Conditions are so bad that Rep. Bennie Thompson (D-MS) and Mississippi Gov. Tate Reeves (R), who agree on little else, agree that Jackson needs a new water operator. Gov. Reeves raised the possibility of water privatization at a recent  press conference:

“I’m open to all options. Privatization is on the table,” Reeves said.

 “Having a commission that oversees failed water systems as they have in many states is on the table… There have been even a number of city council members that I have seen over the last several weeks that have talked a lot about the need to hire outside contractors to come in and run different pieces of or the system as a whole.”

“I think you’re seeing more and more individuals recognize that the operations of city government in general, but particularly the operations of the water system… it ain’t Republican or Democrat or ideological, it’s about delivering a basic service to the people you represent,” he said.

Reeves and the state government will play a role in helping Jackson overcome its water problems. Still, the financial and productive capital required for such a large undertaking will likely need to come from the private sector. Long-term, Jackson’s water, sewer, and stormwater system need an estimated $2 billion to get them working again and back in compliance with the Environmental Protection Agency.

Jackson’s shaky finances and the dire shape of its water and sewer operations mean merely outsourcing maintenance, as Jackson Mayor Chokwe Antar Lumumba suggested as an alternative to privatization, would not solve the long-term water system replacement concerns, attract the needed capital investments to repair and rebuild, or truly address the city’s more extensive environmental compliance and staffing concerns.

While outsourcing would certainly help some of the day-to-day operations issues, Jackson would still be mostly on its own for getting itself back into compliance and finding the $2 billion needed for system repairs and upgrades. 

Jackson’s previous bad contracting experience with its water system should not prevent the city from seeking a long-term deal now. A few years into a 2013 water contract with Siemens to repair sewer infrastructure and upgrade billing and meter systems, Jackson filed a complaint in court against the company, claiming it was misled into the 15-year $90 million contract with promises of increased revenues that never materialized and work that was never done. Before going to trial, the parties agreed to a settlement equal to the original contract’s total amount, $90 million, paid to the city.

In the future, a well-written, long-term privatization contract can set clear benchmarks for the private company to meet and instill financial penalties for failing to do so. Any privatization contract should protect Jackson’s taxpayers, make it easy to hold the private water company accountable for meeting its commitments and avoid some of the problems from the Siemens deal. 

Six weeks without drinking water has drawn public attention to the government’s failures in Jackson and decades of failing to comply with EPA standards. For example, drinking water quality is partly ensured by monitoring the turbidity—cloudiness from impurities—of water samples taken from the system. A 2020 EPA inspection found that the turbidity monitoring equipment at one of Jackson’s two water treatment plants didn’t work because it hadn’t been calibrated in around three years, resulting in continuously inaccurate readings. And, in an example of how hard it will be for the city to fix all of its water problems itself: The technician position needed to perform water turbidity maintenance and monitoring is not filled right now. In fact, the job no longer exists in the city government at all.  

Additionally, the EPA found that when Jackson’s lead levels rose above acceptable limits, the city didn’t notify residents. The EPA report also noted that Jackson did not have a plan to remove lead service lines from its water system—something the city has been required to do but has been failing since 1992. 

Among other problems, the EPA report also discovered that filter membranes in water treatment facilities were not functioning and were damaged beyond repair, automated treatment systems were failing, and low staffing levels were a constant problem.

Jackson’s water problems are severe, and solving them won’t be inexpensive. Still, the right long-term partnership could help the city overcome its obstacles as cost-effectively as possible. Hiring capable partners legally bound to perform well would put Jackson on a path to bring its system into compliance and start reducing its backlog of maintenance and repairs.  

Without a privatization deal, Jackson’s water system will likely worsen. Procuring a multi-decade lease will undoubtedly be challenging, but without one, there is no path to address Jackson’s many water and sewer management problems fully.

The post Jackson’s boil advisory lifted, now must address long-term water problems  appeared first on Reason Foundation.

Arizona is dedicating $1 billion over the next three years to fund water rights acquisition, conveyance, and conservation efforts while allowing the water projects to be established through a wide variety of contracting and procurement methods. This substantial investment better equips Arizona to respond and adapt to the challenging demands of both its growing population and the dwindling availability of freshwater supplies, a move other Western states should watch with keen interest.

The Associated Press reports seven Western states relying on the Colorado River should expect more water cuts:

But those reductions represent just a fraction of the potential pain to come for the 40 million Americans in seven states that rely on the river. Because the states failed to meet a federal deadline to figure out how to cut their water use by at least 15%, they could see even deeper cuts that the government has said are needed to prevent reservoirs from falling so low they cannot be pumped.

“The states collectively have not identified and adopted specific actions of sufficient magnitude that would stabilize the system,” Bureau of Reclamation Commissioner Camille Touton said. Together, the missed deadline and the latest cuts put officials responsible for providing water to cities and farms under renewed pressure to plan for a hotter, drier future and a growing population. Touton has said a 15% to 30% reduction is necessary to ensure that water deliveries and hydroelectric power production are not disrupted.

Seven states and Mexico rely on water from the Colorado River for both consumption and recreational needs. And the water needs in those Western states are increasing. The populations in Arizona, Colorado, Idaho, Nevada, and Utah all grew by more than 10% over the past decade, according to Census Burea data.

Back in 2016, the Bureau of Reclamation (BOR) forewarned: “Growing demands in the Colorado River system, coupled with the potential for reduced supplies due to climate change, may put water users and resources relying on the Colorado River at risk of prolonged water shortages in the future.”

While both this and next year’s announced cuts by the BOR will not affect residential use, the current cuts have already forced Arizona farmers to cut back around 65% of their Colorado River allotment. The drier Colorado River is not all due to a drying climate, either—agricultural interests draw heavily from groundwater supplies that also source about half of the Colorado River’s water. Continued dry conditions and groundwater extraction could lead to a 30% decline in the river’s flows over the next 30 years, which would necessarily include even more drastic water allotment cuts.

While many conversations and assessments will need to be made before Arizona’s water projects come to fruition, the recently-passed legislation and its dedicated funding show there are possibilities to start solving Arizona’s water use demands.

The state may end up conveying water from the Mississippi River or transferring desalinated water from offshore Mexico, both ideas that Arizona is examining, or it may discover those ideas are not financially viable. For now, the fact that those ideas and others are even being considered demonstrates state lawmakers recognize the need to find creative ways to overcome water problems that will likely only intensify as populations in many parts of the West continue to grow.

In an era where bipartisan agreement is increasingly rare, Arizona lawmakers from both major political parties wisely agreed that securing water for the coming decades required swift action that was bold enough to embrace an “all of the above” type approach, which means local governments and potential public and private partners will not be limited in looking for ways of potentially delivering innovative solutions to secure and save water.

Modern technology has provided the means to make sure there can be enough water to sustain populations all over the world, including in dry, fast-growing environments like the Western United States. While some methods are still quite expensive and not always practical at scale, potable water can now be generated from almost any potential source, including seawater and even raw sewage.

For Western states to meet their growing populations’ water needs, they will need funding, the flexibility to seek a wide variety of projects, and a determination by lawmakers and local leaders to pursue the right arrangements to structure those critical projects and operate and maintain them for decades.

Managing and operating water projects comes with inherent risks. For example, cities in the Eastern United States have dealt with deferred maintenance issues with their aging municipal water systems. Needed repairs and upgrades that have been put off for years become increasingly expensive and difficult for governments and taxpayers to fund.

Long-term leases and public-private partnerships with clear contracts and accountability can be effective in shielding taxpayers from the financial risks of building and maintaining many expensive water infrastructure projects. Governments can transfer the risks to private companies better capable of managing those risks.

While Western states and the federal government have made efforts to plan for higher water demand and reduced supplies from traditional sources, much work remains to be done. Arizona made a critical step in passing legislation earlier this year that gives the state’s local water systems varied and valuable tools to help manage water acquisition, conservation, and conveyance. Arizona’s legislation saw nearly unanimous support in both legislative chambers and other states might find it useful to adopt a similar approach as they seek to secure water for the future.

The post Western states facing water cuts should look at Arizona’s recent water legislation appeared first on Reason Foundation.

With the state’s elected leaders prudently setting aside more than $500 million for water augmentation and conservation projects and overhauling the state agency responsible for financing water infrastructure in the closing days of the legislative session, Arizona’s robust tradition of using public-private partnerships (P3s) to deliver critical water investments appears set to enter a transformative new phase. 

The state’s economy today would not exist without the legacy of major waterworks like the Central Arizona Project or Salt River Project’s network of dams, reservoirs, and canals—projects built with extensive collaboration between federal, state, and private entities. Cities like Phoenix have also used public-private partnerships to deliver major new water and wastewater infrastructure.  

Financing water infrastructure is complex, but the fundamental issue for Arizona is simple: There aren’t enough traditional tax or ratepayer dollars today to deliver the future water infrastructure Arizona needs.

Offshore desalination plants, new reservoirs, and multistate pipeline agreements are among the types of promising—but costly—new-build water supply projects that have captured the minds of policymakers.

These projects could easily cost billions of dollars on their own and, back in 2013, the U.S. Environmental Protection Agency estimated the state would need $7.4 billion by the mid-2030s just to improve, repair, and upgrade existing water infrastructure, a figure that excludes costly expansions needed to accommodate population growth.  

Public-private partnerships provide opportunities to overcome many of the water infrastructure challenges that Arizona faces, including sourcing, conveyance, and treatment. They have been used extensively around the world to ensure water systems and treatment facilities are financed, built, operated, and upgraded in ways that minimize taxpayer exposure. 

When government water agencies enter partnerships designed to manage major financial and operational risks, they shield taxpayers and users from unexpected repairs and other costly problems.  

