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. ❑