Water Design-Build Council Blog

Can P3s Accelerate Puerto Rico’s Path to Recovery?

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On September 20, 2017, all eyes were on Puerto Rico as Hurricane Maria made its way across the island and left devastation along its path. A crippling economic crisis and population decrease already painted an uncertain future for the people of Puerto Rico. Two major back-to-back hurricanes later, questions about the future turned to questions about survival. No water. No power. No communications. Scarce supplies. While conditions are improving, there are still thousands of people without power, water, and a safe sustainable infrastructure.

Based on what we have learned from similar disasters, such as Hurricane Sandy, recovery could take 10 to 20 years, if not more. This means an entire generation of Puerto Ricans may grow up in a state of recovery. While it is yet to be seen how this could impact quality of life in the long run, we know for certain that short-term solutions will not cut it. For Puerto Rico to bounce back from and adapt to the acute shocks and chronic stresses of today and tomorrow, it’s crucial that an integrated, programmatic plan come into focus quickly. Planning in silos is not optimal nor cost-effective. The more time that passes before implementing solutions that address multi-hazard vulnerabilities in critical assets such as water, energy, transportation, and telecom systems, the greater the risk that social, economic, and environmental structures will collapse.

A sustainable future for Puerto Rico, especially for its water infrastructure and power utilities, is possible. The newly certified Fiscal Plans for the government and key instrumentalities call for austerity measures and a complete overhaul of its systems—implementation of new and improved technologies, system diversification and redundancies, operational transformation, and stronger, more transparent and accountable governance, to name a few. However, while federal funding assignments have been allocated to Puerto Rico in history-making amounts, these resources will not be enough. Therefore, the government of Puerto Rico is exploring alternate sources of funding, including foreign and private investment backed by favorable tax incentives and exemptions. It is also betting on the use of public-private partnerships (P3s) as an alternate project delivery system that can both deliver the water infrastructure projects more efficiently and relieve the investment repayment burden.

In 2017, the government of Puerto Rico held a P3 summit where it presented more than 20 potential P3 projects, which included higher education, transportation, and maritime projects, as well as modernization and transformational projects for its power and water utilities. By engaging a P3 model, Puerto Rico can expect investment efficiencies, strategy alignment, risk sharing, and schedule acceleration and certainty—important benefits that are needed to get key transformative projects implemented.

Puerto Rico’s recovery program is going to be complicated and it’s going to cost a lot of money given the many moving and evolving variables, the number of players involved (on both public and private side), and the size and complexity of the island’s infrastructure. However, Puerto Ricans don’t scare easily and have a demonstrated history of rising to the occasion. The real cause for fear is missing out on an opportunity to impact meaningful change by embracing planning, design, and construction methodologies that can accelerate the rebuilding process.

Time is of the essence. Stronger storms and longer, recurring drought periods will continue to negatively affect Puerto Rico’s water resources and systems, which could be a detriment to social and economic prosperity. The diversification of energy source, as well as dependable transmission and distribution power systems, are paramount to improving quality of life and strengthening economic vitality. Furthermore, advancing and diversifying urban transport systems is a must if Puerto Rico wants to gain a competitive edge, enhance productivity, and increase its attractiveness. If done right, P3s could help Puerto Rico reap real benefits in a shorter amount of time and support the island on its path to recovery. But, getting P3s up and running continues to be a challenge and an underleveraged mechanism and will depend greatly on the risk and investment appetite of the private sector under the still uncertain fiscal landscape.

Melissa L. Pomales, PE, ENV SP, PMP is the Program Management Leader for Water in Arcadis and Board Director of Arcadis Caribe in Puerto Rico. She is a licensed Professional Engineer in Puerto Rico and Florida with over 15 years of experience in program and project management, capital planning, engineering, and business advisory in the water industry. She has supported utility municipal bond transactions totaling over $3 billion and has led program and project management engagements for multi-year, billion-dollar capital programs. Ms. Pomales has provided business advisory services to water utilities in Puerto Rico, the United States, and in Latin America in the areas of non-revenue water, energy management, rates and affordability, utility management and optimization, asset management, and public-private partnerships.