Some Privatization Issues

Private or "investor-owned" water utilities account for about 15% of total water sales and revenues.

Many investor-owned utilities operate multiple water systems. The decision to privatize is complex and can involve significant trade-offs.

The interest in privatization is linked to the mounting pressures on water utilities in terms of replacing the aging infrastructure, complying with stringent regulations, and meeting needs associated with growth.

Recently, the city of Milwaukee, WI put the brakes on a public water privatization program.

With increasing pressure on the city budget, the city council had raised the idea of leasing the Water Works for 75 to 99 years...

in exchange for a one-time payment of $550 million to $600 million.

That cash could be invested to create an endowment that would generate $30 million a year...

which the council figured would stave off annual debates on slashing services or raising taxes. Sounds good?

Some issues that were raised in Milwaukee's case, and would be raised in Cape Coral's case:

Would you want to give the rights and control over your most valuable resource to foreign interests?

All the major water companies that would be bidding for the contract were foreign companies.

Could the city afford to lose Federal, State & County shared revenues?

With the one time right's payment generating money the chances were good that the state legislature would reduce the city's funding from the state shared revenue.

The end result would be that the city would be no better off financially, and would have lost control of its water.

Could the city budget be balanced with the $35 million per year return on the $500 million?

The city assumed that if they invested the rights fee at a conservative 7% interest that they could make $35 million a year.

In the current market there are no "long" portfolios earning 7% and if the market were to turn south again...

there is a possibility that the portfolio could generate negative returns and eroding the city's asset.

To promote profit, won't the private company make a large investment in the city's water infrastructure?

One of the biggest reason municipalities have for selling of their infrastructure assets is deferred maintenance and the high cost of repair or upgrades.

Both city's have recently spent hundreds of millions of dollars to upgrade their capacity and keep their water systems state of the art.

Could the privateers sell off the city's water supply to those willing to pay a higher price?

There is huge profit to be made in selling water from a water rich region to a water poor region. And remember, privatization IS about being FOR PROFIT.

While regional water compacts CAN prevent pumping water to customers beyond the watershed, it doesn't prevent the bottling and sale of that same water.

Would a private company care about water conservation?

Fresh water isn't a commodity, its a resource and basic human right that should be protected.

Today people are thinking about and acting to protect their water sources.

From a FOR PROFIT standpoint: The more you use, the more you waste, the more money they make.