On Monday the Joint Committee on Environment, Natural Resources and Agriculture heard testimony on House Bill 1333, an act to preserve public water and sewer systems. The bill if passed would “prevent the privatization of public water supplies and sewer systems in the Commonwealth,” essentially reversing more than three decades of experience, and expertise.
This measure puts politics over common sense and practicality. Beyond being misguided, the bill is potentially very dangerous. If signed into law it would require all private operators of water and sewer systems to divest their assets, at cost, to their host communities. What’s next? Where will the Commonwealth stop? What business is safe from the reach of government? Who’s property is protected from seizure if the government can just decide it doesn’t want you around any longer? While this may very well likely violate the takings clause of the Constitution, that is not the only fault with the proposed legislation.
Perhaps most disturbing is that the bill dismisses the vital role private water and wastewater companies play in the Commonwealth and the country at large. More than 40 percent of drinking water systems in the United States are private, regulated utilities-there are more than 25,000. Many of these are small ancillary systems that the government has no interest in owning or running.
Of the remaining systems, more than 1,100 local governments have entered into a public-private partnership and contracted out the operations and maintenance to a private company for water services. An additional 1,300 communities have similar arrangements for wastewater operations. Nationally, the rate of private participation has been impressive in the last 15 years, growing by more than 85 percent.
The private sector responded to governments call for help. Faced with new clean water drinking regulations most local governments needed new technology and investment in their infrastructure to meet strict standards. Even still, the U.S. Environmental Protection Agency estimates that water and sewer infrastructure needs around $300 billion in investments over the next 20 years. In the face of such a crisis, surveys show that privatization is a policy tool public officials often turn to. Local government surveys have found that public officials turn to privatization in response to fiscal crisis and/or when privatization has been shown to work in other jurisdictions.
Indeed, even the U.S. Conference of Mayors has endorsed public-private partnerships for water and sewer operations. Furthermore, it was President Clinton’s EPA that endorsed private participation as a means by which local governments can meet environmental standards and meet needs more efficiently as well, calling public-private partnerships a “classic win-win situation.”
One argument often used against water and wastewater privatization is that water is too vital a resource that we can’t trust private contractors? This is a conceptual rather than a research question, but ignores basic facts about our lives in the United States. Yes, water is vital, and along with most other vital things, we rely on the private sector to provide it. The closest example is food, which the market provides, as it does medicines and healthcare.
The sheer track record of water and wastewater privatization, with thousands of satisfied communities, reveals this concern to be mainly rhetorical, rather than factual. Government remains responsible for establishing and enforcing quality and reliability standards. While contractors have every incentive to ensure the same. Just as with government-run facilities, employees and managers, and their families, live in the community and are customers of the services they provide. And companies that consistently fail to deliver expected service will soon find no more willing customers.
HB1333 flies in the face of reality and national experience in water and wastewater privatization. Its supporters have largely ignored the importance of competition and private sector participation. If they were truly concerned with the quality of water and the rates taxpayers pay they would embrace additional competition and privatization—that’s what the data and experience tell us is needed.
Geoffrey F. Segal is the director of government reform at Reason Foundation.