DWSD: neither a profit center nor job creator for Detroit

[sehender1]

I thought folks in this forum would be interested in this op/ed we have up at FreepOpinion.com today.
It suggests selling the water department would be among the city's smartest short- and long-term financial moves.

http://www.freep.com/article/2010041...ter-Department

[Novack]

Is this true?

Is this Cash Cow of ours really not make any money?

If someone offered to sell me a water system with more then a million households need, I buy it in a second. but why are you selling it? Why? Because you don't make money on it, you say? What are you the biggest failure in business history? I would ask.

I'm......speechless

really

AND WHO THE HELL DO THEY OWE 5.4 Billion dollars too? How the hell did that happen?

[Detroitnerd]

Same old refrain: Privatize the profit, socialize the loss.

[jt1]

Is this true?

Is this Cash Cow of ours really not make any money?

If someone offered to sell me a water system with more then a million households need, I buy it in a second. but why are you selling it? Why? Because you don't make money on it, you say? What are you the biggest failure in business history? I would ask.

I'm......speechless

really

AND WHO THE HELL DO THEY OWE 5.4 Billion dollars too? How the hell did that happen?

By law they can not profit on the the water system.

[SWMAP]

Maybe spend some time reading this report from public citizen on the privatization model:
http://www.citizen.org/documents/waves.pdf

I am a resident of Detroit I am opposed to privatizing our water system.

[Detroitnerd]

Maybe spend some time reading this report from public citizen on the privatization model:
http://www.citizen.org/documents/waves.pdf

I am a resident of Detroit I am opposed to privatizing our water system.

Yeah, I love how our country's "entrepreneurs" have zero idea on how to put people to work by actually making things, but instead want to make money by barging into the "business" of selling you the necessities of life. Come back to the five-and-dime, Henry Ford.

[Hermod]

While nt a common as privately owned public electric and natural gas utilities, there are private water supply utilities in the US which seem to work quite well. The government entity model is far more common than the privately owned utility model for water systems.

[Detroitnerd]

While nt a common as privately owned public electric and natural gas utilities, there are private water supply utilities in the US which seem to work quite well. The government entity model is far more common than the privately owned utility model for water systems.

There's an interesting film about the push to privatize Highland Park's water system. Here's an online synopsis:

Water Fight
As first conceived, the documentary The Water Front was supposed to look at the issue of privatizing municipal water systems. But it ended up being about much more than that. The subject drew the attention of Montreal filmmaker Liz Miller because, as she says, access to clean and affordable water is expected to become a major issue over the next 20 to 30 years. After considering locations in Africa, Latin America and other parts of the United States, she settled on Michigan's Highland Park as the focus of her film. The fact that people living amid the world's largest supply of fresh water were having their flow shut off intrigued her. But after she started filming more than four years ago, the narrative began to grow in scope and complexity. "I went in there thinking I was going to be telling a story about water," she says. "But then it became a bit of a spider web." It morphed into a story about a "postindustrial city in crisis," with issues of race and class and poverty weaving their way into an increasingly tangled storyline.

[rb336]

first off -- I had never heard of those "myths" mentioned in the article. Never.
that is a classic red herring fallacy

second -- take a look at privatized roadways that have popped up in a few places, most notably the DC environs. two road project there were started about the same time, and were of similar size. one was private, one public. the private one cost more to build initially AND has had more quality problems AND costs the drivers more to use. That is exactly the kind of result we can expect when a company driven by profit takes over a necessary function. maintenance and improvement will only go forward when that company is forced to act.

third -- how much is someone going to pay for all the billions that have been put into the system? it certainly won't come close to what it would cost to build a competing system. [[which is why several plans by various communities to build their own over the last few years have gone by the wayside). Want to see people bitch? wait till the private owners decide to double your water rates a month after taking over. Detroit water is quite reasonable in pricing, and remember, Warren and other suburbs boosted what THEY charge their citizens by much larger percentages than the amount DWS raised their rates, and blamed the whole thing on Detroit

[Detroitnerd]

first off -- I had never heard of those "myths" mentioned in the article. Never.
that is a classic red herring fallacy

second -- take a look at privatized roadways that have popped up in a few places, most notably the DC environs. two road project there were started about the same time, and were of similar size. one was private, one public. the private one cost more to build initially AND has had more quality problems AND costs the drivers more to use. That is exactly the kind of result we can expect when a company driven by profit takes over a necessary function. maintenance and improvement will only go forward when that company is forced to act.

third -- how much is someone going to pay for all the billions that have been put into the system? it certainly won't come close to what it would cost to build a competing system. [[which is why several plans by various communities to build their own over the last few years have gone by the wayside). Want to see people bitch? wait till the private owners decide to double your water rates a month after taking over. Detroit water is quite reasonable in pricing, and remember, Warren and other suburbs boosted what THEY charge their citizens by much larger percentages than the amount DWS raised their rates, and blamed the whole thing on Detroit

I believe you're right. Unfortunately, you're going up against three decades of brainwashing that "private companies do it better and cheaper" and "government is always bad." Yeah, great idea. There may be a few problems with the system we've spent billions building. Naturally the solution will be to give it to a private company for a song so they can squeeze every penny out of it before running it into the ground.

