Supplemental Executive Summary
Comparative Delivery Models, Risks, and
Conditions for Success
1 Project Options to Deliver Wastewater and Stormwater Services in the City of Richmond
Watearth # 24-092.0
Subject Supplemental Executive Summary - Comparative Delivery Models, Risks, and Conditions for Success
Date March 12, 2026
Prepared by Jennifer J. Walker, PE, DWRE, ENV SP, QSD, LEED AP BD+C Jacob Guise
Introduction
The City of Richmond is approaching an important decision point regarding how wastewater and stormwater services will be delivered in the coming decade. The current service delivery arrangement reaches a decision horizon in May 2027, requiring the City to determine whether to renew, replace, or restructure its operational model for wastewater and stormwater services.
Advance planning is necessary because wastewater and stormwater utilities are complex, highly regulated systems that require substantial lead time for procurement, organizational preparation, and transition activities. This analysis provides a policy-level overview of potential service delivery pathways, the City’s ongoing responsibilities under any model, and the principal risks associated with alternative approaches.
The purpose of this summary is not to prescribe a specific outcome, but to clarify the decision framework and identify the considerations that should inform the City’s next steps.
Decision Horizon and Near-Term
Planning
The City’s decision horizon is primarily driven by the expiration of the current operational arrangement in May 2027. Any transition between service delivery models, whether toward a new contracted provider or toward expanded municipal operations, requires advance preparation to ensure continuity of service and regulatory compliance.
Operational transitions in regulated utilities involve workforce planning, procurement activities, regulatory coordination, and knowledge transfer processes. Even continuation of a contract - based model requires time to structure a procurement, solicit proposals, evaluate providers, and establish oversight mechanisms.
In addition, wastewater and stormwater systems operate within a strict regulatory framework.
Compliance obligations, infrastructure management requirements, and prior enforcement actions underscore the importance of maintaining consistent operational overs ight and institutional capacity. For these reasons, early planning is necessary to maintain viable options and avoid compressed timelines as the decision horizon approaches.
DRAFT EXECUTIVE
SUMMARY RELEASED
UNDER THE AUTHORITY
OF JENNIFER J. WALKER
PE (C77079), DWRE, CFM
ON 2026-03-12 AND
SHOULD NOT BE USED
FOR DESIGN OR
CONSTRUCTION.
Supplemental Executive Summary
Comparative Delivery Models, Risks, and
Conditions for Success
2 Service Delivery Pathways Evaluated
The analysis considered three potential service delivery pathways, though only two were determined to be practicable within the City’s current planning horizon.
Pathway 1: Competitive Procurement for
Long-term Service Delivery
Under this approach, the City would retain ownership of wastewater and stormwater assets while competitively procuring an external entity to perform operations and maintenance services. Operational staffing, day-to-day system management, and maintenance activities would be performed by the selected provider, while the City would retain responsibility for governance, oversight, and regulatory accountability. At the planning level, this pathway presents lower implementation risk as operational staffing and workforce management remain the responsibility of the service provider.
Pathway 2: City-Operated (In-house) Service Delivery
Under a City-operated model, Richmond would directly manage wastewater and stormwater operations through hiring of additional municipal staff. This approach would provide greater direct operational control but would also require significant organizational development, including:
1. Recruiting and retaining certified operators and technical staff;
2. Establishing internal operational management systems;
3. Expanding supervisory and compliance oversight functions; and
4. Managing long-term workforce and labor obligations.
Because wastewater utilities require specialized expertise and continuous operational oversight, this model introduces greater staffing and implementation requirements.
Pathway 3: Asset Transfer (Screened Out)
A third pathway involving transfer of system ownership to another public agency was evaluated but screened out during the planning analysis. Legal, regulatory, and financial constraints make this option incompatible with the City’s current decision horizon.
Supplemental Executive Summary
Comparative Delivery Models, Risks, and
Conditions for Success
3 Retained City Responsibilities
Regardless of the delivery model selected, the City retains several non-delegable responsibilities as the owner of the wastewater and stormwater systems and the regulated permit holder.
These responsibilities include:
1. Regulatory compliance and coordination with state and federal agencies ;
2. System oversight and performance monitoring;
3. Financial governance, rate setting, and budget management;
4. Capital planning and infrastructure investment decisions;
5. Risk management and emergency response coordination; and
6. Contract administration where services are outsourced.
While operational functions can be performed by external providers, accountability for compliance and system performance ultimately remains with the City. As a result, maintaining sufficient owner-side governance capacity is critical under any service deli very model.
Key Risk Drivers
The comparative analysis identified several factors that most significantly influence implementation feasibility and long-term operational performance.
Staffing Availability
The wastewater sector is experiencing a nationwide shortage of certified operators and technical specialists. Under a City-operated model, the City would assume responsibility for recruiting and retaining this workforce. Competitive procurement shifts this responsibility primarily to the service provider.
Governance Capacity
The City retains governance responsibilities under any model, but the nature of those responsibilities differs. Contract-based delivery requires strong contract management and performance oversight, while municipal operations require direct management of d aily operational activities.
Transition Complexity
Transitioning operational models requires careful planning to avoid disruptions to system performance. Insourcing operations generally requires longer lead times and greater organizational preparation than transitioning between contracted providers.
Regulatory Accountability
Regulatory obligations remain with the City regardless of service delivery model. Maintaining clear oversight structures and operational accountability is therefore essential to managing compliance risk.
Supplemental Executive Summary
Comparative Delivery Models, Risks, and
Conditions for Success
4 Near-Term Path Forward
The analysis indicates that the City’s immediate priority is preparing for the upcoming decision horizon while preserving flexibility regarding the final delivery model. Several near-term actions can support this objective:
1. Strengthen owner-side governance capacity
Enhancing the City’s internal oversight capabilities will reduce risk under any service delivery model.
2. Maintain operational continuity and institutional knowledge Preserving system expertise during the planning period will support regulatory compliance and service reliability.
3. Prepare for potential competitive procurement
Early preparation will allow the City to develop procurement structures and performance requirements if a contracted model is pursued.
4. Conduct targeted follow-up analysis where necessary
Additional evaluation of staffing needs, governance structures, and transition planning can help refine future decision-making.
Advancing these steps will allow the City to approach the May 2027 decision horizon from a position of readiness, ensuring that essential wastewater and stormwater services continue to be delivered reliably while maintaining flexibility for future policy choices.
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1 Project Options to Deliver Wastewater and Stormwater Services in the City of Richmond
Watearth # 24-092.0
Subject Technical Memorandum – Comparative Delivery Models, Risks, and Conditions for Success
Date March 12, 2026
Prepared by Jennifer J. Walker, PE, DWRE, ENV SP, QSD, LEED AP BD+C Jacob Guise
Executive Summary
Purpose
The purpose of this memorandum is to provide the City Council with a planning -level, comparative assessment of alternative wastewater and stormwater service delivery pathways to inform policy discussion and future decision-making. The analysis evaluates each pathway through a consistent framework that considers operational feasibility, owner -side governance and regulatory obligations, cost context, capital delivery implications, transition complexity, and execution risk.
This memorandum is intended to function as a decision-support tool, not a final recommendation or procurement action. It clarifies the City’s non-delegable responsibilities under any service delivery model, identifies key trade-offs among the evaluated pathways, and highlights areas where further refinement would be required prior to implementation. A planning- level screening indicated that Pathway 3 (asset transfer) was not technically feasible within the 2027 contract horizon due to bond covenant restraints and regulatory requirements. Based on current information and the City’s existing organizational capacity, the analysis indicates that Pathway 1 (Competitive Procurement) presents the lowest overall execution risk at this stage; however, all findings are directional, based on stated assumptions and professional judgment, and are intended to guide Council deliberation and next steps rather than establish a predetermined outcome.
Key Findings
1. The City retains non-delegable regulatory, financial, and governance responsibilities under all service delivery models. Competitive procurement can transfer day-to-day operations and staffing to a service provider, but the City remains the asset owner and permittee and must maintain robust owner-side oversight, contract administration, compliance monitoring, and enforcement functions.
2. The analysis is forward-looking and comparative in nature. Findings are based on stated assumptions, available documentation, and professional judgment and are intended to inform policy discussion and identify areas for further due diligence rather than prescribe a final course of action.
3. Competitive procurement and in-house service delivery pathways are technically feasible. Each delivery option presents materially different levels of implementation complexity, governance burden, transition risk, and organizational capacity
DRAFT MEMORANDUM
RELEASED UNDER THE
AUTHORITY OF JENNIFER
J. WALKER PE (C77079),
DWRE, CFM ON 2026-03-
12 AND SHOULD NOT BE
USED FOR DESIGN OR
CONSTRUCTION.
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Comparative Delivery Methods, Risks, and
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2 requirements. The asset transfer delivery pathway was screened out due to incompatibility with the 2027 timeline.
4. Differences among pathways are driven primarily by execution risk rather than service outcomes. The Decision Support Matrix indicates that relative scores are influenced by staffing availability, governance workload, transition lead times, procurement constraints, and regulatory accountability, rather than by fundamental feasibility .
5. Planning-level cost ranges are directional and reflect how responsibilities and risks are allocated, not differences in service quality. No pathway eliminates owner-side costs, and capital delivery and transition impacts vary based on management structure and risk transfer rather than efficiency alone.
6. Pathway 1 (Competitive Procurement) presents the lowest overall execution risk at this planning level, given the City’s current organizational capacity. This pathway offers shorter transition timelines, reduced near-term staffing and institutional build-out requirements, and greater alignment with existing procurement and oversight structures.
7. City-operated pathways provide increased direct control but introduce higher implementation complexity and transition risk. These options require substantial internal staffing expansion, longer lead times, and greater exposure to labor, compliance, and organizational risk during implementation.
High-Level Comparative Risk Matrix
To support consistent comparison across the primary retained-ownership pathways (Pathways 1 and 2), a scoring system was developed for each option based on the evaluation criteria established in the Study Context and Evaluation Framework Section of this memorandum.
Relative risk exposure across key dimensions is summarized in Table 1, while the following narrative risk profiles provide additional context on how those risks arise, how they are distributed between the City and external entities, and how they are influenced by governance capacity, staffing, and uncertainty. Scores are comparative and qualitative, intended to illustrate relative differences among options based on current information and industry experience. They are not additive and should not be interpreted as rankings or recommendations.
The risk designations provided in the comparative risk matrix indicate the following:
● Low: Risk is well understood, readily manageable within existing governance and staffing structures, and unlikely to materially disrupt service continuity, regulatory compliance, or cost stability.
● Medium: Risk requires active management and mitigation, involves uncertainty or external dependencies, and could affect service, compliance, or cost performance if not closely monitored.
● High: Risk is strongly influenced by staffing, governance, and transition complexity, with potential for material impacts to service continuity, regulatory compliance, schedule, or cost if not effectively managed.
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3 Table 1: Comparative Risk Matrix
Evaluation Criteria Competitive Procurement
Service Delivery
City-Operated Service
Delivery
Staffing and Labor Market
Constraints Risk
Low High
Long-term Labor and
Retirement Obligations Risk
Low High
Governance and
Management Burden Risk
Medium High
Transition vs Steady-State
Cost Separation Risk
Low High
Compliance Exposure Risk High High
Procurement Pathway and
Decision Gates Risk
Medium High
Risk ratings reflect forward-looking assumptions based on modern, well-structured contracting and governance models, not legacy contract conditions.
Near-Term Implications for the City
1. Owner-side responsibilities require immediate and ongoing attention regardless of pathway selection. In the near term, the City must continue to resource and strengthen non-delegable governance functions, including regulatory compliance oversight, financial and rate governance, contract or operational management, and risk management, independent of any future service delivery decision.
