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Shelby County, Alabama

2011 NCPPP Infrastructure Award
Project Location: Shelby County, Alabama
Public Sector Partner: Shelby County, Alabama
Contact Name: Charles M. Lay, Jr., P.E., Water Services Manager; clay@shelbyal.com
Private Sector Partner: SouthWest Water Company
Contact Name: Craig Sorensen, P.E., General Manager

Project Summary
In 2008, Shelby County, Alabama opened the new South Shelby water treatment facility to address a severe need to increase the available amount of drinking water. The County was under pressure from its citizens to provide for their growing needs due to significant population growth from 2000 to 2008, or otherwise risk losing their residents to the nearby City of Birmingham that could supply utility services. Shelby County was able to utilize an on-going relationship with SouthWest Water to forge a public-private partnership that allowed access to funds necessary to build the new facility and satisfy their citizens.

The North Shelby wastewater treatment facility is located near the border of Shelby and Jefferson Counties, not far from the City of Birmingham. This facility was part of the only County owned system, and it was built to address the growing needs of the developing location that provided housing communities and other amenities. It was paid for using a County-wide sales-tax, even though it only supported about 12,000 residents, which is less than 7% of Shelby County’s population of about 180,000. This was perceived as inequitable, and the situation was further aggravated by a high concentration of wealth in the area this system served. As promised, the tax was removed after the facility was paid for; however, the County now faced new problems of providing enough potable water and assuaging taxpayers.

Shelby County owned the asset of the wastewater treatment facility, and had an operations and maintenance contract with a SouthWest Water subsidiary to provide service to the community since 1992. In 2005, the County decided that owning and upgrading the facility was a drain on finances, and decided to sell the system for $8.5 million while retaining authority over wastewater services. In addition to the revenue, the County also had about $7 million in reserve from a capital fund that was planned for future plant infrastructure projects. These sums supplied the $15 million necessary to build a new water treatment plant that delivers potable water to about 60,000 residents. The public-private partnership was crucial for allowing the County to provide for the needs of the citizens now as opposed to waiting for investment capital or paying off long-term loans. It also displaced desire to seek support from the City of Birmingham for their utility services.

Project Objectives
Shelby County, Alabama had significant residential and commercial development during the 2000s leading to an increased strain on their supply of drinking water and water treatment facilities. The County found the wastewater collection, treatment, and disposal system to be financially burdensome, and the County residents were unhappy that their taxes paid to support a water plant that only served a small number of citizens. To alleviate all of these problems, the County decided that a public-private partnership selling their current assets to build a new facility for increased capacity and establishing long-term operations and maintenance contracts would relieve the budget and concerns.

Project Description
Shelby County, Alabama is the public sector partner on this project. The County owned a wastewater treatment facility that provided sewer service to a small portion of the population south of Birmingham through an operations and maintenance contract with SouthWest Water. The County needed a reasonably quick way to provide more potable water to the growing number of residents. Selling financially burdensome property to build a new facility, and continuing the practice of contracting private companies for operations and maintenance services was the best possible solution.

SouthWest Water Company is the private sector partner on this project. A SouthWest Water subsidary has operated the Shelby County wastewater plant since 1992. The company acquired the old plant in 2005 and continued to operate it. SouthWest Water then won the operations and maintenance contract in 2007 for the new South Shelby water plant.

Implementation Environment—Legislative and Administrative
The public-private partnership was initiated through the normal procurement process allowed by the State of Alabama. The operations and maintenance of the North Shelby wastewater treatment facility by SouthWest Water was already occurring under the supervision of Shelby County. The selling of the facility was done under normal measures to sell public assets. The process included a fair and competitive request for proposals (RFP) with multiple private companies bidding for the contract.

Financial Agreement
Shelby County sold the North Shelby wastewater treatment plant, which includes the County’s collection, treatment, and disposal system to SouthWest Water in 2005 for $8.5 million. The revenue from the sale plus $7 million reserved in a capital improvement fund gave Shelby County $15 million to produce the new facility. In 2007, SouthWest Water secured the operations and maintenance contract for the new South Shelby water treatment plant.

The agreement locked Shelby County into guaranteed wastewater rates for the next 11 years. The contract provides for an annual rate increase of 8%. This allows for SouthWest Water to realize a return on their investment and CPI adjustment.

Contract Provisions
SouthWest Water operates and maintains the North Shelby County wastewater treatment plant and owns the utility system—collection, treatment, and disposal. This includes an infrastructure of 56 pump stations, regulatory compliance, and billings and collections of customers. The County retains the authority to conduct activities and operations of sewer services.

The company also operates and maintains the South Shelby County water treatment plant. This includes the plant, intake structure, influent pump station, water quality testing, and regulatory compliance. This plant has a capacity of 8 MGD and can expand to 16 MGD. The plant serves about 60,000 residents in Shelby County.

Implementation Metrics
SouthWest Water is responsible for the operation of the sewer system that was acquired from Shelby County. This includes collecting, receiving, and treating sewer system influent and discharging sewer system effluent. The company must transport and dispose of all residuals and operating wastes, and provide odor control. SouthWest Water is also responsible for all necessary permits and billing and collecting all accounts receivable for services.

SouthWest Water provided an on-site manager to assist with the design-build process of the new South Shelby water treatment plant. This helped the process to be cost-effective, and addressed any foreseeable operations concerns based on previous plant experience.

In 2007, the State of Alabama notified all parties that discharged waste into the Cahaba River that the phosphorus limit was being reduced from 5 mg/l to 0.043 mg/l. This regulation was set in effort to protect one of Alabama’s most unique and valuable natural resources. SouthWest Water started a $9 million project to meet the new requirements that are being phased in over 10 years. This entails measures such as equipment upgrades for the chemical feed storage and application system, additional clarification, an RAS/WAS pump station, dewatering equipment, and a safe area for solid transport.

Methods for Overcoming Impediments
Shelby County was able to establish a public-private partnership that utilized assets the County was no longer interested in owning. The selling of the wastewater treatment plant freed immediate capital funds to put towards another facility that would better serve the demand of the citizens. The County also saved money in long-term upkeep of their old facility by selling it to a private company better equipped for such management.

In 2007, Alabama was experiencing a severe drought. Shelby County and SouthWest Water were able to work under pressure to get the plant operational in order to meet potable drinking water needs. The plant had to obtain permission to transition from the build phase quickly enough to alleviate some of the water access problems.

Key Points of Success or Failure
The on-site manager provided by SouthWest Water during the construction of the new South Shelby facility was successful in helping the plant transition from the construction phase to daily operation. This allowed the plant to provide some water during a terrible drought that started in 2007.

The new facility currently handles 8 MGD of water purification. At maximum capacity, the plant can purify 16 MGD. This advanced planning by Shelby County and SouthWest Water gives them the ability to expand water treatment for further increases in population. The County also benefitted from the obligation of SouthWest Water to upgrade the wastewater treatment plant in preparation for the new phosphorus limits.