Wednesday, April 19, 2017

Public Water, Now?

Well, they're back! A local group of activists called Public Water Now thinks that doing the same thing over again will have a different result. That thing involves yet another ballot measure asking Monterey Peninsula voters if we want to buy out the privately owned local water company, California-American Water (Cal-Am), and turn it into a publicly owned utility. After two failed attempts in recent years, PWN seems to think this time will be different. 

They may have a point. In the two years since their last attempt, Measure O, failed, Cal-Am took Peninsula ratepayers for a ride with a wholly unethical rate increase. During the drought Peninsula water customers did their best to conserve water, resulting in less water passing through our water meters which in turn resulted in less money flowing into Cal-Am's bottom line. Cal-Am never claimed that they were losing money, but they did argue before the California Public Utilities Commission that their profits were not as great as they “should” have been. The corporate puppets at the PUC agreed that Cal-Am could collect those expected profits retroactively by adding them to our water bills for the next five years. Needless to say Peninsula ratepayers are fuming. 

So the political climate may be right for a successful third attempt. But before we dive into a public takeover we need a cold, hard reality check. 

PWN's arguments for a public water company include more local control, better accountability, no need to satisfy shareholders with profits, and lower water bills. While the first three points seem to me self-evident, the fourth is not so clear. 

PWN points to public water systems nationwide which have lower rates than we currently have. According to a chart on PWN's home page, Cal-Am's water bills are the ninth highest in the nation, and that seven out of the top ten communities with the highest water bills are served by privately owned water companies like Cal-Am. Based on this we are asked to conclude that a public buyout of Cal-Am would result in lower rates here on the Monterey Peninsula. 

But is that really true? Most public water utilities were publicly owned from the beginning. Their systems were built up gradually over 80, 90, or 100 years, maybe more, and their financial investments in water infrastructure were also spread out over as many years. These public systems are therefore mostly, if not entirely, paid for. 

By contrast, a public buyout of Cal-Am would require us to pay for an entire municipal water delivery system all at once. I have no idea how much that would cost, and I couldn't find any hints on PWN's website, but I think it is safe to say it will cost an awful lot. I sincerely doubt that any local public agency has enough cash on hand to pay an awful lot, so a buyout would have to be financed over a long period of time on the order of 20-30 years, maybe more. During that time the debt burden – principal and interest – would have to be added to our water bills. 

Maybe, just maybe, the debt payments would be offset by eliminating profits paid to shareholders or other cost savings. But maybe the debt would actually cause our water bills to go up for a few decades until the system is paid for. The fact is nobody really knows for sure because nobody knows how much it would cost to buy Cal-Am. So when anyone says a public takeover of Cal-Am will automatically result in lower water bills, give them a wide berth. Until somebody produces actual numbers specific to our situation, rather than spouting statistics about public systems in general, I reserve the right to be skeptical and suggest you do the same.


Carmel River Lagoon>