Incredible turnaround at DC Water with George Hawkins
Willy Walker: Good afternoon, and welcome to another Walker Webcast. It's my great joy to have my old friend George Hawkins join me today. George and I worked very closely together at what used to be called the DC Water and Sewer Authority which he and I rebranded DC Water. This webcast will get into both the transformation process that George so successfully led at DC Water. We're going to go back and forth on a couple of the, if you will, battle wounds and scars. The two of us both endured and were able to move beyond during that period of time and talk a little bit about water more broadly in the United States and around the globe, water systems. And, if there's anyone who knows a lot about water utilities and some of the issues our country faces as it relates to water systems it's George.
So George, first of all, thanks, buddy. It's great to see you.
George Hawkins: Fantastic to see you, Willy. And It was a very kind introduction as you and I know from public meetings, whenever anyone's introducing me and they're not swearing, that's a good start of the day, but it's very kind of you to say it was led by me. We had a team that you were very much part of, and we could not have accomplished the goals we did without so many different elements working together to a common end. So I very much felt you were a key, and as did everyone on the team. You were such an important part of that success. And it's a story where I'm actually sitting in State College, Pennsylvania. I did the opening here for a big water conference, and I told the DC Water transformation story. It's still a story that people are interested in and much to learn from, and they have as much to learn from you as they did for me.
Willy Walker: I will refute that statement all day long, but let's wind the clock back for a second here, George. You're a Princeton undergrad and Harvard Law School graduate. Someone who is exceedingly well educated. Also, a wrestler by training, which I think says a lot about you and your personality. But you were running the D.C. Department of the Environment for Mayor Adrian Fenty when you and I first met. And I was asked by Mayor Fenty to come in as chairman of the board of the DC Water and Sewer Authority. For a moment, let's wind the clock back to D.C. Sewer and Water Authority at the turn of the millennium, 2000, 2001. And the lead issue had made its way to the front pages of the Washington Post and done a lot of damage to both the DC Water and Sewer Authority's reputation, as well as lawsuits that were saying, “We need a change here.” I think that it's important to understand that as the backdrop, as you and I talk about the transformation that we led at DC Water and some of the things that we were up against. Talk for a moment about the lead scare. And when you joined from the board of the D.C. Department of the Environment, what did you see from that seat rather than from the seat I actually put you in?
George Hawkins: Sure. And it's such a great look back because the last thing I ever expected to be was the general manager of DCWASA. I don't know if you remember this. And by the way, for those of you listening, this is one of the reasons I gave such respect to Willy when he agreed to come on the board of a huge important organization. I remember reading at the time, a Washington Post article that ranked DCWASA as the worst customer service agency in Washington, D.C. And think on that one for a while. Of all agencies, DCWASA was at the bottom of it, which is one of the reasons we’re both smart.
Willy Walker: Enough to find a really low bar is to jump over. That’s the cue of our success to find the lowest bar to jump over.
George Hawkins: That’s one of the reasons that your friend Adrian Fenty selected you and ultimately that you selected me. He had been a ward-based council member and realized how terrible the customer service he received when he ever contacted DCWASA. The other challenge is just the one you mentioned. The worst crisis in the United States prior to Flint was in DC. And the irony was, it wasn't because the agency was trying to do something wrong. They were changing the treatment process. I won't go into all the gory details, but it was to reduce something called disinfectant byproducts. You have put chlorine into the pipes that deliver water to everybody's homes, who are listening to this podcast to clean the pipes along the way, and they switch to a new disinfectant trying to reduce a byproduct that is not good for people. What they did not know is that caused the scaling that kept lead from leaching in the water to dissipate. And they had a huge lead crisis. So it wasn't a bad thing that had triggered it. The challenge DCWASA had is in the old days, DC Water didn't communicate with people. It was a terrible customer service agency. And it didn't tell people on time. So the story in the Washington Post is that not only had the agency done a step that polluted the water and put kids at risk, they didn't tell anybody and they weren't open and transparent about it. And so there was article after article, as they said in the old days, were above the fold on the front page about DCWASA being this organization that was poisoning your kids.
So when Willy was selected to be board chair by Adrian Fenty and then eventually several steps down the road, I was selected as GM. It was an agency that was in really tough shape and I regulated it. This is ironic to me. Most of the people running water utilities have engineering and science backgrounds. I'm a lawyer by training. I never worked for a utility before. I'd only ever sued them, regulated them, and agitated about them, including that one. I regulated DCWASA and wasn't particularly friendly because they were not particularly friendly in return. It was a very combative organization back then, as you remember Willy. So I guess the backdrop of that is there was a huge mountain to climb when you agreed to come on as board chair. And then when I started contemplating, at the request of Mayor Fenty, whether I would apply to become GM, what this challenge was in front of us and the scale of it. It was pretty daunting at the time.
Willy Walker: I think one of the interesting things, George, that I think back on is that we hired a third party, one of the big headhunting firms to do a national search for the new general manager of DC Water. And it was Mayor Fenty who said to me, “You ought to take a look at George Hawkins.” And with now hindsight and incredible, just thanks and respect and awe for what you did in the GM role. When Adrian first said that to me, I said, “You mean George Hawkins, who's a member of the board. He comes in and out of meetings. He's kind of antagonistic to us because the environmental regulator is on our ass about everything.” And I have to say when he first mentioned your name, I was like, “Why would we think about that? We need to go find someone who understands water, understands water systems, whatever else.” And what I found to be so interesting as I thought about it and what Adrian putting your name forward made me think about was, what was the real thing that ailed DC Water, DCWASA at that time, in the sense that as you rightfully outlined. It wasn't a matter of the capability of the management team to get the water to the consumers. It wasn't a matter of whether the pipes were running if you will. So from an actual water system standpoint, it was working well obviously, barring the change from chlorine to chloramine back in 2000 which caused the leaching. But that had clearly been corrected. As I sat there and thought about your candidacy, one of the things that I realized was we at DCWASA had lost all credibility with the environmental community, which was putting a huge amount of pressure on DCWASA to change things. The second thing was we weren't communicating with our clients and you were a master communicator. The final thing was, that it was more of a branding/leadership need than it was a technical/engineering need in that role. And, hindsight’s 20/20 vision, I would have never had the expectation that you would have led the transformation that you led. But in hindsight, it is very interesting to think of what I initially thought we needed in that role. What Adrian suggesting you made me think about it. And then when we actually put you in that role, the magnificent transformation that you were able to enact because quite honestly, you didn't come from water systems. Here's the engineering here, the pipes, let's go do that. But much more from PR, general management, and general leadership perspective. And then also with the bona fides from having been on the environmental side to be able to meet and engage with the environmental community to say, “Hey, hang on a second, there's a new sheriff in town. We take these issues very, very seriously. Give me some time. We're going to focus on them.”
