Paul Yarossi and Roger Ward - HNTB Corporation - US Chamber of ...

UNITED STATES CHAMBER OF COMMERCE
GLOBAL WATER STRATEGY SUMMIT
Confronting Water Infrastructure Challenges
March 18, 2010
Presentation by:
Paul Yarossi, president HNTB Holdings Ltd
Roger Ward, vice president and national leader water professional services

• SIZE OF THE US WATER MARKET
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• AGING INFRASTRUCTURE
• Decades of under-investment have left a legacy of decaying
infrastructure
• ASCE Report Card for 2009
▪ Wastewater D-
▪ Drinking water D-
▪ Levees D-
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• LACK OF INVESTMENT
• Water is a capital-intensive industry
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• LACK OF INVESTMENT
RELATIVE CAPITAL INVESTMENT TO REVENUE RATIO FOR A RANGE OF UTILITIES
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• LACK OF INVESTMENT
• Low user fees and public ownership has resulted in difficulty
attracting the necessary capital to the sector.
• Stimulus package expected to provide only limited relief
• Other sources of capital (developer contributions, bond issues)
are cut back
• Investment is likely to become more crisis-driven
• Projections from 2011 forward indicate rapid acceleration of
investment in pipe rehabilitation (CAGR: water 15%, sewer 17%)
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• SCARCITY
• Fixed renewable water supply + growing demand = Scarcity
• Demand rising in parts of US which have lowest natural
water availability
• Aquifers are being drained significantly faster than they are being
replenished in some parts of the country.
• Water rights trading, desalination, and water reuse are potential,
but not universally popular, potential solutions
• Forecast $15.5 billion will be invested in desalination and water
reuse between 2009-2016
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• SCARCITY
EFFECT OF DRY CONDITIONS ACROSS THE USA, FALL 2008
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• SCARCITY
US$ PER CAPITA DRINKING WATER NEEDS BY STATE
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• PRIVATE SECTOR PARTICIPATION
• Strong political resistance to private sector involvement in the
US water sector
▪ 8.8% of population is served by regulated private water utilities
▪ 6.5% is served by private operators contracted by municipal
utility owners
▪ Will tax incentives, need for more complex technologies, and
aging of municipal workforce create additional opportunities for
the private sector in the future?
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• DESIGN-BID-BUILD
• Will continue to be the procurement model of first choice, particularly where schedule is not a
critical factor
• DESIGN-BUILD
• Will grow in popularity, especially where more complex arrays of technologies are involved and
when regulatory and judicial deadlines will not be met by Design-Bid-Build procurement
time lines (approximately 1/3 of states allow for DB project delivery)
• DESIGN-BUILD-OPERATE
• Will grow rapidly, especially among small medium-sized communities where recruiting trained
staff is a challenge
• DESIGN-BUILD-FINANCE-OPERATE
• A longer-term underlying growth trend is expected as smaller communities under regulatory
pressure to upgrade their treatment plants see value in outsourcing finance and public debt
financing limitations
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• State Revolving Funds set up by EPA to help municipalities comply
with environmental regulations.
▪
▪
Clean Water State Revolving Fund
Drinking Water State Revolving Fund
• State Revolving Funds have been the mechanism through with the
Obama administration has chosen to incorporate water in the
economic stimulus package.
▪
▪
$4 billion for Clean Water State Revolving Fund
$2 billion for Drinking Water State Revolving Fund
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• INFRASTRUCTURE INVESTMENT
EPA 20 YEAR INVESTMENT REQUIREMENT ESTIMATES
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FORECAST OF CAPITAL EXPENDITURE IN US WATER AND WASTEWATER
INFRASTRUCTURE 2007-2016
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• Federal/State
• Expand annual funding of the State Revolving Fund (SRF) for
Clean Water to $5B and Drinking Water to $3.5B
• Establish Water Trust Fund, structured like Highway Trust Fund,
to provide $12B annually for drinking water and wastewater
infrastructure needs, based on:
▪ Water Based Beverages Fee
▪ Product Disposal Fee
▪ Pharmaceuticals Fee
▪ Clean Water Restoration Tax
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• PRIVATE
• Provide long-term debt financing instruments to match long-term
useful life of assets (e.g. useful life of water mains, sewers and
tunnels 50 – 100 years)
• Provide leasing of major assets
• Provide alternate project delivery
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• LOCAL GOVERNMENT
• Establish “True Value” water and wastewater user rates
• Open up alternate project delivery and private financing
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UNITED STATES CHAMBER OF COMMERCE
GLOBAL WATER STRATEGY SUMMIT
Confronting Water Infrastructure Challenges
Discussion