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As Water Infrastructure Crumbles, Many Cities Seek Private Help
March 30, 2016
By Mindy Fetterman for Stateline, an initiative of The Pew Charitable Trusts.
WOODBURY, N.J. — As city councilors here discussed the local water system recently, Summer Smith, a homeowner, rose to ask a question: “Can you explain in plain English what ‘emergent water conditions’ means? It sounds kind of alarming.”
David Trovato, the council president, acknowledged that any hint of a water quality emergency “would scare the hell out of me, too.” But there is no emergency in Woodbury.
New Jersey has designated Woodbury’s water system as “emergent” because it can’t meet the need for water at peak demand times. So this town of 10,000 across the Delaware River from Philadelphia is considering selling its water system to a private company.
Woodbury isn’t alone.
More than 2,000 municipalities have entered public-private partnerships for all or part of their water supply systems, according to the National Association of Water Companies, which represents private water companies like Veolia North America and American Water. Partner municipalities include San Antonio; Akron, Ohio; and Washington, D.C. Miami-Dade County is considering partnerships for three water facilities, including one built in 1924. And Wichita, Kansas, is starting to study the issue.
The water crisis in Flint, Michigan, where old pipes leached out lead into water supplies, has raised new worries that cities aren’t keeping up with maintenance and improvements.
Maintaining, operating, replacing and upgrading the nation’s water infrastructure could cost $2.8 trillion to $4.8 trillion through 2028, according to the U.S. Conference of Mayors. The American Water Works Association estimates that replacing and expanding water pipes alone would cost $1 trillion through 2035. And the American Society of Civil Engineers gives U.S. water infrastructure a D grade. Greg DiLoreto, past president of the ASCE, estimates that systems nationwide would need $84 billion in improvements by 2020 to get to a B grade.
Some cities are turning to private industry for help.
“There’s a desire to bring more private capital into the water world,” said Diane VanDe Hei, executive director or the Association of Metropolitan Water Agencies, which represents the largest municipal water utilities in the country. “Money is needed for aging infrastructure, for treatment plants, for pipes. The more money you can make available, the more you can do.”
Public-private partnerships (known as P3s) take many forms. Companies can take over maintenance and operation of an entire system, or parts of it, for a large one-time fee plus future profits. Or the companies can design, build and operate a new water and wastewater treatment plant, for instance. P3s have been used for years in transportation, but are relatively new in water.
Lead, Storm Water and People
A recent USA Today analysis of data from the U.S. Environmental Protection Agency found that nearly 2,000 water systems across all 50 states have lead levels in excess of federal limits. Lead can cause developmental damage, particularly in children.
Municipalities with little money, like Flint, can’t afford to improve their systems, or issue bonds to finance improvements because their bond rating is so low. They’d have to pay higher interest rates on that debt. In the case of Flint, the city chose to switch water sources from the Detroit River to the Flint River to save money, and then didn’t properly treat the water to avoid lead leaching from old lead-lined pipes.
But even cities that are not in financial difficulty are choosing to sell some or all of their water systems. Miami-Dade County Mayor Carlos Gimenez said he “doesn’t want to operate anything,” and has opened the door to public-private partnerships for water and other services.
Cities also are facing other water-related problems, such as how to keep storm water from overwhelming wastewater treatment plants and slopping untreated sewage into rivers, streams and the ocean. Rising sea levels and rapid population growth will compound the challenges.
But governments are spending less on water infrastructure when they should be spending more, says Bill Reinhardt, editor of Public Works Financing, a newsletter that follows the industry.
The Congressional Budget Office reports that capital spending on new construction and major rehabilitation projects for water utilities is falling, as are federal grants. Capital spending by state and local governments hit $33 billion in 2014, down 23 percent from $42.7 billion in 2009, in inflation-adjusted numbers. And federal spending on grants and loans fell to $3.4 billion in 2014, down 35 percent from $5.3 billion in 2011.
Mayors are worried.
According to a 2015 survey by the U.S. Conference of Mayors, mayors of cities larger than 30,000 said their No. 1 concern was underinvestment in infrastructure. Their top need was mass transit (22 percent), followed by roads (20 percent) and water, including wastewater and storm water (18 percent).
