Local residents could begin to feel a financial pinch at the kitchen sink as more private investment firms take aim at public water utilities.
That’s according to a new report from a citizen’s advocacy group that shows some major financial players, like JPMorgan Chase, Australian bank Macquarie and the Carlyle Group, are taking advantage of the public sector’s slow recovery from the recent recession by buying up public utilities.
Emily Carroll, Midwest regional director at Food & Water Watch, said Chicago’s water infrastructure system isn’t “at risk of being sold, per se.” But Carroll warned that Mayor Rahm Emanuel’s controversial Infrastructure Trust will smooth the path towards public-private ownership of some Chicago utilities.
“Private equity firms could invest a whole bunch of money … if there was some guarantee for them that they were going to profit off investing in infrastructure. So, it’s likely that Chicago taxpayers would be on the hook for paying back this debt that we would have to these private equity firms … most likely through water rates,” Carroll said in a phone interview Friday morning.
The report, titled “Private Equity, Public Inequity: The Public Cost of Private Equity Takeovers of U.S. Water Infrastructure,” details how taxpayers in many cities across the globe are paying more money for inferior service due to the private takeover of public utilities.
Carroll said public utilities have become prime targets for investment groups lately because they represent stable low-risk, high-return investments in a currently volatile financial market. But the problem is that private investments tend to be more expensive in the long run than government borrowing. What’s more is that private equity investors tend to flip their assets every few years and expect annual returns of up to 15 percent.
“Usually these private equity firms are not very good managers of water systems. They’re not in it for the long haul, they’re not looking to invest and upgrade water systems. It’s not only high water rates, it’s high water rates with poorer service than if they had remained public” Carroll said.
Instead of public-private partnerships the advocates say they’d rather see public-public partnerships that operate on a not-for-profit basis, whereby a group of local public water utilities would pool resources to share capacity, improve aging pipelines, and enhance efficiency.
Some Chicago suburbs have since 2010 been fighting rising water rates associated with the privately owned Illinois American Water system. Company officials at the time told the Chicago Tribune that “they have no choice but to pass all of their expenses along to customers.”
In a related action in New Jersey, citizens marched on Newark’s City Hall last week to protest their mayor’s proposal to sell the city’s water system to a private firm.