Exploring New Delivery and Finance Models for Water & Wastewater Infrastructure

The landscape for the financing capital projects and delivering public services in general in North America has changed dramatically in the past dozen years as a result of number of factors, including continued customer demand for high-quality service, upheavals in traditional municipal financing, progress in Canada and other continents in increased use of private delivery options that include finance, increased private sector interest in investing in the water and wastewater utility sector, and a backlog of unfunded projects. These factors, and other related drivers, have led an increasing number of water, wastewater, and stormwater utilities in the United States to explore an expanding array of public private partnership (P3) options for delivering services to customers, including design-build-operate-finance (DBOF) models that include private financing as a key component.This paper describes lessons learned and recommendations made through a strategic planning process conducted for the West Coast Infrastructure Exchange (WCX), a collaborative effort of California, Oregon, Washington States and the Canadian province of British Columbia in exploring opportunities to accelerate the use of private financing sources(such as pension funds, impact funds, equity capital funds) to address the $1 trillion backlog of infrastructure projects in those jurisdiction through the use of:• Market analysis to confirm the underlying investment needs in the West Coast jurisdictions;• Financing reviews that included evaluation of financing models and instruments that could be used to attract private capital sources to address the infrastructure backlog;• Project evaluation frameworks needed to provide a valid comparison of traditional public delivery and finance with the emerging P3 options;• Governance evaluations that explored options that could be used to ‘stand up’ the Exchange, based on models that have been used within states and internationally to support the expansion of project delivery and financing options for infrastructure projects.• Options for reviewing, packaging and offering projects to a wider array of potential investorsThe paper also identifies steps that an individual water or wastewater system could use to explore the applicability of private delivery and finance options for its capital projects and service needs, based on lessons learned from the WCX strategic planning process and emerging trends in the water and wastewater sector. The paper identifies utility financial and organizational contexts and project characteristics, such as size and revenue generating capability, which can increase the opportunity to attract private financing interest.