2. Maintaining service continuity is the primary near-term priority. No immediate operational changes are required as a result of this planning-level assessment; however, sufficient staffing and institutional knowledge must be retained to ensure uninterrupted compliance, safety, and service performance during any future transition period.
3. If Council elects to further advance Pathway 1 (Competitive Procurement), early preparation will be required. Near-term actions would include confirming owner-side staffing capacity for procurement and contract administration, refining performance , and reporting requirements, and establishing governance and enforcement structures necessary to manage a competitively procured service model.
4. Advancement of City-operated pathways would require longer lead times and early organizational commitments. Near-term implications of pursuing these options include initiating workforce planning, assessing labor and classification requirements, and
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4 evaluating management and compliance infrastructure needs well in advance of any operational transition.
5. Additional due diligence can be scoped incrementally without committing to implementation. The City may pursue targeted next-step analyses—such as staffing plans, transition sequencing, market sounding, or refined cost validation —while preserving flexibility and avoiding irreversible commitments.
6. Policy direction will shape the pace and scope of near-term actions. Clear guidance from Council regarding risk tolerance, desired level of operational control, and appetite for organizational change will be essential to determine whether near-term efforts focus on procurement readiness, internal capacity development, or maintaining optionality.
Study Context and Evaluation
Framework
City Decision Point
The City is at a critical decision point regarding how wastewater and stormwater services are delivered due to a convergence of contractual, regulatory, operational, and governance factors that affect long-term service reliability and risk exposure.
First, the City’s current wastewater and stormwater services contract is approaching a defined decision horizon, with the existing agreement expiring in 2027. Decisions regarding renewal, replacement, or transition to a different delivery model require advance planning to avoid service disruption, ensure regulatory continuity, and allow sufficient time for organizational or contractual changes. The timing of this decision is further constrained by the scale and complexity of the systems involved and the potential need for interim or transitional operating arrangements.
Second, regulatory pressure on the City’s wastewater and stormwater systems has increased over time. The City is subject to the San Francisco Baykeeper settlement agreement. This agreement imposes stringent requirements related to sanitary sewer overflow r eduction, system inspection and maintenance, reporting, and corrective action timelines. In parallel, emerging nutrient removal regulations and ongoing permit compliance obligations continue to drive capital investment, operational rigor, and enforcement risk. Regulatory obligations apply regardless of the delivery model selected and heighten the consequences of operational failures, staffing gaps, or governance weaknesses.
Third, the City faces persistent governance and oversight challenges associated with managing aging infrastructure, complex interagency arrangements, and a system that exhibits high operational and regulatory complexity relative to its size. While the City’s wastewater and stormwater systems are mid-sized in terms of population served, their age, condition uncertainty, shared facilities, and regulatory expectations place them closer to large-system complexity from a management and risk perspective. Conditions elevate the importance of staffing capacity, institutional knowledge, and clear accountability structures in any delivery model.
Taken together, these factors create a near-term need for the City to evaluate feasible service delivery models, understand the tradeoffs and risks associated with each, and identify the conditions required for successful implementation. Delaying decisions may constrain available options due to timing, staffing, or regulatory considerations.
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5 Current Contract Background and Structure
Currently, Veolia operates and maintains the City’s wastewater treatment plant (WWTP) and collection system as well as stormwater system infrastructure. The total system managed by Veolia consists of an estimated 185 miles of sewer lines with appurtenant manholes, 13 wastewater lift stations, and an estimated 94 miles of stormwater main lines, 3,300 catch basins, 1,200 manholes, 12 miles of ditches, and 7 stormwater lift stations. The WWTP has a capac ity of 24 million gallons per day. Throughout Veolia’s contract term, the City has experienced multiple instances of infrastructure failures and limitations. City residents experienced repeated instances of noxious odors emanating from the WWTP, one of which resulted in a pollution citation.
Repeated sanitary sewer overflows (SSOs) resulted in multiple lawsuits against the City and subsequent financial penalties. Some infrastructure challenges appear to be associated with maintenance delays, deferred corrective actions, and system condition issues identified over time. Any service delivery must include clear performance expectations, timely oversight, and effective escalation mechanisms to proactively address potential issues.
Under the current contract structure, operational execution and day-to-day management are delegated to Veolia, while governance, funding, and regulatory accountability remain fully with the City. The responsibilities outlined below describe execution roles under the contract and do not transfer the City’s obligations as system owner and permittee.
The City’s wastewater and stormwater services have been provided by Veolia since 2002. The most recent amendment to the original contract was enacted in 2018. As outlined in the City’s contract with Veolia, Veolia is responsible for the following for the City’s Wastewater Treatment Facility and Collection Systems:
1. Initial improvements associated with contract initiation and early facility upgrades;
2. Capital improvements (execution and construction management; funding, prioritization, and delivery risk retained by the City);
3. Long term operations;
4. Maintenance; and
5. Management of the facility, supporting compliance with local, state, and federal regulations under the City’s permits.
Additionally, Veolia is expected to provide the labor, materials, and resources required to meet the outlined responsibilities. The City is responsible for paying the service fee, providing access to facilities, and furnishing information related to the design, condition, operation, or maintenance of the facilities. All operating and capital costs are funded by the City through the Wastewater Enterprise Fund and related rate and fee revenues. The City funds routine operations through annual appropriations and finances capital improvements through planned Capital Improvement Project expenditures driven by regulatory requirements, system condition, and settlement obligations. Veolia executes the operation and management of projects but does not provide the capital funding. Financial risk associated with capital investment, long-term asset condition, and regulatory compliance remains fully with the City regardless of the operational delivery model.
While Veolia performs day-to-day operations and supports compliance activities, the City remains the named National Pollutant Discharge Elimination System (NPDES) permittee and the legally accountable entity under state and federal law. Regulatory determin ations, enforcement response, and authority to direct corrective actions reside exclusively with the City and cannot be transferred by contract. As a result, accountability to regulators and the public
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6 remains with the City regardless of how operational duties are delegated. This distinction between operational execution and regulatory accountability is central to understanding the City’s retained risk under the current contract and under any future service delivery model.
Under the current delivery model, Veolia executes defined operational services while the City retains the core governance role and accountability as system owner. The City remains accountable to regulators, ratepayers, and the public for system performance , compliance outcomes, and long-term infrastructure conditions. Oversight of Veolia’s performance is exercised through the Public Works Department, under the direction of the Director of Public Works, with support from City management, legal counsel, and financial staff as needed. In practice, this means the City must:
1. Set enforceable contract scope, performance expectations, and reporting requirements;
2. Review contractor outputs, documentation, operational reports, and regulatory correspondence;
3. Approve, fund, direct, and prioritize capital improvement projects through the City’s Capital Improvement Plan; and
4. Engage directly with regulators and respond to enforcement actions or settlement obligations.
Even when operational work is contracted, oversight gaps can translate into direct City exposure because compliance obligations and public accountability do not transfer with the contract. The current operation model illustrates how “contracting out operations” still requires a strong City governance and oversight function.
The current contract structure separates execution from accountability: Veolia performs defined operational tasks, while the City remains the entity accountable to regulators and the public. As a result, operational or staffing failures by a contractor can still create direct City exposure (e.g., enforcement risk, mandated corrective actions, public trust impacts) if City oversight and escalation mechanisms are not effective. This division of roles is central to the evaluation of all future delivery pathways because it clarifies where risk is truly transferred versus where it is only shifted procedurally. As a result, the effectiveness of this model depends less on the contractor’s technical capability alone and more on the City’s capacity to govern, monitor , and intervene when performance, staffing, or compliance risks emerge.
The original contract with Veolia addressed the payment procedure for the reimbursement of transaction costs, pass through costs, and a fixed service fee. The reimbursement of transaction costs was a one-time payment with a set maximum provided by the City at the initiation of the original contract period. The passthrough costs and service fee are monthly payments. The monthly service fee equals 1/12th of the total service fee for the Contract Year. The City reserves the right to adjust the service fee payment formula throughout the contract term to comply with private activity limitations and/or account for a change in the average ranges for flow and loadings. The fee terms may also be altered upon the mutual agreement of both parties in accordance with the law. The City may adjust the service fee annually. The cost section of the contract explicitly states that Veolia must actively pursue improvements in the effectiveness and efficiency of the operation, maintenance, and management of the system. Veolia’s c ontracted operations and maintenance fee is funded by the City’s enterprise revenues (e.g., wastewater and stormwater user fees).
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7 Veolia Planning-Level Cost Context
The following information is intended to support planning-level cost evaluation of the costs incurred by the City of Richmond’s (City) contract with Veolia. The document intends to address differences between the base fees outlined in the contract and amendment documents, Watearth’s estimate of the City’s contract operations and maintenance (O&M) fees, and the payments submitted to Veolia from the City. The estimates are based on industry standards, including estimates sourced from national and California industry standards and prior Watearth and Arup planning work. Costs are represented as 2025 equivalent dollars and, as available, in the dollars of the year in which the cost was incurred. The cost tables provided indicate that the City incurs additional costs in the provisioning of Veolia’s contract beyond the costs outlined in the 2025-26 Consumer Price Index (CPI) change table due to city oversight staffing, regulatory compliance costs, settlement-driven work, and emergency response. This document does not provide a comprehensive analysis of all costs incurred by the City but instead represents a high - level overview of the kinds of costs incurred throughout Veolia’s contract term.
The tables presented provide a planning-level view of total City cost exposure under the current delivery model throughout the contract term based on known costs and industry standards.
They are not intended to represent audited expenditures or a full life-cycle cost analysis. Instead, they illustrate the categories of costs incurred by the City as system owner and permittee, many of which are not visible in contract payment summaries alone.
The approximate annual steady-state operating cost context utilizing the most recent yearly costs paid to Veolia are outlined in Table 2. The estimated total annual operating cost reflects the base O&M service fee and supplemental operating services paid to Veolia, combined with planning-level estimates of City-retained oversight and operating functions that are not embedded in the contract. Routine regulatory compliance activities are embedded within the base O&M service fee and owner-side oversight estimates and are not included as a separate line item; however, enforcement actions, settlements, and corrective capital are explicit costs the City may be responsible for in any given year. The percentages provided for owner -side oversight and other recurring operating costs are planning-level estimates intended to illustrate categories of City-retained responsibility and are not additive. They represent distinct City functions retained under the current delivery model and together comprise approximately 4-7% annually based on system scale and regulatory complexity.
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8 Table 2: Annual Operating Cost Context (Steady-State) Cost Category Description Planning-Level
Magnitude
Source/Notes
Veolia Base
O&M Service
Fee
Contracted annual
O&M
~4.0M Veolia Contract Amendment #4
(2016)
Supplemental
Operating
Services
Pass-through O&M
services
~4.0M Richmond 2025-26 CPI Change –
Veolia
Owner-Side
Oversight
City contract
management and
compliance
~4-7% of O&M Benchmark-based
Other
Recurring City
Operating
Costs
Legal, financial,
compliance
support
~20-30% of City-
retained
operating
responsibilities
not captured in
contract fees or
owner-side
oversight
(planning-level)
Benchmark-based
Total Annual
Operating Cost
Steady-state
operations
~$13-15M -
The City retains full responsibility for funding capital improvement program (CIP) projects, which are in turn executed by Veolia. While Veolia’s labor and material costs for CIP projects are included in the contract fees, there are additional costs incurred by the City in their management and oversight. Representative CIP projects (shown in Table 3) are likely to or will incur additional costs to the City in its management and oversight of Veolia. The costs presented in the table represent the scale of capital investments for which the City retains funding responsibility and delivery risk. The values do not represent capital delivery costs themselves but illustrate the magnitude of capital programs that drive ongoing City staff time, engineering oversight, regulatory coordination, and construction management activities. Capital delivery costs are typically scaled with the size, complexity, and regulatory sensitivity of the capital program and are incurred over multiple years. Capital delivery costs are impor tant to consider because the operator executes the work, but the City bears the risk of project costs and delivery.
