District of Columbia s4

I. Call to Order

Ms. Rachna Butani, Chairperson, called the meeting to order at 10:25am.

II. FY 2016 – FY 2025 CAPITAL IMPROVEMENT PROGRAM (CIP)

Ms. Butani commented that the CIP update is being presented in the joint committee meeting as a continuation of the November Board meeting discussion. District of Columbia Mr. Len Benson, Chief Engineer, Water and Sewer Authority explained that the Lifetime Budget includes the entire cost of any projects that Board of Directors have any activity occuring in the 10-year budget period of FY2016 through FY2025., Joint Meeting of the Environmental Quality and Sewerage Services and Water Mr. Benson commented that the DETS- Quality and Water Services Committees managed projects amount to $9.743 billion and factoring in capital equipment and Thursday, November 19, 2015 Washington Aqueduct, and labor, the Total Capital Budget for FY2016 through 10:00 a.m. FY2025 is $10.4 billion as shown in attachment A-1 of the meeting materials. MEETING MINUTES Mr. Benson explained that “dropped projects” are projects that have been completed and closed out and will be dropped from the Lifetime Budget the following year; “deferred projects” are Committee Members Present DC Water projects that were not included in the Staff Present FY2016 because of the need to balance Rachna Butani, Chairperson risks with available budget and the resulting prioritization of projects. $237 George Hawkins, CEO and General Manager million of projects were deferred. “Project James Patteson, Chairperson changes” refers to projects already in the CIP that experienced changes in their Len Benson, Chief Engineer estimated cost. David Lake Mr. Benson provided the DC Clean River Randy Hayman, General Counsel (DCCR) Project as an example of “project Matthew Brown change” by explaining that this was the first year where the estimated 2002 costs Linda Manley, Secretary to the Board for the Potomac and Rock Creek Tunnel Howard Gibbs projects have been adjusted to 2030 dollars per their expected completion date.

Mr. Benson explained that the “New Projects” (slide 6) category may include

1 2 some projects starting in year 2016 and approaching FY2022, when the Northeast others starting in year 2025. The budget for Boundary Tunnel is scheduled to be the Wastewater Treatment service area completed. includes projects/systems that are near the end of their useful life and thus require Mr. Benson commented DCCR will have a replacement. The Sewer System service period between FY2022 through FY2025 area budget includes the larger sewers where when green infrastructure (GI) will be the inspections and requests from the focus. Then, the Potomac River Tunnel Department of Sewer Services (DSS) have Project will start with an expected increase resulted in an increased priority for these in DCCR disbursements as a result. Mr. projects and the corresponding budgets and Benson noted a constant disbursement in anticipated project start dates have been the Water and Sewer service areas over adjusted accordingly. Mr. Benson noted the the 10-year period with approximately $50 Water System budget includes projects for million planned spending for sewer and facilities nearing the end of their useful life $60 million for water each fiscal year. The and will be closely monitored to determine Committee commented the stacked whether the equipment may last another graphs clearly depict the service areas year(s) or if the equipment may need to be disbursement trends well. replaced earlier than the estimated start year for each project. Mr. Hawkins commented on the line graph (slide 11) depicting the disbursements and Mr. Benson explained that Project Changes highlighted that a majority of capital project (slide 7) represent projects already in the funding was shared with suburban Lifetime Budget where there has been a jurisdictions (wholesale customers) in the budget increase either because of revised past for Blue Plains (light blue line) and cost estimates or added scope to the project. that now, with the major projects at Blue Plains near completion, the Blue Plains Mr. Benson explained that the proposed disbursement is decreasing. Mr. Hawkins Capital Project Disbursement (slide 8) for the commented that the funding for other DETS-managed capital projects is $3.36 service areas is mostly paid for by the DC billion and after factoring in capital equipment rate payers (retail customers). Mr. and Washington Aqueduct, the proposed Hawkins explained that a significant Total CIP disbursement is $3.66 billion. Mr. portion of the rate increase for the retail Benson highlighted the trend in capital customers is because a higher percentage spending decrease starting in FY 2017. of the capital program is anticipated to be allocated to the retail customers in the Mr. Benson explained the aggregated future. The Committee asked if the same spending for each service area by year is or similar graph has been provided to the depicted in the stacked graphs (slide 9). Mr. wholesale customers for them to Benson noted that the Non-Process Facilities understand the periods of increased user service area was added to provide more share and the decreasing disbursement clarity and includes the new headquarters planned for Blue Plains. Mr. Benson building, where previously costs/budgets responded that the same graph will be associated with this facility were included in presented to the Financing and Budget the combined sewer overflow (CSO) service Committee meeting the next day and to area since the new headquarters building will the representatives of the wholesale be located on the Main Pumping Station customers at their annual meeting and tour parcel. Mr. Benson noted a decreasing trend planned for the same day. in the disbursements for Blue Plains due to completion of mandated projects, and a Mr. Benson explained the “prioritization-of- decrease in DCCR disbursements spending line graph” and noted that known

