There is a proposal to sell the Sugar Creek water and sewer systems to Missouri-American Water on the April 8th ballot. The company is offering Sugar Creek $5 million for the systems and guaranteeing an $8 million investment into improvements.

Sugar Creek needs to make improvements to its water and sewer systems. Sewer rates just went up this month, and water rates will likely increase, too. The question for voters is whether the city will fund those improvements via debt or whether Missouri-American will pay the city for the asset and fund the improvements itself.

Studies have shown that private utilities generally operate more efficiently than public utilities. Privatization of these two systems could result in a substantial infusion of money for the city, and placing the water and sewer facilities on the tax rolls would expand the tax base. That large payment plus the broader tax base could lead to tax cuts elsewhere in Sugar Creek.

The residents of Sugar Creek currently receive their gas and electricity from private utilities closely regulated by Missouri’s public service commission. Getting their water from Missouri-American Water would be no different, and this sale would greatly benefit the people of Sugar Creek.

The post A Sweet Deal for Sugar Creek appeared first on Show-Me Institute.

Columbia is currently considering raising its municipal water rates. The proposed increase would be set at four percent, with higher increases for some water services during the summer. I have no criticism of the proposed increase if it is truly necessary and the revenue is properly used, but there is an even better option that Columbia citizens and leaders should consider: privatization.

There is no standard method for providing utility services in Missouri cities. Springfield, for instance, has a city-owned public utility that provides every utility service. Alternatively, almost all of the 1 million residents of Saint Louis County are customers of private utilities for water, gas, and electricity. The private sector also provides utility services in Jefferson City.

Despite the structural differences between public and private provision, there is little difference between what customers pay in Columbia and Jefferson City. Both cities are below the national averages for utility costs. According to data from payscale.com, a residential customer of Columbia’s municipal electric utility has an average monthly charge for usage of $169.75, which is four percent below the national average. In Jefferson City, that average monthly electrical bill is $162.50, or five percent below the average. That’s obviously a small difference in favor of customers of Jefferson City’s private utility compared to Columbia’s city-owned utility.

Studies have demonstrated that private utilities are generally more efficient than municipal utilities. In 2000, economist B. Delworth Gardner of Brigham Young University determined that private water utilities in Utah charged lower rates for water than comparable public utilities, even after accounting for the large advantages in taxation and regulation that public companies have. Economists Daniel Hollas and Stanley Stansell found in a 1994 study that private gas utilities were more economically efficient than public gas utilities.

It is reasonable to suppose that private utilities would be more efficient in their costs and operations than Columbia’s current municipal utilities. Privatizing the utilities could benefit the city in a number of ways. Most importantly, the city would experience an immediate cash infusion from the sale. Eureka, in Saint Louis County, sold its municipal water and sewer utility to Missouri-American Water for $28 million in 2020.

Columbia would also see other fiscal benefits from privatizing the city utilities. The assets of the newly private utilities would become taxable, expanding the Columbia and Boone County tax bases. Finally, reducing the number of municipal employees entails scaling back the long-run taxpayer costs associated with government pensions and health care.

Currently, there is a question about how Columbia has been calculating the payments-in-lieu-of-taxes (PILOTs) from the water department (and likely the electric department, too). The Columbia city charter states that the public utilities shall pay to the city the amount that would be due in taxes to the city if the utilities were private. However, the city has long been transferring into the city’s general fund the total taxes that would have been due to all of the local governments, such as the county and school district, which is a much higher amount. While it may seem like a harmless transfer from one city fund to another, it also looks like a questionable use of water department revenues to increase Columbia city revenues while going around the requirements of the Hancock Amendment. Heavy users of water, such as swimming-pool owners, should pay high water bills to account for their greater use of water. They should not have to pay more for water because Columbia wants to transfer more money from the water division to the general fund as a subsidy to other city services. Privatizing the water and electric utilities would stop that appearance of impropriety for good.

Private utilities are just as capable of providing quality services at a low price to the residents of Columbia, and likely more efficient, than city departments. Privatization of the Columbia Water and Light Division would bring a needed cash infusion to the city, add substantial assets to the tax rolls, and reduce long-term public employee costs. Cities around Missouri have seen positive results from such privatization efforts, and there is good reason to believe that Columbia taxpayers and residents would also benefit.

