An Analysis of the Privatization of Drinking Water Facilities in the United States
Abstract
The drinking water infrastructure in the United States faces significant underinvestment.
The 2009 American Society of Civil Engineers Report Card on America’s Infrastructure
gave a D minus for the Nation’s drinking water infrastructure. In a 2007 study, the
EPA found a 20-year investment gap of $334.8 billion. Degrading infrastructure and
constrained finances have led cities and municipalities to consider selling, or privatizing,
their drinking water services to for-profit companies.
Debate regarding the efficiency of public or private ownership lacks sufficient quantitative
analysis to address two major concerns: water prices and infrastructure investment.
Previous studies quantifying the impacts of ownership on drinking water utilities
are dated or lacking financial analysis. This study uses survey data from 2002-2008
provided by the American Water Works Association and National Association of Water
Companies. Quasi-experimental design methods and statistical regression analysis
provide a causal link between ownership and employment levels, operating revenue,
and infrastructure investment.
Results of this study show ownership to have a significant impact on operating revenues
and number of employees at a facility. Specifically, private ownership will increase
operating revenues and decrease facility-staffing levels. However, public facilities
regulated in a similar manner to private facilities show no statistical difference
from private ownership regarding employment numbers. Ownership does not have a significant
effect on infrastructure investment as approximated through depreciation expense and
planned capital expenditures.
Analysis of the results emphasizes ownership to be neither the savior nor the downfall
to issues in U.S water management. This study suggests policy-makers and advocates
shift focus away from debate regarding privatization towards the proper management
of water infrastructure. Future studies would benefit from analyzing management structures
and incentives at drinking water facilities.
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https://hdl.handle.net/10161/3708Citation
(2011). An Analysis of the Privatization of Drinking Water Facilities in the United States.
Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/3708.Collections
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