whether it's fair market value that hasn't 3a been maintained so it's a lower fair market value it's not like we're not going to have extra 39 funds one way or another if it has been better maintained if you add a lower market value ao plus the cost of capital improvements if it had not been maintained to our standards should ai equal what the fair market value of the plant is had it been maintained at a higher level. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schemadc of both proposals - Page 62 Appendix II - Schematic of e~sting Sewer Ponds - Page 63 ,_, . : $ s Page 42, Vol. 31 September 22, 1997 ~ MM - these are important points to consider, the option, of course, is that we could reject all 2 bids and continue with a public procurement process, so nobody said that this was a 3 completely perfect procedure and we are doing our best to limit the risks but these are a things to consider. s Karen - the term of the agreement is always a difficult point. VVhat you want to do is come 6 up with an agreement that is of sufficient length that that's not too long and not too short. ~ And 30 years seems like a good term a reasonable useful life of the facilities, although s obviously you are living today with facilities that are even older. So these facilities can be 9 expected to last if they are properly maintained, perhaps indefinitely. Within 30 years, io however, the whole industry may experience some significant technological changes so that ~ i by the time you got to 30 years, in fact, you would want to build something new that was ia going to be cheaper to operate for the next 30 years. So it's very hard for any of us to look ~3 that far into the future. But those are all the issues and there is no perfect resolution of them. 14 In terms of the service fee is DK - I mean just to keep this in perspective, we could have a municipally owned plant and ~6 have operating contracts for 10 or 15 years and deal with those issues exactly that way. » There are other approaches to dealing with this. Just because we have decided or we haven't ~a decided but we've gone on a track of full privatization doesn't necessarily mean that that is ~9 the solution to all those problems. There are other tracks. Zo Karen - there are. You may not get the same willingness to guarantee the operation of a 2~ plant from a third party operator that didn't build the plant to begin with. Zz DK - but there are costs we are paying for that risk and that reliability. 23 Karen - on the service fee, one of the issues that came out that was identified as being a za financing driven issue was whether the city should have the right to offset or to stop Zs payments, if the plant didn't work and the proposals based on this third party financing came z6 back and said well we really would like the city to tell the bond holders that the city will 2~ keep making payments until the point that they actually terminate the agreement, but the za contractor will pay to the city, in addition to fixing the facility, they would pay to the eity z9 liquidated damages equal to debt service on the bonds. This is an issue that I would expect 3o to be treated somewhat differently by U. S. Filter/EOS, we'll see what happens. 3z ~ut on the other hand, they may come back and say we really don't like offsets, why don't sz you keep paying us until we get a judicial determination on whose fault it was. Who has the 33 money is always a very important point in terms of leverage when you get to any problem or 34 negotiation. *****************~**~***~****z*** ICey to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read 1'H-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency Appendix I- Flow Schematic for both proposals Appendix II- Schematic of existing Sewer Ponds -. , j:.E • V Y September 22, 1997 Vo1.31, Page 43 i In terms of the economic adjustment factors that were proposed in the original agreement, we 2 have proposed that various costs or portions of the operating fee would not capital cost ?? 3 portion of the fee remains fixed for 30 years, but the operating portion of the fee gets a adjusted based on CPI, other types of indexes, and I think we had proposed something less s than CPI, hoping this would give them an incentive to be as efficient as possible. And I think 6 both came back 100% of CPI in terms of the increase. ~ One of the issues that we identified as something that gave us a lot of heartburn was their s unwillingness to cap annual increases. We had proposed that there be a 5% cap on the total 9 service fee. After discussions with them and clarification of what this meant that we were io talking about the entire service fee which encloses?? capital element that shouldn't go up at ii all, that they in fact were willing to take the 5% cap, but there has been some discussion iz about some relief in the event that it goes way above 5%, and if in the next year three years ~3 down the road the increase is not 5% that they could recapture it in later years. ra DK - on just that point, I find it extremely unusual and I think a little excessive to look for is retroactive rate recoupment, the recoup of costs retroactively to a limit of 5% a year. ~6 Essentially that means they'll probably always get their 5%. How many years is it supposed i~ to go back? My understanding in utility regulation is there are very few situations where is there is retroactive recoupment of costs: It's perspective and it's by agreement so the rate i9 payer and the company have to do their work and take their chances. If they re going to ask zo for recoupment of excess in future years, I want a recoupment of rebates on excess profit Zi excess income. And I this is pretty outlandish to me and seems once again to be it's part of 2a the things that's built into where the service fee is structured and I am not happy with it. 2s Karen - we do have a provision in the agreement for looking at these increases every five za years. zs DK - that's also another provision in there that says they can they will be looked at when the z6 regulations change. When the discharge regulations change, that was instant time for another z~ review. That could happen based on the way the Federal Government has been going now 2s with the Clean Water Act and other requirements for discharge and also the condition of the z9 Petaluma River that can be happerung every year. So essentially that is almost meaningless. so Because you do have that other provision in there. 3i Karen - change of law is a risk that is on the city it is not on the contractor. sz DK - right but it means they would come they can come back and ask for a revision to the 3s rate adjustment to the rate. 34 Karen - that's right. There is a provision in the agreement that addresses what happens if 35 there are increases in taxes, and each of the proposers has taken a slightly different approach. 36 U. S. Filter/EOS has specifically identified certain tax increases that they would not be 3~ responsible for, which means those kinds of taxes increased that would be a pass through to 3s the city. Their list includes sales, property, export import, and special duties. Montgomery s9 United Water, I think, said that the city should take responsibility for all taxes, other than ao income taxes. That again is an issue we would expect to negotiate in some detail. Key to abbreviations: JH-i~ice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CW,4GCrtizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 8~ Page 44, VoL 31 September 22, 1997 ~ Lastly, in terms of rec~uired or rec~uested modification to the project or services, I think it 2 was Montgomery United Water that indicated a concern that this might require bond holder 3 consent and we haven't discussed with them what that means. It may have been U. S. a Filter/EOS, I'm not sure, but that is an issue that I would expect regardless. It is something s we will have to address as to what extent if there are changes or modifications that the city 6 wants you'd have to go to the trustee or representative bond holders to get their agreement ~ that it wasn't somehow going to affect their stream of payments. Montgomery United Water s also indicated that if the company proposed to change and the city disagreed they would 9 want to see that either submitted to arbitration or have that to be a cause for termination for ~o convenience. ~ t On insurance. bonds and indemnification we had a go round with one or both proposers on a ~2 project development bond which would essentially be the construction bond and I think both ~3 have agreed to provide it, and in terms of the service bond I think they both agreed to ia provide a service bond in the amount of 2 years service fee. For earthc~uake insurance is Montgomery United Water indicated that they wanted it to be a pass through because of the t6 uncertainties of the