Water Pollution Control Authority Regionalization Bridgeport Monroe Trumbull

Water Pollution Control Authority Regionalization Bridgeport Monroe Trumbull Glenn A. Santoro, Esq. Robinson & Cole LLP 280 Trumbull Street Hartford, CT 06103 (860) 275 -8322 gsantoro@rc. com

Today’s Topics • What is a Regionalization Transaction • Benefits of Regionalization • Challenges of Regionalization • Case Study – Greater New Haven Water Pollution Control Authority

What is a Regionalization Transaction? • Statutory basis to create a regional water pollution control authority (the “Authority”): – Sections 22 a-500 to 22 a-519, inclusive, of the Connecticut General Statutes (the “Act”) • How is the Authority formed? – The legislative bodies of two or more municipalities adopt a concurrent ordinance to create a regional water pollution control authority – The municipalities do not need to be contiguous

What is a Regionalization Transaction? • Requirements for the concurrent ordinance: – Name of the Authority – Address of the Authority’s principal office – A statement that the Authority is created pursuant to the Act

What is a Regionalization Transaction? • Requirements for the concurrent ordinance (cont’d): – Information regarding the Authority’s directors: • The number, names, addresses, and terms of office of the first directors • Provisions for director compensation, if any • Number of votes to be cast by each director • Method for appointment and removal of directors

What is a Regionalization Transaction? • Approval by the State of Connecticut: – The constituent municipalities must prepare and submit a preliminary plan of operation for the Authority to the Commissioner of Environmental Protection and the State Treasurer for review and approval – The Commissioner of Environmental Protection will review the preliminary plan of operation, and after consultation with the Secretary of the Office of Policy and Management, may approve such plan if it is in the furtherance of the environmental protection laws of the State.

What is a Regionalization Transaction? • What is typically included in the preliminary plan of operation submitted for State approval? – Description of wastewater system assets to be transferred – Description of the Authority’s organization and management – Financing plan and bonding requirements – Estimated budget and rates

What is a Regionalization Transaction? • The Authority is officially formed once: – All of the constituent municipalities have adopted the concurrent ordinance; and – The State has approved the Authority’s preliminary plan of operation.

Benefits of Regionalization • The Authority is a separate legal entity – Governed by its own board of directors and officers – Has the ability to: • Issue bonds • Purchase wastewater system assets • Impose fees, rates, charges and penalties and levy assessments on property benefited by the wastewater system

Benefits of Regionalization • Governance of the Authority: – Board of Directors – each constituent municipality will have the right to elect one or more directors to the board – The Authority will also have a chairman of the board, to preside over board meetings – The initial chairman should be identified in the concurrent ordinance

Benefits of Regionalization • Governance of the Authority (cont’d): – Board of Directors will elect officers of the Authority, which typically includes an Executive Director, Secretary and Treasurer – Board of Directors will adopt bylaws • The bylaws will govern the administration of the Authority’s property and the conduct of its affairs.

Benefits of Regionalization • Purchase Wastewater System Assets – The Authority can use the proceeds from the bond issuance to purchase the wastewater system assets of each constituent municipality – The bonds can be secured by a pledge of the Authority’s revenue – Each constituent municipality can deposit the proceeds of the purchase price received from the Authority in: • The general fund of the municipality, to be used for any lawful municipal purpose • A rate stabilization fund for the benefit of that municipality’s users of the regional wastewater system

Benefits of Regionalization • Additional Benefits: – The Authority can assume all sewer-related obligations and sewerrelated debt of the constituent municipalities • Improves the balance sheets of the constituent municipalities by decreasing liabilities – Authority considered a “municipality” for purposes of receiving grants and loans under the Clean Water Fund Program (Conn. Gen. Stat. Section 22 a-517(b)) – The Authority may be provided higher “priority” for receipt of funding under the Clean Water Fund Program – Reduced administrative costs for constituent municipalities and economies of scale – More effective and broad based protection of the environment

