Free Markets Can Help Us Avoid Flint 2.0 – Mackinac Center


Using private companies to provide municipal water service is dangerous, says progressive professor and author Robert Kuttner. “Privatized systems are generally less reliable, much more expensive, and prone to corruption,” Kuttner writes in The American Perspective.

But while the case cited by Kuttner – the Flint Water crisis – is a sad example of long-term municipal neglect, the culpability of the private contractors involved is much less clear.

“French multinational Veolia released a report in 2015 certifying that the Flint, Michigan water system met EPA standards,” writes Kuttner, adding that the company “neglected to mention the high concentrations lead”. But the presumption of fault of the French company did not resist in court.

Veolia Water was a defendant, along with Flint-based engineering consultancy Lockwood, Andrews and Newman, Inc., in a federal civil lawsuit brought by four people who say they were harmed by poor water quality during Flint’s water crisis. The plaintiffs in that case claimed that the two engineering firms “failed to take adequate steps to respond to the lead contamination that hit the city.” Both companies responded by saying state and city officials are responsible for the crisis and arguing that they were hired to “examine the city’s water treatment plant, not the service lines and lead pipes that directly contributed to the lead contamination “.

A acrimonious the civil trial lasted five months but ended in a mistrial when the jurors could not reach a unanimous verdict. After lengthy and fruitless deliberations, the judge handling the case declared the trial a mistrial, in response to concerns about the emotional health jurors. This result gives an idea of ​​the complexity of the case.

The Flint Water Crisis is probably a case study in long-term neglect and mismanagement at the municipal level. This neglect was compounded by a declining population and the decline of major manufacturing industries, which led to financial difficulties for the city. Flint’s situation was further aggravated by what a 2018 EPA Report on the crisis described as “failure of implementation and oversight at the EPA, the State of Michigan, the Michigan Department of Environmental Quality and the City of Flint.” many other media, of a variety of perspectives, to quotedisqualifications at all levels of government,” as well as allegations of corruption in state and city government.

Anna Clark’s book,The poisoned citydescribes how Flint’s fiscal mismanagement has also created serious budgetary and decision-making problems for other levels of government. At the height of the crisis, EPA officials in Chicago wondered if limited funds from the Drinking Water State Revolving Fund would be enough if other, better-run cities with lead in their water infrastructure decided to invoke Flint’s need for financial assistance in order to seek similar assistance.

“I don’t know if Flint is the kind of community we want to go out for,” an EPA staffer said in an email.

There is no escaping the insensitive tone of this statement. There’s also no escaping the fact that years of fiscal mismanagement in Flint city government were hurting citizens and potentially compromising services to other cities across the country.

The Flint crisis was complex, involving multiple levels of government, multiple public agencies, and private actors. Proponents of a more active public sector limit their attention to the claims of negligent private companies. But high prices and corruption are more likely to show up in government-run services.

The two government-run systems discussed in our previous article—those in Flint and Benton Harbor—provide some of the most poignant examples of failing or corrupt infrastructure services.

A 2022 University of Michigan The report found that “average inflation-adjusted water costs have roughly doubled statewide since 1980” and “10.75% of Michigan households in 2018 had a unaffordable water”. According to the report, the percentage change in water tariffs outpaced price increases for health care, housing, transportation, telephone, electricity, food and natural gas.

Not surprisingly, rising water rates are having the greatest impact in urban areas, especially Detroit and Flint. The UM researchers say that “households in large cities in Michigan have annual water bills that are, on average, $124 higher than non-large city households, while those in poverty pay, on average, $9 more than those who are not in poverty”.

Governments could use market forces to provide better service at lower cost, rather than simply accepting ideological claims that private entrepreneurs take advantage of powerless consumers. A more realistic approach would recognize that private water producers have government agencies as their primary customers, which tends to hold government administrators accountable.

Private companies offer their experience, expertise and other options to officials who run water and sewage systems, and elected officials should be open to using contractors as a way to improve service. But even with outside help, the government has a responsibility to provide residents with safe, clean, reliable and affordable water and sewage.

A Forbes Article published following the Flint crisis outlines several potential benefits of using private producers for water services. They include a company’s accumulated knowledge, increased efficiency, room for public scrutiny, and the elimination of politics from the decision-making process.

Forbes also touched on a key problem plaguing many aging government systems. Rate increases to support essential maintenance and repairs in public systems are not driven by commercial realities, but by politics. Flint had high water rates and city officials took money out of the water system to pay for other government services. In doing so, they violated state rules specifically designed to prohibit this type of abuse.

Bringing private contractors into the process of providing water services gives municipal managers the advantage of market competition while retaining government oversight of water safety and quality. The private sector can bring efficiency gains in the design, construction, financing and maintenance of infrastructure, such as water and sewage systems. In addition, Congressional Budget Office Research recalls that “the profit of a private partner depends on the success of the project, which increases the incentive of the private partner to obtain the best result at the lowest cost”.

The CBO also reports that a 2004-05 survey showed that by working with private companies, public entities found that “compliance with EPA regulations improved three-quarters of the time and that cost savings were realized”. Another survey of public-private partnerships found savings of 10-50% on planned spending levels. A 2006 study by the Water Partnership Council found other benefits: “Municipal satisfaction with the partnerships is high, employees are satisfied, and the impacts on the environment, customers and community are positive. »

Companies trying to make money can help governments do their jobs better, so government managers need to be open to them. These managers should ask for help if they see an opportunity to improve performance, then solicit bids, choose the best option, and monitor the contractor to make sure they are doing the job right.

Examples like Flint and Benton Harbor demonstrate that there is no simple solution to the problems present in Michigan’s aging water infrastructure. But it is abundantly clear that the free market can help governments improve services and save more.

Permission to reproduce this blog post in whole or in part is hereby granted, provided proper attribution is given to the author (or authors) and the Mackinac Center for Public Policy.


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