Public vs. Private Financing of Water & Wastewater Infrastructure

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1 Public vs. Private Financing of Water & Wastewater Infrastructure Earlier this year, I had the opportunity to attend the Grand Opening and take a tour of the new wastewater treatment plant serving the community of Carnation a city of 1,905 residents located in eastern King County, Washington. The new plant employs Membrane Bio-Reactor (MBR) technology to provide advanced treatment, suitable for both discharge to the Snoqualmie River and wetlands remediation. The treatment plant is the responsibility of King County. The city of Carnation is responsible for side sewer connections and a vacuum sewer collection system. Total budgeted cost for the treatment facility as authorized in 2005 was $14.2 million 1 including $12.5 million for the treatment plant and $1.7 million for conveyance to the point of discharge in the Snoqualmie River. Based on recently updated budget numbers provided by King County 2, the treatment plant costs alone, including design and engineering will now approach if not exceed $15 million. Coincidently, a new wastewater treatment plant of similar size was recently opened by the Yakama Nation to serve their Legends Casino in Toppenish, Washington. This new plant also employs MBR technology and is designed to meet Class A wastewater reclamation and reuse standards. The Toppenish project was 100% financed by the tribe, but cost less than $5.0 million 3 to complete. What can possibly account for this very large disparity? I believe the answer can be largely attributed to the differences between public and private financing of water and wastewater infrastructure, at least here in Washington. First, here are the design parameters as we understand them for each project: Carnation Plant 1 Toppenish Plant Design Capacity Peak Month Daily Flow 480,000gpd 360,000gpd Influent BOD mg/l lbs/day 1,189 2,102 Influent TKN mg/l lbs/day Permit Discharge Limits BOD (mg/l) 30 5 Fecal (col./100ml) Turbidity (NTU) N/A < 0.5 Ammonia (mg/l) < 1.0 < 1.0 Total N (mg/l) N/A 10 1 Final Wastewater Facilities Plan for the Carnation Wastewater Treatment Facility prepared for King County, October Construction cost estimates provided by King County based on construction 98% complete. 3 Based on contractor billing documentation and equalized to include sales taxes payable in King County. 1

2 While it s clear that the Toppenish plant is somewhat smaller hydraulically, its organic loading (lbs/day of BOD and TKN) is substantially higher than Carnation. This is a direct result of treating casino wastewater, which is significantly more concentrated than typical municipal wastewater. Further, since discharge from the Carnation plant will be to the Snoqualmie River and nearby wetlands, the NPDES permit issued by DOE does not require reduction in total nitrogen, just ammonia. At Toppenish, discharge is to soil, thus a reduction in total nitrogen concentration to less than 10 mg/l is required to protect groundwater. Therefore, the Toppenish plant must provide significantly greater anoxic basin capacity per gallon of hydraulic capacity in order to meet these stricter discharge limits. In addition, the Toppenish plant includes membrane-thickened aerobic digestion of Waste Activated Sludge (WAS), producing Class B biosolids, which is not included at Carnation. Carnation WAS is trucked to the Renton wastewater treatment plant for further processing. Comparative plant engineering, design and construction costs can be summarized as follows 4 : Carnation Treatment Plant Toppenish Plant 10/05 Estimate 7/08 Estimate Contract Construction Contract $9,377,900 $11,758,125 $4,041,280 Design & Engineering $2,192,000 $2,192,000 4 $307,331 Project Administration $900,000 $900,000 4 $220,465 Treatment Plant Total Cost $12,469,900 $14,850,125 $4,569,076 $/Gallon Hydraulic Capacity $30.94 $12.69 $/lb. BOD Treatment Capacity $12, $2, $/lb. TKN Treatment Capacity $78, $19, Looking at just dollars per gallon of hydraulic capacity, the Toppenish plant cost is just 41% of the Carnation plant - $12.69/gallon versus $30.94/gallon. Based on the pounds per day of BOD and TKN to be processed, the Toppenish plant cost drops to just 17% of the Carnation plant per unit of capacity even with sludge management included. How can such a large disparity exist? Is the Yakama Nation doing it on the cheap and sacrificing long term performance? Is there something inherent in the public process that drives these costs higher? Or is there really something out of whack in King County? A visit to the Toppenish plant will readily dispel concerns of taking shortcuts. The MBR technology selected at Toppenish is different than that used at Carnation and has a very 4 Based on interim budget documents, it appears that engineering and design costs and project administration costs for the Carnation plant exceed the roughly $3.1 million itemized above. However, since we have been unable to obtain final project costs from King County for these items, to be conservative, the above comparison assumes budgeted costs established in

