2009 Feb FWW Money Down the Drain
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Money Down the Drain: How Private Control of Water Wastes Public Resources

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Our country faces one of the greatest challenges of this generation. The collapse of the housing market has forced families out of their homes, dried up capital markets, led to job loss and unemployment and left local governments scrounging for money just to keep day-to-day operations running. This includes water and sewer service. Dilapidated sewer lines, faltering treatment plants and unfunded federal mandates only further burden struggling municipalities.

Water corporations are trying to milk this economic turmoil for all its worth. They are approaching cash-starved cities and towns with offers of money in exchange for their water and wastewater systems.

Confronted with tough choices, and beleaguered by corporate lobbyists, many elected officials fall prey to the quick fix proffered by advocates for privatization. Leases and asset sales of municipal systems were rare in the United States until recently. In 2008, several cities, including Akron, Ohio, and Milwaukee, Wis., have laid the option on the table. While local governments would get an influx of cash, corporations would recover that amount, along with their profits, through rate hikes and service cuts. It amounts to taxing residents through their taps. What’s more, it’s an expensive way to finance infrastructure and services.

Companies often tout the idea that the private sector is more efficient, and that they can upgrade systems at a lower cost. In fact, both notions are myths, and public officials should know better than to get caught up in the corporate spin. Privatization does not enhance efficiency. The results are mixed, at best, and many communities end up paying much more, if not through their bills, then through the degradation of their service and environment.

From Fairbanks, Alaska, to North Brunswick, N.J., residents have felt the sting of perpetual rate hikes after privatizing their sewers. An analysis of 20 states shows that these experiences are not just anecdotal; they are demonstrative. Compared to municipalities, private utilities charge as much as 80 percent more for water and 100 percent more for sewer service.

High financing costs, taxes, profit requirements and an assortment of other factors collide to make privatization an expensive and irresponsible alternative to reliable public management. Lynn, Mass., had to shell out nearly twice as much as it should have after giving a corporation control over a project to separate its combined sewer system and eliminate sewage spills.

Cities across the nation now realize that privatization has failed to yield the promised savings, and when it does cut costs, it does so by sacrificing human and environmental health. Lee County, Fla., spent years and millions of dollars cleaning up the mess of corporate neglect.

Using shoddy construction materials, deferring maintenance, backlogging service requests and massive downsizing of the workforce are common tactics of a profit-driven water corporation.

Municipalities have better options to reduce costs and stabilize rates. Public purchases of privately owned systems in Felton, Calif., and Fort Wayne, Ind., have saved many families hundreds of dollars a year on their water bills. From Houston, Texas, to Fairfield-Suisun, Calif., cities are finding that the public can provide better, cheaper, faster service.

What’s more, public employees have pioneered even more ways to keep rates low. Whether in Ann Arbor, Mich., or Miami-Dade County, Fla., public utilities have come together with labor unions and other municipalities to implement innovative strategies to cut costs and improve service. Many more cities could employ similar plans if only they are bought a little more time to stave off corporate takeovers.

If the federal government does not act, more and more floundering public officials will collude with corporate profiteers to hatch privatization schemes in attempt to ease budgetary woes.

Our country needs a federal trust fund for safe and clean water and a national infrastructure reinvestment bank that will provide public utilities with the support they need. This assistance must to go only public entities and public projects. With a renewed federal commitment, our nation’s good public operators can keep our water safe, clean and affordable for generations to come.

Key Findings

  • Private utilities charge higher rates than municipalities
  • Privatization does not increase the efficiency of water and sewer systems.
  • Privatization has many hidden expenses.
  • Water corporations drive up costs and shoot down service quality.
  • The public can do it better and cheaper.
  • Public funding for water must go to only public utilities.