insurance market, the fact that earthquake insurance costs go up and i~ down frequently. ia Another issue with respect to insurance are what kind of deductibles we feel comfortable in ~9 having the company have and those are to be negotiated. In terms of indemnification, as I 2o said this is something that tends to get pretty heavily negotiated. We took a pretty strong 2~ position in our original draft. I think both proposers came back and said we will indemnify 22 you for negligence or willful misconduct. We need something kind of in the middle and we 23 expect to be talking to them about it. Indemnification for environmental issues tends to be za handled in a somewhat separate fashion with issues addressed with far more specificity. That Zs is again something that we will be negotiating in some detail. z6 Finally, let's talk a little bit about defaults and remedies - both proposers were very anxious z~ to limit defaults to specified types of events and I think both have told us that the real risk to zs the bondholders here is that we will terminate the contract. And so the bondholders want to a9 know exactly whv this a~reement can be terminated. It can only be terminated if something 3o really terrible happens and something fairly specific. And again, defaults are something that 3~ tend to be heavily negotiated. It was an issue that was identified as being finance driven. A 32 contractor can get more comfortable with default provisions if it's just them and the party 33 they are contracting with, but it's a lot harder to get the underwriters and third party lenders 34 comfortable with looser default provisions because they just don't have a feel for the 3s dynamics of the arrangements between the city and the company. 36 Both have proposed a limitation on consequential damages which is kind of what we 3~ expected to see. That's not the way we had it, but it was both came back with that. In terms 3a of conditions to terminating the agreement and terminating the lease, because of the way the 39 default remedies fall out, the way we have proposed the deal is that if there is a default they ao lose the lease, essentially, they lose the whole project. They want to be able to recover ai somethirig from their investment in the project in the event of termination. *******~*********************~*** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCI j- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~~~ ,~:: ~y September 22, 1997 Vo1.31, Page 45 i They want to be able to.hold onto the lease and recover whatever they can from what is 2 there. That was a major departure from the agreement as we had it. They have proposed in 3 the event of default payment of liguidated damages as opposed to just a flat out temunation if a liquidated damages is a feasible remedy for the type default there is. s The lenders will want to have the ability, if there is a default, to come in and to propose to 6 the city that we take the agreement and assign that agreement or permit the lenders who have ~ taken over the project at that point to assign it to another operator. And we had discussions s with both proposers about how that would happen. Obviously, the city wants to have some 9 control over the identity of a replacement operator. You want to know that it's going to io have the financial capability of and the experience to adequately perform under that i i agreement for the remaining term. And then our original agreement I think acknowledged ,~. ia that the lenders would have certain cure rights, and both proposers have come back with a `; ; i3 more ~elaborate enunciation of what the what role the lenders are going to play in the event of ia a default. ~s So that's pretty much my review of the agreement terms. Again, I'll be happy to come back is and review with you next week, if we get the revised agreement in time or whenever you ~~ think is appropriate to go over whatever the proposed changes have been. is DK - Back on the insurance bonds and indemnification, you indicated that both seek limited i9 indemnification to neg~igence or willful rrusconduct. LJ. S. FilterBOS substantially rewrote Zo sections to separate environmental from non-environmental. U. S. Filter/EOS also want to Zi control settlement even if they do not accept tender of defense. Montgomery United Water Zz expressed exception to most of the draft language. Can you explain what you mean by 23 `controlled settlement' even if they `don't accept tender of defense' za Karen - there are procedures that are written into the agreement with respect to the process 2s in the event that something occurs for which the city feels the company should indemnify it, 26 and as I recall the proposal from U. S. Filter/EOS there was a provision in there that I was a~ concerned about that basically would perrrut U. S. Filter/EOS to deny the obligation to zs indemnify, but still say all right if we ultimately do have to indemnify you and you go off and 29 settle it on you own, we don't have to agree to that settlement. 3o DK - they could opt out of the settlement? 3i Karen Hedlund - they could opt out of the settlement even though they have said they were 3a not responsible. I dori't think that is the right result. But it is something as to which we 33 haven't had a detailed discussion. 34 Pat Gallagher: Ted Richie with Public Financial Management is handing out copies of the 3s overhead, they are really quite simple. Ted has worked with his firm on a lot of the detailed 36 financial analysis, I have worked with Ted on that. I have worked with Karen on the 3~ agreement terms. I'm going to take about 10 or 15 minutes to summarize to two aspects of 3s our review of the proposals, one having to do with financial capabilities and the second 39 having to do with financing approaches proposed by the two proposers. Lastly, we will talk ao a little bit about some of the key agreement payment terms that are related to the different ai financing approaches. Key to abbreviations: JH-I~ice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - SchemaUc of existing Sewer Ponds - Page 63 90 Page 46, Vol. 31 September 22, 1997 i In terms of financial capabilities, two very simple points if you will. First, we have two very 2 large companies. Prior to the most recent U. S. Filter/EOS proposal concerning financing 3 we were tallcing about two guarantors. Now we are talking about a guarantor on the a Montgomery United Water proposal and in the case of the U. S. Filter/EOS proposal, I s believe is saying that they will be the contract signer, so technically they are not a guarantor 6 but the net effect is the same. ~ That is in both cases we have a large financially strong companies that have clearly s sufficient resources for this project. And on top of that each firm is going to be requixed to 9 post a performance bond that is sort of like an insurance policy. All construct~on projects in ~o the city have performance bonds associated with them. >> We also have, as Karen mentioned, the project development bond. We call it that because it ~z is more than a construction and performance bond. It is essentially a bond that would be ~3 posted at the beginning of the signing of the agreement and would remain in effect until the ia plant is constructed and accepted. And performance bonds like these normally don't come ~ s into play. We would hope that they would not come into play, but they are basically i6 insurance policies. So, if the company, whether it's the company that you sign the » agreement with or the guarantor, ran into some severe financial problems and couldn't ~s perform, the surety bond provider would step in and perform on their behalf. ~9 PT regarding these performance bonds, is there a cost of performance bonds and does it Zo depend upon how you finance what the cost of what those bonds are? 2~ Pat - It's not so much tied to the financing approach but it is tied to the sum of the bond, the zz capital cost of the project. And that cost is built right into the service fee. z3 On financial capabilities I'd like to revisit the request for proposals (RFP). We had set forth za four items as minimum criteria in the RFP, and quickly run down how each firm responded. as In the case of performance bonds, we set as a minimum criteria that both or any of the 26 proposers need to demonstrate the ability to post a bond. And in the case of the two 2~ proposals we have, there were both able to do that. 2s In addition to providing the bond, if the project goes forward, at this level it also provides z9 sort of a surrogate review of what the financial health of these companies. If either of these 3o companies are unable to post a bond that means that they are having some financial 3~ problems. In this case, we didn't have that in either event. Putting it another way, a surety 3z company basically is not going to provide a bond or provide an indication of being willing to 33 provide the bond backing up a company that is it not very sure of its long term financial 34 health. 