UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
ENVIRONMENTAL FINANCIAL ADVISORY BOARD
JUL 3 2001
Honorable Christine Todd Whitman
Administrator
U.S. Environmental Protection Agency
Washington, D.C. 20460-0001
Dear Administrator Whitman:
We are pleased to transmit to you the Environmental Financial Advisory Board's (EFAB)
latest advisory report, Private Sector Initiatives to Improve Efficiencies in Providing Public-
Purpose Environmental Services. This report examines some practical alternatives to
established management approaches that offer "cheaper, belter, faster" ways of providing cost-
effective environmental services.
The report looks at how different tax treatments of private activity bonds issued lor public
purpose drinking water and wastewater facilities would lower costs and expand the construction
of system upgrades and replacement. A second important area involves greater efficiencies in
procurement practices. For example, in developing its Toll River Water Filtration Plant. Seattle
used a two-step procurement process to implement a design-build-operate approach. The final
cost for the facility was $101 million compared with a $171 million estimate using a
conventional design-bid-build process. In addition, the report recogni7.es the need for more KPA
attention and public education regarding the many innovative and cost-effective public-private
partnerships operating and owning public-purpose environmental projects across the nation.
In evaluating these and other cost-savings options. EFAB recognizes that the primary
responsibility for meeting public sector environmental needs resides with local governments and
ultimately system users. These needs, therefore, must be met in large part through increases in
user fees and/or reductions in system capital, operation, and maintenance costs. The Office of
Water's Gap Analysis estimates that a twenty percent reduction in costs is attainable by applying
cost-effective management strategies and techniques. The Board has embraced this approach as
one of its main themes through the creation of a Cost-Effectivc Environmental Management
Workgroup.
This Workgroup began work last year by holding a public meeting to gather views and
ideas on improving efficiencies in the wastewater and water industry, particularly with respect to
private sector approaches. The enclosed report is the result of that meeting and later Board
discussions. Earlier this year, the Workgroup held a second public meeting to gather information
on best practices with regard to public sector approaches to providing water and wastewater
services. A complementary report on public sector initiatives is scheduled for this
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fall, and we expect that additional related reports on specific issue and options will follow.
We want to take this opportunity to recognize and thank the members of the Board's
Cost-Effective Environmental Management Workgroup for their efforts in developing this
report:
- Michael Deane, Workgroup Chair, Corporate Vice President, United Water;
•• George Raftelis, Raftelis Financial Consulting, PA;
•> Keith Hinds. Liaison lo Senator Domenici* Infrastructure Development Services. Inc.;
•• Terry Agriss, Assistant to the Chairman, ConEdison;
•• Sonia Toledo, Managing Director, Lehman Brothers;
»• Bi lly Turner, President. Columbus Water Works; and
•• John McCarthy, Program Director, Northeastern Rural Community Assistance Program.
On behalf of the entire Board, we would like to express appreciation for the opportunity
to assist EPA in addressing the many financing issues critical to meeting the nation's
environmental mandates.
Sincerely,
Robert O. Lenna A. Stanley Meiburg
Chair , Executive Director
Enclosure
Linda Fisher, Deputy Administrator
Diane Regas, Acting Assistant Administrator, Office of Water
Michael W. S. Ryan, Deputy Chief Financial Officer
Joseph L. Dillon, Acting Comptroller
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Environmental
Financial Advisory Board
EFAB
Robert Lenna
Chair
A. Stanley Meiburg
Executive Director
Members
lion. Pete Domcnici
Tern Agriss
George Hrewster
George Butcher
Pete Butkus
Michael Curley
Michael Deane
Michael Finnegan
Kvan Henry
Anne Pendergrass Hill
Martin Kamarck
Stephen Mahfood
Langdon Marsh
John McCarthy
George Raftelis
Arthur Kay
Andrew Sawyers
James Smith
Sonia Toledo
Jim Tozzi
Billy Turner
Mary Ellen Whitwonh
Joseph Young
Private Sector Initiatives to Improve
Efficiency in Providing Public Purpose
Environmental Services
FINAL REPORT
This report has not been reviewed for approval by the U.S. Environmental
Protection Agency; and hence, the views and opinions expressed in the report do not
necessarily represent those of the Agency or any other agencies in the Federal
Government.
