Opinion: Texas needs private investment to vastly enhance its water supplies

Ron Simmons and Carlos Rubinstein

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 to maintaining and growing our vibrant Texas economy.

Over the decade from 2010 to 2020, Texas added nearly 4 million people. In that same period, water supplies have not kept pace.

According to the public policy think tank Texas 2036 and 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, the Texas Water Development Board 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.

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 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 under a P3 is not required to pay service costs if the project fails to deliver the quantity and quality of water specified in a water purchase agreement.

Only with private investment and innovation can Texas 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, 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 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. As the Comptroller’s report indicates: “the impact of (water) shortages would echo throughout the state economy, affecting everything from power generation to the cattle business.”

Simmons is chairman of the Invest Texas Council  Advisory Board. 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.