3s Secondly, we had indicated an equity minimum requirement of $50 Million. When we talk 36 about large, financially resourceful companies, both firms far exceeded the $50 Million 3~ equity requirement. In the case of Montgomery United Water, the guarantor its equity is in 3a the vicinity of $0.5 Billion so that is about ten times our minimum requirement. In the case 39 of U. S. Filter/EOS, its equity is in the vicinity of $1 Billion which is 20 times our minimum ao requirement. *~***~*~**********~*~**~**~****** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13- Fer~ric-Chloride CWAC - Citiiens Wastewater Advisory Committee ,SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds 1~j S.~ ~ 91 September 22, 1997 Vo1.31, Page 47 i Another piece of data that is in the various memoranda that Public Financial Management put 2 together, if we were to look at both firms and three most recent fiscal year in terms of s operating income, how much income has the firm generated from a year's worth of a operations in its business? Well it turns out that in the most recent fiscal year both companies s are fairly close to one another, they are both again in round number approaching the $100 6 Million mark. Just comparing it to the equity requirement, here we have two companies that ~ most recently have generated operating income that are almost double in one smgle year, s almost double what we are looking for them to have on their balance sheets. That is a very 9 strong indicator io DK - what do you make of the on the chart that we have here in 1996 Montgomery United ii Water had operating income of about $96 Million and U. S. Filter/EOS about $83 Million, iz b'ut if we go back only three or four years, there is a percentage change. Not orders of is magnitude c}iange on l~ontgomery United Water so that 1993 was $55 Million but in 1994 ia U. S. Filter/EOS was in the red $4.9 Million. is What do you in terms of stability in terms of looking at a company that has some kind of i6 track record here we've got minus $4.9 Million in `95 we've got $14.6 Million, `96 $35 i~ Million, `97 $80 basically $83 Million that's a very significant rise in a very short period of is time. i9 Pat - yes, I think you've put your finger on the key difference between these companies. ao Absolutely you know we can take the picture of where they are right now and there that's 2i one thing; we start looking at the last five, ten, fifteen, twenty years, we see a very different 22 history. U. S. Filter/EOS has gone through a dynamic growth phase, and I can't say I have 23 really looked deeply into the history in the sense that they have gone through an enormous aa amount of acquisition over the last few years. If you look back five years ago, U. S. zs Filter/EOS is not the same, by any means, the company they are today. You compare that to z6 United Water Resources the guarantor on Montgomery United proposal and you see a water s~ utility that's been in business for many many decades and very steady relatively steady flow of Za business and income. zv What we have done with this analysis is really looked at current and the past few years, and 3o boy I think we get into a very subjective area in terms of looking at the future, but I think that si is a difference between the companies in terms of the trends and the acquisitions and the 32 things that are going on. 33 DK You may not want to predict or speculate on the company's futures but we do, we have 34 t0. Key to abbreviations: JH-Vice Mayor Jane Hami/ton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hi/ligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~~ Page 48, Vol. 31 September 22, 1997 Pat - Let me see if Ted can supplement. 2 Ted - Councilman Keller, I think that is a very valid point. One of the aspects that is present s is the difference between the two companies is the nature of the businesses historically. U. a S. Filter/EOS has historically been a manufacturing company. You will see different types s of ratios for manufacturing firms as opposed to service providers. The trend that has been 6 taking place with U. S. Filter/EOS and certainly each of the companies can comment much ~ more validly on their positions in the future, but one of the trends that is taking place with U. a S. Filter/EOS that has been noted in the industry and the markets is that they are going at a 9 service oriented aspect, major service oriented aspects nationally and internationally to their ~o company base of business. So if one were to look at the future one of the factors, one would i i consider is looking at the long history as a service provider and water resources has that's i2 the trend which U. S. Filter/EOS is going but it's a very valid point. 13 Pat - Next two items on the minimum criteria relate to osp itive return on e uit . Just again ~a looking over the last few years have they been in the black? Both firms have been the last is few years. And then on liquidity is a measure of current assets compared to cunent debt, ~6 and both companies exceeded the ratio that we had set in the criteria. » PT - on the return on ne ding eauitX these they have U. S. Filter/EOS in 1993 had a negative ~a 22% so you were saying that they are all positive. , i9 Pat - well just in the last two years two or three years two years, yes. Zo PT - okay we are looking at a history here arid so I wanted to just clarify that when we are Zi looking at these over a since 1993 but in 1993 they had a-2.2 return on the common equity. 22 Pat - some of the key differences between the two companies in terms of these various 23 financial factors and ratios when we look at tangible net worth, which is when we take ia equity and remove intangible assets like `good will' and patents and things of that nature, Zs basically things that might not have a very large value in the event of a severe downturn or z6 distress in terms of the company basically having to liquidate assets. One of the hard assets, 2~ cash and other realizable assets with United Water we see a significantly higher tangible net 2a worth, basically, on the order of double in the most recent fiscal year twice what U. S. 29 Filter/EOS shows on their balance sheet. We see in the case of United Water a long term so history of positive cash flow going back over many many decades. Lower liquidity, the ratio 3~ of current assets to current liabilities, is less favorable in United Water's case compared to s2 U. S. Filter/EOS. Lastly, we touched upon this, but we basically are looking at currently a 33 company that is in a very different core business, it's in the business of having owned and 34 operated private water systems mainly on the east coast, second largest investor owned water 3s company in the United States at present. s6 When vve looked at U. S. Filter/EOS, we see, compared to LJnited Water, much higher gross 37 revenue. We see a lower profit margin in terms of how much of that gross revenue makes its 3s way down to the bottom line. *~**~*****~*~***~******~******~** Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Ch[oride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency Appendix I- Flow Schematic for both proposals Appendix [I - Schematic of existing Sewer Ponds :f. ., ~ ~3 .~ September 22, 1997 Vo1.31, Page 49 i There is a thinner margin than in the case of United Water. We see for a company with z assets in excess of $2 Billion an amazingly small amount of long term debt, and, again as Ted 3 mentioned, this company is a basically manufacturer of water equipment and also m the water a and wastewater treatment services business. s One last item that should have been put on the list, it's in the memorandum that was 6 circulated both on Friday and prior, is a difference in the credit rating. In the case of United ~ Water, the long term debt rating for senior debt is A- and the long term senior debt credit a rating for U. S. Filter/EOS was BBB-. 