[Motor City Sam]

first off -- I had never heard of those "myths" mentioned in the article. Never. that is a classic red herring fallacy

Agreed. The other thing that bothered me was the opening of the article, about how from almost the day we're born Detroiters are conditioned to believe in the magificence of the DWSD. I must have missed that class at Schulz Elementary and my parents must not be like the rest of the Detroit parents, because they never gave me long lectures on the great DWSD.

Note to the author of that article: When you start off an opinion piece with a sweeping falsehood like that, I find it hard to take you seriously.

[Detroitnerd]

BBK, where Hudson works, is a management consulting firm in Southfield. In other words, they're buzzsaw men.

[jbd441]

The county owns our water system. It "took over" as many of the privatized water and sewer systems as it could in the county. In the early 90's the water and sewer bill was bi-monthly and when rates went up billing started every month. Any price increase had to be approved by the county. Just before the county took over our system it approved a huge rate hike. A month after the take over, the county issued a letter stating prices wouldn't increase much in the coming years. [[they blamed high prices on the private companies' price hike) So now we have a base rate system, not using a drop costs over $30.00 a month. Sewer rates per gallon of course are higher than water but a household is charged per consumption whether the water goes down the drain or not.
The average water and sewer is $60.00 for about 2.0 thousand gallons a month. After 4 thousand the rates increase to promote conservation. We are even charged $2. a month for the county to send a bill.
So what happens when water and sewer bills become too high for the middle to lower income households to pay? Or when the systems need updating to the tune of millions? Will we start seeing these improvements or subsities on our property tax bill? The county hospital uses this tactic and the county airport has tried in the past. The state even has regional water agencies that we support with property taxes.
So which is better?

[sehender1]

first off -- I had never heard of those "myths" mentioned in the article. Never.
that is a classic red herring fallacy

You must not listen to talk radio shows where most callers are from the city.
You'll hear it at least twice a week there.

Lots of local pols also fetishize the value of owning the city's assets [[because they "make money" or create jobs) and use DWSD as their primary touchstone.

I don't think Marcus was off at all making the point he did.

[sehender1]

BBK, where Hudson works, is a management consulting firm in Southfield. In other words, they're buzzsaw men.

Exactly. He's looking at it from the perspective of someone who might be called in to mop up if the city becomes insolvent.
DWSD would be among the first things considered for sale under receivership or in bankruptcy, precisely because of its inability to help stabilize the city budget as an owned asset, and its tremendous "street value" under sale conditions.

The question I think we have to ask is whether there are alternatives to selling DWSD that would have as big an immediate impact on the city's finances, with potential [[if the deal is structured right) to aid long-term stability.

If there aren't, it won't matter: DWSD will get sold anyway.. under emergent conditions by an imposed overseer who might not maximize the deal for the city's long-term benefit the way the mayor and city council might be able to now..

[szla]

Let's just say the system sold for 5 billion. Amortize that over say 15 years. 333 million per year. The income tax could be reduced to a less onerous level say 1 percent and .5 percent. People would be less likely to not want to take that job in Detroit. As a matter of fact cap it at $100,000. If you become rich the city will no longer tax you out of the city. You might even find a lot of upper middle class people buying in former upper middle class neighborhoods. Major institutions would not have to make up the difference because you work in the city. The property tax could be reduced to acceptable levels. This would at the least increase interest in city housing. It could give the city 15 years to get its' house in order. Water rates would go up. Water rates will go up.

[Detroitnerd]

Exactly. He's looking at it from the perspective of someone who might be called in to mop up if the city becomes insolvent.
DWSD would be among the first things considered for sale under receivership or in bankruptcy, precisely because of its inability to help stabilize the city budget as an owned asset, and its tremendous "street value" under sale conditions.

Oh, sure, in a corporate setting. Corporations are only interested in their bottom line, and pleasing their shareholders. That's why they hire those "take-charge" types to come in and create short-term profits, spin off businesses, fire employees, give other employees more work, and to enhance PROFITABILITY. That is what management consultants do. They are not there to enhance the product, help corporations reach a higher level of service or even to help a company survive in the long-term. They're not there to do anything other than help please the shareholders and raise profits in the short term.

Unfortunately, governments are a lot different from corporations. Governments are accountable to residents, not shareholders. Every citizen has one vote, where shareholders have as many votes as they own. Governments routinely engage in long-term planning that, in a corporate setting, would be regarded as wasteful. That's because businesses are always focused on this year, this quarter, this week's numbers.

So there are a variety of ways in which business and government are different, and so I take Mr. Hudson's views with a liberal dose of salt.

The question I think we have to ask is whether there are alternatives to selling DWSD that would have as big an immediate impact on the city's finances, with potential [[if the deal is structured right) to aid long-term stability.

I doubt it. What we're talking about here is selling a system for pennies on the dollar and turning Detroit into its customer. This is by necessity a scheme for short-term gain, with no view to the long-term picture.