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9 Table 3: Representative CIP Projects Relevant to City Capital Delivery Risk (City- Funded, Multi-Year)
Capital
Category
Example Projects Adopted CIP Magnitude
(Capital Program Value)
Delivery Responsibility
Wastewater
Treatment
Plant (WWTP)
Cogeneration,
Declorination
Sodium Bisulfite
Tank, WWTP
Seismic Retrofit -
Phase II, WWTP
Sludge Thickener
Replacement
~$107M Execution: Veolia
Funding and oversight:
City
Collection
System
Dornan Drive
Force Main, Ferry
Point Dornan Drive
Pump Station,
Marina Bay
Parkway Force
Main, Pipeline
Rehab and
Replacement,
Sanitary Sewer
Repairs
~$37M Execution: Veolia
Funding and oversight:
City
Other costs may arise throughout the contract term that are not captured by contract fees, owner-side oversight, recurring City operating costs, or capital delivery costs. Additional costs may be the result of unexpected maintenance, emergency response, or non-compliance. Table 4 illustrates two examples of extra costs incurred to the City during Veolia’s contract term.
Unexpected one-time costs cannot be eliminated completely, but insufficient operator performance combined with limited oversight will increase their likelihood. The provided examples are included to illustrate that one-time capital or corrective actions can create cost variability for the City as the system owner, regardless of the delivery structure.
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10 Table 4: One-Time and Episodic Costs (Illustrative)
Cost Type Example Cost (dollars,
year incurred)
Equivalent
Cost (2025
dollars)
Notes
Cost Differential 2007 Pump
Station
Improvements
$4.3M ~$5.6M In 2007, Veolia
provided the City with
an estimated budget
of ~$3.3M for pump
station improvements
outlined in the capital
improvement projects
plan. At 60%
completion, the City
had paid Veolia
$5.5M for the work
performed. An
agreement was
reached between the
City and Veolia that
the City would pay no
more than an
additional $2M for
project completion.
Non-Compliance
Fees
2018 San
Francisco
Baykeeper vs
City of
Richmond
Settlement
~$505,000 ~$525,000 The 2018 San
Francisco Baykeeper
vs City of Richmond
settlement was the
result of multiple
sanitary sewer
overflow (SSO)
violations over
multiple years. Per the
Settlement, the City
was required to pay a
one-time plaintiff fee
and a recurring fee to
a monitoring fund.
Additional financial
penalties were
stipulated for
subsequent violations.
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11 Scope and Limits of this Phase
This memorandum is intended to support near-term decision-making by providing a structured, comparative assessment of feasible wastewater and stormwater service delivery models. This memorandum builds on substantial work already completed for the City, inc luding the review and synthesis of existing plans and contracts, a risk workshop, an insourcing transition analysis, review of private providers, and review of public providers. Insights from targeted, non - procurement conversations with private providers and public agencies are also incorporated to ground the analysis in real-world operating practices. Discussions with private providers and public agencies were informational and did not constitute a procurement process or solicitation.
The scope of this memorandum focuses on:
● Comparative evaluation of delivery models;
● Identification of key risks and implementation considerations; ● Assessment of governance, staffing, and institutional capacity requirements; and ● Presentation of high-level, directional cost context using industry benchmarks and comparable experience.
This memorandum deliberately represents planning-level estimates and avoids presenting unwarranted precision where data is incomplete or where further study would be required to responsibly support detailed conclusions. As such, this memorandum:
● Is not a procurement action or provider selection;
● Is not a final recommendation of a single delivery model; ● Does not include vendor pricing, proposals, or negotiated cost terms; ● Does not rely on a new system-wide condition assessment; and ● Does not present full lifecycle economic modeling.
Cost information presented herein is directional and benchmark-based, intended to inform relative cost posture and risk exposure rather than to establish definitive budgets or rates. All planning-level cost ranges are presented in 2025 dollars (unless otherwise indicated), exclude capital program costs and contingency, and are based on industry benchmarks, prior planning studies, and senior engineer input. Costs are provided for comparative planning purposes only and are not intended to represent budget estimates or procurement pricing. Data gaps, timing constraints, and labor market conditions are explicitly acknowledged as part of the analytical context. Limitations are not deficiencies of the analysis, but reflections of what can be responsibly concluded at this stage to support informed and defensible decision-making. The analysis assumes current asset condition information is incomplete and that this uncertainty materially influences risk allocation and cost posture under all options.
Evaluation Framework
To ensure consistency and comparability across delivery models, each option evaluated in this memorandum is assessed using a common framework focused on factors that strongly influence feasibility, risk, and long-term performance. This framework reflects both industry practice and the specific conditions facing the City. Each delivery model is evaluated against the following criteria:
1. Staffing and Labor Market Constraints Risk:
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12 The ability to recruit, retain, train, and manage a qualified workforce; exposure to labor market constraints; and reliance on internal versus external expertise.
2. Long-term Labor and Retirement Obligations Risk:
The provision and management of long-term pension, benefit, and retirement obligations; duration of obligation beyond operation-phase; and structural, long-term financial exposure.
3. Governance and Management Burden Risk:
The clarity, effectiveness, and sustainability of oversight structures, decision -making authority, enforcement mechanisms, and escalation pathways.
4. Transition vs Steady-State Cost Separation Risk:
The degree of annual cost stability, exposure to volatility, and likelihood of embedded risk premiums or long-term cost escalation; considering short-term transition costs to long- term steady-state costs; how cost uncertainties are embedded.
5. Compliance Exposure Risk:
The entity bearing legal accountability for regulatory performance (the City remains the regulated permittee under all procurement pathways); how compliance outcomes are outlined and realized; mechanisms for monitoring and managing system performance.
6. Procurement Pathway and Decision Gates Risk:
The general timeline of the procurement pathway and decision-making processes; potential pressure points; capacity to determine the staffing authorization, organizational structure, funding, and leadership required.
This evaluation framework is applied consistently across all options discussed in subsequent sections to facilitate transparent comparison and to highlight where differences in outcomes are driven by governance capacity and implementation readiness rather than by the delivery model alone.
Common Transition Considerations
Regardless of the service delivery model selected, the City will be required to undertake transition activities to ensure operational continuity and regulatory compliance. There is no practical “no-transition” option. Continuation of a procured operator requires contract restructuring and reaffirmation of regulatory processes. Transition risk differs by option in form and duration, not in presence.
Pathway 1: Competitive Procurement for
Long-term Service Delivery
Under a competitive procurement pathway, the City would retain ownership of its wastewater and stormwater systems and would remain the regulated permittee. Through contracting, the external entity would perform defined operational, maintenance, and technical services. This pathway encourages both private operators and public agencies to compete for long -term service delivery under a structured procurement process. Operational execution and workforce management are shifted to the selected provider, while the City retains responsibility for governance, oversight, and regulatory accountability. Competitive procurement is intended to preserve operational continuity and access specialized expertise while limiting the City’s exposure to direct staffing execution risk. The City retains governance, oversight, and regulatory
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13 accountability, while day-to-day workforce management is assigned to the service provider.
Outcomes under this pathway are shaped less by the identity of the provider and more by procurement design, contract structure, and the City’s ability to sustain effective oversight and compliance management over time.
The competitive procurement pathway assumes full delegation of defined operational functions to a single contracted entity.
Staffing and Labor Market Constraints
Under the competitive procurement pathway, staffing capacity is largely dependent on the selected service provider’s ability to recruit, retain, and deploy qualified personnel. Competitive procurement shifts primary responsibility for workforce recruitment, certification, training, and day-to-day staffing management to the provider, which typically maintains established hiring pipelines and access to regional or national labor pools. This structure reduces the City’s direct involvement in workforce management and mitigates the execution risks associated with recruiting and maintaining licensed operators under a City-operated model.
Notwithstanding these advantages, broader labor market conditions continue to affect all service providers. Persistent shortages of licensed operators, competition among public agencies and private operators, and retirement-driven attrition remain sector-wide challenges.
Reported vacancy rates for certified wastewater operators at small- to mid-sized California agencies commonly range from approximately 10% to 20%, with higher vacancy pressure for senior and supervisory classifications (Grades III–V) required for regulatory compliance coverage. Recruitment timelines for licensed operators typically range from four to nine months, while senior or dual-certified positions often exceed nine to twelve months and may require multiple recruitment cycles due to limited qualified applicants.
Statewide workforce constraints further limit available supply. The State Water Resources Control Board’s Wastewater Operator Certification Program lists approximately 6,000 active certified operators (Grades I–V), and many utilities report that 30% to 50% of their operator workforce is currently eligible for retirement or will become eligible within the next five to ten years (US Environmental Protection Agency, 2020). Retirement risk is particularly concentrated among lead operators and supervisors with significant institutional knowledge, and replacement pipelines are constrained by certification requirements, training duration, and competition from larger utilities and private operators offering broader advancement opportunities.
While these system-wide labor constraints remain present, the City’s direct exposure to staffing execution risk is comparatively lower under a competitive procurement model, as recruitment, retention, and workforce management are contractually assigned to the service provider.
However, market-wide operator scarcity may still be reflected in contract pricing, depth of bench, surge capacity, and turnover rates. As a result, the City’s role shifts from direct staffing execution to ongoing oversight, including monitoring staffing adequacy, qualifications, and turnover through performance standards and contract administration to ensure service continuity and regulatory compliance. The City retains governance oversight, and regulatory accountability under this pathway even though day-to-day workforce management is assigned to the service provider.
Long-term Labor and Retirement Obligations
Competitive procurement limits the City’s direct exposure to long-term labor and retirement obligations. Wages, benefits, pensions, and retirement liabilities associated with the operational workforce remain with the service provider and are reflected indirectly through contract pricing
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14 rather than City employment systems, including thorough contract pricing and escalation clauses, rather than being assumed directly by the City. Workforce benefit obligations are borne by the service provider and reflected through market pricing, subject to competition at re- procurement and term limits.
This structure provides greater flexibility over time, as workforce obligations do not persist beyond the contract term. While labor costs are incorporated into service rates, they do not create permanent employment commitments for the City. This distinction allows future adjustments to service delivery arrangements to occur without carrying forward long-term workforce liabilities, subject to procurement timing and market conditions.
Because the contracted workforce is not City-employed, the City does not carry unfunded pension or retiree health obligations on its balance sheet related to that workforce, preserving long-term financial flexibility. Overall, the long-term labor and retirement obligations risk to the City under a competitive procurement model is low, reflecting reduced direct exposure to long- term workforce liabilities; labor-related financial risk remains and may be realized through contract pricing changes over time.
Governance and Management Burden
City Governance Responsibilities
Under competitive procurement, the City retains ownership of the wastewater and stormwater systems and remains the regulated permittee. The City is responsible for defining service expectations, aligning contractual requirements with regulatory obligations , and ensuring that operational performance supports compliance and long-term system objectives. Unlike City- operated delivery, where management effort is continuous and operational, competitive procurement concentrates City effort on oversight, enforcement, and escalation rather than daily execution.
Competitive procurement is a shift in governance focus, not a reduction in City responsibility.
The City’s role shifts from operational command to contract performance management, regulatory compliance assurance, financial and rate oversight, enforcement a nd dispute resolution, and strategic direction and capital governance. While day -to-day operational supervision is externalized, the City retains the ultimate decision authority, permit compliance responsibility, regulator interface and enforcement exposure, and the obligation to intervene if the contractor performance degrades.
