By Honorable Ron Simmons and Carlos Rubinstein
Texas may be nearing a water crisis. At a time when Texas continues it’s massive population growth, yet is experiencing declining water supplies and persistent drought, it is apparent that water remains the limiting factor as it relates to maintaining and growing our vibrant Texas economy. Complicating matters are aging water systems.
Only July 8, the Texas Tribune reported on a water line break that impacted Odessa. The Odessa Utility Director stated, “Aging water systems are common throughout the country…It’s often difficult for municipalities to be able to afford to manage those systems as they age. That’s the situation we find ourselves in.”
Affordability is the key word, especially in light of other factors impacting every Texas community. Over a decade, from 2010 to 2020, Texas added nearly 4 million people In that same period of time, water supplies have not kept pace.
- According to work by Texas2036, a public policy think tank, in concert with the state climatologist, “the number of 100-degree days has more than doubled over the past 40 years and could nearly double again by 2036.”
- According to the Office of the Texas Comptroller, “droughts represent continuing challenges to a rapidly growing state with an economy dependent on reliable fresh water supplies for residential, commercial and agricultural use.
- In the absence of new sources or additional conservation, (also according to the Comptroller) the Texas Water Development Board (TWDB) expects the state’s water supply to fall by 11 percent from 2020 to 2070, from 15.2 million to 13.6 million acre-feet per year.
Lack of resources and aging infrastructure has made water safety more urgent. Reviewing data from the Texas Commission on Environmental Quality (TCEQ), the Tribune found that there were nearly 4,000 boil water notices statewide in 2021.
While SWIFT, a Texas low-interest loan and loan deferral program to aid communities intending to expand water supplies is helpful, and substantial funding via the Bipartisan Infrastructure Law (BIL or IIJA) will soon be available via the State Revolving Funds for water projects the fact is, there is not sufficient public funding available to meet all Texas water needs. The enhancement and resiliency of our water systems, and other infrastructure projects through public-private partnerships could not be more pressing.
A public-private-partnership, or P3, for water projects is where a public entity (city, county, for example.) enters into a contract with a private funding/developer to construct and deliver a needed project. The private entity assumes construction risks and the obligation to deliver the project on-time and on-budget. In exchange, the private entity can operate the facility and recover its investment via predictable service rates. Typically, a public entity is not required to pay any service costs unless the project delivers the quantity and quality of water specified water purchase agreement. The Carlsbad, California desalination facility, the largest in the Western Hemisphere, is an example of a successful P3 water project.
Private investment and innovation can help Texas cities provide the infrastructure necessary to support future population growth and economic development. Public revenue sources alone will not be enough to support the needs of the estimated 51 million individuals residing in Texas in 2070.
According to the 2022 State Water Plan (SWP), the estimated capital cost to design, construct, and implement the more than 2,400 recommended water management strategy projects by 2070 is $80 billion in 2018 dollars, without accounting for future inflation. If private and public investment strategies are not implemented, approximately one-quarter of Texas’ population in 2070 would have less than half the municipal water supplies they will require during a drought of record. If Texas does not implement the water supply strategies and projects in the state water plan, a severe drought could cause $110 billion of economic damages in 2020, increasing to $153 billion per year by 2070.
With our state’s growing population, we need to look beyond traditional funding mechanisms and the issuance of public debt to meet demands.
P3s also provide many benefits beyond the economic. P3 water projects have shown increased operational efficiency, improved public safety with better planning, and efficiency in project completion. They also provide an avenue to decrease state liability, and attract more private investment in the state. Costs have and will continue to rise in areas such as construction, water development and treatment and supplies in our current economy.
The utilization of private financing, in concert with a public partner, is the most cost-effective solution to these issues facing the state, and it’s imperative including in Odessa. As the Comptroller’s report indicates: “An adequate water supply is so essential that the impact of shortages would echo throughout the state economy, affecting everything from power generation to the cattle business.” P3’s are an answer.
The Honorable Ron Simmons serves as Chairman of the Invest Texas Council (ITC) Advisory Board. He is a businessman, former member of the Texas House of Representatives, and leader in conservative politics; Carlos Rubinstein is the Principal member of RSAH2O, LLC – an environmental consulting firm – and former Chair of the Texas Water Development Board and Commissioner of the Texas Commission on Environmental Quality. Rubinstein also serves on the ITC Advisory Board.