While water P3s typically involve large projects with high upfront costs, they also include decades-long commitments to operations and maintenance that government agencies typically lack the resources to do alone, resulting in lower operating costs over the long term. 

Private partners are on the hook for decades for managing the systems under performance-based contracts, as well as handing managed assets back to government owners in good shape. Contracts designed to protect the public interest while outlining clear terms for project delivery give partner firms the incentive to find value through the right capital investments that balance cost and quality.  

Some major P3 investments are being used to secure and deliver water from new sources to accommodate population growth. In 2016, fast-growing San Antonio, Texas, entered a 30-year, $923 million P3 to deliver up to 50,000 acre-feet of water per year via a new 140-mile pipeline to provide about half of the water needed to meet future population demand.

The partnership puts the risks of securing the water on the private partner responsible for negotiating with local landowners to secure drinking water supplies, as well as the risk of building and operating a 140-mile pipeline to deliver the water to the city from its watershed source. The project was financed with loans taken out by the private partner, which will be repaid by the city over several decades from collected user fees.

Santa Clara, California, after an unsuccessful attempt a few years back, is close to finalizing a similar 30-year, $600 million public-private partnership that would secure water from multiple sources. 

Just as Arizona’s water challenges aren’t confined to sourcing clean water, P3s can be and have been used to overcome numerous ecological and environmental challenges. Chicago, Atlanta, Baltimore, and many large cities have partnered with private firms to deliver and operate wastewater treatment and processing facilities to help prevent massive pollution problems, often to comply with EPA and state consent decrees.  

Opportunities also exist to encourage land ownership practices through P3s that reduce the strain put on water and sewer infrastructure: Prince George’s County in Maryland has worked with landowners and developers to integrate more porous ground surfaces capable of diverting stormwater from the area’s overburdened sewer systems. And San Mateo, California, is in the process of exploring an advanced water treatment P3 that can keep clean water in reserve for droughts and other hazardous conditions. 

Innovations in leak detection, a problem that results in 1.7 trillion gallons worth of lost revenue for water systems each year, are also becoming a source of water agency contracting, as technology allows detection using acoustics without digging.  

With the Arizona state legislature setting aside a major down payment for critical water projects and simultaneously expanding the state finance agency’s toolkit to deliver them the key to success will be giving governments the greatest flexibility to enter long-term public-private partnerships designed to increase water supplies through acquisition, treatment, conservation and more. 

Arizona’s continued economic success will require effective partnerships between public, private, and stakeholder interests to secure the state’s clean water future in a fiscally responsible way going forward.  

A version of this commentary first appeared in The Arizona Republic.

The post How to maximize Arizona’s water investment appeared first on Reason Foundation.

California Gov. Gavin Newsom, noting years of drought in the state, harshly criticized the rejection, saying, “We need more tools in the damn tool kit.”

The commission claimed it was worried about higher water bills for the area’s lower-income residents, impact on marine life near the facility, and reduced public access to the shoreline, especially during the construction period. It remains to be seen whether those objections will also defeat the proposed Doheny Beach desalination facility in southern Orange County despite its seemingly initially favorable reception from regulators. But even if the Doheny plant is approved, it would provide only 10% of the water that the Huntington Beach facility would’ve provided.

The Coastal Commission’s objections to larger facilities are out of touch with numerous other countries pursuing desalination at scale. Australia has five major desalination plants with more under development. Spain has hundreds of smaller desalination plants providing water for industry, agriculture, and drinking. On El Hierro, in the Canary Islands, desalination plants are powered by wind energy and hydroelectric power, demonstrating how Spain is addressing climate change and water security.

Last year, Singapore opened its fifth desalination facility and now meets about 30% of its water requirements from purified seawater. Its government is also experimenting with new technologies that reduce desalination’s energy consumption sharply.

Israel’s success with desalination is well known. It has five operating plants and two more under construction. Once all seven plants are online, they will collectively provide enough fresh water to meet 85%-to-90% of Israel’s municipal and industrial water requirements.

The world’s largest desalination plants are in Saudi Arabia and the United Arab Emirates. The Ras Al Khair plant in Saudi Arabia can produce 228 million gallons of water daily—more than four times the volume processed by the facility in Carlsbad, which remains California’s only major desalination plant.

These numerous examples suggest an overall pattern: countries with high per capita income, insufficient rainfall, and a seacoast are increasingly investing in desalination. But California, despite years of drought and its long-term water needs, is not following this global trend. And even within the United States, California is becoming an outlier.

This year, Arizona Gov. Doug Ducey proposed an ambitious plan to increase his state’s water supply. Under Gov. Ducey’s plan, Arizona would fund two desalination plants on the Sea of Cortez in northern Mexico. The desalinated water would be used in Mexico in exchange for Arizona being allowed to increase its use of Colorado River water, which is now limited by a binational agreement that reserves a portion of the water for Mexico.

If California officials cannot get comfortable with building more desalination plants in the state, they might consider participating in the Arizona project. Or, perhaps they could work on a similar deal with the Mexican state of Baja California, which had to cancel its own desalination project in 2020 due to the declining value of the Mexican peso. If California agreed to buy a portion of the water purified by the proposed facility in Rosarito, about 15 miles south of the border, perhaps the economics would work for everyone.

While it is true that desalinated water is much more expensive than groundwater or snowmelt piped in from the Sierra, this cost needs to be put in perspective. The estimated cost of water from the Huntington Beach desalination plant would have been $2,900 per acre-foot, which works out to just under one cent per gallon. This is a tiny fraction of the cost of bottled water, recently estimated to average $9.60 per gallon.

With many of the state’s politicians warning of worsening climate change and severe droughts, California shouldn’t be rejecting a sustainable opportunity to buy water for a penny per gallon.

A version of this commentary originally appeared in The Orange County Register.

The post California should embrace large-scale water desalination projects appeared first on Reason Foundation.

EPA assigns water providers violation points based on a complex formula outlined in a 2009 memo on enforcement targeting to ensure water “systems comply with the requirements of the Safe Drinking Water Act.” It describes its violation point system as follows: 

The enforcement targeting formula is the basis for the enforcement targeting tool that identifies public water systems having the highest total non-compliance across all rules, within a designated period of time. A higher weight is placed on health-based violations (including treatment technique and maximum contaminant level violations). The formula calculates a score for each water system based on open-ended violations and violations that have occurred over the past five years but does not include violations that have returned to compliance or are on the ” path to compliance” through a specified enforceable action. 

The accompanying map shows data for over 900 city- and county-owned water providers across the United States. Dedicated water districts are not included in this analysis. Dot colors on the map reflect the net income or loss per resident and the number of water quality violation points the water providers have accumulated. The red dots on the map reflect providers with some combination of substantial financial losses or many violation points while green reflects positive net income and/or relatively few violations. 

Three municipal water providers serve as good case studies for relatively poor performance across these two metrics.  

Lindsay, CA 

Lindsay is a small city located in California’s Central Valley. About a third of its residents live in poverty and per capita income is less than half of the state’s average.  Lindsay has suffered long-term fiscal distress as documented in a 2021 report by the State Auditor’s Office and this fiscal distress has impacted the city’s ability to provide safe drinking water to residents. 

As the California State Auditor Elaine Howle observed in her summary: 

Lindsay has improved the condition of its general fund over the past several fiscal years…because the city forgave more than $6 million in loans from restricted funds to its general fund, a violation of Proposition 218, which restricts the use of certain local government funds. This unlawful action has exposed the city to possible litigation from taxpayers and utility ratepayers, and it obscures what we estimate to be a general fund deficit of more than $3 million as of June 30, 2020, instead of its apparent surplus. 

Because of both Lindsay’s loan forgiveness and the fact that it has not regularly updated the fees and rates it charges for city services and utilities, it lacks resources in some of its utility funds. The city’s water fund recently incurred a nearly $1 million deficit and is unable to pay for necessary infrastructure projects… 

In fiscal year 2020, Lindsay's municipal water fund reported a loss of $195,000, or $14 per user, and had no cash reserves. Without available financial resources or positive cash flow, the city’s water system does not have the resources to tackle water contamination issues. The city’s water system has been repeatedly cited for providing water with excessive levels of two categories of disinfection byproducts: Total Trihalomethanes (TTHM) and Haloacetic Acids (HAA5).  According to the city’s 2020 Annual Drinking Water Quality Report: 

The TTHMs and HAA5s were found to be out of compliance during 2020 and studies have been completed and identified the options available to correct the violations.    The City is pursuing funding to construct improvements. Quarterly sampling and public notification are in place until the violation is corrected. 

The report goes on to note that some people who drink water with high TTHM levels over many years “may experience liver, kidney or central nervous system problems, and may have an increased risk of getting cancer,” while excess HAA5 intake over many years may also be a cancer risk. 

Lindsay has not imposed a water rate increase since 2015 and does not expect to do so until it completes multiple studies. Meanwhile, residents are obliged to choose between bottled water or taking the risk of bladder cancer due to long-term consumption of disinfection byproducts. 

Lemoore, CA 

Fifty miles west of Lindsay, the city of Lemoore is also struggling with disinfection byproducts in its municipal water supply even though it is in a stronger financial position to address the problem. The city is fully reliant on groundwater, which has naturally-occurring compounds that react with chlorine to produce TTHMs. Lemoore's city water exceeded TTHM health guidelines in 87 of the 88 samples analyzed between 2014 and 2019. 

In fiscal year 2020, Lemoore’s water fund reported a net income of $3.75 million, or $114 per resident. The city also reported substantial general fund reserves and a positive unrestricted net position—two indications of strong overall fiscal health. 

In March 2019, the city issued $27.8 million in water revenue bonds to finance the construction of new water treatment plants, an additional well, and a storage tank. It then approved a design-build contract with J.R. Filanc Construction to create the new facilities while also contracting with AdEdge Water Technologies to remove TTHM’s from its chlorinated groundwater using a combination of ozone, activated carbon, and ion exchange. 

