published Sunday, October 14th, 2012

Water takeover a bad idea

In his waning months as mayor of Chattanooga, Ron Littlefield has one final goal in sight: A government takeover of Tennessee American Water.

The private business has been serving Chattanoogans in some form or fashion since 1850. Today, Tennessee American Water serves nearly 80,000 customers and maintains a customer satisfaction rating of 94 percent. What’s more, Tennessee American provides some of the cleanest, safest water in the United States — scoring 260 times the industry average for compliance with drinking water standards.

So why would the mayor want to seize a successful, efficient and effective free market water provider and, in a socialist-style takeover, have Chattanooga’s lumbering, bungling, wasteful city government hijack the management of the water system? After nearly eight years at the helm, Littlefield has little to show for it. He has no real legacy and he’s scrambling in search for one.

A takeover of Chattanooga’s remaining private water supplier would, Littlefield figures, would be a reason for Chattanoogans to remember him.

Well, that may be true. But for all the wrong reasons.

A city takeover of the water system would mean higher costs for customers, lower tax revenues for the city, less support of community organizations and charities, and worse customer service.

Earlier this month, Tennessee American reached a settlement with state regulators to increase water rates by 12 percent — or about $2.35 per month for an average residential customer. This rate hike prompted criticism by Tennessee American customers, and rightly so. But compared to recent rate hikes by the city-owned sewer service, Tennessee American price increases looks paltry.

Since 2001, Chattanooga’s sewer service raised rates 15 times at an average cost increase of 7.2 percent a year. Over the same period, Tennessee American implemented only five rate increases, with an annual price hike of 4.7 percent annually.

To put it in plain numbers, over the past decade, the average monthly city sewer bill increased from $12.82 to $22.99, while the average monthly Tennessee American water bill increased from $12.60 to $19.15. Chattanoogans are now paying $10.14 more per month than they did in 2001 for the city’s sewer service, but only $6.55 more per month for Tennessee American water. Clearly, Tennessee American has done a much better job at controlling its cost to consumers than the City of Chattanooga

In July, the U.S. Environmental Protection Agency and the U.S. Justice Department slapped the city’s sewer system with a consent decree that requires taxpayers to spend $250 million to fix the faulty sewer system.

Given the failures of the city-owned sewer system, no one realistically thinks the city can do a better job at managing water service than Tennessee American. But Littlefield and other advocates of a government takeover the water system don’t care. They see the water company as a way to drum up money to help underwrite the sewer system’s quarter-billion dollar repair bill. After taking over the water company, the city would hike water rates and attempt to pour any water system revenues into offsetting the steep cost of the sewer system debacle.

Ultimately, rather that reinvesting revenues from the water system into implementing new technologies and improving infrastructure, as Tennessee American does now, the city would ignore the water system, which would result in more significant repair costs in the future. In the end, a city-owned water company would provide worse reliability, quality and service than Tennessee American, at a higher cost.

• • •

There’s another reason why the city leaders should resist the urge to take over Tennessee American: It’ll hurt the city’s bottom line. From 2001 to 2011, Tennessee American paid $46 million in taxes, including $27.9 million in property taxes to the city. Tennessee American is one of the top five taxpayers in Chattanooga and Hamilton County.

Municipally-owned water companies pay just a small fraction of the taxes a private water company like Tennessee American pays. In fact, if Tennessee American wasn’t weighed down with such a heavy tax burden, it’s likely that the recent rate increase would be necessary.

If the city owned the water company, the more than $3 million per year the city receives in taxes from Tennessee American would vanish. Instead of the water company being a money maker for the city, it would likely become another expense for taxpayers.  

A city takeover of water services would also harm the community. Since 2001, Tennessee American has given organizations like the United Way of Greater Chattanooga, Junior Achievement and the Tennessee Aquarium more than $600,000. If the city owned the water company, all that money would be lost.

Mayor Littlefield is right to be worried about his legacy. After nearly eight years in office, he doesn’t have much of one. But the worst thing he could do before he leaves office is push the city into spending hundreds of millions of dollars to seize control of Tennessee American and get in the water business. It would be one thing if Tennessee American were failing Chattanoogans, but it’s not. The company provides clean, safe water at a cost of less than a half-cent per gallon to highly satisfied customers.

The same wouldn’t be true if the City of Chattanooga ran the water company.

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nucanuck said...

We are fast arriving at a time of water criticallity...wordwide. The cities that control their own water supply will be miles ahead of those that don't.

