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Sale of the Wastewater Utility, Water Utility and Related Assets

Sale of the Wastewater Utility, Water Utility and Related Assets. P3 CONNECT CONFERENCE Denver, Colorado July 29, 2014. Westfield: Outline. Motivation behind Sale of Water and Wastewater Utilities Solution Outcome Lessons Learned. Westfield: A Success Story.

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Sale of the Wastewater Utility, Water Utility and Related Assets

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  1. Sale of the Wastewater Utility, Water Utility and Related Assets P3 CONNECT CONFERENCE Denver, Colorado July 29, 2014

  2. Westfield: Outline • Motivation behind Sale of Water and Wastewater Utilities • Solution • Outcome • Lessons Learned 2

  3. 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 3

  4. 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 4

  5. 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 5

  6. Regional Water Strategy • Not solely economic benefits; long-term water management White River Aquifer Shared Resource 6

  7. 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 7

  8. 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 8

  9. 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 9

  10. 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 10

  11. 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 11

  12. 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 12

  13. 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 13

  14. 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 14

  15. 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 IURC Process 15

  16. Outcome: Infrastructure Improvements • Online survey via Facebook and the City’s website to gather citizen feedback on infrastructure improvements 34% 26% 15% 873 total votes 10% 5% 3% 4% 3% 16

  17. 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 17

  18. 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 18

  19. 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 19

  20. 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 20

  21. Questions? 21

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