Unfortunately, the city’s initiative suffered a severe setback in June 2021 when a gas explosion destroyed the city’s new water tank, killing a J.R. Filanc employee and injuring a city worker. 

Aiken, SC 

Unlike Lindsay and Lemoore, the municipal water in Aiken, SC, did not contain contaminants above legal limits, although its TTHM levels usually exceed 0.15 parts per billion, which is the health guideline published by the Environmental Working Group. Aiken has instead been cited for various procedural violations including failure to maintain a sanitary control area of at least 100 feet around one of the city’s wellheads, employing a system operator lacking the required license grade, and not conducting tests to ensure that fire hydrants have adequate water pressure. 

Aiken has a combined water and sewer fund that reported a net loss of $2 million in fiscal year 2020, amounting to about $48 per resident. But the fund had over $10.5 million of cash on hand, suggesting that resources are available to address the procedural issues found by state inspectors. 

Conclusion 

Every town, city, or county that operates water, sewer, or stormwater systems will continue to face challenges in the coming decades. Larger, older cities with declining populations will be especially challenged, as their infrastructure will require significant investments while their ratepayer bases and (likely) bond ratings fall. But even fast-growing cities will face sourcing and compliance challenges as treatment facilities must be expanded or created to maintain compliance standards with larger demands of water and sewer infrastructure for ratepayers. Finding the right people to operate those systems and facilities is becoming a greater challenge, too. 

While hardly a definitive means to identify all potential problems, our modest effort to cross-tabulate financial and compliance data to yield a combined analysis presents a fuller picture of municipal water system challenges and potentially helps identify problems mentioned earlier. While those challenges will affect municipalities differently and unevenly, more forward-thinking and openness to contracting and public-private partnerships in municipal water systems will be required by agencies to ensure systems operate safely and effectively. 

The post Municipal water systems show wide variations in quality and financial results  appeared first on Reason Foundation.

Many of us don’t often think about the vast resources required to ensure our tap water remains clean and our sewage is properly diverted. But inadequate water, wastewater, and stormwater infrastructure contribute to the approximately 900 billion gallons of clean water wasted by household leakage every year, according to the U.S. Environmental Protection Agency. A 2013 report from the Center of Neighborhood Technology estimates 2.1 trillion gallons of clean water is lost every year, mostly from a combination of leaking and broken pipes. 

Wastewater and stormwater systems have their own problems; cities with combined (wastewater/stormwater) sewers discharge billions of gallons of diluted sewage and industrial wastewater into waterways each year. The EPA estimates a minimum of 23,000–to-75,000 overflow discharge events occur in any given year from sanitary (not combined with stormwater) sewer systems.

Many systems are falling behind from a technological standpoint, relying on an excess of manual labor to read meters and perform other tasks that could be partially or fully automated.

Finding answers to the structural and technical problems will be extremely costly—$600 billion in the next 20 years, the EPA says—and seeking additional equity goals add to those costs by lowering the ratepaying base. Getting all of these things right will require innovation, extensive education and training.

Unfortunately, the equity goals sought by water-for-all proposals are often tied with blanket opposition to outsourcing and privatization of municipal water systems. Yet, the main benefits the private sector brings through contracting include state-of-the-art practices, innovation, and improved technology—the types of solutions needed to upgrade, modernize and maintain water systems. 

Some jurisdictions are utilizing the private sector’s expertise and efficiency.  Atlanta (operations and management), San Antonio (water delivery), Milwaukee (wastewater treatment), and many other cities continue to renew contracts with private companies to realize their water goals at lower costs, accumulating savings that are passed on to customers. 

Moreover, accessing the innovation, knowledge, financing, and construction capacity to meet the environmental and equity challenges of municipal water will often require contracts with private sector companies.

Baltimore’s private water ban went into effect last year, but the city’s many failures, as documented by the Inspector General, required contracting anyway. The Inspector General report noted late last year that the amount of “fraud, waste, and misconduct” cost “millions of dollars in lost water and sewer revenues,” “thousands of digital water meters…are not fully functional,” and over 8,000 tickets of about 12,000, mostly concerning “zero-read” (not charging customers) account-related issues, remained unresolved for over a year. 

The COVID-19 pandemic has exacerbated Baltimore’s shortcomings, as the 63 Meter Shop employees, who install, replace, and repair all 400,000 water meters in the city and county, were placed on paid leave in March 2020. By the Inspector General report’s release in December 2020, only 18 had returned to work, of which only 11 had “the training and ability to handle meter-related tasks…includ(ing) reading meters,” while also being confined to the use of a single vehicle. 

As a result of the city’s reduced Meter Shop, last October the county entered an emergency contract with a private firm to provide monthly readings for 210,000 meters. The city, too, despite its ban, entered over $5.7 million in water contracts last year, mostly related to repair, replacement, billing, and related software. 

The water equity advocates achieved another self-debilitating victory in Baltimore this January when an attempt to outsource the Meter Shop itself was defeated. Instead of cutting costs and improving revenues through better trained and fewer staff, Baltimore is ensuring its ratepayers get the worst of both worlds: uncollected revenues from ineffective meters and a bloated, ill-trained workforce to manage the solution. Baltimore claims the employees will be properly trained to improve operations, but even getting meters functional enough to bill customers will likely be a steep uphill climb for the city to manage by itself.

Many water agencies rely on contracting with private companies because they see advantages in having a private sector company fulfill duties the public expects of its agencies. When agencies are open to innovative solutions, contracting can bring considerable value to the building, operating, repairing, and replacing of water-related infrastructure.

That value actually makes equity-focused goals more achievable. 

Water equity advocates hope to achieve universal ratepaying assistance for low-income customers, as well as a ban on shutting off water services of those who cannot afford the bills. While admirable, those goals put even more pressure on municipal water agencies to provide reliable and expensive services with an even smaller revenue base to pay for them. Contracting with experienced private companies can provide effective and accountable solutions to help relieve that pressure, which is why water equity advocates should embrace private sector contracting, not seek to ban it entirely.

The post Public-Private Partnerships Can Help Achieve Water Equity Goals appeared first on Reason Foundation.

While private sector participation in public sector infrastructure should always be carefully monitored and managed to protect taxpayers’ interests, demanding that private actors exit the areas of public water and sanitation management is not only short-sighted but also makes it more difficult for governments to provide affordable water and sanitation services.

Critics of water privatization point out that shortsightedness in the 20^th century led most government leaders to see clean water as a “limitless resource available to all,” but this mentality has necessitated the need for substantial innovation in the municipal water space. Replacing aging infrastructure, complying with extensive regulatory oversight, expanding capacity for new developments, detecting and fixing breaks and leaks, diverting stormwater, and extracting valuable resources from wastewater are just a few of the adjustments municipalities have made.

When locales cannot engage private entities to help manage these changes, municipalities are left retaining the risks of doing so alone.

Governments are usually ill-equipped to manage all the changes and risks that come up while operating and maintaining water-related systems by themselves. Years of deferred maintenance in water infrastructure means that needed improvements will be costly, especially when you consider the federal and state-level environmental mandates that systems need to comply with. According to a 2012 report from the American Water Works Association, over $1 trillion is needed over the next 25 years for merely expanding infrastructure for growing populations and replacing components past their useful life.

The private sector has offered innovative solutions to better manage the risks of operating public water systems and will continue to provide them. Profit motives in the municipal water sector are not a moral wrong that needs to be corrected. Rather, the private sector can often provide a lifeline for governments trying to walk the tightrope of balancing affordability and reliability.

Public Works Financing’s June 2017 issue identified many cities, both large and small, that have benefitted from contracting with the private sector for water infrastructure projects. The publication found Tampa saved an estimated $85 million on a 15-year water public-private partnership, as well as saving 50 percent compared to its in-house costs over a 30-year deal on their desalination plant. Seattle saved a combined $120 million on separate projects entered into 1998 and 2001, with savings of 47 percent and 31 percent over in-house services, respectively. Bessemer, Alabama, saved a reported $100 million on the 20-year project it entered into in 1997. And Pawtucket, Rhode Island, saved $37 million on its 20-year water project. Nassau County, New York, expects $378 million in savings just from contracting out operations and maintenance for 20 years.

Even when cost savings are not reported, many of the largest cities in the U.S. have chosen to contract out water and wastewater infrastructure operation and maintenance, as well as to rely on privately-operated (and sometimes, owned) treatment plants and other facilities for wastewater, sludge treatment and other complementary services. Atlanta, Baltimore, New Orleans, Philadelphia, Phoenix, and San Diego are a few of the cities that have done so.

While it may be true that water privatization and outsourcing can frequently come with initially increased rates for consumers—as companies step in to address decades of undercharging and deferred maintenance, rate hikes are typically needed to start to repair and improve the water systems, whether they are in public or private hands.

Typically, long-term concessions and leases of water systems to private companies are designed to minimize rate hikes through effective use of capital and maintenance schedules. Counterfactually, a lack of access to private capital and resources is likely to result in even higher rates since resources for agencies limit the extent to which a long-term “lifecycle” approach to infrastructure can be adopted. By transferring the risks of financing, maintenance, operation, and repair to outside entities in long-term contracts that incentivize effective performance, government agencies can sometimes soften the sticker shock of costly improvements over time, keeping infrastructure in consistently good operating condition — as opposed to deferring maintenance and fixing things as they break.

Undoubtedly, supplying every citizen with clean water, regardless of ability to pay, is a noble goal, but denying the private sector participation makes it unrealistic many financially-strapped governments will be able to meet that goal over the long-term. Maintaining the delivery of clean water, the sanitary diversion of wastewater, and the safe diversion of stormwater for citizens in an efficient manner is not simple or without considerable cost.

