Assessment of Reconstruction Costs and Debt Management

Transcription

Assessment of Reconstruction Costs and
Debt Management for Wastewater Utilities
Affected by Hurricane Katrina
Water Environment Federation
601 Wythe Street
Alexandria, VA 22314
www.wef.org
2006
Assessment of Reconstruction Costs
and Debt Management for
Wastewater Utilities
Affected by Hurricane Katrina
Prepared for Water Environment Federation
by
Black & Veatch Corporation, Overland Park, Kansas
2006
WEF
Assessment of Reconstruction Costs and Debt Management for Wastewater Utilities Affected by Hurricane Katrina
WEF
Improving Water Quality for 75 Years
Founded in 1928, the Water Environment Federation (WEF) is a not-for-profit technical and educational organization with
members from varied disciplines who work toward the WEF vision of preservation and enhancement of the global water
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601 Wythe Street
Alexandria, VA 22314-1994 USA
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http://www.wef.org
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All Rights Reserved.
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Table of Contents
Contents
Chapter 1
Executive Summary..................................................................................................................................................5
Chapter 2
Wastewater Collection Systems and Treatment Plants:
Overview and Findings ............................................................................................................................................7
Chapter 3
Wastewater Utility Financial Operations:
Overview and Findings...........................................................................................................................................13
Chapter 4
Recommendations..................................................................................................................................................16
Appendix A
Methodology...........................................................................................................................................................18
Appendix B
Bibliography............................................................................................................................................................23
2006
Acknowledgments
Principal investigators of the report were
Christy Cooper, Black & Veatch*, Kansas City, Missouri
Bill Davis, Black & Veatch, San Antonio, Texas
James H. Clark, Black & Veatch, Los Angeles, California
Additional content and review was provided by
Edward H. McCormick, East Bay Municipal Utility District, Oakland, California
(Chair of the WEF review panel)
Lynne E. Chicoine, West Yost & Associates, West Linn, Oregon
Scott Cummings, City of Auburn, Water Resources Management Department, Alabama
Rich Cunningham, City of Albany, California, Public Works Division
John Daniel, Powell Goldstein, L.L.P.
Jim DeLony, Collier County Public Utilities
David A. Flowers, Natural Water Solutions, L.L.C., Cedarburg, Wisconsin
Barton G. Jones, Strand Associates, Madison, Wisconsin
Terry L. Krause, Earth Tech, Inc., Chicago, Illinois
Peter LaMontagne, The Centrifuge Guys, New Britain, Pennsylvania
Mardane R. McLemore, Hampton Roads Sanitation District, Virginia Beach,
Virginia
Trille C. Mendenhall, Charlotte-Mecklenburg Utility Department,
Charlotte, North Carolina
George A. Raftelis, Raftelis Financial Consulting, Charlotte, North Carolina
Eric P. Rothstein, CH2M Hill, Wimberley, Texas
John E. Salo, Brown and Caldwell, Andover, Massachusetts
Jamal Y. Shamas, URS Corporation, Baton Rouge, Louisiana
Edward O. Wagner, CH2M Hill, New York, New York
Charles H. Williford, Williford Gearhart & Knight, Inc., Canton, Mississippi
The following individuals and organizations supported this
project:
Agencies and Associations
Alabama’s Water Environment Association
Kansas Water Environment Association**
Louisiana Department of Environmental Quality
Louisiana Water Environment Association
Mississippi Department of Environmental Quality
Mississippi Water Environment Association
U.S. Environmental Protection Agency, Office of Wastewater Management
U.S. Environmental Protection Agency, Region 4 and Region 6
Field Investigators
John Borowski, Kansas City, Missouri
Joe Botinelly, Wichita, Kansas
Christy Cooper, Kansas City, Missouri
Bill Davis, San Antonio, Texas
Chuck Duncan, San Antonio, Texas
Kurt B. Haunschild, Oakland, California
Dale Howard, Ottawa, Kansas
Teresa Loar, Kansas City, Missouri
Elizabeth Rodgers, Kansas City, Missouri
James H. Stuit, Lawrence, Kansas
Page Surbaugh, Merriam, Kansas
Philip Topek, Houston, Texas
Ashok Varma, Dallas, Texas
Michael Welch, Topeka, Kansas
Tommy West, Columbus, Georgia
Private Companies
Telephone Surveyors
Joe Botinelly, Wichita, Kansas
Barbara Collins, Fountain Valley, California
Philip A. Friess, Whittier, California
Amar Sidhu, Oakland, California
Krista Smith, Montgomery, Alabama
James H. Stuit, Lawrence, Kansas
Philip Topek, Houston, Texas
Charles B. Turhollow, Los Angeles, California
Charlene Wachs, Montgomery, Alabama
Utilities
City of Los Angeles, California
Columbus Water Works, Georgia
County Sanitation Districts of Los Angeles County, California
East Bay Municipal Utility District, California
Montgomery Water Works And Sanitary Sewer Board, Alabama
Orange County Sanitation District, California
The following utilities hosted field visits and/or responded to
telephone surveys:
City of Beaumont, Louisiana
City of Bogalusa, Louisiana
City of Collins, Mississippi
City of Columbia, Mississippi
City of Covington, Louisiana
City of Hattiesburg, Mississippi
City of Lumberton, Mississippi
City of Picayune, Mississippi
City of Slidell, Louisiana
City of Westwego, Louisiana
Fairhope Public Utilities, Alabama
Gulf Shores Utilities, Alabama
Harrison County Wastewater and Solid Waste Management District,
Mississippi
Mississippi Gulf Coast Regional Wastewater Authority, Mississippi
Mobile Area Water & Sewer System, Alabama
Severn Trent and Plaquemines Parish, Louisiana
Sewerage & Water Board of New Orleans, Louisiana
St. Charles Parish, Louisiana
Cities, utilities, and parishes generously provided access to
and information about their facilities. At the time of the field
visits, utility staff who hosted field investigators worked
overtime to repair facilities and ensure the well-being of their
employees, many of whom lost their homes and were still
sleeping in temporary quarters. The investigators, volunteers,
Water Environment Federation, and Black & Veatch are deeply
grateful for their time and wish them continued strength in the
effort to rebuild their homes, lives, and communities.
* Black & Veatch designed the study, oversaw the field
research, and drafted this report.
** Kansas Water Environment Association provided grant
funding to support field investigations.
BRB Contractors, Kansas
Wade & Associates, Texas
Executive Summary
Chapter 1
Executive Summary
The provision of public sanitation—that is, collection and
treatment of wastewater from homes, offices, schools, and
other enterprises—combined with sound hygiene behaviors
significantly reduces infectious disease. The World Health
Organization estimates that, in countries with inadequate
water management, improved sanitation can reduce diarrheal
morbidity and mortality by 32%.
Databases provided by the U.S. Environmental Protection
Agency (U.S. EPA) and states revealed that 118 wastewater
utilities serving approximately 1.8 million people were affected
by the hurricane. A sample group of 25 utilities was assessed
for the infrastructure portion of this report. Field investigators
visited 19 facilities, and telephone surveyors gathered
information from an additional six utilities. Results were
categorized by damage zone and treatment plant type and used
to develop average costs, which were then applied to all 118
utilities.
Hurricane Katrina devastated wastewater utilities that provide
essential services to residential and commercial interests. The
long-term effect on these utilities is of great concern to local,
state, and federal officials. The purpose of this report is to
provide
1. An explanation of the nation’s complex wastewater collection and treatment infrastructure (Chapter 1) and a description of typical financing mechanisms used to fund these
costly assets (Chapter 2);
2. An objective assessment of the damage to wastewater utilities, including both infrastructure losses (Chapter 1) and
long-term financial solvency issues related to a decline in the
population rate base and the consequent reduction in utility
revenues (Chapter 2); and
3. Recommendations for additional recovery assistance for
Hurricane Katrina-affected wastewater utilities and changes
to improve future disaster relief processes (Chapter 3).
The study generated additional findings and observations
beyond the original project scope. While some of these findings
are anecdotal and may require further study, they are of interest
to the wastewater sector and are, therefore, provided herein.
Background and Participants
This report is the result of a pro bono study by Black & Veatch
for the Water Environment Federation. Utility and corporate
volunteers, federal and state agencies, and water environment
associations provided assistance to the study. Numerous
utilities from Louisiana, Mississippi, and Alabama helped
investigators understand and assess Hurricane Katrina-related
damages.
