Kansas City Councilman and Municipal Union Vow to Kill Water Privatization -- Regardless of Plan

By E. Thomas McClanahan - The Kansas City Star
Date: 06/07/99 22:00

Kansas City Councilman Kelvin Simmons says he's against privatizing the Water Services Department. Never mind that no specific plan has been formulated: He's already opposed. "I'm going to do my best to kill it," he told a Star reporter.

Nate Byas, president of the union local that represents many of the department's workers, suggests the talk of privatization is evidence of a "conspiracy" to oust city employees. Councilman Troy Nash also sees a "conspiracy," and vows not to be drawn into it.

Nash and Simmons may regret this rush to judgment.

Their reactions stemmed from a recent Star story detailing the clumsy efforts of a three-company consortium, EA2/Systems, to win a management contract to run the water department -- if such a contract is ever offered.

The story had a melodramatic twist. A document allegedly taken from the office of political consultant Pat Gray was anonymously sent to The Star. Gray's role has produced outrage in some quarters. It turns out he was working on the campaign of Kay Barnes, now mayor, while also working on behalf of EA2/Systems.

According to the document, EA2/Systems planned some sort of media campaign to undercut the water department's credibility and promote privatization.

My reaction is: So what? Ultimately, privatization will be decided on its own merits. Although it's always better to know who's trying to influence whom at City Hall, this is a tempest in a teapot.

What about the "conspiracy" to stop privatization in its tracks, a scheme that seems to be working? Suddenly, anyone at City Hall in favor of lowering the costs of government -- which is what privatization is about -- is on the defensive.

The critics should calm themselves and take a look at how other cities proceeded.

Leasing municipal water systems is not some devilish plot. Every year, dozens of cities make the shift. Selling such an entity outright is less doable because existing debt must be refinanced at higher, private-sector interest rates. For this reason, it's a stretch to describe privatization as a "takeover." Water department assets would remain in public hands.

Adrian Moore of the Reason Foundation, a Los-Angeles think tank that tracks privatization issues, says that on average, contracting-out saves cities about 20 percent on operating costs.

Atlanta leased out its system last year, after analysts concluded that complying with federal requirements would force a 100 percent rate increase. With the savings from privatization, the city met Washington's standards with a 25 percent rate boost.

The biggest hurdle is employee resistance, but most cities succeed in protecting workers. Any downsizing is accomplished through attrition, not layoffs. Sometimes, special arrangements are made to meet local concerns. Moore says that when Milwaukee leased out its sewer department, the IRS approved a waiver allowing workers to stay within the city's pension system. In some leasing arrangements, workers remain city employees.

The deeper implications of the hysteria at City Hall are more troubling.

In April, the City Council approved a new budget with a $15 million "structural imbalance," City Hall's cant phrase for "deficit." The previous mayor left office talking about a tax increase -- in an era when many cities and states are arguing over how much to cut taxes. Over the last decade, rates charged by the city water department have been going up an average of more than 5 percent a year, which is well above inflation.

The people whose taxes run this city have a right to expect better performance. What we have now is a system in which every special interest is coddled, while a rising proportion of economic development can't occur unless it's subsidized. This is a recipe for continued decline relative to other large cities.

The way to revive the city is to reduce the cost of living and doing business here. If the opportunity to achieve savings through privatization is subverted because of misplaced fears, once again Kansas City will have stomped on its own future.

City Council members should guard against coming to hasty conclusions before details are made public. Otherwise, like Nash and Simmons, they risk taking positions that could look foolish when the furor abates.

At some point, the constituents of these brave councilmen may want to know why their elected officials think the urban poor should have to face ever-rising water bills when privatization could offer relief.

Other cities have found ways to protect their workers while reducing operating costs. There's no reason Kansas City can't do the same.

E. Thomas McClanahan is a member of The Star's Editorial Board. His column appears Tuesday. To reach him, call (816) 234-4480 or send e-mail to mcclanahan@kcstar.com.