Declaring water and sanitation “human rights” is easy. Building, funding, maintaining, and operating those water systems are more complicated. Denying municipalities the option of working with private sector leaders in the industry just makes effective water infrastructure management costlier and more difficult, which ultimately hurts customers and taxpayers.

The post Private Sector Water Management Solutions Help Governments Deliver Affordability and Reliability appeared first on Reason Foundation.

As the state considers its response to the pandemic and how it can help the tourism industry recover, it should ensure that another problem does not further deter visitors from going to Florida’s legendary waterways.

Florida has recently suffered from a wave of blue-green algae blooms triggered by nutrient pollution from urban and agricultural sources. In addition to killing wildlife, the algae present health hazards to humans including irrigation the gastrointestinal tract, liver, nervous system, and skin. Some research even links long-term exposure to the development of neurodegenerative disorders like Amyotrophic Lateral Sclerosis (ALS) and Alzheimer’s disease.

Blooms in 2016 and 2018 were severe enough to cause states of emergency to be declared, generating negative headlines across the country, something Florida can hardly afford over the next few years as it tries to recover from the current recession.

At the center of Florida’s water quality issues: Lake Okeechobee and the wider Everglades region. Starting in Central Florida, nutrients (nitrogen and phosphorous) flow through the Kissimmee River and into Lake Okeechobee. Historically, water would spill over the southern end of the lake before flowing through Everglades to the southern end of the Florida Peninsula. The water was naturally filtered as nutrients were taken up by a vast “river of grass,” giving rise to one of the most diverse ecosystems on the planet.

U.S. Army Corps of Engineers

Beginning in the 1850s, a series of drainage and infrastructure projects altered the natural flow of water to make way for human settlements. Today, a network of over 2,200 miles of canals and 2,100 miles of levees operated by the South Florida Water Management District (SFWMD) blocks water from flowing south of Lake Okeechobee. While this infrastructure provides flood control for millions of Florida residents and has enabled tremendous economic growth, it results in enormous quantities of nutrient-laden water being flushed to the coasts each year. This flow of nutrients fuels blooms along the Caloosahatchee and St. Lucie rivers, damaging local economies, and driving away visiting anglers.

After recognizing the harmful effects of altering the natural flow of water through the Everglades, Congress authorized the Comprehensive Everglades Restoration Plan (CERP) in 2000. Widely regarded as the single largest ecosystem restoration plan in the world, the strategy consists of massive infrastructure projects with construction timelines spanning decades. Thus far, state and federal authorities have spent nearly $4 billion restoring wetlands and constructing massive water storage and treatment infrastructures. Despite the scale of these investments, the majority of the 50+ projects planned under CERP are far from complete.

The most immediate action Florida can pursue to address the issue is to expedite restoration efforts and invest in improved water quality monitoring. There are currently insufficient systems in place to determine the impact of completed projects, engage in strategic project selection, and assess progress toward water quality goals. Developing a more robust monitoring program would help achieve these goals while making the most effective use of scarce state resources.

In the longer term, Florida must address agricultural and urban sources of nutrient pollution. Agricultural runoff, primarily from dairies and pastures north of Lake Okeechobee, is the largest source of nutrient pollution the causes algal blooms. Producers in the Okeechobee watershed are currently required to either implement “Best Management Practices” developed by the Florida Department of Agriculture and Consumer Services to reduce runoff or demonstrate that they are meeting water quality standards.

According to SFWMD, Best Management Practices resulted in a 70 percent phosphorus reduction south of Lake Okeechobee in 2017. However, environmental groups challenge these figures because SFWMD relies on best-case-scenario modeling to produce the estimates. Improved water quality data and monitoring would provide greater clarity as to the effectiveness of Best Management Practices and help identify areas for further improvement.

In urban areas, wastewater runoff from failing septic systems and overwhelmed sewer systems also contributes to the problem. Many of Florida’s estimated 2.6 million septic systems will need to be replaced or converted to sewer systems in the coming years. This will come at a great financial cost to households and municipal governments. As more homes are connected to sewer systems, additional investments will be required to expand system capacities. So that infrastructure investments can be more targeted improved monitoring would help form a more accurate picture of the areas where wastewater contributes to nutrient pollution most heavily.

Avoiding severe blue-green algae blooms will be essential to Florida’s economic recovery from the current recession. While substantial restoration efforts began two decades ago, there is still much progress to be made. Investing in better water quality monitoring will help accomplish the short-term goal of expediting key infrastructure projects while also informing evidence-based decision-making in the longer term.

The post Tackling Florida’s Blue-Green Algae Crisis Is Going to Be a Key to Economic Recovery appeared first on Reason Foundation.

Improved water management and algal bloom mitigation are necessary to sustaining Florida’s growth. Economic growth, public health, and quality of life in Florida depend on the quality, quantity, timing, and distribution of water resources. Addressing blue-green algal blooms in Florida requires action at the private, municipal, state, and federal levels.

Increased nutrient levels, combined with sunlight and slow-moving water, provide the necessary conditions for algal blooms to form. Non-toxic algae can kill fish by clogging their gills and kill plant-life by blocking sunlight from reaching below the surface. As the algae die, their decomposition consumes large amounts of oxygen in the water which suffocates fish and other marine animals. This oxygen depletion is known as hypoxia and leads to “dead zones” in oceans, lakes, and rivers. Large algal blooms can result in thousands of dead fish whose decomposition further pollute water systems and contribute to further algal growth. In addition to the effects of non-toxic algal blooms, toxic blue-green algae can accumulate through the food chain as smaller organisms consume algae and are then consumed by larger organisms. Severe blooms can kill wildlife and have serious health consequences for humans. According to state officials, contact with or accidental ingestion of the algae can cause irritation of the gastrointestinal tract, liver, nervous system, and skin. Research also suggests that long-term exposure to blue-green algae through the consumption of aquatic organisms may be linked to the development of neurodegenerative disorders like ALS and Alzheimer’s.

Algal blooms and their associated health risks could hurt tourism along with large segments of Florida’s economy. Tourists list Florida’s beaches as their primary reason for visiting—more often than theme parks, retail, dining, and nightlife. When tourists visit Florida, they stay in hotels, eat at restaurants, and shop—contributing to the state’s overall economic activity. If algal blooms deter tourists, it could have rippling effects throughout the economy. Florida is also known as the sportfishing capital of the world. In the year 2011 alone, over 1.9 million residents and 1.2 million visitors fished in Florida waters, but algal blooms are threatening Florida’s sportfishing industry and the economies of many coastal communities. Marinas, boat charters, and bait shops have struggled as deteriorating water quality continues to reduce fish populations and drive away visiting anglers.

Blue-green algal blooms occur in water bodies all around the state, including the St. Johns and Loxahatchee rivers, but Lake Okeechobee and the wider Everglades region are by far the largest and most complex components of Florida’s water quality issues. Blooms are largely caused by nutrient runoff into the lake from Orlando and Kissimmee that then flows to the coasts through the Caloosahatchee and St. Lucie Rivers. Severe algal blooms have become more frequent over recent years causing state of emergency declarations in 2016 and 2018. These episodes were largely triggered by major storm events and higher-than-average rainfall in those years. In July 2018, the National Oceanic and Atmospheric Administration reported that up to 90 percent of Lake Okeechobee contained the toxic blue-green algae. Later that summer, areas along the Caloosahatchee and St. Lucie rivers also experienced algal blooms, which led to environmental and economic damages in the surrounding communities.

Florida lawmakers passed the sweeping Clean Waterways Act in 2020 which addressed many of the underlying causes of algal blooms. However, there is broad consensus that additional action is necessary. Disagreement over who is responsible and the best approach to mitigation will likely stall further management efforts. Environmental groups point to agricultural producers and the disruption of natural water flows through the Everglades. Others cite urban and suburban runoff including fertilizers and untreated wastewater. The truth is most likely a combination of all these factors. This report aims to identify the causes of water degradation, mechanisms for mitigation, and how to fund the necessary interventions. The findings and recommendations of the report closely align with the first round of recommendations from Florida’s recently appointed Blue-Green Algae Task Force.

Full Policy Brief: Solving Florida’s Blue-Green Algae Bloom Crisis

The post Solving Florida’s Blue-Green Algae Bloom Crisis appeared first on Reason Foundation.

Blue-green algae blooms affect freshwater bodies throughout Florida, but Lake Okeechobee and the wider Everglades region present the largest and most complex environmental challenge. Over a century of misguided drainage projects in the region has altered the natural flow of water into and out of Lake Okeechobee. As a result, large quantities of water carrying algae and excess nutrients are discharged from the lake to the coast through the Caloosahatchee and St. Lucie rivers.

A massive restoration effort is underway to reduce the need for these harmful discharges and provide additional water treatment, but tackling Florida’s water quality issues requires the state to address sources of nutrient pollution directly. The two bills signed by Gov. DeSantis are a strong first step in that effort.

One of the bills, HB 1091, increases penalties for sewage spills which will provide stronger incentives for municipal governments to upgrade aging sewer infrastructure. Sewage spills are a significant source of nutrient pollution that contributes to algal blooms. Nearly 23,000 spills across the state released 1.6 billion gallons of wastewater into the environment between 2009 and 2019—over 370 million gallons of which were completely untreated. Approximately 980 million gallons of this wastewater, including 220 million gallons of raw sewage, flowed into Florida’s waterways.

The other bill, SB 712, incorporates several recommendations from the governor’s Blue-Green Algae Task Force (which has been meeting for the last year) and addresses a wide range of nutrient pollution sources including wastewater, septic systems, and agriculture.

Regarding wastewater, SB 712 creates a wastewater grant program that will provide funding for sewer infrastructure projects and efforts to upgrade or convert septic systems. If the Department of Environmental Protection determines that wastewater contributes at least 20 percent of nutrient pollution in an area, the bill requires local governments to develop wastewater treatment plans in order to meet established water quality standards.

