Friday, April 01, 2016

As Water Infrastructure Crumbles, Many Cities Seek Private Help

As Water Infrastructure Crumbles, Many Cities Seek Private Help

"More than 2,000 municipalities have entered public-private partnerships for all or part of their water supply systems, according to the National Association of Water Companies, which represents private water companies like Veolia North America and American Water. Partner municipalities include San Antonio; Akron, Ohio; and Washington, D.C. Miami-Dade County is considering partnerships for three water facilities, including one built in 1924. And Wichita, Kansas, is starting to study the issue."

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The problem is that voters don't want to pay taxes to maintain existing infrastructure. They can be more easily persuaded to approve bonds and borrow to build something new than to maintain what they already have. When it comes to boring old maintenance, they don't want to approve the borrowing and spending. So municipal infrastructure is in serious decline in this country, to the tune of at least $3.6 trillion needed by 2020. But of course people want top quality infrastructure--clean water, safe bridges and dams, smooth roads and highways--they just don't want to pay for it. And this is where PPPs (private-public partnerships) and investment banks come into the equation.  It's another way to say "privatization." And the record of bad, bad deals in the name of these complex arrangements is quite impressive.  There's always some cool way of financing the whole thing--investment banks, sovereign wealth funds, private equity firms, vendors, concessionaires, derivatives, interest rate swaps... The deals usually get negotiated in secret by the city mayor or chief executive of the county, then fast-tracked through city councils or county boards without sufficient study or any right to change it--up or down, now, or it's off--and foisted off on the public as brilliant ways to get something for nothing. Ask the people of Jefferson County, Alabama.  They got taken to the cleaners so badly using interest rate swaps to pay for a new sewer system that the county had to go bankrupt. J. P. Morgan took care of everything, don't you know.

1 comment:

Deborah Goonan said...

Thanks for sharing this, Evan. This is a critically important issue. I think you are correct in saying that people want top quality infrastructure and clean water, but they have an unreaslistic perception about what that costs, and seem unwilling to pay for it.

This is the very same thought process that has led to the proliferation of Association Governed Residential Communities and Developer-centric Multi-function Special Districts. Local government leaders, aware that taxpayers will balk at paying more for new infrastructure, have decided to allow private investment to become the norm for creating new housing and new neighborhoods.

But in the end, taxpayers are still paying for new infrastructure -- and in many cases, overpaying for infrastructure of questionable quality -- through HOA assessments. When you add in the cost of long-term maintenance, you see that, in the end, the Association living scheme is not such a bargain.