Three Ways Corporate Accountability Gets It So Wrong In Latest Report
Earlier this year, Corporate Accountability released a report claiming that cities and towns across the country have the ability to single-handedly address all the challenges facing their water and wastewater systems without turning to the private water industry’s so-called “false solutions.” However, each assertion the group presents is laden with inaccurate representations of the challenges these communities faced and the solutions they pursued.
We dissected some of the report’s claims and exposed Corporate Accountability’s unfounded statements to provide you with the truth.
Full Cost Recovery
Investing in infrastructure is key to ensuring the delivery of safe, high-quality drinking water. However, overall capital investments in water infrastructure – the funds spent to support repairs and replacement of water mains, pumps, and treatment facilities – have fallen precipitously and now sit at an all-time low. That’s why many cities have turned to an approach called Full Cost Recovery, or Full Cost Pricing. This approach ensures utilities are fully funded by capturing all the costs of providing water services, including the costs of necessary capital investments, through customer water bills, instead of subsidizing water service by other means, like through general fund revenue or taxes.
Water companies regulated by the public utility commission are mandated to use the Full Cost Recovery approach. Full cost pricing is widely supported by experts and water policy organizations, including the U.S. Environmental Protection Agency (EPA), the American Society of Civil Engineers (ASCE), the American Water Works Association (AWWA), and the Bipartisan Policy Center, among others. Yet Corporate Accountability calls this structure “an impossible burden on residents” that “[doesn’t] work for cities.”
Corporate Accountability’s rejection of Full Cost Recovery is another illustration of activists ignoring experts and disregarding the negative consequences of blindly keeping water rates artificially low.
There are two potential consequences of rejecting Full Cost Recovery:
- Utilities depend on support from property taxes or general municipal funds, which pulls resources from other municipal priorities and underprices water, which encourages over-use of this important natural resource.
- Utilities fail to generate enough revenue to properly maintain infrastructure, which puts public health at risk.
Affordability is a challenge for many low-income households; as necessary investments are made in infrastructure to protect public health, water bills have risen for both municipally and privately run systems. But under-funding the critical services that water utilities provide is not a sustainable solution. Instead, utility operations should be fully funded and those with a demonstrated need should receive help through a federal water bill assistance program, similar to the popular and successful Low Income Home Energy Assistance Program (LIHEAP).
South Bend, IN
In 2004, South Bend, Indiana had to confront challenges with its wastewater system, including a lack of water system expertise and aging infrastructure that went unsupported by capital investment for decades. The solution South Bend adopted was a “smart sewer approach,” which included installation of a network of sensors to monitor available sewer storage space and a control system of valves that allowed workers to redirect wastewater to prevent overflow.
Corporate Accountability celebrates this South Bend sewer project as an example of a municipality solving problems without the private sector. However, the group blatantly ignores how the private sector did indeed play a leading role in the project. EmNet, a smart water technology firm, consulted with the city on this smart sewer approach. In fact, EmNet designed and installed the system, and still maintains it to this day.
This innovative smart sewer approach is a great model of how communities can deal with water system challenges. But it is completely disingenuous for Corporate Accountability to disregard the role the private sector played in helping make it happen.
Corporate Accountability ignores many key details when it talks about Bayonne’s partnership with SUEZ and the private equity firm KKR. The group claims that the Bayonne-Suez deal has left residents with skyrocketing rates and that the $150 million upfront payment the city received came “at a very high price to ratepayers.”
The truth is, this deal provided a financial lifeline to the city by paying off $100 million in old debt, resulting in an upgrade for the city’s low credit rating. Moreover, the 40-year deal commits SUEZ and KKR to contribute $2.5 million annually to support needed repairs to water infrastructure, plus $500,000 to the city itself. This money has allowed SUEZ to upgrade safety equipment and replace inoperable hydrants and will continue to enable necessary investments to modernize the water system with new technologies over the decades to come.