CONSIDER THE RESULTS:
These three public/private partnerships resulted
in major savings. The municipalities met their
environmental needs faster and more cost
effectively. Many other cities are also benefitting
from similar partnership arrangements that:
• Shorten construction time and lower
construction costs;
• Meet compliance ahead of schedule
and resume community growth:
• Reduce user fees by 10 to 20 percent
compared to traditional financing;
• Improve access to engineering and
operations expertise resulting in more
efficient operations;
• Achieve savings through bulk
purchases of chemicals and supplies;
• Avoid additional municipal debt.
Stephen P. Allbee, Director
Planning and Analysis Division
Office of Municipal Pollution Control
Office of Water, EPA
"The Nation's commitment to clean water
requires constant investment. Without
question public/private arrangements will
play an increasing role in meeting wastewater
treatment needs."
Call Don Rush at EPA on (202) 245-4153.
AEPA Public/Private
Partnerships
Save Cities
Millions
An Environmental
Management Option
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PUBLIC/PRIVATE
PARTNERSHIPS
This brochure defines how public/private
partnerships can become workable solutions to
meet shortfalls in environmental infrastri: cture.
The brochure profiles the cities of Auburn,
Alabama, Downingtown, Pennsylvania, a idMt.
Vernon, Illinois which have found partnerships
an answer to their water needs. Savings of as
much as 30% of life cycle costs are accomplished
by partnership arrangements ranging from full
privatization, through contract operations, to
contracting for selected support services.
AUBURN, ALABAMA
(Full Privatization)
Douglas J. Watson
Auburn City Manager
"Auburn has been extremely pleased with
the service and savings provided by our
privatization contract for wastewater
treatment services."
In 1983, Auburn needed a wastewater project
with a capital cost of $32.6 million. Federal
funding would have covered only 33% of this
cost. After extensive options analysis — full
privatization proved to be the answer.
Privatizaton is the broadest and most
encompassing of the public/private partnerships
providing private sector planning, design,
construction, and ownership of the wastewater
treatment facilities.
The city entered into a contract with a private
provider to fully privatize its wastewater
treatment plants.
According to
Doug Watson,
"Auburn
selected the
privatization
option for
primarily
economic reasons.
Even though
Federal grant
money was available, Auburn would have
incurred $25 million in costs over the life of
the project because of the need to cover the
local share, the high issuance costs, and future
capacity not eligible for grant funding."
The city didn't have to spend $25 million of its
funds to cover this project because the privatizer
provided the capital. The privatizer and the city
have a contract that specifies the roles,
responsibilities, and economic interest of both
parties.The long term service contract provides
a reasonable return on the privatizer's
investment.
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facility. A new facility (consisting of upgrades
and expansion) was built around the existing
facility. DARA owns the Federally funded
facility and the privatizer owns a separately
identified new portion of the plant. The
construction cost for the expansion was $10.4
million. The contract provided for expert
operations of the entire treatment facility, support
which would have been very difficult to obtain
if it were not for private sector involvement.
DARA demonstrates that a small previously
grantfunded municipality can use public/private
arrangements to expand and improve waste water
treatment operations.
MT. VERNON, ILLINOIS
(Municipal Ownership)
R. Jerrad King
Privatizer
"We feel that as Federal money for
wastewaterprojects disappears, privatization
is going to make all the sense in the world."
Mt. Vernon, Illinois, like the two preceding
cities, needed to increase capacity of its treatment
facility. Despite upgrading waste water treatment
and improving effluent standards, the capacity
limitations of the Mt. Vernon facility restricted
growth and blocked the opportunity to attract an
industry considering locating in the area. With
189o unemployment, funding options to upgrade
and expand were limited. The city options for
funds were: the Federal Government ($2.3
million available), self financing-pay as you
build (a cost of $9.5 million), or privatization
According to Mayor Rolland Lewis, "Through
'turnkey construction' of the facility, the
private partner provided a facility at a cost of
about $5 million saving $4.5 million over
other financing proposals." There are two
contracts. A
"turnkey"
contract
provides for the
total planning.
design, and
construction of
the facility. Mt.
Vernon through
this contract was
able to meet the
additional
service requirements five years ahead of the
original projected schedule. The second contract
is a 20 year full-life service agreement.
Mayor Lewis said, "The private firm has
been outstanding in its contractual and non-
contractual performance. The trust placed
in the private sector by our City has paid off
with tremendous dividends for our citizens,
the State of Illinois and Federal EPA."
Mt. Vernon shows that partnership projects
can proceed under current tax policy,
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The exact economic conditions for the Auburn
project cannot be replicated under current
Federal tax policy. However, Auburn believes
non-tax related benefits continue to justify this
approach. These benefits include:
• The municipality and the privatizer are
still enthusiastic about their "win-win'1
service contract;
• "Turnkey Construction" enabled a 5.4
mgd facility to go on line in 12 months,
a time savings of approximately 3 years
when compared to similar projects:
• Through the contract, the municipality
shares responsibility and risk, as
well as, benefits from cost saving
incentives tied to operations.
Prior to the change in tax incentives,, an
economic analysis was unnecessary because
the tax incentives alone supported the economic
feasibility. The privatizer believes that
privatization arrangements are still economically
feasible. The basic difference in the post tax
reform period is that projects need to be
considered on a case-by-case basis.
Current Wastewater Needs
Adaquate
Facilities
9113
Facilities
Needing
to be
Expanded or
Upgraded
4623
New
Facilities
Bequired
2684
DOWNINGTOWN, PENNSYLVANIA
(Partial Ownership)
Representative Dick Schulze
5th Congressional District, PA
"The success of privatization in the
Downingtown Area Regional Authority
(DARA) expansion has shown me that the
participation of the private sector is going to
be a key ingredient in the modernization of
our infrastructure,"
DARA was developed by five small cities to
solve their treatment needs. The facility includes
a prior EPA
construction
grant. It is an
example of
regionalization
as a solution to
a small
communities'
wastewater
treatment
,,
problems.
DARA serves
Downingtown and four surrounding
communities. The wastewater treatment
facilities were near capacity and Federal funds
were not available. A moratorium on new
connections was being considered. Tax-exempt
bonds were not an economic source of funding
because of the small size of the municipalities.
DARA concluded there was a definite advantage
to partially privati zing the wastewater treatment
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