CITY OF GALVESTON

JULY 2013

GALVESTON PAST

• First Post Office (1836)• First Chapter of the Masonic Order (1840)• First Law Firm west of the Mississippi River (1846)• First Grocery Store (1851)• First Use of Telegraph (1854)• First Gas Lights (1856)• First Trade Union (1866)• First Cotton Exchange (1872)• First Electric Lights (1883)• First Drug Store (1867)- still in business• First Orphanage (1876)• First Medical College (1886)• First Golf Course (1898)• First Bakery (1838)• First Cotton Compress (1842)• First Cathedral (1847)• First Insurance Company (1854)• First Jewelry Store (1856)• First Hospital (1866)• First Opera House (1871)• First Telephone (1878)• First School for Nurses (1890)• First Country Club (1898)

GALVESTON FIRSTSGalveston is the site of many “FIRSTS” in the State of Texas which includes:

• First Naval Base (1836)• First Military Company

(1841)• First Roman Catholic

Convent (1847)• First Railroad Locomotive

(1852)• First Private Bank (1854)• First Real Estate Firm

(1857)

• Galveston as the choice for business and education, fostering entrepreneurship, R&D facilitated by Universities and job growth

• Galveston as a modern well equipped US port, insuring it’s competiveness into the future

• Galveston as the place to live, work and play, for young and old with a convenient and affordable lifestyle

• Galveston as the place for visitors, with entertainment, dinning and accommodations to rival the best worldwide

• Galveston as the city leading the way, with public services like health care, security, environmental and self sufficiency, including storm protection and 24 hour response

Since the founding of Galveston in 1839, the city has led with distinction and honor. The greatness of Galveston is the pride it takes in itself and it’s willingness to step forward when the need is great and the options few. The time is here and the need is now to take charge of Galveston’s destiny, making Galveston great once again.

A New Beginning

A New Beginning

Galveston - Opportunity

Galveston must decide it’s future by examining it’s needs and it’s resources, thenformulating a comprehensive business plan

• The City should utilize it’s natural and physical resources, as part of a coordinated plan to create an investment friendly environment

• Establish a long term holistic plan to become self sufficient

• Develop a system to attract private capital, for present and future stability

• Institute a self-sustaining resource for water, sewer and power, thereby creating a mechanism to finance growth without taxing inhabitants and businesses • Make Galveston a dynamic, forward thinking business friendly Community

Aerial Photo of Fujairah Desalination and Cogeneration plant.

• Combined Net Revenue $ 642,400,000

• Combined Net Income $ 189,360,539

Forecasted Potable Water and Export Power Revenue and Net Income

CategoryDesalinatio

n Power Total Description

Water Production 224,028  224,028 Acre feet

Power Production   1,500

1,500 Megawatts

Cost of Construction*

$ 1,200,000,000

$ 2,000,000,000

$ 3,200,000,000 USD

Annual Revenue $ 182,500,000

$ 459,900,000

$ 642,400,000 USD

Debt Service $ 68,602,298

$ 114,337,163

$ 182,939,461 USD

O&M Cost $ 73,000,000

$ 197,100,000

$ 270,100,000 USD

Net Income $ 40,897,702

$ 148,462,837

$ 189,360,539 USD

*Includes all rail, bridges, roads, support and storm infrastructure on Galveston and Pelican Island

Proposed First Phase

Develop and refurbish Port and Add Island Protection

New Cruise Ship Slips and Terminals

Revitalize Historic District

Revitalize Mixed Use

Possible expansion with Port of Houston

Dredge Spoils

Desalination and Cogeneration

Investment at Texas A&M and Add Island Protecion

Rail and Vehicle Bridges and rail expansion on Pelican Island I

Galveston / Pelican Island Improvements and additions, including Rail and VehicularBridge with Desalination and Cogeneration Plant at a total investment of $ 4 billion

Infrastructure Improvements and Additions $ 3.2 Billion

• Building an Industrial Rail and Vehicle Bridge • Pelican Island Rail Expansion• Desalination and Cogeneration• Expand Galveston and Pelican Island Storm Protection• Create Galveston Island Self Sufficiency with Water, Sewer and

PowerGalveston Improvements and Additions $ 800 Million • Revitalize Historic District• New Ship Slips and Terminals• Investment in Downtown, Texas A&M and UTMB• Develop and Refurbish Port on Pelican Island

Galveston and Pelican Island Phase 1

Projected Increase in Water Spending for Region H

Area H will spend $3.88 Billion in 2013 and $11.46 Billion in 2060 for Water.

