NCPA - National Center for Policy Analysis

REMOVING THE POLITICAL SHORTAGE OF WATER

May 14, 2009

About 82 percent of Americans receive drinking water via publicly-owned water systems, according to the Environmental Protection Agency (EPA).  Many of these municipal and regional systems operate at a loss, meaning users' fees don't cover the cost of treating and delivering the water.  Many water authorities are critically behind on maintenance.  They lack the capital to update their water purification and wastewater treatment plants, or to secure additional water supplies to meet expected growth in demand, say H. Sterling Burnett, a senior fellow, and Ross Wingo, a research assistant, both with the National Center for Policy Analysis.

Abroad, studies have found operating and infrastructure improvements from privatization have improved water quality.  For example, a study from the Universidad Torcuato Di Tella in Buenos Aires, Argentina, found that water privatization reduced child mortality by 8 percent.

According to the Rio Grande Foundation, a research institute in New Mexico, private systems are more efficient than government-run systems:

  • Operating expenses are 21 percent lower for privately run systems than comparable government-run water systems.
  • Maintenance costs for privately run water suppliers are on average half that of public water systems.
  • Private water companies require less than half as many employees as public water systems and spend one-third less of water sales revenue on employee salaries.

Consumers benefit when private suppliers are allowed to manage water supplies, say Burnett and Wingo:

  • Water fees are slightly lower -- an average of $14 less per household per year -- in counties where water is provided solely by private companies, according to the AEI-Brookings study.
  • The AEI-Brookings study found ratepayers saved about 10 percent or $33 per year, on average, in counties served by a number of private companies.
  • The Rio Grande Foundation found even higher savings, an average of 25 percent, on water rates in areas where a number of private companies provide water and sewage treatment.

Source: H. Sterling Burnett and Ross Wingo, "Removing the Political Shortage of Water," National Center for Policy Analysis, Brief Analysis No. 659, May 14, 2009.

For text:

http://www.ncpa.org/pub/ba659

 

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