Page 92 - Urban water supply handbook

IMPROVING URBAN WATER INFRASTRUCTURE THROUGH PUBLIC-PRIVATE PARTNERSHIPS

IMPROVING URBAN WATER INFRASTRUCTURE 3.11

In most public-private partnerships, the regulatory burden for meeting environ-
mental mandates falls to the private firm. Compliance with EPA standards is often
guaranteed by private firms through performance-based contracts. Cities such as
Atlanta and New Orleans that faced possible EPA sanctions were able to come into
full compliance through public-private partnerships. A major benefit cited by
some city officials is the peace of mind of knowing that their private partners have
responsibility for meeting compliance standards. 25

3.4.4 Improved Performance
Along with meeting stricter regulatory standards, private firms can improve over-
all system performance and quality. Many cities are turning away from the tradi-
tional low-bid approach and seeking the “best value for the money” through
advanced bidding procedures. Atlanta officials used a two-tiered bidding process
that included a “best and final offer.”
City officials are also using performance-based contracting to ensure optimum
performance. Milwaukee’s incentive-laden contract for wastewater treatment is a
prime example—the contract set the permitted effluent discharge levels well
below the levels permitted by state regulators. Performance exceeded even the
more stringent level, earning the firm two $50,000 bonuses thus far.
In addition, private firms often invest in new technologies and computerization
at water and wastewater facilities, expenditures that many local governments find
26
difficult to make. Private contractors also provide increased training opportuni-
ties for employees, another area where municipal budget-cutters look for reducing
expenditures. Preventive maintenance plans that are common in many partner-
ships help to lengthen the useful life of existing assets and defer costs into the
future.

3.4.5 Lack of Political Will

It can be difficult for local officials to make the necessary investments in commu-
nity water systems. Water pipes and sewer mains are not visible and thus are eas-
ier for elected officials to ignore compared with expenditures for police and fire
services. In addition, in many municipalities, water and sewer rates do not ade-
quately cover the actual cost of providing services. Raising water and sewer rates
to cover operations and maintenance, as well as capital replacement, is a risky
move for elected officials.
Water and wastewater rates may increase under public-private partnerships but
not at the rate they would under municipal control due to operational efficiencies
and savings. In January 1997 Atlanta Mayor Bill Campbell estimated that his city
would have been forced to raise water rates 81 percent under continued municipal

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