US public-private water contracts lead the way

Partnerships between the private sector and US municipalities are releasing funds for environmental compliance and upgrades, providing local governments with stable income and improving service. World Water reports.

The US government’s control of water dates back to before the American Revolution, when cities provided residents with water at public wells. But in the late 18th century, private companies sprang up to meet the increased demand for water.

The first US partnership was signed in 1972 when Burlingame, California signed an operations agreement with USFilter (then Envirotech Operating Services) to manage a WwTP.

Forms of public-private water partnerships

In O&M agreements, the municipality contracts with a private company to manage, maintain and operate some or all of its water supply system.

  • Design-build-operate (DBO) agreements are full-service contracts that include design, construction and operation by a private company, often with financing options.
  • Managed Competition scenarios pit private companies against public agencies in order to enhance efficiency and can result in privatization. These competitions are sometimes criticized by employees and private-sector companies alike. Private-sector firms typically criticize Managed Competition because the private firm must provide service and performance guarantees to the municipality. Employees of public firms working in partnership agreements often do not have to guarantee the same levels of performance and service as those working in private companies.
  • In Asset Sales, the municipality sells its water supply system to a private-sector company, which then manages it as a public utility. These contracts can offer the largest up-front payments, but cities are often reluctant to enter into such agreements for fear of losing control over the city or region’s water supply.

Municipalities typically privatize to lower their operating costs and stabilize rates. A private-sector firm, through its operating experience and technical know-how, can usually reduce or stabilize a municipality’s cost per gallon of treated water or wastewater. Studies over the last 25 years have concluded that private water companies generally produce water at a lower cost than municipalities, according to Professor Barton H. Thompson of Stanford University’s Law School.

As populations, operating costs and regulatory pressures intensify, many municipalities find themselves hard pressed to come up with the large capital outlays necessary for new water and wastewater facilities and upgrades. Facing budgetary crunches, renting out water facilities and services to a private company makes a lot of sense. Some water companies will even make up-front cash concession or transfer payments to the municipality, which the city can use to invest in new water and wastewater infrastructure or to reduce debt and taxes.

Although there is some disagreement as to how much US communities will need to spend in the next 20 years on wastewater infrastructure – the Water Environment Federation projects $330Bn while the EPA estimates $128Bn (see World Water, May 1999, p.7 and August 1999, p.6) – there is no doubt that substantial investment will be unavoidable.

Public-private partnerships allow municipalities to avoid depending solely on limited federal funding. In addition, some cities either can’t use tax-exempt bonds for funding or they’ve reached their debt limits.

With core competencies in water and wastewater technologies and systems, private-sector companies can provide operating solutions without complications. The DBO can also reduce costs and speed-up facility delivery by combining design engineering, construction and operation and by streamlining bidding processes.

One of the biggest challenges facing the American water industry is how those municipalities that service less than 3,000 people – 85% of all municipalities – will manage to introduce new treatment technologies and meet increasingly stringent regulatory demands. Public systems with a small number of employees often lack the expertise needed to stay on top of complex regulatory issues, infrastructure analysis, and financial markets. As a result, these smaller communities can’t match the big private-sector firms’ clout in price negotiations for materials, insurance and employee benefits.

Often, a privatization contract allows a municipality to shift

certain risks to the operating company. This can be agreed along with contractually-guaranteed long-term rates, operating costs, maintenance requirements, and capital improvements.

Private-sector water and wastewater firms also have specialists who stay current in safety, environmental and industry standards, and who can assume responsibility for compliance. In a situation where a city is facing a consent decree order or other compliance issue, the private water expert is on site to offer answers and to ensure that a facility operates within environmental guidelines.

Since municipal employees typically become employees of the private partner, their job conditions are an essential part of the terms of the contract. The best partnerships will provide personnel with career opportunities, job security, a range of benefits, ongoing training and a competitive compensation package.

A look at those municipalities which have taken the privatization option shows that the majority are happy with the outcome.

Until recently, legal and administrative problems were the twin hurdles facing privatization. But now, the federal government, the US EPA and many state regulatory agencies are advocating public-private partnerships and are working to ensure that smooth approval procedures are adopted.

