Public/private partnerships should ‘carry the water’

Water is ho-hum stuff…until you need it and don’t have it. It sits somewhere out on your mental South 40, until you’re told you can only water your lawn once a week and you can’t wash your car.

Well, get yourself in gear for big changes, because water in South Florida, along with its costs, is moving front and center into your life.

Florida has five Water Management Districts, and ours is the South Florida Water Management District. Historically, most of these districts have been money sponges.

In the past, business leaders commonly believed that the SFWMD was an out-of-control agency with a bottomless-hole budget, and an unelected board that could raise taxes willy-nilly but was unaccountable to voters. It purchased huge swaths of land, spending tens of millions at a pop, while its land ownership reached a bloated 1.4 million acres. In 2008, the SFWMD spent $30 million of taxpayer money to buy the Brady Ranch so they could “flood it to make a government-owned swamp.”

But recent actions by the legislature and governor may have put a stop to such nonsense. The SFWMD has been flatly told it cannot “do business in the same old way”. A maximum cap has been placed on WMD tax revenues, and the governor has a line-item veto. The governor’s new directive is “No new debt, no new land acquisitions, streamline your staffing, and pare down or eliminate non-core activities.”

It’s way overdue. You are the rare person indeed, if you have any glimmer of how gargantuan is the SFWMD. Until recently, it had about 1900 employees, total assets of $5.2 billion, and annual governmental revenues of close to $1 billion. It was not unusual for its annual budget to approach $3 billion, and it had amassed a $400 million cash reserve.

But with recent legislative and gubernatorial actions, the SFWMD must reduce its budget by 32%, top management has been required to take a pay cut, administrative overhead is slimmed down, and 250 employees are gone. The District now has a “spend down” plan to use its cash reserves in lieu of increasing taxes.

But local agencies still face a “perfect storm”: water regulation is costly, a mishmash of federal, state and local regulations. The fiscal resources of local governments are now choked while infrastructure needs are growing. In short, local governments have huge needs and little money to meet them. Even worse, government has shown it’s an inefficient spender, and the public is increasingly mistrustful that bureaucrats can get the job done.

But yonder ’round the bend comes a possible white knight solution: the SFWMD should look at doing a public/private partnership, a “P-3”, or PPP. A P-3 is a contract between a public agency and private interests. It involves an outright sale of government assets to the private sector in return for a commitment that business talent and sense will be applied for a more efficient delivery of services, contracts will be performance-based, and assets will be used for the public good. SFWMD gets a cash infusion. Participants share the risks and rewards, and a P-3 is not the same as privatization, as P-3 projects usually have public oversight and control.

And here’s the crowning glory: a P-3 is a job creator, with a lid on the taxpayer’s exposure. For example, a P-3 set-up as a non-profit corporation could design, plan and build rainwater reservoirs in return for long-term commitments beneficial to both the public and private partners; IRS rulings allow funding by bonds issued “on behalf of” the government agency, offering tax-exempt interest to private investors.

And this is a no pie-in-the-sky dream. A Florida Public/Private Partnership Act of 2012 will be proposed in the upcoming legislature. This is a jobs bill that carries huge potential for efficient water management. It’s a fool’s errand for government, in these darkly sparse economic times, to try funding the infrastructure needed to solve our looming water problems. The private sector is much better equipped to handle our water future. Let the free market “carry the water”- – the legislature should give incentives to private interests to hop on this, and hop on quick.

John R. Smith

John R. Smith is chairman of BIZPAC, the Business Political Action Committee of Palm Beach County, and owner of a financial services company.
John R. Smith

Comments

Latest Articles