sale of the wastewater utility, water utility and related assets p3 connect conference denver,...
TRANSCRIPT
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Sale of the Wastewater Utility, Water Utility and Related Assets
P3 CONNECT CONFERENCE
Denver, Colorado
July 29, 2014
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Westfield: Outline
►Motivation behind Sale of Water and Wastewater Utilities
►Solution
►Outcome
►Lessons Learned
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Westfield: A Success Story
► – “Best Places to Live” 2013► #1 in Indiana► #18 in the Nation
►Westfield Washington Schools – 6th best high school in the state; highest graduation rate in Central Indiana
► - “10 Best Towns for Families” 2014
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Westfield is Growing
►32,000 residents; about 10,000 utility customers
►Improvements to US 31, Grand Junction, Grand Park
►Growth over next 5-10 years► New housing permits up 20% from last year► Population growth expected to double by 2030
►Needed infrastructure improvements
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Economic Benefits to Westfield
►Approximately $91 million transaction
►Elimination of 100% of City’s utility infrastructure debt; more than 50% of the City’s total debt portfolio
►Rate mitigation
►Trusted stewards – Customer service, reliability, quality
►All employees keep their jobs
►Funds for aggressive infrastructure improvements
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Regional Water Strategy
►Not solely economic benefits; long-term water management
White River AquiferShared Resource
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Timeline/Highlights
►Fall 2011 – Initial internal discussions ►Feb. 14, 2012 – Issue Request for Expressions of Interest►Apr. 17, 2012 – RFP published►May 25, 2012 – Proposals due►Jun. 22, 2012 – Notify finalist and begin negotiations►Nov. 16, 2012 – Execute purchase agreements►Nov. 20, 2012 – File Joint Petition with IURC►Jan. 31, 2013 – APA Amendment No. 1►Nov. 25, 2013 – IURC issues Order approving transactions►Mar. 21, 2014 – Close transactions; APA Amend No. 2
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Solution = Test the Market (REIQ)
►City issued Request for Expressions of Intereston February 14, 2012
►Meetings with Respondents (March 5 and 12):
►Concepts gleaned from the REI► Efficiencies of combined operations► Potential rate mitigation► Benefits from economies of scale
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Request for Proposals
►Up-to-date, well-run system►Request for Proposals issued April 17, 2012►Respondents registered to bid by April 20, 2012►Mandatory tour of selected Utility facilities and meetings for
all Proposers on May 2nd - May 3rd ►Questions and Answers
► May 7: Q&A #1 – (not required/scheduled) Emailed responses to oral questions asked by Proposers during tour of Utility facilities
► May 21: Q&A #2 –Emailed responses to all written questions submitted via email by the Proposers
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Request for Proposals
►Established due diligence portal and gave password protected access upon request to all Proposers who registered
► continued to update during process
►City established open webpage for the transaction, posted the RFP, Exhibits, Appraisal and other important documentation
► also continued to update during process► transparency/public access to information
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Evaluation Process for Proposals
►May 25, 2012 – Proposal Due Date
►May 25-June 22: Evaluation Committee review Proposals► To maintain confidentiality, Evaluation Committee members spent
multiple hours at Faegre Baker Daniels office to review Proposals► June 14-15: Evaluation Committee, plus technical consultant,
interviewed the three finalists► June 20: Evaluation Committee met with two respondents to
clarify regional water supply strategy
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Negotiation of Transaction Documents
►Six Primary Deal Points Emphasized:► Targeted net proceeds of $50 million from transaction► City needed to cover $1.7 million (decreasing amount) gap created by
sale of utilities via replacement PILOT► City needed some rate mitigation► Quality Customer Service/Community Support► Access to water► Retained rights of City
► Restraint on transfer of assets► Periodic reports to City► Coordination with City on water conservation measures and
communications
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Side-by-Side Asset Purchase Agreements
►Sliding purchase price based upon net asset value►Excluded assets:
► Aquifer► Lagoon (option)► Public works building► Cell tower antenna agreements
►Billing for trash►Public Safety Training Academy Property►No sale of Utilities, subject to buyer’s lender’s rights
► 10 years► City right of first refusal after 10 years
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Statutory Approval Process
►August 30, 2012: ► File ordinance providing for the sale of the Water Utility and Wastewater
Utility with the Council► Publication of notice of public hearing on the proposed sale of the Water
Utility and the Wastewater Utility►October 8, 2012 – Council meeting to:
► hold public hearing on the ordinance providing for the sale of the Utilities► adopt ordinance authorizing the sale of the Utilities
►November 16, 2012► Execute utility purchase agreements (subject to IURC approval)
►November 20, 2012: File petition for IURC approvals
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IURC Process
►Each buyer would be regulated utility►IURC Issues:
► Public convenience and necessity► Reasonableness of purchase price (appraisal $74 million;
purchase price $91 million)► Historical accounting treatment of contributions in aid of
construction (CIAC) from prior acquisition►March 21, 2014 – closing; amendments to purchase
agreements necessary to incorporate IURC Order and other changes in deal
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Outcome: Infrastructure Improvements
►Online survey via Facebook and the City’s website to gather citizen feedback on infrastructure improvements
34%
26%
15%
10%
5%
3%
4%
3%
873 totalvotes
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Assurances
►Quarterly reports to Westfield Council; regular updates to WeCAN
►Service Advisory Board►Indiana Utilities Regulatory Commission oversight►Indiana Office of Utility Consumer Counselor►Results:
► Accountability► Quality► Reliability
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Community BenefitsInvestments Supporting Westfield’s Growth
►Commitment to Westfield utility system investments
►Capital investment synergies provide supply security and efficiencies to support Westfield growth
►Rate of return allows new owner to invest in system and community
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Community Benefits Mitigating Rate Increases
►Affordable rates based on Westfield’s needs, not needs of Indianapolis
►16 percent smaller rate increases by year 2020 compared to City ownership
►State oversight of rates
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Lessons Learned
►Start political process/public meetings as early as possible (we did; it helped)
►Know your potential partner’s needs
►Don’t plan schedule around regulatory approval; it could take longer than you think
►Be prepared for partner’s failure to meet high expectations after close; its normal, work together
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Questions?
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