Management and Oversight workload
While day-to-day operations are performed by the service provider, competitive procurement requires sustained City capacity for contract administration, technical review, compliance oversight, and financial monitoring. Oversight responsibilities include re viewing reports, validating compliance activities, tracking performance metrics, and enforcing contractual requirements when deficiencies arise. The best practices described for management and oversight serve to identify actions for ensuring effective operation and are not meant to characterize the City's current oversight practices.
A competitive procurement model shifts the City’s role from direct operational control to continuous oversight and accountability management. While operational staffing is largely externalized under this model, City staffing demands shift toward contract m anagement, compliance review, technical validation, and enforcement rather than direct operations. The effectiveness of the pathway depends on the City’s ability to maintain disciplined, proactive oversight rather than relying on reactive intervention.
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15 Non-delegable functions
Regulatory and permit compliance accountability remains with the City regardless of contractual arrangements. Permits, inspections, enforcement actions, and regulatory correspondence are issued to the City as the permittee. While operational tasks may be c arried out by the provider, the City remains responsible for ensuring that corrective actions are taken and that regulatory expectations are met. The corrective actions may be carried out by the provider under the direction of the City.
Ongoing compliance and reporting obligations
Compliance under competitive procurement depends on clear alignment between contractual roles and permit requirements. The City must retain sufficient internal expertise to review monitoring data, assess compliance documentation, coordinate with regulators , and respond to inspections or enforcement actions. In some cases, the City may need to perform inspections, collect samples, or analyze data in addition to provider monitoring. Independent monitoring and verification are more likely to be necessary if a provider does not fulfill the standards outlined in the contract. However, independent monitoring or verification serves as a useful risk- management tool within contract administration under all performance conditions and does not necessarily imply provider non-performance. Clearly documented standards, defined response authority, and effective escalation mechanisms are central to managing compliance obligations over time and preventing additional labor from City staff.
Competitive procurement shifts the City’s role from operational execution to contract governance, making oversight discipline rather than provider capability the key determinant of success. Success under competitive procurement depends less on operator sel ection and more on the City’s ability to write, manage, and enforce a strong contract. Still, both operator capability and contract structure influence outcomes, with contract design and governance serving as key determinants of long-term performance.
Overall, the governance and management burden risk to the City under a competitive procurement model is medium.
Transition vs Steady-State Cost Separation Risk
One-time and transition costs
The transition costs for a competitive procurement model will vary depending on procurement results, as different providers will have various needs and demands. Generally, transition costs will be associated with the procurement process, contractor mobilization, and operational ramp-up activities. Examples of the expected costs include procurement support, contract negotiation, onboarding of the selected operator, initial staffing alignment, knowledge transfer, and establishment of reporting, compliance, and asset management systems.
The magnitude of costs will vary, but they are more readily separable from steady -state operations than under City-operated delivery. They are more discrete and time-limited, providing more certainty when compared to a City-operated model if procurement and contract terms are well defined.
The scale and duration of transition costs depend on asset condition uncertainty, the degree of operational complexity encountered during transfer, and the provider chosen (e.g., costs may vary between a small provider and a larger provider). Clear procurement requirements, defined performance expectations, and early identification of transition responsibilities are therefore critical to managing transition cost risk under a competitive procurement model.
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16 Ongoing steady-state operating costs
Under a competitive procurement model, steady-state operating costs are primarily embedded within the contracted service fee. The service fee covers labor, routine operations and maintenance, management, and compliance support provided by the selected oper ator. Cost breakdowns and potential changes are explicitly outlined in the terms of the contract.
Compared to a City-operated delivery, a competitive procurement structure generally results in greater annual cost predictability, as staffing, training, and workforce management costs are consolidated within a single contractual framework that includes clear guidelines on how and when the costs may change. Although there may be stipulations for interim changes, costs generally remain the same throughout the Contract Year. Changes to the contract terms (including all fees and payments) are negotiated before costs are incurred.
However, long-term cost performance under this model is highly sensitive to contract design, scope definition, and governance effectiveness. Asset condition uncertainty, regulatory requirements, and labor market pressures are typically internalized within contract pricing, either through baseline service fees or through mechanisms such as escalation clauses, change orders, and contract amendments. As a result, while year-to-year expenditures may appear stable, cumulative lifecycle costs may increase if risk premiums remain embedded or if contract terms are not periodically recalibrated. Costs may be higher in a year when extensive maintenance or large capital improvement projects are present; careful contract management will ensure that projects are completed efficiently and that the contract terms are appropriately modified to remove these costs once projects are complete.
The City retains financial responsibility for capital investments and regulatory compliance outcomes. Steady-state costs under competitive procurement are influenced not only by contractor efficiency, but also by the City’s ability to manage scope, verify deliverables, perform QA/QC, review compliance reporting, and enforce performance standards, and align operational execution with long-term capital planning. These functions represent a material, ongoing workload that must be realistically sized and costed, and contractually supported, rather than assumed to be absorbed within existing City staffing levels. A fully resourced City oversight function under this model would typically include roles responsible for contract administration, regulatory compliance oversight, financial review, and technical performance monitoring. Considering the complexity of the City's system, additional staff will be needed to support contract management, engineering review, and compliance coordination. Embedding clear performance outcomes and procedures in the event of non-compliance offers protection against unexpected costs. Effective contract oversight and periodic benchmarking are therefore critical to maintaining cost control and avoiding gradual cost escalation over time.
Overall, the transition and steady-state costs risk to the City under a competitive procurement model is low provided that the City maintains strong contract governance, oversight capacity, and enforcement discipline.
Compliance Exposure
The City retains full regulatory accountability under competitive procurement. Because regulatory agencies recognize only the City as the permittee, compliance exposure remains high regardless of provider’s performance. While the service provider may perform monitoring, reporting, and corrective actions on the City’s behalf, compliance outcomes depend on the clarity of contractual responsibilities and the City’s ability to oversee, verify, and certify day -to- day compliance activities performed by the contractor, and intervene when necessary.
Ultimately, regulatory agencies place full compliance responsibility on the City even if non - compliance occurs as a result of provider action/inaction. In addition to providing clarity of
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17 contractual responsibilities and overseeing performance, the City should outline contingencies within the provider’s contract in the event of non-compliance to mitigate potential compliance exposure.
Compliance exposure is most pronounced during transition and during periods of heightened regulatory scrutiny, when coordination, documentation, and response authority are critical.
Sustained City engagement is required to maintain alignment with regulator y expectations and manage compliance risk over the contract term.
Overall, the compliance exposure risk to the City under a competitive procurement model is high.
Procurement Pathway and Decision Gates
Under this pathway, the City would pursue a competitive procurement process in which qualified service providers may submit proposals to deliver operational, maintenance, and technical services. While competitive procurement does not eliminate risk, it red istributes risk in ways that are manageable and familiar to the City, provided decisions are sequenced deliberately and governance capacity is sustained.
As reflected in Table 1 (Comparative Risk Matrix), the primary risks associated with this pathway are not staffing or long-term labor obligations, which remain largely externalized, but rather schedule sensitivity, governance discipline, and compliance exposure during transition and steady-state operations.
Procurement Approach
Under the competitive procurement pathway, the City will issue a Request for Proposals (RFP) for long-term service delivery. The procurement would define:
1. Scope of services,
2. Performance standards,
3. Staffing expectations,
4. Transition requirements, and
5. Compliance responsibilities.
Both private operators and public agencies could respond, allowing the City to assess differing organizational approaches within a single, structured process.
Importantly, procurement design functions as a risk management tool rather than a passive selection mechanism. Under this pathway, contract structure is the City’s primary tool for managing operational, financial, and compliance risk over time. The effecti veness of this pathway depends as much on contract structure and oversight capacity as on the identity of the selected provider.
Ideal Major Phases and Duration
Durations shown are “planning-level, best-case ranges.” Both pathways carry material schedule risk from approvals, labor processes, and readiness dependencies, which must be explicitly linked to the Veolia contract end date and transition continuity requirements.
1. Procurement Planning and Readiness (1–2 months)
This phase focuses on confirming the scope of services, performance expectations, and risk allocation framework to be included in the solicitation. Key activities include defining service boundaries, refining governance and oversight roles, establishing ev aluation
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18 criteria, and aligning internal stakeholders on objectives and constraints. Early planning decisions influence the quality of proposals received and the City’s ability to manage transition and ongoing performance.
2. Solicitation Development and Release (1–2 months)
During this phase, the City prepares and issues solicitation documents, including technical scope, contractual terms, pricing structure, and performance requirements.
The solicitation establishes the framework through which operational, staffing, and compliance responsibilities are contractually defined. Market response during this phase is influenced by the clarity of expectations, risk allocation, and assumptions regarding asset condition and staffing availability.
3. Proposal Evaluation and Selection (1–2 months)
The City evaluates submitted proposals against established technical, financial, and governance criteria. Evaluation activities include review of operational approaches, staffing plans, compliance programs, cost structures, and transition strategies. This phase culminates in identification of a preferred proposer, subject to negotiation and governing body approvals.
4. Negotiation and Contract Finalization (1–2 months)
This phase involves negotiation of scope, pricing, performance standards, escalation mechanisms, and transition provisions. Contractual terms governing risk allocation, reporting, compliance support, and enforcement are finalized during this period.
Decisions made in this phase materially influence cost predictability, oversight workload, and the City’s ability to intervene if performance or compliance issues arise.
5. Transition and Mobilization (3–6 months)
Following contract award, the selected provider undertakes mobilization activities, including staffing, systems setup, data and knowledge transfer, and coordination with City staff and regulators. While day-to-day operations continue under the existing arrangement until transition is complete, oversight intensity increases during this period.
As with all delivery models, compliance and service continuity risk are most acute during transition, requiring active City involvement and monitoring.
Executive and Council Decision Points
The procurement pathway includes several decision points that vary in consequence and reversibility:
1. Authorization to initiate procurement, which preserves optionality but commits staff and resources to a defined process
2. Approval of procurement scope and risk allocation, which materially shapes outcomes and should reflect explicit City risk tolerance
3. Contract award approval, which represents a binding commitment to a service delivery approach and provider
4. Transition authorization, including acceptance of mobilization plans and compliance protocols
Clear differentiation between preparatory actions and commitment points is essential to avoid premature lock-in or compressed transitions.
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19 Schedule and Transition Risks
Schedule risk under competitive procurement is assessed at medium: the process is well understood but time sensitive. If procurement milestones slip, the City may face reduced negotiating leverage, the need for interim contract extensions, or compressed tr ansition periods.
These conditions increase governance burden and compliance exposure during handoff, even if long-term operations remain stable.
Transition risk is highest during contract start-up, when reporting roles, response authority, and oversight protocols must be clearly established. While transition and steady -state costs are more separable under this pathway than under City operation, inadequate preparation or oversight during mobilization can undermine that advantage.
Alignment with Veolia Contract End Date
The feasibility of the procurement pathway is directly tied to the expiration of the existing Veolia contract in 2027. To avoid service disruption, regulatory gaps, or rushed transitions, procurement and transition activities must be sequenced backward from this date. Delaying initiation of procurement increases the likelihood that the City will be forced into interim extensions or constrained options, reducing flexibility and potentially increasing long -term risk.
Conversely, initiating procurement does not preclude future consideration of City -operated service delivery. It preserves continuity while allowing the City to strengthen internal capacity, improve asset condition visibility, and refine its long-term risk posture before making more consequential organizational commitments.
As summarized in the Risk Matrix, a competitive procurement model concentrates regulatory risk within the City while transforming staffing and execution risks from direct to contractual. A competitive procurement model does not eliminate risk, and the City must maintain appropriate governance and monitoring structures to ensure successful operation. Competitive procurement preserves operational continuity and reduces direct staffing execution risk but depends on disciplined governance and oversight capacity to manage compliance and long-term performance.