June 2001
Printed on RecycL'il Paper
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PRIVATE SECTOR INITIATIVES TO IMPROVE EFFICIENCY
IN PROVIDING PUBLIC PURPOSE ENVIRONMENTAL SERVICES
Introduction
The Environmental Financial Advisory Board (EFAB) has identified cost-effective
environmental management as one of its central themes. In that regard, the Board's goal is to
recommend practical measures that achieve greater environmental protection through increased
efficiencies in the planning, design, construction, operation, and financing of public-purpose
environmental infrastructure.
There is already a major cost reduction trend evident in the \vaste\sater and water
industry. Increasing competition has helped to spur improved efficiencies in many systems.
With the general recognition that there would never be sufficient funding from grants and other
subsidy sources to meet all environmental needs. Thus has come the realisation thai present and
future needs must largely be met through increased user fees and capital investment paid for by
system users and by reducing costs. Cost efficiencies achieved at the system and plant level can
significantly reduce operating costs and capital needs. The Office of Water's Gap Analysis
estimates that a 20 percent reduction in costs is attainable from the application of cost-effective
management techniques and strategies.
For the past year. The Cost-Effective Management (CUM) workgroup of EFAB has
examined and debated public and private initiatives affecting the wastewater and water industry
that would improve efficiency. The workgroup first considered private sector initiatives
beginning with a public meeting in Washington D.C. The purpose of the meeting was twofold.
First, the members wanted to gather views and ideas on cost-effective environmental
management, particularly with respect to public-private partnerships in the drinking water and
wastewater industries. Second, they wanted to develop EFAB recommendations to the
Environmental Protection Agency (EPA). The workgroup decided first to prepare this report on
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private sector initiatives, which will be followed by a second, complementary report on public
sector initiatives scheduled for completion this fall.
This report identifies two major issues highlighted at the meeting. A summary of
findings from the meeting is attached.
Discussion
To begin with, there is general agreement that "cheaper, better, faster" ways of providing
cost-effective environmental management are possible. The question is. of the many private
sector initiatives that might be considered, where should HFAB focus?
The workgroup decided that the most worthwhile areas to focus on are procurement
practices and private activity bonds. The Board has a long and rich history of recommending
improvements to tax-exempt bond borrowing and to a somcuhat lesser extent, procurement
practices.
In the case of procurement practices, there is a clear potential for improvements in
procurement practices for public purpose environmental infrastructure that would lower overall
costs. In the case of private activity bonds, the workgroup believes that a different tax treatment
of private activity bonds issued for public purpose drinking water and vvastewater facilities
would lower costs and expand construction of replacement systems as well as system upgrades.
Both areas tie closely to basic findings of the Gap Analysis that municipal borrowing is
flat and must increase significantly if replacement and upgrade needs are to be met. At the same
times, the Board believes that collecting and disseminating information on public-private
partnerships involving the operation and ownership of environmental projects is an important
service deserving of greater HPA attention. The issues are discussed briefly below, followed by
several recommendations.
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1. Procurement Practices
Procurement practices for providing public-purpose environmental infrastructure often
have used sealed bidding where the award for construction of the facilities is made to the lowest
responsible bidder. The design phase is handled separately and not necessarily bid out. nor is
management and operation, which in the case of wastewater has been performed largely by
municipal employees.' Many times when a bidder is considered minimally qualified, then price
becomes the sole criteria for selection. Unfortunately, this process many times has resulted in
the least optimal facility when considering technical quality and life-cycle costs.
Generally, federal wastewater construction grants programs awarded separate grants in
three steps: Step 1 - Planning; Step 2 - Design: and Step 3 - Construction. This approach
rellected and reinforced the traditional public procurement process. Treating each phase of an
interrelated process as a separate and distinct slop has its advantages, but does not ensure that the
most cost effective facilities are built. In addition, having discrete steps for planning, design, and
construction, makes assigning nonperformance of a facility to any specific entity (planner,
designer, constructor, or operator) problematic. As a result, a publicly owned treatment plant
owner (typically a city, county, special sen-ice district) faces lengthy litigation to determine
technical and financial responsibility in the case of nonperformance of a facility.
