Sanitary Sewer System Sold

Background of the Sale

Upper Dublin Township has been very deliberate in its consideration of the future of the sanitary sewer system. The sale of the system was advertised in January 2001. The Township received expressions of interest from twelve potential bidders and issued contract documents to those firms and public agencies on February 12, 2001. A pre-proposal conference was held on February 26, 2001 and seven of the twelve entities formally registered to participate in the bid process. These seven firms exercised their opportunity to inspect the Township's facilities and review the records of the system. Ultimately, two entities submitted complete qualifications statements as required by the Instructions to Bidders. Suburban Wastewater Company of Bryn Mawr, Pennsylvania (an affiliate of Philadelphia Suburban Water Company) and Bucks County Water & Sewer Authority of Warrington, Pennsylvania were properly qualified and offered proposals on April 17, 2001. The Board of Commissioners unanimously approved the sale of the system at a pubic meeting on October 9, 2001 after three public meetings at which public comments were taken on the proposed sale and the sale contract documents were finalized. The Bucks County Water and Sewer Authority approved the final contract on October 23, 2001. Settlement was on April 25, 2002.

The Auction Process

The procedure followed on April 17, 2001 was described in the Instructions to Bidders dated February 12, 2001. The bidders provided the bid security described in the Instructions. The Township then opened the auction process and accepted proposals from the qualified bidders. Bids from Bucks County Water & Sewer Authority and Suburban Wastewater Company were opened and read publicly. The initial bid from Bucks County Water and Sewer Authority was higher than the maximum price that Suburban Wastewater was willing to offer. As a result, there were no additional bids beyond those offered in the first round of the auction. Bucks County Water and Sewer Authority offered to purchase the system for $20 million.

Public Input

Three special public hearings were incorporated into the Commissioner's deliberations. The third and final meeting was held on June 13, 2001. At each of these meetings, the Commissioners raised concerns about future rates, protection for current employees of the Township, customer service standards, and environmental performance. Members of the public in attendance at these meetings raised an additional question concerning extensions of the system to serve properties with failing on-lot disposal systems. Many of these issues were addressed in the Contract Documents as originally issued by the Township. In addition, Bucks County Water & Sewer Authority responded to each of these issues and offered to incorporate all of their representations in the sale contract.

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Proceeds of the Sale

The proceeds of the sale were used first to defease the debt on the system at the time of closing. This left a net of roughly $16 million. The Commissioners have used these funds to establish a Township capital improvement fund. The interest from the fund can be used to address future capital improvement needs of the Township.

Additional Information

For additional background information, please contact:

Paul A. Leonard
Township Manager
Upper Dublin Township
801 Loch Alsh Avenue
Fort Washington, PA 19034
Phone: (215) 643-1600

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Frequently Asked Questions

Links to FAQs

1. Why did Upper Dublin Township consider the sale of its sanitary sewer system?
2. Who showed an interest in buying the system?
3. How was the transaction handled?
4. Why was the system offered for sale at auction? Why didn't the Township take sealed bids?
5. How are the customers and existing employees protected?
6. What about areas of our Township that are not yet sewered?
7. In 1992, the Township purchased the plant owned by DVISCO. Why did the Township consider a sale so soon?
8. I need more information. Who should I contact?

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Q1. Why did Upper Dublin Township consider the sale of its sanitary sewer system?
A. There were three principal reasons to evaluate a sale:

1. Major capital improvements for treatment upgrades and collection system expansion were needed. The wastewater treatment plant renovations had been bid at $7 million and the collection system improvements were estimated at over $5 million. In all likelihood, the objectives of these improvements could be met at a significantly lower cost by an entity dedicated solely to the provision of water and wastewater service.
2. The regulatory burden has been growing with the advent of watershed management programs, the need to eliminate combined sanitary sewers, and the establishment of Total Maximum Discharge Limits (TMDL's) for receiving streams. Research is focusing on the effect of prescription drugs in wastewater on receiving streams and drinking water. This will lead to yet more stringent treatment requirements for wastewater system owners.
3. There are 68,000 public water systems and 18,000 major publicly owned wastewater treatment plants in the United States. Fragmentation to this extent is inefficient and it has led to a strong trend toward consolidation in both the private and public sectors. Consolidation creates larger, more financially sound utility systems that are better able to make improvements while maintaining customer rates.

