Get the Facts America’s Water Companies: Myths Debunked
Our nation’s water systems are in crisis, facing simultaneous challenges with water quality, infrastructure needs, customer affordability, and a fragmented water grid. America’s water companies can help, but communities that would benefit from the support of private sector water professionals are sometimes misled by myths pushed by ideological opponents.
Below are some of the deceptive myths opponents push alongside the facts local leaders need to make informed decisions about water system operations and infrastructure in their community.
Water companies take local control of water away from communities.
FACT: The claim that water companies “take control” of water is nothing more than a scare tactic with zero supporting facts. Water companies acquire and/or operate water systems, which includes the pipes, pumps, treatment facilities, and other infrastructure necessary to deliver clean drinking water to households and businesses. Under all models of water company operations, control and management of the source water itself remains in public hands, typically under the auspices of a state water resource management agency.
Water companies have a poor drinking water quality record.
The data is clear: systems run by water companies are significantly less likely to violate federal drinking water standards than systems run by local governments. This fact has been confirmed by every major study of water quality ever conducted in the United States, including a landmark study of EPA drinking water quality data published in the Proceedings of the National Academy of Sciences in 2018.1
Water companies don’t invest in water infrastructure.
Water companies provide local governments access to capital to address urgent infrastructure needs. The 10 largest water companies in the United States collectively invested $3.7 billion in community water systems in 2019. These are dollars coming from the private sector and not out of a municipal budget. In comparison, the federal government’s two water infrastructure revolving fund programs were funded at a combined total of just $2.8 billion in 2019.2
Working with a water company results in higher rates for customers.
Ensuring a safe and reliable system calls for ongoing investment in upgrading and replacing water infrastructure. Depending on a local community’s unique needs, the investments necessary to strengthen local water and wastewater systems and ensure safe drinking water for customers can sometimes result in higher costs. On the flip side, keeping rates artificially low (often the case with systems run by government officials concerned about raising rates before their next election) , which is often the case with systems run by government officials with elections always front of mind, all too often means necessary investments in water systems are deferred, jeopardizing water quality and public health. Trading poorer quality water and a less reliable water system for lower water rates is dangerous and unwise.3
Water companies can raise rates whenever they want.
Water companies never set their water rates.
Under the regulated model of water company operations, rates are set by a state government agency called a public utility commission. These independent, expert regulators determine the rates needed to operate the system and deliver safe drinking water. Experts have noted that this process enhances transparency and consumer protection in comparison to the rate setting process for local government systems, which are not subject to state utility commission regulation.4
Under the contract model of water company operations, rates are set by the local government through their operations agreement with the water company. The contracts between water companies and local governments dictate performance metrics that must be met in order for the company to get paid. These terms cover everything from staffing and treatment protocols to infrastructure investments.
Water company operation means fewer local jobs and less expertise.
Water company acquisitions and contracts are typically structured to ensure current employees keep their jobs, often with higher pay and/or improved benefits. Water companies are proud union employers and honor existing collective bargaining agreements when new operations are launched. In addition, water companies provide enhanced training, advancement opportunities, and strong worker safety protocols. Studies show water company workers have a nearly 20% lower illness and injury rate under water company operations compared to local government operations.5
Water companies are not eligible for municipal bonds or government loans with lower rates, which means borrowing costs are more expensive for water companies compared to local governments.
Local governments across the U.S. are facing major and urgent water infrastructure needs, and public capital alone cannot cover the associated costs. The use of private finance is about “additionality” – gaining additional capital on top of public capital – not choosing private capital in lieu of public capital. Experts agree that private water models are a proven and necessary solution for local governments to address urgent water and wastewater infrastructure needs.6
Water companies answer to their shareholders and don’t care about the communities they serve.
