Beyond Privatization: Restructuring
Water Systems to Improve Performance
Gary Wolff , P.E., Ph.D.
Principal Economist & Engineer
Pacific Institute
Oakland, Californiawww.pacinst.org
The Problem Cities Face Many
Challenges, Including:Chronic Under-
InvestmentTighter RegulationsSecurity ConcernsLimited Financial
Resources
Is Privatization A Silver Bullet?
It Has Been Proposed as THE Solution to All Woes, Internationally and in the United States
The Issue Has Been Hotly Contested But We Say: Public Vs. Private Is NOT the
“Bright Line” Between Success and Failure It Is An Important “Value Issue” That Has,
Unfortunately, Become A Distraction From More Important Determinants of Success
A Side Comment About “Value Issues” In Water Governance
The Public Vs. Private Debate Contains Important Issues
Such As How to Ensure Economic and Social Values are Realized
See Our Previous Report, Available Free On-Line, For Discussion
What Are The Determinants of Success?
They Are, Based on Research in the Upper Midwest (Iowa, Minnesota, Wisconsin, Illinois, Michigan, Indiana, Ohio, and the Province of Ontario):
Effective Staffing
Adequate Funding, Including Innovative Approaches
Detailed Asset Management
Performance Measurements and Rewards
Transparent Decision Processes and Governance
Example: Adequate Funding Through Economies of Scale
The Lansing Board of Water and Light and Smaller Municipalities Have Cut Costs Through Service Contracts That Leverage Administrative Costs Over a Larger Base, Allow Assets to Be Run at Capacity, Etc.
Similarly, the “Hub and Spoke” Area of Minnesota (St. Michael, Albertville, and Hanover) Achieves Similar Cost Control Through Contracts With a Private Company
Example: Performance Measurements and Rewards
The Louisville Water Company, A Municipal Corporation, Has Achieved Many Goals Via Employee Incentive Awards (Bonuses)
MMSD Contract Has Performance Bonuses Hamilton, Ontario Switched From Private to
Public Operation Without Much Turmoil Because They Had Developed Specifications Suitable For a Commercial Relationship
Ideally, All Systems Would Do This
Example: Effective Labor Transitions Maintaining Fairness & Stability For Workers During
Restructuring Is Important, For Numerous Reasons These Transitions Have Been Made Effectively at:
MMSD; Indianapolis Wastewater Operation; Butler County, Ohio; Akron, Ohio; and Hamilton, Ontario
In Contrast, The Indianapolis Water Contract Has Had a Troubled Transition. Federal Mediation Has Been Required, 17 Formal Complaints Were Filed With the NLRB; Fired Employees Have Sued; and So Forth…
But These Examples Do Not Show a “Public-to-Private” Problem. Indianapolis Water Was Private-to-Private, and the Other Examples Are Varied.
Beyond Privatization: Restructuring
Water Systems to Improve Performance
Gary Wolff , P.E., Ph.D.
Principal Economist & Engineer
Pacific Institute
Oakland, California
Our Report Will Be Released In November 2005
You Can Obtain a Copy at www.pacinst.org
OR, Be Notified of Its (Free) Availability on the Web By Writing Us At: [email protected]
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