The government projects that at least 36 states will face water shortages within five years due to a combination of rising temperatures, drought, population growth, urban sprawl, waste and excess. According to Barry Nelson with the Natural Resources Defense Council, “the last century was the century of water engineering and the next century is going to have to be the century of water efficiency.” Communities are going to be challenged not only to develop new water, but also to manage the commodity that they already have.
Sullivan County, Missouri and its surrounding region, is one such region that has an acute water shortage which can only be alleviated through the construction of a water reservoir. Civic leaders in and around Sullivan County formed the North Central Missouri Regional Water Commission to pursue funding and construction of a surface reservoir that will encompass 2,235 acres of water, sitting on approximately 4,300 acres of land, and will be a regional water source, producing 7 million gallons per day (the East Locust Creek Reservoir) as a long term solution for the water problem. The $63 million project is sponsored by the Natural Resources Conservation Service.
Because of the economic disadvantage in the area and the need for local matching funds, a creative approach to secure funding streams and to decrease costs was needed. The project team undertook cost saving through a reduction in the Reservoir footprint, reduced mitigation costs, and cost-saving design and engineering. To secure revenues, the project team initiated a ½ cent sales tax, a wholesale water rate increase, a private bond, aggressive grant writing, the State’s largest TIF District, and legislation allowing for its creation.
A project of this magnitude is characterized by numerous challenges associated with financing, planning, environmental mitigation, land acquisition, design, construction, and regulatory oversight and compliance. Brad Scott, General Manager of the North Central Missouri Regional Water Commission assembled a project team including Spencer Fane Britt & Browne, led by Jim Grice and Craig Davis; All State Consultants, led by Chad Sayre and John Holmes; and Stifel Nicolaus & Company led by Lara Radcliff to address the issues simultaneously in order to move the project forward.
Financing and Incentives
Several financing tools will be used to fund the project. The North Central Missouri Water Commission just closed on a traditional bond issue for preliminary financing. The bond issue will be followed by final financing through the USDA’s water direct loan program. Spencer Fane Partner John Brickler and Laura Radcliff with Stifel Nicolaus led this effort. The entire project will be overlaid with Missouri’s largest Tax Increment Financing District. The incentive effort is headed by Craig Davis and Jim Grice.
Master Planning and Governmental Affairs
Chad Lamer with Spencer Fane and John Holmes with Allstate will be the architects of the master plan for the entire reservoir area. Both the master plan and the Water Quality Assurance Plan required for the Missouri Department of Natural Resources are required for the incentive financing. Working with SFBB governmental affairs attorney Joe Bednar, Lamer helped draft legislation that created a Lake Authority that allowed for zoning authority in this specific water shed. The bill was signed into law on July 11, 2011 and resulted in a net savings of approximately $3M to the land acquisition portion of the project.
Spencer Fane partner Joe Hatley will direct the land acquisition team. The team consisting of appraisers, title companies, negotiators and relocation specialists, will ultimately acquire approximately 4300 acres from 90 individual property owners.
The reservoir will sit in a former creek channel creating significant mitigation issues. The initial mitigation estimate provided by the U.S. Army Corps of Engineers was nearly $230M and could have easily put an end to the project. Spencer Fane Partner Mike Comedeca, working with John Holmes of Allstate, convinced the Corps to adjust their methodology reducing the mitigation estimate to $30M. Mike and John will be instrumental in drafting the new mitigation plan for the project.
The team’s contribution to the project is best summed up by Brad Scott, General Manager of the North Central Missouri Regional Water Commission. “When the desperately needed East Locust Creek Reservoir becomes a reality it will be in large measure due to the proactive efforts of many partners on this team. The Reservoir project has required the full breadth of legal, engineering, and finance counsel ranging from real estate, to financial modeling, financial planning and environmental. I am eternally grateful for the expertise, creativity and passion of these teammates. They are a force multiplier and I am continually amazed at their breadth of abilities and their capacity for handling the complexities of the project.” The collaborative SMART Lake approach of the East Locust Reservoir addresses the challenges presented when developing new surface water sources and can serve as a model for other projects throughout the region.