Yesterday, I participated in a meeting hosted by the White House Council on Environmental Quality and the Environmental Protection Agency on financing water infrastructure.
Although I applaud the administration’s efforts to convene a discussion about the enormous need to invest in our nation’s aging infrastructure, I was discouraged that much of the meeting focused on promoting public-private partnerships and attracting more private financing for public water systems.
Throughout the meeting, a misleading notion was continually raised that using private capital to fund water systems somehow constitutes an innovative approach to financing. This couldn’t be further from the truth. Time and again, municipalities and consumers have suffered under privatized water systems.
As if attempting to package and sell privatization as a new trendy approach isn’t alarming enough, the chief financial officer of American Water, the nation’s largest water company, added insult to injury when she asked about the status of the company’s proposal that the IRS modify its rules to allow companies that take over privatized municipal water systems to retain public tax benefits on the system’s existing debt.
Why not just give private companies like American Water the same tax-exempt status on bonds as public utilities? That’s actually another proposal out there these days. Apparently, this so-called “innovative” private financing requires government tax breaks and special treatment to compete with traditional public financing.
This is not the first time American Water has floated this proposal to the federal government. In response to a FOIA request filed by Food & Water Watch in November 2012, we learned that American Water’s proposal had made it to the Treasury Department last September. Then in March of this year, the company included its proposal in testimony submitted to the House Appropriations subcommittee. Talk about persistence.
Modifying the tax code to allow private companies like American Water to receive the same tax benefits on its financing as our public, local governments would not level the playing field. It would give companies an unfair and unjustified advantage. Worse, unlike with local governments, there is no guarantee that lowering the borrowing costs for private companies will result in greater investments in our water systems or lower water rates for consumers. The companies could just pocket most of the savings, using the lower debt costs to rationalize higher returns. That means we would sacrifice tax revenue to pad the profits of the water privatization industry.
We have to keep tabs on their next moves and continue to protect our water systems. At the end of the day, privatizing our public water systems is not an innovative approach to delivering clean, safe, affordable water to U.S. communities. Instead, we should stick to a tried and true method—keeping water in public hands. If we want to talk actual innovation, why not establish a steady source of federal funding for community water systems so no municipality ever has to entertain the notion of privatizing its water.