September 4, 2009

The Reason Foundation’s Annual Privatization Report 2009, released in August, provides a good snap shot of private-sector involvement in American water and wastewater utilities. Some highlights:

• Public Works Financing reports that 1,336 government agencies contracted out some part of their water or wastewater utility operations in 2008.

• Governments appear to be satisfied with their outsourcing arrangements. In 2008, 95 percent of the water industry contracts up for renewal were renewed with the incumbent contractor, and five percent went to a competitor. Just five percent reverted to municipal operations.

• Milwaukee is contemplating a long-term lease of its water system. City Comptroller Wally Morics has proposed a 75- to 99-year lease in exchange for an up-front payment of more than $500 million – a payment that, when invested, would generate over $30 million a year to supplement city revenues. In May, the city put on hold a study of this option. Milwaukee has more than a decade of experience with contracting out wastewater operations. The city first contracted out wastewater operations to United Water in 1998. In 2008, it signed a new 10-year, $400 million contract, this time with Veolia Water North America.

• Phoenix’s Lake Pleasant water treatment plant is the country’s largest design-build-operate project. American Water got the 15-year contract (with a five-year renewal option) in 2003 and the plant opened in 2007. The US Conference of Mayors has given the project its 2009 Excellence in Public/Private Partnership Outstanding Achievement Award.