M II A II R II K
Senior Member
Siemens Report: Public-Private Partnership Success Stories
MAY 7, 2014
Read More: http://nextcity.org/daily/entry/siemens-report-public-private-partnerships
Website: http://w3.siemens.com/topics/global/en/sustainable-cities/Pages/home.aspx#
A new report from Siemens, PwC, and Berwin, Leighton, Paisner looks to the very recent past to answer that frequently asked question of why cities are increasingly opting for public-private partnerships as a means to finance infrastructure.
- The report, called “Investor Ready Cities,†offers a few compelling examples of partnerships that worked to provide cities with the capital needed to modernize infrastructure, without asking voters for a tax increase or state or federal governments for help.
- The “Investor Ready Cities†report suggests these cities will save money. While it’s difficult to measure costs not incurred, the report points to an incident in 2011 where Chattanooga was hit with a series of tornadoes that knocked out power in 77,000 homes. More than half of the homes saw their power restored in just two seconds. The city estimates that without the smart grid, the same event would have required 250 service visits and 17 hours of work, with a cost of around $1.4 million — just for one storm!
City: Delhi, India - Project: Metro rail system
- The Delhi Metro Rail Corporation (DMRC) was formed by the governments of India and Delhi as a central focal point to oversee the project’s implementation and financing. Most of the funding came from “soft†loans (low interest rate over a long duration) from the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA), and matching grants from the governments of Delhi and India. Ten to 15 percent of the funding came from a “value capture†scheme, where the DMRC captured back some of the proceeds from commercial property development around the metro stations.
- DMRC was able to keep costs low with innovative procurement policies like fixed-price contracts, streamlining of approvals, and contracting out portions of the projects to different firms, rather than putting one contractor in charge of the whole project. Despite worries that this would lead to a messier process, DMRC proved deft at coordinating the different contractors. Sometimes there’s just no substitute for skilled administration.
City: Singapore, Republic of Singapore - Project: Water system
- Through aggressive policy changes such as raising water prices, mandating water-efficiency labeling for water-related consumer products like taps, shower heads, and washing machines, and imposing energy efficiency mandates in the building codes, the city-state succeeded in achieving a more diversified water supply, full sewer coverage for residents, and one of the world’s lowest water loss rates — a mere 5 percent.
- Singapore achieved this result through a mix of consumer regulation and infrastructure construction funded by public-private partnerships. On the regulatory side, the public utilities board helped create a culture of conservation by setting user prices by incorporating the full unsubsidized cost of water, instituting water efficiency labeling, and amending building codes to require low-flow toilets and self-closing taps. On the infrastructure side, the PUB contracted with the private sector to build desalination plants and other infrastructure using a design-build-own-operate (DBOO) approach that freed the utility from the upfront construction and operating expenses of the plant.
- Singapore is making strong progress toward its goals of providing cleaner water while conserving resources. Through its DBOO contract structure, the public utilities board is able to issue financial penalties against the operator in the event of poor service quality, like “reduced plant availability, reduced storage capacity, excessive residual waste or insufficient water quality,†so in theory the operator has a strong incentive to deliver high-quality service, in order to get its contract renewed at the end of the term.
City: Chattanooga, Tennessee - Project: Smart grid and communications
- Chattanooga not only faced all the usual problems American cities experienced in the post-World War II era (its population dropped by 20 percent between 1950 and 1990 due to the decline of manufacturing and suburbanization), it also faced a heightened risk of power outages from tornadoes and other natural disasters due to its location in Tornado Alley. The “Investor Ready Cities†report estimates that these kinds of outages cost a city of Chattanooga’s size around $100 million a year in repairs and lost economic activity.
- Forward-thinking city leadership had spent decades devising a plan to reinvent the city as a regional business hub, using targeted public investments like “self-healing†smart grid electricity and a fiber-optic communications system that would ensure reliable power and connectivity. When the recession hit in 2008, and the federal government announced it would pump hundreds of billions of dollars into “shovel ready†projects around the country, Chattanooga had a plan ready to go that would prove to be one of the greatest success stories of the stimulus — the Gig City municipal fiber network.
- A little less than one-third of the project was funded with federal dollars, and the rest came from revenue bonds issued by the city of Chattanooga. Issuing bonds can be risky if a positive return on investment isn’t a sure bet, but in October 2012, the city’s (and federal government’s) proactive investment in its infrastructure paid off when the bonds were upgraded to AA+ status, lowering the city’s borrowing costs and improving the return on the public’s investment.
- EPB, Chattanooga’s municipal utility, made the business case that launching the nation’s most advanced electric grid would generate enough savings for electricity customers that EPB could afford to expand broadband to the entire city — not just a small affluent area willing to pay premium rates for ultra-fast Internet.
- Electricity savings, not revenues from the standard triple-play of television, telephone and Internet — would fund the network. Businesses looking for higher-quality power and Internet service would move to the city and pay taxes, enabling the utility to recoup its investment and the city to pay off its revenue bonds. Only a public provider with access to both ratepayer revenue and bond revenue would be able to take this kind of global view of the return on an infrastructure investment, unlike a traditional cable company or municipal authority.
- In 2010, Chattanooga became the first U.S. city to connect every home and business in a 600-square-mile area to a lightning-fast one-gigabit-per-second fiber-optic network and smart electricity grid. EPB is able to save users money by offering time-of-use tariffs, where they can pay lower rates if they agree to run power-hungry appliances during off-peak times. Companies like Claris Networks, now based in Knoxville, Tennesse, have been expanding their business in Chattanooga due to the lower cost and higher-quality connectivity, which is eight to 10 times cheaper than in Knoxville. This is putting pressure on other cities in the region to finance their own fiber-optic networks to compete.
