New York
Dominated by Small Systems

by Frank Mangravite, Ph.D.
(reprinted, with permission, from Public Works Financing)

In 1980, Sewer District #7 of Carmel, N.Y., contracted with Mid Hudson Pollution Control, now owned by Severn Trent Environmental Services, to provide the labor to operate its system. This was the first New York State operations contract. Private firms today operate over 266 water and wastewater systems in New York. The majority of these are small-less than 0.33 mgd.

Before American Anglian Environmental Services' 10-year contract in 1997 to manage operation of the City of Buffalo's 160-mgd water system, the last new contract to operate a municipal water or wastewater system greater than 10 mgd was in 1992 when OBG Operations started operating Utica's newly constructed 32-mgd water filtration plant, which requires 7-9 employees.

This survey includes the known operating contracts for the following firms:

  • Allied Pollution Control
  • American Anglian Environmental Technologies
  • CAMO Pollution Control
  • OBG Operations
  • Professional Services Group
  • Severn Trent Environmental Services
  • U.S. Filter Operating Services
  • Upstate Consultants of Green County
  • Yaws Environmental Laboratories

Figure 9 gives the distribution of contract-operated water and wastewater systems in New York as a function of the design flow of the system. There are at least 200 systems that are less than 0.33 mgd. These 200 small systems have the following characteristics:

  • Water-52%
  • Wastewater-48%
  • Municipally Owned-41%
  • Privately Owned-59%
  • Water: 71% Privately Owned,  29% Municipally Owned
  • Wastewater: 46% Privately Owned, 54% Municipally Owned.

Contract Operated PlantsNew York differs from New Jersey and Connecticut in the extent of the market penetration for small facilities. New Jersey has 66 facilities below 0.33 mgd. About 53% are privately owned facilities and most are wastewater. All the privately owned facilities in the survey served the public such as condominiums and developments. Connecticut has only a single small system. The distributions of projects for New Jersey and Connecticut are also given in Figure 9.

Market Comparisons
Market penetration analysis based on population is subject to many approaches, interpretations and results. Still, it can reveal some insights, as long as they are regarded as qualitative in nature. There are approximately 340 communities in New York with populations of 5,000 or greater. New York's privatized plant size distribution in Figure 9 reveals 28 plants that are 1 mgd or greater. This equates to a market penetration of 8.2%, assuming each privatized plant serves a separate single community of 5,000 or more persons.

A similar analysis for New Jersey and Connecticut yields market penetrations of 8.9% and 8.0%, respectively. New Jersey has 26 privatized plants over 1 mgd and 291 communities of 5,000 or greater. Connecticut has 12 plants over 1 mgd and 137 communities of 5,000 or more.

The populations of these states are: New York-11 million plus New York City (18 million total); New Jersey-8 million; and Connecticut-3.2 million. If the previous analysis is repeated for all privately operated plants over 0.33 mgd, the market penetrations become: New York-22%, New Jersey-13%, and Connecticut-9%.
The age of the markets, based on the start date of the first known project of size, is New York-17 years, New Jersey-15 years, and Connecticut-7 years.

One flaw in the above market penetration analysis is that a community typically has more than one utility system. In New Jersey, there are about 431 wastewater plants, 613 water systems and 291 communities over 5,000 population. This gives a ratio of 3.6 plants per community. Assuming the same ratio for the other two states yields the following market penetrations for communities over 5,000 persons:

  • New York (266 plants)-22%
  • New Jersey (106 plants)-10%
  • Connecticut (13 plants)-2.6%

The estimated aggregate design flows of the contract-operated water/wastewater systems in each of the three states is:

  • New York-346 mgd (36% of which is wastewater)
  • New Jersey-261 mgd plants (24% wastewater), 294 mgd pipes (26% wastewater)
  • Connecticut-103 mgd (91% wastewater).

Both New Jersey numbers exclude the 80-mgd Newark water filtration plant, which reverted to public operation this year. The first includes known contracts for only treatment plant O&M, including those for drinking water wells. The second includes the flows of projects that are only for the operation of collection systems and or distribution systems. New Jersey has a significant number of contracts for the operation of collection and distribution systems alone.

The wastewater portion of design flows in New York and New Jersey are each strongly influenced by a single large water treatment facility, Buffalo's 160-mgd plant and Jersey City's 80-mgd plant. Subtracting these design flows changes the percentage of contract-operated flow from wastewater plants to 64% for New York and 61% for New Jersey. All of Connecticut's projects are for wastewater with the exception of New London, which is for both water and wastewater.

The average projects size can be calculated by dividing the aggregate plant design flows by the number of plants or projects. For the three states, they are:

  • New York-1.3 mgd (0.7 mgd, excluding Buffalo)
  • New Jersey-2.5 mgd
  • Connecticut-7.9 mgd

These average flows show that market penetration has proceeded quite differently in each state. In Connecticut, many of the larger cities have embraced the concept of private contracting. There appear to be few or no small systems under contract, however.

In New York, larger cities, with the exception of Buffalo, have not been able or willing to contract out utility operations. On the other hand, there are several small O&M firms and two national firms-Severn Trent and Ogden Yorkshire-that have acquired local operators that serve a large number of small water and wastewater systems.

Market penetration in New Jersey has been effective for both large and small systems.

The New York water/wastewater privatization market. It is estimated to be between $40 million and $80 million. The majority of the New York contracts for the smaller systems operated by Severn Trent and Ogden Yorkshire, are for labor only. Operating costs for electricity, sludge, chemicals, etc. are paid by the owner. However, there are exceptions to this rule where the operating firm may pay for certain non-labor operating costs and not others.