Private management of water systems can pay off

Contracts can bring efficiency and new technology

OVER THE PAST few decades, a growing number of municipalities in Massachusetts and across the US have attempted to reduce costs by turning to private companies to operate their water, wastewater, and stormwater management systems. This has stirred up a debate over the pros and cons of what some refer to as privatization, with advocates arguing that private management of water systems is economically and environmentally advantageous, and opponents arguing the exact opposite.

But an important distinction to this debate has been lost amid the clamor, due in large part to the often misleading term privatization. While privatization may imply the transfer of ownership from a public utility to a private company, in most cases what’s actually taking place is a partnership; a private company oversees operations and maintenance but ownership and the ability to set rates remains in the hands of the public utility.

This partnership dynamic has a strong track record of addressing some debilitating issues affecting publicly owned and operated water systems.

Private water companies can enable municipalities to reduce maintenance and labor costs, realizing greater efficiencies from systems improvements. First and foremost, private companies enhance quality and safety by using advanced technologies and resources that are often beyond means for public systems. Private companies introduce sophisticated purchasing practices which enable economies of scale from higher volume purchases and increased bargaining power. Private companies also bring state-of-the-art technologies that improve efficiency and ensure consistent water quality.

Most cash-strapped municipalities have avoided the investments needed to upgrade eroding and outdated water infrastructures, and this has left them vulnerable to contamination issues, ruptures, and a variety of other problems. These neglected systems have made municipalities especially vulnerable to flooding at a time when research shows storms becoming increasingly destructive. In Massachusetts, there have been many success stories of municipalities that have partnered with private companies to oversee water and wastewater services, including award-winning projects in Lynn and Brockton that have been recognized by the Commonwealth for outstanding environmental quality.

Public-private partnerships have led to innovative financial structures in which third-party sources, such as union pension funds, invest in upgrades and capital improvements on behalf of municipalities. In many cases, the source of that financing is publicly and locally based, and not generated by private trading on Wall Street.

For instance, a decade ago, the Water Pollution Control Authority in New London, Connecticut, entered into a public-private contract with Veolia North America, eventually giving greater responsibility to the company for the operation of the city’s water and wastewater facilities. According to Barry J. Weiner, chairman of the water authority, private companies bring a range of resources and expertise that help public facilities keep up with advances in technology. And in New London’s case, Veolia has been diligent about inspecting and maintaining all systems so that potential problems are identified before they become serious or expensive to repair.

Last fall’s US National Climate Assessment report was the latest reminder that much of America’s already aging infrastructure –- including here in the Commonwealth — is being increasingly threatened by extreme weather.  As the region’s infrastructure continues to deteriorate, the impetus will be on local governments to combat current climate trends and minimize the damages.

According to the National Association of Water Companies, cities like Brockton and New London are among more than 2,000 municipalities across the US and Canada that have successfully partnered with private companies to provide quality water treatment services to the people they serve. More than 93 percent of public-private partnership contracts are regularly renewed, with private companies safely maintaining more than 500 plants and 100,000 miles of distribution pipes across North America.

These communities have recognized that partnerships offer the best opportunity to invest in aging utilities and prepare for the climate challenges looming on the horizon.

Meet the Author
Bill DiCroce is president and CEO of Veolia North America, which is headquartered in Boston and provides contracted water and wastewater services to municipalities across the US and Canada.