The new law also transfers oversight of septic systems from the Department of Health (FDOH) to the Department of Environmental Protection (FDEP). This change is significant because in the past FDOH oversight focused primarily on pathogen reduction rather than preventing nutrient pollution. Similar to wastewater treatment plans, local governments will be required to develop septic remediation plans in areas where septic systems contribute at least 20 percent of nutrient pollution.

Agriculture is the largest source of nutrient pollution in the Lake Okeechobee watershed. The primary method for reducing nutrient runoff is the adoption of agricultural “Best Management Practices” (BMPs) developed by the Florida Department of Agriculture and Consumer Services. Producers in protected watersheds are required to either implement BMPs or conduct monitoring to demonstrate compliance with water quality standards.

SB 712 strengthens the BMP program by requiring onsite inspections to ensure that BMPs are achieving nutrient reduction goals. Moreover, producers enrolled in BMPs are now required to provide regulators with detailed documentation of fertilizer use.

Many of the regulatory provisions included in SB 712 will cost at least $1 million over the first five years of implementation and will, therefore, require legislative ratification each year. State budget cuts in response to the COVID-19 pandemic, recession, and decreased tax revenue could jeopardize these provisions and other funding intended for wastewater projects.

Although these bills make substantive changes to Florida water policy, environmental groups have criticized the legislation for doubling-down on failed regulatory schemes and not going far enough to target agricultural nutrient sources. Regardless of their shortcomings, these reforms are still a strong step toward addressing Florida’s water quality crisis. However, legislators shouldn’t close the book on Everglades restoration­­––there is still plenty of work to be done.

The post Florida Legislation Addresses Toxic Blue-Green Algae Blooms appeared first on Reason Foundation.

Those concerns are reaching a boiling point over an application to renew a water-use permit related to a water bottling plant along the Santa Fe River. The permit allows the Seven Springs Water Company to pump water out of Ginnie Springs which is then sold to Nestlé, the world’s largest food and beverage company, for bottling. The Suwannee River Water Management District was set to vote against renewing the permit on March 10, but a last-minute petition by Seven Springs postponed the decision for several months.

Since the 1970s, the Wray family has owned the land surrounding Ginnie Springs, operating a recreational park on the land. The family also owns Seven Springs and held a permit to extract over 1.15 million gallons of water a day from the springs since 1998. When the permit expired in December 2019, Seven Springs filed an application with the Water Management District for renewal. 

Nestlé, the company behind the Zephyrhills and Pure Life water brands, recently acquired a nearby bottling plant in the city of High Springs with plans to purchase water from Seven Springs. The plant was formerly owned and operated by several other water bottling companies, including Coca-Cola, which also bought water from Seven Springs. 

According to the Florida Springs Institute, the Santa Fe River and springs are experiencing negative impacts from a variety of stressors including reduced discharge, excessive recreation, and aquatic plant management activities. While the Floridian Aquifer is vast and deep, only about 20 feet of water near the top of the aquifer is available to feed the springs. Even relatively small declines in the water level can, therefore, reduce or halt spring flows altogether. However, the impact of Seven Springs is considerably less than groundwater withdrawals of agricultural producers and municipal utilities in the area. 

Over the 20 years that Seven Springs held its permit, the company never came close to extracting the daily limit of 1.15 million gallons. However, Nestlé is in the process of expanding the bottling facility’s capacity to increase production volumes to the full 1.15 million gallons a day. Even with plans to increase withdrawals, 1.15 million gallons is less than half of one percent of the average flow through the Santa Fe River near the Ginnie Springs site. Nevertheless, the prospect of the permit being renewed caused an outcry from groups concerned about the environmental impact of withdrawals on the springs and the connecting Santa Fe River. 

A major point of contention is the relatively low cost that Seven Springs pays for the right to withdrawal water before selling it to Nestle. In fact, the only cost to Seven Springs is a $115 permit application fee. Environmental groups are advocating for reforms that would impose greater costs on water withdrawals.   

In response to calls for reform, Florida legislators considered levying taxes on water used for bottling. A bill (SB 1098) introduced by Sen. Janet Cruz would have required the Florida Department of Environmental Protection to collect a 5 cent-per-gallon tax on water extracted for the production of bottled water. The revenue raised by the tax would be deposited into the Water Protection and Sustainability Program Trust Fund. Another bill (SB 1112) from Sen. Annette Taddeo would impose an excise tax of 12.5 cents per gallon on bottled water operators. Both of these bills were postponed after failing to gain traction among state lawmakers. The bills didn’t gain traction during the most recent legislative session. 

While there are legitimate concerns about the impact of large-scale withdrawals on the environment and the sustainability of water supplies, the solution is not to impose arbitrary fees or single out water bottling companies. Rather, Florida should reconsider its approach to water management and permitting. A market-based approach would treat all users equally and result in prices that are more accurately determined by supply and demand.

In a market system, users—including agricultural producers, municipal utilities, and water bottling companies—would be allocated initial rights to extract specified amounts of water commensurate with their land ownership. Those allocations would be treated similarly to property rights. For example, users would be free to sell portions of their allocations to other users. This voluntary exchange of water rights between users would result in market prices and encourage conservation. 

Oversight would only be required to prevent users from extracting more than their commensurate share and to ensure that withdrawals do not cause ecological harm or infringe on other users’ water rights. In effect, this oversight would serve to enforce property rights rather than determine appropriate uses of water. 

Consider an agricultural producer with the right to extract one million gallons of water per day. Under the current system, they would not have any incentive to conserve. However, if they were permitted to sell the right to a portion of that one million gallons, there would be an incentive to invest in strategies to reduce consumption. Suppose those strategies required a monetary investment. If the seller were able to recoup that investment by selling the conserved water at a profit, a rational actor would invest in conservation. 

A free market for water rights would also allow environmental groups to purchase water for conservation. In the case of the Santa Fe River, environmental groups could purchase the rights to an equal or greater amount of water to offset the withdrawals by Seven Springs. Moreover, Seven Springs and Nestlé would face a more accurate market price for water. If the price were higher than the value of the bottled water, they would not continue to operate in the area. 

Australia’s tradeable water permits provide an example of how water markets could function. Under the Australian system, water prices reflect the cost of water delivery and scarcity. In other words, prices increase in times of shortage and decrease in times of surplus. Consequently, market forces encourage conservation when it is needed the most. Adopting a similar system in Florida would help avoid conflicts over water permits and ensure a sustainable supply of water for generations to come.

The post Water Markets Present a Solution to Florida’s Water Bottling Conflict appeared first on Reason Foundation.

A recent analysis by Gatehouse Media found that nearly 23,000 spills released 1.6 billion gallons of wastewater into the environment between 2009 and 2019—over 370 million gallons of which were completely untreated. Approximately 980 million gallons of this wastewater, including 220 million gallons of raw sewage, flowed into Florida’s waterways. Reducing sewage spills will require stronger incentives for municipal governments to upgrade sewer systems and public-private partnerships could be used to offset some of the financial burdens. 

Blue-green algae blooms have plagued Florida in recent years. The toxic algae kill wildlife and can have serious health consequences for humans including irritation of the gastrointestinal tract, liver, nervous system, and skin. Prolonged exposure may even be linked to neurological disorders like amyotrophic lateral sclerosis (ALS) and Alzheimer’s disease.

The algae feed on nutrients such as the nitrogen and phosphorus found in wastewater spills and released by failing septic systems.

If these blooms continue to make negative headlines for the state, it could do serious damage to the Sunshine State’s economy, which relies heavily on tourism and inter-state migration. Florida’s reputation as the sportfishing capital of the world draws millions of anglers each year. In the year 2011 alone, over 1.9 million residents and 1.2 million visitors fished in Florida waters, supporting local marinas, boat charters, and bait shops in communities all around the state. The blooms also threaten property values and quality of life for residents living along the state’s lakes, rivers, and coastal estuaries. 

Tackling Florida’s algae crisis will require major upgrades to municipal sewer systems to reduce spills. In fact, the state’s recently-appointed Blue-Green Algae Task Force pointed to failing sewer systems in their first-round recommendations released in October 2019. The task force also concluded that many of the state’s 2.6 million septic systems will need to be converted sewer, further highlighting the need for greater capacity. Unfortunately, despite clear environmental and economic harms, municipal governments often lack sufficient resources and incentives to invest in sewage infrastructure improvements. 

Tougher penalties for spills could create stronger incentives, while public-private partnerships (PPPs) have the potential to alleviate some of the financial burdens local governments would face. The Florida legislature is currently considering legislation that would increase fines for sewage spills to $3,000 every day the spill continues. The frequency of spills over recent years suggests that the existing fines of $2,000 provide insufficient incentives to invest in infrastructure improvements. 

The nature of individual public-private partnerships would vary depending on the context and needs of different municipalities. Broadly, PPPs could be involved in several aspects of infrastructure delivery including project design, construction, financing, operation, and maintenance. PPPs are most commonly used to outsource operation and maintenance (O&M). Under O&M contracts, municipalities maintain ownership of a facility, but a private firm operates, manages, and maintains it. In some cases, systems are sold or leased to private firms. If executed properly, PPPs could reduce costs and ensure that future upgrades are made in a timely manner. 

Sewage spills and related algal blooms threaten Florida’s water and way of life, but municipalities lack sufficient incentives and resources to resolve the problem on their own. Tougher penalties combined with private investment would address these shortcomings to provide a workable solution. 

The post Greater Accountability and Public-Private Partnerships Could Reduce Sewage Spills in Florida appeared first on Reason Foundation.

Florida’s water problems boil down to issues of supply and demand.

