This is the second of a two-part report. Read the first story here.
Does a water ‘pipeline’ exist? Does it make a difference?
As the Polk County town of Tryon considers an offer from a private company to buy its water system, Mayor Alan Peoples isn’t the only one who’s uncomfortable with selling essential public infrastructure to private entities.
While he acknowledges that Tryon’s water and sewer distribution systems are definitely in need of upgrades, “I don’t think we should sell our system,” he said.
Some 45 miles away, Asheville resident Barry Summers has been outspoken about his concern that there is strong interest among some entrepreneurs and politicians, including the chair of a House committee studying the future of the city’s water system, in the prospect of privatizing essential public services like water, transit and prisons.
The next meeting of the state’s House Metropolitan Sewerage/Water System Committee is set for Wednesday, March 14, at 1:30 p.m. in Room 643 of the Legislative Office Building in Raleigh. More information, including the agenda, can be found on the committee’s website. Live audio of the meeting will also be available through the N.C. General Assembly website.
It’s an attempt to shrink government, Summers and others argue, and allow private companies to profit from providing more of the services currently provided by public institutions and tax dollars. Committee leaders say that isn’t the case.
In his blog on Asheville’s water system, Summers said that Houston-based Ni America, which has made a bid for Tryon’s water system, may be interested in the utility because of the existence of a pipeline that connects water systems in communities from Asheville to Spartanburg, S.C., via Hendersonville and Tryon, through Columbus and Inman, S.C.
Such pipelines have been encouraged by the N.C. Division of Water Quality over the years as a means of drought contingency planning.
“These linked networks are naturally attractive to companies in the water business,” Summers said, “especially those with a ready water source like the Asheville watershed at the top, as they work to build regional water networks that are privately owned.”
Drawing a comparison to Asheville’s water system, Summers said that the creation of a regional water authority may not lead to privatization immediately.
But it could set the stage for such a change down the road, he said, “if it gets into the hands of an appointed board that’s less ideologically opposed to privatization.”
Rick Melcher, Ni America’s public relations manager, denies that the existence of the pipeline – or a desire to control water rights – factored into the company’s initial interest in Tryon.
“We’re not in the business of trying to acquire water rights or corner the water market,” Melcher said. “We just want to own and operate the distribution system. The profit that’s available and allowed by the service commissions is only around a 10 percent rate of return. It’s far less sinister than some people might believe.”
Tryon is at a crossroads now, Melcher said.
“Systems all across the country have been putting off repairs” the same way Tryon has, Melcher said. “The systems owned by municipalities are run by politicians. The last thing they want to do is raise taxes to put money back into the utility.”
Private companies can provide the funds for needed upgrades, he argued.
“Creating a larger customer base is the key,” Melcher said. “And we can do it cheaper.”
And if that sounds counter-intuitive where a profit-making venture is concerned, Melcher said: “Governments will build a system to meet the needs as much as 30 years down the road, at enormous burden to the taxpayers of today. We do it smarter than that, and grow the system only as the need arises.
“We’re totally governed by the public service commission,” Melcher continued, “so we have to comply with all the government regulations, and with the public service commission controlling the rates.”
Among the concerns: Who decides how much consumers pay
But Summers said that approach hobbles the growth of a robust, worry-free utility. Spot fixes for leaks on aging lines while the rest of the system languishes amounts to “fixing it until the next check clears,” he said, not the creation of a vigorous system for the long term.
But Ni America spokesmen insist the company operates within state regulatory bounds.
“When we make an acquisition, we talk to the state regulators about the deficiencies and compliance issues that need to be taken care of first,” Melcher said. “We may take two or three years to do the repairs, and after repairs are made, we go back to the state regulator and ask for a rate increase to cover the cost.”
Ni America points to its acquisition of Palmetto Utilities, which was overseen by the S.C. Department of Health and Environmental Control, as an example of how well things can go. The system needed a number of repairs and upgrades to its water and sewer lines when they acquired it, Melcher said.
“We gave them (the department) our six-month report card that shows we are way far ahead of schedule on the three- to five-year plan to bring the whole system into compliance,” Melcher said.
As a regulated utility, Palmetto argues that its rates are among the lowest in the region – among both government-owned and private utilities.
But customers have complained of wastewater line breaks, sewage back-ups, and overflows, both before and after its purchase by Ni America. As of Sunday, the third-largest release of raw sewage reported to the state environmental agency so far this year – 43,000 gallons – was from a Palmetto sewer line.
Third committee meeting scheduled for Wednesday
As Tryon leaders consider their next move regarding their water system, the next meeting of the legislative Metropolitan Sewerage/Water System Committee has been scheduled for March 14.
As a study committee, it can only meet a total of four times under legislative rules.
Chairman Rep. Tim Moffitt (R-Buncombe) insists the committee has no intention of taking Asheville’s water system and turning it over to a private entity.
“I have no desire to privatize our system, or take our assets and put them in the hands of a private company,” he said during an Asheville public forum last month. “It’s not gonna happen at my hand.”
“These are issues that need to be thought through,” Moffitt added, “as far as – do not create a process where an unintended consequence could ultimately lead to privatization.”
But Summers insists that moving the system to the control of a regional authority – one of the committee’s stated potential outcomes – opens the door for those who would like to acquire Asheville’s water system.
“If a private company wanted to get their hands on the Asheville water system, the first thing they’d have to do is get it away from the city,” Summers said. “It’s not likely the city would ever willingly give it over. But an independent authority is a necessary first step. It’s much more vulnerable then to the kinds of overtures that a private company would make.
“Privatization could be the result, whether it’s intended or not.”