The doors of opportunity are opening for private investors in the municipal water market in the United States. With the country facing a water infrastructure funding gap of $532 billion over the next 10 years, private-sector investments and public-private partnerships (P3s/PPPs) are expected to play a growing role in ownership, management and operation of municipal water and wastewater system projects.
According to a recent report by water market expert Bluefield Research, dwindling local government budget funds combined with aging public water and wastewater infrastructure have local government officials taking a closer look at the availability of private capital or collaboration opportunities. Whether infrastructure dollars are needed for new construction or high-dollar rehabilitation and upgrades, private capital is abundant for these local projects.
Private ownership of municipal water systems currently stands at 15 percent of the market. The Bluefield report indicates that number is steadily increasing along with the number of P3s. There are approximately 20 investor-owned deals nationwide that are either completed or pending, totaling $384 million.
Municipalities are also suffering from a decline in federal funding for water and wastewater projects over the last four decades. Today, federal funds finance only about 4 percent of municipal water projects, according to Bluefield. That leaves municipalities in search of financing solutions to fund the remainder of the project costs. For many such projects, local governments not only are in need of an infusion of revenue, but also the technical expertise that the private sector can provide relative to water and wastewater projects.
While the U.S. was slower to accept the use of P3s than some other countries around the world, that is changing. In recent years, there have been an increasing number of these public-private collaborations for desalination, water treatment and wastewater reuse projects in a number of states.
Also providing incentive for private-sector participation is the fact that several states, including Pennsylvania, New Jersey, Illinois and Indiana, have proposed legislation that will encourage and facilitate private investment in infrastructure projects.
Additional financing options will be key to municipalities fulfilling their water infrastructure needs today and in the future. An increasing reliance on public-private partnerships and private-sector investment can help bridge their funding gaps.