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Decentralization tion is critical in framing the economic costs and benefits. What is the plan for equalizing the service levels? How much will it cost? Is there a willingness to decrease some levels of service in order to equalize them? These are all important questions that have to be addressed. What you can���t have in a regionalization is a supposed cost savings that is actually the result of decreased service: that���s not a real economic benefit; that���s just repackaging. Make sure economic costs and benefits are real by reaching an early understanding of the levels of service and the costs involved in obtaining them. ments. Any changes in service provider would have to satisfy these agreements. Ultimately, despite the economic feasibility of the consolidation for the utility and most sub-districts, the ballot issue was voted down by the community citing disagreement over issues of operations and governance, and the desire for local control over the utilities despite potential economic savings. Conclusion Successful regionalization of utility service is an often touted but not often implemented strategy to increase Recognizing Governance cost efficiency. It is important to Changes recognize that regionalization in Utilities are seeking Economic and financial viability and and of itself is neither efficient nor service level issues for the utilities inefficient, it is simply an approach. economies of scale to and community are the first gateways Ideally, a regionalization will procreate meaningful and to gaining buy-in for a regionalized vide for greater use of capital assets approach. In the process of conductand reductions in average costs per sustainable solutions ing the economic feasibility analysis, it unit of service. Economic analyses that reduce the is important to gain a working undercan help identify the potential wins standing of the future governance of and losses, and that analysis needs burdens on rates. the utility. Utilities must identify govto start with some basic workernance issues that are ���deal killers.��� ing assumptions on service levels For example, if the merger of the utilities is forbidden by and governance. Reaching consensus on regionalization law, then there is nothing further to discuss. In most cases, efforts is elusive, but by going to the numbers sooner governance is an issue that can wait for resolution until after rather than later, utilities can determine whether regionalthe parties can agree that the merger is mutually beneficial izing is a winning strategy and start to build buy-in while for service reasons and economic benefits. Too often, govercontinuing to work through more detailed understanding nance is placed first and foremost in regionalization studies. of service levels and governance models. ��� There is no doubt that governance is critical, but agreeing on governance issues requires agreement on other issues first. If Jason Mumm is director of financial consulting the proposed regionalization doesn���t make sense for service services for MWH. Mumm is an experienced or economic issues, then it will not make sense from a govfinancial and management consultant in the water and wastewater business. His professional career ernance perspective. includes extensive work developing water rates, sewer rates, financial plans, utility valuations, costThe value of governance is linked to control, and control of-service allocations, management consulting, and has intrinsic value in many communities. As an example, an expert witness testimony. Prior to joining MWH, Jason founded StepWise Utility Advisors, which was MWH client faced possible fines by the state of Colorado after acquired by MWH in September. Jason is based in years of neglect of its existing wastewater treatment facility. Broomfield, CO, and holds a master���s in business administration from the University of Colorado at The plant was out of compliance with federal permits, and Denver and a bachelor���s in finance and economics while the utility���s new management found operating stratefrom Colorado State University. gies to put the plant back into compliance, there was a need to replace the plant at a cost of $15 million. In addition, the utility needed to replace its water supply source from nonMarilynn Robinson is a vice president for MWH. renewable groundwater supplies to surface water with a capiRobinson joined MWH in 2000 and leads a team of management consultants and technology tal cost near $50 million for water rights and $20 million for a experts dedicated to optimizing people, processes, new water treatment plant. The utility needed to examine the and systems for clients. She has a degree in civil engineering from Texas A&M; University. Robinson is feasibility of consolidating its water and wastewater operabased in Broomfield, CO. tions with its neighboring utilities to address these increasing capital costs. In this example, the economic and financial benefits quickly became obvious; however, the governance issues made the analysis more complex. The utility���s operations included not only service to its own residents, but also service to three other sub-districts through intergovernmental agree30 wateronline.com ��� Water Online The Magazine