Water companies employ local workers, pay local taxes, and support the communities they serve. Water company employees donate to important local causes and meet routinely with local officials and environmental groups. Furthermore, water companies lead the sector in customer service and satisfaction: 78% of NAWC members score above average on overall customer satisfaction in their region, according to a national J.D. Power survey.7
Opponents regularly distort the water company experience in just a handful of cities to make
their ideological case against water company solutions. Over and over again, critics point to
these seven cities to argue against solutions offered by water companies. But their favorite “case studies”
contain more fiction than fact. These groups rely on partial timelines, made-up facts and biased
reports to paint a purposefully misleading picture of what happened during private operation –
and more importantly, what’s happened since.
In 1999, the Atlanta City Council signed a 20-year, $428 million contract with United Water to operate Atlanta’s water system. However, by 2003, the two parties ended the contract. Water activists claim that the partnership between Atlanta and United resulted in lost jobs, declining water quality, higher rates, backlogged maintenance and unrealized cost savings. In fact, the system had no water quality issues and no public employees lost their jobs. In addition, critic claims about maintenance backlogs and cost savings don’t tell the full story. After moving back under public control, Atlanta’s water system has been plagued with problems, from skyrocketing water rates to faulty meters and erratic billings – information conveniently ignored by opposition groups. As of 2011, Atlanta had the highest water rates of any major U.S. city, and inconsistent and incorrect billings even led to a class-action lawsuit against the City. Learn more about the true story in Atlanta.
In 2002, American Water asked the California Public Utilities Commission (CPUC) for approval to raise rates in Felton by 57 percent over three years, citing an urgent need for infrastructure repairs. The water rate increase, approved and deemed necessary after review by the state CPUC, spurred some public opposition, leading some to push for a government takeover, or condemnation, of the water system. After six years of American Water operations, the system was brought under government control via eminent domain. Activists like Food & Water Watch call Felton a “great victory” and applaud the current operations model, claiming water costs have decreased since condemnation in 2008. In reality, water rates increased a total of 67 percent under government ownership between 2008 and 2016, about three times faster than condemnation advocates promised. And when the San Lorenzo Valley Water District Board proposes additional rate increases, local residents are largely ignored and no longer can rely upon a transparent CPUC rate-setting process to air their concerns. Learn more about the true story in Felton.
In 1998, the Gary Sanitary District (GSD) awarded a 10-year, $95 million contract to United Water to operate the city’s wastewater treatment facility and sewage collection system. In 2008, the contract was extended for five additional years. However, in 2010, the two parties agreed to end the engagement after a series of disputes. Opponent groups claim that the experience in Gary “underscores how a private water company can prioritize profits over human and environmental health.” But in reality, before United took over operation in 1998, an EPA environmental engineer called the Gary Sanitary District the “most poorly operated sewage facility in the Midwest,” and the EPA considered the system incompliant. Just one year after the public-private partnership began, United and Gary received the U.S. Conference of Mayors’ Outstanding Achievement Award. When the contract was renewed in 2008, the president of the Gary Sanitary District said, “This public-private partnership has served Gary area residents well… We have made tremendous strides working with United Water during the past decade.” Learn more about the true story in Gary.
In 2002, Indianapolis signed a 20-year, $1.5 billion deal with Veolia to manage the city’s water system. However, the two sides agreed to end the deal in 2010. Food & Water Watch (FWW) has claimed the experience in Indianapolis “illustrates why the movement to stop the privatization of water is gaining momentum around the world.” However, critics fail to note that after exiting the Veolia contract, the Indianapolis water system has experienced job cuts, worker benefit cuts, and rate hikes. Double-digit rate increases occurred in 2011, 2012, and 2014, and the system is currently seeking another 20% water rate increase. Learn more about the true story in Indianapolis.
In 1998, United Water entered into a 10-year, $300 million agreement with the Milwaukee Metropolitan Sewerage District (MMSD) to provide wastewater treatment services. Milwaukee officials expected to save an estimated $130 million, or 34 percent of the sewer service cost over the term of the contract. Opponent groups claim the company was at fault for various problems with the city’s system, including sewage overflows and pump shutdowns. In reality, United’s operations in Milwaukee saved residents $144 million in the first nine years of its contract, beating projected savings by a wide margin. In addition, city overseers didn’t blame United for the issues that arose and, in fact, applauded the company’s work. While critics attempt to blame United for every issue, facts from independent sources tell the real story. Learn more about the true story in Milwaukee.
