Benefits: The Value Proposition

Lower Costs

A public-private partnership typically results in annual operating cost savings of 10 to 40 percent,3 allowing municipalities to avoid or mitigate increases in water rates. A sample of such partnerships realized average savings of 24 percent over the period 1992–1997 as reported in a joint publication of the Association of Metropolitan Sewerage Agencies and the Association of Metropolitan Water Agencies (AMSA/AMWA).

Enhanced Career Opportunities for Employees

Private operation typically results in better educational and training opportunities for employees and improved worker safety. For both the private partner and the public facility owner, enhanced training and safety translates into better-run, more efficient, and environmentally sound facilities. For the employees, enhanced training means more opportunities for professional growth and advancement.

Environmental Stewardship

A private firm's reputation and ability to secure new contracts rests significantly on its ability to maintain safe, clean water in compliance with federal and state standards. The firm will work closely with environmental stakeholders and regulators to keep the systems in compliance with stringent regulations at all times. The private partner takes responsibility for regulatory compliance through a service agreement with specific performance standards. If the firm causes a permit violation, it pays the penalty.

Decreased Liability Risk

In many municipalities, significant operational, financial and environmental risks go along with managing water and wastewater systems. By sharing those risks, the private partner helps to reduce its public partner’s liability.

Performance

The private partner guarantees performance. If decreased operating costs are promised, the private partner is bound by contract to deliver. Costs to the public partner increase over time only as allowed by the contract. These prescribed increases are typically tied to inflation indices and to unforeseen changes in demand or changes in environmental laws or regulations. Because contract terms ensure a level of predictability, private operation provides elected officials with greater control than public operation over the user rates required for a self-sustaining enterprise.