Water Privatization: An Indirect Tax Increase
Water privatization is, in simple terms, a way for the city to raise taxes on the population of the city through a third party (the management team that buys the water system). Since the city isn’t allowed to raise the water rates and use the additional revenue to fund non-water related expenses, the city needs to sell the entire system in order to obtain the excess revenue necssary to fund other parts of the city budget. While this could also be accomplished through a simple property tax or related tax/fee increase, the water privatization route provides direct cover for our local politicians since they aren’t the ones actually increasing our water rates. In fact, they’re given an opportunity to “save” the city by working together to solve our deficit. What happens then is that new owner/operator the water system raises the water rates by the legally-restricted 7% each year and recoups the money it paid to the city, plus a substantially extra amount. In the end, the city plugs a portion of the hole in the budget, its citizens pay a lot more for water and irony thrives throughout the land as water is touted as the answer to Milwaukee’s economic future, even though we no longer own it, per se.
$500 million might sound like a lot of money now, and I don’t doubt that its a much needed sum for a city trying to fix a very serious deficit for next year, but in 2084 an inflation adjusted $500 million will be nothing at all. Considering the water system currently brings in $70 million per year, a private company stands to make, at a minimum, $5.25 trillion over 75 years assuming no rate increases. Who do you think is getting the better deal in this situation: the city or the private company? Compared to Indiana’s sweet deal to lease the Indiana Toll Road, it appears at first blush that the city of Milwaukee is preparing itself to be fleeced.
Here’s the current rates of return for each and every water system in the State of Wisconsin.