Privatization Can Be a Solution

The unfortunate Orange school bus problem cited in the Times editorial Sept. 10, “Privatization Is No Panacea,” as an example of the potential drawbacks of privatization, should be noted as an exception that proves the rule of the advantages of judicious privatization.

Facing increasingly uncertain municipal revenue sources, cities are seriously considering entering into agreements with private utilities to operate their water systems. Such a decision could free up millions of dollars from fixed capital assets to be used for infrastructure improvements, public safety or any other community need.

Contrary to the oft-cited Santa Margarita Water District example--which was an unsolicited hostile attempt to buy the system--true public-private partnerships for water system operation can and do offer considerable benefits to cities, while protecting against loss of control over rates or quality.

In February, the city of Hawthorne in Los Angeles County entered into a 15-year lease with California Water Service Co. to unlock a $6.5-million upfront payment and $100,000 in annual revenue. Some seven months into the 15-year lease, the city has reduced its debt and enjoys an improved level of system maintenance.

The city of Westminster has completed its proposal process for an operation and maintenance partnership--California Water Service Co. is one of three finalists--and the City Council is expected to consider the matter at a special meeting Tuesday. Westminster estimates it will gain $15.7 million in added value over 15 years from the proposals, even after paying off $10.5 million in debt and providing for $20 million in system improvements.

It is important to note that such a partnership arrangement leaves control over water system rates and service standards where it is now, in city hands, and municipal employees are offered jobs at current pay with comparable benefits.

JAMES L. GOOD

Vice President

California Water Service Co.

San Jose