9~NR - I think that's a really important point, right? io Pat - yes. i i NR - so if it if we have to go to a lender and it's the city's credit which hopefully is a positive ia credit plus you add it to this part of the mix that's important for financial capabilities when ~s one has an A- which is not an A as opposed to BBB-. ia Pat - there was a fair amount of time spent on that difference in the context of financing. And is with the new financing proposal that U. S. FilterlEOS has made, that is probably going to be i6 less significant. If there aren't any other questions on financial capabilities, we'll move on to i~ financing approach. is DK - I did have one quick question on that, what's your sense about U. S. Filter/EOS i9 expanding company large assets, what's your reading on having relatively small long term 2o debt? What's the significance of that? How are they doing what they are doing and what do 2~ they look like to you? 22 Pat - my response would be that, basically, is a question of policy on the company side and ~s corporate finance. I can't really explain their rationale. But what they are doing is financing Za their growth and acquisitions by issuing additional stock, diluting their stock if you will, ~s bringing these assets in as opposed to all the comparues that you may see expanding by 26 issuing debt to finance their expansions. So it's basically a very heavily equity based 2~ expansion, and I believe that's a pretty positive sign that they can bring assets mto the ~~ company without issuing long term debt. z9 Different voice - one of the other dynamics there is debt costs less than equity. And one can 3o provide as a long term strategy, and I'm not speaking for U. S. Filter/EOS, this is a dynamic 3i that e~cists. One can attract more equity in the future by offering a higher return; one can do 32 that by issuing less debt, but in order to do that you have the possibility of attracting the 33 equity. So it's a give and take there that works, if the markets perceive that there is a long sa term perspective of getting a higher return as an equity holder as opposed to a debt holder. 3s So it is one of the dynamics, again, that the market is loolcing at with respect to U. S. 36 Filter/EOS. This says it is a company that is changing. I~oes it have good prospects? The 3~ marlcet is making its decision today by giving it the ability to do this type of funding. 38 Pat - We are going to turn our attention to the different financing approaches. Where do each 39 of the proposers intend to raise the capital funds necessary to design and construct this ao facility? In the case of Montgomery United Water, they are proposing that 90% of the ai capital funds be raised by the issuance of bonds, either taxable or tax exempt bonds. Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 94 Page 50, Vol. 31 September 22, 1997 ~ If an allocation from the State of California is available, they would utilize tax exempt z bonds. 10% is proposed to come in the form of equity invested by the owners of 3 Montgomery United Water. There are two owners, Montgomery Watson, the engineering a firm that is going to be providing the design services, and United Water Resources, the s guarantor of the utility company that we have been talking about. We also indicated that, if 6 it is necessary that there be more than 10% equity put into the project, they will, in fact, do ~ that and provide that additional equity if it is necessary. I think: what they are aiming at here g is a low cost financing in the sense that debt, as Ted just menfioned, debt is less expensive 9 than equity. So from the City's standpoint, the more they can finance this with deb~, the ~o lower the service fee they are going to be able to offer the city. So 90:10 is a pretty i~ aggressive, cost effective approach. ia U. S. Filter/EOS has indicated that they will finance this 100% internally. They will i3 basically write a check, if you will, and we will talk about that a little bit. ~a MM - Pat you are saying the 100% internal capital is their recent offer. is Pat - that's right. i6 MM - you know again this gets back to a policy decision that's not been made by the City » Council. I'd appreciate it if you'd give us your summary based on what was submitted at ia the, you know when the proposal cut off occurred, because this City Council has not i9 discussed whether or not we will accept that at this point, and you know I just want to zo reiterate to you guys as our consultants that this is a very presumptive act on your part to 2~ take this approach, you know and so I want to reiterate until we make that decision go by Zz what's been submitted. Okay 23 Pat -okay, the original proposal from U. S. Filter/EOS was very similar to the Montgomery za United Water proposal. They had indicated an 80% debt to 20% equity ratio. They had also Zs proposed that the 80% debt be raised through the issuance of bonds, either taxable or tax a6 exempt. The basic structure of the Montgomery United Water proposal and, in fact, the z~ original U. S. Filter/EOS proposal is what's referred to as "a project finance approach." It's zs a fairly typical approach to financing private projects of this nature. Waste energy facilities 29 have been financed in this manner for decades in the United States; and, basically, what it so involves is setting up the project and the revenues from the project as the primary security to 3~ repay the debt that is issued for the project. Basically, the lenders, whether it is bond holders 3z or institutional investors, in this case we are talking about bond holders, we'd be looking 33 primarily to the revenues that are paid, the service fee that is paid by the city once the pTant 34 is up and running to pay ~the debt service on the bonds. The lenders have certain rights to 3s cure, in that instance, Karen touched upon them earlier. ********~*~**~~****************** ICey to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Counc.ilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, AT-Councilmember Pamela Torliatt MtLI-Councilmember MattMaguire F'eC13- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonama County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds 95 September 22, 1997 Vo1.31, Page 51 i Basically these lenders or bond holders are going to have insist on provisions in the z agreement whereby if the company fails to perform under the agreement, they would have a s right, sort of like a mortgagor, if you will, to, actually a mortgagee, they sort of own, if you a will, an interest in the asset, so that they could step in and either bring a new operator or s company in, or somehow correct the problem before the city put the whole project m default 6 and stop paymg the bonds oflE The guarantor would be required to step up in the case of a ~ default during the construction period. The guarantor plays a very strong role because there s are no revenues coming into the project until the plant is on line and finished, so that 9 guarantor would be, effectively, who the bond holders are looking to to pay off the bonds if io the project never started generating revenue and never came on line. ii Also, after the project is up and running that guarantor, in the case of Montgomery United i2 Water, they have made it very clear that their guarantor would, in fact, have a commrtment to i3 step in and pay off the bonds if in fact the company defaulted under the agreement. In the ia case of U. S. Filter/EOS it wasn't so clear in their original proposat that they would provide is that clear step up responsibility, although, I think it is implied in what they subrrutted. i6 In terms of equity, whether it is the 10% proposed by Montgomery or the 20% proposed by i~ U. S. Filter/EOS, that equity does not get a return until the debt service and all the operating ~a costs are paid. It is at risk for all those costs to be covered, and it is also at risk in the event iv of a default. 2o Should I mention at all the corporate finance approach or not that U. S. Filter/EOS proposed. 2i PT - I would like to hear the difference in the internal capital being used, if you could briefly 2z summarize. za Pat - what we have is a conceptual proposal at this point. From what we understand what U. za S. Filter/EOS is proposing is in their most recent proposal is something that might be Zs characterized as corporate finance as opposed to project finance where the project is really 26 viewed as the revenue source for the debt. In the case of the U. S. Filter/EOS proposal they z~ are basically saying that they will offer their balance sheet off of their various lines of credit aa off of their various credit sources and cash on hand. We actually won't know where the cash 29 comes from; they are saying that they will internally again through their various lending 3o sources and through whatever cash they have on hand make available capital funds for this si project. 