published Wednesday, June 6th, 2012

Yoked to costly monopoly

When Tennessee-American Water Co. proposed a whopping 23 percent rate increase last week, Chattanooga Mayor Ron Littlefield's responded that it was finally time for the company's corporate parent to "sit down with us and negotiate a sale."

Hear. Hear. Can't we all, at last, agree on this: Chattanooga should not be, and should not remain, the only major city in Tennessee that does not own its public water utility, and that does not have control its infrastructure-driven destiny.

As a matter economic competitiveness and fairness to ratepayers, local residents and businesses should not continue paying excessive costs -- and needless profits -- to an out-of-state, for-profit corporation for treatment and supply of water drawn from our own Tennessee River.

Certainly local taxpayers and commercial and industrial customers of TAWC should not be forced to regularly pay lawyers to challenge the corporation's huge, double-digit, rate-increase proposals before the Tennessee Regulatory Authority.

Excessive rate proposals

TAWC's last rate proposal, in 2010, was for a 28 percent increase; in 2008, it sought a 21.7 percent hike; in 2007, it was 19.67 percent. Those proposals were reduced by state regulators -- to 14.76 percent, 4.37 percent and 12.3 percent, respectively -- but the regulators still acknowledged TAWC's corporate right to extract a "reasonable" profit from TAWC's Chattanooga customers for its corporate parent, American Water Co., and its stockholders.

As Sen. Bob Corker put it when he was Chattanooga's mayor, corporate-owned utilities have the sweetest deal in the country: They are allowed by law to extract a "reasonable" profit from captive customers of a protected public monopoly every year, never mind what the economy is doing, or whether their performance is adequate or poor.

City stands alone in costs

In fact, Chattanooga is an anomaly in Tennessee in the way it gets and pays for public water.

Tennessee's other major cities and towns have long owned their local public water utilities. If local citizens appointed to the boards of these utilities decide they must raise rates for infrastructure improvements and operations, their fellow citizens and ratepayers have to be persuaded of the need for such a cost increase. And if they approve, local ratepayers get all the benefit of their water-rate dollars.

You simply will not find citizens in Knoxville, Nashville, Memphis and most other Tennessee towns and communities who pay water rates that cannot be justified locally. None are paying for, and shipping away, excessive profits taken out of their pockets to be sent by a private, for-profit water utility monopoly to rich out-of-state corporations and their stockholders. Their local water utilities are theirs, and theirs alone.

All other Tennessee cities and counties are also served by local, non-profit utilities organized under charters controlled by municipal or county governments. Hamilton County has nine of these smaller public utilities serving parts of the city and county outside of TAWC's pipelines.

These water utility districts include Hixson, Savannah Valley, Sale Creek, Union Fork/Bakewell, Soddy Daisy/Falling Water, Eastside, Suck Creek, Walden's Ridge and Mowbray Mountain. Walden's Ridge finally gave up pumping valley well-water to the top of the Cumberland Plateau a few years ago and began buying its water from TAWC, but that's rare.

Unfortunately, if the city attempts to buy TAWC, its corporate owner, America Water Co., a New Jersey-based corporation bought in 2001 by the German corporate giant RWE Group and spun off again in 2008 in an IPO, is likely to again mount the same sort of fierce battle it launched when former mayor Jon Kinsey initiated a forced purchase of TAWC in 1999.

Mayor Kinsey's bid to buy out TAWC foundered on the betrayal of a few myopic City Council members and on the public backlash stirred by American Water Co.'s misleading advertising campaign against a city takeover. That ad crusade featured "Not for Sale" ads played out under a theme suggesting it was unpatriotic to support a government takeover of a local company.

Ratepayers duped last time

City residents who bought that, of course, didn't consider the common corporate practice of hostile takeovers. Nor were most aware that AWC itself sold out to the German-based mega-international utility, RWE Group, in 2001. So in the 2001-2008 period, TAWC's profit on water rates in Chattanooga were shipped abroad to its then German owner.

Mayor Littlefield, alas, has waited until nearly the end of his tenure to propose that the city undertake the legal process of an eminent domain proceeding to purchase TAWC, whose value would be determined by a jury. There's also good reason to doubt the vision, fortitude and support of some City Council members for a commitment to such a drawn-out legal contest.

Still, the logic for a purchase by the city through eminent domain (a practice commonly used by utilities themselves to install pipelines and other infrastructure) will be forever compelling.

Sending dollars away

The cost of profits on top of operations and infrastructure investments would go away. Local customers of a city water utility wouldn't have pay additional dollars that would be taken out of our local economy and sent to out-of-state corporate owners and international stockholders. If current employees chose not to stay, operations of a city water utility could be easily contracted out until local employees were trained. And lastly, the city would finally control its destiny with regard to water infrastructure and economic development opportunities, instead of having to beg and coax out-of-state corporate owners to respond to the city's infrastructure needs.

It's well past time for Chattanooga to join the host of major cities, in Tennessee and across the country, in assuming control of its public water utility. The yoke of a private, for-profit monopoly on public water needs to come off. All it takes is a commitment by the city's leaders, and informed public support.

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328Kwebsite said...

If we buy it, then we have to pay for it. We'll own it; and, we'll have to pay to maintain it. We haven't seen genuine concern for maintaining value in this city from its leaders.

For those reasons, there will be no political will to take control of a utility necessary to sustain life. They'll sell out every day because it is easier to do nothing than it is to try something.

Also, notice that the water company's situation is different because of the Littlefield administration's cabal that imposed an unelected set of officials on this area. When the city/county agreement broke down through corrupt and direct activities of local politicians and landholders, the balance of responsibility changed. Who takes care of what and who pays for what and who is responsible for what now has a different balance. That significant point was ignored in the editorial's analysis and comparison of ownership proposals.