Scope and Methodology
The goal of this project was to provide a general assessment
of infrastructure damage to treatment plants and collection
systems as well as an estimate of the effect on the financial
stability of utilities that lost a significant portion of their
rate base. The range of the assessment includes all affected
wastewater utilities in Louisiana, Mississippi, and Alabama.
The intent was to include only those costs associated with
Hurricane Katrina damages; however, if utilities were affected
by both Hurricane Katrina and Hurricane Rita, it was difficult to
distinguish costs and the assessment may include some costs
related to the latter.
The basic methodology used to develop the assessment of
infrastructure damage was to review damage to a sampling of
utilities in each of three damage zones and then extrapolate this
information across all affected utilities. The three damage zones
were defined as those subject to storm surge, flood, and winds
of 100 miles per hour or more.
2006
Satellite imagery of Pascagoula, Mississippi, shows the destructive nature of a storm surge
that hit three states. Uprooted populations translate into reduced revenues for utilities (photograph courtesy of National Oceanic and Atmospheric Administration).
To estimate the financial effect on utilities, a model was
developed using a National Association of Clean Water Agencies
(NACWA) 2005 financial survey. Investigators used NACWA
data to estimate various categories of revenue and expense
on a per person served basis. Population served estimates
from the U.S. EPA database were then factored by the average
revenue and cost data to develop a financial statement for
all wastewater utilities in the surge area. The resulting model
allowed investigators to assess the effect of revenue reductions
on wastewater utilities’ financial solvency.
A full discussion of the methodology used to assess both the
infrastructure losses and effect on revenues is provided in
Appendix A.
Findings
Most of the damage to wastewater utilities was in surge zones,
where administration buildings, maintenance buildings, chemical storage facilities, and electrical and control systems experienced catastrophic damage. Reinforced concrete structures
associated with the treatment units typically experienced only
minor “cosmetic” damage. Further, cities affected by the surge
lost 25 to 80% of their population. The study estimates that
445 000 people in the surge damage zone, including New
Orleans, lost homes. This will result in reduced revenues for
the utilities that serve these populations. Though all utilities
expressed optimism that they would not default on bonds, it is
clear that some will require support beyond currently available
grants if they are to cover operating costs, debt service, and
maintenance and capital expenditures.
the treatment plants and individual lift stations. Costs were
based on January 2006 prices and excluded inflation, though it
should be noted that construction material costs may increase
substantially as rebuilding efforts advance.
The total assessment of the effect of Hurricane Katrina on
wastewater utilities approaches $1.4 billion. The cost to repair
and rebuild wastewater utilities in the study area was estimated
at $1.2 billion. This estimate is for treatment plant and
collection system infrastructure only. The effect on wastewater
utilities of the decreased revenue base was estimated at
approximately $163 million.
While the study was not designed to assess costs by state, it
was recognized that lawmakers would be interested in this
information. Table 1 provides an estimate of costs by state.
Louisiana makes up 78% of the total approximate cost of $1.4
billion. Mississippi accounts for 18% and Alabama accounts for
approximately 4%.
Recommendations
Federal government
1. Monitor wastewater utilities’ fiscal health and provide relief,
if necessary;
2. Provide a greater role for U.S. EPA in managing and coordinating federal postdisaster recovery efforts for wastewater
utilities;
3. Provide access to the best information available;
4. Provide guidance on federal funding sources and grant application processes; and
5. Provide technical assistance and information to help wastewater utilities rebuild for the future.
State government
1. Monitor wastewater utilities’ fiscal health and, if necessary,
provide relief, and
2. Institute mutual aid compacts with neighboring states.
The Sewerage & Water Board (S&WB) of New Orleans’ East Bank Wastewater Treatment
Plant shortly after Hurricane Katrina (photograph here and cover courtesy of S&WB).
Local communities and wastewater utilities
1. Promote mutual aid compacts;
2. Rebuild only as necessary to meet revised population estimates;
The assessment excluded inflationary pressures and
administrative costs that would typically be borne by federal
and state governments overseeing grant processes. Also
excluded were any exceptional costs associated with the
Sewerage & Water Board of New Orleans’ consent decree related
to its sewerage system.
3. Apply funding received in a manner consistent with revised
hurricane and flooding risks; and
The infrastructure portion of the assessment included
engineering, construction, legal, and administrative costs
associated with repair and replacement of infrastructure. It
excluded operational and temporary repairs that occurred
before field investigations in November, as well as any costs
related to on-site power generation and power distribution to
1. Offer training and technical assistance for wastewater utilities’ emergency preparedness;
4. Ensure adequate planning and preparedness for future hurricanes (in particular, relocate assets away from coastline
when feasible).
Wastewater sector
2. Promote mutual aid compacts;
3. Develop best practices for emergency preparedness and
response;
4. Develop best practices for system design to withstand highcategory hurricanes; and
5. Continue to highlight the value of wastewater infrastructure.
Private financial sector
The private financial sector should provide financial relief
to communities, if necessary, so that communities can avoid
default. Wastewater utilities that lost a significant number of
ratepayers may be at risk of default on debt service obligations
held before Hurricane Katrina. This situation should be closely
monitored and, if necessary, bond holders should work with
communities to reschedule debt obligations to avoid default as
a result of ratepayer base loss.
Wastewater Collection Systems and Treatment Plants: Overview and Findings
Chapter 2
Wastewater Collection Systems and Treatment Plants:
Overview and Findings
The provision of public sanitation—that is, collection and
treatment of wastewater from homes, offices, schools, and
other enterprises—combined with sound hygiene behaviors
significantly reduces infectious disease. The World Health
Organization estimates that, in countries with inadequate
water management, improved sanitation can reduce diarrheal
morbidity and mortality by 32%.
It is important for policymakers to understand the value and
complexity of the nation’s wastewater systems and the critical
issues related to infrastructure repair and replacement after
a catastrophic event such as Hurricane Katrina. This section
provides a general description of the nation’s wastewater
infrastructure, the effect of hurricanes on this infrastructure,
and the cost of rehabilitation and replacement of damaged
infrastructure as a result of Hurricane Katrina.
Wastewater Infrastructure: A Vast Network Quietly
Working
In the United States, a century of effective wastewater treatment
has protected the country from diseases such as cholera and
typhoid. Much of the population takes this essential public
service for granted, not appreciating the expansive—and
expensive—network of pipes, lift stations, and treatment
facilities that protect human health. Wastewater treatment
plants remove contaminants that would otherwise spread
serious disease among humans and animals and severely
damage aquatic ecosystems in receiving waters. Modern
treatment plants may include advanced treatment process
trains, chemical plants, laboratories, on-site power generation,
and supervisory control and data acquisition systems.
Each large U.S. city has billions of dollars worth of infrastructure
dedicated to wastewater treatment. Wastewater is collected
from residences, businesses, schools, government offices,
and other enterprises through a vast network of underground
pipes, which are referred to as the collection system. Three- to
four-inch-diameter pipes at residences and businesses connect
to larger pipes as the wastewater is collected throughout a
community. Collection systems rely on gravity and pumping
stations to transport the wastewater to one or more treatment
plants, typically located in lower lying areas near streams,
rivers, or lakes.
Wastewater entering the plant, or influent, goes through basic
or primary treatment. It is then typically subjected to a higher
level of treatment, commonly referred to as secondary treatment,
and may be subject to tertiary treatment before it is safely
reintroduced to the environment. Treated wastewater flowing
out of the plant is termed effluent.
and 30% of organic
matter is removed
during primary
treatment.
Secondary
treatment includes
a biological process
that treats the
organic matter that
was not eliminated
during primary
treatment. The
process removes
a large portion of
Above: Damage to chemical feed building (green line indicates
the suspended
high water mark). Below: Damaged pumps (Pascagoula,
matter and
Mississippi).
organic material
(secondary
treatment is
typically defined
as removal of 85%
of the biochemical
oxygen demand).
This step
relies upon a
concentration of
microorganisms
already present
in the wastewater
to consume the
organic matter,
thereby removing it from the influent stream. Infrastructure
used to achieve secondary treatment includes aerated lagoons,
aeration tanks, and trickling filters.
Tertiary, or advanced, treatment may include filtration,
reaeration to add dissolved oxygen, and/or the removal of
nutrients such as nitrogen and phosphorus. Filtration is used to
remove additional suspended solids that could otherwise cause
environmental degradation in the receiving stream. Reaeration
provides additional dissolved oxygen to the receiving stream
and additional biological treatment. Nutrient removal can be
accomplished biologically or through the addition of chemicals
to the wastewater stream. Tertiary treatment is more expensive
than secondary treatment but provides for a higher level of
effluent quality.