George Hawkins: I'm not surprised that when you first saw my name as a candidate, it was not obvious that I would be a good selection. I wasn't a particularly involved board member, and that was actually for a reason. When you're a member of a board, you've got a duty of care to the enterprise. But my core job was being the environmental regulator of that enterprise. And I thought those roles were a little bit in conflict. So that's why, in truth, I was not as active a board member as I could have been. And I always had felt this conflicting two roles that bumped into each other.
The change that came to me Willy which was similar to you had the question, “Is the person hiring?” And for me is someone applying like, “Do I want to do this job? Given all the things I don't know about water utilities are.” The change that came over to me which was really quite dramatic when I thought about it, is that I always thought of DCWASA and every other treatment plant regulated over the years. I've been an EPA enforcement lawyer. All the rest I've had these jobs as a polluter. A polluter is the one person you regulate and you hold them responsible. What I realized as I thought about the job is that DCWASA is not a polluter, in the same way that a company that makes a product that has pollutants as a byproduct has to pay for the cost of those pollutants. So it's internalized and the price of the product. Instead, DCWASA was taking everybody else's pollution and on their behalf cleaning it and then putting it back where it came from in the first place. The water comes off the Potomac, you clean it, we send it around the city, we take it back and put it. It's recycling. The original, largest, and most important recycling program in the city and the most important environmental service done for the nation's capital. And that literally was an epiphany for me that transformed. This was the process of applying my perspective on DCWASA where I started. Do I really want to do this job to, oh my gosh, what you could do at the reins of an enterprise like this thinking of it as an environmental organization and seeing what difference you can make for the city in which you reside, which happens to be a city that gets the kind of visibility that D.C. does.
Willy Walker: So a couple of things that listeners ought to understand as it relates to DCWASA and the board and the role you were stepping into just as a little bit of background. DCWASA is the public utility that has a board that's made up of 11 permanent members and 11 alternate members. So it's a 22-person board. It is also a board that is made up of all the constituencies sitting around the D.C. metropolitan area. So there are board members from Montgomery County, Prince George's County, Fairfax County, Loudoun County, and the District of Columbia. So, if you think about a board that has, if you will, distinct interests at hand around the table, DCWASA at that time, now DC Water, could not have a more let's just say challenging board composition. Because everyone isn't pulling on the same ore, every one of those different. And oh, by the way, all of those people who were on the board were elected officials. They were elected in Montgomery County or appointed to the board by an elected official in Montgomery County, Prince George's County. So you had Maryland, DC in Virginia as three separate states. Then you also had different people who were either appointed or elected officials who sat there. And every word that they said in a DC Water board meeting, which by the way, are all webcasts live and recorded. So there are no secrets. Could and will be used against them in their next campaign or when they're the person who appointed them to the board is up for reelection.
So it was a very challenging board structure. And inside of that, as general manager, you had a chairman of the board who, by the way, just talking about governance. I will say “If this ever makes its way to any public officials thinking about redoing some type of board, having someone from the private sector be able to sit as chairman of that board is exceedingly important.” The DC Water Board had elected officials as chairman prior to me and I don't think that allows for the chairman or chairwoman to be able to move the enterprise in the way it needs to go. If you have an elected official from DC sitting in that seat, all of the constituents from Maryland and Virginia look at you as the enemy to some degree, or at least not working on their behalf. And so I would just say that I had the luxury of being from the private sector sitting in that role that allowed me to do some things like go and bring in a new general manager that someone who was an elected position on that board, I don't think would have had the ability to do. The other thing that I think is important for people to realize is that DC Water is the largest or Is it the largest wastewater treatment plant in the United States, George? I know it's a top.
George Hawkins: So what I would say is two things. One, the reason I give so much credit to you happily, is because the board structure was such a challenge. And if we had not had the relationship with you and your leadership on the board, all of these good things we were able to do would not have happened. It was an absolute. Both are significant. And yes, the treatment plant that DCWASA is responsible for is the largest advanced wastewater treatment plant on Earth. There is no bigger one anywhere on the planet. Although I did use the word advanced again without going into all the details. In most treatment plants there's primary treatment. There's a secondary treatment. That's where almost every treatment plant has. Only a few have tertiary treatment which is a very advanced level. And it takes up a lot of geography. So the plant is the largest advanced treatment plant that has all three of those steps. And there's an interesting story behind that as it relates to Eisenhower and worries about all sorts of things. But 750mi² around DC, all of that flow goes to one giant plant. And when you would chair board meetings, that's where we would sit. We would be at Blue Plains looking out the window to the treatment plant in the background. It was amazing.
Willy Walker: I remember it pretty neat. The one other thing, George, that I think is important for people to understand is the infrastructure as it relates to sewage and how sewage is collected in an old system like DC has and many cities on the East Coast have versus more western cities that were developed later on that separated runoff with sewage. You want to just talk that through for a second so people understand why DC Water was set up the way it was.