In 2010, city officials in Missoula, Montana, launched an effort to purchase Mountain Water, the privately owned local water system. Following a breakdown in negotiations, the mayor led the city into a government takeover, or condemnation, of the water system using eminent domain laws. After several delays, Missoula was successful in taking over the system in 2016, but it came at a high cost for taxpayers. Advocates originally argued that the system could be purchased for $43 million, yet the final cost surpassed $105 million. The city spent 20 times its legal fee budget for the takeover, amounting to millions of dollars in cost overruns. After convincing the public that a takeover would lower costs, rates immediately increased 6% under government ownership. Learn more about the true story in Missoula.
From 2012 to 2015, the Pittsburgh Water and Sewer Authority (PWSA) maintained a peer consulting arrangement with Veolia, where a small group of Veolia employees worked alongside more than 200 PWSA employees to improve day-to-day operations and share industry best practices. Despite the fact that the water system in Pittsburgh has been owned and operated by the government for decades, critics try to blame Veolia for PWSA’s longstanding problems, including $1 billion in total debt; deferred investment in infrastructure, illustrated by an average water mainline age of over 70 years; longstanding billing and customer service issues; and recurring water mainline breaks leading to millions of dollars in lost water and repair costs. Given all of these issues, it is shocking that these critics and activists continue to argue that the status quo of continued public operation is the right path forward for PWSA. Learn more about the true story in Pittsburgh.
Between 2014 and 2018, as Baltimore faced enormous water infrastructure and operations challenges, city officials considered engaging a professional water company to help improve the performance of the city’s water system. Under city control, the Baltimore water system incurred four health violations of the Safe Drinking Water Act since April 2014, exceeding the Maximum Contaminants Levels of the Disinfectants Byproducts Rule each time. The city reported over 189 million gallons of sewage overflows in 2018, blaming them on inadequate infrastructure and heavy rains. All the while, the Baltimore DPW struggled to implement a new billing system for the water utility, leading to thousands of incorrect bills and customer complaints. Unfortunately, the question of how professional water companies could help the city deliver safe, reliable drinking water to its residents was hijacked at every turn by opposition groups opposed to any private sector involvement in providing water services. Learn more about the true story in Baltimore.
Allaire, Wu and Lall, PNAS, “National Trends in Drinking Water Quality” Feb. 2018; Konisky and Teodoro, American Journal of Political Science, “When Governments Regulate Governments” Sept. 2015; American Water Intelligence, “Investor-owned water firms boast sterling SDWA record” Oct. 2011
Annual reports and 10-K filings for American Water Works Company, Aqua America, SUEZ, Cal Water Service Group, San Jose Water Company, American States Water Company, Middlesex Water, Aquarion Water, Connecticut Water, and Artesian Water; U.S. EPA, “Drinking Water State Revolving Funds: 2017 – 2020 Allotment of Federal Funds for States, Tribes, and Territories”; U.S. EPA, “FY 2019 Clean Water State Revolving Fund Final Allotments” April 2019
Konisky and Teodoro, American Journal of Political Science, “When Governments Regulate Governments” Sept. 2015
NRDC, “Water vs. Energy: Solving the COVID-19 Utility Crisis” 12/17/2020.
Governing, “The Most Dangerous Government Jobs and Why They're Riskier Than the Private Sector” 11/19/2013
KPMG, “Delivering Water Infrastructure using Private Finance,” 2011; Certified Accountants Educational Trust, “Taking Stock of PPP and PFI around the World,” 2012; EPA Response to Congress on Privatization of Wastewater Facilities, 1997; Jeffrey W. Jacobs, National Research Council; Charles W. Howe, University of Colorado; “Key Issues and Experience in U.S. Water Services Privatization,” 2005.
J.D. Power, “U.S. Water Utility Residential Customer Satisfaction Study” May 2020.