Faced with aging infrastructure and high employee costs, cities are looking to privatization, public/private partnerships or consolidation for infusions of capital and to reduce operating costs and risk.

Demographics are a moving target. And with municipal revenues struggling more than ever to meet their residents’ needs, one option that’s on the table is the privatization of wastewater facilities.

Michael Healey, chairman of the Water Resources Management Committee for the American Public Works Association, has 42 years of experience in the field. The knowledge he’s acquired makes him think that municipal wastewater is still a pretty hard nut for private wastewater companies to crack.

“On the water side, it’s fairly common. With wastewater, with the exception of underserved communities, it’s far less so,” he said in March.

It’s not easy for wastewater companies to offer a better deal to municipalities or government entities because the latter has been in the game for so long — a fact that
also means they’ve been able to adjust rather quickly to the regulatory burden of the Clean Water Act, and were often accessed grant money to do so, he added.

But that scenario may be changing.

The federal government did prop up municipal wastewater management during the ’70s, ’80s and ’90s. Even rural communities with fewer than 3,000 residents could apply for part of more than $50 million in low-interest loans to upgrade and update their wastewater treatment plants and projects. That money is no longer available, though, and the infrastructure of systems across the country are aging to the point that they require another shot in the arm — which isn’t likely to come.

The challenges of addressing the needs of populations that abandon one neighborhood and sprawl in another, in the face of skyrocketing infrastructure costs and frozen or falling tax revenue are obligating more and more cities to consider privatization. Keeping wastewater
treatments manned and the facilities upgraded at a rate that keeps up with that growth can make private ownership or partnership attractive, and employee costs and contract negotiations alone can make the option worth a look.

Jessica Knight of the National Association of Water Companies concurs. Even though fully-privatized municipal wastewater treatment plants only comprise 20 percent of all plants in the country, privatization can also take place in the form of a public/private partnership that allows the city to divvy up the risk while maintaining control of the management of the plant. Among the systems that are privately owned and operated, she notes, most are very small operations.

Is consolidation the wave of the future for struggling municipalities? It’s worked for other public services.

Private wastewater treatment companies work with enough municipalities to be able to manage a system efficiently, usually more efficiently than a mid-size or small town. They also tend to have access to more funding sources, which translates
into more opportunities for capital improvements, and are extensively versed in EPA requirements and other efficiencies such as staff training, management, technology and staffing levels, Knight noted.

“Private companies don’t even want cities to do something that’s not in their best interest. So if, for whatever reason, they’re not comfortable, it doesn’t happen,” Knight said. “It was to be a win-win.”

Cities as large as Indianapolis, Ind.; Cranston, R.I.; New Orleans, La.; and Schenectady, N.Y., have embraced the option of private management or public/private partnerships.

But Healey recommends that cities facing insurmountable wastewater issues instead consider an alternative: consolidation with a nearby water treatment facility.

Fall River, Madison and Columbia County, Wisc., looked at privatization last year because of increasing employee and chemical costs and their inability to purchase supplies on a larger scale, he said. Instead, they built a forced main and created one infrastructure.

“Given the number of plants that have cropped up and their proximity to each other, before you put dollar one down I would look at consolidation. Permit costs, regulatory costs are extremely high,” Healey noted. “I think the future is really in shared resources. We’ve done it in the educational field for years … we’ve done it with sharing equipment between cities. This is the next frontier.”

By JODI MAGALLANES
The Municipal