Public-private partnerships deliver solutions to municipal water challenges

By Michael Deane

On July 30, 2014 in Los Angeles, a 93-year-old water main operating past more than three times its useful life burst and flooded the UCLA campus with 10 million gallons of drinking water. And this was not an isolated incident. Water main breaks occur all over the country in large and small communities alike with frightening frequency.

According to the U.S. Environmental Protection Agency (EPA), there are more than 240,000 water main failures each year. What’s more sobering, the agency has projected a $384 billion gap in funding that will be needed to maintain drinking water infrastructure through 2020.  This is exacerbated by the fact that the American Society of Civil Engineers (ASCE) estimates seven billion gallons of treated water never reach the tap due to leaks, at an estimated cost well over $2 billion annually.

Water main failures, leaks and lost revenue are increasingly having a negative impact on communities. It is clear that the nation’s drinking water infrastructure is as essential to life as the life-giving water it delivers. Combined with issues like record-breaking droughts and limited water supplies, the water challenges can be easily characterized as a matter of national security. No one entity can fix all the water challenges America’s municipalities face, but we can take steps together to deliver solutions.

The National Association of Water Companies are advocates for a holistic approach to the restoration of the nation’s infrastructure − an approach characterized by collaboration and constructive steps to expediently address the water challenges both the public and private water sectors face. One of the approaches that the association feels is working effectively throughout the country is public-private partnerships (P3s).

Ultimately, a meaningful discussion about municipal water infrastructure challenges requires a myriad of potential solutions. Some solutions include ready access to capital, shared expertise, applying new technology, operational acumen through improved processes, or potentially some combination of all of them. Admittedly, applying these solutions can be daunting for a municipality when there are political considerations, competing priorities and limited resources for high-priority projects. This is where P3s can be effective.

Across the country, more than 2,000 communities have benefited from water-related P3s. These partnerships concentrate on sharing expertise, assets, risks and resources, including access to funding for capital-intensive improvements, modifications and maintenance of water systems.  

The increased use of P3s gained more momentum last July when President Obama established the Build America Investment Initiative to bring the best of the public and private sectors together to explore and identify innovative financing and management of the infrastructure necessary for economic growth and protection of public health and the environment in communities across the country.

Additionally, there is the proposed Water Infrastructure and Resiliency Finance Center (WIRFC) at the EPA to serve as a resource for communities, municipal utilities and private companies as they seek to address water infrastructure needs with limited budgets. The WIRFC will support communities and explore creative and innovative financing practices, including P3s. This “center of excellence” will help ensure that communities have the information and tools to explore all opportunities for innovation in project finance, delivery and operations. 

Today, the potential exists for 98 percent of investment in water infrastructure made at the local level to grow significantly through incentives made possible through federal policy.

Limited municipal budgets often mean only a fraction of the investment needed for proper maintenance and replacement of our aging water infrastructure is invested at any one time. P3s can reduce municipal costs, provide access to capital and share in the associated risks. With P3s, private water companies and municipalities can share the financial requirements for a time, while ownership remains with the public sector and decreases costs for the community.  

Some examples of P3s benefiting a community include Bayonne, N.J., Rialto, Calif., and Phoenix, Ariz.
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 for the community.

Rialto signed a 30-year concession agreement with Rialto Water Services in which the city retains asset ownership while private operator Veolia North America oversees a $41 million investment in capital improvements and provides operation and maintenance of the water and wastewater facilities.

Phoenix turned to CH2M and Spacient Technologies to develop procedures to improve communication between the more than 450 field personnel of Phoenix’s combined Water Distribution and Wastewater Collection Divisions. In doing so, they would also enhance customer service and operational efficiency. This new system gave Phoenix better information on customer issues, infrastructure needs at call sites, maintenance history and allowed for more effective customer communication.   

Michael Deane is the executive director of the National Association of Water Companies (NAWC), the national organization representing private water operating companies. Before joining the NAWC in 2009, he was associate assistant administrator for water in the U.S. Environmental Protection Agency where he played a key role in developing and implementing national water policy.

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