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Landrieu unwisely dismisses water privatization

Maybe current New Orleans Mayor Mitch Landrieu’s preference for big government for now may get in the way of privatization of the city’s sewerage and water services, but his successor should not display the same bias.

In the wake of the city’s Sewerage and Water Board’s indifferent management that culminated in failure to adequately stem recent flooding, Landrieu promised a top-down review of the agency that he largely controls through appointments. He initially implied bringing in a private sector operator during the process to implement any reforms eventually deemed desirable.

But he later walked back on any impression that a private entity actually would run things during or after the review process. The subject had come up at the beginning of the century but populist urges led the political appointees then of SWB to reject the effort.

Subsequently, aging infrastructure and environmental concerns have continued to foist escalating costs onto ratepayers. The Board has changed somewhat since, with most appointments consolidated into the mayor’s hands, although he must choose from lists of recommended individuals made from various sources which has led to somewhat less politicization of it. Regardless, as typically observed, political appointees of these enterprise operations tend to shy away from making necessary decisions about infrastructure, until forced, over concerns rate increases may harm the political standing of their benefactors at the ballot box.

Nor has the new governance scheme addressed the bureaucratization that may have led to the culture of secrecy that Landrieu used as a justification for triggering resignations of Board members and officials over the latest incidents. Even though he recognized the inflexibility of its civil service system enough to want to change state law to relax that, it seems not to have occurred to Landrieu that contracting out the entire operation may resolve this problem.

The effort to end civil service protections of SWB employees failed in the Legislature this year because of perceptions that, without civil service protections, cronyism would emerge. However, privatization would moot that concern, as companies do not let that get in the way of efficient operations in the quest to keep costs in line to make contracts profitable.

Going back to the previous discussion 15 years ago, a critical report by the Bureau of Governmental Research helped turn policy-maker opinion against privatization. Yet the report did not so much criticize the idea as it did the approach the city took to let the contract and some vague provisions within that. And, notably, some sewerage and water duties the city has contracted out for over a quarter of a century, to one of the largest private sector firms in the industry, Veoila.

Grappling with many of the same issues of aging infrastructure, environmental compliance, and pension costs set to spike within a few years, Shreveport recently had an offer made by another prominent firm in the industry, SUEZ, to take over operations that would include upgrading infrastructure with a long-term contract for over $500 million.

Predictably, leftist special interests, akin to their reaction over the 2001-02 debate in New Orleans, criticized that through scare tactics of isolated incidents in contracted water services and in publicizing a few cities’ dissatisfaction with this. In fact, more and more municipalities, typically struggling with similar issues faced by Shreveport and New Orleans, have turned to privatization and almost all find it agreeable enough to continue it, most of the time renewing contracts with the same provider.

The kinds of difficulty exposed by flooding in the New Orleans over the past month signal a reevaluation of SWB privatization should happen. Even as Landrieu dismisses it out of hand, candidates vying this fall to become his successor must not and should address this issue in their campaigning.

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