In recent years other delivery methods have come to be recognized in the drinking water
and wastewater industries as offering the real possibility of achieving significantly lower costs in
the procurement process. Examples include design-build, design-build-operate (and maintain),
and design-build-finance-operate. Under these alternative delivery methods two major objectives
have been addressed many times. First, by combining the different phases of project
development, design, construction, and operation, cost savings are achieved. The designer,
constructor, and/or operator work together to create the most cost-effective facility, resulting in
the lowest life-cycle costs. The process creates a dynamic whereby all parties strive for the most
cost-effective long term facility. In some cases, savings approaching 35 to 40 percent of project
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costs have been achieved, when compared to traditional design/bid/build procurement methods.
Second, accountability and, therefore liability, is assigned to one entity, the design/build team.
As a result, the owner avoids some complexities in seeking relief for potential damages in the
case of nonperformance.
A common characteristic of all "integrated project delivery methods, as they are often
called, is the bundling and bidding out of at least two of the several steps in the procurement
process. Competitive sealed proposals are submitted in response to a request for proposal (RFP),
while the traditional method uses competitive sealed bidding. Another characteristic is that the
selected offerer need not be the lowest responsible bidder; rather the selection is based on
qualifications where factors other than price are considered. RFPs typically prescribe
performance-based standards which detail the results or outcomes sought. The award is made to
the responsible offerer whose proposal is most advantageous to the governmental entity.
Another defining characteristic is that competitive sealed proposals, which arc used for these
deliver)' methods, allow for discussions with an offerer after opening of the proposal and
changes to be made. Precautionary measures are adopted to treat all offerers fairly in this
process.
Design/build has been commonplace in private sector construction projects for many
years. Design/build and other integrated methods have several advantages that reduce costs over
traditional sealed bidding for construction proposals. The process is faster because it compresses
several steps into, one-proposal. It lends to encourage innovation by requiring performance-based
standards and allowing the designer to be the builder. Design questions and issues are reduced in
the construction phase since the same firm is involved. With design/build/operate (DBO) there is
an added advantage that the designer and builder of the facility will be its operator, thus helping
to ensure fewer and less significant operational problems down the line.
The industry has successfully embraced several design/build models. Probably the most
viable DBO model is the Seattle Toll River project. This project involved the development of a
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DBO water treatment plant serving greater Seattle area. The potential savings of the DBO are
estimated at 40 percent compared with the traditional design/bid/build approach. The project
was so successful that Seattle recently selected the same procurement method for the Cedar water
treatment plant. Other communities such as the Phoenix. Arizona: Detroit, Michigan: Fulton
County Georgia: and Houston, Texas are following Seattle's lead in pursuing more cost-effective
alternative delivery methods.
In addition, many communities arc looking at design/build options as a way of expanding
and/or upgrading their existing facilities. Under this concept, a project team bids on capital
improvements as well as operations of the facility under a long-term contract. The concept is
particularly attractive to communities with wastewater treatment plants needing upgrades to
address evolving environmental requirements. Successful examples of such procurement
methods include the water or wastewater treatment facilities in Wilmington, Delaware: Jersey
City. New Jersey: Newport. Rhode Island: Franklin. Ohio: Charlotte, North Carolina: and
Cranston. Rhode Island.
The Board realizes that the delivery method for public works construction can be a
controversial subject. Perhaps one of the most contentious issues is the concern of municipal
employees and their unions regarding job security and other related matters. EFAB certainly
wants to recognize the legitimacy of municipal labor issues with respect to innovative
procurement and management strategies. At the same time, it believes that these issues fall
outside of its qualifications to evaluate and its charge to examine potentially more cost-effective
ways of providing public-purpose environmental services. It was clear from the public meeting
that many states and localities have policies that restrict or even prevent the use of alternative
integrated delivery methods. Moreover, there is a perceived general lack of awareness and
knowledge among many public officials involved with the procurement process of the
advantuues of alternative delivery methods.
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Added to municipal labor issues and the perceived lack of awareness among public
officials is the challenge that design/build projects may present to the (environmental) permit
review process. Many agencies conduct their reviews based upon project drawings submitted at
the 75-90 percent design stage. Many permitting agencies are uncomfortable reviewing plans for
projects that are incomplete or already partially constructed. Design/build projects will require
greater flexibility on behalf of the reviewing agency and increased coordination between the
reviewing agency and the permittee.