George Hawkins: What was fascinating about the transformation and Willy is absolutely right. Early on, the most important change was a connection to the people we served, a sense of customer service, and a sense of environmental stewardship in an agency that hadn't had those attributes. But what I learned when I got there, and I used to, and I remember joking about this to myself early on in my ten years, I hadn't really realized this. The issue that that I will come back to in a moment is what Willy asked me about the nature of the sewer system in DC, which is similar to 855 cities in the United States. Is there's a solution to that problem, I'll come back to that.
But it cost a total now $3.2 billion. 2009, which is the year you selected me to be GM, was the first year and the first contract starting on that $3.2 billion project. In parallel, there was another billion dollar project to improve Blue Plains for nutrients to the Chesapeake Bay that's $4.2 billion. By far the largest public expenditures in the Mid-Atlantic. And this agency that was disliked and distrusted by the customers we serve. We were supposed to raise that revenue with the people we were serving. That's why this transformation started with outreach. But what we embarked on and really helped champion some of the most far-reaching projects on this is not only a good relationship but what could we do with the utility to reduce costs, to generate revenue, to do all these innovative strategies, to have at this enormous challenge of all these huge financial projects that we're obligated. This is not discretionary. These were mandated.
Willy Walker: I was going to jump in there real quick because I think there's a piece to the story that people need to understand. Which is that the DC Sewer System was developed back in a time when the designers thought that you could have runoff off the streets and sewage that came out of houses and it could all come together into what is called a combined sewage system. And back in the day, the old Tabard Creek used to run in front of the US Capitol, and literally the Tabard Creek would take the human sewage from the US Capitol, as well as the runoff down Pennsylvania Avenue. And it all comes together and it flows down the Potomac River and goes to Blue Plains. And it got treated.
Unfortunately, as the city grew, those pipes would get to a point where they would overflow. You would have a rain event and the rain off the streets would combine with the sewage coming out of the homes, and you get this big backup. That backup would come out of the sewage system, and it would pour into the Anacostia River and into the Potomac River. And that would raise pollution levels in the Potomac River to levels that were unsafe for humans, unsafe for the environment. So the Justice Department sued DCWASA and put DCWASA under a consent decree to build capture tunnels that would allow for this combined sewage to be basically stored in these capture tunnels. And that's the $3.2 billion that George just talked about. And then once the storm event passes, the sewage would be pumped out of the capture tunnels and into Blue Plains, treated in Blue Plains, and then put back in the Potomac River as clean water. And so when George came in, that consent decree was put on DCWASA before I became chairman of the board. But we were planning on getting going on the building of these capture tunnels right as I came in as chairman of the board. On top of that, George just underscored the billion dollars that we needed to invest into reducing overall effluent out of the sewage treatment plant. And then there's another project that George and I got to in a moment that I think is also a very interesting one. As people think about capital expenditure, how do you pay for all this? And then what do you need to do with the customers at the same time? One of the key things that you did so well, George, that I was in awe of, we had the ability to raise rates, but those rates always were under public scrutiny on an annual basis. And if you didn't have the support of the community, you would never get those rate changes through.
What do you think was the most successful thing that you and the management team did to be able to get the community to accept the rate increases that we put through at that time to pay for all of this?
George Hawkins: Sure. By the way, for all of you listening, anyone now who is in the water sector as much as I am, we seek a board chair that can talk about combined sewers with the accuracy and understanding that, Willy.
Willy Walker: As you well know, when the Washington Post is listening to every word you say to try and put something on the front page, you better be damn clear on what you're talking about. But go ahead.
George Hawkins: That was so fun. It was great to have a board chair, but I'll tell you one thing. I want to work in the public sector. But one thing I do want to go back to is when you were selected as a private sector business leader, as chair of the board, and I came in as a lawyer. I think there was a real strength to the fact that neither of us came in with any preconceived notions about what was possible. I remember the prior board chair of DC Water and they were debating society between all these interests, with no clear near what's the drive, what kind of projects? And if it wasn't exactly what public sector agencies always do, why would we try that as opposed to the reverse is “What should we do?” And sort of having an open mind of all these new things that could be tried that maybe weren't common in this sector? You and I were able to do that in part because we didn't have any preconceived notions. And I thought that was a really powerful part. And then you brought this perspective. We should be doing things to run more efficiently and more effectively for our ratepayers which links to your question.
So we did raise rates my first year 2009, 2010, we raised rates 18% and then it was faster than inflation every single year thereafter. So by the time I stepped down from the board, we had tripled rates in Washington, D.C., which is mind-boggling. I remember people saying to us “That would never happen.” And what was remarkable to me is we got every one of those rate requests approved unanimously by a board that could often be contentious. And the question is, “What do we do differently?” And it's a good lesson here for public agencies.
In the old days, prior to our time at DCWASA, you were required by administrative law to attend two hearings. And I don't know if you remember. They were in that building behind Union Station. Nobody could find it, I remember I had to go as a board member. And I remember walking around until I could find the place. And they'd have a hearing covering their administrative legal requirement and maybe 20 people would show up. This is of the enormous service area and that was considered a victory. Because you have checked off the boxes. You can get your approval. And then the first time any customer sees the increase is when they get a bill. And my reaction to that is, “Well, you can do that once or twice,” but in a context of needing to raise rates from here to as far as we can see in the future, that's not going to work. People are going to rebel as they should, about all these rate increases they have no idea what's going on. What's this for? Why should I pay for this?