2 mandates are decreasing; high-priority III. ASSET MANAGEMENT projects are steadily decreasing; and good PROGRAM UPDATE engineering projects are remaining constant. The Committee commented that perhaps the Ms. Liliana Maldonado, Director of decreased spending shown for mandates in Engineering and Technical Services the out-years (FY25) should be tempered (DETS), introduced Mr. Craig Fricke, with the many unknowns with regards to Manager Enterprise Asset Management, potential future regulatory requirements. Mr. who will be leading the asset management Hawkins responded that the “mandate” effort moving forward and to provide an heading should be revised to “Known update to the Asset Management Program Mandates” for clarity of definition. Mr. (AMP). Mr. Fricke presented the AMP Benson added that the Chesapeake Bay governance structure (slide 23). Mr. Total Maximum Daily Load (TMDL) mid-term Fricke explained the governance structure review in 2018 may result in new mandates has two levels consisting of the Steering to be implemented by 2023/2024 for Team, which is comprised of executive example, which could impact the CIP budget management; and the Working Team, but are not quantified at this time since which is comprised of all operational areas potential timing and impacts are unknown. of DC Water and support and subject matter expert (SME) resources such as Mr. Benson explained that the FY 2015 strategic planning, financing, IT, and actual disbursement (slide 14) was 96.3% of engineering project controls. Mr. Fricke the planned disbursements. noted one of the responsibilities of the Work Team members is to be liaisons to Mr. Benson explained that the Unfunded their respective departments. Mr. Fricke Projects or “below the line projects” (slide 15) explained the governance structure will are not included in the 10-year CIP budget. enable the expedited transition from The listed projects are being monitored to consultant-led effort to a DC Water led identify if and when the projects might need effort. Mr. Fricke remarked that the to be included in the CIP. Mr. Benson noted transition is already taking place and some projects for CIP consideration, such as continues to progress. the Full Plant Deammonification project, will warrant business case evaluation to Mr. Fricke commented that the current determine potential return on investment. Mr. approach to the AMP is to integrate and Benson commented that any new projects leverage the extensive efforts that have added to the 10-CIP would push out an been performed in the water, sewer, and equivalent cost for lower critical/priority wastewater programs and to accelerate project(s) to maintain the 10-year CIP results. Mr. Fricke explained that the disbursement budget target. primary AMP objective is to integrate the asset management activities across all the Mr. Benson explained that the CIP program areas while focusing on strategic Issues/Sensitivities (slide 16) and noted objectives and metrics to drive and focus regulatory/consent decree unknowns were the AMP efforts. Mr. Fricke noted that previously discussed. Mr. Benson over the next year initial asset commented that the DC Water cost for the management plans for water, sewer, and DC PLUG is unknown. Mr. Benson noted the wastewater will be developed. ramped up condition assessment for the large sewers has the potential to create new Mr. Fricke explained that the AMP key CIP projects based on the criticality of the elements (slide 26) include using the risk findings. framework developed in Phase 1 to assess risk for water and sewer system assets in the authority; develop business