Unfortunately in many states, design/build alternatives have been discouraged. In fact, in
some states these approaches are considered illegal. As the industry has recognized economic
and accountability benefits of design/build options, state laws have changed slowly to
accommodate alternative deliver)' methods. Many states still lack sufficient legislation to
maximi/.c design/build benefits, and need to focus on removing the impediments to developing
the most efficient delivery method. I:PA could he a catalyst to encourage stales to consider
design/build options.
2. Private Activity Bonds
EPA increasingly is concerned about the sustainability of this nation's systems for
providing drinking water to our communities and effectively collecting and treating wastewater.
The Agency's Gap Analysis shows that capital needs for the rehabilitation, upgrade, and
replacement of existing facilities, along with new infrastructure io support continuing growth, are
greater than can be met under current funding programs and trends. In addition, operating costs
in aggregate are escalating beyond what is reasonable given the capital stock to which they
apply. It is clear that EPA needs to consider alternative approaches to financing and managing
water systems, such as private activity bonds, and also should advocate for changes to support
these approaches when they are clearly in the public interest.
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Since its inception, the Board has focused on the availability and efficient use of tax-
exempt financing for environmental infrastructure. Its most notable work in this regard was the
1991 Board Advisory on Incentives for Environmental Investment: Changing Behavior and
Building Capital. This advisory proposed that all bonds used to finance public-purpose
environmental infrastructure, including drinking water and wastewater systems, be classified as
governmental bonds and be tax-exempt regardless of the extent or type of private sector
participation. Alternatively, the Board proposed excluding private activity bonds used to finance
such facilities from state volume caps as a minimum alternative.
Most of this Nation's drinking water and wastewater treatment systems are financed at
least in part with the proceeds of tax-exempt bonds. For facilities owned and operated by
municipalities, there are few restrictions on the ability to use tax-exempt debt. For communities
thai choose to pursue public-private partnerships to provide these essential services to their
residents, there are significant restrictions under the tax code to ensure the bonds are not deemed
taxable.
Drinking water and wastewater facilities generally are exempt facilities under private
activity bond regulations and therefore are eligible for tax-exempt status. However, each state
has a volume cap limiting the amount of tax-exempt private activity bonds that may be issued
each year. Environmental infrastructure, including water and wastewater, typically has not fared
well in the competition for volume cap. If the nation is to benefit from the increased capital
investment and the more efficient delivery systems that can be developed for projects with
private activity bonds, public-purpose water and wastewater facilities must be excluded from
state volume caps.
The Board also notes the closely related issue of the ineligibility of private owned.
public-purpose wastewater projects for Clean Water SRF funding. While this eligibility exists in
the Drinking Water SRF program, there is no parallel provision for the Clean Water SRFs.
Privately owned wastewater systems and their customers are thus at an economic disadvantage
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because they are denied the access to and the benefit of the below market loans offered by the
SRFs.
These capital-related barriers to public-private partnerships, particularly with respect to
providing public-purpose wastewatcr services, have limited their use and thus the opportunity to
municipalities for achieving potentially greater cost savings.
3. Information on Public-Private Partnerships and Management and
Procurement Strategics
A common theme running throughout the workgroup meeting was the need for more
public education on cheaper, better, taster ways to plan, design, construction and operate public-
purpose environmental systems. Most participants felt that EPA should play a strong role in the
collection and dissemination of information on new and more efficient ways of providing cost-
effective management. Participants believe strongly that the Agency should perform this
important service. Indeed EPA already does this in other areas, such as the community-based
environmental protection and clean energy programs.
Some discussion occurred on the most effective means to communicate CEM best
practices, ideas, opportunities, events, and trends. Ideas included: A "how to" manual for local
elected and career public officials on the evaluation of alternative management strategies and
procurement practices; case studies (the U.S. Conference of Mayors was suggested as a source);
technical information on developments in such fields as asset management strategies and federal
tax matters: model procurement ordinances: a clearinghouse on success stories; information on
funding opportunities for pilots and demonstrations; and short items on practices in other
countries.
El-AB recogni/es that many publications on these and related issues already exist and
discourages EPA from merely duplicating information available in the marketplace. Still, the
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workgroup believes that there is a need for more focused and consolidated information. EPA
should provide fresh documentation and analyses only where necessary and appropriate.
The Board recommends that EPA consider the following
1. Procurement Practices:
At the minimum, EPA should educate communities about successful and more
efficient ways to deliver environmental services.
