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HomeMy WebLinkAboutPrivate sector partnership cuts water costPrivate sector partnership cuts water cost North Bardell City Manager College Station, Texas Providing an adequate water supply to our burgeoning population has been one of our most pressing challenges. An unusual type of private financing helped us get started on the solution. AS EVERY PUBLIC OFFICIAL knows, population increases, although desirable, mean an increase in prob- lems. The amount of population growth in College Station, Texas, is evidenced by the fact that 2,000 new permits for living units and construction permits totalling $72 million were issued in the 11 -month period from January through November 1981. This population surge was beneficial and, at the same time, created a lot of problems. Planning and decision making were often forced to immediacy; however, we strove to en- sure that our goals were well defined, and our alternatives for action were adopted to long -range solution. During the past six years we have turned to the private sector at two critical points in the development of our water system because it enabled us to act quickly and, at the same time, lock in long -term benefits. In the early 1970s, when College Sta- tion first began experiencing its growth pains, the city council developed specific objectives for future planning. In 1973 the council adopted a com- prehensive development guide that called for development of an indepen- dent water source. At that time, we were buying water at steadily escalating rates from the neighboring city of Bryan. We realized we needed our own system to be in a position not only to accommodate but also to con- trol growth. In June 1975 we asked the Whalen Corporation of Dallas to explore for water and to help with the financing. Whalen agreed to drill a test hole, pay- ing all costs of the test and completing the well if results indicated presence of a usable water supply. If, on the other hand, the test did not prove out, the city would share up to 25% of the drilling costs with the company. This was the least expensive option to test for groundwater and so was an advantage for College Station. Since a private company would be bearing most of the exploration cost, we were able to begin developing our own water supply with minimal financial risk. Fortunately, the test proved suc- cessful. College Station installed its first water well in 1975 with a capacity of one million gallons a day (mgd). We were thus able to enter into an agreement with the private sector to "joint venture" the beginning of our water system. And it was to the private sector that we turned again when that system reached a critical expansion point. By 1981 the new water system was complete. It included two 4 -mgd wells, 14 miles of transmission lines, and two pump stations. However, by that summer, a peak usage of 7 mgd was recorded, which was barely covered by the new system's capacity. An analysis of new construction permits for industrial, commercial, and residential projects indicated an even higher peak demand of 9 mgd the next summer. At this point we had to move quickly. Normal bond election, bond sale pro- cedures, and bidding could delay ac- tion too long. By the time we went through the entire process, it could be fall, leaving us with a good possibility of shortages in late summer. And again we had to look at our basic problem with costs. The longer it takes to get a project going, the more money it will in- volve. The inflation factor must be figured in all planning, since land prices and construction costs steadily escalate. The old saying that time is money" was never more true than in to- day's economy. Since we had found that working with a private company in a service agree- ment often allows a quick response time, we again approached Whalen Corporation. This time the company agreed to absorb all costs of exploring. In September of 1981 we initiated A private firm joined forces with College Station, Texas, to drill two new wells when that municipality needed more water to supply its growing population. Reprinted from October, 1982, APWA Reporter discussions; by December we had signed a contract; two months later the drilling rig went into place. Both wells drilled for us by Whalen are financed by an unusual method. The wells are drilled, equipped, and maintained by the company at no cost to the city. Whalen is obligated to deliver a minimum quantity of water per well, which we in turn agree to purchase at a price guaranteed for the entire con- tract term. For instance, our newer well delivers a minimum of 3 mgd, for which we pay 17 cents per 1000 gallons — a price guaranteed for the next 12 years. We paid no money up front for the wells, and we assume no risk if they fail to deliver. Our only expense is payment for the water when received. At the end of the contract term, the city will assume ownership of the wells. This type of contractual service with the private sector can be quite beneficial to the municipality. In many cases the private sector has a much easier time locating and providing the pertinent resources. Each city, however, must consider all options and determine how working with the private sector can result in an optimum ar- rangement. Some questions to be considered when looking at contracting out services are: •Does private enterprise provide a more timely response than traditional channels? Normal municipal /govern- mental process can be time - consuming and costly in the long run. • Does private enterprise save costs or provide improved efficiency? Private firms have incentives for minimizing costs that governments can overlook. • Has the firm under consideration provided this service elsewhere? Is it a reputable company? • Does the arrangement with private enterprise save the municipality capital costs and thus preserve its bond capacity? The basic approach should be, of course, that your private source is also your partner, working closely with you in fulfilling the agreement. We anticipate that College Station's growth will continue at a healthy rate for some time to come. Among our re- cent developments are a 1- million- square -foot shopping mall and a defense plant. We plan to provide all services needed by this expanding base of business and population by maintaining productive relationships with private enterprise. ❑