Wednesday, March 10, 2010

The Politics of the Water/Sewer Deal for Mayor Ballard; Little Upside With Landmines Everywhere

Today Indianapolis Mayor Greg Ballard officially announces backroom deal the City cut with Citizens Energy Group to buy the city's water and sewer systems. Now the deal gets trotted out to the Council and the public to approve the deal city leaders cut behind closed doors and to work out the details.

Keeping true to the title of my blog, I am most interested in the "politics" of the deal. That brought me to Matthew Tully's column this morning when he analyzes the impact of the deal and suggests it could be a make or break moment for the Mayor politically. I disagree with the "make" and agree with the "break."

First, of all, one thing the media has missed is that the luster has been off privatization for quite some time. To give you an example, last night I stopped by a county Libertarian event to promote my candidacy for Pike Township School Board. (I am running as a team with Allison Maguire, the wife of Libertarian County Chairman Tim Maguire.). During a get together after the meeting, the issue of privatization as policy was raised. You would think that this group more than any other, would greet privatization with enthusiasm. Instead skeptics abounded. They had seen the failures of privatization in practice. (FSSA is but one glaring example.) One Libertarian made the comment that if it was going to be a service that had to be provided by government, he would rather have government workers provide the service than have it contracted out to a private company that is given a monopoly.

If you can't sell privatization to a group of Libertarians, how is Mayor Ballard going to sell it to the general public? The toll road lease brought in billions to be used for infrastructure repairs, but did Governor Daniels campaign on the issue? Absolutely not. It was the biggest such deal in the history of the state, but the Governor wouldn't touch it with a ten foot pole on the campaign trail.

No, the reality of the political equation for Mayor Ballard is that, at best, there is very little political upside from doing the water/sewer deal and to do so requires that he walk through a field filled with land mines Democrats will gleefully plant. In addition, there is another political problem - the sale of the city's water and sewer utilities plays perfectly into the negative perception that Mayor Ballard is selling off the city to political insiders and campaign contributors.

Yes, there could be a building boom result out of selling these assets that might help his popularity somewhat, but those construction projects won't take place until months after the unpopular Mayor Ballard loses his bid for a second term, should he even decide to run for a second term.

Of course, this is not the first occasion this Mayor and his staff have a tin ear when it comes to politics.


Downtown Indy said...

Lest we forget, the Toll Road deal resulted in a doubling of tolls for many of the users, lesser amounts for others.

So the private company does the dirty deed of raising the 'tax' on the payer freeing the politicians from being tainted with the 'you raised taxes' label in the next election campaign.

Paul K. Ogden said...

DI, Yep.

Linda Thompson said...

Was there a legal notice that the city's asset was for sale?

Was there a bid notice, so all businesses could have a chance to compete to buy the asset? How does the taxpayers know the amount of dollars the city received is actually market value for a water company?

Is there a contract penalty with Veolia? If so, how much? What happens to that company?

Can anyone fill me with more details?

Paul K. Ogden said...

I think the proposed sale was listed publicly, though it was not open for bid. It was RFI.

If Veolia's contract is anything like the others, it has a penalty provision which the City will refuse to enforce.

Mike Kole said...

Trading a public monopoly for a private monopoly isn't always any better. I would like to see the city go much further than simply divesting. Open the field to any service provider, for any utility. Let real competition- not merely the theoretical kind- play itself out, and we'll see lower rates and better service than any monopoly is willing to provide.

Sean Shepard said...

Paul's point is well taken that libertarians consider the granting of monopolies over services that should be openly competitive to be just as bad as government itself holding the monopoly.

As far as the toll road goes and DI's initial comment. How long had it been since tolls were increased on the road before the private operator did it?

We have to remember that when government does something via forcible extraction of tax dollars all feedback mechanisms related to cost/value get lost.