Page 87 - Urban water supply handbook

IMPROVING URBAN WATER INFRASTRUCTURE THROUGH PUBLIC-PRIVATE PARTNERSHIPS

3.6 HISTORY, PLANNING, OUTSOURCING

3.3.1 Water

According to the Environmental Protection Agency (EPA) approximately one-
third of drinking water systems nationwide are private regulated utility systems. 4
Also, 15 percent of urban water utilities are regulated investor-owned companies. 5
Of those that are publicly owned, few contract operations and maintenance with
private firms. A 1997 International City/County Managers Association (ICMA)
found that 5.7 percent of responding cities nationwide privatize water distribution
6
and 3.7 percent contract water treatment. Few state sources of data exist on lev-
els of privatization. One of the few, a 1995 survey of Illinois municipalities,
reported that 5.1 percent of responding cities contract for water distribution and
7.9 percent contract for water treatment. 7

3.3.2 Wastewater

There are fewer sources of information regarding the extent of wastewater public-
private partnerships. A 1994 article reported there are approximately 40 large
facilities [greater than 10 million gallons per day (mgd)], 350 midsized facilities
(1 to 5 mgd), and 1000 small plants under some form of contract management in
8
the United States. In the ICMA survey, 6.2 percent of responding cities have pri-
9
vatized wastewater collection and treatment. The Illinois survey showed that 3.9
percent of municipalities reported contract operations for wastewater collection
and 6.5 percent for wastewater treatment. 10

3.3.3 Trends
Several recent reports indicate that the amount of privatization is increasing and
will continue to grow in the future. A survey of selected firms in the water indus-
try by Public Works Financing revealed that the municipal contract operations
11
market increased 16 percent in 2000. Although the rate of increase was down
from the previous year, it still indicates an upward trend in water privatization.
Contract operations have been increasing as much as 25 percent annually. 12 In
2000, Moody’s Investor Service also predicted more privatization, saying that
“public policymakers will turn to the private sector for financial, technical, and
operating assistance when the municipal water system receives reliable and rea-
sonably priced services.” An analysis of ICMA survey data shows that water dis-
tribution was one of the municipal services with the largest increase in
13
privatization between 1988 and 1997. Finally, a 1995 Illinois survey of cities of
more than 5000 showed that wastewater treatment is among the services most
likely to be considered for privatization in the future. 14
Since the new IRS regulations were announced in 1997, numerous cities, large
and small, have entered into long-term water and wastewater contracts. The size

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