By the way, Willy, I always get a kick out of the surveys where those are surveys and people don't want to pay more for water. If they want to pay more, who calls someone and ask them if they want to pay more. And we would say yes. No one's going to answer that question. Yes, unless they understand the value of what they're gaining for the additional money. So what we did, as Willy well recalls because he was there, as many of them as we disbanded the well, actually, we still did the two formal ones that you had to do by statute, but we did a meeting in each ward of the city, and we did it in locations picked by the ward council members. So these were schools, rec centers, or places that people know about and could attend. And we would come into the community, invite everybody, not passively, everybody to come visit. And we would bring every office of DC Water into the room, and I would make a presentation like, “What? Have you ever made it to the head of one of your infrastructure agencies?” I'm standing in front of you in your rec center, and I always felt I really had to make two main presentation cases to the audience. The first is one that's very private sector oriented, but not common in the public sector, but no reason why it can't be done, which is “Can I present to you, the audience, that we are doing better this year than we did last year by measures that you will understand.” It used to cost us $5 to treat this and now it cost us $3. It used to cost us $1,200 a man-hour to replace a fire hydrant. Now it costs $1,000. You have to prove to you that we are using your money better this year than last year. This is why the continuous improvement of performance which you helped us orchestrate was so important. If I have proved that to you that opens the door to the second case I have to make. Which is we need more money and I need to prove to you that that's meaningful to you. This is the best dollar you can spend for Washington, D.C. And that's my case. I have to present to you why that's true. And at the end of those two, then we show the actual bill before and after hiding nothing. This is what the bill looks like. And here's why we think it's the best investment you can make. Then we open it up to questions. And if I couldn't answer it, or someone in the room couldn't answer it, we would answer it in 24 hours. And that process, people started their stand. Gosh, by the way. Well, I'm not sure you remember this. One of the overlays of our capital program was to make sure we did projects in every ward because I wanted every ratepayer. So I could say in those meetings, “Yes, we're doing all these good things. We're here there.” But, in your ward, there's a map back in the room here that shows exactly the projects we are doing in your neighborhood that matter to you and that's what your money is going for. This is not money going and disappearing to some agency you don't understand. We're here. We serve you. And that, I think, worked. It changed the dynamic and was part of that change of rebranding, connecting to the customer. And we got those rate increases approved. And were able to do projects that fundamentally have changed the environment and the services that people in Washington, D.C. deserve and gain from its local utility.
Willy Walker: It sounds easy in the way that you just outlined it and it makes perfect sense in hindsight. People need to understand that what you just outlined was. There wasn't a conversation about having that type of outreach prior to your coming to DCWASA. I distinctly remember you, first of all, told me you were going to do those meetings. And I was like, “Man, you got some strong skin, you got some tough skin.” And then the second I remember you, one night you called me at 9:30, 10:00 at night. You'd been in one of these meetings for 3 to 4 hours, and you had just gotten, people weren't throwing tomatoes at you, but they were throwing verbal tomatoes at you the entire night, and you came out and you just said, “Woof. That was a seriously heavy lift.” But that's leadership. That's retail politics, George. One of the things that I find to be so incredible about this transformation process is it obviously takes a lot of different things. It does take getting the board behind you. It does take leadership at the board level. It does take getting the right general manager. It is great getting leadership in your team to say, “This is where we're going to go.” All those things can come together. But unless you're willing to roll up your sleeves and do the blocking and tackling. What in this role is really the kind of retail politics that you lead and willing to put yourself out there. I hear you talk about it now, George and I sit there and go, “Yeah, in hindsight, it sounds like it was pretty easy to do.” It wasn't easy at all. And as you were saying that what was so interesting is you say it now because your future and your job don't depend on it. But at the time. Your success, my success, and our collective success as a team was dependent on going and meeting with those constituents, talking to them, hearing their disappointment, their inability to pay rate increases and all the things that you had to deal with to convince them that this was what we needed to do. And on the backs of that and the rate increases, we were able to push through. You then turned to me and said, “Let's issue a 100-year bond.”
So talk about that for a moment. Because given that I'm in the finance world, the fact that we did the first 100-year bond with Goldman Sachs when you were running DCWASA this day, and also given where rates are today, everyone, every single person listening right now wishes that they'd done a 100-year bond at the rates that DCWASA issued paper. So talk for a moment about that because the rate increases were an instrumental piece to us being able to go out and raise long-term debt financing because they could see the P&L growing and the ability for us to take on that debt on a 100-year term and be able to service it.
George Hawkins: Sure. And, as you remember, Willy, I give tremendous credit for the 100-year bond. We did an environmental impact bond, which is the first that had ever been done at variety because we had Mark Kim as our CFO, who I felt was the best CFO in the business and is now running the municipal securities rulemaking board. So he's gone on to quite the role. But what happens? And I will absolutely answer your question, but what I felt, yes, I had three police officers with me in those meetings, and some of them were very tough. But I actually felt they were meaningful because many of the comments that were being made were fair. Always like, I'd be mad if I were you. And if we don't hear it, we can't respond. And then someone's angry out there just saying bad things, which only gets worse.
Someone says, “I talk to the general manager, someone called me the next day and they're now working on it.” It's amazing that transformation. And it's usually not hard things. In the old days I couldn't get anyone to respond to them. I had the issue Willy, trying to build a rapport with a team and Caucasian guy lawyer, and most of the staff at DC Water are African American veterans were like, “Who is that person?” And it was amazing the loyalty I built from my team. It wasn't why I did it. But they saw me out there putting myself in front of what was going on to better the enterprise. And it was amazing the interpersonal relationship that I started to build with our team. They're like, we do hard work, you do hard work, you're one of us. And that changed the whole dynamic on the inside.
On the outside, what we started to get a reputation for was doing creative things. And why can't public agencies do creative things? I don't know but we did. As soon as that happened, someone like Mark Kim absolutely stellar financial mind from New York City and was encouraged to come down and join us. And we started getting tremendous talent coming into what had been a sewer agency that nobody liked. And when Mark Kim got there, we started racking our brains. What are all the financial innovations that we can do to lessen the cost to ratepayers? And so part of it is straight financial. The other is to encourage and expand on this reputation we have of innovating about everything. If it's procurement, if it's paperwork, if it's technology, we want to be at the cutting edge of everything. And I had asked him, “What about longer-dated debt, could we stretch this out? I thought he might go 40 or 50 years.” And I remember when he came back. This is a debt usually municipal debt is 30 years, 20 years in that range. He came back, let's do a green-certified century bond. So it was the first independently green-certified. So we didn't certify ourselves as someone saying it's green now. We had a separate entity that was based in Europe because there were none in the US at that time certifying that this was for green purposes. And it was for a maturity of 100 years. And what I never knew Willy is how exciting finance could be because I was in the Goldman Sachs office.