The timing and distribution of water is often unreliable and can vary depending on weather patterns. Moreover, growth in some areas of the state is driving demand beyond the available supply while other areas have surplus water resources. The majority of the state’s water originates in the north, but the greatest demand lies in population centers in central and south Florida. In fact, 80 percent of water is located north of I-4 while 80 percent of the population resides south of the Interstate. Large quantities of water historically flowed south through the Florida Everglades, but decades of water mismanagement and misguided infrastructure projects have altered the natural flow of water south—causing ecological damage and reducing the supply for consumption.

Efforts to resolve the mismatched supply and demand for water through the political process have been met with resistance. In 2003, a report from the Florida Council of 100 recommended the formation of a statewide water board to oversee the five existing regional water management districts and send water to where it is needed most. While the plan would have allowed water-rich areas to sell their water to communities in need of additional supply, centralized water management is far from ideal. 

A better solution could come in the form of a free market for water with improved pricing mechanisms. Presently, water prices are typically set arbitrarily by government authorities. The process is consequently motivated by political considerations and results in impractically low prices which do not encourage responsible use. In fact, consumers pay less for water in the U.S. than in other developed countries including Canada, Germany, Spain, Denmark, and the United Kingdom.

If prices were allowed to fluctuate with changes in supply and demand, water could be allocated more efficiently. In times of shortage, prices would increase and create an incentive to conserve. Households could reduce consumption and save money by upgrading to more efficient appliances and water fixtures. Moreover, pricing that reflects the costs of providing water would ensure that appropriate funding is available for infrastructure maintenance, operational costs, and capital investments.  

Market-based pricing would also create incentives for private industry to develop innovative technologies. For example, the desalination of saltwater and sanitation of wastewater are growing industries with the potential to greatly expand potable water supplies. The best way to encourage their development and implementation is to provide financial incentives through markets. 

Australia is leading the way in market-based water pricing. Their system of tradable water permits results in prices that reflect the cost of delivery as well as scarcity. In the U.S., some water utilities charge seasonal rates to reflect typical variations in demand throughout the year. Others incorporate anticipated infrastructure costs into their pricing schemes, but neither of these systems relies on actual market forces. Florida should look to follow Australia’s example and embrace the idea of tradable permits to ensure that water prices reflect both supply and demand.  

The post Market-Driven Water Pricing Could Help Solve Florida’s Water Problems appeared first on Reason Foundation.

Harrisburg, Pennsylvania, for example, is considering whether or not to sell its combined water/wastewater systems to a private operator. The city announced in September it would invite four firms to make bids to buy the combined systems.

If Harrisburg decides to keep the combined systems’ ownership and operation in Capital Region Water’s  (CRW’s) hands, it would likely have to raise fees dramatically on customers or be unlikely to be able to finance needed improvements to prevent a serious environmental problem that unfortunately is too common in the U.S.: the dumping of raw sewage into the nation’s waterways. When heavy rains overburden treatment facilities, outfalls must empty waste into waterways, a process known as “combined sewer overflow.”

Harrisburg has a $300 million plan to help address the problem, but the U.S. Environmental Protection Agency (EPA) says more work is needed since the plan is projected to eliminate only about 60 percent of the raw sewage dumping into the Susquehanna River and other nearby waterways. Samples taken from those waterways have been shown to contain as much as 10 times the level of e. Coli that is deemed acceptable by the EPA. Even if the plan for this problem had been fully implemented last year, it still would have allowed around 840 million gallons of the Harrisburg region’s untreated sewage to spill into rivers and creeks, which empty into the Chesapeake Bay.

Of course, CRW’s systems also contain lots of old pipes in need of replacement, with some dating back to 1839. While CRW has made over $100 million in improvements over five years while trying to map out the system, there’s no dedicated revenue source to ensure repairs and improvements can continue.

To pay for the city’s plan, CRW plans to charge customers an annual stormwater fee of around $75 but getting the system in compliance with the EPA’s standards would take something more expensive and CRW lacks the resources to do it alone. A 2015 agreement between CRW and the EPA to help end the sewage spillage has resulted in the EPA treating CRW with kid gloves, only penalizing 20 percent (26 of 131) of the water management agency’s violations over the ensuing three years.

Given CRW’s inability to solve the problem by itself, the prospects of private sector participation in fixing the problem are appealing. A long-term lease or sale appears the best path forward for CRW. Over the long-term, CRW has shown that it does not possess the ability to fix the city’s water issues alone, much less ensure Harrisburg won’t be facing similar problems down the road. The best results are likely to come from a private partner with the institutional capacity to comprehensively tackle Harrisburg’s problems.

While critics of private water management are understandably worried about higher rates potentially being charged to customers, it is important to note the reasons for those possible rate increases. First, water agencies, like CRW, often delay or neglect to make needed investments in maintenance and upgrades. If CRW has consistently made the investments and improvements the system needed, customers would have likely experienced gradual rate increases to fund those projects. Instead, they let the system deteriorate, meaning the needed improvements to the systems become larger and more expensive.

Harrisburg’s water management problems, which affect not only local citizens but millions more downstream, will take large amounts of spending and expertise that CRW is unlikely to be able to successfully manage alone. With the water and wastewater system’s poor environmental conditions spilling billions of gallons of sewage, selling or leasing the city’s water systems appears to be the best way to solve the problems as quickly as possible.

The post Harrisburg’s Water and Wastewater Systems Need Major Investment appeared first on Reason Foundation.

Blue-green algae, or cyanobacteria, kill wildlife, poison pets, and have serious health consequences for humans. Algal blooms occur when large amounts of nutrients—originating from urban and agricultural areas—enter a body of water. Algae feed on the nutrients and grow until a slimy, green layer is formed on the water’s surface. The recent blooms originated predominately in Lake Okeechobee before spreading to the St. Lucie and Caloosahatchee estuaries.

The spread of blooms to the coasts is the result of state and federal infrastructure projects which block the natural flow of water south to the Everglades and Florida Bay. Beginning in the 1850s, wetlands in the historic Everglades region were drained and cleared for human settlement. A series of devastating hurricanes and floods in the early 1900s prompted the construction of the Herbert Hoover Dike (HHD) surrounding Lake Okeechobee and a series of canals to the east and west to divert water through the St. Lucie and Caloosahatchee rivers when water levels in the lake climbed too high.

Today, over 2,200 miles of canals and 2,100 miles of levees controlled by the South Florida Water Management District (SFWMD) regulate the flow of water in south Florida. While the HHD and other infrastructure projects provide flood protection to urban and agricultural communities in south Florida, they also alter the natural flow of water through the Everglades and contribute to the spread of algal blooms to coastal estuaries. There is wide agreement that more storage, treatment, and conveyance infrastructure in south Florida—especially surrounding Lake Okeechobee— is necessary but little progress has been made in the 20 years since the Comprehensive Everglades Restoration Plan was authorized.

U.S. Army Corps of Engineers

Among the most controversial pieces of the Everglades puzzle is the approximately 700,000 acres of agricultural land south of Lake Okeechobee (Lake 0). The area has been used for agriculture since the early 1900s and was formally designated as the Everglades Agricultural Area (EAA) in 1948. The primary crop grown in the EAA is sugarcane, accounting for nearly half the national supply of sugar.

Fertilizer runoff from agricultural areas is a major source of nutrient pollution that leads to algal blooms in Lake O. However, measures taken by producers and government authorities in the EAA to reduce nutrient pollution are highly effective at mitigating the impacts of agriculture in the area. In fact, a 2011 SFWMD report estimated that less than 10 percent of net phosphorus imports in the Okeechobee watershed originated from sugarcane production compared to 30 percent from urban areas and 60 percent from other agricultural activities mostly north of Lake O.

While sugarcane production in the EAA contributes a relatively small portion of the nutrient pollution in Lake O, agricultural lands in the area prevent more water from naturally flowing south. Environmental groups have long advocated for the state to purchase the agricultural land in the EAA and restore the natural flow of water from the lake.

In 2008, then Florida Gov. Charlie Christ planned to buy almost 200,000 acres of land from U.S. Sugar at a cost of $1.75 billion. After the recession, the deal was reduced to just 72,800 acres for $536 million before collapsing altogether in 2015.

Last month, Florida Gov. Ron DeSantis announced a new deal to pay $1,940 per acre to terminate a 1,234-acre lease of state-owned land. The land will be used to construct the EAA Storage Reservoir—the single largest water storage and treatment project under the Comprehensive Everglades Restoration Plan. Additional water storage in the EAA will allow more water to flow south thereby reducing the harmful freshwater discharges to the St. Lucie and Caloosahatchee rivers.

The buyout is expected to save the state about $16 million in construction costs by expediting the project timeline. Florida Crystals, the sugarcane producer occupying the land, enabled the deal by waiving a notice requirement which would have prevented the state from terminating the lease until at least three years after receiving a permit from the U.S. Army Corps of Engineers.

While the deal is significantly better for Florida taxpayers than previous attempts to purchase the land, buying out producers in the EAA may not be the best approach to addressing the challenges presented by the EAA in the future.

Instead, lawmakers could address the system of tariffs and subsidies that prop up the sugar industry and raise the price of land in the EAA in the first place. Federal policy effectively sets a minimum price for sugar in the US, typically well above the world market price. Moreover, the US government is required to buy excess sugar in times of surplus and resell it at a loss to ethanol producers. These backward policies cost consumers between $2.4 and $4 billion annually to the benefit of large sugar corporations. Even if sugar producers in the EAA are not the primary cause of nutrient pollution, they shouldn’t receive special treatment at the expense of taxpayers.

It is also critical that restoration efforts don’t inadvertently exacerbate the problem. Sending more water south is essential to addressing blooms in the St. Lucie and Caloosahatchee estuaries but doing so may increase the risk of spreading blooms south. Additional storage and treatment infrastructure north of Lake O to clean water before it reaches the lake could reduce this risk.

