CITY OF HIALEAH REVERSE OSMOSIS WATER TREATMENT PLANT United States Conference of Mayors Mayors Water Council 2008 Water Summit Palm Beach, Florida November 19-20, 2008 CITY OF HIALEAH REVERSE OSMOSIS WATER TREATMENT PLANT Honorable Julio Robaina Mayor City of Hialeah, FL Eric Petersen Partner Hawkins Delafield & Wood LLP New York, NY

THE HIALEAH REVERSE OSMOSIS WATER TREATMENT PROJECT Honorable Julio Robaina City of Hialeah, Florida

THE PROJECT 10 MGD, Expandable to 17 MGD 14 Wells Brackish Groundwater Floridan Aquifer

DRIVERS Develop Newly Annexed Area Joint Effort With Miami – Dade County SFWMD Water Supply Policy Alternative to Biscayne Aquifer Top City Priority

CITY/COUNTY ROLES Joint Participation Agreement 50-50 Project Ownership City Procures and Contracts Joint Board Oversees

FUNDING 50-50 Capital Contribution Bond Financed 50-50 O & M Share $6 Million State Grant

CITY/COUNTY TEAM Mayor – Julio Robaina Public Works Director – Armando Vidal OMB Director – Alex Vega City Attorney – Bill Grodnick County Liaison – Ralph Terrero

CONSULTANT TEAM R.W. Beck – Procurement Parsons – Technical First Southwest – Financial Hawkins – Legal (Contract) Holland & Knight – Legal (Permitting)

PROCUREMENT Request for Expressions of Interest (RFEI) – Issued Request for Qualifications (RFQ) – Issued Request for Proposals – Planned “Best Value” Proposal Will Be Selected

BLUE RIBBON COMMITTEE Five Members from Public Varied Expertise Evaluates RFQ, RFP Responses Ranks Firms Assists Mayoral Recommendations to Council

RFQ RESPONDENT Five Teams Industry Leaders  Ambient Technologies (Israel)  American Water (US) – Pridesa (Spain)  Befesa (Spain)  Inima (Spain) – AECOM (US)  Veolia (US) – CDM (US)

SELECTED FIRMS Highest Ranked by Committee Mayor Recommended, Council Approved  American – Pridesa  Inima – AECOM  Veolia – CDM

STATUS Preliminary Permitting Activity Test Well Drilling Imminent Pilot Testing Planned RFP Being Developed

JPA TIMETABLE RFP Issuance – Spring, 2009 Proposals Due – Summer, 2009 Contractor Selected – Fall, 2009 Construction Commences – Early 2010 Operation Commences – February, 2011

WHY DESIGN BUILD OPERATE FOR HIALEAH? Hawkins Delafield & Wood LLP WHY DESIGN BUILD OPERATE FOR HIALEAH? Eric S. Petersen Partner Hawkins Delafield & Wood LLP New York, NY

HAWKINS PERSPECTIVE Public/Private Partnership (P3) transaction attorneys Special Counsel to governmental owners National public contracts and finance firm Work actively with city and county attorneys

TRADITIONAL CONTRACTING Design-Bid-Build Public operations Governmental obligation municipal bonds (revenue or tax secured) Design, construction, operation and financing all separate functions with separate contracts

DBO UNIFIES RESPONSIBILITY Comprehensive asset development and management under a single contract Strong parent company guaranty One contractor deals with all subs and equipment suppliers Avoids the cost and risk of disputes between the designer, builder and operator Easier administration

DBO INDUSTRY TRENDLINES Extensive use in the private sector Cooperation among participants Life-cycle cost perspective Consistent success 5-20% savings against “benchmark” “Faster, better, cheaper” Growing acceptance nationwide

DBO ACHIEVES Accelerated project delivery Cost savings to the City and County Price certainty Guaranteed performance Substantial risk transfer

DBO SAVINGS Sources of savings: Preventative v. breakdown maintenance  Core competency  Competition as to design  Competition as to operation  Cooperative relationship between designer, builder, and operator  Smaller contingency allowances  Bulk consumables buying power  Broader technology access Preventative v. breakdown maintenance Optimized balance between capital and operating costs

PERFORMANCE GUARANTEES Water treatment (quality) Water delivery (quantity) Production efficiency Maximum electricity utilization Price and schedule guarantees Performance incentives

RISKS RETAINED BY OWNER Owner’s risk under any delivery method:  Changes in law  Force majeure  Unusual raw water parameters  Pre-existing site and environmental conditions  Buried infra structure conditions  General price inflation

RISK TRANSER Design and construction risks:  Design liability  Completion risk (delay and efficacy)  Construction cost overruns  Disputes between designer and builder Operation and maintenance risks:  O&M cost overruns  Regulatory compliance  Capital maintenance

EARLY PRICE CERTAINTY Traditional DBO  Owner design costs 8-10% of construction cost  Costs unknown until 100% design  Bidder’s price may exceed engineer’s estimate  Project may be delayed or re-designed DBO  Owner design costs 1-3% of construction cost  Proposers design to level necessary to guarantee price  Owner obtains early price guarantee for low cost

CITY RETAINED RIGHTS Ownership of assets Ownership of water system revenues Setting user rates Capital planning Bond financing (tax-exempt) Securing site and rights-of-ways Obtaining water rights Obtaining grants and subsidies

HIALEAH’S SELECTION OF DBO Clear legal authority (state law, municipal code) No existing water treatment plant workforce Aggressive implementation schedule Life-cycle cost perspective Shifts performance risk Lower NPV cost than traditional contracting Viable in contractor market

DB/DBO SUCCESSES - WATER Seattle, WA (120 mgd) San Diego County Water Authority (100 mgd) Phoenix, AZ (80 mgd) Tampa Bay Surface Water Project (80 mgd) San Juan Capistrano, CA (Desalination) (10 mgd) Santa Fe, NM (15 mgd)

INGREDIENTS FOR SUCCESS Initial strategic planning and development Thoughtful, well developed RFQ/RFP Creative and responsive proposals Clear and comprehensive Service Contract Full proposer due diligence opportunity Fair and balanced risk allocation Outstanding leadership

THANK YOU Honorable Julio Robaina Mayor Hialeah, Florida and Eric Petersen Hawkins Delafield & Wood LLP New York, NY 10005