Willy Walker: You looked at me and said, “That Walker guy, I don't know what the hell he does during the day.” It seems like what he does it so boring.
George Hawkins: It was nerve-wracking. I was sitting in the office looking out over the steam coming off, and I didn't realize the book runners. In the old days, they set what they thought the price was going to be for a century bond that no one has ever put on the market before. So we had no idea if anyone would buy it. We set the price that morning, not knowing if anyone would buy a century bond. And they turned around and we were oversubscribed. And it was like this back and forth all morning. What was going to be that the basis points went down by 16 basis points, which saved our ratepayers even more money over time. And again, what it told to all the people we served is that we were creative. We were doing everything we could to save money for our ratepayers, which was part of this whole package of what we were delivering to the people we served.
Willy Walker: So as we're talking about innovation, obviously doing a century bond was huge and I want to get to the digester in a second. But there were some things that you talked about how you garnered leadership, how you garnered respect, how you gained the respect of everyone at DCWASA before we went and rebranded. We got to talk about the rebranding as well.
One of the first things that I remember and to those listening to this, you got to remember I already told you at the top, George is a Princeton undergrad, Harvard Law School graduate. If you want to look at any type of elite education, George is this elite white lawyer who has come in to run a utility. And so he walks in with a lot of skepticism as it relates to who this guy is? What's he going to do? How are you going to do it? There were a couple of things that you and I did, George, that I think kind of changed the tone a little bit, and I'll just start on two that I did and then I will tee you up on one that is very evident. And then I want you to talk about a couple of others.
There used to be a reserved parking spot for the chairman of the board and I had them rip the sign out of the ground literally so that there was no reserved parking spot for the chairman so that I would come and find a parking spot wherever I could find a parking spot. There was a special office behind the boardroom that was for the chairman's use, and I said, “That's for anybody on the board to use whenever they want to use it.” And at least from a board perspective, I tried the best that I could to just sort of get rid of the perks and sort of say, “Look, we're trying to run this thing efficiently. This is why I'm not here because I want some big title or some great parking spot. I want to make a difference, and I want to do what's right for the taxpayers and for the community.”
The most notable thing that you did when you first came in was you started wearing a DCWASA shirt and it said general manager on it. It was a white shirt and you wore it every day. And I remember the first time you walked into a board meeting, I looked around and there were these other board members who in many instances were elected officials in counties around Washington, D.C. And they looked at you sideways. They said, “Hang on a second General Manager of DCWASA wears a coat and tie. A suit is a white-collar worker.” And you basically said, “Watch me. Talk about that for a moment.”
George Hawkins: Sure. It is one of my favorite memories of DC Water, and I miss wearing that shirt. A very sort of team pride for me. But one of the things I think about leadership Willy is most of the good ideas don't come from me. I won't speak for you. For me, most of them weren't mine, but I thought I was good at recruiting good people like Mark Kim, but also seeing a good idea and knowing it when I saw it and adopting it quickly.
We had a uniform shop in DCWASA which I did not know about. This was still in the DCWASA days and this older woman was in charge of it. She was kind of irascible but with a very warm heart underneath. And she came in one day and said, “I've given a standard issue uniform to every GM has come in. No one's ever worn it. But I'm giving one to you two. You should wear it.” She's like wagging your finger at me. And I remember looking at her going, “Okay, I'll wear it for a day. It's what I thought. So I just because she'd come in and talk to me directly. So I put it on and wore it the next day. And what I was not prepared for was the sensation that it caused inside the utility. And to me, changing organizations where there are teams that are working together, are encouraged and enthusiastic to common ed and my team, the people we depended on to change where all of these veteran folks who have worked, and most of whom are blue collar in the field, fixing pipes, doing all this. And they needed to be as enthusiastic as I am and as you are. And the question was how to build that rapport. And as soon as I saw the response, I was like, “Oh my gosh, A) I like it. I feel good in the shirt. I feel like I am part of the team, but B) it’s working. It’s gaining me a connection to the team that I didn’t have otherwise.” And it became a symbol. I would go to places and people would say, “Better be wearing your shirt, because it sort of became part of the whole thing.”
And another interesting component to that is my wife thought you should wear a blue shirt because they were blue shirts and white shirts with the name. My kids told me that I looked like I worked at a gas station. And so I asked this woman who I see in the hallways, “Can I have a blue shirt?” She goes, “No.” I'm like, “Really? I'm not a very imperious GM, but I would have thought I could get a blue shirt because you don't do blue-collar work.” Only if you do work in the field do you get a blue shirt. And I love that. The spirit and camaraderie of the folks who do it. So I used to herald the fact of the blue shirts in the white shirt, I wear my white shirt, but I know who does the work in the field. And that again was another step. But it's something I would testify to in Congress wherever I went. Wearing that shirt symbolized to me what we stood for and who the people were. I would talk a lot and present all the rest, but who are the people who are actually doing the work that embodies DC Water and their folks wearing this shirt? And that's why I wear two and I miss it. I felt part of the team just by putting it on every day.
Willy Walker: I still have my chairman of the board shirt. It's right up in my closet with a bunch of other nice stuff.
So we decided to rebrand. The DCWASA brand was something that you and the team thought we needed to move beyond. We've told listeners that when we both stepped into this role, DCWASA had a pretty awful reputation in the DC area. And the idea was let's go rebrand it. Talk for a moment about that because you and I could have very easily gone into a back room. Pulled in your head of marketing, Alan, said, “Hey Alan, what's the new name going to be? The three of us could have sat around and come out and we'd done something as far as a board proposition or whatever else, and we could have gotten it done.” But you took a totally different tact when you came to me and said, “I think we got to rebrand DCWASA into something new.” Talk for a moment about how you underwent that, and why that participation was so important to the launching of the new brand.