The post Columbia Should Privatize Its Water and Electric Utilities appeared first on Show-Me Institute.

As systems evolve and become more complex over time, certain things that used to be commonly provided by cities and counties have moved beyond the realistic capacity of local governments. Two such examples are sewers and hospitals. The last public hospital in St. Louis closed in 1997, and municipal sewer systems in Arnold and Eureka have both been privatized recently. Not all of these changes result in the private sector taking over service provision. For example, in the City of St. Louis and most of St. Louis County, the Metropolitan Sewer District (MSD) is a large, independent public agency with the resources and expertise to manage the sewer system for our region. Local governments in two areas in our region are currently preparing to hand over responsibility for major services to outside providers, and in each instance the prospects for beneficial transformations are being put at risk by a process that is not being managed in the best interest of the public.

First, the sewers. Festus and Crystal City are considering selling their shared municipal sewer system to the Jefferson County Public Sewer District (JCPSD). Like MSD, this larger, regional system has more resources and expertise than the cities do. However, the leadership of both cities have missed an opportunity to get the best deal for their residents. Earlier this summer, both councils approved a plan to consider only JCPSD’s proposal for a $5 million sale of the sewer system—that is, to exclude any other potential applicants from participation—after quietly negotiating only with JCPSD for months. This is despite the fact that representatives from both Missouri-American Water, which has recently purchased systems in Jefferson County, and Central States Water Resources, which operates sewer systems throughout Missouri, expressed interest in making a proposal once the idea become public. Those private utilities have been denied the opportunity to participate thus far.

Leaders in both cities deserve credit for their willingness to consider major changes to their sewer system. JCPSD’s $5 million offer may well be the best overall proposal the cities receive. But how can the cities know it is the best deal for their residents if they don’t even take any other offers?

The hospital example is even more troubling. In Perry County, located between St. Louis and Cape Girardeau, the county hospital board is planning to sell county-owned and operated Perry County Memorial Hospital (PCMH) to Mercy. Such a deal is almost certainly necessary and likely beneficial for the county and its residents, but the manner in which it has been conducted would make former Kansas City political boss Tom Pendergast blush. While they probably don’t have smoke-filled rooms for politicians in Perry County hospital, they might as well have. There are two boards that run the hospital—one elected and one appointed—and the boards have gone so far as to deny vital financial information to elected members of the hospital’s own board who have had the audacity to ask tough questions about the deal. You read that right. Elected members of the hospital board who aren’t falling into lockstep are being shoved aside as the board majority forces the deal through. Things like the Sunshine law and open records requirements are not suggestions; they are the law, and someone needs to inform the Perry County hospital boards of that.

In general, I strongly support local government changes such as outsourcing services to the private sector or other, larger public bodies. Divesting entities like the Perry County hospital and the Festus–Crystal City sewer system could benefit both communities. However, elected officials in both places have a responsibility to go through the process in an open, transparent fashion. They have utterly failed that test in Perry County, and they aren’t off to a good start in Festus and Crystal City. Residents of Perry County, Festus, and Crystal City should demand better from their local leaders.

The post Good Ideas Done Poorly in Jefferson and Perry Counties appeared first on Show-Me Institute.

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.

The post St. Louis Should Privatize Its Water System appeared first on Show-Me Institute.

Independence is one of the few cities in Jackson County that continues to provide extensive municipal utilities to its residents. It recently announced that is it considering the privatization of its municipal electric utility. If privatization is done in a transparent manner designed to encourage multiple bids for the electric assets and customers, it will greatly benefit the residents of Independence. In fact, the city should go even further and consider privatizing its water utility, too.

There is no standard method for providing utility services in Missouri cities. Springfield, for instance, has a city-owned public utility that provides every utility service. In Kansas City gas and electric are provided by private companies, while water service is handled by a city department. Almost all of the one million residents of Saint Louis County are customers of private companies for utility services.

Municipal utilities often charge lower rates than private utilities, but that is not the case with Independence. The city admits its municipal electric utility charges more than the private companies serving the area (mainly Evergy), despite the structural cost advantages in taxation, regulation, and financing that government-owned utilities have.

