Four reasons why public-private partnerships may be a lifeline for struggling cities

This past week The New York Times published an article entitled, “Public-Private Partnerships Could Be a Lifeline for Cities.” The author, Kent Rowey frames his argument in support of public-private partnerships with an example from the crippling financial state of Detroit. Apparently, the Motor City is considering dire revenue raising options such as selling its collection of classic cars and permanent art collection. Detroit recently filed for the largest municipal bankruptcy in the nation’s history. Rowey argues that the solvency solution need not be so permanent or culturally punishing as selling Detroit’s Mustangs and Monet masterpieces. Instead, he suggests exploring public-private partnerships for municipal services in which a private equity investor would make an up-front payment to run a public service or utility.  In return, the private companies gain a concession to run a long-term contract. Rowey cites United Water’s own partnership with the City of Bayonne, New Jersey as an exemplary public-private partnership. In 2012, Bayonne contracted a 40-year concession for its water and waste system through a partnership with KKR and United Water that abides by a strict scheduled rate protocol and other tight regulations. Employees have since benefited from increased training and enhanced safety conditions and the City has benefited from an upgrade in its debt rating by Moody’s. United Water will also invest at least $20 million in the City’s infrastructure in the first 5 years. Similarly, Rowey cites Chicago’s $1 billion dollar, 75-year contract with a private company to operate its 36,000 parking meters that began in 2008. Chicago’s parking meter system is now considered to be one of the best in the world....

Nation’s Water System Infrastructure Requires $384 Billion Investment by 2030

Last week, the U.S. Environmental Protection Agency (EPA) released the results of its fifth Drinking Water Infrastructure Needs Survey and Assessment. The survey identifies and assesses the nation’s water infrastructure needs over the next 20 years, which include thousands of miles of new pipes and treatment plants, storage tanks and water distribution systems. The survey findings show that our nation’s water systems need an estimated $384 billion in improvements by 2030 for them to continue to produce and deliver safe drinking water to 297 million Americans, which is critical not only for public health but also for our economy. No business can be started or maintained without a safe and reliable water supply. Water Industry experts agree that in order to maintain sustainable water and wastewater systems for the future, not only do we need operational efficiency, expertise and technological innovation, but also capital investment. According to Brent Fewell, Senior Vice President, Environment Health and Safety at United Water, “the recipe for failure is when the perceived risks of failure exceed the perceived benefits of success. The recipe for success is changing recipes.” United Water’s SOLUTION℠ business model addresses the water infrastructure challenge and is an example of the type of innovative, effective and scalable “recipe” that can ensure sustainable water systems. SOLUTION℠ was first implemented late last year by the Bayonne Municipal Utilities Authority and a joint venture created by United Water and financial partner Kohlberg, Kravis, Roberts (KKR). Since our partnership with Bayonne, we have eliminated nearly $125M of municipal debt and continue to implement full management, innovation and operational best practices and make capital investments – approx. $110M...
United Water Bayonne Team Completes First 90 Days of Operations

United Water Bayonne Team Completes First 90 Days of Operations

On March 21, we completed 90 days of services since we first began operations in Bayonne, NJ. Last December, we announced the initiation of our partnership with KKR for water and wastewater system operations in the City of Bayonne, NJ, using United Water’s award winning new SOLUTION℠ model to address Bayonne’s water infrastructure needs. SOLUTION℠ is designed to provide municipalities an option to upgrade and operate water infrastructure more efficiently and help meet increasing environmental and water quality standards. In turn, SOLUTION℠ attracts new, long-term capital from private equity partners. The new resources generated can then be used specifically to upgrade water systems and also to help ease pressure on municipal balance sheets, freeing cities to invest in other public services. As a part of this joint venture with KKR, United Water acquired a 40-year water and wastewater concession from the Bayonne Municipal Utilities Authority (BMUA). Under the contract, BMUA continues to maintain control of rates charged to customers, the ownership of the water and wastewater system and oversee compliance adherence and customer service performances. The last three months have been very exciting and important for our operations team at Bayonne. We asked our Bayonne team to talk about their experiences and learnings so far, and this is what they shared with us. Employee Health and Safety First: We spent the first week of operations almost solely concentrating on health and safety training of our team members. The Bayonne management team has made a commitment to all the employees that its first goal is to ensure that everyone has a safe and healthy work environment. This commitment, in turn,...

Moody’s Revises Bayonne, NJ Credit Outlook to Stable for the First Time in Five Years

Moody’s Investor Services recently upgraded City of Bayonne’s bond rating from Baa1 with negative outlook to Baa1 with stable outlook. In its report on City of Bayonne, Moody’s attributed the upgrade in rating to the city’s recent progress in reducing its debt burden through the lease-sale of the MUA operations, significant reduction of deferred charges, declining reliance on TAN borrowing and the expectation that fund balance reserves will remain adequate. The rating agency also noted that the Bayonne Municipal Utilities Authority’s (MUA) joint venture with United Water and Kohlberg Kravis Roberts (KKR) is one of the factors that contributed to the rating upgrade. The joint venture eliminated $120 million from Bayonne’s local debt burden by paying off all the MUA’s debt and a portion of the debt of the Bayonne Local Redevelopment Agency. We first announced the initiation of our joint venture with KKR and Bayonne MUA in December 2012, using our award winning SOLUTION℠ model. United Water’s SOLUTION℠ allows cities to attract new long-term capital from private equity partners to fund infrastructure upgrades and improve operating efficiencies, helping cities meet the growing demand for improved water quality and environmental standards. As Mayor Mark A. Smith put it: “This upgrade is very good news.  It shows that Bayonne has made significant financial progress during my Administration.  Moody’s has raised Bayonne’s rating for the first time in more than five  years. Our hard work and fiscal discipline are paying off. We have turned a corner and are moving in the right...