Teno A. West, Esq. Principal and Partner Municipal Infrastructure Team Leader

Bruce H. Tobey, Esq. Partner Municipal Infrastructure Team

Steven A. Torres, Esq. Partner Municipal Infrastructure Team

Managing Organics to Energy Technologies in Project Development:

What You Need to Know to Capture Opportunities

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Goals of Organic Bans

Organics from other solid waste at the source SEPARATE

From landfills to save valued space DIVERT

Valuable energy or fuels from the organic material RECOVER

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Goals of Organics Ban

Materials that include food scraps, food processing residue, vegetative materials,

soiled or unrecyclable paper.

A process where bacteria break down organic materials in an oxygen-free environment producing gasses and

solid digestate.

Organic Waste

Anaerobic Digestion (AD)

Organic Waste

M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014

Important Definitions

Reducing Waste in Landfills

Source: US EPA

Source Reduction

Feed Hungry People

Feed Animals

Industrial Uses

Composting

Landfill Incineration

EPA Food Waste Hierarchy

Waste Management Hierarchy

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

States with Active Organic Bans or Programs

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

California Connecticut

Massachusetts New York

Ohio Oregon

Vermont Washington

What is banned?

What materials?

Who is affected?

When/Who?

Organic material, including, but not limited to, food scraps, food processing

residue and soiled or unrecyclable paper

Commercial producers of an average of 104 tons per year or more of organic waste,

located within 20 miles of a composting facility

Beginning in 2020, this will apply to producers of an average of 52 tons per

year or more.

Source separated organic materials for landfill disposal

Connecticut Organics Ban

Connecticut Organics Ban Program

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Food

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Vermont Food Waste Ban

Beginning on July 1, 2017, food residuals must be separated from other solid waste and delivered to a location that manages food residuals.

What is required

under the legislation?

July 2014: 104 tons/year of food residual July 2015: 52 tons/year July 2016: 26 tons/year July 2017: 18 tons/year July 2020: any person who generates any amount of food residuals

To whom does the

food waste ban apply?

WHEN?

WHO?

WHAT?

Organics waste ban begins July 1, 2015

Applies to wide array of retail and commercial food waste producers

Requires organic waste to go to a: • composting or anaerobic digestion facility, or • transfer station that delivers to such a facility

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

New York City Organics Program

San Francisco Program

Leader in recycling and food waste legislation

2009 complete ban on food waste disposal in landfills for all producers

Collects food waste separately from other waste

Seattle offers a similar ban and is in

the early stage of implementation.

April 22, 2014

April 22, 2014

Massachusetts Organics Materials Ban

M U N I C I PA L I N F R A S T R U C T U R E

What is the ban?

What are organics?

What is the goal?

Who is covered?

October 2014 ban prohibits the disposal of all organic materials through the normal solid waste channels

Food or vegetative materials, that can be processed into energy using new technologies

1 ton of food/vegetative waste per week

The goal of the ban is to reduce the amount of organic material that is deposited in landfills

April 22, 2014

Massachusetts Funding for AD Services

M U N I C I PA L I N F R A S T R U C T U R E

$3 million in low-interest loans to companies that conduct AD services, administered by BCD Capital through DEP’s Recycling Loan Fund

$1 million in grants for AD to public entities through DEP’s Sustainable Materials Recovery Grant Program.

$200,000 in Clean Energy Research Grants awarded by MA Clean Energy Center.

Grants and Low-interest Loans

Central Florida Energy Garden: a 120,000 tons of organic materials annually producing 5.4 megawatts of combined heat and power

Dry fermentation, AD, and composting facility: renewable compressed natural gas for vehicle fuel 30,000 tons/year of finished compost.

An AD facility - 200 tons/day of municipal source separated organics, food processing wastes

Alberta, Canada

San Jose, California

Orlando, Florida

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Recent Projects

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Compliance Issues: Siting, Permitting and Regulatory Air, Emissions and Interconnection

Qualified facility or defined utility

Electrical interconnection agreements

Net metering or power purchase agreements Public and Private cap

Utility pipelines and delays

US EPA air permits for electrical generation facilities

Zoning

Environmental and site assignment

Emissions

(where applicable)

Significant Concerns

New solid waste policies foster development of emerging technologies

Broad regulatory frameworks are being developed to implement these bans

Frameworks may include technical assistance and seed money

Waste bans are on their way for organics

Summary and Takeaway

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

M U N I C I PA L I N F R A S T R U C T U R E

Project Development Delivery Models

April 22, 2014

Traditional

Alternative

Other Program Manager at Risk Construction Manager at Risk

Design-Build Design-Build-Operate Design-Build-Finance-Operate

Design-bid-build

Alternative Project Delivery Model

Benefits of Alternative Delivery Models Qualification based selection (“QBS”)

