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Keystone, SD, Wastewater Treatment Services Partnership

2004 NCPPP Infrastructure Award Winner
Project Location: Keystone, South Dakota
Public Sector Partner: Town of Keystone
Contact Name: Vanessa Row, 605.666.4827
Private Sector Partner: ECO Resources, Inc. (Southwest Water Company Services Group)
Contact Name: DeLise Keim, 213.929.1800

Project Summary
Keystone, South Dakota, would be little more than a pinpoint on the map if not for the granite likenesses of four great presidents carved into the southeast face of the area’s highest peak. Because of Mount Rushmore, the town’s year-round population of 311 swells to between 6,000 and 8,000 people from Memorial to Labor Day. Like other tourist destinations, the dramatic population flux presents Keystone with municipal service challenges.

In 1972 after a flood wiped out the entire town, including its septic tanks, Keystone built its first municipal wastewater treatment system, consisting of a sewer plant, trunk line, and aeration and settling ponds. This basic system served the town well until 1994 when the state enacted more stringent monthly discharge requirements, rendering the plant out of compliance.

Like many small towns, Keystone was strapped for cash, but an unrelated state law prevented the town from borrowing more than 10 percent of its assessed value, limiting the size of any loan to $1.9 million. Rather than leverage the town to the hilt, its board looked for a private partner to design, build, finance and operate (D/B/F/O) a new wastewater treatment system.

A company that is now part of ECO Resources, Inc., bid and won the D/B/F/O contract, proposing to fund the construction of a sewer plant with private bonds. To balance cost-cutting incentives during construction with on-going operations and maintenance (O&M) costs, the contract provided that for every dollar not spent during construction, Keystone would receive 75 percent of the savings, but that the 20-year operations contract would be structured in a cost plus format. At the end of nine months, Keystone got both a $30,000 rebate and a state-of-the-art facility.

Designed to accommodate growth, the extended aeration activated sludge plant can process up to 1 million gallons of wastewater a day, although daily flow rarely exceeds 200,000 gallons even during peak tourist season. In the winter, flow drops to just 40,000 gallons a day. The lower volume presents the greater challenge because the plant needs adequate effluent to run efficiently. To maintain compliance the plant uses SCADA, a telemetry system for monitoring industrial processes that triggers an alarm and pages the facility operator should anything require immediate attention.

ECO Resources has operated Keystone’s wastewater treatment system since 1999 with no EPA violations. The plant won an Excellent Operation and Maintenance Award from the South Dakota Department of Environment and Natural Resources in 2003, the first year that it was eligible. Under its contract, the city pays ECO an annual fee for O&M and allows the company to make purchases at its own discretion up to an agreed-upon limit. The town also makes scheduled payments toward the cost of the plant, which ECO financed entirely with private bonds.

Besides the town’s size and fluctuating population, what truly distinguishes this partnership is the facility operator’s community standing. In Keystone the face of ECO Resources is Tom Mulloy. The area is subject to devastating forest fires, such as the 8,000-acre blaze in 2002 that had to be back burned to save the town, and last year’s fire that destroyed nine businesses on Main Street. Tom was on the front lines both times. Currently he serves as president of the Keystone Fire District Board, which solicits tax dollars to operate the fire department. He also sits on the Keystone Library Board and the Keystone Ambulance District Board.

Originality
The municipal challenges that face Keystone, South Dakota, are not unlike those of some 10,000 small towns nationwide – namely a lack of funds to provide state- and federally mandated services. In 1994 when the state enacted more stringent monthly discharge requirements for wastewater treatment plants, Keystone had no choice but to look for private help to replace its existing facility. Unfortunately, small towns like Keystone aren’t often attractive to private contractors. That wasn’t the case with a company that is now part of ECO Resources, which in 1999 formed a public-private partnership with this unique tourist hamlet at the base of Mount Rushmore. The partnership has flourished ever since.

Besides the town’s size and fluctuating population, what truly distinguishes this partnership is the facility operator’s community standing. In Keystone the face of ECO Resources is Tom Mulloy. The area is subject to devastating forest fires, such as the 8,000-acre blaze in 2002 that had to be back burned to save the town, and last year’s fire that destroyed nine businesses on Main Street. Tom was on the front lines both times. Currently he serves as president of the Keystone Fire District Board, which solicits tax dollars to operate the fire department. He also sits on the Keystone Library Board and the Keystone Ambulance District Board.

Quality
In 1972 after a flood wiped out the entire town, including its septic tanks, Keystone built its first municipal wastewater treatment system, consisting of a sewer plant, trunk line, and aeration and settling ponds. In 1994, however, South Dakota enacted more stringent monthly discharge requirements (from 30/30/10 mg/L a month to 10/10/10 ), rendering the plant out of compliance.

To meet the stricter standards, ECO proposed an extended aeration activated sludge treatment plant. It features an oxidation ditch equipped with rotors to aerate the water and help microorganisms break down and separate the waste. The resulting liquid is piped into a large open tank and allowed to settle. The clarified wastewater, or effluent, is then pumped through filters and exposed to high-intensity ultraviolet light that destroys any remaining harmful organisms before leaving the facility.

Keystone needed a system that could perform well despite the steep fluctuation between its static year-round population and growing tourist population. The new plant can process up to 1 million gallons of wastewater a day, although daily flow rarely exceeds 200,000 gallons even during peak tourist season. In the winter flow drops to just 40,000 gallons a day. The lower volume presents the greater challenge because the plant needs adequate effluent to run efficiently.

To maintain compliance the plant uses SCADA, a telemetry system for monitoring industrial processes that triggers alarms and pages the facility operator should anything require immediate attention. Using this system, ECO has operated Keystone’s wastewater treatment system since 1999 with no EPA violations. The plant won an Excellent Operation and Maintenance Award from the South Dakota Department of Environment and Natural Resources in 2003, the first year that it was eligible.

Implementation
Keystone’s board knew the town had to comply with the state’s tougher discharge standards, but like many small towns, it was strapped for cash. An unrelated state law prevented the town from borrowing more than 10 percent of its assessed value, limiting the size of any loan to $1.9 million. Rather than leverage the town to the hilt, the board looked for a private partner to design, build, finance and operate a new wastewater treatment system.

ECO Resources bid and won the D/B/F/O contract, proposing to fund construction of the sewer plant described above. A staff engineer designed the project and oversaw construction. At the end of nine months the plant was operational.

Economics
To balance cost-cutting incentives during construction with on-going O&M costs, the contract provided that for every dollar not spent during construction, Keystone would receive 75 percent of the savings, but that the 20-year operations contract would be structured in a cost plus format. At the end of nine months, Keystone got both a $30,000 rebate and a state-of-the-art facility.

Under its contract, the city pays ECO an annual fee for O&M and allows the company to make purchases at its own discretion up to an agreed-upon limit. The town also makes scheduled payments toward the cost of the plant, which ECO financed entirely with private bonds.

Through this arrangement, since 1999 Keystone has been able to meet stringent state and federal compliance standards without leveraging most of its assets. The town is sheltered from all regulatory issues, including any financial repercussions.

Longevity
The public-private partnership between the Town of Keystone and ECO began in 1999 and will run through 2019, at which time the town can assume operation or renew the contract. For the last five years, both partners have enjoyed a mutually beneficial relationship, proving the value of partnerships between small towns and municipal service providers.

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