.....
MAY 7, 2014
Read More: http://nextcity.org/daily/entry/siemens-report-public-private-partnerships
Website: http://w3.siemens.com/topics/global/en/sustainable-cities/Pages/home.aspx#
A new report from Siemens, PwC, and Berwin, Leighton, Paisner looks to the very recent past to answer that frequently asked question of why cities are increasingly opting for public-private partnerships as a means to finance infrastructure.
- The report, called “Investor Ready Cities,†offers a few compelling examples of partnerships that worked to provide cities with the capital needed to modernize infrastructure, without asking voters for a tax increase or state or federal governments for help.
- The “Investor Ready Cities†report suggests these cities will save money. While it’s difficult to measure costs not incurred, the report points to an incident in 2011 where Chattanooga was hit with a series of tornadoes that knocked out power in 77,000 homes. More than half of the homes saw their power restored in just two seconds. The city estimates that without the smart grid, the same event would have required 250 service visits and 17 hours of work, with a cost of around $1.4 million — just for one storm!
City: Delhi, India - Project: Metro rail system
- The Delhi Metro Rail Corporation (DMRC) was formed by the governments of India and Delhi as a central focal point to oversee the project’s implementation and financing. Most of the funding came from “soft†loans (low interest rate over a long duration) from the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA), and matching grants from the governments of Delhi and India. Ten to 15 percent of the funding came from a “value capture†scheme, where the DMRC captured back some of the proceeds from commercial property development around the metro stations.
- DMRC was able to keep costs low with innovative procurement policies like fixed-price contracts, streamlining of approvals, and contracting out portions of the projects to different firms, rather than putting one contractor in charge of the whole project. Despite worries that this would lead to a messier process, DMRC proved deft at coordinating the different contractors. Sometimes there’s just no substitute for skilled administration.
City: Singapore, Republic of Singapore - Project: Water system
- Through aggressive policy changes such as raising water prices, mandating water-efficiency labeling for water-related consumer products like taps, shower heads, and washing machines, and imposing energy efficiency mandates in the building codes, the city-state succeeded in achieving a more diversified water supply, full sewer coverage for residents, and one of the world’s lowest water loss rates — a mere 5 percent.
- Singapore achieved this result through a mix of consumer regulation and infrastructure construction funded by public-private partnerships. On the regulatory side, the public utilities board helped create a culture of conservation by setting user prices by incorporating the full unsubsidized cost of water, instituting water efficiency labeling, and amending building codes to require low-flow toilets and self-closing taps. On the infrastructure side, the PUB contracted with the private sector to build desalination plants and other infrastructure using a design-build-own-operate (DBOO) approach that freed the utility from the upfront construction and operating expenses of the plant.
- Singapore is making strong progress toward its goals of providing cleaner water while conserving resources. Through its DBOO contract structure, the public utilities board is able to issue financial penalties against the operator in the event of poor service quality, like “reduced plant availability, reduced storage capacity, excessive residual waste or insufficient water quality,†so in theory the operator has a strong incentive to deliver high-quality service, in order to get its contract renewed at the end of the term.
City: Chattanooga, Tennessee - Project: Smart grid and communications
- Chattanooga not only faced all the usual problems American cities experienced in the post-World War II era (its population dropped by 20 percent between 1950 and 1990 due to the decline of manufacturing and suburbanization), it also faced a heightened risk of power outages from tornadoes and other natural disasters due to its location in Tornado Alley. The “Investor Ready Cities†report estimates that these kinds of outages cost a city of Chattanooga’s size around $100 million a year in repairs and lost economic activity.
- Forward-thinking city leadership had spent decades devising a plan to reinvent the city as a regional business hub, using targeted public investments like “self-healing†smart grid electricity and a fiber-optic communications system that would ensure reliable power and connectivity. When the recession hit in 2008, and the federal government announced it would pump hundreds of billions of dollars into “shovel ready†projects around the country, Chattanooga had a plan ready to go that would prove to be one of the greatest success stories of the stimulus — the Gig City municipal fiber network.
- A little less than one-third of the project was funded with federal dollars, and the rest came from revenue bonds issued by the city of Chattanooga. Issuing bonds can be risky if a positive return on investment isn’t a sure bet, but in October 2012, the city’s (and federal government’s) proactive investment in its infrastructure paid off when the bonds were upgraded to AA+ status, lowering the city’s borrowing costs and improving the return on the public’s investment.
- EPB, Chattanooga’s municipal utility, made the business case that launching the nation’s most advanced electric grid would generate enough savings for electricity customers that EPB could afford to expand broadband to the entire city — not just a small affluent area willing to pay premium rates for ultra-fast Internet.
- Electricity savings, not revenues from the standard triple-play of television, telephone and Internet — would fund the network. Businesses looking for higher-quality power and Internet service would move to the city and pay taxes, enabling the utility to recoup its investment and the city to pay off its revenue bonds. Only a public provider with access to both ratepayer revenue and bond revenue would be able to take this kind of global view of the return on an infrastructure investment, unlike a traditional cable company or municipal authority.
- In 2010, Chattanooga became the first U.S. city to connect every home and business in a 600-square-mile area to a lightning-fast one-gigabit-per-second fiber-optic network and smart electricity grid. EPB is able to save users money by offering time-of-use tariffs, where they can pay lower rates if they agree to run power-hungry appliances during off-peak times. Companies like Claris Networks, now based in Knoxville, Tennesse, have been expanding their business in Chattanooga due to the lower cost and higher-quality connectivity, which is eight to 10 times cheaper than in Knoxville. This is putting pressure on other cities in the region to finance their own fiber-optic networks to compete.
.....