“It takes a big thing like Flint to get people to worry about water,” said Todd Herberghs, executive director of the National Council of Public Private Partnerships in Washington. “Roads they see; roads they use. But water? People really take it for granted. People see it as cheap and just, well, just there.”
Water is ‘Touchy’
Water partnerships can be controversial.
Residents often are concerned about losing control over water supplies, and fear that a private company will impose rate increases without voter input. Food & Water Watch, a nonprofit in Washington, opposes P3s because, it said, they don’t result in cost efficiencies and can be more expensive for consumers than public systems. For their part, unions are concerned about protecting city workers’ jobs.
But DiLoreto, the former ASCE president, said rate increases are inevitable, with or without partnerships. DiLoreto said many years of insufficient spending on infrastructure has put cities in the position they are in today.
The average monthly water bill jumped 6 percent in 2015 and 41 percent since 2010, according to a survey of the nation’s 30 largest cities by Circle of Blue, a nonprofit research firm focused on natural resources. Atlanta, which has a publicly run system after experimenting with a private partnership, has the nation’s highest combined monthly water-sewer bill at $325.52 for a family of four.
Despite those increases, more rate hikes for consumers will be necessary to pay for improvements, DiLoreto said. Americans will pay hundreds of dollars a month for cellphone and cable TV service, but expect water and sewer rates to be much lower, he said. That’s because water bills have been kept artificially low by local governments under pressure from the public, he said.
“You and I have to decide that having clean, safe drinking water is important,” he said. “And we have to be willing to pay the money to get that done.”
Richard Anderson, senior adviser to the U.S. Conference of Mayors’ water council, said cities need to consider partnerships because the costs for infrastructure improvements are so high that some cities would go bankrupt trying to pay them.
“We allow water to be operated as a monopoly by local governments,” Anderson said. “People go to rate meetings and the nun gets up and says: ‘Rain is free. Why are we paying so much?’ Well, go out and catch it. You’re not in Ethiopia! You’re not going to take a bucket down to the river and get dirty water. It’s very hard for the public to understand why you have to pay so much for clean water.”
In Woodbury, City Councilor William Fleming tried to reassure the 25 or so citizens at the meeting that selling Woodbury’s water system isn’t a done deal. There will be public hearings for citizen input, he said, and months of discussion and study.
“Up until the very last minute we can always say no,” Fleming said.
This article originally appeared on the Stateline website. Stateline is an initiative of The Pew Charitable Trusts.
Veolia has named William J. “Bill” DiCroce as the new president and CEO of Veolia North America succeeding succeeds Terry Mah, who served as the company’s CEO since 2013 and now leads business development activities in the Americas as senior vice president for Veolia’s Global Enterprises group.
DiCroce is a 32-year veteran of the energy and environmental industries, including 20 years in the nuclear industry. He previously served as president and chief operating officer of Veolia North America’s Municipal and Commercial business. Prior to the consolidation of Veolia’s water, energy and waste businesses in 2013, DiCroce served as president and CEO of Veolia Energy North America, following his successful four-year role as the company’s executive vice president and chief operating officer. He joined Veolia in June 2008.
“More than ever, our services can make a very real difference for cities, campuses, companies and other organizations looking for environmental services and resource solutions – whether it’s managing, conserving and recovering energy or water resources for cities or helping a refinery with their operations or with a critical turnaround,” said DiCroce. “I’m very excited to be leading so many talented environmental professionals throughout the United States, Canada and the Caribbean, and I look forward to building a dynamic future for our team and for the customers we serve.”
Read the full press release online.
NAWC is proud to sponsor UIM’s second annual Water Finance Conference August 30-31 in Denver.
The two-day conference is aimed at reaching executive-level utility representatives, consultants and finance professionals involved in the fields of water, wastewater and stormwater.
The conference agenda will feature presentations and panel discussions covering a range of topic areas, including: trends in public utility financing; traditional sources of funding for water infrastructure; private financing; private capital investment for public utilities; rate setting; affordability issues; leveraging Clean/Drinking Water State Revolving Funds; new water financing tools; emergency funding; and funding for drought-related projects.
