Taxpayers and governing boards want to make sure you're not leaving money on the table or failing to obtain their share of grants and loans. What they don't know is that for every success story they hear, there are many more failed applications.
This is particularly true for federal programs that, like the American Recovery and Reinvestment Act of 2009, have new, different, or still-evolving eligibility requirements. At press time, the House of Representatives' Jobs for Main Street Act is poised to pump $2 billion into water projects with some of the same stimulus-required Buy American and prevailing-wage previsions, while the Senate has yet to pass a major stimulus bill with direct spending for the water industry.
Given the intense competition for funding from outside sources, how much effort should you invest in pursuing a grant or loan? And if your operation has more than one potential project, which one should you pursue?
Two wastewater agencies faced this conundrum with the stimulus package. One had a shovel-ready project but no experience with prevailing-wage requirements or the law's unique sourcing requirements. The other had to decide if fast-tracking design was worth the potential risk of being turned down for construction funds.
About a month before the stimulus package became law, Johnson County Wastewater in Overland Park, Kan., received six construction bids on a major component — a fats, oils, and grease (FOG) receiving and processing station — of a solids improvement project at its 14.5-mgd Douglas L. Smith Middle Basin Wastewater Treatment Plant.
The facility combines biosolids with food processing and restaurant waste to create enough methane gas to run two electric cogeneration units, each producing 1 MW of power. That's enough to meet most of the plant's energy needs, representing more than $500,000 annually in savings on electricity. Greenhouse gas emissions will be reduced by 9,700 metric tons in carbon dioxide equivalent annually. One of the largest wastewater cogeneration projects in state history, it'll also reduce the number of miles traveled by waste haulers by at least 40,000 miles annually, saving an estimated 8,000 gallons/year in fuel and lowering emissions by 80 metric tons.
The utility had never applied for federal funds, and was planning to pay for the project through its capital improvements budget. But managers felt they were in a unique position to qualify for stimulus funding that, if awarded, would free up resources for other capital projects.
“Our design was complete, so we knew we could meet the shovel-ready requirement,” says Chief Engineer John Metzler. “In addition, the innovations we were employing gave us the green component necessary for funding. This was particularly important because Kansas allocated 100% of the principal forgiveness portion of the stimulus dollars to green projects.”
The utility's application noted that construction could begin in April. But because bids came in before the law was enacted, managers had two hurdles to jump to qualify: the new Buy American provision and the Davis-Bacon Wage Act, which has applied to federally funded public projects since 1931.
There are only a few waste-receiving station units like Johnson County's in the United States, and most are in warmer climates. With the freezing weather in Kansas, the system had to be designed to operate in more severe climatic conditions. After an extensive search and benchmarking with a system in Sweden, the team identified an Austrian-made co-generator, from the Jenbacher division of GE Energy, that can be purchased in a pre-engineered containerized system, saving more than $1 million in upfront capital costs.
Luckily, EPA announced several months after the stimulus package was signed that projects that had already been bid were exempt from the sourcing requirement. But just in case a national waiver wasn't granted, managers developed a specific waiver application.
Then there was the potential financial impact of federal prevailing-wage requirements.
The Davis-Bacon Wage Act requires that all laborers and mechanics employed by contractors and subcontractors working on government projects receive the median wage paid to workers in a specified locality.
“The project was bid without prevailing wages, so we had to work with the Department of Labor and EPA to determine what wages to pay contract workers, and then renegotiate the contract with our construction contractor,” says Metzler. To meet this requirement, the utility needed a change order for the contractor so that more funds could be available to meet prevailing-wage requirements.
“Implementing the change order took a lot longer than expected,” he says. Several factors complicated the determination of appropriate differentials: substantially lower prevailing labor rates in Topeka, Kan., where the contractor is located, compared with Johnson County; and the initial bid had been based primarily on material prices and unit prices rather than discrete labor calculations.
Satisfying federal labor laws took nearly five months and added $2.241 million to the project contract cost. But the investment paid handsomely. Half of the $17.8 million principal of the stimulus loan will be forgiven, enabling the utility to do just what managers hoped: proceed with $8 million in other projects without raising rates.
Consulting fees for help in resolving these issues were $120,000.
A $75,000 BET PAYS OFF
For the Austin Water Utility in Texas, the challenge was being shovel-ready with a major project — $25 million in digester improvements to the Hornsby Bend Biosolids Management Plant — that wasn't scheduled to be implemented for several more years. Managers planned to upgrade old equipment to newer technology that would increase volatile solids reduction in biosolids from 30% to 40% to almost 50% and increase biogas production by 70% to 90%. In addition, a new concrete pad would double production of “Dillo Dirt” compost product.
Luckily, both the city and the plant have a track record of environmentally sound decision-making. In operation since 1956, the zero-discharge facility has won more than 40 local, regional, state, and national awards and is home to more than 320 bird species. In addition, the project aligned with the city's aggressive green infrastructure goals:
Having worked with Johnson County on its stimulus application, CH2M Hill was ahead of the game in helping Austin meet Buy American and wage requirements. Here, the challenge was developing in less than five months design documents that would make a more successful green business case than competing candidates.
“We used hands-on technical workshops to provide a holistic vision of the proposed design improvements,” says Austin Water Utility Director Greg Meszaros. “Next, weekly progress meetings were held to execute the decisions made in the preliminary workshops into construction documents within a tight schedule.”
The utility spent $75,000 in consulting fees, but the gamble paid off in the form of $32 million in the largest green project loan under the state's Clean Water State Revolving Fund: $25 million for the digester improvements and $7 million for the composting pad.
“Given the environmental uniqueness of Hornsby Bend and the soundness of the green business case, we felt confident of our chances obtaining funds,” says Meszaros. “These funds will contribute significantly toward improving the sustainability of our wastewater operations.”
—Matichich ([email protected]) is global technology leader, Financial Services, for CH2M Hill.