Then and now are much different. They are different by a significant margin because we have an unelected government that is imposing legal decisions upon the people without the endorsement of voters. Those decisions have resulted in many, many corrupt and self-paying decisions. Really, the only wonder is that they have taken this long to get back to trying to get the water company money for themselves.

In short, given the unethical and obviously corrupt behavior of the city and county government high officials, it's unlikely that they have a genuine concern about water resources. They are not concerned about water in and water out. They are not concerned about sustaining life and maintaining sanitation. Instead, they are most likely to be concerned about using water as a commodity to pay themselves from the taxpayer's coffers.

Without ensuring that local cronies can be prevented from paying themselves any significant sum of money, then the seizure of a business will only result in more corrupt payoffs. For that reason alone, we should object to the seizure of the water company.

June 6, 2012 at 3:17 a.m.
AndrewLohr said...

Government set up the monopoly. Just end it: let other water companies compete.

June 6, 2012 at 6:04 a.m.
BigRidgeGOP said...

I do not want the Mayor Littlefield or the city to own and operate my water system. Just look at how the city has operated the wastewater utility. You have to look no farther than the ongoing smell of downtown, multiple sewer overflows (many which went unnoticed) and years of neglect as evidence to what would happen if the city got their hands on Tennessee American Water. It's funny how the newspaper and this editorial page says nothing about the city is fighting EPA and its efforts to force the city to address their infrastructure needs now rather than kicking the can down the road as a lot of municipalities are doing with their utilities. Taxpayers get ready.... the EPA is about to slap a major order on the city for this neglect and delaying needed infrastructure improvements to the wastewater system. This EPA acation will force multiple, double digit increases on all taaxpayers in Hamilton County... this is something our city leaders have know about for decades but refuse to make the difficult decision to fix it due to the impact to rates. The newspaper and the public just need to look at Jefferson County, AL and Nashville to see what Chattanooga taxpayers have to look forward to when it comes to deadling with this coming EPA order. Thanks but not thanks... I want to keep Tennessee American Water!

June 6, 2012 at 9:29 a.m.

328KWebsite: You're paying for it anyway. If your problem is with your local government, change that too.

AndrewLohr: And exactly how would you arrange that? Running individual water pipes to every house? Setting up a separate water-delivery system with various suppliers feeding into it? I can't count the ways that would go wrong.

Sorry, but unless you can come up with some way to get past the realities, you're not going to get anywhere.

BigRidgeGOP: That editorial was a couple of weeks ago. Did you miss it? But keeping that water company won't change that problem, it'll still hit you. So you have to consider the situations separately.

Try doing that, instead of distracting yourself. Or work with 328Kwebsite, and fix your local government.

June 6, 2012 at 10:06 a.m.
MasterChefLen said...

What "happywithnewbulbs" fails to mention in the their holier than thou attempted rebuke of the previous commenters is the citizens of Chattanooga have tried to change the local government. They formed a recall petition and vote. The vote was certified by the county, and Mayor Littlefield fought it all the way with lawsuits. The mayor's rubberstamp city council has backed him all way with unlawful (annexing for the purpose taxbase expansion), appointing a known sexual harasser buddy (Paul Page) to his administration, and forcing a metro government agenda without a vote. The Chattanooga City government is really giving Chicago a run its money.

June 6, 2012 at 11:04 p.m.

MasterChefLen, bit pretentious to talk past a person, without even engaging in a discussion first?

From my perspective, that recall petition wasn't about changing the local government for the better, it was about going backwards. But hey, whose fault was it that they couldn't figure out what they needed to do to get a recall done properly?

Were they getting advice from Thad McCotter?

But still, you have a group who wanted to change the local government, where they now? What are they doing?

Oh wait, they stopped, because it was too much like those nasty Occupy folks. Maybe you didn't notice the change in tone, but I sure did.

June 6, 2012 at 11:55 p.m.
328Kwebsite said...

Another aspect of this that occurred to me yesterday was that the city/county cabal has moved from dumping unprofitable city service obligations to trying to gain profitable ones.

This is not in the interest of the community.

For example, we see the city/county deal destroyed by Mayor Littlefield and County Mayor Coppinger's failure to renew the city/county contract. As a direct result, services like the care for the mentally ill and care for severe chronic pediatric conditions and the library: all went unfunded.

What do those causes have uniting them? They are all unprofitable. They are all going to require the steady payment of funds out. There's no way anyone is going to be able to conduct those services, with each viewed coldly as a transaction, in a way that's reasonable to believe the they'll ever make money.

Meanwhile, the water will. Even if the margin of profitability was slim; and, it would be slim because these cheap @#$%^&*( will do nothing laudable in their lifetimes: water sales can generate profit. 0.001% profit is a lead over the 0% profit and certain debt of the other, now abandoned, services that will be discontinued as swiftly as the city/county can weasel out of providing them.

There's one problem with this profit-grab strategy: government service isn't meant to be profitable. It's meant to provide service.

Our people need services that work. Whether by design or by environment, we see a steady push from local leaders (and a not-so-leading paper staff) to gain money through government operation.

Return government's focus to providing reasonable service for the funds we provide through taxes. Trying to get out of something by strangling local government will not create a better situation.

Over the span of a calendar year, we see our community leaders in city/county government shunning their responsibility toward the sick and the poor while favoring the seizure of profit from water.

Where are our priorities?

The library looks wrecked. It seems to be ignored to the point of embarrassment. The city/county contract, an important aspect of maintaining the community we have: ignored into oblivion. Who's going to suffer? All of those families with sick kids, old people who are poor, and the mentally ill.

Meanwhile, the "paper" editorializes for water profit.

June 7, 2012 at 5:34 a.m.
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