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2018 Strategic Directions:Water Report

A New Model for Stormwater: Community Based P3s

The need for innovative, efficient solutions and models to help communities across the United States meet their stormwater regulatory requirements is growing, and community-based public-private partnerships (CBP3s) may hold the key. Recognizing the challenges of funding large-scale stormwater management infrastructure projects, Region 3 of the U.S. Environmental Protection Agency (EPA) developed the CBP3 framework to assist communities in these efforts. Black & Veatch’s 2018 Strategic Directions: Water Report survey found that there is a strong receptivity to better understanding the role the private sector can play in a community-based P3 structure and consideration of such a partnership.

What is a CBP3?

A CBP3 is a partnership between a local government and a private partner that agrees to a performance-based approach to build infrastructure and deliver on broader policy goals and objectives, such as established community-centered metrics, incentivized redevelopment and workforce development initiatives. CBP3s span the full life cycle of assets, including a maintenance period for the assets that lasts 20 to 30 years, to ensure asset sustainability and increased economic and social impact for a community.

Examples of social/economic community benefits include disadvantaged (e.g., minority-, woman- or veteran-owned) business-entity participation, education, faith-based initiatives and local business participation that provide job creation and positive economic impact for the community. Twenty-nine percent of respondents said they would consider a partnership with the private sector that combines the construction and long-term O&M of stormwater and yields community benefits (e.g., job creation, economic development, etc.).

Local governments and private partners both benefit when the agreed key performance indicators (KPIs) that are associated with social/economic and delivery performance outcomes of the contract are met. In this way, the partnership aligns goals and metrics to create a true alliance and accountability between the two entities.

Program Benefits

Employing a CBP3 approach enables local governments to incentivize a greater volume of shovel-ready projects to the marketplace to access a greater array of tax-exempt and/or taxable capital sources; however, the CBP3 in and of itself does not represent a new source of funding, but instead the framework to aggregate projects for greater scale. It better leverages existing available funding to maximize the amount of infrastructure and community impact delivered and does so through a turnkey delivery model whereby the partnership can efficiently deliver projects, inspection services, maintenance services or other infrastructure installations in a timely manner. A CBP3 delivers community benefits through agreed performance outcomes, with greater risk transfer than traditional design-bid-build (DBB) approaches.

The community is able to greatly increase efficiency; expedite the delivery of needed infrastructure improvements across the community at scale; deliver quantifiable community and economic impact metrics; accomplish greater inclusion and outreach with the local community; meet regulatory requirements; and create a measured return on investment for stormwater ratepayers in the community.

CBP3s address a delivery need that transfers greater risk and accountability to the private sector and are “financing agnostic.”

A CBP3 is a collaborative effort driven by project goals and deliverables rather than a specific financing approach. CBP3s address bottom-line efficiency and exist to provide greater output, value and risk transfer than the traditional DBB delivery approach. The DBB approach requires a great deal of involvement and risk on the part of local governments to contract design services, procure and inspect construction, and maintain assets.

The private partner provides services and risk transfer that varies from one CBP3 to another, but typical services include planning, design, procurement, construction management, capital structuring, financing, regulatory submittals, public involvement and long-term maintenance. With a CBP3, these services are wrapped into a single contract that provides commercial guarantees to the public entity for agreed performance outcome.

Community Benefits

Another CBP3 driver is community and economic impact. CBP3s drive community and economic impact through the inclusion of KPIs that center on broad policy goals and objectives for the community. The private partner adopts accountability for these goals and objectives as part of the delivery plan. For example, stormwater infrastructure is pervasive throughout a community, and investing in stormwater infrastructure can create opportunities for other strategic infrastructure investments while delivering stormwater projects such as sidewalks, recreation parks, community areas, bus stops and street improvements. Investment in stormwater infrastructure through a CBP3 framework can also be a catalyst for other development through strategic land reclamation.

In addition, stormwater development has a lot of low barrier to entry activities and responsibilities across design, construction and maintenance operations that create tremendous opportunities for coordinated local subcontractor development, workforce training and employment. A community can achieve almost triple its local return on investment of every dollar spent on a stormwater program delivered through a CBP3. Based on Esri economic development models, communities that have employed a CBP3 have almost tripled the amount of each dollar invested to reflect over $2.5 billion dollars returned in economic stimulus in the community.

Leveraging Other Trends

The CBP3 model is evolving in parallel with other trends in the stormwater field that complement the use of CBP3s. One is the application of asset management techniques and principles for stormwater systems. The water and wastewater sectors have used asset management for many years. Some stormwater utilities and/or system managers are beginning to seek ways to capture the benefits of asset management frameworks that link assets to business planning and budgeting for the life cycle of the assets.

The application of asset management to stormwater-management programs helps program providers move from reactive to predictive management practices, efficiently apply limited resources and quickly and confidently communicate the value of the system and future improvement plans. Incorporating a CBP3 approach to improve stormwater assets encourages managers to look at their stormwater systems as managed infrastructure, which naturally dovetails well with asset management techniques and practices. Asset management programs can be capital-intensive, so incorporating a CBP3 approach can help lower costs and provide an overall economic benefit to the community.

Case Study: Prince George’s County Clean Water Partnership

The Clean Water Partnership (CWP) between Prince George’s County, Maryland and Corvias is a leading example of the benefits of a CBP3. CWP is a three-year, $100 million program that initially retrofits 2,000 acres of stormwater infrastructure and is endorsed by both the Maryland Department of the Environment (MDE) and EPA, and meets their regulatory Municipal Separate Storm Sewer System (MS4) permitting, total maximum daily load (TMDL) and Clean Water Act compliance requirements. The economic impact is estimated to be $210 million, with economic impact of local expenditures of $132 million based on a Regional Economic Studies Institute study conducted by Towson University.

Throughout this 30-year, $100-million partnership, Prince George’s County retains control of assets, investments and prioritization for the full program of work. Together, the county, along with its private partner, Corvias, is better able to build local capacity and buy-in, and achieve social, economic and infrastructure benefits that go well beyond the industry’s standard measurement of cost per acre.

 

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