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Sugar Land Mayor Wallace Promotes "Metro Agenda 2004" at National Council for Public/Private Partnerships Water Conference

By Rich Anderson
September 13, 2004

Sugar Land (TX) Mayor David Wallace delivered a keynote speech on August 19 in Austin (TX) at a conference entitled "Partnerships for Water Infrastructure". The conference was sponsored by the National Council for Public Private Partnerships (NCPPP), the Texas Water Development Board and the Texas Municipal League. Wallace stated, "This is a great opportunity for all three of these fine organizations to stand shoulder to shoulder, in an effort to tackle extremely important issues relative to our aging infrastructure."

Wallace told attendees and participants about the U.S. Conference of Mayors Metro Agenda for 2004. He stated that the goal of the Metro Agenda is to focus efforts to achieve improvements in four priority areas. According to Wallace, "Water related issues touch all four of the Agenda's priority areas, jobs and public/private partnerships; smart investment in new infrastructure; public safety and homeland security; and improving the intergovernmental partnership by limiting unfunded mandates and cost shifts to local government." These goals, he stated, were also consistent with many of the goals of NCPPP. Wallace stated, "This conference gave us an opportunity to articulate the Mayors '04 Metro Agenda to many people that are deeply involved in the service delivery process."

He provided some details on how the Conference of Mayors is approaching these priorities. One example the mayor used is tax incentives. Wallace said this approach fosters private investment in modern infrastructure development including transportation and water projects. Another example is modernization of infrastructure financing and establishing creative public/private partnerships to help finance major projects in areas such as water and wastewater.

Wallace focused on the American Society of Civil Engineers' infrastructure report that gave a "D" grade to the state of water and wastewater infrastructure in the United States. He pointed out that infrastructure investment is at a critical crossroad: 54,000 drinking water plants are rapidly aging and there is an $11 billion annual shortfall in rehab and replacement spending; 16,000 wastewater treatment plants are facing a $12 billion annual shortfall in funding. Overall, EPA estimates a $534 billion shortfall in water infrastructure investment over the 20-year period 2000-2019.

Against this gloomy outlook, Wallace offered encouraging words regarding the demonstrated ability of local government to harness private sector expertise to achieve quality services and cost savings in water infrastructure. He discussed how these public benefits can be obtained through short and long-term service contracts more commonly referred to as water partnerships. In addition to water partnerships, Wallace discussed design-build-operate (DBO) water partnerships. This approach offers cost savings on operation and maintenance of water and wastewater plants, and can realize lower levels of capital spending without compromising quality or quantity of service, Wallace said.

Wallace provided some examples of successful public/private partnerships. Cranston, Rhode Island entered into a wastewater treatment plant partnership with a private operator. The system services 71,000 people. The partnership is estimated to save the City $74 million over 25 years. It reduced capital spending to meet compliance upgrades by $40 million. It has also provided stable rates for sewer service, with increases pegged to the consumer price index (CPI). Another example involved Oklahoma City where three wastewater treatment plants with a combined volume of 75 million gallons per day are now operated by a private company. The partnership is estimated to save the city $150 million over 18 years. It has solved a sludge-odor problem that had been difficult to manage in the past. The partnership also saves the city $85,000 annually via a biosolids recycling program.

The mayor discussed the linkage between infrastructure modernization and tax incentives. He said that private activity bonds (PABs) can be a potentially powerful tool for providing water infrastructure investments. Currently, the federal tax code allows the use of PABs for water and wastewater investment, but their use is limited because of state volume caps. Under this situation, water infrastructure investment competes with financing for many other forms of local government infrastructure. Lifting the volume caps for water and wastewater facilities could go a long way to bridging the current "gap" documented buy the US EPA.

In closing, Wallace reemphasized the need for local governments to examine the potential benefits of public/private partnerships in facing the challenges that lie ahead in critical areas touched by water/wastewater infrastructure, operations and services.