32 What they are also saying is that when it comes to pricing, when it comes to what is the city 33 going to pay for that capital, they are going to view this as if 80% of what's going into the sa project is treated as debt. There is another slide to go into that into a little more detail and ss 20% is being treated as if it's equity. That will all shake out when we get a revised, if in fact 36 the City Council requests, a revised service fee is obtained to reflect this corporate finance 3~ approach. At this point, we have the outlines of a concept, but the real important piece is the 3a ne~ step, and that is what does it mean to the pricing. And we don't have that at this point. Key to abbreviations: JH-Vice Mayor Jane Hami/ton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeC13 - Ferric-Chloride CWAC-Citizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 96 Page 52, Voi. 31 September 22, 1997 PT Is this normal for a company to do something like this on this large of a project 2 Pat - no, it's not. But this project in the industry is large and would not normally be finariced 3 this way. From U. S. Filter/EOS standpoint, I understand their current line of credit is about a $1 Billion, and if you look at the $2 Billion in assets and so forth, it's not a big project for s them to finance this way. So it's unusual in the industry, but if this is something that they 6 are willing to do and the city is will to consider this, it might work to the benefit of the city. ~ We don't know that yet. ~ s PT - why would a company propose something like this, and I know you are speaking, but it 9 looks like Ms. Hedlund wants to respond, as well. ~o Pat - I think they could probably answer that much better than we could for sure, but I would >> speculate that it reflects their desire to win this contract, their desire to compete and to put ~2 forth something that, again when the details come out may or may not, we haven't seen the i3 details yet, but I think they are looking to improve their competitive position on this project -a and they must have long term reasons for wanting to do that which I would only be ~s speculating about. ~6 MM - Pat, what is the implication in terms of the if they still have to record on their books ~~ some kind of return on the equity and the cash that they are using et cetera and that in turn is ~ s going to have some impact on stock presumably although as you say it may be small in ~9 comparison to their overall holdings, but that in turn may have some impact on how the Zo market perceives what the company is doing too, would you explain how that works. zi Pat - I think what they are saying is this treatment facility would be another asset of U. S. Zz Filter/EOS corporation among their $2+ Billion in assets, so it would appear on their balance 23 sheet as an asset, so their return on assets will be affected by that. But in terms of the Za profitability of this project and its impact on its return on equity and to stockholders and so zs forth, it gets far more complicated than that. because what they basically saying is they will z6 fix the debt portion of this even though it's a little odd to talk about a debt portion and equity a~ portion because, from the city's standpoint this is 100% equity. They're basically saying Zs we're putting 100% of our money in this project. So from your standpoint, it looks like a9 100% equity. What they are saying from a pricing standpoint, they are going to price their 3o return on capital based upon a fixed rate of 6.5% per annum against 80% of the capital cost. 3i We don't know, they've not said anything about their return on equity on that 20% portion. sa The way it will all basically shake out is that when then they fix the service fee, they will be 33 putting funds into this project that are coming from various sources, and they will have a 34 return on that capital that will be higher or lower. It'll blend in with the rest of their return 3s and could they afford to do this forever? I don't know. I wouldn't think so. 36 MM - how can they just get the rate ofreturn on the 80%? ~~***~~*************~**********~* Key to abbreviations: JH-Vice tl~layor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor ~f. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Counci/member Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~7 September 22, 1997 Vo1.31, Page 53 i Pat - T'hey are basically saying we have a cost of capital, a blended cost of capital. Some of 2 our capital comes from short term. They may be issuing 7 day commercial paper that is a 3 taxable rate of 5.5% today. I~1ow, in five years, that could be 15% or it could be 2%. So I a think a fair amount of their capital is in short borrowings that they turn over. They have lines s of credit with banks, they have retained earnings, cash, a whole 6 NIM - while interrupting Pat this typist couldn't understand going to be tied up for 30 years ~ or something are they gonna change that rate every year to get a???for the term s,. Pat - what they are proposing is to fix that rate. ,~ 9+MM - for the term? io Pat - for the term, yes. Again, the business judgment and the rationale and all that have gone ii into that, I think they could best answer why they are willing to do that. i2 PT - I'd like to hear Ms. Hedlund's response to the normality of this type of proposal. i3 Karen Hedlund - I just want to make two points. First of all, the number of privatization ia projects that have been closed in the United States you can count on one hand to say what is is normal and what is not normal. We are in an industry that is very much in its birth and we i6 don't know how it is going to develop. But one of the things you can look at is the industrial i~ sector. And it is not at all unusual for companies that provide wastewater treatment services ia to industrial companies to finance those plants internally. So, there is precedent for it, I iv believe, in the industrial sector. I am not an expert in this, I have done a little reading, I 2o know of some other companies in this business for whom providing all of the financing is part 2i of their corporate strategy. 22 PT - for this magnitude of a project? 23 Karen Hedlund - yes, this is a relatively small project. ~a Pat - the last area we are going to touch upon, well this is the next to last area, but is the zs question of the cost of capital. Again at this point we're going to talk about some of the z6 factors that will affect that. In the case of Montgomery United Water's proposal, what they 2~ are basically saying is that the interest rate on the debt portion of their financing will be fixed 2s at the time bonds are issued, based upon market conditions at that time. That could be a year z9 or so from now. So they are basically saying that if a t~ exempt rate can be obtained 3o because a private activity bond allocation is assigned, then the city will see that lower tax 3i exempt rate. If it needs to be taxable bonds, whatever that rate is at the time will be passed s2 through. They have demonstrated, I think, in both their proposal and their presentations that 33 achieving an A rating on bonds would appear to be a very likely outcome, in which case 34 you're pretty close to the high end of the credit rating on bonds, meaning the lower interest 35 rate. 36 The cost of issuing bonds would be included in the principal amount of the debt and therefore 3~ reflected in the S.ervice Fee. The cost of issuing bonds tends to be in the neighborhood of 3a about 2% of the face value of the bonds. Return on equity is something that has not been 39 explicitly presented and ultimately is something that will depend upon the success of the ao project, both their ability to manage costs and the revenues that are received. Key to abbreviatrons: JH-Vice Mayor.lane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHillrgoss, ~1~IS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt Mr1~I-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ,~ 9~ Page 54, Vol. 31 September 22, 1997 ~ In the case of U. S. Filter/EOS going back to their original proposal, it's very similar to what a we see under the Montgomery proposal with one exception. In their original proposal it 3 probably would be more likely that a lower than A bond rating would have been obtained; a however, at the presentation to the CWAC they indicated that they would guarantee a A s rated bond, and whatever cost might be involved via credit enhancement to attain that, they 6 would absorb. If in fact the bonds were to be rated at a lower level like a BBB, it would be a ~ significant difference in the cost to be reflected in the service fee. a The rest of this is pretty much the same in the case of ~J. S. Filter/EOS, If we look at 9 changing over to their most recent proposal on internal financing, they have suggested that ~o they would fix the interest rate on the debt portion. Again this was indicated to be 80% of ~ i the capital funding at 6.5% per annum. T'he way it appears to be proposed, a tax exempt ~2 bond rate would not be available with what they appear to be proposing, although that is not ~3 100% for certain. ~a DK - What is current percentage on tax exempt bond? ~s Pat =I would say about 6%, for A rated bond. ~6 DK - so right now they are proposing about a 0.5%. » Pat (somebody unknown is talking somewhere) lower than 6? (somebody is saying about ~s 5.5%.) ~9 DK - so they are proposing about 1% over current tax exempt bonds? ao Pat - yes, in terms of the ultimate credit rating of the U. S. Filter/EOS entity and the market z~ conditions, since they are fixing the rate in the beginning that does not enter into the cost to zz the city. The cost of issuing bonds they have indicated would be eliminated, again, we have 23 yet to see that in terms of a fixed proposal. And the return on equity would sort of follow za the same concepts as in the Montgomery proposal. Zs °The last topic is to touch upon some of the key payment terms, by no means is this every z6 aspect of the Service Fee and the various payments under the agreement but we'd just like to 2~ touch upon 3 areas. One, and this is true in the case of both proposals, it's a pretty Zs significant point and that is that the city is not obligated to pay any part of the Service Fee or 29 is not obligated to pay anything to either of these proposers until the plant is up and running 3o and tested. That's the same in both cases. Both companies have stepped up to that and it's a 3 ~ fundamental point. 