Before effluent is discharged to a receiving stream, it undergoes
disinfection, typically via chlorination or ultraviolet radiation.
Typically, effluent permit requirements can be met with a
combination of primary and secondary treatment. Most of
the wastewater plants surveyed in Mississippi, Louisiana, and
Alabama consisted of secondary treatment processes.
As part of each treatment process, solids are removed from
the liquid stream and treated and stabilized before disposal.
After treatment, solids may be dewatered or subject to other,
more-expensive processes such as incineration. Solids are then
transported to landfills or safely recycled. A schematic of these
treatment processes is shown in Figure 1.
Hurricane Katrina
Primary treatment consists of solids removal, typically through
screening and settling. Approximately 50% of suspended matter
Hurricane damage primarily results from flooding, high winds,
and storm surge. Storm surge is commonly defined as a “dome
2006
A hurricane is defined as a low-pressure weather cell of tropical
origin with wind speeds in excess of 73 mph. In the United
States, hurricane intensity and likely damage is determined
based on the Saffir-Simpson Hurricane Scale (Table 2).
a category five, making
landfall as a category
three or four hurricane
in Plaquemines
Parish, Louisiana, at
approximately 7:00 a.m.
Eastern Daylight Time on
August 29, 2005.
FIGURE 1: WASTEWATER TREATMENT PLANT SCHEMATIC
Though the intensity of
Hurricane Katrina was
downgraded before making
landfall, the hurricane’s
storm surge is estimated
to be the highest in
U.S. history. Official
statistics from the Federal
Emergency Management
Agency currently indicate
surges of 15 to 25 ft
extending from Louisiana
to Alabama and inundating
the entire gulf coastline of
Mississippi. Large tracts of
low lying land in Louisiana
were inundated by storm
surges higher than 20 ft.
of water” that builds up in association with a hurricane. The
difference between the height of the dome of water and the
normal tide level is the surge height. Typical storm surges can
be 50 or more miles wide and 10 ft high. Storm surges can cause
devastating damage and most hurricane-related deaths are
caused by storm surge. Details on the storm surge related to
Hurricane Katrina became very important to the results of this
study and are discussed later in this chapter.
Official statistics about a hurricane can change for up to 1 year
or more after the event. At the time of this study, Hurricane
Katrina was widely regarded as the costliest hurricane to hit
the United States. At peak intensity, the hurricane reached
Three weeks after
Hurricane Katrina, another
category five hurricane
formed in the Gulf of
Mexico. Hurricane Rita lost
strength before making
landfall on September 24,
2005, with wind speeds
of 120 mph. Hurricane
Rita’s trajectory was west of Hurricane Katrina’s; nonetheless,
there was some overlap and some areas were affected by both
hurricanes.
This study focuses on the effect of Hurricane Katrina only. Some
utilities were affected by both hurricanes. For those utilities, it
is difficult, if not impossible, to separate damages from the two
hurricanes. To the extent that those utilities were included in
the sample set, damages from Hurricane Rita may be included in
the cost estimates.
Findings
Hurricane Katrina’s storm surge caused catastrophic damage
to residential and industrial infrastructure, which will affect
utilities’ future revenue. The storm surge caused extensive to
extreme infrastructure damage to wastewater utilities. Flooding
also caused extensive to extreme damage, whereas wind caused
minimal damage to utility facilities.
This study investigated the damage to utilities in the “study
area”, which is defined as those regions in Louisiana,
Mississippi, and Alabama that experienced any of the following
types of damage from Hurricane Katrina:
1. Storm surge,
2. Flooding, and/or
FIGURE 2: 15-TO-25-FOOT SURGE (IN RED) IMPACTS THREE STATES
3. Peak wind gusts equal to or in excess of 100 mph.
Damage in the surge zone was found to be the most severe,
followed by flood and then wind. Early in the study, it became
clear that most of the damage would be in the surge zone; thus,
investigators paid close attention to the mapping of the surge
damage zone. The resulting storm surge map is shown in Figure
2. This map is not a final map of storm surge, but rather an
estimate required to complete the assessment. A full map of the
study area is presented in Appendix A.
According to U.S. Environmental Protection Agency (U.S. EPA)
databases, 118 wastewater utilities were located within the
study area. Of these, 19% were in the surge zone, 7% were in
the flood
zone, and the
remaining
utilities were
in the highwind-only
zone (any
facility that
experienced
multiple
types of
damage was
assumed
to be in the
2006
most severe category). The damage in New Orleans was found
to be consistent with storm surge damage, so its East Bank
Wastewater Treatment Plant, the largest plant in the study area,
was placed in the surge category.
The 118 utilities in the study area served approximately 1.8
million people with a combined treatment capacity of 424 mgd
and a total collection system length of approximately 9600 miles
(Table 3).
Investigators performed field and telephone surveys of 25, or
21%, of the facilities in the study area (Table 4). As expected,
damage to the treatment infrastructure varied depending on
the type of effect from the hurricane: surge, flood, or wind.
Characterization of infrastructure damage in each segment
was consistent across the segment; that is, surge damage was
similar at all treatment plants and collection systems visited
and likewise for flood and wind damage.
Cost Effect
Order of magnitude costs were developed to quantify the
damage in the study area. The total cost of damage to
wastewater treatment plant and collection system infrastructure
in the study area was estimated to be $1.2 billion, split almost
evenly between wastewater treatment plants and collection
systems.
The $1.2 billion figure represents the effect on infrastructure
from the
hurricane
and excludes
infrastructure
investment
needs that
existed before
the hurricane.
It includes
engineering,
construction,
legal, and
administrative costs associated with repair and replacement
of the infrastructure. Though high levels of inflation may
reasonably be expected as rebuilding efforts proceed, the actual
inflation rate is difficult to predict. Therefore, the assessment is
based on January 2006 costs.
Excluded from the assessment are administrative costs that
would typically be borne by federal and state governments
overseeing grant processes. Also excluded are operational and
temporary repairs that occurred before field investigations in
November and any costs related to on-site power generation
and power distribution to the treatment plants and individual
lift stations.
The assessment indicates that 51% of the cost damage was
related to treatment plants and 49% to collection systems.
Storm surge caused 83% of the damage, while flood and wind
caused 9% and 8%, respectively. Tables 5 and 6 present this
breakdown by state.
During field visits, investigators were surprised that damage
was not more extensive. In particular, concrete structures at
the treatment plants withstood the surge and the underground
portion of the collection system required fewer than expected
point repairs.
Typically, it is challenging, time-consuming, and costly to
estimate damage to collection systems. Under the constraints of
the study, it was possible to investigate only a small portion of
the collection systems. While there is perhaps greater uncertainty
surrounding this portion of the assessment, investigators found
considerably less damage to collection systems than had been
expected.
Port Sulphur Wastewater Treatment Plant’s concrete structure (background) only suffered
minor damage, whereas the steel structure in the foreground was destroyed. This was
typical of much of the damage seen in the surge zone (Plaquemines Parish, Louisiana).
Damage to treatment plants and collection systems is
characterized below by damage segment. Following this is a
section on anecdotal findings related to how utilities may better
prepare for disasters such as Hurricane Katrina.
Plant Infrastructure
The Sewerage & Water Board of New Orleans (S&WB) has a
consent decree with U.S. EPA covering rehabilitation of its sewer
system. At the time of this study, the S&WB reported recently
completing a $30 million sewer system evaluation study,
which may now have to be repeated. These and other costs of
complying with the preexisting consent decree are not included
in the $1.2 billion assessment.
10
Treatment plant infrastructure assessed included liquid and
solids process trains (basins, trickling filters, lagoons, etc.),
administration buildings, chemical plants, laboratories, and
instrumentation and electrical and control systems. Damage to
treatment plants is characterized by damage zone below.
WIND. Treatment plants in the wind-only zone primarily
sustained damage to roofs, doors, windows, and metal
buildings. Building interiors suffered water damage consequent
to roof impairment.
mostly cosmetic. Other structures experienced severe damage.
Most administration buildings, maintenance buildings, and
chemical storage facilities were destroyed.
Mechanical equipment required cleaning and lubrication as
well as protection against corrosion associated with salt water
immersion. It is anticipated that mechanical equipment will
need to be replaced.
