Create a Stable and Efficient Water and Sewer Facility for Durham

The following was published in the Durham Herald Sun on Friday, May 30, 2008:

Create a Stable and Efficient Water and Sewer Facility for Durham

By Jack Steer, President of Durham Citizens Coalition

Unfortunately for Durham, the Water Management Department is just that. It is one of many departments run by the city. This means that the Chief Executive Officer is the City Manager. It also means that the Water Management budget is subject to becoming involved in the City Council's annual budget discussion "where do we put the emphasis on capital spending this year?". A couple of years ago it was streets that received the go ahead to spend big bucks, so water department spending was reduced. Now, it is the other way around except that streets are still at the top of the list as well, so we get a proposal to increase the budget to the point of requiring a reported property tax increase of 11%.

If the water system owned by the city were run as a business with a board of directors consisting of 2 outside directors and 3 council persons, this push/pull on the water system budget would be all but eliminated. It would take very little to accomplish this. The Water Management department is already staffed with experts in the field. It has its own borrowing capacity through revenue bonds, It has adopted a new billing system that will allow it to have sound budgetary control over revenues and operating costs, and it is supported with other city's water departments for interaction in dealing with water supply problems. The problem of neglected maintenance will, over time, be steadily reduced and at an accelerated pace because utility long term planning and budgeting includes infrastructure replacement as an integral part of operating an efficient and profitable community service.

In other words, it is like any other utility that supplies services to the city and some county residents. There is only one difference, The Gas, Electricity and communications services are run by private companies. With all that is going for creating a water supply corporation, all that is needed is that the city create a company called, say, Durham Water and Sewer, Inc. (DWSI) Shares can be issued representing the city's ownership of the utility. Then, instead of stuffing or starving this utility through political decisions, when the city needs extra money for some new asset, it can sell shares on the open market thus raising funds while still holding onto a majority of shares, and at the same time not incurring additional debt. Yes, shares will sell because the assets of DWSI will continue to rise. Even though the profits will be small, the DWSI Board will want to see to it that the city has an asset that helps the city's financial stability for Bond ratings.

As a private company, with both bond and share money raising capabilities the DWSI would never have to worry about its capital budget, and would not be treated as the unloved cousin during city budget cycles. Revenue rates would have to be approved by the state Utilities Commission after being approved by the DWSI board of Directors of which 60% are city Council persons. The final result is protection of customers, and a sound business approach to operations as well as long range planning and budgeting.