Built in 1953, the Fiveash Water Treatment Plant in Fort Lauderdale, Florida, has exceeded its useful life. The facility is not hurricane resistant – a must-have in the Sunshine State – and its outdated technology and lime softening systems are causing significant discoloration of the water.
“Certainly, all the other quality indicators are being met, but the color, I mean, we have hotels in the city of Fort Lauderdale that have signs on their bathrooms that say: Hey, the water's okay, it's just a little brown,” noted Susan Grant, assistant city manager for the City of Fort Lauderdale.
In a welcome announcement for the rate payers and community, a new facility - the 50-MGD Prospect Lake Clean Water Center - is slated to open in 2026. The project is the result of a P3 among the City of Fort Lauderdale, IDE Technologies and Ridgewood Infrastructure. Kiewit Water Facilities Florida is the design-builder, Kiewit Engineering is the lead designer, and IDE Technologies will perform process design, procurement, and manage operations and maintenance over the 30-year term. Financial close on the P3 occurred in February.
And while this P3 appears to be on the road to success, its origin story provides many lessons about the political leadership, tenacity and creativity it takes to bring a complex deal to close.
The city’s P3 journey began in 2019, when Mayor Dean Trantalis led a delegation of elected officials and business leaders to Israel to tour the Hadera Desalination Plant. Hadera, developed by IDE Technologies, is a Seawater Reverse Osmosis desalination plant providing clean, potable water to over a million people.
As a result of the trip, a relationship formed between IDE and local leaders. During a presentation at the recently held P3 Electrified Summit, Lihy Teuerstein, CEO of IDE’s Water Assets division explained: “We’ve been following the city and the city's leadership, the mayor and the commission and all of the activities that they've been able to accomplish. Mayor Trantalis says that they are the can-do commission. And indeed, I think that is correct for this city.”
Teuerstein noted that after the city published a report of the need and the requirements to upgrade their aging facility, they decided to take a chance in 2020 and submit an unsolicited proposal. “We knew that the need exists, and we also knew that there's a will because we knew the city has a will. And the question was just the way and how do we get that done.”
Taking advantage of Florida’s unsolicited proposal rules, IDE and one other company submitted proposals which were rejected by the commission, primarily due to the city’s unionized employee concerns. After discussions with the Teamsters Union and garnering their support, IDE once again submitted an unsolicited proposal. The second round of proposals saw four submissions and, after an extensive review by Ernst and Young Infrastructure Advisors, the project was awarded to the IDE-led team.
A key differentiator in this DBFOM model is that the plant employees will remain city employees. Teuerstein noted that the team probably worked harder on the Labor Services Agreement during the negotiation process than any other document. “I can say that working together with the Teamsters from day one, understanding what's important for them and understanding what's important for the city kept us in focus of this agreement.”
Also unique to this P3 is the financial structure which combines tax-exempt debt raised by the city with a concession agreement that places private capital at risk for performance failures. IDE and Ridgewood will fund 25% of the project costs and own the risk of construction and the long-term risk of operation and maintenance of the project.
Dolly Mirchandani, partner at law firm White & Case, and who advised the city during the negotiations, credits Grant’s creativity and novel thinking on risk with helping bring the project to close. “You [Grant and the city] got your tax opinion together. You're doing your bonds and really optimizing the rate structure. Very responsive to your electeds.”
While acknowledging the nearly four-year journey from first contact to financial close was long and drawn out, Grant offered the following advice to others that may be considering such an approach: “Start now. If Fort Lauderdale had started 10 years ago, certainly it would've been much cheaper. It only gets more expensive and impacts [end user] rates.”