 Problems Facing Municipal
Owners |
| Solutions Provided by
Private Operators |
| Forms of
Privatization – Examples |
| Water Company Revenues |
| Employee Concerns |
| Decision Making |
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The Future of Metro Water Services
Privatization of Water and Wastewater Utilities
Prepared by the
Metropolitan Government of Nashville and Davidson County Task Force
September 21, 1998
Major Topics
| Problems Facing Municipal
Owners |
| Solutions Provided by
Private Operators |
| Forms of
Privatization – Examples |
| Water Company Revenues |
| Employee Concerns |
| Decision Making |
Problems Facing City Owned Utilities
| Excessive Costs to Operate |
| Excessive Investments Needed |
| High Rates to Users |
| Increasingly Stringest |
| Lack of In-House Expertise |
| Failing Infrastructure |
| Keeping/Expanding Specialized Work Force |
Why Privatize a Public Service
| USEPA Estimates: – $ 138 billion for water systems – $ 212 billion for wastewater systems |
| Reduce O&M Costs |
| Obtain Management Expertise |
| Cash and Debt Capacity Needed for Other Public Services |
Solutions Provided by Private Operators
| World Class Experts in all facets of the water and
wastewater industries |
| Access to latest technologies |
| Minimize costs of perators through effeciencies and
scale of procurements |
| Reduced and Stabilized Rates |
| Train and Develop specialized work force |
| Private operators accept responsibility for regulatory
compliance and liability |
| Accountability and guarantees |
| Defined Quality Standards and conctractural obligations |
| Debt Restructuring |
| Asset Management |
Alternative Forms of Ownership and Operations
| Regulated Public Utilities |
| Long-Term Concessions & Leases |
| Contract Operations – Design, Build and Operate (DBO) – Build, Own, Operate and Transfer (BOOT) – Operation and Maintenance |
Examples of Recent Projects
| Buffalo, New York – City retains ownership – $4.6 million annual savings to City – Stable rates – $15 million per yer capital investment |
| Seattle, Washington – Tolt River Water Filtration Plan – 120 MGD direct filtration facility – 25-year Agreement – $70 million savings to City |
| Atlanta, Georgia – Bid Contract Operations – Reduced budget from $49.5 million to $21.8 million – No staff reductions for 3 years |
Regulated Public Utility
| Private investment used to meet an essential public need |
| Regulated enterprise – Tennessee Regulatory Authority – Tennessee Department of Environment and Conservation |
| Owner/Operator approach to captial planning |
| Eliminate inter-governmental friction over water and wastewater issues |
| Property and franchise taxes benefit local community |
| Utility assumes all liability and compliance risks |
Management Service Agreements
| Allows City to keep its assets and staff |
| Operator provides a management staff and specialized
experts as needed |
| Fixed fee arrangement similar to hiring a Consultant |
Contract Operations
| City maintains ownership |
| Can be structured to protect employee positions, salaries
and benefits |
| Guaranteed Savings to City |
| Shifts compliance standards to Operator |
| Operator is accountable for all services, quality and
performance |
Long Term Concessions
| Inlcudes O&M of distribution and collection systems
and treatment facilities |
| Billing and Collection |
| Capital Improvement Program |
| Up-front concession funds |
| Guranteed costs and savings to City |
Industry History
| Private ownership of water utilities dates to 1860's |
| Contract Operations are at least 50 years old |
| There are approximately 1,000 US water utilities |
| At least 31% of major US cities are considering some form
of public-private partnering |
Financial Depth of Operators
| Major Private Operators are all traced to large water
companies world-wide |
| Assets exceeding $10 Billion is common among parent
companies |
| Revenues are generally near or exceeding $1 Billion
annually |
| Provides financial stability and guarantee performance |
IRS Regulations
| Tax Exempt status of municipal bonds snce 1986 Reform Act |
| Private Operation of tax exempt assets limited to 20
years |
| IRS permits conversion to private activity and retention
of tax exempt status if bonds are defeaed to earliest call or final maturity |
Current Size of Private Water/Wastewater Operations
| Transformed structure strengthens employees'
responsibility to quality |
| Broadens career opportunities |
| Smooth transition plan |
| Enhanced training and development |
| Empower worker's ability |
| Must address basic policy questions |
| Critical review of the facts |
| Thorough assessment of future needs |
Moving Forward
| Define the roles of government and the private sector |
| Develop a request for qualifications |
| Issue a request for proposals |
| Accept bids and award |