32 We talked briefly before about this fair market buy-out provision. Both proposers are s3 proposing that at year 30, if this is the so-called initial term, if the city were to elect to 34 acquire the facility, of course it has the election to extend service for another ten to twenty 3s years, but if it decided, instead, that it wanted to take over ownership to the asset and operate 36 it itself or get a different contract operator, however it desired, it would need to pay fair 3~ market value for that asset. ~ # ~ * # * # # * * * * # *~# # * * # * # # * * * ~k * * * # ~k # * # Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix i- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~p-. 99 September 22, 1997 Vo1.31, Page 55 i The reason that that is in both proposals is that both proposers need to be able to 2 demonstrate to the IRS that they in fact own this asset, otherwise they cannot depreciate its s capital cost, in which case they would have a very poor income tax situation on their hands. a And, actually, if taxable financing is utilized, there is a bit of an accelerated depreciation s schedule that both firms can utilize. I believe that most of the capital cost can be depreciated 6 over 15 years. So there are some positive benefits that both firms are reflecting to some ~ degree in the Service Agreement back to the city. But even without that positive effect, it is s fundamental that with private ownership, these companies need to, in fact, own the asset as 9 far as the IRS is concerned, and fair market value purchase at the end of the 30 years is io fundamental requirement for that. i ~ Each proposer has taken a slightly different approach to the fair market value terminology. iz In the case of Montgomery Uruted Water, they have indicated that they would write into the i3 Service Agreement the city's right to select three appraisers and have three different ia appraisals done on the fair market value of that asset at that time. And then the average of is those three appraisals would be the value. i6 In the case of U. S. Filter/EOS they have indicated that they would be willing to write a. i~ formula into the Service Agreement, and that formula would talk about the original cost of ~s the asset, less depreciation, times inflation. At this point it is hard to tell which of these is i9 more favorable or less favorable to the city. I think the formula might provide a higher Zo degree of certainty. Of course, inflation is something that we can't predict with any high zi degree of certainty. It gives the city, I think, a little more sense of what the asset value might zz be in the 30 years. 2s And then the last point on the Service Fee this was mentioned earlier, but just to revisit it, in 2a the case of the 1~Iontgomery United Water and in the case of the original U. S. Filter/EOS 2s proposal the "FC1" component of Service Fee, that is basically the fixed capital pricing zs component, this is where the debt service is recovered. In both cases of the original 2~ proposals, that would not be fixed until bonds were issued and the actual interest rates are 2a known. In the case of the most recent U. S. Filter/EOS internal financing proposal, that 29 would be fixed. Their proposal was 6.5% at the time the agreement is signed, so you would 3o know what that is. If interest rates go down, of course, that goes to the benefit of U. S. si Filter/EOS, if interest rate goes up that goes to the benefit of the city. sz That concludes the summary of the financial aspects. 3s Tom Hargis - Bill White is going to be the spokesman for the CWAC. sa MS - It's almost 11:00 could we schedule this for the 29~'? 35 PT - How long is it going to take? 36 MM - We made Bill sit through this, this is going to be fast. s~ Bill White - This is a proposal that is a summary of our recommendation. What I would like 3s to do is, I have given you each a copy and I would like to read it. It is a little long. I brought 39 a couple of copies for the consultants and they can follow it, too. More could be made if you ao want to. Key to abbreviations: JH-I~ice Mayor Jane Hamilton, NR-Counci/member Nancy Read PH-MayorM. PatriciaHillrgoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmem6er Pamela Torliatt MM-CouncilmemberMattMaguire FeC13 -Ferric-Chloride CWfIC-Citizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~o~ Page 56, Vol. 31 September 22, ]997 i In the following paragraphs we have tried to provide the City Council with some 2 background information on our recommendations and our thoughts and the evaluations of 3 the wastewater facility project proposals from Montgomery tJnited Water and U. S. a Filter/EOS. s It is the recommendation of the CWAC that the City Council select one vendor for the 6 purpose of conducting contract negotiations for the wastewater facilities project. We ~ recommend Montgomery United Water as the superior choice to be that vendor. This s recommendation does not represent a complete acceptance of Montgomery United Water's 9 proposal. There remain key negotiation points on price, agreement terms and technical ~o issues as detailed in our recommendation memorandum of July2, 1997. ~ i As some background, on January 21, 1997, Montgomery United Water and U. S. Filter/EOS i2 submitted proposals for the privatization of the city's wastewater facility project. This ~3 submission of proposals was the culmination of five plus years of effort by the staff, the city 14 CWAC, the City Council and the citizens of Petaluma to begin negotiations with one of the ~s private vendars to design, construct, finance, and operate for 30 years the new wastewater ~6 treatment facility. » More than two years earlier, the Wastewater Advisory Committee had made a ~s recommendation to the City Council to proceed ahead with the privatization approach. T'he t9 Council agreed based on the expected advantages of privatization. A process was adopted to zo proceed with the privatization approach with a caveat that once the final contract was z~ negotiated, it must be checked against the cost of the public approach to ensure that the z2 private approach was indeed cheaper and at a lower risk to the rate payers than the public z3 approach. aa It is important to keep in mind that costs quoted on January 21 by the proposers were not for zs the cost of construction of a wastewater treatment facility, but the cost to the city to process 26 a certain quantity of effluent that has entered the new plant during the 30 year life of the a~ contract. In other words, the private proposers take on the risk of designing the plant, 2s building the plant, financing the plant, and operating the plant. It was this assignment of risk 29 from possible cost overruns, design flaws and certain construction delays that made the 3o privatization approach so much attractive to the CWAC and a strong reason why we ariginal 3 i recommended the privatization approach. A second, and certainly equally important reason, 32 was that we felt that a private vendor, in addition to taking on risks the city would have 33 otherwise had to assume, could provide the service of treating the city's effluent cheaper 34 than could a public entity. ss In the last two years, the CWAC has been following the process as established by the City 36 Council. Since the January 21 submission of proposals, we have had several meetings 3~ covering the noted items, as follows: 3s On February 13, 1996 we had a discussion of the contents o the proposals. Proposal costs 39 were not included in these discussions since the established process ealled for qualitative ao analysis at this stage. ~*~~**********~************~**~~* ICey to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II- Schematic of existing Sewer Ponds J e6. o ~ September 22, 1997 Vo1.31, Page 57 i On March 1 l, 1997, we had a coritinuing review of proposals, with responses to the CWAC z questions by