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Trends utilities are providing customers safe water. However, as regulation has become more extensive and complex, water utilities have struggled to make the upgrades necessary to comply, resulting in record numbers of EPA fines and consent decrees. Particularly hard hit have been smaller utilities, which often lack the scale, capital, and expertise to meet the requirements of an ever-changing regulatory landscape. The P3 Solution(s) With government budgets increasingly strapped for cash, more and more municipalities are turning to the private sector to partner in solving this problem. Through contractual agreements between a public agency and a private sector entity, the parties form what is commonly referred to as public-private partnerships (P3s). Through these agreements, the skills and assets of each sector are shared in delivering a service or facility for the use of the general public. P3s are becoming an increasingly viable vehicle for private investors to participate in the water space. P3 models encompass a wide spectrum of degrees of participation by the private sector, ranging from 3- to 5-year consulting contracts, all the way to investorowned projects with lives extending past 25 years. The commonality among these partnerships is the utilization of private resources to help drive additional efficiencies in the system. Utilizing private sector expertise and capital to increase plant efficiency through enhanced operations, economies of scale, and positive net-presentvalue upgrades enables water utilities to improve their systems more rapidly and with less impact to customers than relying exclusively on public capital financed by tax or rate increases. The most commonly witnessed forms of the P3 model are the Investor-Owned and Operations and Maintenance (O&M;) Management and Support models. In the Investor Owned model, a private entity completely privatizes the water system, assuming all the responsibility and control for every facet of the water enterprise. The O&M; Management Support model is structured upon the practice whereby municipalities "outsource" the operational demands and necessary maintenance of the system to the private sector, with examples of successful implementation including the metropolitan water systems of Milwaukee and Buffalo. One limitation of traditional O&M; contracts is they often only addresses the issue of infrastructure and facility upkeep, leaving the need for long-term capital expenditures and systems development still unresolved. The public's apprehension over complete privatization through the Investor-Owned model combined with the limitations of the O&M; model has led to the increasing popularity of the Concession Lease model. Often with more than 20-year time horizons, the Concession Lease model allows the distribution of maintenance and wateronline.com restoration costs along an extended time period, offering a more acceptable risk-to-reward payoff for the sizable initial expenditure necessary for new or newly upgraded facilities. Variations of the O&M; principle exist in the form of the Design-Build-Operate-Maintain (DBOM) and the Design-Build-Operate-Maintain-Finance (DBOMF) Infrastructure Contracts. The DBOM and DBOMF models are fundamentally similar to the O&M; model, with the exception of an added infrastructure engineering and construction component. These arrangements provide the benefit of the operator leveraging the efficiencies of a brand new, state-of-the-art facility they designed from the ground up. Surprisingly, these new facilities can often be constructed at lower cost than retrofitting existing facilities and with the added benefit of lower operating costs. The DBOMF model adds the component of financing the facility privately, eliminating the municipalities' need to raise initial and ongoing capital. The P3 Track Record Many municipalities have begun to adopt these partnerships, recognizing that P3s offer unparalleled opportunities for infrastructure improvement, heightened efficiencies, and extraordinary benefits for communities. In December of 2012 private equity firm Kohlberg Kravis Roberts (KKR) and United Water, a subsidiary of Suez Environnement, announced a joint venture to acquire a 40-year water and wastewater concession from the City of Bayonne, NJ. The agreement stipulated an initial payment to the Bayonne Municipal Utilities Authority (BMUA) of $150 million for the concession, plus another $157 million to be invested in the infrastructure over the life of the contract, 90 percent of which will be funded by KKR. According to the contract, the BMUA will retain ownership of the system to ensure rate stability and quality adherence, while allowing United Water to operate the system under an O&M; agreement. The Santa Paula Water Recycling Facility in California is another great example of a P3 delivering a cost-effective solution to quality-assurance issues. Constructed in 1939, the facility was completely outdated and the source of more than 3,700 quality violations. As a result, the city had entered into a consent decree where the system had until December 2010, three years from the decree, to comply with these violations or be subject to $8 million in fines. After spending nearly $11 million in engineering consulting fees, it was estimated that upgrading Santa Paula's existing wastewater facility would cost nearly $85 million, well beyond the city's investment capacity. PERC Water of California submitted a comprehensive solution to the problem that provided the city a brand new treatment facility at a cost $20 million less than upgrading its existing facility. After Santa Clara's acceptance, PERC Water and private investment firm Alinda Capital created a joint venture, Santa Clara Water, Water Online The Magazine, Wastewater Edition 25