Electrical and control systems experienced extensive damage.
Many of these systems were not operable during field visits.
Collection System Infrastructure
Collection system infrastructure assessed consisted of sewer
lines, interceptors (large sewer lines), lift stations, and force
mains. Damages are characterized below by damage zone.
Above: Power had been restored to this lift station by the time investigators assessed it
in November 2005. Below: Maintenance holes were opened as part of the inspections
(Bogalusa, Louisiana).
WIND. Wind caused little direct damage to the collection system
Equipment and electrical damage at Biloxi’s Wastewater Treatment Plant (Harrison County,
Mississippi).
FLOOD. Flood zones typically experienced high wind and flood
waters less than 4 ft deep. Structural damage to treatment
plants in flood zones was minimal. Interior walls; flooring; and
building heating, ventilating, and air conditioning systems
experienced water damage. Restoring required mechanical
equipment primarily involved cleaning and lubrication of all
moving mechanical parts.
The majority of damage was inflicted on the electrical and
control systems. Transformers, switchgear, cable, conduit, and
motors were submerged to varying degrees. Many of these
systems had undergone temporary repairs and were back
in operation at the time of the field visits, but investigators
expected that the equipment would have greatly diminished
remaining useful lives. Replacement of this equipment was
included in the study’s cost assessment.
Instrumentation and control panels experienced similar damage
and were also included in the costs for replacement.
SURGE. Coastal surge inflicted the greatest damage to treatment
infrastructure. Rapidly rising sea water, high winds, and salt
water flooding lasting from hours to weeks inflicted heavy
damage to treatment facilities.
Structural damage to reinforced concrete structures was
minimal and damage to basins/clarifiers and trickling filters was
2006
but did cause some consequential damage as roots of falling
trees damaged underground pipes, necessitating point repairs.
Wastewater flows were diminished as a result of the loss of
power and a small reduction in customer base, contributing
to increased accumulation of grit and solids in the collection
system and subsequent blockage. Little physical damage was
done to the pipelines.
11
FLOOD. Flooded areas experienced similar problems to those
seen in the wind-only areas. In addition, lift stations were
submerged, damaging electrical equipment. Increased grit
accumulation in the collection system will require cleaning.
tial services to an area used by early responders. In addition,
it required that the S&WB report discharge quantity and
characteristics such that U.S. EPA could monitor the situation and help develop a plan quickly to get treatment back
online. The AO was viewed as very effective by the S&WB.
SURGE. The greatest amount of damage to the collection
system was observed in areas that experienced surge. Service
connections to residences and businesses were particularly
affected. Damage to the customer base served by any one
wastewater treatment plant ranged from 40 to 100%; it is
estimated that the same percentage of service connections
were damaged. (Though not part of the cost estimates, utilities
reported repairing service connections twice as debris removal
was further damaging connections.)
Point repair requirements were greater than in flood and wind
zones, primarily because of damaged maintenance points and
greater uprooting of trees.
Lift stations experienced similar damage to that seen in flood
zones. Increased grit accumulation and subsequent blockage as
a result of all of these factors will be a considerable problem as
the communities revive and residents return to rebuild.
Additional Findings
The following anecdotal findings were incidental to the study
results but may be, nevertheless, important to future disaster
planning.
1. Numerous utilities reported going on standby generation
before the storm made landfall. This was done to prevent
voltage spikes and ensure that generators were working so
that utility workers would not have to manually activate
generators during the storm. For utilities that experienced
flood and surge, generators were ruined if they were running
at the time of the flooding. One utility’s generator failed to
activate; flooding occurred in a deenergized state, which
protected the electrical systems. Further study of best practices for preparing for flooding of electrical systems may be
warranted.
2. Utilities that had prior experience with hurricanes removed
lift station control panels before the storm and placed them
in safe storage. Trucks, tractors, and spare parts were also
vulnerable and needed to be protected.
3. Fuel supplies were heavily affected in surge zones and some
utilities were left without a fuel source. Redundancy in fuel
supplies should be an important component of disaster planning.
4. Communications were difficult even 2 months after the
storm. Utility personnel were issued cell phones in some areas. Utilities should be prepared for a prolonged loss of land
lines in the event of a disaster.
5. Utilities with hurricane experience understood that some
residents would ignore evacuation orders and planned accordingly. Some utility staff also ignored evacuation orders
and stayed at the utilities. Others were asked to stay by
senior management. Decisions on whether to keep critical employees in place were difficult and no clear answer
emerged. Some utility staff were trapped at the facilities and
had to be rescued. Other utilities may have fared better had
staff not been evacuated.
6. In New Orleans, Louisiana, U.S. EPA issued a protective
administrative order (AO) allowing the S&WB to bypass
wastewater treatment and discharge directly to the receiving
water. The AO was a legal mechanism that allowed the utility
to abide by the Clean Water Act while still providing essen12
Wastewater Utility Financial Operations: Overview and Findings
Chapter 3
Wastewater Utility Financial Operations: Overview and
Findings
Wastewater utilities in the surge region lost a significant
portion of their population rate base. This will result in reduced
revenues. Unfortunately, costs are not likely to decrease at the
same rate, and some utilities may have difficulties with longterm solvency. To protect public health, the financial health of
these utilities needs to be assured.
This chapter provides a general description of how utilities
finance assets and the issues faced when utility revenues
decline. It then provides an assessment of the minimum subsidy
that will be required to keep the utilities financially stable.
minimize monthly wastewater charges to households and
businesses (user charges) by spreading the cost of large capital
investments over a long period of time. Thus, communities pay
for facilities as they use them rather than one generation paying
for the next generation’s wastewater assets.
Utilities fund asset investment through excess cash flow and
by accessing long-term debt markets—low-cost revenue bonds,
lowest cost State Revolving Fund (SRF) programs, and other
federal financing programs. These are described below.
REVENUE BOND FUNDING. In the United States, many
wastewater utilities have become independent of enterprise
fund entities that bill their customers—households, businesses,
and so on—directly for services. Independence from general
municipal budgets reduces the revenue fluctuations that are
common to municipalities’ tax-based revenue streams during
the ebb and flow of economic cycles. Thus, billing users directly
for services allows publicly owned utilities to reduce their
“revenue risk”. Utilities can then minimize debt costs by issuing
long-term, tax-exempt revenue bonds to finance a significant
portion of their capital improvements.
When a utility issues bonds, it becomes the borrower.
Bondholders, or lenders, are effectively lending money to the
utility and being repaid at a specified interest rate and time period.
This satellite image of Gulfport, Mississippi, shows a debris field of approximately 500
yards inland. Much of the coast of Mississippi bears the same marking, indicating
significant loss of utilities’ population rate base (photograph courtesy of National
Oceanic and Atmospheric Administration).
Utility Funding
Water and wastewater utilities are the most capital intensive
of utilities (i.e., the ratio of capital dollars to revenue dollars
is high). Asset investment includes costs associated with
new capital improvement projects as well as treatment plant
upgrades and collection system replacement programs.
As effective sanitation is a key element of public health, a
wastewater utility’s basic and most important goals are to
(1) provide effective wastewater collection and treatment
that meets regulatory requirements and (2) ensure that these
services are affordable and available to all users within its
service area. This section provides an overview of how utilities
use bond financing to meet the latter goal. Concepts discussed
represent the “typical” case; in practice, funding for large
utilities may be notably more complex than for smaller and
midsized utilities.
Most wastewater utility assets are long-term in nature—
wastewater treatment plant structures have 25- to 50-year
lives and the collection systems (underground infrastructure)
have 50- to 100-year lives. Because of these extended lives,
the financial markets allow utilities to finance assets over a
20- to 30-year timeframe. Matching the duration of financing to
the anticipated life expectancy of the facilities helps utilities
2006
Repayment of the bonds, called debt service, includes
principal (borrowed amount) and interest payments. Most
municipal utility revenue bonds are tax-exempt, meaning that
bondholders/lenders do not pay taxes on the interest payments
they receive. These tax-exempt bonds command a lower interest
rate than private, taxable bonds, thereby lowering the cost to
the borrower/utility. Utilities further minimize interest rates on
the bonds by maintaining high ratings (given by independent
rating agencies such as Standard & Poor’s, Moody’s, and Fitch),
which indicate a lower risk of default.
