Congress passes legislation to encourage more private sector participation in water sector

 

Capitol_Building_Sunset_DC

 

A water funding bill passed by the U.S. Congress this week provides a major endorsement and path forward for public-private partnerships in the United States.

United Water is preparing to invest nearly $1 billion over the next five years in its own assets. And we are prepared to work with cities and public partners to leverage similarly high levels of funding from private financing partners and to collectively tap into newly available federal dollars.

Within the recently-passed Water Resources Reform and Development Act (WRRDA), is the 5-year, $175 million Water Infrastructure Finance and Innovation Program (WIFIA), which will offer supplemental federal funding to projects that have a sufficient revenue stream and have attracted a private financing partner.

The WIFIA pilot program is based off of a successful TIFIA program that has been used in the transportation sector since 1998. Since passage of that legislation, total TIFIA assistance has mushroomed along with private sector investment: $59.8 Billion in transportation projects have been developed with a smaller $15.9 Billion leverage from the federal government.

This incentive structure is also similar to one that has been used successfully in Canada to develop private sector participation for large water and public works projects. United Water’s Canadian sister company, SENA Waste Services, has demonstrated success in working within these guidelines to structure public-private waste management services – most recently in the City of Edmonton.

In the face of scarce public dollars, many Canadian cities have begun to develop public private partnerships for their water, waste and sewer needs and have thus been able to tap into government money. Not doing so would be tantamount to leaving government money on the table.

In 2011, United Water and private equity firm KKR partnered with the City of Bayonne, NJ to unlock the value of its water and sewer assets and access funding to; pay off $125 million of the utility’s debt, invest nearly $110 million to modernize the water and sewer system, retrain and bolster the utility’s staff, and eventually save the utility an estimated $35 million over the lifetime of the contract, based on the city’s analysis.

In water infrastructure projects, like the one in Bayonne, with a clear revenue stream from rate-payers, there is ample opportunity for the private sector to increase capital investment, bring in new technologies, and improve services. The WIFIA program not only recognizes the value in doing so, but also provides supplemental assistance in cases where risk can be mitigated by federal assistance.

Submit a Comment

Your email address will not be published. Required fields are marked *