staff and consultants. CWAC concluded that both proposals were in compliance s with the criteria as established by the City Council. a On May 28, 1997, there was a review of the staf~s evaluations cores for the Performance s Criteria. Reference should be made to Table 1, Performance Criteria, of the Executive 6 Summary submitted to CWAC for that meeting. ~ On June 3, 1997, presentations to the committee by U. S. Filter/EOS and Montgomery s United Water on their respective proposals. In addition to their own presentation, each 9 proposer had an opportunity to comment/respond to the other's proposal. There was a io lengthy question and answer session following the presentations. ii One June 4, 1997, additional technical input and clarification was provided by the city's i2 consultants on the relative merits of the proposals. It was at this meeting that the committee i3 made its recommendation to enter into contract negotiations with Montgomery United Water ia for the wastewater facilities plant. is One July 2, 1997, approval of the written recommendation to the City Council to enter into i6 contract negotiations with Montgomery Uruted Water. i~ Our analysis of the Performance Criteria differed from that of the city's staff and consultants. ia The difference was not because we felt the staff was not thorough and careful in their i9 approach. They have done a find job throughout the process. Zo Our analysis follows: 2i The Techrucal Approach - in reviewing the two approaches to plant design it became clear 2z that the differences could, and should, be researched and further refined in negotiations with Zs the selected proposer. Both proposers were open to changes and refinements to their aa technical approach, and in both cases, the city will be the final deternunant of the precise Zs system that is used. However, we felt the Montgomery United Water's plan was developed 26 to a greater level of engineering detail and illustrates a more refined level of supportmg 2~ information. Therefore, the committee gave some advantage in this Performance Criteria to za Montgomery United Water. 29 Agreement terms - it also became clear in the process that both parties were somewhat 3o flexible in negotiating the agreement terms. Further, neither party would finalize the 3i agreement terms until they vvere in exclusive negotiations, and that is probably as it should sz be. Therefore, no advantage was given to either party by the committee in this Performance 3s Criteria. 34 Financial capabilities - it was the strong feeling of the committee that Montgomery United 3s Water was clearly in the advantage in this category. This is a 30 year contract; we felt 36 consistency in historic and expected financial strength was very important. Unlike the prior s~ two Performance Criteria, financial capability is not something that can be negotiated. It is 3a vvhat it is! Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County Water Agency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~02 Page 58, Vol. 31 September 22, 1997 1 This is not to say that U. S. Filter/EOS was not financially capable of getting the job done. 2 But we were comparing the two vendors and asking, given the choice, who should the city I 3 probably shouldn't use that term, `get in bed' with for 30 years. In our opinion, a Montgomery United Water certainly has the advantage. None of the subsequent information s we have heard or seen at the City Council meetings have changed our opinion on this matter. 6 Financing approach - in our opinion, this criteria follows from the financial capability. The ~ stronger party will be able to get the better financing. How it is specifically structured (the s use of public money, type of private debt) is something we will all be trying to improve 9 upon as we get closer to going to the market for debt. We believe that Montgomery Ilnrted io Water has the advantage in this Performance Criteria. i i Please note that "all cash" proposals tend to obscure the issue; either party could build for ia cash. But at some point it is logical that they would exchange all or a portion of the cash 13 equity for considerably less expensive debt. i4 Staff qualifications - we looked at this Performance Criteria in two parts, first part being ~s development staff - these are the people who will get us fro~n where we are today, to an 16 operating wastewater facility. The committee feels that in its proposal, Montgomery United ~~ Water was appreciably more thorough and responsive, and more prepared in their ~a presentation. They may not have ended up with the exact technical solutions that the city ~9 will use, but it was evident that they did considerable homework and thought through the 2o reasoning and consequences of each part of their proposal. We also felt a higher level of Zi comfort with Montgomery United Water's construction team, as reflected in their tighter 22 construction schedule. In none of the areas of project development did we get the same level z3 of comfort with U. S. Filter/EOS. The advantage in this extremely important section of the za staff qualification Performance Criteria was clearly with Montgomery United Water. Zs Operating staff - I think that the city staff and the committee have been very pleased with the a6 responsiveness and capabilities of the current operating staff at the treatment plant. a~ However, we have a long way to ~o before we get to the operating level of a new facility, Zs and although U. S. Filter/EOS has very good operating people at our existing treatment 29 plant, we felt that Montgomery United Water provided a more precise picture of the duties 3o and responsibilities of their operating staff. 3~ On overall staff qualifications, we give a strong advantage to Montgomery United Water. 32 Over the past eight months, the committee has reviewed the applicants' proposals in great 33 depth. We have heard each vendor's presentation, both before the committee and before the 3a City Council. 35 We have asked questions of clarification, and analyzed their written responses. We have 36 discussed the pros and cons of each vendor at length, and have ranked them using the agreed 3~ upon evaluation methodology. Having assessed this information with all the methods and 3s tools available to us, we unanimously agreed that the City Council should begin single 39 vendor negotiations for a new waste water treatment plant with Montgomery United Water. # # # * # # # * * # # # # * * # * # * * * # * * #~* #~# # ~k # # * .~Cey to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Counctlmember Pamela Torliatt t1~IM-Councilmember i1~Iatt Mcaguire FeCl3- Ferric-Chloricte CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma Counry Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds ~03 September 22, 1997 Vo1.31, Page 59 i I'll be happy to answer any questions and I have a couple of other comments before I sit z down. s 7H - I'd really like to thank you, Mr. White, and Dan Libarle and Ralph Sartori and Matt a 1Vlaguire. s Bill White - I was supposed to introduce them here,.thank you. 6 JH - I've been so grateful all along for. all theahours that you have volunteered to wade ~ through this and with us. I want to know is your recommendation unarumous? s Bill - yes. 9 JH - everyone on the committee? io Bill - I must say that it is unanimous. After the presentation it became very clear to us ii independently that and unarumously that this is our opinion. iz JH - so nobody had to be talked into to is Bill White - no, it wasn't even close. ia JH - individual ok is MNI - I'd just like to say also that you know through this very arduous process there were a i6 lot of times when there was significant disagreement on the committee you know it i~ passionate disagreement but in every single case we actually ended up you know coming to is some form of agreement or recognition that something could be discussed more and I think i9 that was an integral part of the process of us corrung to this unanimous decision because we Zo each got to work through the issues that were most important to us and test them against zi each other's thinking. Which I found to be a very valuable process. zz Bill White - and we didn't rush it, quite frankly. If there were more answers that we needed 23 to get, we took the time to get more answers. That's been the case for five years. We za haven't rushed the process. There have been some of us that would have loved to just zs bulldoze this thing through and have done it, but the fact of the matter is that is not the 26 process that was established by the Council and it wouldn't have worked in our group, 2~ because we do have some different opinions on things and I think that they all focused in 2s co~rung through with this conclusion that this was the way to go. 29 I,et me, if I may, suggest where I think we go from