Friday, December 28, 2007

Putting Off Investments

What happens when you party for years on your seed corn, indulging your dramas and pretending the future will always be like the past.

Huge increases in water and sewer bills are on the way in many places as cities and towns try to repair aging pipes and correct artificially low prices.

New York, Detroit, Tampa and Atlanta are among cities facing large rate increases. Many of the nation's 70,000 smaller systems — from Monterey, Calif., to Charleston, W.Va. — are imposing major price hikes, too.

The Environmental Protection Agency estimates that the nation's water and wastewater systems need an investment of up to $1.2 trillion over 20 years. Also, arid states such as Arizona, Texas and Utah, where water costs more to provide, have fast-growing populations.
Many people, however, will see much larger increases because of the quirky pricing policy of water and sewer systems. Already, some communities are getting scalded by price hikes of 50%, 100% or more.

The problem: Many municipal owned systems have treated rate hikes like tax increases and avoided them for years. The Government Accountability Office estimates that 29% of water systems and 41% of sewer systems charge customers less than the cost of the service.

These money-losing systems have no way to finance expensive repairs without delivering a rate shock to customers.

"About the only time customers hear from water systems is when they want increases, and that makes people furious," says Missouri Public Service Commission Chairman Jeff Davis.

Wanna be the policymaker who asks voters to support more funding for public safety and corrections sentencing on top of this? How high will you have to raise the "fear factor" to get them to do it?

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