Studies have demonstrated that private utilities are generally more efficient than municipal utilities. In 2000, economist B. Delworth Gardner of Brigham Young University determined that private water utilities in Utah charged lower rates for water than comparable public utilities despite the large advantages in taxation and regulation that government utilities have. Economists Daniel Hollas and Stanley Stansell found in a 1994 study that private gas utilities were more economically efficient than public gas utilities. A recent comparison of public and private electric utilities in Florida concluded that private utilities outperformed public utilities in nine of 14 categories (with one category being equal).

It is a reasonable supposition that private utilities would be more efficient in their costs and operations than Independence’s current municipal utilities. Privatizing the utilities could benefit the city in a number of ways. Most importantly, the city would experience an immediate cash infusion from the sale. Eureka, in Saint Louis County, sold its municipal water and sewer systems to Missouri-American Water for $28 million in 2022. Independence is much larger than Eureka, and its electrical and water utilities could likely be auctioned off for a much higher price. The substantial sale proceeds could be used to continue funding vital city services, be deposited into a reserve fund, or be put to a variety of other uses that would benefit city residents.

Independence would also see other fiscal benefits from privatizing the city utilities. The assets of the newly private utilities would become taxable, expanding the Independence and Jackson County tax bases. Finally, reducing the number of municipal employees would scale back the long-run taxpayer costs associated with government pensions and health care. It is imperative, though, that the entire process be an open one to serve the interests of taxpayers and consumers.

Private utilities are just as capable of providing quality services at a low price to the residents of Independence, and likely would be more efficient than city departments. Privatization of the Independence water and electric utilities would bring a needed cash infusion to the city, add substantial assets to the tax rolls, and reduce long-term public employee costs. Cities throughout Missouri have seen positive results from such privatization efforts, and there is good reason to believe that Independence taxpayers and residents would, too.

The post Independence Could Benefit from Privatizing Utilities appeared first on Show-Me Institute.

The usual problems with water in St. Joseph, Missouri relate to having too much of it all at once. But properly getting rid of the water you have used—through your sewer system—is also a complex issue. More stringent water quality requirements from state and federal regulators have made it more difficult for many municipal utilities to operate. Often, they simply do not have the resources to meet the higher water-quality and sewage-control standards. Even large cities have had trouble dealing with revised Environmental Protection Agency (EPA) sewage guidelines. For instance, Kansas City reached an agreement with the EPA in 2010 to upgrade its sewer system at a cost of $2.5 billion over 25 years, and cities like Kansas City have more resources to deal with sewer infrastructure than communities like St. Joseph.

Sewer rates in St. Joseph are already a matter of complaint. A June 2019 article in the News-Press detailed concerns among the area’s business community that high municipal sewer rates were harming the region’s economic environment. Whatever the price, St. Joseph’s sewer issues aren’t going away anytime soon. The city reached an agreement with the EPA to improve the sewer system years ago. During the Trump administration, the EPA gave St. Joseph additional time and flexibility to complete those required system improvements. Under that revised agreement, the city will be upgrading the system until at least 2036, and during that period will continue to periodically release untreated sewage into the Missouri River during major storm events. While the agreement and time extension with the EPA may be justified, the fact is that St. Joseph has another option to consider: privatization. Water in St. Joseph has long been provided by private utilities, and the city should once again—as it has previously—carefully consider privatizing its sewer system.

Indianapolis outsourced its sewer systems to private operators in 1994, and the cost savings were even greater than had been estimated. The city saved $72 million over the first five years of the contract, and those savings allowed the region to invest in major repairs to its aging sewer system. On a smaller scale, communities across Missouri have realized that the best thing for their residents is to privatize their water and sewer systems. Within just the past two years, voters in Bolivar, Eureka, Taos, Trimble, Purcell, Hallsville, and Garden City have approved privatization of their municipal water and/or sewer systems to either Missouri-American Water or Liberty Utilities. Those communities—mostly small towns spread around the state—realized that maintaining these systems was going to be an enormous burden on city governments not properly equipped to manage them. Privatizing them—for amounts ranging from $200,000 to $28 million—was a way for each city to guarantee proper operation of their water and sewer services by a regulated, privately-operated utility. The cities can use (and have used) the money to pay down debts, invest in other municipal needs, or do whatever the city wants to prioritize.