The 2016 Water Finance Conference will be held at the Denver Athletic Club in downtown Denver, Colorado, conveniently located near hotels, restaurants and popular attractions, including the 16th Street Mall and Colorado Convention Center.
Additional information will be available on the conference website, www.waterfinanceconference.com in the coming weeks.
To shine a light on great one water leadership, the US Water Alliance annually awards the US Water Prize. The Water Prize is a first of its kind program and recognizes outstanding achievement in the advancement of sustainable solutions to our nation’s water challenges.
Nominations are open and the deadline for nominations is March 1, 2016.
Any United States-based organization is eligible to win. Government agencies, utilities, private companies, non-profit organizations, educational institutions, coalitions, and others that have a demonstrated track record of moving one water solutions forward may be nominated.
Past winners of the US Water Prize have included a wide range of public, private, and non-profit water leaders, each making unique and transformative contributions to one water management. 2015 winners included Coca-Cola, the City of San Diego, and the Electric Power Research Institute. Additional details about the selection process can be found here.
For questions or additional information, please contact Hope Hurley.
Pennsylvania American Water has announced applications are being accepted for its 2016 Stream of Learning Scholarship Program to provide financial assistance to high school seniors who are planning to pursue careers in the water and wastewater industry.
The program was established to support outstanding students living in Pennsylvania American Water’s service territories who are charting a course of study in specific fields, ranging from engineering to environmental science, which are crucial to the water and wastewater business.
The company will award 10 scholarships of $2,000 each to students selected through the program’s application process. Applicants must meet the following criteria:
• Students must currently live in one of Pennsylvania American Water’s service areas. (Students can attend college outside of the company’s service territory.)
• Students must plan to attend a two- or four-year college or technical school.
• Students must plan to study environmental science, engineering, biology or chemistry.
“Now in its seventh year, our Stream of Learning Scholarship Program is helping attract extremely bright, dedicated students who have much to offer for our industry’s future,” said Kathy L. Pape, president of Pennsylvania American Water. “We believe it’s important to inspire and support talented young people who share our commitment to maintaining public health, protecting the environment and promoting economic development.”
Winners will be selected by a panel of judges and will receive their awards in May. Family members of Pennsylvania American Water employees are not eligible.
Applications can also be downloaded from the company’s website at www.pennsylvaniaamwater.com and must be postmarked by March 21, 2016.
The U.S. Environmental Protection Agency (EPA) has released a survey showing that $271 billion is needed to maintain and improve the nation’s wastewater infrastructure, including the pipes that carry wastewater to treatment plants, the technology that treats the water, and methods for managing stormwater runoff.
“The only way to have clean and reliable water is to have infrastructure that is up to the task,” said Joel Beauvais, EPA’s Acting Deputy Assistant Administrator for Water. “Our nation has made tremendous progress in modernizing our treatment plants and pipes in recent decades, but this survey tells us that a great deal of work remains.”
Adequate wastewater infrastructure plays a vital role in the health of streams, rivers, and lakes, where discharged wastewater and stormwater runoff often end up. Wastewater infrastructure must also become more resilient to the impacts of climate change, including sea level rise, stronger and more frequent storms, flooding, and drought.
Wastewater infrastructure improvements also support healthy economies. Construction projects create good-paying jobs, and where new facilities are built, workers are needed to operate and maintain them. Upgraded infrastructure results in cleaner water, which is essential for many businesses and sectors of the economy.
The average American receives a much higher level of wastewater treatment today compared to when the Clean Water Act was passed in 1972. Between 1972 and 2012, the U.S. population receiving secondary treatment increased from about 75 million to 90 million, and the population receiving advanced treatment increased from 7.8 million to 127 million. Over the same period, the population receiving less-than-secondary treatment decreased from almost 60 million to 4.1 million. This has resulted in dramatic improvements in the waterways receiving discharges from these treatment plants.
The $271 billion is primarily for projects needed within five years.