As the name implies, revenue bond debt is secured, or
collateralized, by a utility’s revenues. Revenue bond agreements
include indentures, which are clauses in bond contracts that
bind borrowers’ future actions. Two common indentures
include minimum requirements for the debt service reserve and
debt coverage ratio.
The administration building at Port Sulphur Wastewater Treatment Plant (Plaquemines
Parish, Louisiana). All of the residences served by this plant were destroyed.
13
The debt service reserve requires that the issuing utility
maintain 12 months’ worth of debt service in a reserve fund.
This helps the utility make payments should it encounter a
short-term financial issue or problem. Use or reduction of the
debt service reserve may constitute a technical default on
the bonds because such a reduction is likely to indicate that a
utility’s revenues are not sufficient to meet operating expenses
and debt service payments. In practice, a lender may or may not
declare a technical default, depending on the utility’s long-term
financial outlook or availability of other financial guarantees to
reduce the lender’s risk.
The minimum debt coverage ratio requires that net operating
revenue (total revenue less operating and maintenance
expense) exceeds debt service by a certain factor (often 1.25).
This further protects the lender’s investment by ensuring that
utilities have sufficient cash flow to cover operating expense,
debt service payments, and maintenance of treatment and
collection system assets.
Some utilities also purchase bond insurance, which further
protects the lenders. Bond insurance improves bond ratings
and typically reduces the interest rate on the bonds. Until
recently, such bond insurance has been relatively inexpensive.
REVENUES/CASH FLOW. Revenue bond indentures typically
require that utilities apply revenues/cash flow first to meeting
operating and maintenance expenses, then to covering debt
service. Any remaining cash flow is typically reinvested in
system assets or applied to reserve funds. Utilities’ financial
planning includes evaluating future revenue streams relative
to projected expenses and debt service to ensure long-term
financial stability and compliance with bond indentures. In
addition, most publicly owned wastewater utilities are required
to have a user charge system in which such charges are at least
sufficient to pay for operations, maintenance, and equipment
replacement.
STATE REVOLVING LOANS. The Clean Water SRF is funded by
the federal and state governments and administered through
the states, typically by state environmental protection agencies.
The SRFs are similar to revenue bonds in terms of the pledge of
revenues for the repayment of the debt, the need to maintain
a certain debt service coverage ratio, and the requirement for
maintaining reserve funds.
Interest rates on these loans are typically lower than market
rates, saving utilities as much as 20% on financing costs.
However, total SRF funding is limited and utilities cannot rely on
SRFs for the majority of their borrowing needs.
U.S. DEPARTMENT OF AGRICULTURE. The U.S. Department
of Agriculture’s (USDA) Rural Utility Service provides loans,
guaranteed loans, and grants for wastewater facilities in
cities and towns up to 10 000 people and rural areas with
no population limits. To qualify, an applicant must be a
public entity and be unable to obtain needed funds from
commercial sources at reasonable rates and terms. Grants
may be provided when necessary to reduce user costs to
a reasonable level. Grants may cover a maximum of 75% of
eligible facility development costs. Loan guarantees may be
available for up to 90% of any eligible loss incurred by the
lender. Borrowers may take up to 40 years to repay these loans;
however, the repayment period cannot exceed the useful life
of the facilities financed or any statutory limitation on the
14
applicant’s borrowing authority. USDA loans use three interest
rates—poverty rate, market rate, and an intermediate rate—that
may or may not be higher than interest rates associated with
SRF loans. These interest rates are set periodically based on an
index of current market yields for municipal obligations. USDA
grants are limited and typically do not cover the entire cost of
wastewater utility projects.
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT—
COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM. The
U.S. Department of Housing and Urban Development (HUD)
provides loans and grant funding to communities to help pay
for infrastructure improvements associated with community
and economic development needs, including housing, water
and wastewater facilities, and other community facilities. The
Community Development Block Grant (CDBG) program provides
annual grants on a formula basis to 1180 general units of local
government and states. The annual CDBG appropriation is
allocated among states and local jurisdictions called “nonentitlement” and “entitlement” communities, respectively.
Entitlement communities are
composed of central cities
of metropolitan statistical
areas, metropolitan cities
with populations of at least
50 000, and qualified urban
counties with a population
of 200 000 or more
(excluding the populations
of entitlement cities).
States distribute CDBG
funds to non-entitlement
localities not qualified as
entitlement communities.
HUD determines the amount
of each grant by using a
formula composed of several
measures of community
need, including the extent of poverty, population, housing
overcrowding, age of housing, and population growth lag in
relationship to other metropolitan areas. These CDBG monies
are limited and used for many different community needs
and cannot be relied on by wastewater utilities as a primary
financing program.
Findings
Before commencing the study, investigators expected that there
would be declines in population in limited portions of the study
area. A significant element of the study design was to assess the
effect of the hurricane on the long-term financial solvency of
affected utilities.
Field visits revealed that utilities in the surge region lost a
significant portion of their population rate base and were
expecting reduced revenue from user charges. Some utilities
outside the surge area experienced the opposite—an increase in
population as people displaced from surge-affected areas sought
housing in nearby communities. These latter communities
needed to expand wastewater treatment plant capacity but were
debating whether the population would remain stable or decline
over the next few years. This section does not address the
issues associated with a rapid increase in population. Rather,
it is limited to utilities that may experience insolvency; namely,
those in the surge damage zone.
Population served data from U.S. Environmental Protection
Agency records, combined with the mapping of surge areas,
indicate that 645 000 people live in the surge damage zone.
Utilities estimated that 80% of the population of New Orleans
lost homes, while 25 to 60% of residents of other affected cities
lost homes. In all, it is estimated that 69% of the population,
or approximately 445 000 people
in the surge area, lost their homes.
Investigators’ observations of the
affected area support the magnitude
of this number.
Employees lost homes at roughly
the same rate that utilities lost users.
However, fewer wastewater utility
employees seem to have left the region
than the general population. For two
utilities surveyed, employment levels
dropped by approximately 35 to
55% of the decline in population. Not
surprisingly, utilities are projecting lower
labor costs, primarily through attrition.
Utilities have high fixed costs, however,
and operating and maintenance
expenses are expected to decline at a
lower rate than revenues.
Over the next few years, debt service requirements will not
decline noticeably because utilities have committed to principal
and interest payments far into the future. Though utilities
expressed optimism that they will meet debt service payments,
some have already tapped into debt service reserves. Without
additional support, some utilities may default on debt service
payments in 2007. Alternatively, they may restructure debt to
repay it over a longer time period, but this will simply increase
the time period during which utilities will have to sacrifice
important maintenance and asset reinvestment and could lead
to dangerous deterioration of critical facilities.
Assuming that 10% of the population returns each year, it
is estimated that affected utilities will require subsidies of
approximately $163 million to maintain a 1.25 debt coverage
ratio. This does not include any allowance for repair,
replacement, or rehabilitation costs that are not covered by
the Federal Emergency Management Agency (FEMA); rather,
it assumes that 100% of the infrastructure damage estimate is
paid through grants (not loans). The financial assessment also
excludes inflation.
Subsidy estimates by state and by year are provided in Table 7
and Table 8.
Additional Findings
As in Chapter 2, incidental findings that may provide insights to
future disaster planning are provided here.
1. In surge and flood areas, a common experience was flood
damage to electronic and paper records. Many utilities were
unable to bill customers for 3 or more months. Utilities also
reported that they did not experience noticeable increases
in customer complaints; most people understood the difficulties faced by the utilities.
2. In the first week after the hurricane, many utility administration buildings were uninhabitable, yet utilities had to provide
emergency housing, medical aid, food, water, and sanitation
for displaced employees. Some employees had to be rescued. New leases were signed to provide a place for people
to work. Emergency telephones had to be staffed, Web sites
updated, cell phones issued, and employees located and
counted. Strong senior management was critical during this
period.
3. Along with the community in general, wastewater utility
employees suffered enormous personal losses. Utilities
exercised a high degree of flexibility in working with staff.
Though often declined, counseling services were offered. For
absentee employees, some utilities continued paying salaries
for weeks and one extended medical benefits, without pay,
for months. Most utilities welcomed employees back even
after long or sporadic absences.
4. Utilities reported that not all FEMA contractors were familiar
with wastewater utility infrastructure and its importance to
public health protection. In these cases, staff indicated their
belief that educating FEMA contractors added to the workload of already resource-strained organizations.
5. Utilities were further affected by their unfamiliarity with
FEMA guidelines. One reported that early recovery work was
not covered by grants because the utility had not specified
the work according to FEMA guidelines.
