TFTT Report

A piece recently ran in an online publication in which the writer and activists from groups like Food & Water Watch tried to demonize the efforts of elected officials around the country who have passed policies to help local communities address their water infrastructure challenges. Fifteen states have in place these commonsense valuation reform measures that make it easier for communities to bring in professional expertise and investment to ensure the safe and reliable delivery of water and wastewater services.

But this piece, fueled by anti-private water activists, completely misconstrues the intention of valuation reform. NAWC members have seen first-hand how hard it is for some cities and towns to maintain their essential infrastructure. On top of the obvious challenges that come from aging infrastructure, this means making necessary strategic short and long-term investments, having professionals who know how to run water systems, and ensuring water quality and safe delivery. As a result, many communities have concluded that this important service is best delivered by a water company that can be 100 percent focused on the task at hand and that elected officials are better off focusing on the countless other pressing needs on their agendas.

Without these reforms, municipalities wishing to sell their water or wastewater systems would do so under unfair and obsolete rules requiring the assets to be sold at book value – or the original costs plus improvements, minus depreciation. For municipal water or wastewater systems that have lacked capital investment in infrastructure over many years, book value could be nothing at all.

Yet it’s not just about money, and the article is completely shortsighted to say that the only benefit of valuation reform is a “a short-term cash boost for local governments.” What about having water that is actually safe to drink? What about more reliable service? What about pipes that don’t spew sewage into streets? What about not having to rely on bottled water? What about not being threatened by deadly contaminants?

Even municipalities that do not face urgent infrastructure challenges have found voluntarily selling water and wastewater systems can be an effective way to offload risk, monetize assets, and focus resources on other local needs. This may include paying down debt, funding pension obligations, making other infrastructure improvements, investing in economic development initiatives, or providing other government services.

The story makes claims about rates under private ownership but fails to acknowledge that these increases would be coming regardless of ownership. These critical infrastructure improvements won’t just go away, and rate increases to fund upgrades will be necessary no matter if the system is owned by a local government or a professional water company. Activists ignore this fundamental reality when arguing against valuation reforms. Further, at least with private companies, unlike government-run systems, there’s state oversight to make sure any related rate increases are appropriate.

New Garden Township, which the author himself brought up, is a perfect example. Facing aging infrastructure and major capital needs to urgently expand capacity and avoid major releases of raw sewage into local waterways, New Garden transferred its wastewater system to a water company under fair market value rules in 2019. While customer rates increased to fund necessary improvements in the system, New Garden officials stated that rates would have been higher if the system were still run by the government and sale proceeds were not available to help fund improvements.

While there are numerous other examples from communities around the country that clearly show the benefits that have come from fair market value reform, here are FIVE more just in Pennsylvania that the author conveniently left out.

• CHELTENHAM: Despite millions of dollars in repair efforts that were driving the Township into debt, the local sewer system remained out of compliance, resulting in a moratorium on new sewer connections and fines by state agencies for the release of raw sewage into the environment. In 2019, state regulators approved the sale of the wastewater system, enabling the Township to leverage private sector expertise to plan, permit and execute more than $50 million in infrastructure repairs without raising taxes on residents – and all while local taxpayers benefited from over $50 million in net proceeds.
• McKEESPORT: The sale of the local wastewater system allowed McKeesport to pay off debt, fund pensions, and avoid municipal bankruptcy – all while gaining an additional $40 million in proceeds to allocate toward other local priorities like economic revitalization. In addition, McKeesport gained a professional operator and tens of millions of dollars in badly needed infrastructure investments for its wastewater system that the mayor said would have been very difficult to fund and execute without a sale.
• EXETER: The sale of the municipal wastewater system enabled Exeter Township to avoid a 32.6% property tax increase; pay off substantial debts; pay for future capital projects, including equipment replacement, township building relocation, and storm sewer improvements; improve the Township’s credit rating; and still leave $48 million in proceeds in the bank. Local officials confirmed that the rate increases customers experienced to fund system upgrades would have been much higher had the township retained the system and made the necessary improvements without professional expertise.
• LIMERICK: Increasing operating costs and the need to fund major capital projects to better serve a rapidly growing population led Limerick officials to sell its local wastewater system in 2018. The community netted $70.5 million in proceeds from the sale which were used to fund a new township building, police headquarters, public works department garage, and road improvements. The Chairwoman of the Board of Supervisors stated at the time of the sale: “To pay for all that would have required us to double the township’s taxes or more.”
• EAST NORRITON: With the local sewer system needing $20 million in new investments to comply with state and federal requirements, local officials turned to Pennsylvania water professionals to plan and execute the improvements. Instead, East Norriton received $21 million in proceeds from the sale of its wastewater system, which it used to improve Township roads and bridges and stabilize property taxes and a professional water company invested in the system. A Township analysis showed that the sale resulted in lower rate increases for residents than if the necessary system improvements were made under government ownership.

It is completely evident that the author has bought into the activist narrative about valuation reform – hook, line and sinker. He goes as far as to parrot back phrases only used by groups like Food & Water Watch, for example making the claim that fair market value is a “phenomenon” called “taxing through the tap,” a phrase only used by these activists.

Finally, the author and the activists that helped write the piece try to allude to something nefarious going, throwing out baseless allegations and red herring claims about campaign donations to try to muddy the water. And while information about campaign donations is publicly available at both the federal and state levels with just a click of the computer mouse, the same can’t be said for the “grants and coalition of donors” funding the author’s work or that of the activists.

The author has clearly put his journalistic integrity on the line by citing claims made by activists without so much as a shred of supporting data or citations. Thankfully, when it comes to valuation reform, one doesn’t have to rely on baseless claims to make an informed decision; one need only to look at the countless cities and towns across the country that are benefitting.