here. I think we need to proceed ahead so with negotiations with Montgomery United Water. The items that need to be negotiated are 3i the price, the technical part and the agreement terms. The committee will prepare specific s2 areas of negotiation for your review. And then we suggest that we move toward contract 33 agreement. sa Once we have contract agreement, and I'm just kind of reiterating what the process is that 3s has been preestablished, that we have tried to follow all the way through here, once we have 36 a contract agreement, we then go to the Sonoma County Water Agency in this case, because s~ that's who the Council suggested and we get a proposal on the comparable program, both in ss terms of cost and terms. Key to abbreviations: JH-Vice Mayor Jane Harnilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, ~Y~IS-Councilmember Mary Stompe DK- Councilmember David Ke//e% PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CW~1GCitizens WastewaterAdvisory Committee SCWA-Sonoma County Water~lgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of existing Sewer Ponds - Page 63 ~.o ~ Page 60, Vol. 31 September 22, 1997 ~ Terms include risks, costs include all the costs. We are talking about the cost of running a a quantity of effluent through the system far 30 years. I strongly recommend and I think that 3 the committee is in total agreement on this I believe that we because of the way this process a has developed with the Water Agency as opposed to what was originally envisioned was s simply going to the consultants and getting a price, and I have to tell you that I concur that 6 the way we are going is probably a fair way to go. ~ It is certainly going to be a more accurate way to go, but it then does not become fair to s release the prices of the two bids when we are saying these two proposers met and to the 9 Water Agency that okay now you know what they are doing you've gotta beat.it. It's just io not fair. If we are going to follow through this process, and do it in a way that I think at the n end we can all hold our heads up and say we did this thing squarely down the road then we iz simply cannot release the numbers at this time. We've got to go down through the process i3 further and come to a contract agreement. Now we have some problems there. We need to ia and I think the committee can work on those problems but we need to make sure that what is we end up with Montgomery United Water if that's what the Council selects is the lowest ~6 price. And you know they've got a lot to lose, I think, Montgomery has a hell of a lot to lose » in this thing in that they want, we are not guaranteeing them anything. We are saying if you is can come to the table with the best price, the best contract terms and the best technical 19 approach, we'll do a deal with you. If you don't we don't do the deal with them. I think if Zo the county can beat them out, great. The interest here is in the lovvest rate to the citye If Zi anybody can beat them that's fine. I personally don't think that the county is going to be 2z able to assume the risks that they can assume. So the overall picture to the city is more 23 favorable, but I may be wrong. aa DK - I want to thank you and Dan and the rest of the committee for all the work that you 2s have done and continue to do. I really appreciate it. On this last point, I'd like to pose to z6 you how you would perceive or how you feel about proceeding on negotiations not having a 2~ clue as to what impact any particular item on the check list fc~r negotiating may .fall out in 2s terms of money. We can negotiated from here till doomsday and not have a sense what it is 29 we are trading for what. so Bill White - I think it is a valid point. But I think we have a clue. I think that we will know, 3~ I think Karen has had a very good feeling for the legal and Pat and I think that we will be 32 able to move down the point we may have to let it out at some point. We may have to look 33 at the comparison of numbers. The staff can certainly right today look at comparison in 3a numbers. And tell us where we are. And some of it may have to be done on a private basis 3s with the staff and the consultants in that regard without the committee. I think we have a 36 clue. I don't think it's that complex, that's not the xight word I thinlc it is complex, but I 3~ think that it can be moved through I would suggest David that you allow the committee to 3s go back and be able to look at this situation and come to you with a credible way of 39 approaching this and hopefully we should be able to do that fair.ly quickly. ao I don't think that should be something that should take forever. ****~~*~********~~*****~*~***:~*~* I~ey to abbreviations: JH-Vice Mayor Jane Ilamilton, NR-Councilmember Nancy Read PH-Mayor M. Patricia Hilligoss, MS-Councilmember Mary Stompe DK- Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-Councilmember Matt Maguire FeCl3- Ferric-Chloride CWAC - Citizens Wastewater Advisory Committee SCWA - Sonoma County Water Agency Appendix I- Flow Schematic for both proposals Appendix II - Schematic of existing Sewer Ponds September 22, 1997 ~05 Vo1.31, Page 61 i DK - I really appreciate that review and those recommendations would be invaluable, a absolutely. s Bill White - good. a JH - after listening to now we have a problem there is obviously a problem with the staff s making one recommendation and the CWAC making another. 6 Bill White - I look at that as an advantage, quite frankly. ~ JH - I don't mean a rprbblem, but it's things are so simple when everybody agrees. a Bill White Councilwoman, I have to tell you that it would have been a lot easier, we would 9 have been home in bed tonight if we had just agreed with everybody in the beginning, years io ago. ii 7H - my question for you is after hearing staf~s justification of all their reasons for their iz recommendation, do you or any of the committee members find yourselves rethinking or i3 wavering or reconsidering any point? ia Bill White - I think that what they reviewed with you tonight is not dissimilar from what they is have reviewed with us in the past and there have been a few new points and I look at it's i6 been passed off a little bit lightly, an A rating versus a BBB- rating, I don't consider that i~ lightly, and we can have Standard and Poors has made their living for a hundred years is evaluating debt. I don't I wouldn't profess that as competent as the rest of us may be that we ~9 could necessarily do a better ~ob than them. Now Standard and Poors has obviously made ~o mistakes in the past and maybe they made one here, but I wouldn't guess that that's the case zi and the cost of debt is the cost of debt and it is affected by those ratings. That's a very za important thing to us. No I don't think so. We could at the next committee meeting we z3 could certainly pool everybody and ask them personally, but it's my understanding that I aa mean I don't think we heard a lot different tonight than we have heard in the past. ss JH - that's what I really wanted to know if you had heard different information or if you had z6 already heard all of that. 2~ PH - any other questions? It's after 11 so we won't start anything new Zs Bill White - I apologize to Councilmember Stompe I didn't mean to come up here and just. 29 MM - I don't think you owe her the apology. 3o JH - I am wondering if there would be willingness to start the 29~' at 3 o'clock. si MM - I don't think I can make that. 32 PH - we'll just start at 7:00 again. Any liaison reports. N e. City Manage eports. None. 33 The meeting was adjourned in memory of Betty Alt villa. , 34 ss T ! . Patricia 'lligoss, ayor 36 s~ Patricia E. Bernard, City Clerk Key to abbreviations: JH-Vice Mayor Jane Hamilton, NR-Councilmember Nancy Read PH-MayorM. PatriciaHilligoss, MS-CouncilmemberMaryStompe DK Councilmember David Keller, PT-Councilmember Pamela Torliatt MM-CouncilmemberMattMaguire FeCl3 -Ferric-Chloride CWAGCitizens WastewaterAdvisory Committee SCWA-Sonoma County WaterAgency Appendix I- Flow Schematic of both proposals - Page 62 Appendix II - Schematic of e~:isting Sewer Ponds - Page 63 ~~~~ ~~~~~~~'~ IbIV ~r Raw SBWage Odor Control `(Fec13) ~ .............................................. : ~I'~'~ ~l11 L /~ ~ ~ yS ~@Y771 - . 1--~ . • Biosolids ' . ................................................. (ISFilter : T'reatrr~ent ~,ystern 1 Reuse R~w ~ Secondary Filtcation 8~ . Sewage ~ . Headworks Ponds ~ . Treatment UV Disin(ec~ion ~ ~ Discharge . Odor Con4rol : ; Soil Bed Biasolids : - ....................... ........................:~ w c~ ~ro /D O~ ~J 7~`,~y-- O v i. ~ V d ~ .=.7 ~ ~ ~ 'U n ~ o ~ .., a. ~ ~ o, ~ i~ N ~ ~ ° ~ ~ y yd y o ,v~ o ~, o ~ ~ ~ ~ ADaeacu II September 22, 1997 Vo1.31, Pa;e 63 ~ ~ 7 Schematic of Ezistin4 Sewer Ponds ~ LAKEV~,LE HIGHWAY : Parcel Line ~ ~y~ ~' ' ~~~ ~ 10~