2008 June FWW Costly Returns
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Costly Returns: How Corporations Could Profit from Inflating the Already High Cost of Repairing the Nation’s Crumbling Water and Sewer Infrastructure

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Although public utilities provide water to about 86 percent of people on community water systems, a private sector push is on to change this. The corporate water barons are salivating at the prospect of profiting from the drinking water and wastewater infrastructure crisis facing the United States. Already, U.S. cities endure 250,000 to 300,000 water main breaks, lose one-fifth of their water through leaks and suffer 1.2 trillion gallons of wastewater spills each year. Americans will spend up to $1 trillion by 2019 to upgrade and repair our 1.5 million miles of piping and the treatment plants to avoid a public health crisis.

Absent a needed increase in federal assistance, consumers and communities across the nation will see their bills continue to climb as utilities make necessary repairs and upgrades. Yet, corporate advocates are deceitfully using the costliness of those upgrades as ammunition to push elected officials into privatizing their water and sewer systems.

Instead of solving our water crisis, privatization pads the pockets of corporate water barons. A 2007 report compiling newsletters from July 2006 to the end of 2007 by investment firm Boenning & Scattergood reveals that, thanks to some fancy finance and accounting, private utilities tie higher earnings to increased costs. Corporations have a financial incentive to oppose conservation, protection of drinking water sources and other policies and programs that would save money and help offset the economic burden on communities across the nation. Wasted water drives up a company’s revenue, which flows from people’s water bills.

The investor research firm states that a “high profile system failure would ‘help’ the situation.” Experts believe that if “faulty underground infrastructure were to interrupt a major city’s water supply for an extended period,” the public would be less resistant to rate hikes that benefit corporations.

The Boenning & Scattergood report reveals that a future favorable to investor owned utilities is a future with poor consumer protections, a limited or non-existent federal safety net for low income communities and large infrastructure investments built to maximize profit, not the interest of the environment or the public. In fact, the prophets of privatization speak out against a federal trust fund for our water and sewer systems. In their view, “every dollar that the federal government injects into local water systems is a dollar that will not go into someone’s rate base…” That “someone” is a water corporation and the “rate base” is revenue from community bills.

Federal funding would reduce financing costs, allow small municipal systems to fend off privatization and ease the financial burden on families across the nation. Indeed, when Congress passes a federal trust fund, it should be available only to the publicly owned and operated utilities that serve most of the nation’s population.