6. Even for approved expenses, FEMA grants did not cover
100% of infrastructure losses and there were no grants available for loss of revenues.
7. The federally mandated Emergency Management Assistance
Compact was useful in some cases, but it was not developed
for the specific needs of water and wastewater utilities.
While utility volunteers from around the country traveled
to affected states to help, affected utilities did not have a
formal support structure that met their needs.
8. If a number of utilities were to default on debt, and given
projections for continued high hurricane activity, it is not
infeasible that rating agencies could deem all utilities in
surge-vulnerable areas to be in a higher risk category. This
would have the effect of reducing ratings and raising borrowing costs for many utilities along the Gulf Coast and eastern
seaboard.
Four months after the storm, the Sewerage & Water Board of New Orleans (S&WB) was still housing employees at its Algiers Water Treatment
Plant (photograph courtesy of S&WB).
2006
15
Chapter 4
Recommendations
Wastewater utilities play a crucial role in protecting public
health. When natural disasters occur, it is important that
basic services, such as sanitation, continue. The following
recommendations are actions that could be undertaken by
government and nongovernmental organizations, including the
private financial sector, to help wastewater utilities recover
from Hurricane Katrina; they also include suggestions to help
mitigate damage from future disasters.
Federal Government
1. Monitor wastewater utility fiscal health and provide relief if
necessary. Wastewater utilities that lost a significant number
of ratepayers may be at risk of default on debt service obligations held before Hurricane Katrina. This situation should
be closely monitored and, if necessary, federal assistance
should be made available, in the form of direct subsidies
and/or forgiveness from payment on debt held by the federal
government.
2. Provide a greater role for U.S Environmental Protection
Agency (U.S. EPA) in managing and coordinating federal postdisaster recovery efforts for wastewater utilities. In the immediate aftermath of Hurricane Katrina, U.S. EPA efforts were
critical to helping responders understand wastewater systems
and priorities. Communities struggled to ensure that essential
services continued to be available. Because of its expertise
and regulatory responsibilities under the Clean Water Act, U.S.
EPA can bring great value to disaster recovery efforts. Its role
needs to be more widely recognized and clarified.
3. Provide access to the best information. States and the federal government maintain a multitude of databases on water
and wastewater systems; federal coordination of databases
could improve the accuracy and utility of the information,
while saving money by reducing duplication of effort.
4. Provide guidance on federal funding sources and grant application processes. Wastewater-specific guidance is needed
regarding federal funding sources and application processes
for natural-disaster related losses. The summaries prepared
by U.S. EPA about federal funding for water and wastewater
infrastructure damage by Hurricanes Katrina and Rita for
Louisiana and Mississippi are important first steps. The work
that the agency is conducting on a nationwide handbook is
also encouraging. These documents should be kept current
and made widely available.
5. Provide technical assistance and information to help
wastewater utilities rebuild for the future. As communities
struggle to rebuild wastewater utilities that may not recover
their pre-Hurricane Katrina population rate base, the federal
government should provide information and technical assistance on sustainable practices and best available technologies that are appropriate in hurricane-vulnerable areas. In a
related matter, utilities should be encouraged to use federal
assistance in the most sensible manner possible, given new
technologies and reduced population in certain cities.
State Government
1. Monitor wastewater utility fiscal health and provide relief
if necessary. Louisiana, Mississippi, and Alabama state
environmental protection agencies that administer the Clean
Water State Revolving Funds (SRFs) should also closely
monitor the financial situation of wastewater utilities and, if
necessary, provide debt service relief to those utilities that
are at risk of defaulting on SRF loans as a result of ratepayer
base loss.
16
2. Institute mutual aid compacts with neighboring states to
specifically aid recovery needs of wastewater utilities.
Mutual aid compacts between the states of Mississippi and
Florida enabled wastewater utilities in Florida to send volunteers, equipment, and other forms of relief to Mississippi
in the immediate aftermath of the hurricane. States should
work with neighboring states to institute these compacts for
emergency preparedness efforts.
Local Communities and Wastewater Utilities
1. Promote mutual aid compacts. Wastewater utilities should
work with state associations and emergency preparedness
agencies to institute mutual aid compacts with wastewater
utilities in neighboring states.
2. Wastewater utilities should rebuild according to changed
circumstances in which a pre-hurricane ratepayer base may
not return. As communities struggle to rebuild wastewater
utilities that may not recover their pre-Hurricane Katrina
ratepayer base, they should take advantage of modern systems and best available technologies that are appropriate for
the changed circumstances.
3. Wastewater utilities located in disaster-prone areas should
prepare for future disasters of the magnitude of Hurricane
Katrina. Wastewater utilities’ emergency preparedness programs should ensure appropriate personnel training; provide
appropriate levels of redundancy in supplies (e.g., sharing
multiple fuel sources with other agencies); safeguard rolling
assets, records, and data; and ensure that backup data systems are stored off-site.
Wastewater Sector
1. Offer training and technical assistance for wastewater utility
emergency preparedness. Organizations such as the Water
Environment Federation should continue to provide training
and promote emergency preparedness measures for wastewater utilities.
2. Promote mutual aid compacts. The Water Environment Federation, utilities, and consultants should support improvements in emergency response and mutual aid compacts on
a state-by-state basis, potentially through the formation of
“Water/Wastewater Agency Response Networks” (WARN)
organizations. Existing WARN organizations—such as those
in California (CalWARN), Florida (FlaWARN), and Texas
(TxWARN)—could be expanded into utility networks crossing state lines that are endorsed at local, state, and national
levels.
3. Develop best practices for emergency preparedness and
response. The wastewater sector should examine current
guidance and protocols for emergency preparedness and
response to ensure that these reflect best practices and the
lessons learned from the 2005 hurricane season.
4. Develop best practices for system design to withstand high
category hurricanes. Engineers and utility designers should
evaluate and share any insights to effective design practices
that can be gleaned from Hurricane Katrina’s effect on wastewater collection and treatment infrastructure.
5. Continue to highlight the value of wastewater infrastructure.
Wastewater industry participants need to be vigilant in continually educating the public on the importance of wastewater infrastructure in protecting public health.
Private Financial Sector
The private financial sector should provide financial relief
to communities, if necessary, so that communities can avoid
default. Wastewater utilities that lost a significant number of
ratepayers may be at risk of default on debt service obligations
held before Hurricane Katrina. This situation should be closely
monitored and, if necessary, bond holders should work with
communities to reschedule debt obligations to avoid default as
a result of ratepayer base loss.
2006
17
Appendix A
Methodology
Study results are based on (1) a database of municipal
wastewater treatment plants in the three states; (2) wind
speed, surge, and damage assessment information provided
by various agencies; (3) specific damage information gathered
from 25 surveyed facilities/utilities; (4) average engineering
costing data; and (4) wastewater utility financial data. Detailed
information on the various phases of the study is presented
below.
Introduction of Project
The Water Environment Federation and Black & Veatch met with
a number of agencies and individuals to introduce them to the
project, review the methodology, and seek support for the datagathering portion of the study. Key agencies included in these
meetings were
• Alabama’s Water Environment Association;
• Kansas Water Environment Association;
• Louisiana Department of Environmental Quality;
• Louisiana Water Environment Association;
• Mississippi Department of Environmental Quality;
• Mississippi Water Environment Association;
• U.S. Environmental Protection Agency (U.S. EPA), Office of
Wastewater Management; and
• U.S. Environmental Protection Agency, Region 4 and Region 6.
Study Area
The study area was defined as regions in Louisiana, Mississippi,
and Alabama that experienced any of the following types of
damage from Hurricane Katrina in 2005:
1. Storm surge,
2. Flood, and/or
3. Winds in excess of 100 mph.
Facility Database
The key building blocks for the assessment were several
databases listing wastewater facilities in the three states. The
first step was to generate a comprehensive list of wastewater
utilities in Louisiana, Mississippi, and Alabama and then
determine which ones were in the study area (industrial
treatment plants were excluded from the study). Two U.S.
EPA databases proved to be extremely useful: (1) the Permit
FIGURE 3: STUDY AREA
18
Appendix A: Methodology
mapping of surge, flooding, and wind damage in the three states.
The final map used for the study area is included in Figure 3.
Of the 896 facilities located in the three states, 118 were
determined to have been affected by Hurricane Katrina. These
facilities were segmented by damage zone (surge, flood, or
wind) and treatment type (conventional treatment, conventional
treatment with filtration, and lagoon systems).
