—Versus the Privately Owned Plant
The Evils of Political Control Pointed Out—Municipalities Hampered in Raising Money—Stress Laid on Permanency of Employees
AND now here is the other side of the question, that of the privately owned water company, argued by a well-known official of a far Western corporation, who sets forth the many advantages which he claims for private ownership of the water works.
These are days of public service commission control over utilities, control that is steadily increasing until we may safely predict that in the near future every state will have its regulatory body with power to pass on the quality of water service and reasonableness of rates.
What bearing has this condition on the question of ownership of public utilities? Simply this, that we are relieved of the old cry against private companies to the effect that they “Save on the Service and Raise the Rate.” This has been the most frequent and perhaps the most justifiable objection to private ownership of utilities in spite of the obvious advantages of this type of operation.
Personal and Political Elements
It has been a common experience in the past for a city when confronted with poor service or high rates to arouse public sentiment to such a point that municipal ownership is authorized, only to find after trial that the supposedly high rates must be maintained or even raised. Why? The personal and political element in management is responsible every time. Unless the city is fortunate enough to be able to separate the water department absolutely from any direct or indirect connection with politics, the management and operation end of the utility will surely suffer. And very few cities have been able to make such a separation. The water department offers too ripe a field for political harvesting to be neglected.
Theoretically it should make little or no difference to the citizens whether the water plant is municipally or privately owned; under the present generally accepted theory of return the plant is entitled to a fair return on the physical value of its property plus the intangible value due to its monopolistic nature and its present establishment as a going concern plus its reasonable operating expenses plus an allowance for depreciation. Practically there are some points of difference from the above statement, one being the item of taxes. The much mooted saving in taxes accruing to a municipally owned plant is to my mind a very doubtful saving, as first, the total tax levy must remain the same as before, and second, the proportionate tax on all other property in the city must be made somewhat higher in order to meet this levy; hence the water consumers save but the taxpayers pay.
“Saving” in Taxes vs. Operating Costs
Here we encounter the old controversy between the water consumer and the taxpayer, furnishing an excellent weapon for the political juggler. Strict justice to each party can be had only by complete separation of the water department from all the other city functions and influences, even if the water company is municipally owned—but how rarely this is done! It can usually he said that the “saving” in taxes is more than balanced by increased operating costs.
The very nature of municipal organization operates against projer water works management—short “tenure of office with consequent lack of permanency in planning improvement policies, lack of real interest on the part of the manager because of his insecurity in office, lack of incentive to hold down operating costs because returns are guaranteed, lack of knowledge of the business by political appointees, or lack of familiarity with the thousand and one peculiar features of the plant by even an experienced water works man before he is able to operate the plant most efficiently.
Municipalities Hampered in Raising Money
From a financial standpoint, municipalities are hampered in the raising of money for purchase or improvements owing to legal restrictions and red tape. Usually, too, the salaries of city employees are restricted—a policy which is often an uneconomical one when the set salary figure fails to attract or hold the desired operator who may lie a far more capable and efficient manager titan the one available.
(Continued on page 120)
Privately Owned Water Plants
(Continued from page 107)
An important feature of private ownership of utilities, one which is little discussed because of its intangible nature, is the character of service rendered by employees to “private” employers. No better illustration can be found than the railroad systems, as one who has observed the loyalty of railroad men can testify.
Permanency of Employees Important Feature
Contrast with the tape-hound, politically controlled municipal plant, a plant whose management is keenly interested in its efficient operation and success, is free to obtain money for needed improvements and extensions, is able to secure efficient operators with some guarantee of permanency of their tenure, is more likely to secure the best personal loyal service from employees— and remember that unreasonable profits to such plants are a thing of the past under state commission control—then I think you will agree with me that until city administrations can be made more nearly perfect, the private ownership of water works utilities is preferable to -public ownership.
(Excerpts from paper read before annual convention of the Southwest Water Works Association at Wichita Falls, Tex.)