Arnold, Missouri, is probably the best guide for St. Joseph. Arnold, a suburb of St. Louis with approximately 21,000 residents, was having trouble keeping up its sewer system as it grew in population. In 2015, city voters approved a plan to sell its sewer system to Missouri-American Water for $13.2 million. Since that sale, Missouri-American has completed several promised system upgrades, while Arnold used the money to pay down municipal debt and expand its park system. As a larger city than Arnold, St. Joseph could expect substantially more money in any privatization effort.

Private utilities in Missouri are regulated. Just as Missouri-American Water cannot raise water rates in St. Joseph without approval from the public service commission, no private company could take over the sewers and raise rates further without going through the same approval process. The fact is that running a sewer system under current rules and regulations is expensive and beyond the capacity of many communities. However, it is well within the capacity of larger, private utilities like Missouri-American Water, Veolia, and Liberty Utilities. As the Indianapolis public works director said about the private contractors they hired to operate the sewer system, “It’s just a different league. These guys have resources our guys could only dream of.”

St. Joseph should take advantage of that expertise and seek bids from several private utilities to either outsource the management and operations of their sewer system or—better yet—purchase and operate it. That is the best way that city officials can address the sewer system needs of St. Joseph for the benefit of everyone in the community.

The post St. Joseph Should Privatize Its Sewer System appeared first on Show-Me Institute.

Missouri American Water, naturally, is supportive of the plan and is confident it can deliver the same services to Peculiar residents they receive now and at a lower rate. A webpage in support of the proposal shows the recent rates in Peculiar compared to other American Water customers across Missouri, including Kansas City neighbors Platte County, Lawson, and St. Joseph. (Incidentally, the Environmental Protection Agency (EPA) claims, “the average American family uses more than 300 gallons of water per day at home” or around  9,000 gallons per month.) 

At a time of increasing water rates in Kansas City, it might be worth considering such a deal here. Kansas Citians already look to private—albeit heavily regulated—companies for their electrical power and natural gas. Why not water too? And if such a sale here would include an upfront payment to the city as well as potentially improved management and lower rates over the long run, city leaders have a responsibility to consider the offer.

All of this hinges on a serious and substantive audit of the Water Department, as Kansas City Mayor Quinton Lucas has called for previously. That is a necessary first step so that taxpayers and any interested buyers know exactly what is at stake. Even without a looming financial crisis, Kansas Citians should be looking to shed costly burdens that can be better and more cheaply provided by others.

The post A Peculiar Solution for Ever-Increasing Water Rates appeared first on Show-Me Institute.

Somewhere in the world, I am sure, a government bureaucracy manages a utility more economically and efficiently than a private company could.

When you find that “somewhere,” you are in for a treat. For there, too, you will find unicorns, Bigfoot, pretty lasses singing “Brigadoon,” Elvis performing live, and light-rail lines that actually pay for themselves.

Kansas City has a great opportunity to work with the terrific private engineering companies in the city and with American Water to turn over management of its water and sewer systems to private entities. They can do this either through an auction (sale), through a management contract, or many other variations or combinations. I hope this issue keeps getting strong consideration in Kansas City.

Thanks to Tony’s Kansas City for the original link.

The post Great Article About Water Privatization In Kansas City appeared first on Show-Me Institute.

“It was clear that not enough assurances could be provided to ensure the protection of the City’s residents or the City employees who were proposed to join American Water,” [Arnold Mayor Ron] Counts said in a news release on Friday afternoon.