3 successful track record in Washington State dating back to There are currently 12 of these plants now operating in the State with another 14 facilities either under design or construction the most of any MBR technology on the market. It s also worth noting that the Toppenish plant was designed by a very well-known national engineering firm. Such firms are not known for cutting corners. Pictures of the Toppenish plant follow: Yakama Nation Toppenish WWTP Yakama Nation Toppenish WWTP 3

4 To account for the disparity in costs between the two plants, we need to gain a better understanding of the public and King County processes. 1. Cost of Doing Business in King County To ensure that cost data comparisons between the two plants were truly apples to apples, we submitted these data to King County for their review. Comments received included: The potentially higher cost of doing business in affluent King County versus Yakima County King County sales taxes are higher than the taxes imposed by the tribe Public projects in King County require unionized prevailing wage equalization Given this feedback, it is appropriate to evaluate the potential impact of these variables; as it turns out, while these factors are notable, they fail to change the basics. Following is a revised budget comparison summary equalized for prevailing wages and sales taxes 5. As you will note, adjusted for these factors, Carnation costs are still more than double the comparable costs per gallon of capacity at Toppenish. Carnation Treatment Plant Toppenish Plant 10/05 Estimate 7/08 Estimate Contract Construction Contract $9,377,900 $11,758,125 $4,041,280 Sales Tax Equalization $0 $0 $252,798 Prevailing Wage Equalization $0 $0 $317,312 Adjusted Contract Total $9,377,900 $11,758,125 $4,611,390 Design & Engineering $2,192,000 $2,192,000 4 $307,331 Project Administration $900,000 $900,000 4 $220,465 Subtotal $3,092,000 $3,092,000 $527,796 Treatment Plant Total Cost $12,469,900 $14,850,125 $5, $/Gallon Hydraulic Capacity $30.94 $14.28 $/lb. BOD Treatment Capacity $12, $2, $/lb. TKN Treatment Capacity $78, $21, Public Design Process and Gold-Plating It s generally acknowledged that public processes involving many constituents can lead to cover-your-rear tendencies, significant design conservatism, and the addition of bells and whistles that you are less likely to see at private projects. Among the things one can see at 5 Assumes that prevailing wages in King County are 25% higher than in Yakima County. 4

5 Carnation that you don t typically see at privately built facilities (and many public facilities of comparable size) include: Odor control system including carbon filtration (big ticket item) Well appointed operator control room, building and lab facilities My point in bringing this up is not to make a value judgment as to whether the amenities and many of the process redundancies at Carnation are really appropriate, but simply to point out that public design will err on the side of conservatism. The two pictures that follow illustrate the elaborate odor control system designed for Carnation compared to the simple but equally effective odor control system installed at Toppenish: Carnation Plant Odor Control System Toppenish Plant Odor Control 5