Public-private partnerships that convert privately-owned land into massive artificial wetlands, or water farms, are one possible model. Existing water farms on former agricultural land north of Lake O have led to significant nutrient reductions and are more cost-effective than other storage and treatment projects. Increased use of water farms surrounding the lake could also achieve greater storage and reduce costs while preserving the rights of property owners.

Gov. DeSantis’ actions on Everglades restoration indicate a serious commitment to cleaning up Florida’s water, but decades of neglect mean there is still much to be done. The EAA reservoir is just one of over 50 projects under the Comprehensive Everglades Restoration Plan authorized nearly 20 years ago. Massive infrastructure costs, dispersed blame, and bureaucratic red tape have largely stalled progress over that time.

Going forward, private investment, evidence-based decision making, and improved inter-governmental coordination will be key to avoiding past mistakes and achieving restoration goals in a timely manner. The future of our state depends on it.

The post How Using Public-Private Partnerships and Ending Sugar Subsidies Could Help Restore Florida’s Everglades appeared first on Reason Foundation.

Blue-green algal blooms are an increasingly common occurrence in water bodies around the state. The toxic algae cause significant ecological damage and pose health risks for humans. Blooms are caused by nutrient pollution — particularly in Lake Okeechobee. Decades of misguided infrastructure projects and water mismanagement require high-volume freshwater discharges from the lake to the coast through the St. Lucie and Caloosahatchee rivers. Nutrients are carried by these discharges, spreading algae throughout the state.

Agriculture, septic systems, wastewater treatment plants, and availability of data are among the major problems which the task force identified over the course of four meetings in the past few months. Their recommendations address these issues directly, including calls for strategic project selection and assessment of project effectiveness.

Agricultural Best Management Practices (BMPs) are the primary tool to reduce nutrient pollution from agricultural sources. BMPs include a variety of cost-effective measures producers can take to conserve water and prevent runoff into vulnerable water bodies. However, only 75 percent of producers in the Lake O watershed are enrolled in BMPs despite statutory requirements. Agricultural activity in environmentally-sensitive areas results in externalities that justify the mandatory implementation of BMPs. Enforcement has been more focused on the Everglades Agricultural Area south of the lake where BMPs have resulted in substantial nutrient reductions. The task force recommends increased enrollment in BMPs and the implementation of an onsite sampling program to assess the effectiveness of sector-specific BMPs.

Failing onsite sewage treatment and disposal systems, or septic systems, are a major source of urban nutrient pollution. The state Department of Health currently has regulatory oversight of septic systems and does not consider ecological risks. The task force recommends broader oversight by the Department of Environmental Protection and the prohibition of septic systems in environmentally-sensitive areas. Septic systems pose a unique challenge in a state like Florida, and restrictions in particular environmentally-sensitive areas may be appropriate. However, the existing regulatory framework is highly restrictive and is preventing the implementation of innovative septic systems that reduce nitrogen seepage. Regulation should be relaxed to allow systems like these in rural areas where the extension of sewer service is not feasible.

Public wastewater systems are also susceptible to failures that contribute to nutrient pollution. Over 1.6 billion gallons of sewage were spilled in Florida over the last decade — 980 million gallons of which entered the state’s waterways. The most common causes of spills are power outages and large storms. The task force recommends the identification of emergency backup power sources for all lift stations constructed prior to 2003 among other wastewater infrastructure investments. Florida’s growing population will continue to place pressure on public wastewater systems and infrastructure improvements will increasingly be necessary. Where possible, these improvements should be done through public-private partnerships to reduce public costs.

Finally, the task force made several recommendations involving improved monitoring, data collection, and project assessment. State and federal authorities have spent billions of dollars over recent decades on restoration projects, with limited assessment after completion. Restoration of Florida’s water bodies is critical to the environment, health and continued growth of the state. However, restoration should be accomplished as efficiently as possible. Improved monitoring and assessment are vital to achieving those goals. As the task force recommends, emphasis should be placed on high-impact, priority projects using a diverse portfolio of cost-efficient technologies.

The report was only the first draft of recommendations by the task force, but the repeated calls for cost-effective projects and science-based decision making were refreshing in the wake of decades of mismanagement. There was surprisingly little emphasis on the expansive set of infrastructure projects under the Comprehensive Everglades Restoration Project (CERP) which was discussed extensively during the task force meetings. Future reports from the task force may address CERP more directly. While the task force’s recommendations were otherwise sound, they should not be interpreted by lawmakers as justification for excess regulation or spending.

This column originally appeared in the Palm Beach Post.

The post Florida Task Force Makes Good Start in Tackling Blue-Green Algae appeared first on Reason Foundation.

When water mains break, the damage often affects more than water itself. In August, for example, a water main break on State Road 410 in Chevy Chase, Maryland, resulted in a sinkhole that shut down approximately a one-mile portion of the four-lane highway, requiring 800 tons of asphalt for road repairs. Just about 40 miles to the northeast in Baltimore, the website that tracks the city’s frequent water main breaks and repairs showed two breaks causing road closures on the same street during a five-day period in June.

Maryland is hardly unique in experiencing problems with aging infrastructure, which affects communities of all sizes. For example, a 2018 study by researchers at Utah State University surveyed water main breaks in locales that serve about 15 percent of the combined populations of the U.S. and Canada and found a 27 percent increase in main breaks compared to 2012. It also showed breaks of cast iron main pipes (of which 82 percent were at least 50 years old) increased 43 percent.  A 2016 study by the state of Indiana found its drinking water systems leaked 50 billion gallons of year, over 20 percent of the total supplied. And a 2010 U.S. Geological Survey study of Wisconsin’s water systems found intestinal viruses and wastewater in all its collected municipal well water samples, in a state only 17 years removed from cryptosporidiosis contamination in Milwaukee that remains the largest waterborne disease outbreak in U.S. history.

Unfortunately, local governments are learning the longer they put off repairs and the longer problems persist, the more costly they are to remedy. So how are governments going to overhaul or rebuild water systems?

Long-term agreements to manage water systems, including comprehensive public-private partnership (PPP) agreements can include designing, building, and financing new infrastructure. These deals often provide a way to avoid hitting customers with what would otherwise be steeper rates hikes. Municipalities don’t sell or lease their systems, nor do they typically enter into long-term contracts, without making some assessment that the arrangement would be better than providing those services and fulfilling those duties in-house.  In June 2017, Public Works Financing reported local governments from all over the county were experiencing cost savings by entering long-term contracts and PPPs for water and wastewater systems, including large municipalities like Atlanta, Honolulu, Phoenix, Seattle,  and Tampa Bay, as well as small municipalities such as Bessemer (Alabama), Franklin (Ohio), Lynn (Massachusetts), and Naugatuck (Connecticut).

“Our number one goal throughout this process was to find a partner who could help us stabilize rates for our ratepayers,” said Bob Willert, executive director of Delaware County Regional Water Authority (DELCORA), after making the decision to sell its wastewater system to a private company. “By partnering with Aqua Pennsylvania, DELCORA was able to develop a rate stabilization plan with an experienced operator with knowledge of the local community while also preserving all DELCORA jobs.”

And that’s an important point: if the system was going to be fixed or upgraded, rates hikes were inevitable. And the rate increases would have been larger in the absence of private sector investment.

Jim Zucal, city service director for St. Clairsville, Ohio, says the city is considering privatizing the system, “I want them to have clean, safe drinking water at a fair price and Aqua is showing us that they can do this in a clean, safe way with a limited, minimal increase.”

For many governments, a public-private partnership or privatization could be the best way to make needed infrastructure improvements while keeping rates under control. Consider, for example, that the median water main pipe in the District of Columbia is over 80 years-old and replacing its system, at its current present pace would take a century.  Yet, rates are still rising,  from an average of $80.62 in 2015 to an estimated $114.48 next year—a 30 percent increase in five years.

Municipalities are facing $1.7 trillion in water infrastructure needs. Local governments are unlikely to be able to come up with that funding without massively raising rates or taxes on citizens. Thus, private sector expertise is going to be needed to play a key role in replacing and expanding America’s water infrastructure while keeping rates affordable for customers.

The post Municipalities Use Public-Private Partnerships to Replace Aging Water Systems appeared first on Reason Foundation.

Last year a gut-wrenching, in-depth analysis by Gatehouse Media found that “since 2009, there have been nearly 23,000 reports of sewage spills to the Florida Department of Environmental Protection. These spills released about 1.6 billion gallons of wastewater, including more than 370 million gallons of untreated sewage.”

That is statewide. I pulled the same data for Sarasota County for the past six months. The table shows the results. We are subject to sewage spills weekly, with thousands of gallons spilled virtually every month.

To be fair, not every spill results in sewage getting into waterways; sometimes it is contained on land. And it is not always the result of a faulty system. Some accidents happen, and construction workers cutting a pipe or grease improperly disposed of by restaurants can’t always be controlled by the county. And the giant spills of reclaimed water are not raw sewage; they have been treated to be clean enough to apply to agricultural land as fertilizer but not enough where it’s safe to even touch. Those spills, which almost always do go into the waterways, are full of the nutrients, sediments and bacteria that bombard waterway ecosystems.

Given that our tourist economy — and more importantly, our own quality of life as residents — depends on clean and healthy creeks, lakes, waterways and bays, you would think that putting a stop to sewage spills would be a priority. A top priority. Why don’t we have as close to a bullet-proof sewage system as feasible?

The city of Sarasota has proposed an increase in millage rates to pay for capital projects in the city sewer system. But most of the spills are in the county system where improving the infrastructure is not the top line item it should be. These subterranean upgrades don’t make for the sexy ribbon-cutting photo-ops of other public works, but that’s part of the solution needed. County leaders need to step up and do the hard work of cutting spending elsewhere to fund the sewer infrastructure improvements we need.

