Can Banning Privatization Keep Water Cheap, Safe, and Flowing?
Privatizing a city’s water system tends to produce a dual outcome: Pipes, once rusty, get sleek; rates get steep. When water went private in Bayonne, New Jersey, local ratepayers started paying an extra 28 percent for water; and in Middletown, Pennsylvania, privatization meant an 11.5 percent surcharge (and officials are suing the utility to stop it).
This November, amid fears that their city will meet the same fate, voters in Baltimore will decide on a charter amendment that would ban water privatization preemptively. They’d be the first major city to do it.
Aging pipes in Baltimore’s more than 100-year-old water and sewer systems require intensive maintenance help that leaks billions of dollars from the city. A consent decree established with the Environmental Protection Agency to eliminate sanitary sewer overflows by 2033 will cost the city another $1.6 billion.
“In Baltimore city we’re already at a crisis point with the affordability of water,” said Rianna Eckel, a Maryland organizer for Food & Water Watch and Food & Water Action. “Unfortunately there wasn’t a lot of preventative and proactive maintenance done.”
For now, it’s Baltimore residents that are paying the price. In 2015, more than a third of the city was paying at least 3 percent of their household income to water bills, brushing against the United Nations’ suggested maximum threshold for water affordability. On July 1, 2018, another rate hike increased water and sewer rates by an average of 13.9 percent—and increases are projected to continue until 2023.
High water bills lead to unpaid water bills, which in Baltimore can put residents on the road to eviction. As CityLab previously reported, an old Maryland law meant that until last December, Baltimore residents who had outstanding water fines and failed to pay a tax lien could see their homes put up for tax sale. Since then, an executive order passed by Baltimore mayor Catherine Pugh has ensured that water fines can’t be the single deciding factor in a tax sale—“a huge victory,” said Eckel, but it’s an impermanent one: The moratorium only applies on tax sales in 2018.
To improve public infrastructure in places like Baltimore—and, in the process, potentially reduce the inefficiencies that cause those mounting costs—the Trump administration has encouraged private companies to take the systems over. Research has shown that privately owned utility companies are more likely to make politically unpopular but critical investments, and that they comply better than public utilities do with federal regulations. But, critics of privatization say, they are less sensitive to the circumstances of low-income customers and don’t have an incentive to encourage water conservation.
Baltimore’s measure wasn’t responding to any one privatization offer in particular, says Lester Davis, a spokesperson for the city council president. But “the threat of water privatization is nothing new in Baltimore city,” Eckel said. Most recently, the private utility company Suez Environment has repeatedly approached Baltimore city council members and the mayor about leasing their water system, offering the city several potential contracts, including one that would bind the city to a 40 to 50-year lease. In return, the city would get much-needed modernizations of the system.
But advocates warn that the sweet deal they’re pitching also comes with a hidden cost. According to Food and Water Watch, a switch to a privately owned water company amounts to a 59 percent increase in water service costs, or $185 more per year, and an average water rate increase of 18 percent every other year.
Those rate hikes are necessary to offset the cost of investment cities have been putting off for years, says Rich Henning, a spokesperson for Suez Environment. “It’s difficult sometimes to put money in underground infrastructure because no one is going to see the improvement,” he said. Instead, they wait until it’s broken to fix it. But often, that’s too late.
“People say, ‘Oh my god, rates are going up because of them,’” Henning said, referring to a private company’s entrance into a municipality. “No, rates are going up because you’re investing in infrastructure… There’s going to need to be a day where you have to invest, because otherwise your system is going to fall apart.” Private companies charge what they charge to bring water systems up to code, he says, and to prepare the system for the future.
A tepid critique of the measure penned by the Baltimore Sun’s Editorial Board gets at the heart of this tension. Sure, pass the amendment, they wrote—but that alone won’t solve Baltimore’s water crisis:
[W]hat we should not do is pretend that banning privatization actually solves anything. City rate payers are still being squeezed by the costs of infrastructure, billing is still haphazard, and conflict remains over this regional resource… Rather than worrying about a sale of the water system that nobody is advocating, Baltimore officials should use it as an entree into a broader conversation with the suburban counties over regional issues, from education to housing to public transportation.
But, says Davis, worrying about the sale now means they won’t have to worry later. If Baltimore voters pass the measure in November, they’ll be the first to have a ban written into their city charter, meaning it will be harder to undo. (Northampton, Massachusetts, passed an ordinance banning privatization in 2016.) “We wanted to close the door on this as far as it even being remotely possible,” said Davis. “The tax payers should not be subjected to the whims of the private sector.”
“Water is an essential element,” he continued. “If corners are cut or things are done wrong it can be a life or death situation.”
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