Greater efficiency; single source guarantor

General contractor is engaged at an early stage, unlike traditional project delivery model

A single point-of-responsibility between the owner and the design-builder

Early contractor involvement in design decisions

Integrated design and construction services

Reduced multi-party litigation (finger pointing)

Ability to conduct “best value” procurement

Can allow for negotiation of contract terms prior to execution

Performance and business risk transferred

“owner contracts with a single entity responsible for design and construction”

Design-Build Model & Evaluation

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Threshold Issues Authority to utilize alternative project delivery models can be limited. Some states require lowest responsible bidder approach. Prior to commencing design-build projects, the public entity must determine if there is legal authority to do so.

Sources of Authority

State law, local charters, special legislation, home-rule authority Special legislation to grant a limited authority

Design-Build: Threshold Issues & Sources of Authority

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Design-build - alternative project delivery models for public owners and projects

Design-build - appropriate/preferred delivery model for many project types

Design-build - creates single contractual relationship/one project – one contract

Time, schedule, budget and operational enhancements

Summary and Takeaways

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Contractual arrangement between a public entity and the private sector

Shared: skills and assets

Shared: risks and rewards

P3: Public-Private Partnerships

“The Best of Both Worlds.”

Developing Organics Facility

“A PUBLIC-PRIVATE PARTNERSHIP (PPP or P3) is a contractual agreement

between a public agency (federal, state or local) and a private sector entity.

Through this agreement, the skills and assets of each sector (public and private)

are shared in delivering a service or facility for the use of the general public. In

addition to the sharing of resources, each party shares in the risks and rewards

potential in the delivery of the service and/or facility.”

- The National Council for Public-Private Partnerships

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

The Powerful P3 Option

Benefits of P3 Project Models in Organics

Increase recycling Provide access to municipal and curbside markets Increase ability to aggregate waste streams

Produce marketable products

Economic benefits to public entities Financial and tax incentives for private industry Access to capital and tax exempt financing

Potential energy and fuel off-takes

Advantages of Public-Private Partnerships for Project Delivery in Organics

Benefits of P3 Arrangement in Organics

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

What level of project/service is party seeking?

• State-of-the-art, next generation facility?

• Satisfactory, cost-effective facility?

How will risk be allocated? • Risk allocation between public and private parties

• Level of risk each party willing to accept

M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014

Shaping the P3 Project

Legal Framework

Identify Project Team

Request for Proposals

Proposal Evaluation

Contract Negotiations

Contract Award

M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014

Procurement Fundamentals

Construction • Fixed price guarantee • Cost-plus pricing • Guaranteed maximum

Operations & Maintenance

• Base service/fixed fee • Variable fee components • Pass through costs: insurance and utility costs (with maximum

usage guarantees) • IRS Letter Ruling 97-13

Service Fee Only

• Private owners/investors finance, design, construct, own and operate facilities

• Public entity and owner/operator enter into service agreement

• Public entity pays only a service fee • Private party recoups all project costs through service fee

Pricing Structure Options

M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014

Financing Options • GO, revenue bonds • -Taxable vs. tax-exempt • Private financing • Equity • Grants • State revolving funds

Business Principles • Requesting disposal of city

waste at no cost • Requesting royalty payment

per ton for regional waste, with guarantee of minimum annual payment

• Possible other revenue sharing

• Rent payment for site • Environmental fund • Reimbursement of city

development costs

Key Contractor Services • Process city waste • Aggregate and process

regional waste • Permit facility • Finance facility • Design, build, operate facility • Market product • Dispose of any residue • Electrical interconnection or

fuel off-take contracts

P3 Financing, Principles & Contractor Services

Strategic Partnerships

+ Media Relations

Mayor or Chief Executive

Private entity

Residents & customers

Businesses & community

groups

Owner - government

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Needed: A Political Champion

Stakeholder Relations

Positioning the project need

Maintaining the support

Managing the issues

Directing the process

Preparing the communications

M U N I C I PA L I N F R A S T R U C T U R E April 22, 2014

The Balancing Act: What, When, How without political support, nothing

else matters

Identify and utilize political champion and achieve P3 consensus

Define desired framework of project and scope of services

Blend public and private skills and resources optimally

Allocate risk and rewards reasonably

Summary and Takeaways

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

Teno A. West, Esq. Principal and Partner

Municipal Infrastructure Team Leader

April 22, 2014 M U N I C I PA L I N F R A S T R U C T U R E

81 Main Street, Suite 510 White Plains, NY 10601 Telephone: 1-914-898-2497 Email: twest@pldw.com

www.pldw.com