Arizona has long seen significant economic and population growth, but this year’s federal designation of a Level 1 shortage limiting the state’s share of Colorado River water and limiting water supplies to users Arizona’s agricultural sector presents a stark reminder of the need for continued large public sector investment. water supply infrastructure to ensure a strong economic future.
With elected state leaders cautiously setting aside more than $500 million for water augmentation and conservation projects and overhauling the state agency responsible for funding water infrastructure in the In the final days of the legislative session, Arizona’s strong tradition of using public-private partnerships (P3s) to deliver critical water investments looks set to enter a new phase of transformation.
The state’s economy today would not exist without the legacy of great waterworks like the Central Arizona Project or the Salt River Project’s network of dams, reservoirs and canals – projects built through collaboration between federal, state and private entities. Cities like Phoenix have also used P3s to provide major new water and wastewater infrastructure.
Tax, taxpayers alone can’t build what’s needed
Funding for water infrastructure is complex, but the fundamental problem is simple: there aren’t enough tax or traditional taxpayer dollars today to provide the future water infrastructure that Arizona needs.
Offshore desalination plants, new reservoirs and multi-state pipeline agreements are among the kinds of promising – but costly – new water supply projects that have captured the attention of policymakers.
These projects could easily be worth billions of dollars on their own, and in 2013 the US Environmental Protection Agency estimated the state would need $7.4 billion by the mid-2030s solely to improve, repair and upgrade existing water infrastructure, a figure that excludes costly extensions needed to accommodate population growth.
P3s offer the opportunity to overcome many of the water infrastructure challenges Arizona faces, including supply, transmission, and processing. They have been widely used around the world to ensure that water systems and treatment facilities are financed, built, operated and upgraded in ways that minimize taxpayer exposure.
Private partners can help accelerate needed projects
When government water agencies enter into partnerships designed to manage major financial and operational risks, they protect ratepayers and users from unforeseen repairs and other costly problems.
While water PPPs typically involve large projects with high upfront costs, they also include decades-long operations and maintenance commitments that government agencies typically do not have the resources to do on their own. resulting in lower long-term operating costs.
Private partners are required for decades to manage systems under performance-based contracts, as well as return managed assets to government owners in good condition. Contracts designed to protect the public interest while setting clear terms for project delivery incentivize partner companies to find value through the right capital investments that balance cost and quality.
Some major PPP investments are used to secure and supply water from new sources to meet population growth. In 2016, strong growth San Antonio entered into a 30-year, $923 million P3 supply up to 50,000 acre-feet of water annually through a new 140-mile pipeline to provide about half the water needed to meet future population demand.
The partnership places the risks of securing water on the private partner responsible for negotiating with local landowners to secure the supply of drinking water, as well as the risk of building and operating a 140-mile pipeline to deliver water to the city from its watershed source. .
The project was financed by loans contracted by the private partner, which will be reimbursed by the city over several decades thanks to the royalties collected. Santa Clara, California, after a failed attempt a few years ago, is close to finalizing a similar $600 million 30-year public-private partnership which would secure water from several sources.
Just as Arizona’s water challenges are not limited to clean water supply, PPPs can and have been used to overcome many ecological and environmental challenges. Chicago, Atlanta, Baltimore and many major cities have partnered with private companies to supply and operate sewage treatment and treatment facilities to help prevent massive pollution problems, often to comply with executive orders. EPA and state approval.
The future of Arizona water lies in its flexibility
There are also opportunities to encourage land ownership practices through PPPs that reduce pressure on water and sewer infrastructure: Prince George County in Maryland has worked with landowners and developers to incorporate more porous ground surfaces capable of diverting stormwater from the area’s overloaded sewer systems. And San Mateo, Calif., is exploring an advanced water treatment P3 that can keep clean water in reserve for droughts and other dangerous conditions.
Innovations in leak detection – a problem that drives 1.7 trillion gallons of lost revenue for water systems every year – are also becoming a source of contracts with water agencies, as the technology enables acoustic detection without digging.
With the legislature setting aside a large down payment for critical water projects and simultaneously expanding the state funding agency’s toolkit to deliver them – the key to success will be giving governments the greatest flexibility to enter into long-term PPPs designed to increase water supply through acquisition, treatment, conservation and more.
Arizona’s boom is one of America’s greatest economic successes, but continuing will require effective partnerships between public, private and stakeholder interests to secure America’s clean water future. the state in the long term.
Austill Stuart is director of government reform at the Reason Foundation. Leonard Gilroy is vice president of government reform at the Reason Foundation and a resident of Gilbert. Contact them at [email protected] and [email protected].