The full press release is available on the EPA website.
Aqua America has announced Karen M. Heisler as senior vice president and chief human resources officer. Heisler comes to Aqua America from UGI Utilities, Inc. where she was vice president of human resources and administration since 2012.
As chief human resources officer for Aqua America, Heisler will lead a department of more than 20. She is charged with attracting and retaining the talented people who will work to keep Aqua America in a leadership role in the utility industry. Heisler will lead the effort to ensure that Aqua America’s more than 1,600 employees receive the professional development and training opportunities to ensure they are part of a world-class workforce. Heisler will also have responsibility for employee benefits, compensation, and labor relations for Aqua America’s 14 local bargaining units.
“Our employees strongly believe in our mission and Karen will bring a unique set of experiences to Aqua that are important in our efforts to continuously evolve and improve our corporate culture. I have elevated the position of CHRO to report directly to me so that I can work with Karen to foster a culture in which all employees are valued and developed,” said Aqua America President and CEO Christopher Franklin. “Karen will be a welcomed addition who further rounds out an already strong senior leadership team. We’ll work together to leverage the comprehensive experience and perspective Karen has gained from working in a variety of other industries.”
Read the full press release online.
The National Association of Water Companies (NAWC) is pleased to announce that Grace Soderberg has been named as its new director of regulatory affairs.
Soderberg comes to NAWC with more than ten years of utility experience on critical energy and environmental issues. Prior to joining NAWC, Soderberg served as manager for regulatory affairs at PEPCO Holdings Inc., one of the largest energy delivery companies in the Mid-Atlantic region. She has also served as director of energy supply for the Edison Electric Institute and assistant general counsel for the National Association of Regulatory Utility Commissioners (NARUC).
“We are very excited to have Grace join our team,” said Michael Deane, NAWC executive director. “Her expertise on regulatory issues is well known and highly regarded throughout the industry, and we are fortunate to have such a strong advocate representing us before policymakers.”
In cooperation with NAWC members, Soderberg will lead the organization’s efforts to advance critical issues for the water and wastewater industry both at the state and national levels through direct engagement with individual state commissions and with NARUC. Her long-standing relationships with key stakeholders across utility sectors, such as electric, gas, and telecommunications, will facilitate meaningful collaboration and strategic alliances.
Soderberg is a graduate of Baruch College and Vanderbilt University School of Law as well as an LL.M. candidate at the George Washington University Law School.
NAWC congratulates Valoria Armstrong on being named president of Tennessee American Water Co., effective next Wednesday.
In her new role, Armstrong will be the principal executive for Chattanooga’s biggest water utility with 103 employees and serving 374,000 customers in Tennessee and northern Georgia. Armstrong joined Tennessee American in 2011 and most recently worked for the utility’s parent company, American Water, in St. Louis.
“American Water is very pleased to have Valoria return to her home state to lead our operations there,” Walter Lynch, president and chief operating officer of American Water’s regulated operations, said in a statement. “She will build on the great work that Deron has done and I know her commitment to delivering excellent customer service along with her passion to build community relationships will make her a great fit for the Volunteer State.”
She replaces Deron Allen, who was named president of Indiana American Water, an affiliate of Tennessee American Water.
The full press release is available online.
During the last 100 years, the water industry has done such an effective job of invisibly and reliably delivering drinking water to the tap at a reasonable cost that we inadvertently diminished the value of the water systems that deliver it.
Today’s homeowners, businesses and industries should expect, but not take for granted, that their tap water is clean, safe and readily available for drinking, cooking, bathing, firefighting, etc., 24 hours a day, all year long. Water saturates every aspect of our life and it stands to reason that the systems that deliver water are as valuable as the water itself.
NAWC’s new video titled, “Water. An Essential Element to Life.” was created to communicate the value of water and the need for immediate, sustained investment in our nation’s water infrastructure. We encourage you to use the video in your outreach efforts to increase the public’s understanding of the value of water and the critical role of private water companies in solving today’s water challenges. The video can be accessed on NAWC’s website and YouTube page. Please email any questions or comments to Marybeth Leongini .
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