Public-private partnerships allow parties to share risks associated with investments in technology
Public-private partnerships (P3s) continue to become more popular, leveraging strengths of all parties while sharing the associated risks. W&WD Associate Editor Amy McIntosh asked Michael Deane, executive director of the National Association of Water Companies, about current trends in P3 financing and how recent legislation may impact the future of these collaborations.
Amy McIntosh: Why is public-private collaboration in the water industry important?
Michael Deane: To respond to the nation’s water infrastructure challenges expeditiously will take the best of both the private and public sectors. The private sector has unique strengths, operational acumen, new capital financing approaches and technology that can support the public sector. We believe a better and more productive paradigm is for the public and private sectors to collaborate and solve problems by sharing in the risk and opportunity—to mutual benefit. That’s the power of a strong partnership.
McIntosh: How can public-private partnerships help utilities overcome common water challenges?
Deane: It starts with transforming the way we think about solutions to the challenges we face in water quality, system reliability, sustainability, operational efficiency, capital outlay and creating a new generation of water professionals.
Integrated solutions are needed and the status quo is not acceptable. Today’s water challenges are pervasive and complicated. No one answer solves all problems the same way.
It’s also important to determine the best solution on a community-by-community basis with less preoccupation on the traditional business and operating models. The private sector was born out of an entrepreneurial mindset, which depends on sustained performance with accountability to survive and thrive. This attitude has led to new technologies, improved processes, improved water quality, strategic approaches to conservation and creative financing.
McIntosh: What are some current trends happening in public-private partnerships?
Deane: There has been a shift in public-private partnerships from focusing only on operational efficiency toward the right blend of capital investment and shared risk. This is a healthy and timely transformation as communities are starting to express more interest in capital investment.
Desalination plants are emerging, and, while not a mainstream technology, coastal communities recognize that public-private partnerships can make these projects a reality in a more expedient way.
The water-energy nexus is giving rise to the necessity of public-private partnerships. According to the U.S. Department of Energy, we can no longer assume the future is like the past in terms of climate and technology. Water scarcity, variability and uncertainty are becoming more prominent, with the potential to adversely affect the U.S. energy system. It is time for a more integrated approach to address the challenges and opportunities of the water-energy nexus, and
public-private partnerships will be an emerging priority.
While there can be risk in using emerging cutting-edge technologies, the public-private partnership approach can reduce the risk assumed by the public sector partner while still applying those technologies. Technology-based solutions are more complex and likely to require more capital outlay. Private water utilities also are able to help the public sector derive tailored solutions.
McIntosh: How do you see legislation, such as the Water Infrastructure Finance and Innovation Act (WIFIA), impacting the future of P3s?
Deane: The WIFIA program is a step in the right direction and the U.S. Environmental Protection Agency (EPA) has the opportunity to structure WIFIA in a meaningful way to facilitate and encourage P3s. In addition, other legislative proposals, such as exempting water projects from the private activity bond volume cap and the Obama administration’s recent proposal for Qualified Public Infrastructure Bonds, would further increase the options for communities to finance partnerships.