ORANGE COUNTY PERSPECTIVE : Prudence in Privatization

Though a decision facing the Local Agency Formation Commission tonight is fairly narrow, some larger issues of countywide importance probably will be in the air. The commission, which oversees takeovers and consolidations of special districts, has been asked to consider a bid by a private firm, California-American Water Co., to buy the Santa Margarita Water District, which serves 60,000 residents in south Orange County.

The proposal represents the first attempt in state history to privatize a public agency. It arrives at a time when, because of Orange County’s bankruptcy, interest in privatization is especially high. LAFCO commissioners, two of whom are Orange County Supervisors Jim Silva and William G. Steiner, will be considering this change against a backdrop of considerable political interest.

Moreover, this particular district has been rocked by difficulties in recent years, which makes it a tempting target for those itching to “throw the bums out.” Two longtime managers were convicted on criminal conflict-of-interest charges.

As in all things related to privatization, however, the facts are more complicated. The district already has done much by way of reform. And in regard to the appeal of privatization, the district already contracts for some services, such as engineering.

Moreover, since the district’s troubles occurred, operations under the direction of a new general manager, John J. Schatz, and a new board appear to be on much more solid ground, at least at the present time. There is no great clamoring among ratepayers; communities served by the district are on record as opposing a change, and LAFCO is the only local public agency under present law that will review the proposal.

The commissioners also have before them a staff report that warns of higher user fees and reduced services. The conclusions of that study are dismissed by California-American Water as government protecting government, and the company contends that it actually would be able to offer lower costs to customers.

The commission should think long and hard before signing off on the sale of this public asset. This may not be the time or the place to make a larger statement about changing government’s business-as-usual attitude. There is no great urgency in making a decision. LAFCO should take the matter under advisement, and be sure to set detailed terms and conditions before acting.