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Public Water Systems Show Little Appetite for Privatization, Despite Hefty Debts

by Jennifer Weaver, Water & Energy Justice Researcher

In recent weeks, CWFNC has been looking into the challenges that North Carolina’s publicly owned water utilities face as they try to maintain the present systems and plan for the future – all while keeping it possible for water customers to pay.

We made contact with town and county managers handling systems that are struggling financially, and, in several cases, have also received water quality violations. We asked each respondent to share the biggest challenges they faced in operating their system, anything that would make those operations easier for them, and whether they were considering privatization as an alternative to their current, publicly owned and operated status to raise some capital to pay off debts.

Six out of eight of the local government staff we’ve spoken to so far expressed opposition to privatizing their system, and some were emphatically against privatization. When asked whether his county would ever consider privatizing its water system, one county manager said “Not for a minute!” And while one Water Department Supervisor said he’d consider privatization among other possibilities for a small ailing water system, no one was fully in favor of privatization! Reasons included:

1) wanting to maintain control–water/sewer decisions are a primary way to control development;
2) the environment and public health are too sensitive to risk outsourcing
3) wanting to prevent losing local jobs.

drinking-waterThese systems really struggle with keeping rates low enough for their residents to afford, yet high enough to take care of repairs and maintenance and operating costs. It’s no coincidence that most of these financially challenged systems are small–an economy of scale to cover costs viable simply isn’t achievable with few customers. More rural (typically county-wide) systems struggle with the dual problem of low density and a small number of customers. These systems have miles of water supply lines to build and maintain that connect very few users, so costs are higher per customer than denser areas, while income is small.

For the systems with multiple violations, changes to state water quality standards have added another financial burden. Every time standards are strengthened, water systems must invest tens of thousands of dollars (or more) to adjust their treatment or retrofit their systems, frequently receiving more violations as they figure it out. Because a publicly owned system’s purpose is to provide a service rather than earn profits, public water utilities struggle with the need to keep rates affordable while still providing quality water.

These interviews show NC is part of the nationwide, growing trend of cities rejecting privatization in search of better solutions for their residents! Prioritizing funding for public water systems is more important than ever to keep water resources in public hands.

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