Benefits of Regionalization • Additional Benefits (cont’d): – Strategic planning on a regional basis – Possible arrangements for PILOT payments (payments in lieu of taxes) by the Authority to the constituent municipalities – Sewer expansion must first be approved at the local level, so the Authority cannot expand without local approval – Possible State budget proposal for Fiscal Year 2010 -2011 that could provide up to $40 million in grants to encourage regionalization among municipalities and $10 million for purchases of heavy equipment

Benefits of Regionalization • Details of the Potential Jewish Home for the Elderly Project: – Monroe constructs the Jewish Home, receives economic stimulus, and has access to the sewerage system – Bridgeport and Trumbull share revenues on access to the sewerage system

Challenges of Regionalization • General Timeline of Action Items (9 to 12 months): – Adoption of concurrent ordinances – State approval of preliminary plan of operation – Appointment of directors and officers and adoption of bylaws – Adoption of a budget, rates and sewer ordinance, and holding of requisite public hearings • Initial budget must be approved by the Secretary of the Office of Policy and Management

Challenges of Regionalization • General Timeline of Action Items (9 to 12 months) cont’d: – Draft and negotiate asset purchase agreement and ancillary documents – Draft and negotiate bond issuance documents • Meet with rating agencies to obtain a rating for the Authority (Standard & Poor’s, Moody’s and Fitch) • Current economic environment will be a challenge

Challenges of Regionalization • Establishing User Rates: – Prior to commencing operations, the Authority will need to establish user rates – No changes may be made to the user rates without at least 60 days prior notice to the users and a public hearing

Challenges of Regionalization • Establishing User Rates (cont’d): – The user rates must be established so that the Authority has sufficient funds each year, with other revenues (if any), to do the following • • • Pay the cost of maintaining, repairing and operating its wastewater system; Pay the principal and interest on outstanding bonds; Meet any requirements of any resolutions authorizing, or trust indenture securing, outstanding bonds or notes of the Authority; Make any agreed upon payments in lieu of taxes to municipalities in which the Authority has property; and Pay all other reasonable and necessary expenses of the Authority.

Challenges of Regionalization Additional Considerations: • Each municipality will not have the same control over the wastewater system as before regionalization – The Authority will be governed by a separate board of directors, and each town may have only one or two appointees on the board – Rates adopted by the Authority may be different than the rates currently charged by each municipality • Municipal revenue sharing proposals can be included as part of the regionalization transaction by including specific covenants in the asset purchase agreement

Case Study – GNHWPCA • Gabriel Varca – Treasurer • Greater New Haven Water Pollution Control Authority (“GNHWPCA”) – Formed in July 2005 pursuant to the Act – Constituent Municipalities: New Haven, East Haven, Hamden and Woodbridge – GNHWPCA was created to operate the wastewater systems of the constituent municipalities, including the treatment plant located at 345 East Shore Parkway, New Haven

Case Study – GNHWPCA • Governing Body of the GNHWPCA – Nine member board of directors • • Four directors appointed by New Haven Two directors appointed by East Haven Two directors appointed by Hamden One director appointed by Woodbridge – Directors serve for three year terms, which are staggered • Directors are divided into three groups of three – Board elects a chairman, who serves for a one year term • No individual may serve more than two consecutive terms as chairman

Case Study – GNHWPCA • User Rates (user fee per ccf) – GNHWPCA – User rates of each municipality prior to regionalization fiscal year ending June 30, 2006: • • New Haven: $1. 36 Hamden: $2. 20 East Haven: $1. 95 Woodbridge: $2. 70 – User rates of the GNHWPCA following regionalization: • • FY 2006: $1. 84 FY 2007: $2. 14 FY 2008: $2. 31 FY 2009: $2. 45

Wrap-Up Topics we discussed today: • What is a Regionalization Transaction • Benefits of Regionalization • Challenges of Regionalization • Case Study – Greater New Haven Water Pollution Control Authority

Questions & Answers For additional information, please contact: Glenn A. Santoro, Esq. Gabriel Varca, Treasurer Robinson & Cole LLP GNHWPCA 280 Trumbull Street 345 East Shore Parkway Hartford, CT 06103 New Haven, CT 06510 (860) 275 -8322 (203) 466 -5265 gsantoro@rc. com gvarca@gnhwpca. com