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Q2. Who showed an interest in buying the system?
A. Twelve independent entities expressed an interest in buying the system. These included Pennsylvania-American Water Company, Philadelphia Suburban Water Company, Bucks County Water & Sewer Authority, North Wales Water Authority, and United Water - Pennsylvania. All of these entities have significant water and wastewater investments in Pennsylvania and two (Philadelphia Suburban and North Wales) already provide water service in Upper Dublin Township. The other firms interested in the system were: SERCO, a British firm with world-wide experience in municipal operations; Azurix North America, a subsidiary of Enron; Aquasource, a subsidiary of DQE in Pittsburgh; American States Water, a southwestern US company interested in expanding beyond its traditional customer base; Environmental Management Corporation, a St. Louis firm with an extensive record in managing and operating municipal wastewater systems; US Water Incorporated, a joint venture of Bechtel and Northwest Water; and US Filter a subsidiary of the French firm Vivendi, the largest water and wastewater company in the world.

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Q3. How was the transaction handled?
A. Each of the prospective bidders was sent a detailed bid package describing the bidding process. The bid package also included an Asset Purchase Agreement describing the terms and conditions under which the Township would consider the sale of the system. The bidders were invited to inspect the facilities and records of the sewer system prior to bidding. Bids and qualifications statements were received and the Township sought public comment on the proposed sale. After three public meetings, the Commissioners decided it was in the best interest of the Township to sell the system to Bucks County Water and Sewer Authority. Closing was on April 25, 2002.

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Q4. Why was the system offered for sale at auction? Why didn't the Township take sealed bids?
A. An auction format was chosen to solicit the highest price. The high bid submitted by Bucks County Water & Sewer Authority was $20 million.

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Q5. How are the customers and existing employees protected?
A. Built-in protections were set out in the bid documents so each bidder provided an offer on the same conditions:

• The sewer department employees were offered employment at comparable rates in similar jobs;
• Customer rates were to be frozen for one year from the date of closing. In addition, Bucks County Water and Sewer Authority agreed to gradually phase in rate increases over a ten-year period. This assures Township residents lower rates than those they would have had to pay if the Township retained ownership of the system; and
• Bucks County Water and Sewer Authority was required to maintain a customer service office in the Township for a minimum of three years.

The high bidder, Bucks County Water & Sewer Authority, agreed to these conditions and indicated they would maintain a full service operations center in Upper Dublin Township beyond the initial three-year minimum.

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Q6. What about areas of our Township that are not yet sewered?
A. The franchise area has been defined to include un-sewered areas of the Township. This is an important step in providing public sewer service to properties served by on-lot disposal systems. Bucks County Water & Sewer Authority indicated they would extend the system to areas with failing septic systems under procedures very similar to existing Township procedures. In addition, the Township Commissioners will continue to exercise all of their authority concerning new development. Bucks County Water & Sewer Authority will only serve new development approved for sewer service by the Township.

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Q7. In 1992, the Township purchased the plant owned by DVISCO. Why did the Township consider a sale so soon?
A. The decision to acquire the DVISCO plant in 1992 was sound and it allowed the Township to address many outstanding needs. Since then, the need to upgrade the plant has grown with changed and tougher regulations. The Township was faced with a sizable bill to improve the plant and the collection system. The Township received bids on the treatment plant improvements and the Act 537 Plan estimates the value of the collection system improvements needed in the near term. These projects represent over $12 million in new capital work -- roughly $1,500 per service connection and nearly four times the debt on the system at the time of the sale. This of course does not address the unknowns posed by future regulation (TMDL's and Watershed Management already exist, but haven't effected the Township's permit). The need to make capital investments in the system won't go away and, for the foreseeable future, there won't be any Construction Grants programs like there were in the late 1970's. The best course of action at this point was to carefully consider the sale of the entire system to an entity dedicated to the provision of wastewater utility service. With only 8,000 customers, the Township would have continued to struggle with new and changing regulatory demands. Capital required to maintain a first rate sewer operation would have always been competing with Township needs to invest capital in other important systems and functions (e.g. the renovations to the municipal building, recycling facilities, parks and recreation, etc.)

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Q8. I need more information. Who should I contact?
A. Paul A. Leonard
Township Manager
Upper Dublin Township
801 Loch Alsh Avenue
Fort Washington, PA 19034
Phone: (215) 643-1600

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