Design-Build With Finance - Design-Build for Water and Wastewater Projects - page 323

No DBF case studies are provided because it is not used in the United States for municipal
water or wastewater projects. Two case studies from DBOF projects are presented.
Philadelphia Biosolids DBOF
In October 2008, the City of Philadelphia (acting through the Philadelphia Municipal
Authority and the Philadelphia Water Department) and the Developer, Philadelphia Bio-
solids Services (PBS), LLC (with a performance guarantee by Synagro Technologies Inc.),
entered into the Biosolids Recycling Center Operation Service Agreement and a lease of
the Biosolids Recycling Center (BRC) site. Under the service agreement, PBS assumes
responsibility for the long-term management of approximately 70,000 dry tons (63,500 kg)
of biosolids, which are delivered in liquid form by the City from its water pollution control
facilities to the BRC site. The agreement outlined specific PBS responsibilities:
1. Interim operation and maintenance of the City's existing BRC dewatering and
other facilities
2. Interim land application and disposal of Class B biosolids
3. permitting, design, financing, and construction of new Class A biosolids drying
facilities
4. Implementation of odor control systems at the BRC site
5. Ownership, operation, and maintenance of the new Class A facilities
6. Marketing and transportation for beneficial use of the Class A biosolids product
The new Class A biosolids processing facilities are required to be placed into opera-
tion by PBS within 5 years of the executed agreement, and a detailed plan for the arrange-
ment of permanent financing for the costs of design and construction was required within
6 months of the executed agreement. The term of the service agreement is 25 years, with
options for the City to renew for an additional 5 years or to terminate early due to PBS
default, financing costs in excess of a fixed cap, or an election after 10 years to purchase
the project assets. If PBS is able to refinance the debt portion of the project's financing to
reduce debt service costs, the net benefits are shared equally between the City and PBS.
Financing of the new Class A facilities' approximate $75,000,000 capital cost has
been arranged by PBS through the issuance in 2009 of $68,000,000 in tax-exempt rev-
enue bonds by the Pennsylvania Economic Development Financing Authority and the
contribution by PBS of about $7,000,000 in equity capital. The bonds are payable solely
from the service fee payments by the City under the service agreement due upon PBS's
operation of the new Class A facilities. The City has no responsibility for repayment of the
bonds. At issuance, the bonds were rated BBB+ by Fitch and Baa3 by Moody's, and carry
an overall effective interest rate of approximately 6.2 percent per annum.
Through the use of a DBOF contract for long-term management of biosolids, the
City was able to accomplish a number of objectives, not otherwise achievable if the project
were to be implemented in a traditional manner (i.e., DBB with City operation, ownership,
and financing).
• The DBF contractor had sole responsibility and accountability for the complex
set of activities associated with the handling, processing, transportation, and mar-
keting of the large volume of biosolids generated by the City's water pollution
control plants.