Egypt is threatening war with Ethiopia over water. California and the whole Southwest will soon be at each others throats over water. We already know that Atlanta has potential supply problems. When push comes to shove, Chattanoogans would be far more secure if they controlled their own water. AGW is changing the world in ways we can't even yet imagine.

When it comes to water, talk of socialism is just rubbish.

October 14, 2012 at 9:51 a.m.
aae1049 said...

I am all in favor of taxation for the chartered services that the City of Chattanooga is to provide per referendum by the people. The City's mission was determined by referendum, and they cannot stay within those boundaries. The City of Chattanooga taxpayers currently own a Gov hotel, a boat dock, entertainment enterprises at EPB, seeded a move theater with PILOT property tax exemptions to help River City have lease income, growing art collections.

Sell or give these assets to the private sector to get them back on tax rolls and shed the liability. The City currently has bond debt of about $436 million, and we need those franchise fees. Love ya Tennessee American, keep sending that check.

They keep shrinking the tax base with this nonsense.

October 14, 2012 at 12:04 p.m.
MasterChefLen said...

I wonder if the reason Ron Littlefield is trying to get Chattanooga to take over the water company is because of the fact that he will not have a job when his term is up? Perhaps he could get his buddy Paul Pate a job their too?

October 14, 2012 at 2:03 p.m.
nucanuck said...

Yes, certainly Chattanooga has no business being in the hotel and restaurant business or any other business that competes with other like businesses. And yes, Ron Littlefield is a below par Mayor, but long-term access to water is far more important than any one Mayor.

When the water wars begin, and they will, we should want to have our rights, access, and control of costs under OUR control. We can hire a private company to operate it, but we should own it.

Water will soon be as important as energy. Cities that control their own water will have a leg up on the rest.

October 14, 2012 at 4:28 p.m.
BigRidgeGOP said...

You only have to look as far as the city's wastewater system to see why I - and many others in this city - would strongly oppose any effort by the city to takeover over Tennessee American Water.

The Chattanooga sewer system remains in shambles and currently sits under a $250 million order with the EPA that mandates the city raise rates to fix the sewer system after years of neglect.

Has anyone even noticed how the city has raised our sewer rates about 7-10% a year for the last 10 years? Where is the discussion about the city's plan to increase sewer rates by 10-12% each year for the next 17 years? Yet, our sewer system continues to dump raw sewage in our streets and the Tennessee River.

It's funny how no one even seems to know where this money is going, or what they city is doing to address this issue.

All we hear from Mayor Littlefield and other city leaders is a reference about the importance of controlling our water rights or a complaint about a water rate increase every two years - which somewhat ironic when the city has increased my sewer rates just as much or more every year.

My last water bill was under $30 per month, which is far less than what I'm paying for electricity, cable, cell phone and yes, my sewer service!

The taxpayers of this city need to bring some fiscal sanity to City Hall... our city has mounting debt... raising crime... a gang issue... crumbling roads... not enough money in the budget to pay our first responders a decent salary or let them take their cars home without paying a fee... these are just some of the reasons why we should stop this idea now before it gets any traction.

April 2013 cannot get here fast enough!

October 15, 2012 at 12:05 p.m.
nucanuck said...

Looks like BRG favors a bigger budget to cure what ails the city, but doesn't address the dangers of having our water beyond our control in a world where water is becoming a scarcer commodity.

October 16, 2012 at 11:48 a.m.
BigRidgeGOP said...

I'm not sure what you mean by favoring a bigger budget to cure what ails the city, but the city gaining control of the water system will not solve anything for the city or its residents.

The fact is, today, our tax dollars cannot fund our essential services, such as fire, police and roads. Why should we support the city spending millions upon millions of our tax dollars to forcibly take something that is privately owned?

Plus, the water is already owned and controlled by the public... Tennessee American Water owns the treatment plant and pipes that treat and deliver water to our homes or businesses. These assets are what we pay for in our water bills.

The EPA and state actively monitor and control what TN American Water can and cannot do with its water system and the water pulled from the Tennessee River.

I pose the same question to you.... who is watching the city? The answer... No one! This is why we have a sewer system that is broken and has a history of dumping raw sewage in the Tennessee River and our streets when it rains.

As I said earlier, the city needs to focus on providing essential services to its residents and leave the water business to Tennessee American Water.

October 16, 2012 at 1:14 p.m.
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