Meanwhile many cities have created privatization models, which provide preferred procedures and minimize administrative costs.

The public-private partnership model appears to offer everyone the best of all worlds.

Honouliuli Water Reclamation Plant

This $140M public-private partnership between Honolulu and USFilter stipulates that USFilter design, build, finance, own and operate a water reclamation plant for 20 years.

The city’s water reclamation project involves the plant accepting up to 13M gallons per day (GPD) (49.2Ml/d) of secondary effluent to produce 12MGPD (45.42Ml/d) for reuse. USFilter guarantees the performance and maintenance of the treatment facility and related equipment for the length of the contract. USFilter will also market and distribute the water to the city, as well as to commercial and industrial users.

The plant is the first reclamation facility on Oahu, and the largest in the Hawaiian Islands. “The partnership eliminates the need for our community to spend millions of dollars to build treatment facilities necessary to meet a federal consent decree. Secondly, it enables us to preserve limited potable water resources through the stringent treatment and reuse of wastewater,” commented Honolulu Mayor Jeremy Harris.

The new facility will employ multi-media filtration, microfiltration and RO processes to treat secondary effluent, which was previously discharged into the Pacific Ocean. These processes will generate two grades of water for reuse.

A high-quality water, called R0, will be treated by reverse osmosis and sold to power and petro-refining companies that operate at a nearby industrial park. A second grade, R1 water, will be treated by multi-media filtration and UV disinfection. The city will buy about 6MGPD (22.71Ml/d) of this grade water for irrigation, thus freeing up an equal amount of potable water for residential use.

To accomplish this, a number of USFilter products will be integrated. Zimpro Products’ Hydro-ClearRegistered filter system will handle the wastewater polishing. Memcor Products’ continuous microfiltration will remove particles and bacteria from the wastewater.

RO treatment – also provided by USFilter – will be utilized to create industrial boiler feed water. USFilter’s Distribution Group will provide approximately 24km piping system.

Local companies are also playing a part in the project, with plant design by GMP Associates and distribution design by Community Planning. RCI Environmental is providing design assistance for the plant and distribution system and Water Engineering Technology will assist with water tank design.

Atlanta-Fulton County WTP

The Atlanta-Fulton County Water Resources Commission (AFCWRC) entered a public-

private partnership with USFilter Operating Services (USFOS) and Khafra Engineering in 1990. The agreement, concerning the then-new Atlanta-Fulton County WTP, was for start-up and operations, and has been renewed twice, most recently in June 1999.

The raw water pumping station, raw water main and WTP supplies drinking water to more than 250,000 residents of Atlanta and northern Fulton County. Under private operation, the flow rate increased from 30 to 45MGPD, (113.55Ml/d to 170.325Ml/d) without any capital expenditures, and later to 56MGPD (211.96Ml/d). Today, with 20 employees, the private partners have operated and maintained the plant at 90MGPD (340.65Ml/d) since May 1998.

Since privatization, the citizens of Atlanta and Fulton County have seen water prices fall from 34.24c/gallon (9.04c/l) to 26.69c/g (7.05c/l), in 1998. In May 1999, that number dropped once again to 20.00c/g (5.28c/l). Reduced costs and increased finished water production means that Atlanta-Fulton County has saved more than $2.29M since 1994. The latest contract renewal proposes more savings for taxpayers, thanks to reductions in the cost of power, chemicals and overall operations.

The WTP has also won more than 12 operations, safety and staff awards including the ‘Best Operated Plant in Georgia’ award three times.

The facility is a conventional turbidity removal treatment plant using plate settlers and declining rate filtration with particle counters and turbidity meters at each filter. It includes a raw water pumping station on the Chattahoochee River, which is connected to the treatment facility by a 137.2cm raw water main.

Major process equipment includes raw water travelling screens, grit removers, pumps, reservoir, chemical addition/feed systems, meters, rapid-mix and flocculation chambers, declining rate filters, clear-well storage and finished water pumps. The facility’s appearance conforms to that of the surrounding upscale community.

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