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Mayors Water Council Summit Public Benefits of Partnering with the Private Sector

Mayors Water Council Summit Public Benefits of Partnering with the Private Sector Consideration of Concession/Leasing Approaches December 2, 2009. “Within the water and wastewater services industry, there are a few, very large…private sector companies that can

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Mayors Water Council Summit Public Benefits of Partnering with the Private Sector

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  1. Mayors Water Council Summit Public Benefits of Partnering with the Private Sector Consideration of Concession/Leasing Approaches December 2, 2009

  2. “Within the water and wastewater services industry, there are a few, very large…private sector companies that can provide contract operations and maintenance and support services…Through years of operating in a competitive private sector environment, not constrained by many public sector rules and procedures, these firms have developed and refined business practices that usually result in the lowest cost of service delivery.” - Association of Metropolitan Sewerage Agencies (AMSA) and Association of Metropolitan Water Agencies (AWSA), 1998

  3. A Concession is one form of a Public-Private Partnership Elizabethtown and Edison, NJ Lake Pleasant, AZ Seattle, WA Fillmore, CA Buffalo, NY; Foxboro, MA; Tampa, FL Jefferson County, MO Private PPP options Public

  4. Definition A transaction in which a private entity makes an up-front payment (or series of payments) for the right to operate municipal infrastructure assets on a long-term basis. Typically, the private entity occupies the premises under a lease matching the duration of the concession. Ownership of the assets remains with the municipality. At the end of the concession, control of the assets reverts to the municipality. Think of it as an O&M contract in which future savings and enhancements are “advanced” to the municipality.

  5. Revenue Post-Concession Revenue Enhancements Revenue Pre-Concession O&M Costs Pre-Concession Cost Savings O&M Costs Post-Concession Funds are “advanced” to Municipality Typical Municipal Water & W/W System $ Yrs

  6. Up-Front Concession Payment Factors • Margin Amount (O&M Savings; Revenue Enhancements) • Margin Growth (System Expansion; Inflation Factor) • Time Period (20-99 years) • Discount Rate (Concessionaire’s Return Requirements) Representative Range

  7. Attractions to Municipality • Significant up-front proceeds. • Transfer of revenue, construction/CapEx, operational and maintenance risk. • Integrated CapEx and OpEx planning may generate further efficiencies. • ‘Failure to perform’ addressable with municipality re-asserting control.

  8. Overview of Infrastructure Asset Classes

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