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Myths about PPPs
Government agencies and political officials from all spectrums have endorsed the idea of combining the resources of the public and private sectors to manage their community’s water system in public-private partnerships. These partnerships with water companies are enabling local officials to solve their most pressing water challenges. In fact, public-private partnerships are at work in more than 2,000 North American communities.
However, several special interest groups have challenged the public-private partnership concept and have gone so far as to publish numerous articles and news releases with inaccurate information, as well as distribute misinformation based solely on false rumors or myths.
Myth: A private company will own our water.
In a public-private partnership, the public maintains ownership of all assets – and sets rates.
Myth: A private company will set our rates.
Rate-setting authority remains the responsibility of the municipal customer. A partnership is not like a regulated utility in which a private-sector company owns assets and seeks rate increases. A public-private partnership is not privatization.
Myth:
A private company will only drive costs up – so it can make a profit!
There are now more than 2,000 North American communities served by public-private partnerships. In the overwhelming majority, costs decreased by 10 - 40 percent. For instance, Oklahoma City has saved more than $150 million through a partnership. A private-sector company’s fee is based on a contractual agreement that is typically only adjusted upward in conjunction with increases in the Consumer Price Index. The best testament to the stability of costs and the provision of good quality water and service is the fact that only two percent of all partnerships reverted to municipal management in 2002, according to extensive research reported in Public Works Financing.
Myth: Privatization will cost municipal employees their jobs.
In most public-private partnerships, employees are terminated only for cause. Staff reductions are generally acheived by transfers or attrition.
Myth: Environmental compliance will erode.
Private-sector companies are often hired specifically to address a municipality’s past compliance issues.
Myth: Companies pad the bottom line by cutting costs and laying off employees.
Cities give their preferences regarding employees. And companies want to take advantage of employees’ local knowledge.
Myth: When given the opportunity, municipal employees prove the most efficient.
Employee groups cannot provide financial guarantees. They cannot assume liabilities for operations and performance. They cannot finance the significant capital investments required by many projects. Nor do employee groups have the experience that comes from adopting a wide range of technologies and management approaches in numerous conditions and settings.
Myth: Companies only care about profit, so the public should manage public resources.
Private-sector profit does not come at the public’s expense. Typical savings for municipalities range from 10 - 40 percent. Further, partnerships enable more local control and flexibility to meet the community’s needs.
Myth:
The city will be left with a bucket of bolts.
Contracts can easily be written so that assets are maintained and preserved. The municipal customer conducts “check ups” to ensure proper functioning of assets. Finally, the public-sector customer always controls spending to help preserve the life of assets.
Myth:
A new company just won’t understand our system like we do.
Companies specializing in water are the same companies that drive innovation in the water industry’s technology and operations. Municipal employees are readily welcomed into the private-sector “family”, as their local, public experience is blended with private-sector expertise. The majority of Veolia Water employees are former public-sector employees who are local to their individual communities.
What are the benefits of public-private partnerships? The benefits are numerous:
- Clean, quality water and improved customer service
- Tremendous costs savings and rate stability
- Environmental compliance
- Employee opportunities (better pay, improved training, professional growth and development, and opportunities in other markets or industries, depending on an employee’s skill sets and interests)
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