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20 Pathway 2: City-Operated (In-house)
Service Delivery
Under a City-operated service delivery model, the City would directly operate the wastewater treatment plant, sanitary sewer collection system, and stormwater infrastructure and would remain the sole regulated entity under state and federal law. This model concentrates operational execution, workforce management, governance, and regulatory accountability within the City organization. While in-house delivery can offer greater transparency and alignment with City priorities, it also requires the City to assume full responsibility for staffing, compliance execution, management capacity, and long-term labor obligations. The primary risks associated with this pathway arise from labor market constraints, the permanence of workforce commitments, the intensity of management and governance demands, and the difficulty of separating transition activities from steady-state operations.
Staffing and Labor Market Constraints
Under a City-operated delivery model, the City would be responsible for recruiting, training, certifying, and retaining the full operational workforce required to manage wastewater and stormwater services. The required staffing needs include licensed operators, maintenance staff, supervisors, compliance personnel, and supporting technical and administrative roles. Staffing requirements are not limited to day-to-day operations, but extend to emergency response, regulatory reporting, asset management coordination, and continuous compliance activities.
While labor market constraints affect both delivery pathways, the risk differential arises because institutional hiring, compensation, civil service, pension, and training constraints are borne directly by the City under in-house delivery.
Labor market conditions present a material challenge to an in-house model. Statewide shortages of certified operators, competition with other public agencies, and retirement -driven attrition limit the availability of qualified personnel. Transitioning to in-house operations would require staffing build-out to occur while systems remain operational and subject to regulatory oversight. Training, licensing, and certifications require time, including achieving pre - certifications (i.e., working for a certain number of years). It is possible that the City is successful in recruiting qualified staff members, but the ability of the staff to adapt and advance includes unavoidable time commitments that may not align with the City’s timeline. As a result, the feasibility and pace of transition are closely tied to the City’s ability to recruit and onboard qualified staff within available timelines. The City would need to authorize staffing, leadership, and training investments well in advance of transition to avoid elevated compliance and service disruption risk. Under City-operated delivery, these staffing constraints translate into direct operational and compliance exposure for the City as the operator.
Overall, the risk presented to the City by staffing and labor market constraints for City -operated service delivery is high.
Long-term labor and retirement obligations
City-operated service delivery entails long-term institutional and financial commitments rather than time-limited contractual obligations. Once operational positions are established, the City assumes responsibility for wages, benefits, pensions, and retiree health (OPEB) liabilities associated with the workforce. These obligations extend well beyond the transition period and persist regardless of future changes in service delivery approach. Pension and OPEB
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21 commitments represent legally binding, structural liabilities that are not easily reduced or restructured once assumed, distinguishing them from contractual service costs that can be modified or reprocured over time.
Sustaining an in-house operational workforce further requires ongoing succession planning, training, and retention efforts to address retirements, turnover, and certification requirements.
These workforce sustainability demands must be managed concurrently with compliance, safety, and operational reliability obligations and influence the City’s long -term financial flexibility and organizational capacity, rather than solely near-term transition costs.
Staffing feasibility therefore represents a primary constraint on City-operated delivery, particularly during the transition period when recruitment delays or unfilled positions could directly affect regulatory compliance and service reliability. Over the long term, the combined effects of permanent labor obligations, retirement exposure, and workforce availability introduce a high level of execution and financial risk relative to service delivery models that rely on external providers for staffing execution.
Governance and Management Burden
City governance responsibilities
Under an in-house delivery model, the City would directly govern all aspects of wastewater and stormwater service delivery, including:
1. Operational priorities,
2. Ensuring regulatory compliance,
3. Overseeing capital planning, and
4. Responding to enforcement actions.
Regulatory agencies recognize only the City as operator and permittee. Accountability for system performance rests entirely within the City organization. In practice, this entails both executive governance (policy direction, budgeting, and compliance accou ntability) and line- management governance (staff supervision, scheduling, incident response, and continuous operational command and control). Compared to contract-based delivery, the line- management function introduces materially higher organizational complexity, greater staffing depth requirements, and increased concentration of institutional risk within the City, including continuity and liability exposure.
Management and oversight workload
In-house delivery requires sustained internal management capacity to oversee daily operations, workforce supervision, compliance execution, emergency response, and coordination with capital and financial planning. Unlike outsourced models, where management effort is concentrated on contract oversight, City-operated delivery requires continuous operational leadership and technical supervision across all system components. The City will need dedicated senior utility leadership with authority over operations, compliance, staffing, and coordination with capital planning, rather than reliance on distributed departmental oversight.
This workload places ongoing demands on executive leadership, utility management, and specialized technical staff. The effectiveness of this pathway depends on the City’s ability to maintain sufficient management depth and institutional knowledge over time .
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22 Non-delegable functions
Certain responsibilities cannot be delegated under any delivery model. While operational tasks may be supported by consultants or temporary assistance, regulatory accountability and approval of major operational decisions remain non-transferable. Under any operation model, all certifications, regulatory correspondence, inspections, enforcement actions, and corrective directives are issued directly to the City. The difference under an in-house model compared to other operation models lies in who carries out corrections - in the event of an in-house model, City staff directly addresses deficiencies and corrective actions.
Ongoing compliance and reporting obligations
The City must maintain internal capacity to implement and update required compliance programs, including Sewer System Management Plan and Capacity, Management, Operations, and Maintenance elements; manage monitoring and reporting; and respond to inspection s and enforcement actions. These obligations apply continuously and must be sustained through organizational change, staff turnover, and evolving regulatory requirements.
Overall, the risk presented to the City by the governance and management burden for City - operated service delivery is high.
In summary, City-operated delivery requires sustained, centralized utility leadership and management capacity. Otherwise, governance gaps are likely to compound operational and compliance risk.
Transition vs. Steady-State Cost Separation
One-time and Transition Costs
Transitioning to City-operated delivery involves one-time and near-term costs associated with staffing recruitment, training and certification, systems implementation, and knowledge transfer from the incumbent operator. These activities must be undertaken while maintaining uninterrupted service and compliance, requiring overlap between transition activities and ongoing operations.
The scale and duration of transition costs depend on staffing availability, asset condition uncertainty, and the degree of operational complexity encountered during transfer. As a result, transition costs are sensitive to timing and readiness rather than solely to the delivery model selected. An accelerated or under-resourced transition would materially increase the likelihood of operational instability and regulatory exposure.
Ongoing steady-state operating costs
Once fully implemented, steady-state costs under an in-house model reflect ongoing labor, energy, materials, compliance activities, and routine maintenance. While these costs may stabilize over time, they remain closely tied to staffing levels, regulatory requirements, and system conditions. Unlike transition costs, steady-state costs represent permanent operating commitments that the City must sustain year after year. Early decisions regarding staffing authorization, leadership structure, and transition sequencing materially influence both near- term feasibility and long-term cost stability.
Overall, the risk presented to the City by transition and steady-state costs for City-operated service delivery is high.
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23 Compliance Exposure
Under City-operated service delivery, the City retains full regulatory accountability for wastewater and stormwater performance. While direct operation can provide clearer visibility into system conditions and regulatory interactions, it also concentrates compliance responsibility within the City organization. Compliance outcomes depend on the adequacy of staffing, management systems, documentation practices, and response capability.
Compliance exposure is most acute during transition, when organizational structures, procedures, and staffing are still being established. Over the long term, maintaining compliance requires sustained institutional capacity and disciplined management pract ices, regardless of the delivery model selected.
Overall, the risk presented to the City by compliance exposure for City-operated service delivery is high.
Internal Pathway and Decision Gates
Under a City-operated service delivery model, transition does not occur through an external procurement process with discrete contractual milestones. Instead, the pathway relies on a series of internal organizational decisions that collectively function as decision gates. These decisions are less formalized than procurement approvals but are more consequential, as they establish permanent staffing, governance, and operational structures that must be in place before the City can assume direct responsibility for wastewater and stormwater operations.
While an external O&M procurement is not required, significant internal approvals and labor, budget, and classification actions still carry schedule and feasibility risk comparable in magnitude to formal procurement milestones.
While these internal decision gates do not occur through a single governing body action, their sequencing and timing are critical. Delays or misalignment among these decisions can compress the transition window, limit readiness, and materially increase ope rational and regulatory risk as the City approaches the end of the existing contract term.
Ideal Major Phases and Duration
Durations shown are “planning-level, best-case ranges.” Both pathways carry material schedule risk from approvals, labor processes, and readiness dependencies, which must be explicitly linked to the Veolia contract end date and transition continuity requirements. In practice, several phases will occur concurrently. However, because critical tasks are constrained by approval sequencing, hiring and certification lead times, and transition dependencies, the planning-level best-case calendar remains approximately 24 months. Durations are not additive but rather represent typical ranges for discrete activities. Overall calendar time is governed by critical-path dependencies.
1. Internal Planning and Readiness (1–2 months)
This phase focuses on defining the scope and scale of services to be assumed by the City and assessing readiness requirements. Key activities include identifying governance and leadership needs, clarifying operational responsibilities, and evaluating staff ing, certification, and training requirements necessary to support direct operation.
2. Organizational Design and Authorization (2–4 months) During this phase, the City establishes the organizational structure required to support in - house operations. This includes defining reporting relationships, management authority, and accountability for operations and compliance. Formal authorization of staffing
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24 levels, position classifications, and budget allocations occurs during this phase, creating long-term institutional commitments.
3. Workforce Recruitment and Certification (3–6 months) The City initiates recruitment of licensed operators, supervisors, maintenance personnel, and compliance staff. Certification, training, and onboarding timelines represent hard constraints that are largely outside the City’s control. Recruitment and traini ng activities must proceed while systems remain operational and subject to ongoing regulatory oversight.
4. Systems, Processes, and Compliance Readiness (3–6 months) This phase includes establishing compliance management systems, documentation protocols, reporting processes, and operational procedures. Regulatory coordination, inspection readiness, and internal controls must be implemented before operational responsibility is assumed. These activities often overlap with workforce onboarding and knowledge transfer.
5. Operational Transition and Assumption of Control (1–3 months) The transition period involves knowledge transfer from the incumbent operator, ramp -up of City staff, and gradual assumption of day-to-day operational responsibility. Oversight intensity and compliance exposure are highest during this period, as new system s, staff, and processes are tested under live operating conditions.
Executive and Council Decision Points
The internal decision pathway includes several key decision points that function as decision gates for City-operated delivery:
1. Authorization of staffing levels, classifications, and compensation frameworks
2. Approval of organizational structure and leadership authority
3. Budget authorization for transition activities and ongoing operations
4. Approval to initiate recruitment, certification, and training programs
5. Authorization to assume direct operational responsibility Unlike procurement approvals, these decisions establish long-term organizational and financial commitments. Once executed, they are difficult to reverse without operational disruption, workforce impacts, or additional cost.
Schedule and Transition Risks
Timing risk under a City-operated model is driven primarily by internal decision-making and workforce readiness. Recruitment, certification, and training timelines are fixed constraints that cannot be accelerated without increasing risk. Delays in authorizing staffing or organizational structure can compress the transition window and force overlapping activities to occur closer to the contract expiration date.
Transition activities must occur in tandem with ongoing operations, increasing the potential for operational strain and compliance exposure. As a result, schedule risk under this pathway is closely tied to the City’s ability to make coordinated decisions early enough to support readiness before assuming direct operational control.
Reversibility and Optionality
Internal decision gates under a City-operated model reduce optionality earlier than procurement-based pathways. Staffing authorizations, leadership appointments, and benefit
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25 commitments create durable institutional structures that persist beyond the transition period.
Once operational responsibility is assumed, reversing course would require additional transition effort and introduce new operational and compliance risk. As a result, optionality decreases rapidly once internal decision gates are passed, underscoring the importance of sequencing and readiness prior to transition.