EPA also should consider taking a more pro-active position by issuing a policy
statement supporting broader forms of service delivery and competition where it
is judged most cost effective in terms of meeting environmental goals. A more
active posture could extend to encouraging Stale Revolving Funds to provide
incentives for DB and DBO pilots.
2. Private Activity Bonds:
EPA should call publically for private activity bond reform to support urgent
environmental infrastructure needs.
EPA should support the exemption of private activity bonds from sta.te volume
caps, whose proceeds finance public-purpose drinking water and wastewater
facilities. EPA is in an excellent position to call for coordination of tax policy
with environmental policy and, in fact, environmental requirements.
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3. Information Services:
EPA should create an information service on public-private partnerships for
environmental services as part of the Environmental Finance Program website.
The site should include extensive "hot I inks" to related websites within and 'outside
government. It could gradually be expanded to include an interactive service and
»
other advanced features. A sample menu of the initial site is attached.
Attachments
Summary of findings from March 6,2000 meeting
Sample website menu for P3 information
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ENVIRONMENTAL FINANCIAL ADVISORY BOARD
Cost-Effective Environmental Management Workgroup
SUMMARY OF March 6,2000 PUBLIC MEETING
The Environmental Financial Advisory Board's (EFAB) Cost-Effective Environmental
Management (CEM) Workgroup Public Meeting was convened by John Wise, EFAB's
Designated Federal Official at 9:10am on March 6.2000, at the National Press Club in
Washington, DC. Michael Deane, CEM Chairman introduced the panels for the meeting.
In accordance with the provisions of Public Law 92-463, the meeting was open to the public
from 9:00am - 4:30pm.
Workgroup members present:
Michael Deane. Chairman Keith I linds
United Water Infrastructure Development Services, Inc.
ferry Agriss George Raftelis
ConEdison Raftelis Financial Consulting. PA
Invited Panelists present:
Chibby Alloway. USFilter Operating Services Stephen Howard, Lehman Brothers
Eric Petersen, Hawkins, Delafield & Wood James Smith, Environmental Finance
Consultant
Steve Allbee. Environmental Protection Agency Roy Anderson, City of Newport, RI
John Joyner. United Water Billy Turner, Columbus Water
Works
EPA Staff present:
John Wise. Designated Federal Official for EFAB
George Ames. Team Leader. Environmental Finance Team
Vanessa Bowie, Lead Staff Official for CEM
The purpose of the public meeting was to gather views and information on cost-effective
environmental management, particularly public-private partnerships and contract management
for drinking and wastewaier and what I-FAB should do to assist EPA in this regard. Two panels
were established to ensure a variety of perspectives.
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Discussions throughout the meeting revealed four types of impediments: (1) legislative and
regulatory; (2) financial; (3) management and procurement; and (4) communications.
Legislative and Regulatory
• There is a lot of legislation affecting public private partnerships and the industry, but
towns from 3,000 - 5,000 people - communities that need our help for quality of water
and drinking water.
Regulations becoming very onerous: others, however, feel that strong sustained
enforcement is essential.
EPA's enforcement policy for municipalities is vague.
Water is not priced to encourage capital development.
• Pumping and distribution costs are the drivers for water not treatment in many/most
cases.
Preliminary Findings
• Water must be priced so that innovation can occur, (not advocating more regulation)
• Regarding municipal enforcement, while the workgroup does not necessarily agree with
the several comments on the lack of a clear enforcement policy, nonetheless, there seems
to be a strong concern that uncertainty in the regulated community over enforcement
policy is an important factor which the workgroup suggests be examined more closely by
the agency.
Financial
• Significant costs savings can be achieved by many publicly and privately-owned water
and wastewalcr systems through the adoption of more efficient management.
procurement, and operational strategics.
• Volume cap restrictions affecting the issuance of private activity bonds for wastewater
facilities causing problems in some states.
Many public- purpose environmental facilities are privately owned, yet they cannot take
advantage of tax-exempt bonds and pass the savings in debt service along to their rate
payers.
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• Projects requiring bond caps do not meet 9713.
• Lack of a sales tax exemption for contractors providing public services.
• In terms of investor interest in drinking water, strong demand for highly structured,
nonrecourse transactions with risk allocation clearly spelled out. However this refers to
the largest best credits; what about undercapitalized companies?
