Arnold Wastewater Privatization: The Policy Breakdown
As Arnold residents prepare to decide on whether to sell the city’s wastewater facilities to Missouri American Water for $13.2 million, they should carefully consider both the possible positive and negative results of such a deal and whether the city of Arnold is getting a fair price for its facilities. And while we would argue this is a good deal for Arnold, residents should consider some general criticisms of water privatization deals, which are listed (with opponent responses) below:
Criticism: Privatized water systems mean higher rates for residents. Many cities that have privatized water or sewer systems, including Florissant, Missouri, have seen rates rise, usually faster than inflation.
Proponent response: Wastewater and water system privatizations often occur because cities are faced with expensive, necessary upgrades to sewer infrastructure. Cities that charge a utilities fee that is too low to generate enough funds for large upgrades are forced to decide between a large tax increase or subsidies from the general fund. In the case of Arnold, the city claims it will have to increase rates should privatization not occur. Luckily, Missouri American Water reports that its rate increases will be less than those the city would implement, even with necessary capital improvements.
Criticism: Cities are selling city assets in order to receive short-term cash infusions. This short-term gain will result in high utility fees in the long-term.
Proponent response: Just because cities could spend sales money foolishly, does not mean they will do so. In Florissant, the city spent a portion of the sales proceeds on immediate needs and put $10 million in a rainy day fund. Arnold plans to use proceeds to pay off existing debt, but beyond that residents should ensure that the city does not spend wastefully.
Criticism: Some cities with privatized water systems have seen the drinking water become unsafe. Companies looking to make a profit might cut corners and provide lower service.
Proponent response: Private water and wastewater management has a proven track record in the United States. The vast majority of municipalities that privatize their water or wastewater system end up renewing the contract. Like municipally owned water utilities, in individual cases private companies fail to meet safety standards, but this is not the norm. Also, the issue of water quality is less important under a wastewater system privatization than a water system privatization, for obvious reasons.
The residents of Arnold should carefully consider these questions surrounding the planned wastewater privatization deal, and whether both the funds the city will receive and benefits of private management outweigh the risks of selling a public asset.