CONNstruction - Winter 2011 - (Page 13)

newsandviews The Potential of Public-Private Partnerships in Water and Wastewater Projects By John W. Butts AGC Executive Director Last October, during its special session on jobs, the Connecticut General Assembly passed a comprehensive bill providing for a number of initiatives aimed at creating jobs in the state. A key part of House Bill 6801 was a provision authorizing the use of public-private partnerships (P3s) as a way to move certain public construction projects forward that would otherwise not be possible under traditional forms of public funding. P3s have been utilized in a variety of ways and have achieved varying degrees of results all around the world, but until now, never had they been specifically authorized by the state for certain infrastructure projects. Now that they are authorized, it will be interesting to see what state officials have in mind in terms of their actual use. The Government Accountability Office (GAO) defines a public-private partnership as a “contractual agreement formed between public and private sector partners which allows more private sector participation than is traditional. These agreements usually involve a government agency contracting with a private company to design, renovate, construct, operate, maintain, and/or manage a facility or system. While the public sector usually retains ownership in the facility or system, the private party will be given additional (often total) decision-making rights in determining how the project or task will be completed.” Traditional uses for public-private partnerships cover the spectrum of construction project types – from highways to bridges to schools to government facilities, and even water and wastewater projects. Although there are many criteria for determining if a P3 is feasible or desirable, what brings a private company to the table first is a project’s potential to generate a long-term revenue stream. A good example of the application of a P3 in a water construction setting can be found in El Paso, Texas, in 1999. Because it was not meeting minimum government guidelines, the county water authority engaged in an agreement with a private company. The company agreed to build a new water resource system to provide potable water to 16,000 residents near El Paso. It further agreed to fund and build the project on behalf of the Authority and put the amortized cost of the facility into a 20-year leasepurchase agreement tied to a new 20-year operations and maintenance contract. Construction was completed in late 2000, and the plant was put in to service in early 2001. Today, it provides water that is about 35 percent cleaner than required and about 24 cents per 1,000 gallons cheaper than the U.S. average for treated water. Let’s take the wastewater industry. As with water authorities around the country, municipal and county sewage authorities struggle with meeting federal-mandated environmental requirements in a cost-effective way. The Federal Clean Water Act imposes heavy fines on municipalities that fail to comply with effluent requirements. The ability to meet environmental standards requires constant and sophisticated employee technical training and large capital outlays. Hoboken, N.J., had such a problem. Its sewage treatment plant was in a state of disrepair and the district faced millions of dollars in fines for being out of compliance with federal standards. They brought in a highly reputable, national company to operate the facilities and, ultimately, the collection system. In less than three months, the plant was operating in full compliance with all environmental regulations. The partnership did not harm the public interest, as is often alleged by opponents. The sewage authority’s assets, the treatment plants and pump stations, and rate-setting and overall policy direction remained with the government-appointed Board of Commissioners. Responsibility, however, for compliance with all federal and state environmental regulations was shifted to the private company, and any fines for being out-of-compliance were paid by it – a strong incentive to meet permit requirements. Long-term contracts provided stability for local employees, for the authority, and for the private operator. Many opponents to P3s fear such arrangements compromise the public interest, do not save money, and enrich private corporations. However, given the right conditions, when steps are taken to properly protect the public interest and when risks are allocated fairly to the private entity, public-private partnerships can work to everyone’s advantage. As Connecticut looks to utilize P3s as one of the tools to address our infrastructure deficit, it is vital that not only Connecticut, but all governments look to P3s as a supplement to, and not a replacement for, public investment in U.S. infrastructure. CONNstruction / Winter 2011 / 13

Table of Contents for the Digital Edition of CONNstruction - Winter 2011

Is Water Affordable?
Water Infrastructure Projects Will Help Return the Construction Industry to Prosperity
FASB Backs Off, Requiring More Rigorous Withdrawal Liability Disclosures
The Potential of Public-Private Partnerships in Water and Wastewater Projects
Working Together
Pour It On
The Name Says It All
Momentum Achieved on MDC Clean Water Project
2011 AGC of CT Industry Recognition Awards & Dinner
CCPC Annual Picnic
YCF September Meeting
The Diggers Mixers Fixers Annual Golf Outing
CEUCA Fall Luncheon

CONNstruction - Winter 2011