St. Louis Should Privatize Its Water System

A version of this commentary appeared in the St. Louis Post-Dispatch.

You have probably heard about all of the large water main breaks throughout the St. Louis region over the past month, leading to boil-water orders, traffic mayhem, and extensive repairs.

Wait, they haven’t been throughout the St. Louis region? They’ve all been in the City of St. Louis? Yes, indeed they have been, but what difference is there?

The difference is twofold. First, the city’s water system is simply older, and in fairness an older system is going to have more problems than a newer one. But the other problem is that the city water division is owned by city government, whereas in most of our region—including all of St. Louis County (with the partial exception of Kirkwood)—the water is provided by a private company (in most cases Missouri-American Water). While water line breaks can and do happen to every water utility, the recent, dramatic trend in the City of St. Louis is not being experienced elsewhere.

The fundamental problem with government utilities is that politics inevitably interferes with the management of the utility. It can do so in ways that may seem beneficial, like holding water rates artificially low because politicians don’t like increasing rates on their own voters. Did you know that the city’s water division has never installed meters in many homes to help allocate billing and prices? That technology is almost a century old, yet it has never been adopted citywide.

In a 2002 study on water utility privatization, the National Research Council stated (emphasis added throughout):

Some studies show that the public is willing to pay for reliability and for high water quality. . . . Yet water managers and city councils often lack the political will to practice cost-based ratemaking. They may want to protect residential customers (who are also voters) from higher rates and use water pricing and availability policies to promote economic development even though there is scant evidence to support the usefulness of this strategy.

Compare those findings with these recent quotes by city officials, as reported by the Post-Dispatch:

The city’s water chief told aldermen Monday he needs two 20% rate increases in the next fiscal year—one in July and one in January—to shore up a division struggling to manage rising costs and aging infrastructure.

The increases . . . would be the largest in nearly three decades.

The system is supposed to pay for itself by charging ratepayers enough to cover the cost of operations and upkeep. When it can’t, the mayor and the board are supposed to step in and adjust rates.

But they don’t like to do it. The last time they obliged was in the late 2000s, another time when staff was telling them they had no choice.

While the proposed water rate hike is absolutely necessary, and the related proposal in the current bill to reduce political influence by automating future price hikes would be beneficial, I have zero faith that future politicians wouldn’t respond to pressure to reduce rates by backtracking as soon as possible. The city’s leaders have a history of ignoring recommendations to deal with the water infrastructure until every decade or so it becomes impossible to ignore it further.

Other communities in our region have privatized their water and sewer systems in recent years. Eureka recently completed the sale of both to Missouri-American Water for $28 million. Florissant and Webster Groves both privatized their water systems 20 years ago, also to Missouri-American. Other utilities are also potential bidders. Voters in Olympia Village in Jefferson County approved the sale of its sewer system to Liberty Utilities in 2021.

I hope city residents reconsider the benefits of cheap, public water the next time they have to boil it before drinking or get home late due to a massive traffic jam. Politics has gotten the St. Louis water division into this mess, and politics isn’t going to get it out. It is time to privatize the entire system as part of an open, transparent process that will hopefully lead to the city’s vital water system being operated by a private, regulated utility. Customers of private water utilities don’t have to think very much about their water supply, and that’s the way it should be.