Keep it flowing: the challenges of maintaining a municipal water system

By Christopher Franklin

In the United States, it’s easy to take water for granted. After all, this natural resource is readily available at the turn of the tap. It arrives in our homes clean and safe to drink, cook with, and bathe in – all at a cost of about a penny per gallon. But the truth is, our nation’s water infrastructure is in dire straits.

The U.S. has approximately 700,000 miles of aging underground water pipes, some of which are more than a century old. Aging pipes can cause inefficiencies and eventually lead to structural damages due to ruptured water mains and interrupted water service to customers. The Environmental Protection Agency (EPA) has estimated that $384 billion of necessary infrastructure improvements are needed through the year 2030 for our nation’s water systems to continue providing safe drinking water to 297 million Americans.

An added challenge is the fact that the water industry is our nation’s most fragmented utility industry, with a majority of our nation’s 53,000 water systems serving relatively small populations. In fact, the EPA reports that 83 percent of the nation’s water systems serve fewer than 3,300 people and less than one percent of systems serve more than 100,000 people. This fragmentation makes enforcing regulations and imposing large-scale upgrades exceedingly challenging.

Today, most water systems are owned by municipalities with the balance – less than 15 percent – being privately held.  However, both the private or municipal owners of small systems find it increasingly difficult to maintain their systems. With tight budgets and limited resources, some are being forced to delay or forego much-needed investments to upgrade aging water infrastructure. Others are struggling to keep up with increasingly stringent environmental and health regulations. In addition to the typically significant capital investment necessary to maintain compliance, there is the issue of accessing the engineering and technical expertise that accompanies that responsibility.

For municipalities facing these challenges, public-private partnerships (PPPs) or operations and maintenance (O&M) contracts can be an ideal solution. In the PPP model, a public entity such as a federal, state or local government agency, contracts with a private water company to manage and invest in water and wastewater systems. Private companies have the capital resources required to update infrastructure, and are in the financial position to invest resources into improvements and renovations to update aging systems, which ultimately benefits customers by providing clean, safe water at an affordable cost. With the more traditional O&M relationship the private entity will take on the day-to-day responsibilities of the utility in exchange for a service fee.

One example of a successful O&M contract is with the Horsham Water Authority in Pennsylvania, which began in 1997. The contract has been renewed continually since then and has broadened in scope to include water treatment, meter operations, laboratory service and compliance monitoring, and system maintenance and repairs including main breaks. Horsham continues to own their assets while employing private sector professionals to operate and maintain it.

A similar wastewater O&M agreement with Greenwich Township in Warren County, N.J., which began in 2002, has been renewed continually since then. It has provided O&M services for the sewer collection system and pumping station that serves about 1,000 residential customers. Also provided in the O&M agreement are emergency services for sewer backups and pipe breaks.

In addition to the benefits a private water company can bring to water systems and customers, the funds generated by a PPP can also be hugely beneficial to a municipality. Take, for example, the Pennsylvania borough of West Chester, which in 1996 was faced with the prospect of having to sharply increase its water rates in order to afford $15 million of required upgrades to keep its water system in accordance with health and safety regulations. Instead, West Chester opted to sell its system for $25 million. The town put half of the revenue generated from the sale toward debt retirement and invested the remaining capital to fund the construction of a much-needed parking garage for the growing borough.

It is undeniable that reliable water service is a necessity of life, and as such, the pipes, treatment plants, wells, tanks and fire hydrants that deliver these services must be properly maintained. However, we cannot rely on state and local governments to bear all of the costs. Private water companies can play a critical role in rebuilding our nation’s water systems. After all, private companies can bring the technical expertise and financial resources needed to repair and operate aging systems, which is a win-win for all parties involved.

Christopher Franklin is executive vice president of Aqua America and president and chief operating officer of regulated operations responsible for Aqua America’s regulated operations, including customer operations, throughout the company’s entire service area, which includes approximately 3 million people in 10 states. Franklin, a 20-year veteran of the company, has held executive roles in public affairs, customer operations and most recently as regional president of the company’s southern and mid-western operations.

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