In the past week, there have been a handful of news stories delving into rumors that the City of Chicago might be exploring privatization of its drinking water system as a means of helping balance the city budget. Whether the city is in fact exploring that or not, the idea itself has caused a fair number of furrowed brows.
The truth is, there’s nothing inherently wrong with privatization, for water or other infrastructure. The real question is why we’re privatizing. Balancing a budget is not sufficient justification for selling or leasing the rights to a public asset. Public-private partnerships—be they for water, parking, transit, etc.—should only be done when the private sector can more efficiently produce benefits (for example, conserving water supplies, easing traffic jams, etc.) than the public sector. If the goal of privatizing the water system is to conserve water, reduce leakage and loss, and be a better steward of our Lake Michigan water supply, and if a private firm can do that better than a public agency, then it’s certainly worth exploring.
The kicker is that any money generated from privatizing the water system should be reinvested in the water system—better stormwater management, higher water quality, a rain barrel and advanced meter for every home, new plumbing fixtures for all public buildings, etc. The sale or lease should create opportunities to do the kind of conservation and efficiency improvements we need (the same should have been the case for Chicago's parking meters, which could have generated revenue to invest in Bus Rapid Transit, bike facilities, or other alternatives to driving).
Many private water utilities managing water for communities in this region do a very good job of maintaining infrastructure, ensuring high quality levels, and sustaining supplies over the long-term. Many public utilities do as well, and the Chicago Dept. of Water’s plans to ramp up metering and main replacement are indicative of that. At the same time, there are instances of mismanagement by both private and public utilities.
So the real question is not public vs. private, but rather, what's the goal? Are we trying to reduce water loss from aging infrastructure? Are we trying to move toward comprehensive advanced metering for all Chicago residents? Are we trying to reduce or reuse stormwater runoff? If so, it may well be that a private firm could do those more effectively than a public agency.
A further trepidation with privatization is higher rates... more on that next week.