Performance Based Infrastructure and Public Private Partnership (P3) Solutions for Water Resources and Stormwater Quality

GEOSYNTEC CONSULTANTS
Performance Based Infrastructure and Public Private
Partnership (P3) Solutions for Water Resources and
Stormwater Quality
Ken Susilo, PE, D.WRE, CPSWQ
Senior Principal, Los Angeles, California
Presentation to
City and County Engineer’s Association
Monterey Park, CA - March 2, 2017
© 2017 Geosyntec Consultants, Inc.

What are P3s?
• Performance-based business ventures, funded and operated
through partnerships by and between government and the
private sector;
• Also referred to as Performance-Based Infrastructure (PBI)
with focus on the alignment of design, construction, operations
and maintenance as the key concepts;
• Designed to help communities optimize limited resources,
control risk and finances, to help build and maintain public
infrastructure;
• P3s have successfully designed, built, and maintained many
types of public infrastructure across the United States,
Canada, and globally.
2

Why Consider P3s?
• To help solve multi-objective, over-arching
problems that fill a need
• To increase the speed of implementation
• To share risk (regulatory, financial, etc.)
• To demonstrate true value (not just penny saving)
– Utilize innovation and best tools
– Develop smart solutions
– Focus on outcomes
• To find linkages to other initiatives (ACP, credit
systems) that could be limited with conventional
approaches
3
Observation:
California faces different
stormwater quality and
water supply stressors than
other regions of the country...

P3 Structures and Relationships
4
Public Sponsor/
Owner
Concessionaire/
Developer
Asset
Equity InvestorsDebt Investors
Equity Investment
Equity Return
Capital Investment
Principal & Interest
Ongoing O&M Investment
Bonds & Loans

Possible P3 Framework for Water (Stormwater)
Owner (Public
Agency or JPA)
Revenue
Sources
Public Trust
Regulatory
Agencies
Electeds/
Public
Auditors/
Advocates
Labor/
Unions

Possible P3 Framework for Water (Stormwater)
Owner (Public
Agency or JPA)
Concessionaire
P3 Developer
Financial
Lenders
Insurers
Contractor
Construction
Operations &
Maintenance
Technical
Planning &
Modeling
Engineering &
Design
Monitoring
Framework
Legal
Metrics
Revenue
Sources
Public Trust
Regulatory
Agencies
Electeds/
Public
Auditors/
Advocates
Labor/
Unions

Examples of Non-Stormwater P3s
• Water/Desalination
(Severely Impaired Water)
• Transportation/Tollroads
• Universities
• Airports
• Power/energy sector
• Court houses/public buildings
• Parking facilities
• Fiber optic solutions
• Distributed Antenna Systems
7

CBP3s
• Community based P3s implemented for stormwater
management – shared benefits to community and contractor.
• CBP3s in the Mid-Atlantic region (EPA Reg 3)
– stormwater, economic development and community-specific
elements
– de-emphasize financing sources, but emphasize payment based
upon realizing performance metrics
– promote economic growth and improved quality of life, particularly
for underserved communities.
Triple Bottom
Line Linkage
Environmental
SocialEconomic
8

MS4 Permit Implementation Requirements
• Permit Requirements Constitute a “Perfect Storm”
– Decisions need to be rendered on optimal approaches for compliance with
uncertain delivery and financing paths
– Risk of fines and political fallout from non-compliance, inability to deliver
programs
– Tight capital budgets; short time frame for compliance and prioritization; life
cycle costs of implementation not covered by existing funding sources
– Prop 218 California limitations for stormwater fees (Hertzberg bill)
– 3rd Party Lawsuits
• Implementation Plans (WQIPs, EWMPs, WMPs) have
identified $Billions in need
– Control measures in the form BMPs
– Ongoing monitoring programs for both compliance and adaptive
management
• Outcome/results-oriented approaches for implementation
(i.e., BMPs and agencies need to perform).
9

Example Implementation
Stormwater Compliance (Centralized BMPs)
StormWaterPermit
Requirements&
CompliancePlans
(EWMP/WQIP/WMP)
Non Structural &
Institutional
Distributed BMPs
Centralized/
Regional BMPs
10
Examples:
• Infiltration
• Wetlands
• Multi-Use
Parks
• Recreation
• Habitat
• Community
Center

Also, other benefits
• Stormwater Alternative Compliance Project Implementation
• Industrial or commercial water/stormwater permittees or users (e.g., power/utilities)
• Existing recreational facilities (e.g., events planning, sporting events)
Example
Benefits
StormWaterPermit
Requirements
Non Structural
Distributed BMPs
Centralized/
Regional BMPs
Certain types of project have the potential to provide
multiple benefits in the “Triple Bottom Line” context.
Local Water
Supply Benefits
Environmental
Justice/Health
Benefits
Habitat Benefits &
Environmental
Mitigation
Economic Benefits
(local jobs,
community)
WQ & Receiving
Water Benefits
11

AssetsDeveloped
Commodity
(Water Supply)
Development
Parks: Outdoor
Recreation (Link to
Wellness)
Open Space
Development
Human Resources
Pollution Reduction
Obligations
These projects develop assets
and features that have
monetary value.
StormWaterPermit
Requirements
Non Structural
Distributed BMPs
Centralized/
Regional BMPs
12
Example

StormWaterPermit
Requirements
Non Structural
Distributed BMPs
Centralized/
Regional BMPs
FundingSources
Suites of projects can be aggregated to utilize
multiple funding sources. This can expand to
utilities, transportation, events, revenue sources or
other bundled features.
Water Agencies
Mitigation & Parks
Funds
Private?
Philanthropic?
Resource Agency?
Other Govt/
Redev./Trans
Funds*
Stormwater Fees
and Grants
13
Example