George Hawkins: I'm glad you asked the questions in the sequence you did because my realization that we needed a rebrand stemmed from wearing that shirt. Because I had the old logo and the old name on my shirt. We had a water main break in Adams Morgan, part of DC, and I was walking home because I lived in Shaw that night. It was a Friday night. There are a lot of water main breaks in the evening because that's when people use the most water. And someone walked up to me and tapped me on the shoulder, “I've always wanted to work for you.” I don't know if you've ever heard this story, really. And I said, “Really, what are you interested in doing?” And he goes, “I've always wanted to work for the Department of Corrections.” That is no joke. That is what he said. And I remember looking, I was like, “What!” But I looked at our logo. I remember the old days, DC Water and Sewer Authority this is a patch on the corner of your shirt, so you can't read any of it. Their letters are too small. The tagline was two sentences, so you couldn't read that either. It was red, white, and blue and it had a helping hand over water. But I'm convinced that they look like two hands and a handcuff. I don’t know I'm not sure, but what I did know is that this guy could not tell from the uniform that I had on who I worked for. So our 600 trucks that were doing work all over the city. No one knew it was us. No one. Why would someone write out a rate, or a check to us if they don't see their money in action? So I thought we should figure out a way to make it easy to identify and present our case to the public. We don't have a lot of budget for it because that's another thing you and I had to do carefully was to really manage every dollar because there's a lot of folks who are watching you to try to see if you slip up along the way. So I didn't want to spend a lot of money on it either. And we did a public contest. We had a prize of $5,000 for the best idea. We got 156 entries. And Ellen Heyman, who was our very capable head of external affairs, again recruited to bring in some of the new talent that came in. That epiphany that we don't need dark red, white, blue. We're an environmental organization. I remember presenting it to you really when we presented these ideas. And you were the one who immediately said, “Absolutely, let's go for it.” It's DC with a water drop. So there's a very simple logo. The water drops tilted a little bit to make it a little more informal. Bright environmental colors with a tagline water is life. So my view is if someone five years old sees a DC water truck, they'll know it's DC, they'll know it's water, and they'll have a sense of its importance at any age or someone even if they can't read. “Oh, I bet that's water because the water drops.” So that was our technique to do that. I vividly remember the day we presented it to you because you were so holding your decision close to the vest. And Ellen and I didn't know how you were going to come out and were very stoic as we presented. And in the end, you said.
Willy Walker: George, no one who ever works with me would say I'm close to my vest and that I'm stoic and all that kind of stuff. And I say that in great jest because you're describing me all too well as I'm trying to make our decision.
George Hawkins: Well you are. I've seen you animated, but when you were evaluating what we were presenting, you were being very serious and going through. We didn't know where you were going to come out. Then you said, “Something I love.” And we had that event sitting out in front with the mayor and everyone else when we pulled down the new and we again did it very inexpensively. We didn't re-logo all the trucks until they were coming in for maintenance otherwise. So how could we at every step reduce the cost of this transformation? But it's simply one of the best things we've done. It's now a logo that's known worldwide and has all benefits. One was our team. We're an environmental organization. I remember when I went back to talk to our crew, I said “I had an epiphany. I really think we're the most important environmental organization in the city.” I remember visibly watching our folks. So to sit up in their chair. Because when you're at work in a place like D.C., it's something you feel inside. You've never heard anyone say it before or you've seen the articles in the post telling us stories of how we poisoned people and all these terrible things we've done. And now we were presenting ourselves. We are environmentalists. We are cleaning the Chesapeake Bay, the largest freshwater estuary in North America, and we are the most important element, and you are the people doing it and the customers who are paying for it. You are enabling us. And it was, again, all part of these factors that came together to build the enterprise that we became.
Willy Walker: So there are two other things to the transformation that I think are important for people to hear. The first one is you got to be in the trenches, and you and I are talking about a lot of highlights of our time. But you mentioned the water main break. You and I on Friday nights at 1:00 in the morning, and it's 22 degrees outside would show up at a water main break where the team is out there in the middle of the night trying to resolve the problem. You and I both went to people's houses where sewage backed up in the house. Given some problems, I got phone calls from residents of D.C. saying, “You're terrible, you're awful, and why aren't you guys doing better things?” And there was a time where you and I were brought in to work with the fire department on a very unfortunate fire that happened inside of DC. There was a lot of finger-pointing between the fire department and the water authority as it relates to sort of who is culpable for it, some very significant lawsuits that came out of that. I raise these issues too because, in hindsight, it looks all great. Under your leadership, DCWASA was transformed into the very best water utility in the United States. And talking about changing uniforms and rebranding and all that kind of stuff and the leadership you provided every single day, in hindsight, all sounds pretty straightforward and relatively easy. And what I think is so important for people to understand is this was all done in the context of a brand that could not have been worse and therefore brought the ire of many people in the DC area. And you and the team did an incredible job of transforming that image. And it's not just changing the brand. It's everything that happens every single day with every single repair, fire hydrant, pipe, and water. Everything has to happen at a certain standard of service that allows you to transform that brand. But then also the bureaucracy with which we worked under.
I remember distinctly you and me sitting in that hearing with the fire department across from us, and it was all like, “Let's get to the bottom of this thing, and let's all figure it out.” And then all of a sudden, the politics started to play in and it was very much fire department versus water utility. And we'll see who wins here. It was scary to be perfectly honest with you. In hindsight, it was scary to be sitting there saying, “We're all part of the same government, we're all part of the same enterprise, and we're trying to do the best for the taxpayers and for the citizens of the District of Columbia.” And then all of a sudden, the knifes come out and you're like, “Oh, well, maybe not.” Maybe somebody has, you know, their interests ahead of yours. Maybe someone's afraid of a lawsuit, maybe someone's afraid of a promotion. And so I think it's important for people to understand that there is an underbelly to all this stuff that you so effectively lead through on a day-to-day basis with your team which allowed for this process to actually happen. It sounds great. It's almost like you could write a book about it, but there would be a very thick chapter if you and I went back and wrote about this, about all the political challenges. Let's just leave it at that. That had to be overcome to make this transformation actually successful.