3 4 case guidelines for alternative selection; Mr. Fricke further noted the risk develop project prioritization criteria; and assessment will evolve to include also a develop an enterprise asset management bottoms-up analysis that will be plan that would roll-up or provide an documented in the maintenance executive summary of the individual water, management system. sewer and wastewater asset management plans. The Committee inquired if the relative risk score includes repair history and Mr. Fricke explained that the water, sewer performance criteria. Mr. Fricke responded and wastewater Facility Plans have been that there are templates used to calculate developed considering asset management the risk score, such as the likelihood of and that the approach moving forward will be failure template, which consists of to transform these Facility Plans into asset maintenance history, physical condition management plans by incorporating and and asset performance among other normalizing of asset risk assessment factors. There is also a consequence of throughout the authority; balancing risk and failure template. The Committee inquired level of service and cost; identifying if the template for consequence of failure performance indicators; and using predictive includes the nature of the consequence. modeling and analytics to quantify potential Mr. Fricke responded that consequence impacts; and calculating potential return on can be defined as potential impacts to investment (ROI) if an action is taken on a public image and/or health and safety for specific facility/equipment. Mr. Fricke noted example. Ms. Maldonado provided an Facility Plans typically focus on capital example whereas the consequence-score improvement recommendations; whereas an for a major trunk sewer failure for a sewer asset management plan also incorporates with no redundancy or bypass capability O&M and business process improvements will be higher; whereas, a trunk sewer with such as equipment data capture to optimize a bypass line will score lower on the equipment performance and extend the consequence matrix. equipment’s beneficial use. The asset management plan also includes a long-term Mr. Fricke indicated that three business investment plan. Mr. Fricke presented a case evaluation process pilots will be graphical illustration (slide 28) of a typical conducted for each service area. The asset management plan decision matrix. three projects were selected because alternatives and costs have already been Mr. Fricke presented a sample of the Top- identified, which will now warrant the Down Risk Assessment (slide 29) that was application of the business case completed for the major vertical assets methodology to determine the best outside of Blue Plains. Mr. Fricke noted a alternative. Ms. Maldonado noted that a similar risk assessment has been performed difference with the Phase 2 AMP approach to date for 24 of the 35 asset systems at Blue is that the analysis of alternatives will Plains. Mr. Fricke explained that the high incorporate the O&M cost and will account level risk assessment is useful for focusing for benefits for projects that may initially and prioritizing specific asset systems where have a high capital cost but may result in a more detailed risk assessment is significant cost savings over the life-cycle warranted. The Committee inquired how of the project. This approach will enable continuity is maintained if the assessment is ROI evaluation and/or for quantification of not performed by the same staff. Mr. Fricke pay-back or savings, and potential social acknowledged the challenge and noted that and/or environmental benefits in other developing a framework with procedures, areas of the enterprise. Previously, it has guidelines and consistent criteria and been difficult to consistently quantify the definitions will help maintain the continuity. overall benefits to the enterprise for a

4 particular project when considering only the The Committee requested that the 3- to 5- capital cost. year timeline and spending for the AMP be closely monitored. Mr. Fricke responded Mr. Fricke presented a draft graphical that the commitments and spending will be illustration of the Capital Project Prioritization monitored. The Committee requested that Process (slide 31) consisting of 8 initial a presentation be provided to the entire criteria and weights. Once the DC Water BOD members to provide a clear criteria are determined, scoring scales will be understanding of the AMP objectives and developed for each, which will then be when they can expect to begin seeing CIP applied to representative projects. The results project prioritization results. Ms. will be used to calibrate the scales for each Maldonado responded that the CIP update criterion and/or to refine the criteria as planned for the spring of 2016 will needed. The Committee inquired to the incorporate the results of the AMP risk definition of the “public image” criteria since a assessment work done to date. Ms. failure of a system may result in health and Maldonado noted that not all assets in the safety issues that might then impact DC enterprise will be assessed in the coming Water’s image. Mr. Fricke explained that the year; however, the objective will be to “public image” criteria will be evaluated evaluate a significant portion of assets during the piloting of the 3 selected projects including those with high risks per the top- and discussed with the steering team as to its down risk assessment to better inform the applicability within the overall project updated 2016 CIP. prioritization criteria. The Committee inquired if notes/records will be maintained and stored to provide a history that documents the ACTION ITEM – JOINT USE rationale for the decision making process. Mr. Fricke responded that records Recommendation for Board Action – development and maintenance will be part of Project Lifetime Budget the guidebook and/or standard operating Recommendation for Board Action – procedures (SOP) set up under the AMP. Disbursements Ms. Maldonado noted that a standard template for capturing the information and discussions was developed in Phase 1 and Mr. Benson requested for approval to send will be modified to include the Phase 2 work forward the 10-year Disbursement Plan and to document key issues or insight that and Lifetime Budget to the full board and factored into the project scoring. The referenced the above FY2016 – FY2025 prioritization scores and supporting CIP summary for the request. documentation and notes will be part of a database that is updated at least annually The Committee will recommend the action when the CIP is updated. items to the full Board for approval.

Mr. Fricke presented the draft asset management metrics for the water, sewer and wastewater service areas that will be OTHER BUSINESS/EMERGING ISSUES used to baseline and establish performance targets for each service area. Mr. Fricke None noted that water and sewer performance metrics may be more directly related to impact on customers; whereas, the vertical asset metrics may be related to regulatory EXECUTIVE SESSION compliance, proactive and reactive maintenance, and/or operational readiness.

No executive session was held.

VII. ADJOURNMENT

The meeting was adjourned at 11:21am.

Follow-up Items