Infrastructure Study
Figure 4 shows a flowchart of the methodology used to develop
the $1.2 billion cost estimate for the infrastructure study. Each
step is described in more detail below.
Compliance System (PCS) database and the Clean Water Needs
Survey (CWNS) database.
FIELD AND TELEPHONE SURVEYS. Black & Veatch project
managers and engineers teamed with utility and private
sector volunteers to assess damages to a sampling of affected
wastewater utilities in the study area. Assessments were
conducted via field visits and telephone surveys on a total of 25
utilities, or 21% of the affected utilities (Table 10). Utilities from
Both databases included facility name, discharge permit
number, latitude and longitude of outfalls, and design flow,
among other data fields.
The PCS database included 770 treatment facilities in the three
states defined as “sewerage systems” by the Standard Industrial
Classification code of 4952, while the CWNS database included
1441 records separated into treatment facilities and collection
systems. The CWNS database also included future facilities and
septic systems. Investigators merged and filtered the records
to remove septic systems and duplicate records. The resulting
database of municipal wastewater facilities in the three states
included 896 records. Table 9 indicates the breakdown of
facilities by state and size (design capacity relates to million of
gallons per day of wastewater treatment capacity).
Both the Louisiana Department of Environmental Quality and
the Mississippi Department of Environmental Quality provided
information from their databases of wastewater facilities. These
databases did not include some details that were critical to
the study; however, they did provide a useful check and gave
investigators additional comfort with information gleaned from
the U.S. EPA databases.
The 896 records in the combined database were used to
determine the location, design flow, and population served data
for wastewater utilities that were affected by Hurricane Katrina.
Study Area Mapping
Investigators performed secondary research on available maps
of the damage, with mixed results. In the immediate aftermath
of Hurricane Katrina, only a few maps of damage zones were
available, mostly based on wind speeds and early Federal
Emergency Management Agency (FEMA) reports on damage.
To supplement this information, field and telephone surveys
performed as part of the study included questions regarding
types of damage sustained. In some cases, utility personnel
from the affected region helped map surge and flood effects
throughout counties and parishes. Investigators combined this
primary research with maps obtained from FEMA, the Mississippi
Automated Resource Information System, and the Southern
Regional Climate Center. This resulted in a much improved
2006
each damage zone were selected for assessment.
Working with estimators and contractors, a field report was
developed to provide specific information about plant and collection
systems damage. This report, developed to serve the needs of
estimators, included both quantitative and qualitative data.
For treatment plants, the field report included a list of
infrastructure components, including details on site work,
administration buildings, liquid treatment, solids handling, and
so on. Investigators were requested to provide a quantitative
damage assessment for each item on a scale of 1 to 5, where
1 = no damage, 2 = 5% damage, 3 = 30% damage, 4 = 60% damage,
and 5 = 100% damage.
Investigators were also asked to record qualitative information
regarding their impressions of the infrastructure damage. As
a result of the limited time spent on any one utility, damage
estimates were not intended to provide a detailed estimate
at the individual utility level. Rather, the goal was to neither
understate nor overstate damages, but to develop a reasonable
average by surveying multiple utilities.
Two field teams were dispatched in November 2005 to perform
the field surveys (Figure 5). Each field team included one safety
professional, three plant inspectors (one project manager with
19
FIGURE 4: FLOWCHART OF METHODOLOGY
Download
Download
CWNS and EPA
CWNS and EPA
WWTP
WWTP
Databases
Databases
Define
Define
Study Area and
Study Area and
Damage Zones
Damage Zones
Download
Download
Hurricane Katrina
Hurricane Katrina
Damage Zone
Damage Zone
Maps
Maps
Identify and Locate
Identify and Locate
All WWTPs in
All WWTPs in
Study Area
Study Area
ESTIMATING PLANT INFRASTRUCTURE.
Plant construction cost components were
developed from a Black & Veatch database
of plant projects. Each component cost
was stated as a percent of total treatment
cost. Costs were developed for the total
construction cost of each type of plant by
gallons-per-day capacity. Damage rankings
from the field reports were then used to
calculate costs (c) for each component
damaged, as follows:
Develop
Develop
Survey Forms and
Survey Forms and
Ranking Criteria
Ranking Criteria
Categorize WWTP
Categorize WWTP
by
by
Damage Zone
Damage Zone
Conduct
Conduct
Field and Phone
Field and Phone
Surveys
Surveys
c = uP × C × R
Where
u = average cost of component as a percent
of total treatment plant cost (%),
Identify WWTPs
Identify WWTPs
to Include in
to Include in
Field and Phone
Field and Phone
Surveys
Surveys
P = total construction cost per gallon per
day treated of an average plant ($/gpd),
C = design capacity of the surveyed
treatment plant (gpd), and
R = damage ranking (%).
Analyze
Analyze
Survey Data
Survey Data
Extend Unit Cost
Extend Unit Cost
by Damage Zone
by Damage Zone
to Study Area
to Study Area
Develop
Develop
Unit Cost Curves
Unit Cost Curves
by Treatment Type
by Treatment Type
Proportion Cost by
Proportion Cost by
Work Breakdown
Work Breakdown
Structure
Structure
Proportion Cost
Proportion Cost
by Population
by Population
Develop Unit Cost
Develop Unit Cost
by Treatment Type
by Treatment Type
and Damage Zone
and Damage Zone
Develop Unit Cost
Develop Unit Cost
by Damage Zone
by Damage Zone
plant engineering experience, one senior level utility volunteer
with plant management experience, and one additional
engineer or contractor), and two collection system volunteers
(consisting of senior level utility volunteers with collection
system management experience and one general contractor–
owner with collection system construction experience).
The two field teams visited facilities in three states and
developed detailed field reports for wastewater treatment
plants and collection systems. In most cases, only one
treatment plant per utility was assessed; neither the worst
nor the best was selected for assessment. In three cases,
investigators assessed multiple plants per utility.
At the request of the Sewerage & Water Board of New Orleans,
a third team performed a field visit January 5 to 6, 2006. As was
the case with the November field visits, the New Orleans field
team met with executive management, performed a field visit
on its damaged facilities (in this case, the East Bank Wastewater
Treatment Plant), and toured surrounding neighborhoods.
20
Develop
Develop
Collection System
Collection System
Unit Costs
Unit Costs
Total costs for each plant surveyed were
determined by summing the individual cost
components.
These costs were used to populate a cost
matrix that provided a unit cost (dollars
per gallon per day) for plant components
in each of the three treatment categories
(conventional treatment, conventional
treatment with filters, and treatment using
lagoon systems) and the three damage zones
(surge, flood, and wind).
The cost matrix was applied to all 118
facilities in the study area according to
plant capacity, damage zone, and treatment
category, resulting in a total assessment
of treatment plant damages caused by
Hurricane Katrina.
COLLECTION SYSTEM INFRASTRUCTURE. Collection systems
were assessed in four categories: (1) lift stations, (2) point
repairs, (3) blockage, and (4) service connections. Survey
results and the investigators’ experiences were used to develop
relationships among the population served and number of
lift stations, length of sewer pipe, and number of customer
connections.
Cost information for lift stations was populated in a manner
similar to that used for treatment plants, with average costs
being developed based on unit costs and lift station capacity
and then applied based on damage rankings.
Average unit costs were developed for point repairs, service
connection repairs, and cleaning of blockages. Field reports
included estimates of the number of point failures and service
connection failures and estimated the percent of the collection
system requiring cleaning of blockages. Lift station damage,
Appendix A: Methodology
FIGURE 5: FIELD TEAMS DISPATCHED TO PERFORM FIELD SURVEYS
Eastern Field Team’s initial meeting with
Gulf Shores, Alabama
Western Field Team
Safety
John Borowski, CIH, CSP, Black & Veatch (Mo.)
Treatment Plant
Christy Cooper, Assessment Project Manager, Black & Veatch (Mo.)
William R. Davis, Deputy Director of Projects, Black & Veatch (Tx.)
Kurt Haunschild, Wastewater Superintendent, East Bay MUD (Ca.)
Michael Welch, President, BRB Contractors (Ks.)
Collection System
Philip Topek, Client Manager, Wade (Tx.)
Dale Howard, Environmental Coordinator, KWEA (Ks.)*
Eastern Field Team
Safety
Elizabeth Rodgers, Safety & Health Specialist, Black & Veatch (Mo.)