Decision Gate Implications
City-operated service delivery requires earlier and more consequential internal decisions than procurement-based pathways. While this model can provide greater operational control over time, its feasibility and risk profile are highly sensitive to decision timing, staffing availability, and organizational readiness. Failure to align internal decision gates with recruitment, certification, and compliance readiness increases the likelihood of transition instability and regulatory exposure, particularly as the City approaches the existing contract horizon.
Alignment with Veolia Contract End Date
Under a City-operated service delivery model, alignment with the 2027 expiration of the Veolia contract is impacted primarily by internal readiness rather than external procurement milestones.
Unlike competitive procurement, which allows transition activities to be structured contractually, in-house delivery requires that staffing, governance, systems, and compliance capacity be substantially in place before the City can assume direct operational responsibility.
The ability to align an in-house transition with the contract end date depends on the City completing a series of interdependent internal decision gates well in advance of 2027, including staffing authorization, recruitment and certification of operators, establishment of management and compliance systems, and knowledge transfer from the incumbent operator. Recruitment and certification timelines represent hard constraints, and delays in internal approvals or staffing can compress the transition window, increasing operational and regulatory risk.
As a result, effective alignment under a City-operated model requires earlier decision-making and sustained coordination than procurement-based pathways. If readiness milestones are not achieved in time, the City may face heightened transition risk at contract expiration or the need to pursue interim arrangements to preserve service continuity and compliance.
Pathway 3: Asset Transfer
General Risk Discussion
Communication outreach triggered a brief assessment of a third pathway that would entail the City selling its wastewater operations assets to a public entity. Under an asset transfer delivery pathway, the City would sell or transfer its wastewater enterprise to another public agency. An asset transfer delivery pathway would be subject to restrictive bond covenants securing outstanding debt and require protection of bondholders, ratings, and pledged revenues. Any proceeds attained through the sale of assets would be restricted to debt redemption or system reinvestment.
As the asset transfer delivery pathway moves wastewater operational authority outside of the City’s direct control, the same risk assessment, pathway analysis, and cost implications considered in Pathways 1 and 2 do not apply. Asset transfer would introduce high legal, financial, and schedule risk. The significant bond covenant and debt constraints introduce considerable legal and financial risks while limiting financial flexibility. The process would be dependent on regulatory, Local Agency Formation Commission (LAFCO) approval, and public
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26 processes, introducing political uncertainty. Benefits retained by the City rely on interest and terms offered by a public acquirer, which are uncertain.
One option explored in greater depth was an asset transfer to West County Wastewater District (WCWD). According to WCWD, the asset transfer process would not be assumed by the May 2027 contract expiration date. Although WCWD has not ruled out long-term strategic consolidation of assets over at least a five- to seven-year timeframe, any agreements would be subject to an extensive analysis of assets, revenue structure, enforcement authority, rate impacts, and governance. Additionally, WCWD has noted that an assumption of the City's assets would require WCWD to nearly double its workforce. Additional limitations would arise due to ongoing internal capital and grant-funded initiatives, as well as the scale of investment required.
WCWD has agreed to consider long-term consolidation at a future board meeting; viability of Pathway 3 is contingent on agreement from the WCWD Board.
Planning-Level Schedule and Financial Feasibility
Context
At a planning level and under best-case conditions, the asset transfer process is anticipated to take at least 42 to 84 months. Major phases would include:
• Threshold feasibility confirmation, ~3-6 months
• Policy direction and authorization to explore, ~6-12 months • Financial structuring and bond resolution, ~6-12 months • Market engagement and negotiation, ~9-18 months
• Regulatory and inter-agency approval, ~12-24 months
• Transition and implementation, ~6-12 months
Even under a best-case scenario, the timeline materially exceeds the 2027 contract horizon and would require interim operating arrangements, introducing additional cost and compliance risk.
Sale proceeds are constrained by the bond covenant arrangements and will likely be limited due to debt redemption or defeasance rather than discretionary use. The transaction, advisory, and restructuring costs would be material and incurred prior to realization of net benefit, further increasing the financial risks involved. The ultimate financial outcome depends on how acquirer terms, negotiated valuation methodology, outstanding debt structure, and regulatory conditions would limit the City’s financial flexibility. At this planning level, cost impacts are characterized by high uncertainty and risk. Anticipated planning-level cost context is provided (Table 5) but cannot be evaluated on a comparable basis to retained-ownership models due to legal and structural constraints.
Table 5: Anticipated Planning-Level Cost Context, Pathway 3
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27 Cost Element Pathway 3 – Asset Transfer to
Public Provider
Planning-Level Range
(2025 dollars)
Pathway 3 - Asset Transfer to
Public Provider: Basis for
Range
Annual O&M Cost N/A* Rate-based costs incurred
by acquiring city post
transfer
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28 Cost Element Pathway 3 – Asset Transfer to
Public Provider
Planning-Level Range
(2025 dollars)
Pathway 3 - Asset Transfer to
Public Provider: Basis for
Range
Owner-Side Cost Elevated during transaction
and transition
Planning level ranges are
dependent on regulatory,
legal, and service
obligations. Values require
more additional analysis
Capital Delivery Cost N/A* Capital cost assumed by
acquiring agency post
transfer
Bond Cost 2017A Bond (to 2048):
Principal: $26,955,000
Interest: $28,736,263 Total:
$55,691,263
2017A Bond (to 2048):
Principal: $22,510,000
Interest: $21,211,550 Total:
$43,721,550
2017A Bond (to 2048):
Principal: $60,975,000
Interest: $22,422,475 Total:
$83,397,475
Supplied by City of
Richmond
Primary Cost Drivers Outstanding bonded debt and covenant restrictions |Bond defeasance, redemption,
or revenue-continuity requirements |Legal,
financial, and regulatory advisory costs |
LAFCO and permit approval processes |
Negotiation leverage and terms offered by
acquiring agency | Rate harmonization
and customer transition considerations
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29 Considering the bond restrictions and multi-layered regulatory and approval requirements involved, an asset transfer pathway would translate to limited predictability of costs and timeline. Overall, the asset transfer pathway has an execution risk designation of extremely high.
The asset transfer pathway has been screened out as infeasible within the 2027 horizon. This determination is driven by bond covenants, regulatory approval requirements, and execution risk, not by any general view on asset transfers as a concept. The remaining analysis focuses on Pathways 1 and 2.
Provider-Informed Operating Context
The purpose of this section is to ground the evaluation of the two service delivery pathways in real-world operating experience rather than theoretical models. Input from private operators and public agencies is used to illustrate how governance structures, staffing approaches, and risk allocation function in practice under both City-operated and externally delivered arrangements, including where challenges most commonly arise. This perspective helps avoid abstract or idealized assumptions and ensures that the analysis reflects practical constraints, market realities, and lessons learned from comparable systems.
Operating Experience Relevant to Competitive
Procurement
Private operators described operating environments in which outcomes are shaped not only by contractual terms, but by how governance and uncertainty are managed in practice. While contracts establish responsibilities and pricing, operators emphasized that sustained City engagement, clearly defined authority, and consistent oversight are critical to maintaining alignment over time, particularly in complex, regulated systems. Regular communication, well - understood expectations, and defined escalation pathways help maintain focus across system components and regulatory programs; where oversight is intermittent or primarily reactive, priorities can drift gradually, increasing the risk of misalignment that may not be immediately visible.
Staffing constraints were described as a persistent condition rather than a transitional issue.
Operators reported ongoing difficulty recruiting and retaining licensed and experienced personnel due to statewide labor shortages, competition with public agen cies, and retirement- driven attrition. Even large operators rely on a limited pool of qualified staff, reducing flexibility and increasing sensitivity to turnover. As a result, staffing assumptions embedded in contracts require ongoing attention, and service continuity can be affected by vacancies or turnover even under experienced operators.
Operators emphasized that asset condition uncertainty remains a significant source of operational complexity. Incomplete information related to underground assets, system configuration, and maintenance history often surfaces during inspections, cleaning, o r emergency response rather than at contract execution. While uncertainty may be addressed financially through contractual assumptions and pricing, it frequently requires operational judgment, coordination, and City involvement during execution and can inc rease workload, repeat effort, or deferred resolution over time.
Regulatory compliance execution was described as highly dependent on alignment between contractual roles and permit obligations. Operators can perform monitoring, reporting, and corrective actions on behalf of the City, but regulatory accountability remain s with the permittee. When roles, documentation standards, or response authority are unclear,
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30 compliance risk can increase due to coordination delays or inconsistent interpretation, particularly during inspections or enforcement actions.
From a cost perspective, operators noted that uncertainty related to asset condition, staffing availability, and regulatory expectations often manifests through conservative operating approaches rather than discrete cost line items. Additional inspections, staffing redundancy, or reactive maintenance may be required to manage unknowns, even if these efforts are not immediately visible in annual budgets. Over time, these dynamics can influence cost stability, contract performance, and renewal conditions.
Operating Experience Relevant to Pathways 1 and 2
Public agency operators described governance, staffing, and risk considerations that are relevant to both City-operated and competitively procured service delivery pathways, particularly where responsibility for compliance, asset condition, and long -term investment must be aligned with authority.. From their perspective, successful arrangements require clear authority over operations, rates, capital planning, and enforcement, rather than a vendor -style contractual relationship. Public agencies emphasized that they cannot operate effectively without durable governance structures that align responsibility with authority. Attempts to lay operational responsibility onto agencies without corresponding decision-making power were described as unworkable, particularly for systems with significant infrastructure needs or compliance challenges. Past joint governance structures, such as joint pow ers authorities, were cited as administratively burdensome and difficult to sustain without strong alignment and long - term commitments.
From a staffing and risk perspective, public agencies described a fundamentally different operating posture than private providers. Staffing is viewed as a long-term institutional function rather than a contract-specific obligation, with greater emphasis on stability, training, and retention. While labor markets remain constrained, established public agencies noted relative success attracting qualified staff due to organizational stability and public -sector employment conditions. At the same time, agencies were clear that they are unwilling to absorb disproportionate operational, financial, or regulatory risk associated with another municipality’s system without strong financial protections and capital commitments.
Common points of misalignment with municipalities include expectations that public agencies can assume operational responsibility without addressing underlying asset condition, funding gaps, or enforcement limitations. Public providers emphasized that to s ucceed, City-operated or public-sector delivery requires clear governance authority, protection of ratepayers, transparency around asset condition and liabilities, and alignment on long -term investment responsibilities before any transition or consolidation can be considered.
Planning Level Cost Across Pathways 1
and 2
The planning-level ranges shown in this section are intended to support apples-to-apples comparison between service delivery pathways at a screening level. They represent order -of- magnitude, directional estimates (2025 dollars) based on available budget co ntext, contract history signals, and California utility management/oversight norms. These ranges are not bids and should be refined through the next phase (scope definition, market outreach, staffing plan development, and validation of capital delivery assumptions). The planning level cost analysis
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31 incorporates annual O&M cost, owner-side cost, capital delivery cost, and transition cost impact.
Annual O&M Cost Description
Annual O&M costs represent the ongoing expenditures required to operate, maintain, and support the wastewater system on a day-to-day basis to meet service, regulatory, and safety requirements. These costs include routine operations staffing (or contracted service fees), maintenance activities, utilities, chemicals, routine equipment repair and replacement, compliance monitoring and reporting execution, and operational support functions directly tied to system performance. Annual O&M costs exclude owner-side governance and oversight costs, major capital rehabilitation or expansion, and one-time transition or startup expenses.
