Milwaukee, Don't Give the Public's Water Away to a Private Company
Led by City Comptroller Wally Morics, the Milwaukee Common Council last fall began going down a path toward privatizing the city's drinking water. Although in pursuit of the worthy goal of balancing the city's budget, this path would ultimately cost the community both money and control over one of its most valuable assets: its water.
Last October, Morics proposed leasing the Milwaukee Water Works to a company as a means generating new revenue. The plan would involve handing over the city's drinking water system for 75 to 99 years in return for an upfront payment to the city. That money would be invested and used to help balance the city's finances. Meanwhile, the company would have a free hand to operate, expand and utilize the asset.
Although the city's financial situation is serious, there are several reasons why privatizing the drinking water system would not benefit the community.
For starters, the upfront payment the city receives would simply be extracted from the community in the form of higher water bills. The company that gets the lease will ensure that it recovers this upfront payment, plus profit, and it will do that by increasing water rates. In Wisconsin, private drinking water utilities charge 59% more than public utilities. That means a typical household has to pay an extra $149 a year on water bills if their system is privatized. Any revenue from higher rates will land squarely in the company's pocket. It's taxing through the tap, but with the company reaping the reward.
Privatizing Milwaukee's water would strip the community of control over one of its most precious assets. Milwaukee is water-rich and already sells bulk water to surrounding communities. Neighbors like New Berlin and Waukesha have sparked debate by applying to purchase Milwaukee water. If the system were privatized, the company would reap the financial benefit of any such sales, and the city would likely relinquish authority to approve or deny them. This would weaken Milwaukee's hand in managing water resources, economic development and sprawl.
Across the country, communities have paid the piper after leasing away their water systems. In 1997, Cranston, R.I., received $48 million for a 25-year lease of its sewer system that led to chronic problems, including sewage spills, putrid odors and thousands of dollars in environmental fines. Scranton, Pa., incurred a hefty early termination fee to escape the rate hikes of a 20-year lease it entered in 1999. Larger cities, like Atlanta and Indianapolis, have suffered under other models of water privatization too. Notably, however, no U.S. community of Milwaukee's size has ever successfully leased its water system.
In the coming weeks, Morics will ask the council to advance the proposal by hiring a financial adviser to grease the wheels of privatization. In theory, such advisers are hired to help the city weigh its options. However, they are often paid on condition of success, giving them an incentive to ensure that privatization occurs. With critical city resources on the line, the council should reconsider further investing in the privatization plan without first measuring community interest through a transparent process including a public forum.
Leasing the Water Works would mean handing over control of the city's water for a very long time in return for short-term gain. If the city were to choose the wrong path, it could spend the next 99 years paying for its decision.