StormWaterPermit
Requirements
Non Structural
Distributed BMPs
Centralized/
Regional BMPs
Governance
Concessionaire
Team
Joint Powers
Authority
Governments &
Utilities
Others
New Construct:
Public-Private-
Partnership
Public and private-sector partners
need to pool resources and
talents, and potentially change
governance structure to succeed.
14
Example

P3 Mechanics
• P3s or Alternative Delivery Mechanisms: Design/Build/
Finance/Operate/Maintain (DBFOM) or Build/Own/
Operate/Transfer (BOOT) or DB, DBF, DBOM, etc.
• Features:
– Developer bears construction risks as well as operations/maintenance over life cycle
– “Ensures” optimal performance over time - measured
– Quality and design standards at all times
– Can include requirements for local job development
– Maintenance as a contractual deliverable, not an aspiration
15

Risk Mitigation Benefits to Agency
• Allow for sharing the risks of project implementation and
compliance
– Development Risk: capital costs first-in, lifecycle operations and maintenance costs
– Hydrology Uncertainties
– Payments based upon measured performance metrics (penalties for noncompliance
and incentives for achieving objectives earlier)
– Risk of non-compliance mitigated by requirement for O&M and adaptive management
for implementation, including the use of innovative technologies.
16

Public Agency Stewardship
• Transparency, Community Values, Stewardship maintained to
protect the public interest:
– Need to have accountability
– Need to specify performance parameters and metrics for bid
– May only afford a partial solution – since these mechanisms are NOT a new revenue source
– Can include long-term performance guarantees that extend years past a typical warranty
period
17

Requirements of P3 Implementation
• Adequately flexible governance structure (e.g., Joint Powers
Authority, Tax Exempt Public-Benefit [63-20] Corporation,
Property-Assessed Clean Energy model, etc.)
• Political willingness
• Highly qualified and willing partners
• Identifiable revenue sources
• Technical needs:
– asset “optimization” (but multiple variables, not just cost),
– adaptive asset management (open/flexible platforms),
– operations and maintenance of BMPs over project life,
– new technologies (such as real time controllers)
18

Multi-Agency Involvement
Regulatory Compliance
(eg, SGMA, MS4)
Flood Control
JPA or
Multi-
Agency
Agreements
Water Service/
Conservation
Wastewater Treatment/
Discharge
Urban Runoff Diversion/
Treatment
Stormwater Capture
Natural Treatment
Credit: Brandt Strategies
19

Example: Mill Creek Wetlands*
• Single project focused effort, tributary to Santa Ana River,
Alternative Compliance related.
• Treats approximately 20% of annual average flows for ~70
square miles
*CASQA Award Winner20

CBP3: PGC Example
• Prince Georges County, MD
(Clean Water Partnership, led by Corvias)
• 15,000 impervious acres to be retrofitted
(2000 acres in 3 years); ~$50k per imp. acre
Source: thecleanwaterpartnership.com
• P3 not required to finance (agnostic to
source)
• Local, small, MBE ~ 40% of work
• Community workforce development
emphasis
21

Input from Potentially Interested Parties
• Hesitations
– Sufficient commitments by public sector (politics)
– Sufficient size of BMP projects to be bundled
– California/US precedent
– Union/privatization concerns
– Quality issues
– Lack of Revenue Stream
• Interest depends on
– Urgency of need
– Delivery and project objectives
– Legalities, optimal procurement path
– Clearly articulated goals
– Political will22

Possible First/Next Steps
• Pilot Implementation
• Request for Information (or Expressions of Interest)
– Determine concessionaire and attorney perspectives on funding and financing options, risk
transfer potential, performance metrics (performance based infrastructure), monitoring,
portfolio needs (TBL), etc.
– Develop potential mutually beneficial, framework and governance structures, duration of
potential agreements
– Potential range of contract values and scopes
– Technology applications (asset management, real time controls)
– Role for owner/city
• Workshop with electeds/directors/policy leaders to assess political will
P3 Water Summit, May 2017, San Diego, CA23

Summary of thoughts
• Six keys considerations for P3s:
1. funding: revenue stream and financing, or is funding established and adequate?
2. risk: expected transfer of risk and shared liability?
3. performance metrics: future changes in compliance metrics? evolve through adaptive
management?
4. future constraints: other constraints (e.g., with operations and maintenance)?
5. governance: governance structures in place or will they need to be developed?
6. benefits: will alternative delivery structures be able to actually deliver expected outcomes?
• Answers will be market-based!
24

Acknowledgements
• Thanks to subject matter experts
– Dr. Yuval Cohen & Kris Helm
– Jeremy Jungreis & Justine Kastan (Rutan & Tucker)
– Wayne Rosenbaum (Opper & Varco)
– Seth Merewitz & Shawn Hagerty (BB&K)
– Roger Feldman (Andrews Kurth)
– Scott Crawford (Lewis Operating Group)
– Seth Brown (Storm and Stream, EPA R3)
– Michael Gagan (Kindel Gagan)
– Jonathan Trutt (West Coast Infrastructure Exchange)
– Norris Brandt (Brandt Strategies)
– John Dewey (Mustang Renewable Power Ventures)
25

Questions
Ken Susilo
Geosyntec Consultants
448 S Hill Street, Suite 1008
Los Angeles, CA 90013
ksusilo@geosyntec.com
310-957-6111
@GeosyntecKenLA
linkedin.com/in/ksusilo

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