Wastewater Utility Regionalization

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After studying the potential for wastewater consolidation three times in the last twenty years, the residents of one California county had seen and considered repeated recommendations to merge its four major sewer collection systems into a single entity. With sewer pipelines reaching 100 years of age or older, the pending capital cost of rapid asset replacement weighed heavy on each of the four agencies. While previous recommendations were favorable, none of the previous studies had ever definitively addressed the economic costs and benefits from the proposed consolidation of the collection systems. The lack of economic findings was a major reason for lack of political action.

    Location: Marin County, California, United States
    Region: Americas
    Service Offering: Management Consulting
    Market Sector: Water & Wastewater
    Status: Complete

    The largest of the four agencies set out to settle the issue of consolidation and to determine the real economic costs and benefits that could be achieved. The commonly held belief is that consolidation will necessarily lead to economies of scale, reduced overhead costs, and substantial savings for rate payers. MWH management consultants changed the dialog. The team introduced a strong data-driven approach including a comprehensive assessment of the agencies’ relative asset valuations and financing capacities. The findings demonstrated that merging the collection agencies (the treatment function had already been regionalized 20 years prior) would not provide any immediate economic benefit for the area’s rate payers, and that the best-case scenario would still require the agencies to identify over a million dollars of additional annual cost savings in order to make the merger viable.

    The analysis provided a definitive answer to a 20-year old question for the residents of the California county. Far from a solution for the area’s aging infrastructure costs, consolidation would require economic trade-offs that nobody had anticipated, including drastic and unsustainable cuts in personnel, and increases in ratepayer bills for some of the agencies while the bills for other agencies decreased. The clear distinction of winners and losers from the proposed consolidation scenarios was an unexpected result for the agencies’ boards of directors, but the overwhelming evidence and analysis proved irrefutable.


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    Address:
    Marin County, California, United States
    GPS:
    38.083403, -122.76330359999997

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