• Tax exempt project financing (project debt/bond caps). Private activity bond caps are a
problem. Should EPA support growth in the bond caps? Are there any studies showing
where the caps are actually denying $s to specific projects?
Affordability - not everyone needs help, but some absolutely do; some people can not do
this without some sort of financial partnership.
• We make it extremely difficult for public and private money to work together, but it can
be done.
• Don't let the public $s benefits flow to the private sector excessively.
Preliminary Findings
What can be done to make investments more cost-effective; what can be done to increase
capital investments? What can be done at the federal level? - these were presented as
general questions EFAB should address.
• EPA should support an exemption from the volume cap for wastewater treatment
facilities.
• The tax code governing the tax exemption of bonds should define such bonds in terms
of the public purposes served, not by the ownership of the funded facilities. The true test
should be who is served.
• Broaden the availability of lax-excmpt financing especially for mandated facilities.
Management and Procurement
• Procurement laws are critical (how you evaluate procurement).
• Procuring plants on a low bid basis does not always produce a cost-effective situation.
• The design is not bid. the management is not bid. only construction is bid.
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• Suggest that the planning process/consent decree mentality is directed to a facility plan.
Focus on administrative practices related to production of a facility plan.
SRF's now moving to giving weight to state procurement policies.
• What could be done to make the whole investment more cost-effective? What could be
done to bring in more capital (cheaper capital).
A major consolidation trend affecting drinking water utilities especially is underway.
• Competition & consolidation - competition should be aggressive level playing field.
What does EPA do to support this?
• Current environment - how much $s should we spend as one company to shape these
procurements, only to end up in a low bid environment? e.g., procurement steps,
evaluation criteria, political forces of city councils.
• There is a need for performance based specifications for design-build-operate. The
emphasis is on broadened nontraditional competition based on performance standards all
the way through the process from design to operation. In some cases (New York) state
law will have to be changed: other states (Georgia) it is not necessary.
• Considerable interest in getting EPA to be more practice in promoting broader forms of
competition for municipal infrastructure. The agency has traditionally been neutral. One
suggestion is to use the SRF to provide incentives to promote DBO as pilots.
• Traditional financing is linked to traditional methods of procurement. If this link is
broken, it opens the way to new methods of project delivery.
• Interaction suggested with conference of mayors - have a lot of case studies.
• Is there a model service contract? What can/should EPA do in this area?
Preliminary Findings
• There is a need for a real clearinghouse for procurement laws. Need to help city councils.
Survey state regulations structures across the country to determine needs in changing
procurement. Reference materials would be helpful by a group that is credible, unbiased.
Need a step-by-step procedure or checklist (F.PA would be appropriate level).
Pay attention to ICMA & political organizations.
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• Need a new form of competition in water and wastewater.
• EPA work with states to encourage planning competition.
Communication
Projects highly structured/customized to local situations
Cranston. RI - $8 million for what was to be a $50 million project. Had to develop a
procurement ordinance that allowed competitive negotiation.
Good local to local communications going on. Peer match aspects of the relationship was
of value in the Cranston case.
Would any kind of how-to-manual for public officials be helpful? Not a clear response
but there was support for case studies.
Preliminary Findings
• FPA has to standardise their own communications to help educate.
• Need some special case studies to illustrate the value of new approaches. EFAB case
studies on CEM approaches could help. ICMA help needed.
• Availability of information a real need (objective info) something balanced from both
sides; pro and con.
• Better effort would be directed to getting EPA to adopt a policy statement encouraging
design/planning competition. A policy statement is important.
Other
• Operations & maintenance up 5.9% each year. Capital debt varies.
• What drives the numbers? O+M+R costs
60% - O&M
40% - Capital
• Wasiewater - debt service growing and need to spend more.
• Federal spending on infrastructure has been flat for 30 years, (we arc at the lowest point
in spending on water since the 1060s).
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More and more communities are having affordability problems.
Raises interesting questions regarding user fees.
Solutions: we spend money in a poor manner (need to maintain systems on an going
basis) more pay-as-you-go, smaller more frequent financings.
Asset management - optimization process (used by utilities).
Capital spending is not adequate ('/2 of what t should be).
New debt is flat. Why?
Sustainability of systems arc at risk and affordability is a growing problem.
