By Rich Anderson
May 1, 2006

Albuquerque (NM) Mayor Martin J. Chávez addressed a packed crowd of public sector officials and representatives from the finance community in Chicago April 20 attending the Public-Private Partnership Summit organized by the Institute for International Research. The purpose of the Summit was to increase public sector awareness of partnerships to generate capital for public infrastructure; and to share best practices and strategies for structuring successful partnerships.

Chávez presented information developed by The United States Conference of Mayors Urban Water Council 2005 National City Water Survey. One of the most important findings of the survey, he stated, is that there are three major water resources priorities that the nation’s principal cities face: rehabilitating an aging water infrastructure; water system security involving acts of terrorism and natural disasters; and water supply availability and critical shortages in 2015 and 2025.

He provided information that indicated robust municipal spending on water infrastructure projects. “Ninety-two percent of the nation’s principal cities have made major capital investments in water and wastewater infrastructure between 2000 and 2004; and a similar percentage of cities plan to make major capital investments between 2005 and 2009,” he said. Chávez also stated that nearly a quarter of the nation’s cities are making major capital investments in all five areas of water infrastructure simultaneously: water supply; water treatment plants; water distribution systems; wastewater treatment plants; wastewater collection systems.

Chávez indicated that roughly half of cities use a single source of water project financing, and the most frequently used approach is cash financing. Known as “pay-as-you-go,” cash financing is frequently accomplished by setting user charges that generate cash reserves that are dedicated to reinvestment in water systems. The other frequently used financing tools are municipal bonds, followed by the Clean Water Act and Safe Drinking Water Act State Revolving Fund (CWSRF/SDSRF) loan programs.

Chávez pointed out the EPA estimates there is a gap of over $500 billion in spending that is necessary to comply with current law over the current 20-year period (2000-2019). He reiterated that, while there is currently robust municipal spending on water infrastructure, the gap remains a big challenge for local government. He stated that local elected officials need to integrate not only federal tax incentives to help close the gap, but also private capital and, where appropriate, partnerships that produce public benefits. Chávez suggested that mayors are starting to get the message that traditional water infrastructure financing needs a boost from partnerships. Citing the 2005 Survey, he said that about 53 percent of cities indicated that they were willing to consider public-private partnerships if they could save money.