Pros, cons of water privatization

Santa Maria Times

Joan Leon/Looking Forward

Posted: Friday, August 20, 2010 12:00 am

With concerns of the growing deficit in government retirement systems, and employees’ health care costs going up, it might be tempting to consider contracting out many services.

Some areas have actually sold toll roads or bridges to private, for-profit investors. Once out of public control, those infrastructures would be difficult to buy back, and they may have been allowed to deteriorate.

Some services are specialized and can be better provided by private companies. The county contracts out jail medical services, some mental-health care and other programs. The recently approved day reporting centers for parolees will be operated by a contractor.

What about privatizing water or other public utilities? Experiences of other cities and counties provide some examples of how privatization has proven to be the wrong decision.

In Stockton, after four years of service from a private water company, the city decided to go back to a public utility. The reason? Poor service, poor water quality and rapidly rising rates. The for-profit company had the bottom line as its highest priority.

The danger in relying on private companies for such essential needs as water, is that the private company has a stranglehold on its customers. You must have water, unlike cable television, where you can go to satellite or do without.

At least in California we have the Public Utilities Commission (PUC), which regulates the rates that utility companies can charge their customers.

Orcutt residents face rate increases from Golden State Water Co., a subsidiary of American States Water Co. That corporation is a for-profit and must answer to its shareholders, who earned 13.7 percent average profit between 2003-07.

If privately owned PG&E or the gas company or phone companies want to increase rates, they must justify the increases and convince the PUC the rates are really necessary. The Utility Resource Network (TURN) is a nonprofit group that monitors phone, electric and gas companies and lobbies for the ratepayers.

Smaller cities, such as Buellton, contract out services because it is more cost-effective than organizing their own departments, such as for police and fire protection.

Trash pickup is also contracted out, using a competitive bidding process. Recently, private companies Marborg and Health Sanitation Services vied for that contract in Buellton.

In Santa Maria, we are fortunate to have city water, sewer and trash-

collection services. People can complain about rate increases, and if

50 percent plus one of the rate-

paying households officially protest an increase, the rates cannot go up.

City maintenance of the water-delivery system and the water-

treatment facilities is taken for granted by residents. But if a private, for-profit company were providing those services, that company might cut back on maintenance and let the infrastructure deteriorate.

Then, if the city took over the services later, ratepayers would be faced with all the deferred maintenance the private company allowed to happen.

Santa Maria does use contractors for street sweeping and to maintain the street landscaping. The city also contracts out street maintenance.

The city keeps a computerized physical inventory and data bank of all city streets on a preventive-

maintenance schedule. The competitive bidding process itemizes the streets to be improved.

To be eligible, a contractor must have the required licenses and insurance. The contractor agrees to provide all tools, materials, labor and equipment.

Residents are more secure if local government controls the infrastructure of water, sewer and streets. Services that can logically be privatized are reasonable for specialized equipment or services. Letting public water systems or roads fall into the hands of private corporations is a dangerous step.

Joan Leon is a local resident. She can be reached at Looking Forward runs every Friday providing a progressive viewpoint on local issues.