Canada - 100 year budget is part of asset management concept.
Value vs need - infrastructure system has an economic value to the economy.
New GASB Rule - all public financial statements must include the value of assets.
Marketplace problems - private companies underestimate how quickly the public sector
people would move to defend themselves. Underestimated how large engineering firms
stand with public sector - they've had a bigger impact than we thought.
Some large companies who have made huge investments must win new jobs (lots of
competition).
Private companies can be more capital efficient (fast track engineering and construction).
public monies; private implementation.
comprehensive asset management program over 20 years.
They are becoming more selective in where to compete - look for a
political/financial/other driver (technology) different to do small projects - they do have a
$ threshold.
CSO projects: long-term control strategy is next.
Be proud of what we have done. We are ahead of the Brits on CSO's.
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• More research needed in many areas.
• How does a city address water quality issues?
• How have cities improved their operations?
• Columbus. Georgia rates low, service improved, employment lower.
• EPA keeps hammering at enforcement (this is a necessity for the private sector).
• Large companies need large projects.
• EPA should deploy a firm, clear, fair, and consistent municipal enforcement strategy.
Preliminary Findings
• EPA could: (1) enforce regulations; (2) get involved in up front procurement planning to
help municipalities in this process: (3) make federal funding available; (4) get out of the
way and let them fix the problem; (5) change CSO strategy.
• Need flexibility from EPA on CSO projects.
• EPA could help make public funding available to the community for use by the private
sector.
• Need belter educated local negotiators.
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JUL 30 2001
OPFICEOF
WATER
Mr. A. Stanley Meiburg
Acting Administrator
U.S. Environmental Protection Agency
Region IV
61 Forsyth Street, S.W.
Atlanta, Georgia 30303-3104
Dear Mr. Meiburg:
Administrator Christie Whitman has asked me to respond to your letter of July 3,2001,
transmitting the Environmental Financial Advisory Board's (EFAB) latest advisory report,
Private Sector Initiatives to Improve Efficiencies in Providing Public-Purpose Environmental
Services. The report examines some.practical alternatives to establishing management
approaches that offer "cheaper, better, faster" ways of providing cost-effective environmental
services. I would like to thank you for preparing the report and appreciate the Board's efforts to
address the critical financing issues facing the Nation in meeting its environmental objectives.
As you-know, the Environmental Protection Agency (EPA) recognizes that the Nation's
water and wastewater infrastructure is aging and deteriorating. Population increases and new
water quality standards and treatment demands are further straining The financial resources
available in many communities to meet these needs. Over the past few years, we have engaged
our stakeholders and a broad range of public and private sector interest groups in discussions to
address these concerns.
The Administrator has identified infrastructure as one of her top priorities and is
committed to fostering a constructive dialogue over the best approaches to assuring that critical
water infrastructure is maintained and improved. We are currently evaluating options that would
help close the gap between current spending levels and investment needs. We see a great role for
activities and practices that would reduce costs and lead to more sustainable systems.
The Board's private sector recommendations are a timely addition to the discussion EPA
would like to have with Congress and other stakeholders about the appropriate roles of Federal,
State, and local governments, and the private sector in meeting these infrastructure needs. *In .
fact, we understand that at least one State currently incorporates integrated project delivery
methods of procurement into its State Revolving Fund program. Massachusetts' experience has
been positive and consistent with results suggested by the Board's report. We have shared the
Internet Address (URL) • http://www.apa.gov
' RacvciediRecyclable • Printed wrtfi Vegetable Oil Based Inks on Recycled Paper (Minimum 30% Postconcumeo
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Board's recommendations with the Agency's Coordinator for Public Private Partnerships and
will distribute it to the State managers of the Clean Water and Drinking State Revolving Fund
programs for their consideration in managing their programs.
We agree with the Board's recommendation that providing a focal point for the collection
and dissemination of information would provide a valuable service to our public and private
partners. I understand that the Office of the Chief Financial Officer is considering enhancing
their web site to provide information on public-private partnerships. We will support their
efforts.
Thank you for your ongoing commitment to effective environmental management If you
have any further questions, please feel free to contact me or call Michael B. Cook, Director,
Office of Wastewater Management; at (202) 564-0748.
Sincerely yours,
iane C. Regas
Acting Assistant Administrator
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