Reason Foundation

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Reason Foundation

Restructuring America's Water Industry

Comparing Investor Owned and Government Water Systems

Kathy Neal, Patrick J. Maloney, Jonas A. Marson and Tamer E. Francis
January 1, 1996

Executive Summary

Who should supply consumers with water This study compares the performance of investorowned water companies with government-owned water companies in California to gauge the potential benefits of restructuring the industry, focusing on tax subsidization, the cost of capital, water charges, operating costs, investment income, and capital expenditures. It also discusses the related issues of regulation and employment. Analysis of the data yields the following results:

These results suggest that the decision to have government entities provide water to consumers should be reconsidered, since private companies can provide this same function at the same cost without subsidies or tax-exemptions. California and other states should adopt policies which encourage the termination of government provision. Such policies would have minimal impact on consumers, since the price of water is approximately the same for the two types of provider. Moreover, the revenues generated by terminating the government water companies could be used to reduce taxes or to fund other, higher-priority government programs.


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