Treatment Plant
Charles Duncan, Project Manager (Ret. Regional Manager),
Black & Veatch (Tx.)
Tommy West, Plant Operations Manager, Columbus Water Works (Ga.)
Page Surbaugh, Engineering Manager, Black & Veatch (Mo.)
Collection System
James H. Stuit, Field Operations Superintendent, KWEA (Ks.)*
Joe Botinelly, Superintendent of Sewer Maintenance, KWEA (Ks.)*
Western Field Team examines pumps
in Slidell, Louisiana
New Orleans Field Team at the East Bank
Wastewater Treatment Plant, Louisiana
New Orleans Field Team
Jim Clark, Project Director, Black & Veatch (Ca.)
Christy Cooper, Assessment Project Manager, Black & Veatch (Mo.)
Bill Davis, Project Manager, Black & Veatch (Tx.)
Teresa Loar, Public Affairs, Black & Veatch (Mo.)
Ashok Varma, Director of Client Services, Black & Veatch (Tx.)
* Dale Howard, Jim Stuit, and Joe Botinelly of Kansas Water Environment
Association (KWEA) volunteered vacation time to perform field work. KWEA
donated $4,000 to the project. Columbus Water Works and East Bay
Municipal Utility District donated their employees’ salary and other costs for
the project. Black & Veatch received no compensation for the project, donating
salary and expenses valued at over $200,000.
number of point failures per mile of pipeline, number of service
connection failures, and percentage of cleaning were calculated
for each system surveyed and categorized by damage zones
(surge, flood, and wind).
data necessary to estimate the
financial effect. However, a low
response rate to the telephone
surveys necessitated an alternative
approach to the analysis.
A model was developed using a
National Association of Clean Water
Agencies (NACWA) 2005 financial
survey. The survey included 141
agencies representing a served
population in excess of 82 million
people. The survey has been
performed every 3 years for more
than 20 years.
Using the NACWA survey results
and adjusting for known anomalies,
average revenue and expense figures
were developed for utilities treating
fewer than 20 mgd. These expense
figures were inflated by 3.5% to
estimate 2006 figures. The estimates
are as follows:
Average revenue per person =
$171.00
Average expense per person =
$157.00
Revenue and expense for all utilities
were estimated by multiplying
the above averages by the total
population served in the surge area.
This resulted in an estimate of the
combined financial statement (the
For the 118 treatment facilities in the study area, population
served and damage zone information were used to estimate
the length of sewer pipe, number of lift stations, point repairs
and service connection repairs, and estimated length of pipe
requiring cleaning. Average unit costs were then applied to each
facility, resulting in a total assessment of the cost of damage to
collection systems.
Financial Assessment
A significant goal of the study was to assess the effect of
the hurricane
on the longterm financial
stability of
affected utilities
(financial
effect).
Originally,
telephone
surveys were
intended to
gather the
Field Inspectors assess damage to electrical circuitry in Biloxi,
Mississippi.
2006
View from Port Sulphur Wastewater Treatment Plant (Plaquemines Parish,
Louisiana). These homes and thousands of others were washed away from their
foundations.
model) for affected wastewater utilities.
The NACWA database also included account breakdowns for
revenue and expense. These details were used to augment the
model and provide better estimates of the financial effect of
population decreases.
For instance, user charges made up 72% of total revenues,
21
whereas miscellaneous revenues accounted for 3% of total
revenues. In developing the model, it was assumed that a
fees associated with the assessment and grant process. It also
excludes any allowance for repair, replacement, or rehabilitation
costs not covered by FEMA grants.
Additional sensitivities are included in Table 12 below. Each of
the sensitivities is mutually exclusive of the others; that is, each
is a unique variation on the base case. Note that in all cases
(even with subsidies), strong financial planning will be required
to ensure that utilities return to financial health by 2010 so that
subsidies are not required in 2011.
population change would have a direct 1:1 effect on user
charges but no effect on miscellaneous revenues.
If utilities do not receive full reimbursement for infrastructure
replacement and repair costs, a likely scenario under current
FEMA guidelines is that financial subsidy requirements will
increase substantially.
Telephone surveys yielded information about employee losses
caused by displacement; for two utilities, employee “losses”
averaged 45% of population reductions. Thus, the model
estimated labor and benefit cost reductions to be 45% of the
population loss. Population changes were a variable that could
be changed in the model. Utilities and chemicals were not
varied; it was assumed that minor reductions in these costs will
be insufficient to cover high commodity inflation rates.
The facility database described earlier in this appendix was
used to determine the population served in the surge area. The
facility database indicated that 613 000 people lived in the surge
area; however, because the numbers were somewhat dated
and understated for some cities, a 5% contingency was added,
raising the estimated total population served to 645 000 people.
Though New Orleans lost 80% of its population, the city
reported that it expected to lose only 70% of its revenue in 2006.
Remaining utilities reported losing 25 to 60% of their population;
given the experience of New Orleans, it was assumed that
the remaining utilities would lose an average of 35% of their
populations in 2006. Using a weighted
average among New Orleans and the
remaining cities, the overall population loss
for 2006 was estimated to be 61% or, stated
another way, 39% of the population rate base
would remain. The model then assumed that
10% of the population rate base would return
each year (Table 11).
To assess the level of supplemental funding
(financial subsidy) required to ensure that
utilities remain financially solvent, the model
set a debt coverage ratio goal of 1.25. The
subsidy for each year was that amount of
revenue that would bring the debt coverage
ratio to 1.25. Thus, the model does not
estimate total lost revenues for utilities but
rather just that amount necessary to keep
utilities financially stable.
The model estimated that utilities will need
approximately $163 million in subsidies over
the 2006 to 2010 time period. This estimate
does not include inflationary effects on
expenses, other than the slight effect on
chemicals and utilities mentioned above. It
assumes no rate increases or administrative
22
Appendix B: Bibliography
Appendix B
Bibliography
Federal Emergency Management Agency, Katrina Recovery
Maps. http://www.fema.gov/hazards/floods/recoverydata/
katrina_index.shtm (accessed Jan 2006).
Goodnough, A. (2005) Forecasters See No Respite in Onslaught
of Hurricanes. New York Times, Nov 30.
Lloyd’s of London (2005) Experts Warn 2006 U.S. Hurricane
Season Will Be Above Average; Company Press Release, Dec 7;
http://www.lloyds.com/News_Centre/Features_from_Lloyds/
US_hurricane_season_2006.htm (accessed Dec 2005).
Mississippi Automated Resource Information System, Hurricane
Katrina Shapefiles. http://www.maris.state.ms.us/HTM/
Miscellaneous/Hurricane_Katrina.htm (accessed Dec 2005).
National Oceanic and Atmospheric Administration (2005) NOAA
Reviews Record-Setting 2005 Atlantic Hurricane Season: Active
Hurricane Era Likely To Continue; News Conference, Nov 29.
National Oceanic and Atmospheric Administration, Hurricane
Katrina Images. http://ngs.woc.noaa.gov/katrina (accessed Jan
2006).
http://www.noaanews.noaa.gov/stories2005/s2540.htm
(accessed Dec 2005).
Peacock, W. G.; Morrow, B. H.; Gladwin, H., Eds. (1997) Hurricane
Andrew: Ethnicity, Gender and the Sociology of Disasters;
Routledge, Chapman & Hall: New York.
Smith, S. K. (1995) Demography of Disaster: Population
Estimates after Hurricane Andrew; Bureau of Economic and
Business Research, University of Florida at Gainesville.
Smith, S. K.; McCarty, C. (1996) Demographic Effects of Natural
Disasters: A Case Study of Hurricane Andrew. Demography, 33,
265–275.
Southern Regional Climate Center. http://www.srcc.lsu.edu/
(accessed Dec 2005).
World Health Organization (2004) Water Sanitation and Hygiene
Links to Health: Facts and Figures Updated November 2004;
Water, Sanitation and Health Subweb of WHO’s Internet Site
(includes quote from Dr. Lee Jong-Wook). http://www.who.int/
water_sanitation_health/publications/facts2004/en/index.html
(accessed Jul 2005).
Wynne, J. (2005) Could Global Warming Be Responsible for
Spawning Deadly Hurricanes Such as Katrina and Andrew?; BBC
World News, Sep 17. http://www.bbc.co.uk/weather/world/news/
17092005news.shtml (accessed Dec 2005).
2006
23

Assessment of Reconstruction Costs and Debt Management

Transcription

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