Under a competitive procurement model, annual O&M costs primarily reflect the contractor’s service fee and reimbursable operating expenses, inclusive of the contractor’s internal staffing, management, and overhead. Under a City-operated model, annual O&M costs reflect direct City labor, benefits, supervision, training, operational support, and internal service allocations necessary to deliver equivalent service levels. While the service outcomes are intended to be comparable, the cost structure and risk allocation differ by pathway, resulting in different planning-level O&M cost ranges.
Owner-Side Cost Description
Owner-side costs represent the City’s non-delegable governance, regulatory, financial, and oversight functions that exist under all service delivery models. This representation is because the City remains the asset owner and named permittee. These functions include program and contract management, procurement and contract administration, regulatory compliance oversight and regulator interface, financial/rate oversight, capital program governance, legal and audit coordination, labor relations (as applicable), safety, and risk management. Owner- side costs exclude field operations labor and contractor O&M service fees (or in -house operations labor) and exclude direct construction costs.
Capital Delivery Cost Description
Capital delivery costs represent the fully loaded costs required to plan, design, manage, construct, inspect, test, and place capital projects into service, expressed as a percentage of direct construction or rehabilitation expenditures at a planning level . These costs include program and project management, engineering and design services, construction management and inspection, contract administration, permitting and regulatory coordination, quality assurance/quality control, commissioning, documentation, and closeout activities.
Capital delivery costs do not represent the cost of physical construction itself, but rather the supporting functions necessary to successfully deliver capital work.
Capital delivery costs vary by service delivery pathway based on how responsibilities, risks, and management functions are allocated. Under competitive procurement, portions of capital delivery may be embedded within contract pricing or performed by the se rvice provider, potentially reducing direct City delivery workload but not eliminating owner accountability.
Under a City-operated model, the City retains a larger share of direct capital delivery responsibility, requiring expanded internal program management, engineering oversight, and administrative capacity. The planning-level percentages shown are intended to reflect these structural differences rather than project-specific efficiencies or performance outcomes.
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32 Transition Cost Impact Description
Transition cost impacts represent one-time or time-limited cost effects associated with shifting from the current service delivery structure to an alternative model. These impacts may include startup or wind-down activities, recruitment and onboarding, training and certification, knowledge transfer, parallel operations during transition, procurement and contracting costs, system integration, policy or labor actions, and short-term inefficiencies that typically occur during organizational change. Transition costs are shown as a temporary uplift or offset relative to steady-state annual costs and are not recurring expenses.
Transition cost impacts vary significantly by pathway due to differences in transition complexity, staffing ramp-up requirements, institutional knowledge transfer, and risk management needs. A transition to a City-operated model generally requires greater upfront investment and lead time to establish staffing, management systems, and compliance infrastructure. A transition under competitive procurement may involve lower or offsetting short-term impacts if responsibilities shift to the contractor, but still requires City resources for procurement, contract mobilization, and oversight. The planning-level ranges presented are directional and intended to inform comparative decision-making rather than predict exact transition expenditures.
Planning-Level Cost Context Breakdown
The planning-level cost ranges summarized in Table 5 below are intended to provide a structured, comparative framework for evaluating alternative service delivery pathways rather than precise cost estimates or bid-level pricing. Each range reflects a synthesis of multiple information sources, including published industry benchmarks, comparable agency budget experience, City contract history, and professional judgment applied at a screening level. To support transparency, each cost category is tied to a defined source basis:
1. (a) published benchmarks and industry references;
2. (b) comparable agency experience, including operating and capital context from the West County Wastewater District;
3. (c) City of Richmond contract history signals, including the current Veolia agreement; and
4. (d) professional judgment assumptions used to normalize costs across differing delivery models.
As shown in Table 6, annual O&M ranges are grounded in professional judgment informed by utility budgeting norms and validated for reasonableness against peer agency expenditure scales. Owner-side cost percentages are derived from documented California utility oversight benchmarks and are applied as a percentage of O&M to reflect the City’s non -delegable governance workload under each model. Capital delivery cost percentages represent fully loaded program delivery allowances and reflect a combination of City contract history context, public-sector delivery benchmarks, and professional judgment regarding differing management and risk structures. Transition cost impacts represent one-time, directional uplifts or offsets associated with implementation complexity and are based primarily on professional judgment informed by prior transition experience and contract context.
Collectively, these ranges are intended to inform policy-level discussion and trade-off evaluation, with the understanding that actual costs would be refined through subsequent scoping, market engagement, and detailed implementation planning.
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33 Table 6: Planning Level Cost Matrix
Cost Element Competitive
Procurement Service
Delivery:
Planning-Level
Range
(2025 dollars)
Competitive
Procurement
Service Delivery:
Basis for Range
City-Operated
Service Delivery
Planning-Level
Range
(2025 dollars)
City-Operated
Service Delivery:
Basis for Range
Annual O&M
Cost
~$15-25M Industry standard
references;
BACWA, CWEA,
APWA peer
practices
~$19-31M Comparable
agency
experience; West
County
Owner-Side
Cost %
~4% to 7% Industry standard
references; Bay-
Area
Benchmarks
~7% to 12% Industry standard
references;
BACWA, CWEA,
APWA peer
practices
Capital Delivery
Cost %
~40% Industry standard
references and
current contract
history
~65% Comparable
agency
experience; West
County
Transition Cost
Uplift %
~-5% to +10% Industry standard
references
~+15% to +35%
above baseline
Industry standard
references
Primary Cost
Drivers
Contract pricing
structure, Cost
volatility embedded
risk premiums,
operator staffing
model, contract
governance and
oversight, change
orders and renewals
- Staffing,
administrative and
compliance
overhead, asset
condition, labor
market volatility
-
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34 Decision Support
The Decision Support Matrix is a comparative, planning-level tool designed to help frame trade- offs among alternative service delivery pathways. The matrix is not intended to produce a predetermined ranking or final recommendation. Rather, the matrix synth esizes multiple qualitative and semi-quantitative considerations into a consistent framework to support policy discussion and identify areas where further analysis may be warranted.
Scoring Scale
Matrix scores are directional and based on stated assumptions, available documentation, and professional judgment informed by utility operations experience, comparable agency practices, and an understanding of California regulatory and governance requireme nts. Where quantitative data were not available or appropriate, qualitative assessment was used to normalize differences in organizational structure and risk allocation.
Each criterion in the matrix is scored on a 1–5 scale, where scores reflect relative implementation complexity, risk exposure, and feasibility from the City’s perspective—not cost magnitude or service quality outcomes.
● 1 = Lower relative complexity / risk; higher feasibility ● 3 = Moderate complexity / risk; manageable with standard mitigation ● 5 = Higher complexity / risk; greater implementation challenge and uncertainty Scores are relative across pathways, meaning a higher score does not imply that an option is infeasible, only that it presents greater execution challenges or governance demands compared to alternatives.
Analytical Drivers for Scoring Scale
Scores for each pathway were informed by a consistent set of analytical drivers applied across all criteria. The combination and relative weighting of these drivers vary by criterion but were applied consistently across service delivery pathways to ensure comparability. These drivers include, but are not limited to:
● Staffing availability and capacity (e.g., recruitment feasibility, certification requirements, management depth)
● Governance and oversight burden (e.g., degree of City management, contract administration, compliance oversight)
● Transition lead times and execution risk (e.g., startup duration, parallel operations, institutional knowledge transfer)
● Procurement and contracting constraints (e.g., market response risk, procurement complexity, contract enforceability)
● Regulatory accountability and risk allocation (e.g., permittee responsibility, compliance exposure, enforcement authority)
Decision Support Matrix
The matrix (shown in Table 7) should be interpreted as a decision-support aid, not a definitive evaluation. In Table 7, highlights relative strengths, constraints, and risk considerations associated with each pathway to inform Council deliberation and identify where additional due diligence,
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35 refinement, or mitigation strategies may be appropriate. The matrix is forward -looking and does not evaluate past contractor performance or historical cost variability. Any references to cost context elsewhere in the analysis are intended solely to inform planning-level assumptions and should not be interpreted as assessments of existing service providers.
Table 7: Decision Support Matrix
Evaluation Criteria Competitive Procurement
Service Delivery
City-Operated Service
Delivery
Staffing and Labor Market
Constraints Risk
1 5
Long-term Labor and
Retirement Obligations Risk
1 5
Governance and
Management Burden Risk
3 5
Transition vs Steady-State
Cost Separation Risk
1 5
Compliance Exposure Risk 5 5
Procurement Pathway and
Decision Gates Risk
3 5
Conditions for Success Across Pathways
1 and 2
Regardless of which service delivery model the City ultimately chooses, there are several foundational conditions that must be in place for wastewater and stormwater services to be delivered reliably and in compliance with regulatory requirements. While th e options discussed in this memorandum differ in how work is performed and risks are shared, none of them remove the City’s responsibility as the system owner and regulated entity. In practice, outcomes are driven less by the delivery model itself and more by whether the City has the governance, staffing, information, and oversight capacity needed to manage that model effectively. The conditions outlined below apply across all options and represent baseline requirements, not optional improvements, which must be addressed to reduce risk, control costs, and ensure long-term service reliability.
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36 Common Requirements
1. Asset Condition Visibility
The City must have a clear and current understanding of the condition of its wastewater and stormwater assets, including treatment facilities, collection systems, pump stations, and stormwater infrastructure. Without reliable condition information, it is difficult to prioritize maintenance and capital investments, manage risk, or accurately assess costs under any delivery model. Improved visibility into asset condition reduces uncertainty, supports regulatory compliance, and allows the City to make informed decisions regardless of whether services are delivered in-house or by an external entity.
2. Clear Governance and Accountability
Effective service delivery requires clearly defined roles, decision-making authority, and accountability for performance and compliance. Whether operations are performed by City staff or through an external service provider, the City must establish who is responsible for oversight, how issues are escalated, and how performance is monitored and enforced. Ambiguity in governance increases the risk of missed maintenance, delayed response to compliance issues, and inefficient use of resources across all delivery models.
3. Adequate City Staffing and Expertise
All delivery models require the City to retain sufficient internal staffing and technical expertise to fulfill its role as system owner and regulated entity. This includes the ability to oversee operations, review reports, coordinate with regulators, manage contracts or interagency agreements, and respond to emergencies. Without adequate internal capacity, the City’s ability to manage risk, control costs, and ensure service reliability is reduced, regardless of who performs day-to-day operations.
4. Budget Predictability Mechanisms
The City must have mechanisms in place to manage cost uncertainty and maintain budget stability over time. This includes aligning budgets with service expectations, planning for labor and energy cost fluctuations, and establishing clear approaches for handling unforeseen maintenance or regulatory requirements. Budget predictability supports long-term financial planning and helps prevent reactive decision-making that can increase costs or compromise service quality under any delivery model.
No-Regret Actions
The actions below represent steps the City can support now that provide value under any future operational or governance model. They respond to recurring issues identified in the City’s planning documents and are intended to strengthen decision-making, clarity, and flexibility regardless of which option is ultimately selected. Each action improves the City’s overall position while preserving discretion over future structure, sequencing, and implementation.
1. Initiate Condition Assessment Planning
The City should initiate planning for a comprehensive condition assessment of its wastewater and stormwater assets. Establishing scope, priorities, and timing now is essential to reducing uncertainty, supporting capital planning, and enabling informed decisions under any service delivery model. Advancing this work is a necessary first step for both continued outsourcing and any form of insourcing.
2. Strengthen Contract Oversight Capacity
The City should strengthen its internal capacity for contract oversight, technical review,
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37 and performance monitoring, including contract management where external providers are used. Regardless of who performs day-to-day operations, the City remains responsible for regulatory compliance and system outcomes. Enhancing oversight capability is critical to managing risk, enforcing accountability, and protecting the City’s interests under all delivery models.
