Guest Column | November 11, 2014

The Time Is Right For Public-Private Partnerships

PlasticPipeCorner

By Michael Deane, executive director, National Association of Water Companies (NAWC)

When one considers the fact that some of today’s water infrastructure dates back to the Civil War, it presents an uncomfortable reality. The reality is we need an acute sense of urgency to fix a long-neglected, complex system of pipes, pumps, valves, tanks and treatment facilities across this nation. The time is right to get to work and accelerate the solutions that are already available and accessible to secure the public health of this country.

One of the solutions is public-private partnerships (P3s). Water and wastewater public-private partnerships have proven they can deliver solutions to this nation’s municipalities and close the infrastructure gap in less time. For municipalities, public-private partnerships have the potential to reduce the time to complete construction projects, provide more flexibility, enable quicker access to capital, increased access to a broader base of expertise and introduce new technologies.

The health and environmental standards of the Safe Drinking Water Act and the Clean Water Act require sustained investment, which can be difficult for some municipalities without the budget flexibility to make ongoing capital improvements in water and wastewater facilities. Public-private partnerships can provide quick access to capital to design, build and operate water treatment facilities and distribution systems. With the introduction of new technologies and expertise, public-private partnerships can identify process improvements that contribute to operational efficiency – enabling municipalities to meet ever increasing water quality standards.

It is the right business climate to do more public-private partnerships in the water and wastewater sectors.  On June 10 of this year, President Obama signed into law the Water Resources Reform and Development Act (WRDDA), which includes the Water Infrastructure Finance and Innovation Act (WIFIA) that many water industry groups have been working on the last several years. This legislation establishes a five-year pilot program, aimed at projects that cost at least $20 million ($5 million for communities serving no more than 25,000 people). A July 17, 2014 Presidential Memorandum encourages more public-private partnerships be applied to repair the nation’s infrastructure. The capital to solve our water infrastructure problems is in the marketplace now looking for the right public-private partnership project. 

Public-private partnerships have a strong track record for municipalities. Public-private partnerships have been in use in the United States for more than 200 years. There are more than 2,000 North American communities served by a public-private partnership arrangement. Public-private partnerships can be customized to fit local needs, which is one reason why these partnerships have had a greater than 85 percent contract renewal rate over the past decade, according to the Public Works Financing’s (March 2014) 18th Annual Water Partnership Survey. 

According to an October 13, 2014, Standard & Poors Capital IQ, “... the number of infrastructure P3s in the U.S. increased in 2013.” The report went on to say that “in the U.S., interest in the P3 approach is growing, and several states are developing programs.”

Three recent water-related public-private partnerships case studies are:

Bayonne, New Jersey: The Bayonne Municipal Utilities Authority (BMUA) signed a 40-year concession agreement with United Water (and investment firm KKR) for its water and wastewater systems. In this concession agreement, the BMUA retains ownership of assets and responsibility for setting rates, while the private entity operates the system, invests $107 million and retires $130 million of debt.

Rialto, California: The City of Rialto signed a 30-year concession agreement with Rialto Water Services LLC, in which the City of Rialto retains asset ownership, while the private entity oversees a $41 million investment in capital improvements and provides operation and maintenance of the water facility.

Tampa Bay, Florida: Tampa Bay has a partnership with American Water to operate and maintain the largest seawater desalination plant in North America. It is designed to supply up to 25 million gallons of fresh water per day and can do so at a cost of less than a penny a gallon for the next 30 - 50 years.   

Public-private partnerships benefit municipalities. When the public and private water utility sectors work together, there is a higher probability this nation will be able to take a more aggressive approach to improving water and wastewater infrastructure at a faster pace. Among the benefits successful public-private partnerships can bring are new infrastructure for the community, exposure to expertise and technology, new efficiencies and the flexibility to own, operate and maintain the system based on the needs of a given community.

It’s the right time to move forward to engage public service and private enterprise.  As communities across the country act to meet their water challenges, forward-thinking public utilities and private operators with extensive expertise and experience are a powerful combination.  The water industry has served this nation for generations and now it is time for the private and public sectors to collaborate more aggressively to ensure future generations can depend on safe, reliable water.

Image credit: "Plastic Pipe Corner," © 2014 darkday, used under an Attribution-ShareAlike 2.0 Generic license: http://creativecommons.org/licenses/by/2.0/