Any city should consider the costs of a decision, and I am glad that Arnold took the time to analyze those costs before making a decision. However, I believe there are benefits which may outweigh the costs. Should the city ever again be presented with the opportunity to sell its sewers, I hope city officials will fully consider the advantages of privatization. Here are a few examples from an op-ed that I wrote on the topic, untimely published five days after the decision not to sell (untimely due to bad luck, not a lack of effort):

1. Arnold’s sewers are in dire straits. The city would face less of a financial difficulty if it relied on private capital to fund renovations and repairs.
2. Private ownership leads to more efficient uses of labor and capital. Privatization can produce savings relative to bureaucratic management.
3. The city of Arnold would obtain monetary benefits from the sale. When Florissant sold its water utility in 2002, it was able to establish a $10 million reserve fund. Arnold could use the revenue to establish its own reserve fund, pay down debt, or lower taxes.

For more Show-Me Institute commentary on privatization, click here.

The post Clutching the Sewers: The Foul Smell of a Missed Opportunity appeared first on Show-Me Institute.

There is no standard method for providing utility services in Missouri cities. Springfield, for instance, has a city-owned public utility that provides every utility service. Alternately, almost all of the 1 million residents of Saint Louis County are customers of private utilities for water, gas, and electricity. The private sector also provides the majority of the utility services in Jefferson City.

Despite the structural differences between public and private provision, there is little variance in utility costs between Columbia and Jefferson City. In Missouri’s cost-of-living rankings for the first quarter of 2010, both cities placed far below the national and statewide averages for utility costs. During the summer months, a residential electric customer in Columbia with an average usage of 822 kilowatt-hours would pay $87.19. In Jefferson City, that same usage would cost $87.52. That’s a small difference in the summer, and the rates actually favor customers of Jefferson City’s private utility during winter months.

Studies have demonstrated that private utilities are generally more efficient than municipal utilities. In 2000, economist B. Delworth Gardner of Brigham Young University determined that private water utilities in Utah charged lower rates for water than comparable public utilities, even after accounting for the large advantages in taxation and regulation that public companies have. Economists Daniel Hollas and Stanley Stansell found in a 1994 study that private gas utilities were more economically efficient than public gas utilities.

Going back further, to a 1970 study of electric utilities that included Columbia, University of Missouri economists Richard Wallace and Paul Junk examined the diseconomies of scale faced by many municipal electric utilities. They noted that small public electric utilities were comparatively inefficient and recommended purchasing power from larger suppliers. These recommendations were implemented to some extent, because Columbia Water and Light purchases most of its power today.

It is a reasonable supposition that private utilities would be more efficient in their costs and operations than Columbia’s current municipal utilities. Privatizing the utilities could benefit the city in a number of ways. Most importantly, the city would experience an immediate cash infusion from the sale. Florissant, in Saint Louis County, sold its municipal water utility to Missouri-American Water for $14.5 million in 2002. Officials used that money to finance immediately needed public improvements, and placed $10 million into a reserve fund. Columbia is larger than Florissant, and Columbia’s electric and water utilities could likely be auctioned off for more than $14.5 million each. The substantial sale price could be used to continue funding city services that are slated for cuts, be deposited into a reserve fund, or be put to a variety of other uses that would benefit city residents.

Columbia would also see other fiscal benefits from privatizing the city utilities. The assets of the newly private utilities would become taxable, expanding the Columbia and Boone County tax base. Finally, reducing the number of municipal employees entails scaling back the long-run taxpayer costs associated with government pensions and health care.

Private utilities are just as capable of providing quality services at a low price to the residents of Columbia, and likely more efficient than city departments. Privatization of the Columbia Water and Light Division would bring a needed cash infusion to the city, add substantial assets to the tax rolls, and reduce long-term public employee costs. Cities such as Florissant and others have seen positive results from such privatization efforts, and there is good reason to believe that Columbia taxpayers and residents would also benefit.

David Stokes is a policy analyst for the Show-Me Institute, a Missouri-based think tank.

The post Columbia Could Benefit From Privatizing City’s Water and Electric Utilities appeared first on Show-Me Institute.

This is something that could, and should, also be considered by Kansas City and Saint Louis. Both cities function with private utilities providing electricity and gas, but both have municipal water systems. In St. Louis County, even the water is provided by a private company, Missouri-American Water. Both St. Louis city and Kansas City have a valuable asset at their disposal that the private sector is fully capable of operating. I hope both cities are willing to give this a careful review, just like Chicago appears to be doing.

The post Chicago Thinks About Privatizing Its Water System appeared first on Show-Me Institute.