3. Clarify City Risk Tolerance
The City should explicitly define its risk tolerance with respect to cost volatility, staffing responsibility, and operational control. Clear direction on these priorities will help align future decisions, guide sequencing of next steps, and avoid misalignment between policy objectives and operational realities.
Advancing these actions in the near-term will materially reduce risk, improve governance readiness, and position the City to make a defensible service delivery decision without prematurely committing to a specific model.
Conclusions and Recommendations
This planning-level assessment evaluated alternative service delivery pathways using a consistent analytical framework that integrates operational considerations, owner -side governance requirements, capital delivery implications, transition complexity, and cost context.
The analysis confirms that while both Pathways 1 and 2 are technically viable within the 2027 horizon, Pathway 1 (competitive procurement) presents the lowest overall execution risk. Overall, both pathways present materially different risk profiles, governance burdens, and implementation demands that must be carefully weighed in policy decision -making.
A key conclusion of this assessment effort is that the City retains non-delegable regulatory, financial, and governance accountability under all service delivery models. While competitive procurement can shift day-to-day operations and staffing responsibilities, it does not eliminate the City’s obligations for contract administration, performance verification, compliance oversight, and enforcement. Conversely, a City-operated model expands internal responsibility across operations, management, labor, safety, and compliance functions, requiring significantly greater organizational capacity and transition investment. These structural realities are reflected consistently across the planning-level cost context and the Decision Support Matrix.
The Decision Support Matrix indicates that relative differences among pathways are driven less by service feasibility and more by implementation complexity, staffing and governance demands, transition risk, and regulatory accountability. Competitive procurement pathways generally present lower near-term staffing and transition burdens but require sustained owner- side oversight and contract governance capacity. The city-operated pathway offers greater direct control but introduces higher transition complexity, longer lead times, and increased exposure to staffing availability, labor, and compliance risks during implementation.
Planning-level cost ranges further reinforce that no pathway eliminates owner-side costs, and that differences in annual O&M, capital delivery, and transition impacts are largely a function of how responsibilities and risks are allocated rather than differences in service outcomes. These cost ranges are directional and intended to support comparative evaluation; refinement would be required prior to any implementation decision.
The next phase of this project should be utilized to conduct the following exercise:
1. Refine contract structure and performance requirements;
2. Validate cost assumptions and projections;
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38 3. Incorporate feedback from private and public providers; and
4. Revisit long-term delivery strategy as information and capacity mature.
Practical Near-Term Path Forward
The analysis in this memorandum indicates that, given the 2027 contract horizon, the City’s immediate priority is not deferring action, but rather advancing a deliberate, near -term path that preserves service continuity while reducing execution risk. While a final service delivery decision need not be made immediately, the City must begin moving forward now to maintain viable options, strengthen governance readiness, and avoid compressed timelines that could elevate operational or compliance risk.
Given current information gaps, labor market constraints, and regulatory pressures, a phased and pragmatic approach is warranted; specifically, one that prioritizes near-term actions aligned with the longest lead-time requirements. In practice, this means focusing first on activities that are necessary to keep Pathway 1 (Competitive Procurement) viable, while continuing to refine information that would be required to support any alternative pathway.
Advancing these steps does not preclude future decisions but rather ensures that the City retains flexibility and negotiating leverage as the contract horizon approaches.
If the City elects to advance Pathway 1, required services would be competitively procured. To do so responsibly and within the available timeframe, the City must complete several foundational actions in advance of issuing a solicitation, including definin g service scope and performance expectations; establishing a clear governance and risk framework; developing pricing and compensation structures; preparing legal and contractual terms; and coordinating internally across departments. In parallel, the City must develop a transparent evaluation framework, including defined criteria, scoring methodology, and proposer engagement processes to support consistent cost, risk, and capability comparisons.
Following proposal evaluation and provider selection, early coordination with the selected provider is essential to ensure a smooth transition prior to contract commencement.
Accordingly, transition requirements—including scope alignment, performance standards, governance and enforcement mechanisms, risk and cost resolution, mobilization planning, and legal and financial due diligence—should be clearly defined before the solicitation is issued, rather than deferred until after award.
Based on typical procurement and transition lead times, the following planning -level schedule reflects a realistic sequence for advancing competitive procurement while maintaining service continuity:
● Procurement Planning: January–March 2026 (confirm timeline is sufficient to complete consultant procurement, scope development, and Council authorization before issuing solicitation)
● Solicitation Development and Release: March–May 2026
● Proposal Evaluation: May–June 2026
● Negotiations: June–July 2026
● Governing Body Approvals: July–August 2026
● Transition Window: August 2026–April 2027
● Current Contract End Date: May 2027
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39 Taken together, these near-term actions represent a necessary and time-sensitive path forward, not a premature commitment. By advancing procurement readiness, improving visibility into asset condition and maintenance needs, and strengthening internal oversi ght and compliance capacity, the City will be positioned to make a defensible, well-informed service delivery decision ahead of the 2027 contract horizon. This approach recognizes the realities of the timeline while allowing the City to move forward deliberately, manage risk, and preserve future decision-making flexibility.
What the City Can Do Moving Forward
1. Actions That Preserve Optionality while meeting the 2027 timeline To avoid foreclosing future choices while recognizing the 2027 contract horizon, the City should focus on near-term actions that maintain flexibility across service delivery pathways and support timely decision-making. Preserving optionality in this context does not mean deferring action; rather, it means advancing preparatory steps that are necessary to keep multiple pathways viable without committing prematurely to a single end state.
a. These actions include initiating planning for systemwide condition assessment, improving visibility into asset condition and maintenance backlogs, and continuing to refine staffing and oversight requirements that would apply under any delivery model. In parallel, the City should advance procurement readiness activities (such as scope definition, governance frameworks, and evaluation criteria) that are required to preserve the feasibility of a competitive procurement within the available timeframe. Taken together, these steps allow the City to adapt to new information, market conditions, and regulatory developments while avoiding compressed timelines that could increase execution risk.
2. Actions That Reduce Future Risk Regardless of Pathway Selection At the same time, the City should take proactive steps to reduce risks that will persist regardless of the service delivery model ultimately selected. These actions include strengthening internal owner-side oversight capacity, clarifying roles and accountability for regulatory compliance, and formalizing expectations for performance monitoring, reporting, and enforcement. Improving data quality related to asset condition, staffing capacity, and operational performance will further reduce regulatory, financi al, and service continuity risk.
a. By advancing these risk-reduction measures now, the City can improve readiness for transition under any pathway, support smoother implementation, and protect compliance and service reliability as the 2027 contract horizon approaches.
What Should Be Sequenced
1. Decisions That Require More Information
Certain decisions should be intentionally sequenced after the City improves visibility into system conditions and operational requirements, rather than advanced prematurely.
These include committing to long-term service delivery arrangements beyond the upcoming contract horizon, finalizing staffing models for full City-operated service delivery, and making definitive assumptions about long-term cost outcomes. Advancing these decisions without sufficient information (particularly regarding asset condition, maintenance backlogs, capital needs, and compliance drivers) would increase the likelihood of cost escalation, regulatory exposure, and service disruption.
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40 a. Sequencing these decisions to follow completion of targeted assessments and data validation will strengthen the defensibility of future recommendations, reduce the risk of rework, and support more informed policy decisions within the constraints of the 2027 timeline.
2. Decisions That Require Capacity Building
Other decisions should be sequenced to align with the development of internal City capacity and organizational readiness. These include assuming direct operational responsibility, materially reducing reliance on external operators, or implementing delivery models that require shared responsibility. Each of these paths demands sustained technical expertise, management depth, compliance infrastructure, and governance systems within the City.
a. Building this capacity requires time, structured investment, and deliberate planning. Sequencing decisions to follow demonstrable progress in staffing, training, oversight systems, and organizational readiness will help ensure that any transition improves service reliability and regulatory performance rather than introducing new execution or compliance risks.
Closing Note and Watearth’s Path Forward
The analysis in this memorandum underscores that successful wastewater and stormwater service delivery depends less on the specific model selected and more on how effectively that model is implemented, governed, and sustained over time. Either service deli very pathway can support reliable and compliant service if the City has the necessary governance structures, staffing capacity, and oversight mechanisms in place. Conversely, even a well -suited delivery model can produce poor outcomes if these foundational elements are not addressed. Focusing on readiness, accountability, and disciplined implementation would therefore be critical to achieving the City’s long-term service, regulatory, and financial objectives, regardless of the path ultimately chosen. For clarity and decision-making, Watearth and Team has identified the following next steps of this feasibility study:
1. Conduct Market Sounding Analysis Through RFI:
Watearth and team will conduct a structured market sounding through a Request for Information to better understand how private operators and public agencies currently structure governance, staffing, risk allocation, and operating models. This step will ref ine feasibility assumptions and ground future decisions in current market conditions without initiating procurement or vendor selection.
2. Develop Specific Vendor Pricing Where Appropriate:
Based on refined delivery model definitions, Watearth will develop vendor -specific pricing information where appropriate, using consistent assumptions and scope definitions. This step would translate high-level cost posture into comparable pricing inputs while maintaining transparency around assumptions and risk allocation.
3. Coordinate Community Outreach Event with Key Stakeholders:
Watearth will incorporate feedback from the ad-hoc committee. As well as assisting the City in planning and facilitating a community outreach process to communicate the purpose of the evaluation, present delivery model tradeoffs at a high level, and gather additional stakeholder input. Outreach would be designed to inform decision -making while managing expectations and avoiding premature commitments.
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41 4. Conduct Final Economic Modeling:
Building on market sounding information, refined staffing assumptions, and vendor pricing, Watearth and team will conduct final economic modeling. This modeling will evaluate lifecycle costs, key cost drivers, and cost sensitivity across service delivery pathways. This analysis would provide a defensible financial basis for comparing options under consistent assumptions.
5. Provide Final Recommendation of a Single Delivery Model:
With completed market input, economic analysis, and stakeholder feedback, Watearth and team will synthesize findings and support the City in identifying a recommended delivery model. The recommendation will clearly articulate the rationale, associated risk s, implementation requirements, and conditions for success to support informed decision - making.
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42 References
American Water Works Association (AWWA). Utility Governance: Best Practices for Water Utilities. https://www.awwa.org/programs/effective-utility-management-program/.
Arup. City of Richmond Insourcing Transition Memorandum. City of Richmond, Dec. 2025.
Boyle Engineering Corporation. City of Richmond Storm Drain Master Plan. City of Richmond, Nov. 2006.
California American Water. Wastewater Operations and Regulatory Compliance. California American Water, www.amwater.com/caaw.
California State Water Resources Control Board. National Pollutant Discharge Elimination System (NPDES) Permit Program. State of California, www.waterboards.ca.gov.
California State Water Resources Control Board. Order R2-2019-0003. State of California.
California State Water Resources Control Board. Order R2-2024-0008. State of California.
California State Water Resources Control Board. Sanitary Sewer Systems General Order. State of California, www.waterboards.ca.gov.
California State Water Resources Control Board. Wastewater Operator Certification Program.
State of California, www.waterboards.ca.gov.
California Water Boards. Wastewater Operator Certification program (WWOCP), https://www.waterboards.ca.gov/water_issues/programs/operator_certification/operato r_certification.html.
City of Richmond. CPI-Adjusted Payment Summary for Veolia Wastewater Services. City of Richmond, 2025.
City of Richmond. Richmond Wastewater Treatment Plant Facility Plan. Final Draft, Oct. 2016.
City of Richmond. Risk Workshop Findings. Sept. 2025.
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Conditions for Success
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Comparative Delivery Methods, Risks, and
Conditions for Success
44 West County Wastewater District. (2024). Budget document: Fiscal year 2024–25. https://www.wcwd.org/wp-content/uploads/2024/07/West-County-Wastewater-District- Budget-Document_July-2024.pdf
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Conditions for Success
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