George Hawkins: But I love that you've raised the point because I think it's an important message about where our country is now. Because there was no magic for how we did this. It was old-fashioned straight. And by the way, again, why do I give you such credit. It gave us so much credit that not only was the GM of the enterprise showing up in these events and being transparent and accountable for issues that were our responsibility, but the board chair was right. It would have been easy for you to duck those other board chairs in the past had done that. But you were there. You were front and center. You were there as a board member. And then we were taking straight on the issues that mattered to the enterprise. And that's again, something that people see and was completely different than what they were used to. And what I found. Because you're right, there was a lot of grueling blocking and tackling. But remember all the various council members from wards, particularly Ward three.
Willy Walker: One in particular.
George Hawkins: Who was chasing after it, just waiting to pounce on you because they could get at whatever in the political world. And I think what we did, and this is a message, is it worked to be direct, to be honest, if we did something wrong, we owned up to it and figured out how to fix it. If we didn't, we didn't try to call other names, even though I think we were pushed on that because we had other folks, I think inappropriately tried to finger us for things. We stuck to the record. We stuck to what the story was. And here's what happened. Here's why it happened. We understand that. And the good news is that even in a city where the politics is as tough as DC, it worked. But it did take that retail grueling. You run to the battles. You don't shy away from it. You don't duck them. If there's a problem I’m going into his office, sit down, like we did in the wards and so did you. And we'll sit right in front of you and talk to you. “What's the issue here?” And if they say something that doesn't seem correct, we'll try to correct the record. Here's what we think happened and all the rest. And it wasn't 100% batting by any stretch of the imagination, but we were productive enough. And again, it added to this whole sense of DC Water's really different. When I'm a council member and I have a problem, they come into my office and ask me what the issue is sitting in front of me or admit or admit that there is a problem and try to fix it. And their board chair will visit if need be. If there's a hearing, I will sit right there. That was just a whole mindset change. And then for your ability to help the board, because we made a lot of tough decisions that the board had to support us on the credibility that you gained in the same way that I gained it with my team, that you gained with the board being willing to go out there and stand up for the enterprise in a thoughtful and substantive way. I think it meant that at both levels of the enterprise where we had to be synced like we'd never seen before. We started to really be productive. And it was hard. There's an underbelly that was tough work, but it was great to see the outcomes.
Willy Walker: So the final story, anecdote, or decision that I think is so telling was the digester. And so people can get a sense of this when you bring all this water into a wastewater treatment plant, you basically separate the solid waste from the liquid waste. And what we have done at DCWASA prior to building this digester was that solid waste would be taken out of the water and would be put in dump trucks, and it would be sent out to the rural fields around the greater Washington area and it would be sprayed onto crops and used as fertilizer. And that was the way it was done. The transportation of it was wildly damaging to the environment if you think about the truckloads of dump trucks that would take all this waste out, and then we would be spraying it onto crops, which was perfectly fine from an environmental standpoint. But that solid waste has a lot of energy. And so we started doing a study to see whether we could build a digester which would take that solid waste and it would burn the solid waste and turn the solid waste into energy. These Blue Planes, which George said previously were the largest advanced wastewater treatment plant in the world, were also at that time the largest point user of electricity in the DC area. So think about all the other things that have to run in the DC area. Blue Planes used more electricity than anything else there. And so the idea here was to go and invest around $300 million to build this digester which would take the solid waste, burn it, and turn it into electricity so we could have a closed loop.
And George told you previously that we had a $3.2 billion consent decree from the Justice Department that forced us to go out and issue debt. We had $1 billion on trying to change some of our effluents into water. And now we were going to add another $300 million on top of that. And he raised the issue of managing the board and the board's expectations, etc. And every board member came from a different county that came from a different state, that had a different view of financial management and risk management. And I don't want to go down the rabbit hole, George. But you remember very well when I got into a big debate with one of our board members as it relates to our investment strategy and trying to put a certain amount of our reserves into bonds. And this board member sat there and said to me, “What if they pay off early, and I won't even go down that?” But the point is everyone had a different view from a financial management standpoint, and the digester was something that the board was vehemently opposed to because it was going to cost us another $300 million and we had $4.2 billion of other obligations we had to go fund. And you and the team were out trying to push through rate increases that were going to be able to pay for what we already had on the table, much less an incremental $300 million. But you and I got through the board the digester project and we built it.
Talk for a moment, if you will, about two quick things. One is just how transformative having a digester and doing the closed loop was. And then the second thing to it, which I think is the most important piece to all of this. Is that the digester when it actually got built there was a front-page article in the Washington Post showing the digester up in the closed loop and all the great things about it. The two people who made that happen, George Hawkins and Willy Walker, were nowhere to be found in that photograph. There was a new mayor, Adrian Fenty, who put me there and put you there. The council members who you and I had to work with to get support on it were nowhere to be found. And what it said to me at that time, George, was if you really want to do great things in public service, you got to have people who don't care about being on the front page of The Washington Post to get credit for what gets done. And all the time, when I think about our election cycles of congressmen and women in the United States for two years, I say by definition, “They are all short-term oriented people who can never ever build a digester.” They can never sit there and say, “It's going to take us 5 to 7 years to build this thing, and then we're going to reap the benefits of it. And the people who are in leadership positions in 5 or 7 years, I might not even be close to them. We'll get credit for it.” And the problem with our politics is that everyone who is in an elected position wants the credit. They need to be on the front page of the Washington Post, which makes them only do short-term projects rather than longer-term investment projects. And that picture, which I actually still have in my scrapbook where you're not in it and I'm not in it and Adrian isn't in it, says to me that that's one of the key problems with our governance of our country and municipalities and states and cities today. But I've gone off on a different tangent.
