Public/Private Partnerships: Key to Survival of Municipalities

by Steve Rao

Across the United States, cities and towns face increasing pressure to address the failing state of local infrastructure. As a local government official in North Carolina, I see my colleagues across the state grappling as economies struggle to rebound in the midst of the COVID-19 pandemic. Declining revenues are making it increasingly difficult for our towns and cities to make critical investments in water and transportation while continuing to deliver high quality services to the citizens we serve. Often, we are faced with paying increasing bills on our own.

In North Carolina, water and wastewater infrastructure needs are estimated at $1 billion a year according to the 2017 Statewide Water and Wastewater Infrastructure Master Plan. Only a small fraction of these costs can be met with existing state or federal funds.

Although the American Rescue Plan provides funding to tune of $350 billion to stabilize operating budgets, the responsibility for major investments in infrastructure will continue to fall on municipal and state leaders for the foreseeable future.

As President Biden and the Senate have yet to reach a deal on Infrastructure, Local leaders have limited means and flexibility to adequately address their deteriorating infrastructure. They simply need more options.

Recent surveys have cited infrastructure as the primary issue that mayors would most like to see addressed, with water and wastewater projects nearing the top of infrastructure priorities. Recently, the U.S. Conference of Mayors endorsed a resolution urging Congress and the Biden Administration to remove policy barriers, increase opportunities for private investment, and provide funding to cities and states to improve local and regional systems capabilities. This same resolution specifically requests consideration for the public-private partnership (P3) model to address the gap between available state and federal funds and total cost of upgrades required.

Public-private partnerships, which are heavily utilized in other countries, offer a flexible alternative to addressing local needs, from infrastructure to economic development and other community priorities. In New Hanover County, local leaders recently voted to sell the county’s regional medical center and related facilities, trusting their ownership and management to a private company. This partnership generated approximately $2 billion for the county to put toward other priorities.

For local leaders struggling to balance the need for critical investments in infrastructure with the need to invest in other priorities that would position their communities for long-term competitiveness and viability, it is imperative to consider alternative and nontraditional financing approaches. Private-sector partners can bring unique solutions to these communities, with readily available capital not bound by traditional financial restrictions and experienced leaders who bring decades of public- and private-sector expertise in maximizing the performance of infrastructure systems.

While communities of all sizes and in locations across the country are facing infrastructure challenges, especially as it relates to water and wastewater systems, and increasingly strained budgets, the specific needs of each community is different. Different solutions will be required to meet these needs. It is both critical and prudent for local leaders to evaluate alternative or nontraditional financing approaches to help meet the needs of their communities.

Despite the challenges outlined here, the good news is that there are indeed options. Capitalizing on these options will require bold leadership — the economic competitiveness of cities and communities will depend on it.

Steve S. Rao is a Council Member and Former Mayor Pro Tem for the Town of Morrisville and also serves on the Board of the New American Economy, a bi partisan coalition of Mayors and Business Leaders, committed to comprehensive immigration reform. He also serves on the NCLM Task Force on Race and Equity. He serves as Of Counsel to State Federal Strategies