Privatization of Water Services in the United States An Assessment of Issues and Experience (2002) / Chapter Skim
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Executive Summary
Executive Summary
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water utilities were initially private ventures. But interest in the prospects for an increased role for private sector participation in water supply and wastewater services in the United States expanded during the l990s as economic, fiscal, regulatory, and environmental factors led city officials across the United States to consider privatizing parts or all of their water supply and wastewater systems.
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It is intended to help the reader make informed judgments about which situations represent good candidates for privatization and which do not, and should therefore be of interest to water utility managers, urban government officials, and concerned citizen groups. STRUCTURE OF THE WATER AND WASTEWATER INDUSTRY Historically, water services were initially delivered by private providers in many cities in the United States, such as Boston, New York, and Philadelphia.
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, the proportion of water services in the United States provided by private water companies, whether measured by customers served or volume of water handled, has remained close to 15 percent since World War II (NAWC, 1999~. FACTORS DRIVING WATER SERVICES PRIVATIZATION The magnitude of investments that will be required to continue to provide high-quality, reliable drinking water and wastewater treatment services to the nation is huge.
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may not favor water system consolidation in the interests of maintaining some degree of local control over personnel, management, and operations decisions. A major impact of increasing competition from the private sector has been to stimulate public water agencies to engage in self-improvement programs such as establishing performance benchmarks, modifying work practices, implementing staff education and certification improvement, and accelerating investments in new technologies.
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Although private operation and management of water services may provide savings in operating budgets and capital costs, because of the bias against private operations in the United States tax code, a private operator with the same real costs as a public operator would have to charge higher rates. Investor-owned utilities that both own and manage assets must allow for depreciation and profits, while public sector rates may not reflect actual costs because of subsidies and for political reasons.
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The grant program has been replaced by state revolving funds that were initially federally funded, but that are now available only to publicly owned water and wastewater utilities. A variety of financial assistance programs that would facilitate private sector participation have been proposed, including federal matching funds combined with state appropriations and low-interest loans, but funding to date has been limited to cases of extreme community hardship.
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KEY FINDINGS AND CONCLUSIONS The Committee on Privatization of Water Services in the United States reviewed a range of issues associated with public and private ownership and operations of water utilities in the United States, and lists its key findings and conclusions below: Water services privatization takes many forms, and no one form or structure fits all situations. Alternatives range from contracting for various services to the sale of system assets.
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The design-build-operate contractual arrangement and its variants have been successful in some large water service systems in the United States. An example is provided by the recent expansion of Seattle's water utility.
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EXECUTIVE SUMMARY 9 likely to respond to the pressures of possible privatization by improving their performance, rather than privatizing part or all of their operations and ownership. Organizations are often reluctant to proactively initiate substantive changes, particularly if there is no overriding water services issue of great local concern.
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