Public/Private Partnerships
in Municipal Water
and Wastewater Systems
Case Studies of Selected Cities

THE UNITED STATES CONFERENCE OF MAYORS -- URBAN WATER COUNCIL

Second Release
September 25, 1997


Introduction


The provision of high quality clean water and drinking water services are essential to economic and recreational development in our nation's urban areas. This development contributes greatly to the overall quality of life in our cities. In providing clean water and drinking water services, cities must develop, operate maintain and improve complex and costly infrastructure to protect public health and the environment. It has been and will remain the responsibility of cities and local governments their water supply, wastewater and stormwater infrastructure needs and to provide the funding necessary for constructing , operating and maintaining this infrastructure.

Clean Water and Drinking Water Infrastructure Needs

According to the U.S. Environmental Protection Agency's 1992 Clean Water Needs Survey, over $137 billion in new wastewater infrastructure construction is necessary to comply with Clean Water Act requirements through 2012, including $31 billion for secondary treatment, $15 billion for advanced treatment and $80 billion for collection system projects (such as collectors, interceptors, control of infiltration and combined and sanitary sewer overflows). The 1996 estimate, to be available in mid-1997, is expected to document clean water infrastructure needs of $150 to $200 billion.

In 1997, EPA completed its first assessment of nationwide drinking water infrastructure needs. This inventory documents over $138 billion over the next 20 years in drinking water infrastructure necessary to meet the mandates of the Safe Drinking Water Act (including $77 billion for transmissio and distribution systems, $36 billion for treatment, $12 billion for storage projects and $11 billion for source water protection).

There is no comprehensive Federal funding program which can provide the capital necessary to meet the clean water and drinking water infrastructure needs documented. Since the Federal government will not be able to meet these future water development financing needs, cities and local governments must seek other options to finance such infrastructure.

Cities Develop Innovative Financing and Op Options

Faced with such staggering capital investment needs and the prospect of passing ever increasing costs on to ratepayers or taxpayers, cities are developing innovative options to become more efficient in providing water and wastewater services. One option involves introducing an element of competition into the water and wastewater area and the formation of "public/private partnerships" for the operation, maintenance, management, improvement and development of water and wastewater infrastructure. By partnering with the private sector, it is possible for a city to realize significant operational cost savings, and to attract private capital investment for needed infrastructure development.

To assist mayors in achieving efficiencies in water and wastewater services, the activities of The United States Conference of Mayors' Urban Water Council (UWC) have focused on implementation of the Resolution on Municipal Water and Wastewater Infrastructure Financing, approved in June 1995. The Resolution calls for Congress to remove barriers which currently limit private industry participation in the long-term operation and ownership of water and wastewater treatment facilities. Regulatory and legislative activities focused on removing various tax code restrictions that adversely impa cted existing tax-exempt bonds if a city entered into a long-term arrangement for facility management or sold a facility to a private entity. This Federal impediment was largely removed with the issuance of new private activity bond regulations and related revenue procedures in 1997. These regulations incorporated most of the provisions suggested to the Department of the Treasury by the U.S. Conference of Mayors.

Despite these new regulations and favorable policy contained in two Presidential Executive Orders, certain impediments still exist. The Conference of Mayors continues to address issues such as construction grant "recapture" and regulatory treatments which serve as disincentives to public/private partnerships or limit the potential benefit of such transactions to cities. The Conferences' 1997 Resolution on Financing Clean Water and Drinking Water Infrastructure Needs also addresses other impediments which exist in the form of restrictive state procurement or contracti ng procedures.

Public/Private Partnership Case Studies an d Key Features Matrix

Many cities are already engaged in public/private partnerships in the area of water and wastewater services. The UWC has compiled brief case studies on transactions completed or under development in some of these cities. The case studies provide a brief history of the project and description of the partnership arrangement, actual or projected cost savings, and a report on labor issues as a result of the public private partnership. Just as important as the information contained in the case studies, a contact person in each city is provided. Direct contact to discuss particular aspects of a project is many times the most effective way to obtain the particular information necessary to apply the lessons and experience of one city to another.

Some of the transactions profiled are still in the developmental stage. The UWC intends to continually up-date these case studies and profile additional activities in cities across the nation. This case stu dy i nformation is available on the World Wide Web, on the U.S. Conference of Mayors Urban Water Council home page -- http://www.usmayors.org/uscm/urbanwater.

The Urban Water Council (UWC) officially commenced operations within the U.S. Conference of Mayors on August 1, 1995. The Council was formed to respond to mayoral concerns regarding municipal water and wastewater services. The UWC serves as a forum for local governments to share information on water technology, management methods, operational experience and financing of infrastructure development. The UWC acts as a "task force" of the Conference of Mayors, and membership is therefore open to any USCM member mayor. The co-chairs of the UWC are Mayors Patrick McManus of Lynn, MA and James H. Sills, Jr. of Wilmington, DE. For a list of mayors currently serving on the Urban Water Council see Appendix A.

The UWC has appointed a Water Development Advisory Board (WDAB) made up of private sector companies providing a variety of water and wastewater related services to cities. The WDAB provides expert advice and information on water issues so that USCM can develop and pursue policy designed to assist cities in providing necessary water services to their residents and businesses. A list of 1997 Water Development Advisory Board members is found in Appendix B.

For additional information on activities of the Urban Water Council, contact Michael A. Gagliardo, Director, Urban Water Council or Kimberly Peterson, Staff Associate, at 1620 Eye Street, NW, Washington, D.C. 20006; telephone 202-293-7330; fax 202-429-0422.


Key Features Index

Click on city name to link to the case study for that city.


City Facility type Transaction type Private Partner
Water Wastewater Short-term
Operations
Long-term
Operations
Lease Design, Build,
Operate
Private
Ownership
Managed
Competition
Bridgeport, CT   * *           Professional Services Group
Buffalo, NY *   *           American Anglian Environment Technologies
Charlotte, NC * * *         * CM-ConOps
Cranston, RI   *   * *       Poseidon/Professional Services Group
Evansville, IN * * * *         EA2 - water
Environmental Management Corporation - wastewater
Franklin, OH * *         *   US Filter/EOS - wastewater
Earth Tech, Inc. - water
Hawthorne, CA *     * *       California Water Service Company
Hoboken, NJ *     *         United Water
Houston, TX *   *         * JMM Operational Services, Inc.
Indianapolis, IN   * *           White River Environmental Partnership
Jersey City, NJ *   *           United Water
Newark, NJ *   *           Professional Services Group
Oklahoma City, OK   * *           Professional Services Group
Schenectady, NY   * *           Professional Services Group
Seattle, WA *     *   *     Camp Dresser & McKee, Inc. and Phillips Utilities Management Corporation
Sioux City, IA   * *           US Filter/EOS
Taunton, MA   *   *         under evaluation
Tulsa, OK   * *         * N/A
Vancouver, WA   * *           US Filter/EOS
West Haven, CT   * *           Professional Services Group
Wilmington, DE   *   *         US Filter/EOS (selected)

Appendix A - URBAN WATER COUNCIL MAYORS
Appendix B - URBAN WATER WATER DEVELOPMENT ADVISORY BOARD


Urban Water Home PageHomeSearchjwelfley@usmayors.org

The United States Conference of Mayors

J. Thomas Cochran, Executive Director
1620 Eye Street, NW, Washington, DC 20006
Telephone (202) 293-7330, FAX (202) 293-2352

Copyright © 1996-97, U.S. Conference of Mayors, All rights reserved.