2013 2060$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

Projected Spending on Water for Region HB

illi

on

s o

f D

oll

ars

Assuming a price of $5 per thousand gallon in 2013 and an inflation rate of 1.5% . Water Rates - $5.00 per Thousand Gallon Gross: https://www.houstonwaterbills.houstontx.gov/SpecialMessages/Rates2012.pdf

Desalination Production to Galveston and Region H

Desalination / Cogeneration Site

Water Production 200,000,000 Gallons per day

 Revenue per 1,000 Gallons$

2.50 Price per thousand gallons

 Revenue per Day $ 500,000 Revenue per day

Revenue $ 182,500,000 Revenue per year     

O&M Cost per 1,000 Gallons $

1.00 Cost per thousand gallon

 Daily O&M Cost $ 200,000 Incremental cost of production

  Total O&M Cost $

(73,000,000) O&M Cost per year

Debt Service$ (68,602,

298)

NET INCOME $

40,897,702 Per year

Potable Water Production

Export Power Production to Galveston, the Grid and Region H

Desalination / Cogeneration Site

Export Power ProductionPower Production in Megawatts 1,500 Kilowatt Hours Conversion 1,000 Kilowatt Hours per day 36,000,000 Price per Kilowatt $ 0.035 Revenue Per day $ 1,260,000 Revenue Per Year $ 459,900,000    O&M Cost Per Kilowatt $ 0.015 Kilowatt Hours per day 36,000,000 Total OM Cost $ 197,100,000     Revenue $ 459,900,000 Less Debt Service $ (114,337,163) Less O&M Costs $ (197,100,000) Net Income $ 148,462,837

Jobs and Opportunities

• The construction job creation in developing $4 billion of infrastructure over 7 years is significant

• The workforce in supporting that development is generally equal to the direct jobs created

• The long term jobs created are approximately 67,000 to 100,000 according to the Milken Institute, IMPLAN and ARRA

• The training and retraining of trades and the curriculum adjustments for education this plan requires will prove to be a positive for Galveston and surrounding

• University involvement with project details and the R&D that could be advanced and implemented will to be prove of significant import

• Long term jobs will be associated with the future of Biomass/Biofuels/Biotech and the process’ and products derived along with export and logistics

Jobs, Training and Retraining

Up to 100,000 permanent jobs created

• Desalination has been used for thousands of years - Greek sailors boiled water to evaporate fresh water away from the salt and Romans used clay filters to trap salt.

• Today’s sophisticated methods still generally use the concepts of

distillation or filtration.

• There are about 15,000 desalination plants around the world. The biggest plants are generally in areas with few fresh water resources or with large populations by seas and oceans, such as the Orient / Middle East, Asia / Asia Pacific, Asia Minor, Australia / New Zealand and North Africa / Africa.

• The largest Desalination and Cogeneration plants are presently in Saudi Arabia, the UAE, Israel, and India

Desalination and Cogeneration Facts

Desalination and Cogeneration have existed since the 1800’s and the size and scope are ever expanding while construction and operating costs are coming down

Desalination and Cogeneration Facts

Lower Operating Cost and Additional Revenues from Export Power are the Purpose and Design of Desalination and Cogeneration in Tandem

• Desalination with Cogeneration systems—also called combined heat and power (CHP) systems are designed to generate both heat and power

• The thermal energy can be used to generate heated water and

steam production as well as for various types of process heat.

• Reduces or eliminates transportation and distribution costs of fuel source or power source. Addition of boiler system or other heat storage medium further increases operating time and efficiency.

• Thermal energy can be used to generate heating water and

steam production, as well as for various types of process heat.

City  Country

Water Production

(MGD) per day

Power Capacity

(MW)

Ras Azzour1 Saudi Arabia 273 1,100

Jubal II Industrial Zone Saudi Arabia 232 2,750

Rabigh2 Saudi Arabia 158 1,813

Shoaiba Saudi Arabia 108 5,600 Fujairah Water and Power Plant United Arab Emirates 130 660

Umm Al Nar United Arab Emirates 114 1,550

Carlsbad, California3 United States 50 NA

Point Lisas Trinidad 48 NA

London England 40 NA Chennai India 26 NA 1 - Estimated Completion 2015: 2- Estimated Completion 2018: 3 - Estimated

Completion 2016

Comparable Desalination and Cogeneration Plants

Implementation

Implementation Plan

• Create a non taxing Infrastructure Authority

• Establish Board Members and governance, including State of Texas

• Engage professional services; bankers, accountants, legal

• Authority raises initial tranche of capital for Business Plan development and pre-construction planning

• Engage additional professionals; engineers, architects, specialists

• Institute business plan and construction programming for phase 1

• Authority coordinates with relevant local, state and federal entities, including water, power, transportation, port, EPA, Corps of Engineers, etal.

• Authority negotiates and finalizes Purchase Agreements for Water and Power

• Authority devises and markets financial instrument via underwriters for Phase 1 capital requirements

Next Steps

• Give the city manger and the city attorney the permission to work with Arthur Val Perkins of the firm Gardere Wynne Sewell.

• Create a non taxing Infrastructure Authority and bring it back to the city council in 30 days for consideration.

Implementation

If we fail to take advantage of this once-in-a-century opportunity, future generations will look back at us with a mix of disgust and anger. They will wonder how we let such a golden opportunity slip by and will think o us as “the idiot generation” And you know what? They will be right.

“Rising Interest Rates Will Soon Make Needed Infrastructure Repairs More Costly”Barry Ritholtz Washington Post July 12, 2013