6 3. Capacity Needs Assessment Process The city of Carnation has a current population of 1,905 people 6. Yet at the time the Wastewater Facilities Plan was prepared in 2005, the City was projecting rapid population growth within their urban growth boundary limits, reaching 2,185 by 2007 and population saturation of 3,871 people in Employees with city businesses and schools were projected to grow to 634 in 2007 and 2,175 by Aggressive assumptions like these often lead to overbuilding and inflate costs. At the current per capita water use rate in the city of 56 gpd, wastewater flows of less than 107,000 gpd can be expected. And given where the city s population stands today, it s likely that the Carnation plant will be operating at less than 25% of the installed capacity for quite some time. Of additional importance, since Carnation residents are not required to tap into the new sewer system and pay the high connection costs that have resulted, actual sewer taps at this point are significantly less than expected well short of what is required to recover facility construction costs 8. As a result, King County taxpayers are now subsidizing the high capital and operating costs of the Carnation facility. A phased approach to building capacity can often prove to be a more prudent approach. The bias of today s government always seems to lean towards over sizing. Long term that may be right, but in this case, it comes at a significant cost borne by the Carnation community and all of King County. How much easier would it have been to provide sewer infrastructure in Carnation 15 years ago if we had planned on taking smaller digestible bites one step at a time? 4. Engineering Design Process The design process for both big and small public works projects is dominated by the large engineering firms. We call them big pipe engineers in our business. Without making value judgments as to the competence or motivations of these engineering firms, we do observe that several of their tendencies can add significantly to public works project costs. Since most, if not all, of their experience and expertise is with big projects, one might expect that they will tend to design smaller projects using what they have learned on big pipe projects. After all, past experience shapes current practice. We clearly wouldn t ask a septic system designer to design a wastewater treatment plant meeting reclaimed wastewater standards even though flows are just 3,500 gpd. So does it make sense to ask firms with big pipe experience to design much smaller projects just because they have experience with Brightwater-sized projects? 6 City of Carnation Web Site 7 Wastewater Facilities Plan for the Carnation Wastewater Treatment Facility, prepared for King County, October The City of Carnation has not disclosed actual sewer taps despite repeated requests for the data. 6

7 Considering most engineering firms are compensated based on their billable hours, it would seem that their tendency would be to err on the side of doing more design tasks in house rather than relying on more standardized or pre-engineered packages, as these packages would significantly reduce the number of in-house design hours required. In the context of the points mentioned above, how does one realistically justify design, engineering, and project administration costs for the Carnation plant at more than 500% of comparable costs for the privately developed Toppenish plant? Should we as citizens really be willing to pay this price, particularly given the paucity of demonstrable public benefit? By nature, engineers generally seem to be more comfortable with complexity than the rest of us. It was interesting to hear one of the operators at Carnation bemoan the fact that the plant has 68 different alarms to which he must respond, often at night. During early startup, frequent alarm events can be expected. But 68 specific alarms for a plant designed for just 480,000 gallons per day and operating at far less than that? If that many things can go wrong and require an operator response, something is amiss here, at least in my opinion. There is virtue in simplicity. The following pictures illustrate some of this complexity by looking at the membrane chemical cleaning and permeate piping systems at both the Carnation and Toppenish plants. Toppenish Membrane Chemical Cleaning and Piping System 7

8 Carnation Membrane Chemical Cleaning System & Piping Carnation Membrane Backpulse and Chemical Process Piping 8

9 Toppenish Permeate Piping Carnation Permeate Piping System 9

10 The regulatory community in Washington and many other states have a strong bias favoring public financing of water and wastewater infrastructure. This bias brings with it a cost and in some cases a very big cost. The Carnation/Toppenish comparison provides us with some interesting insight as to why and how big this cost premium from public works can be. And while private investment in infrastructure is not the answer to all our problems, it does provide a viable alternative that merits more open minded consideration. As citizens, we also need to find a way to require greater accountability from the leadership of our public works agencies. I am pleased that the city of Carnation finally now has sewer capacity available, but it comes at an extraordinary price to each and every resident in King County. Craig Goodwin NCS Wastewater Solutions A Division of Northwest Cascade, Inc. October 2008 craig@nwcascade.com NCS Wastewater Solutions, a Division of Northwest Cascade Inc., Puyallup Washington designs, builds and operates decentralized water and wastewater infrastructure for commercial and residential developments across the country. NCS also operates as a private utility in Virginia, Georgia and soon in North Carolina. For additional information, please visit our website at 10