Why Leasing the Water System Is a Bad Deal for Consumers

Cost implications for the community

• A lease of the Milwaukee Water Works could cost the Milwaukee community a total of $17 million to $31 million a year.

• By investing a concession fee into an endowment, the city could net between $7 million and $28 million a year for its general fund.

• At the same time, because of the higher cost of private capital, a lease could increase the water utility’s revenue requirement by $38 million to $45 million a year — 55 percent to 65 percent — resulting in higher water bills for the consumers.

• For every dollar that the city receives from an endowment, water users, as a whole, could have to pay approximately $1.60 to $5.40.

High water bills

• In Wisconsin, private water service costs 59 percent more than public water service.

• Long-term leases with large concession fees can result in significant increases in water rates, according the U.S. Environmental Protection Agency.

Loss of local control

• Because water utilities are natural monopolies, a long-term lease would reduce consumer choice.

• The leasing company may construct water main extensions that encourage sprawl.

• Although state regulators would oversee elements of the utility’s operation, according to the Association of California Water Agencies, regulation “provides a poor substitute for marketplace discipline or ballot box accountability.”

• Studies have found that competition for water system contracts is rare, and long-term contracts that require private capital further reduces the list of viable competitors.

Service concerns

• Poor performance by private operators is the number one reason why cities decide to bring previously contracted-out services in house.

• Private operators can have a financial incentive to neglect system maintenance and upkeep.