Beyond privatization restructuring water systems to improve performance
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Beyond Privatization: Restructuring Water Systems to Improve Performance. Gary Wolff , P.E., Ph.D. Principal Economist & Engineer Pacific Institute Oakland, California www.pacinst.org. The Problem. Cities Face Many Challenges, Including: Chronic Under-Investment Tighter Regulations

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Beyond Privatization: Restructuring Water Systems to Improve Performance

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Beyond privatization restructuring water systems to improve performance

Beyond Privatization: Restructuring Water Systems to Improve Performance

Gary Wolff , P.E., Ph.D.

Principal Economist & Engineer

Pacific Institute

Oakland, California

www.pacinst.org


The problem

The Problem

  • Cities Face Many Challenges, Including:

  • Chronic Under-Investment

  • Tighter Regulations

  • Security Concerns

  • Limited Financial Resources


Is privatization a silver bullet

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

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

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

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

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

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 performance1

Beyond Privatization: Restructuring Water Systems to Improve Performance

  • 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]

Gary Wolff , P.E., Ph.D.

Principal Economist & Engineer

Pacific Institute

Oakland, California


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