We residents have to turn up the pressure and accept the trade-offs. We should demand the county makes fixing the sewer system a top priority. Reach out to your county commissioner, and tell them. And accept that probably means moving funds from lower-priority items in the budget. Commissioners hate doing that, in part because people show up to scream and yell at them for any cut. But if we as residents can’t prioritize county issues, we can’t really expect the commissioners to do so.

There is a lot involved in fixing the system. Replacing, upgrading and adding new underground pipes are expensive, as is expanding and improving stormwater systems. Lift stations, generators to run them, complex valves, digital monitors and supervisory-control systems are also expensive and require ongoing staff and training. Expanding reclaimed water basins and overflow catchment is costly, as well.

If raising the capital and higher operating costs are too much of a barrier, the county should look at a public-private partnership. Thousands of cities and counties around the nation have brought in private companies to build new sewer infrastructure and operate expanded systems. I have authored several research studies on these types of partnerships, which if structured properly can help a system with:

• Reducing costs, both capital and O&M costs;
• Increasing efficiency;
• Enhancing risk management;
• Meeting capital investment needs; and
• Achieving regulatory compliance.

That might be what Sarasota County needs to get a handle on its sewage spill problem.

This column originally was published in the Sarasota Observer.

The post Why Are Sewage Spills Just Accepted in Florida? appeared first on Reason Foundation.

Advocates of the technology believe it can be most effective off the coasts of developing and island nations that face more-significant water challenges than developed countries. 

Resolute Marine Energy’s technology, Wave2O, is straightforward. Its central mechanism is a metal flap that oscillates with changing wave movements. The flap converts that energy into pressurized seawater, which is sent to the shore for filtration via reverse osmosis. Reverse osmosis is a water purification process that removes ions, unwanted molecules and larger particles from a water sample by passing the water through a partially permeable membrane. Once the water has been treated, the excess brine and other impurities are sent to the brine diffuser, which distributes the brine over a larger area so as not to adversely affect marine life. Because Resolute’s technology relies on wave power rather than fossil fuels, it does not produce greenhouse gas emissions associated with climate change. 

SAROS (Swell Actuated Reverse Osmosis System), a group started as a senior design project at the University of North Carolina at Charlotte, deploys similar technology that captures wave energy. The SAROS system utilizes small buoys which rock back and forth with the passing swells. The wave energy captured by this motion activates pumps, which suck saltwater into the buoy. The saltwater then gets pushed through the buoy to an onshore facility where the reverse osmosis process begins. The SAROS technology is on a much smaller scale than Resolute Marine’s, producing on average 3,500 gallons of freshwater per day, as opposed to Resolute Marine’s estimate of 1.057 million gallons of freshwater per plant per day.

Resolute Energy claims that Wave2O can produce a cubic meter of freshwater for $1.25. To put this in context, it costs residential customers about $1.78 per cubic meter of water produced by the Carlsbad seawater reverse-osmosis facility near San Diego, California. The Carlsbad facility is a traditional desalination plant, a technology powered by tremendous amounts of electricity. In terms of acquisition costs, SAROS estimates that a smaller unit capable of approximately 3,500 gallons of freshwater per day would cost approximately $23,000 and have a 10-year lifespan.

To understand if Wave2O could be scalable to meet the water demands of a metropolitan area, it helps to look at how much water the average person consumes. According to the Environmental Protection Agency (EPA), the average American uses about 100 gallons of water per day. A city like Los Angeles could be a candidate for Wave2O as its coastline and stronger waves could provide the ideal environment for the technology. Los Angeles has about 3.9 million residents, so they might consume about 390 million gallons of water per day. Resolute Marine claims five of its plants could produce roughly 20,000 cubic meters of water per day. That equals 5,283,441 gallons of freshwater, which is less than 2 percent of the total amount of water consumed by Angelenos. If it were able to scale up to 10 or 20 or more plants, then the technology could potentially take a larger dent out of the total water usage in a city like Los Angeles. But as of now, it does not appear that Wave2O could be scaled to meet the water needs of a large city in the developed world. 

The initial testing of this technology in the U.S. has been encouraging, however. The SAROS team reported that its device was easy to deploy and anchor, with the results exceeding expectations. The initial testing buoy produced freshwater despite being placed in a relatively low wave energy environment off of the North Carolina coast. In addition to the physical tests conducted in North Carolina, the National Renewable Energy Laboratory simulated the technology’s efficacy and economic feasibility using the power generated by waves at a reference point off the coast of Humboldt, California. This modeling experiment found that the technology could be “a viable near-term solution to provide the nation with drinking water.”

A few potential challenges are associated with this technology, for example, the wave height needed to generate enough power. According to Resolute Marine Energy, the minimum amount of power needed to start the desalination process is 10 kilowatts of wave energy per linear meter of wavefront. In some pockets around the earth, waves will not meet this minimum energy threshold, but it appears that most areas can produce enough. 

It may be necessary to lower expectations for this technology in the short-term. As this technology requires low capital investment, can power itself, and can be deployed to most parts of the world, the temptation exists to treat this as a panacea. If the technology becomes more widely adopted and continues to perform to a certain standard, people and governments may see this as the answer to their water crises, as opposed to one of several technologies in a broader repertoire of solutions. While it seems promising, there is nothing to indicate that the technology has the capacity to currently address anything approaching all or most of the world’s freshwater needs.

Resolute estimates that five 4,000 m3/day Wave2O plants could meet the UN-mandated minimum daily water requirements for approximately 240,000 people. While this would no doubt be a tremendous step in the right direction, this number must be kept in perspective. Approximately 1.1 billion people worldwide lack access to clean drinking water. As this technology scales upward, it is critical that global expectations viewed it correctly: as one promising tool in the fight for increased water access.

Wave-powered desalination could also run into legal hurdles if it becomes more realistic on a large scale. Depending on the jurisdiction, local environmental and not-in-my-backyard groups may oppose adding buoys that could affect pristine coastal vistas and boating corridors in places like California or Massachusetts. There may, however, be fewer hurdles in the developing world where the technology is needed most. Coastal areas in Africa, Asia, South America and island areas facing water challenges may be more eager to deploy this technology and more likely streamline its implementation. 

Wave energy technology has potential, but it is very early in the implementation phase. The technology can produce freshwater using only wave energy, reducing the need for expensive, energy-intensive traditional desalination. Wave energy technology does not produce any carbon byproducts, which represents a key development in the fight against climate change. And while there is hope that wave-powered desalination can help improve water rights worldwide, it should be treated as one of several technologies that could help achieve this end.

The post Wave Powered Desalination May Help Meet the World’s Drinking Water Needs appeared first on Reason Foundation.

But the metro area’s infrastructure has failed to keep pace. Traffic congestion due to inadequate roadways cost motorists $1.4 billion in wasted time and fuel in 2014. And an aging water system now suffers water main breaks, causing local flooding. Fixing these problems would obviously cost a lot, and it is unlikely Congress will come up with the money. But a new self-help approach called “asset recycling” could bring fairly speedy relief to Las Vegas.

As detailed in a new study from the Reason Foundation, the basic idea is to lease aging infrastructure facilities to well-qualified companies that will commit to refurbishing, operating and maintaining them for a long period of time (e.g., 35 to 50 years). In exchange, the selected company would make most of the annual lease payments to the government up-front. That money could then be invested in new or expanded infrastructure that does not have a built-in revenue source.

This is not a think-tank fantasy. Australia has extensive experience with infrastructure asset recycling. Its state governments have sold or leased any number of infrastructure assets (airports, seaports, electric utilities) to investor-owned companies and used the proceeds for needed new infrastructure. For several years, Australia’s federal government provided incentive grants to states that agreed to lease or sell such assets, as long as they used the proceeds to build new infrastructure.

Las Vegas could utilize asset recycling to fund road and water projects. While the Trump infrastructure proposal released last February included a version of this idea, the largest example of U.S. asset recycling took place in Indiana, with the long-term lease of the poorly managed Indiana Toll Road in 2006. The winning bidder paid $3.8 billion to the state up-front. After paying off the outstanding toll road bonds, Indiana invested the net proceeds in a 10-year highway improvement program statewide, plus a $500 million trust fund to ensure proper maintenance of the new highways. And the company itself has invested more than $300 million in improvements to the toll road thus far.

One recent example of asset recycling in the water utility sector took place in Bayonne, New Jersey, in 2012. The city’s water system had a large backlog of unmet capital needs and deferred maintenance. Competitive bidding led to a 40-year lease that would allow the investor-owned company to use ongoing water/wastewater user fee revenues for system improvements while providing regular payments to the city to pay off the water system’s outstanding debt.

On a much larger scale, Pittsburgh’s aging and ailing water system is also a candidate for asset recycling. With poor water quality and nine water main breaks so far this year, the city has begun receiving unsolicited proposals from companies such as Peoples Natural Gas. Pittsburgh’s multibillion-dollar needs include replacing dangerous lead pipes and building a new water treatment plant.

The Las Vegas Valley Water District system is neither as old as Pittsburgh’s system nor as troubled. But the Reason Foundation study finds the ballpark estimate of the gross proceeds from a long-term lease of the water district system is $1.4 billion. Thus, after paying off existing bonds, the estimated net proceeds would be more than $600 million — money that could be invested into new infrastructure in the city. For example, such a sum could produce a large number of road improvements, boosting the economy by easing Las Vegas’ serious traffic congestion and reducing wear and tear on vehicles.

Asset recycling is a way to bring professional expertise in to revamp Las Vegas’ infrastructure while using the proceeds to improve or build other infrastructure. Las Vegas’ population boom has stressed the region’s infrastructure and increased its needs.

This column first appeared in the Las Vegas Review Journal.

The post Raising Money for Southern Nevada Infrastructure Improvements appeared first on Reason Foundation.