If there aren't, it won't matter: DWSD will get sold anyway.. under emergent conditions by an imposed overseer who might not maximize the deal for the city's long-term benefit the way the mayor and city council might be able to now..

Oh, I see. So we should definitely settle now for a crappy deal slapped together by some bullshit private buzzsaw man to sell off a system that took decades to build, because, if we don't, then we'll get an even WORSE deal later. Somehow, I remain unconvinced.

[Detroitnerd]

Ooooh, I can't wait until these guys are controlling our water system. I'm sure that'll work great.

http://www.youtube.com/watch?v=DOLNW...eature=related

[Melocoton]

Agreed on the point about red herrings. The two "myths" are not only not myths in the first place [[at least not ones that I've heard, and I doubt that many Detroit dinner table and bar-room conversations ever get around to Our Glorious Water and Sewerage Heritage), but the so-called myths are also irrelevant to the argument.

Myth #1 is that the water company generates a profit for the city of Detroit. The author says that DSWD doesn't generate profit for the city. But I don't get why this is a reason for the city to sell it. It's a municipal utility--its purpose is to provide a service to the people, not to make money.

Myth #2: DSWD is a job creator. The author notes that many, maybe most, of DSWD employees now live in the 'burbs. I have no idea what this is supposed to do with water privatization. The residency of employees won't change if DSWD is sold to a private corporation, so what's the point of mentioning this at all? In fact, privatization will almost certainly result in less jobs overall, for city-dwellers and suburbanites both.

This article was like Amateur Hour on freep.com.

BTW I posted something on the freep.com forums earlier on this, and I have to say there were actually intelligent comments there. All the racists must have had work today.

[sehender1]

Oh, sure, in a corporate setting. Corporations are only interested in their bottom line, and pleasing their shareholders. That's why they hire those "take-charge" types to come in and create short-term profits, spin off businesses, fire employees, give other employees more work, and to enhance PROFITABILITY. That is what management consultants do. They are not there to enhance the product, help corporations reach a higher level of service or even to help a company survive in the long-term. They're not there to do anything other than help please the shareholders and raise profits in the short term.

Unfortunately, governments are a lot different from corporations. Governments are accountable to residents, not shareholders. Every citizen has one vote, where shareholders have as many votes as they own. Governments routinely engage in long-term planning that, in a corporate setting, would be regarded as wasteful. That's because businesses are always focused on this year, this quarter, this week's numbers.

So there are a variety of ways in which business and government are different, and so I take Mr. Hudson's views with a liberal dose of salt.



I doubt it. What we're talking about here is selling a system for pennies on the dollar and turning Detroit into its customer. This is by necessity a scheme for short-term gain, with no view to the long-term picture.



Oh, I see. So we should definitely settle now for a crappy deal slapped together by some bullshit private buzzsaw man to sell off a system that took decades to build, because, if we don't, then we'll get an even WORSE deal later. Somehow, I remain unconvinced.

Detroitnerd: You totally missed most of my point, but let's not get stuck there.

Tell me: What's YOUR solution to the city's probable half-billion dollar cumulative deficit by June 30, combined with precipitously falling revenues and no obvious source of new cash?

That's the challenge here..

[sehender1]

This article was like Amateur Hour on freep.com.

BTW I posted something on the freep.com forums earlier on this, and I have to say there were actually intelligent comments there. All the racists must have had work today.

Disagree about the quality of the initial article.

And yes, the discussion tends to be more civilized and nuanced on opinion stuff on the Freep,, because we're working at it. I go into the comments more frequently, and I encourage outside authors to do the same, which seems to help..

[Detroitnerd]

Detroitnerd: You totally missed most of my point, but let's not get stuck there.

Tell me: What's YOUR solution to the city's probable half-billion dollar cumulative deficit by June 30, combined with precipitously falling revenues and no obvious source of new cash?

That's the challenge here..

I think it might have been a good idea to listen to what Joe Harris had to say EIGHT YEARS AGO. Back then, he found that the city could save $60 million a year. He gave his recommendations to the Kwamster, and only $6 million of the cuts were implemented. We've known about this for a very long time.

But, see, nobody really wants to do the hard work of finding out where to make some cuts. They just want to let the disaster continue so they can use it to campaign for THEIR idea, whether that's selling the water system, privatizing the schools, allowing development on Belle Isle, etc.

So what's the solution? I think it's pretty simple. Draw a line around Detroit, starting in Mount Clemens, arcing over Rochester, descending through White Lake and Commerce and Novi, falling through Plymouth, Canton and Belleville, slipping around Romulus, Brownstown and Trenton and including Grosse Ile. And let's make that all one government: Detroit. You will see fat cat politicians kicked out of office faster than Kwame Kilpatrick spends a public dollar, and suddenly folks in Detroit and Drayton Plains will not feel so smug about whose problem it is and who's to blame. Then we could enact some sensible revenue-sharing and pay off all our debts with the money we could save by not having two or three dozen school systems, police forces, fire departments and the like.

Does it sound ridiculous? Never gonna happen? This is precisely what happened in Boston and New York 100 years ago, and, more recently, Anchorage, Alaska.