Kirkwood is the only municipality in Saint Louis County that continues to provide utility services to its residents. Would citizens benefit if Kirkwood abandoned this service model, instead allowing private, regulated utilities to provide all utility services to residents?

In January 2002, Florissant sold its water distribution system to Missouri-American Water Company for $14.5 million. That works out to $268.78 per person. Going by that ratio, Kirkwood could sell its water distribution system for $7,344,072 (in 2002 dollars), which matches the estimates Kirkwood received in 2004 when it investigated the possibility of selling its water system.

Florissant used the profit from its sale to finance additional street repairs, public works improvements, and police department projects. It then put most of the money, $10 million, into a reserve fund that earned interest for the city. Kirkwood had to consider a similar decision in 2004 because of the major capital needs of its aging water treatment plant. Officials opted to close the treatment plant and purchase water wholesale from Missouri-American Water, but maintain city operation of the distribution system. Kirkwood Electric operates in the same manner, purchasing electricity wholesale from AmerenUE and reselling it to residents.

A 1970 study by University of Missouri economists Paul Junk and Richard Wallace demonstrated that private, investor-owned electric utilities had significantly lower operating costs per kilowatt hour than municipal utilities. While that study compared power-generating municipal utilities to private utilities, it is still relevant to the current situation. The study concluded it would be better for municipal utilities to purchase and redistribute power from outside sources, as Kirkwood now does for both electricity and water, rather than produce or treat it themselves, as Kirkwood used to do. Is it now time to move further?

There are good arguments for maintaining the existing municipal electrical and water distribution systems. Both systems continue to generate excess revenues that can be reinvested into other Kirkwood services and help keep the city’s tax rates lower. The current tax-exempt status of the municipal distribution system decreases pressure on costs and allows more revenue to be returned to other city services. In fiscal year 2005, the electric department returned $1,380,000. Although it is hard to measure, a sense of civic pride can result from having your own city provide this service, much like community pride in a high school football team.

Kirkwood’s own website states that residents pay the same rates for electricity as AmerenUE customers. From a review of the publicly listed rates for water, it seems that Kirkwood residents pay a slightly higher rate for water ($1.8353 per 100 cubic feet compared to $1.5253 for Missouri-American) than other county residents, but with Missouri-American’s recent rate hike request, the Kirkwood rate may soon be lower. The benefits to Kirkwood residents do not lie in cheaper electricity or water, but in reinvesting resale profits in the city rather than seeing them go to shareholders.

There are also strong arguments for selling off municipal utilities. The one-time profit from a sale of the water distribution system could finance immediate needs, an emergency fund, a long-term, interest-earning reserve fund, and a property tax cut for Kirkwood’s residents — all at the same time. While there might be no short-term salary savings from employee layoffs, because the utilities still generate a profit, savings from long-term employee pension costs could be significant. On top of the immediate profits Kirkwood would receive from any sale, AmerenUE and Missouri-American Water are two of the 10 largest property taxpayers in Saint Louis County. Replacing tax-exempt facilities with systems they own would increase Kirkwood’s tax base and provide a long-term revenue benefit on top of immediate profits from the sale and budget savings.

While Kirkwood utilities do make “payments in lieu of taxes” back to the city, those payments really just move government money around without generating new revenue or long-term savings. And not every year going forward will result in an operating profit to be transferred to the general fund. According to Kirkwood’s 2007 budget report, “The high average age of our (electric) system dictates more replacement and maintenance and drives our operations and maintenance costs up.” This situation will not become less expensive for Kirkwood over time.

In my opinion, Kirkwood should follow the example of the other municipalities in our area that have ceased providing utility services, and sell its facilities to investor-owned, regulated utilities. This would allow Kirkwood to focus on services that are not privately provided, such as police and fire protection. Aside from the one-time profit, however, the immediate, quantifiable savings to residents from the sale would be minimal. If the residents and leaders of Kirkwood wish to continue the current system, there are legitimate reasons to do so.

David Stokes is a policy analyst at the Show-Me Institute, a Missouri-based think tank.

The post Should Kirkwood Sell Its Municipal Utilities? appeared first on Show-Me Institute.