George Hawkins: No, I would say two things. One, actually you haven't given yourself enough credit. That was $470 million.
Willy Walker: When you get into these billions and all that stuff, it gets a little bit of a rounding error. But I wouldn't say that to any ratepayer. And by the way, I think you clearly articulated we were very focused on expenses, very focused on efficiency, and very focused on being great stewards of the enterprise. So I don't say that flippantly of saying a couple of hundred here and a couple hundred there. But the bottom line was it was a big expense that we quite honestly, at the time had a lot of board members who thought we couldn't afford it.
George Hawkins: It was discretionary. This was a project that was not mandated. It was something we decided we wanted to do. And by the way, just to give a flavor of the scale, this is the sewer sludge we're taking out of the waste that we don't want in the Chesapeake Bay, the Potomac, and the Anacostia. We were generating 1200 wet tons of biosolids every single day, 60 tanker trucks. And these big trucks were coming in and out of the site every single day. And, as Willy said, that's the energy that we can use in DC as most utilities. By the way, anyone who's watching this is probably the biggest energy user in your community is the water utility. Why carry a gallon of water around? It's really heavy. Imagine moving millions of gallons of wastewater because we were doing both, drinking water wastewater, all over a city. We had a $37 million power bill overall at DCWASA. So the biggest water, the biggest power user in the Mid-Atlantic for God's sake. So the question of how we could generate and I won't go into all the details, but this was, again a perspective that you were able to help change the point of view of the board, because even though it was $470 million in total, not all at once that was broken out. The first bond was $300 million because that was the first initial cost. But the savings were so great. Not having to do all those trucks, now generating power on-site, now buying less power off the grid. It was cash flow positive over time. So the savings that we were able to generate with this project was more than the debt service that we issued, and that was what changed the minds of Anthony Griffin, Tim Firestine, and all the people we remember well. And it was a different way of looking at how to do capital budgeting.
It's one of my favorite stories in DC Water. It's one of the things again, you help with this perspective. I remember we would divide up our capital program into categories. And one category we never used to fund was called Better Business Practices. And you'll remember Len Benson. I remember asking Len “What's in that category because we never fund it.” And he goes, “That's the projects that would make us more efficient to operate. But because we're doing all the mandated projects and all the rest, we never have any money left over.” I'm like, “But that's crazy, because if we do those projects, we will permanently be more efficient and more effective, and we will always be able to do more.” So we started to ask ourselves, this was a Mark Kim innovation. All capital projects had to have a return on investment. The business plan associated with it. Most public agencies doesn't do that, but there's no reason why they can't and it changes the decisions you made. We spent more on biosolids upfront but knew that the cost of service was that we were going to save money each year forever into the future. And I can't remember when the crossover was when we paid ourselves back. And then it was all positive. And that was you're leading the charge, representing very carefully what we would do to change the mind of the board. And that's what's possible with a public agency. You can do those projects even at a higher cost. If you start thinking about life cycle, return on investment, ratepayer, and risk. The toughest consumers are ratepayers. And we could tell them, yes, this is being invested in, but it's going to save money today. Actually, our budget is going to be better off after we do this project, not worse. And then into the future, it's going to get better. And that changed the decision on what was groundbreaking. That was the first time that the technology that we adopted at DC Water had ever been used in North America and the largest installation to this day that has ever been built in the world. And it's the cleanest and greenest sewer sludge project ever devised. And it was done in a way that cost more money upfront. So if you hadn't thought of it in a different way, we never would have done it. It took a different mindset to get there, and you were absolutely part and parcel to having the board and the staff think of it that way.
Willy Walker: That might be your epitaph on your tombstone. George. That was the largest and greenest sewer sludge project ever developed. It came off your tongue perfectly. I have to tell you, it was really quite something.
I could keep going on with this. And you and I haven't even gotten into where the water industry is today and water and all that great stuff. I think we're gonna have to do part two because we are out of time on this first one. But the story of DC Water is something that I'm wildly proud of. I got as lucky as I've ever gotten in having Adrian Fenty whisper in my ear, you ought to be looking at George Hawkins. Having a group of people who helped me make the decision to bring you in as the leader and the team that you assembled around you, and the way that the board and the management team and the entire enterprise at DCWASA turned into DC Water, which turned one of the worst utilities in the United States and turned it into the number one utility in the United States. It's an incredible story.
And I'm super thankful for A) having been part of it, B) all that you have done, and C) for the friendship that you and I developed throughout it. And I hope that people who've listened today got a little bit as it relates to what it takes to get these things right. And then also some of the trials and tribulations from a leadership and general management standpoint that one must endure and lead through to be the successful leader that you were on this transformation.
George Hawkins: Bless you, Willy. Like I said, this was a team effort and you were absolutely part of it. It could not have happened if we had not had you as chair. I don't think because of the number of things, we looked at differently. And you helped us look at it differently. But for the folks watching, it's a story of what can happen in the public sector. There's nothing we did that other agencies across the country can't do and should do, because you can deliver better service to your customers. Boy, the sense of what the government can actually do their job, do it well, and serve you well. And I think the country needs those stories and they absolutely are possible. And it was a blessing for me. It's a highlight of my whole career.
And for another time. But what I'm doing now and this organization is trying to help disadvantaged and low-income communities do the things we were able to do at DC Water. That's why I stepped down. And that's a story for another time because it's fairly shocking some of the realities of the water systems in our country that we all rely on every day for everything.
But Willy, yes, wonderful friends, an incredible partnership. Who would have guessed? It shows what was possible. And I was blessed to be part of it.
Willy Walker: Thank you, George. It's been a pleasure for me to run down memory lane with you. Thank you, everyone, for listening today. And we'll see you again next week for another Walker Webcast. Thanks, George.
George Hawkins: Bye bye. Absolutely.
