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Silex should privatize its water and sewer utilities

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Silex

Silex, Mo. - The usual problems with water in Lincoln County, Missouri relate to having too much of it. 

The author has witnessed first-hand from a helicopter over the floodwaters of the Mississippi and Cuivre rivers just how bad flooding can get in Lincoln County. But the small town of Silex in Lincoln County has water issues all its own resulting from its mismanagement of the municipal water and sewer systems. 

Silex should privatize its water and sewer systems and get out of the utility business entirely. 

The problems with the municipal water and sewer system are multiple and obvious. Silex has been sued, cited and chided by regulatory agencies and contractors for years. 

A contractor sued Silex for unpaid bills from a sewer project. The Missouri Department of Natural Resources has cited them for violations of the Safe Drinking Water Act. The Missouri State Auditor’s office criticized the city for poor management practices of the water system, among many other problems with the city raised by the audit. Politically, the issue has divided city officials for years and helped lead to a culture of acrimony on the city’s Board of Alderman. 

On a larger level, more stringent water quality requirements from state and federal regulators have made it harder for small, municipal utilities to operate. Often, they simply do not have the resources to meet the higher water-quality and sewage-control standards. 

Even large cities like St. Louis — with far more resources than small towns like Silex — have had trouble dealing with revised EPA sewage guidelines. 

Communities across Missouri have realized that the best thing for their residents is to privatize their water and sewer systems by offering them for sale to the highest bidder capable of effectively operating them. Within just the past two years, voters in Bolivar, Eureka, Taos, Trimble, Purcell, Hallsville and Garden City have approved privatization of their municipal water and/or sewer systems to either Missouri-American Water or Liberty Utilities. 

These companies have paid cities amounts ranging from $200,000 to $28 million for their systems. Privatizing them was a way for each city to get paid for the valuable public assets and guarantee proper operation of their water and sewer services by a regulated, privately-operated utility. The cities can use the money from the sale to pay down debts, invest in other municipal needs or do whatever else the city wants to prioritize. 

Purcell, with its small population of 300, is probably the best guide for Silex. Purcell voters recently passed a proposal to sell their water and sewer systems to Missouri-American Water for $200,000. 

Even at that modest amount, Silex would be able to pay off debts and get this watery albatross from around its municipal neck. But the actual amount Silex might receive from a sale is unknown. Lincoln County is one of the fastest growing counties in Missouri, so the Silex utilities may well be worth more than what Purcell received. 

One common concern about privatization is the fear of large increases in people’s utility bills. Some increase is often necessary, because government-owned systems often underprice their utilities for political reasons (i.e., they buy votes with cheap water). 

Underpricing utilities leads to less investment in the system, and that is part of the problem. However, residents of Silex should not worry that privatizing their water and sewer systems will lead to an unsupervised free-for-all on rates. Private utilities in Missouri are heavily regulated by the state Public Service Commission, and they would not be able to take over in Silex and institute a steep rate hike. 

Municipal officials have done a poor job of managing the water and sewer utilities in Silex, but the fact is that running such a system under current rules and regulations is beyond the capacity of most small towns. 

However, it is well within the capacity of larger utilities like Missouri-American Water, Veolia and Liberty Utilities. Silex should take advantage of that and seek bids from several private utilities to run their water systems.

 

(David Stokes is Director of Municipal Policy at the Show-Me Institute, a free-market think-tank based in St. Louis.)

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