This action might not be possible to undo. Are you sure you want to continue?
The Top Five Reasons to Keep New Mexico’s Water in Public Hands
Fact Sheet • June 2009
he waters of New Mexico belong to the people of New Mexico,1 and the resource must remain public to keep it safe and affordable. When water and sewer systems fall into private hands, costs grow and consumers end up paying too much for poor-quality water. It can lead to sewage spills and service problems. Because of these failures, taxpayer money should neither incentivize nor subsidize private ownership, management or operation of water and sewer systems.
The research shows five main ways that private control of water is a bad deal for New Mexico. 1. High Water Rates. The typical New Mexico household pays 37 percent more for water from a private utility than for service from a municipality. That’s an extra $97 a year (see figure 1).2 2. Expensive Financing. Private financing is far more expensive than public financing (see figure 2). From 2000 to 2007, even the best-rated corporate bond was 45 percent more expensive than a typical municipal bond issued in the state, and 168 percent more expensive than loans from New Mexico’s State Revolving Fund programs.3 3. Clean Water Act Violations. Compared to their publicly operated counterparts, privately operated major sewage treatment plants were five times more likely to have alleged significant violations of the Clean Water Act (see figure 3).4 4. High Operating Costs. Public control is a better deal for the ratepayer and the taxpayer. Eldorado (water). In 2008, the state Public Regulation Commission chastised the Eldorado Water and Sanitation District for what it called “extraordinarily high” operating expenses. The criticism centered on the district’s management contract with CH2M Hill’s Operations Management International, Inc. The regulatory commission recommended that the district replace its contractors with full-time public employees to save money.5
Figure 1: Annual Water Bill of a Typical New Mexico Household Using 6,000 Gallons a Month (2007)
$400 $350 $300 $250 $200 $150 $100 $50 0
Municipalities Private Utilities
5. Wasteful Water Practices. Private utilities often avoid water conservation measures, which drive down revenue and profit. Instead of repairing leaking pipelines and reducing water usage, corporations often pursue expensive new water supplies. Albuquerque and Rio Rancho (water and sewer). In 2009, Albuquerque Bernalillo County Water Utility Authority purchased a water system from New Mexico Utilities, Inc., a subsidiary of Southwest Water.6 The public authority believed the takeover was the only way to protect the area’s water supply. According to the authority, the company refused to enact an effective water conservation plan and, instead, sought to pump six times more water from the aquifer. The authority worried that the company’s water use could cost the authority’s customers more than $50 million.7
Figure 2: Interest Rates on New Mexico State Revolving Loans, Municipal Bonds in New Mexico and Corporate Bonds Nationwide from 2000 to 2007
8% 7% 6% 5% 4% 3% 2% 1% 0
New Mexico New Mexico Drinking Water Clean Water State Revolving State Revolving Fund Fund Top-Rated Corporate Bonds New Mexico Corporate Bonds Nationwide Municipal Nationwide (Moody’s Baa) Bonds (Moody’s Aaa) (Moody’s Aaa)
7.1% 6.1% 5.2% 2.1% 2.4%
Note: Municipal bond rate is the market interest rate based on Bond Buyer Index for 20-year general obligation (GO) bonds rated Moody’s Aa issued in New Mexico. Corporate bond rate is Moody’s yield on seasoned corporate bonds — all industries, rated Aaa and Baa
Eldorado (water). Two candidates for the Eldorado Area Water and Sanitation District estimated that 4 million gallons, or a quarter of the district’s water, was lost from the system during July and August 2008. That is more than four times the average water-loss of a typical water utility over a 29- to 32-day period. They blamed the losses on the district’s private operator, CH2M OMI, which they alleged had failed to adequately repair leaks.8 Clovis (water). In 2008, Clovis City Commission protested a request by New Mexico American Water to alter its water rights to lift restrictions on the amount of water it pumps from individual wells. Residents that rely on personal private wells worried that the change would deplete their water sources.9 In 2008, one year after increasing water rates by 13 percent, the company sought to hike water rates by 16 percent to pay for new water supplies.10 A corporate official admitted that although the company more than doubled the number of wells over the previous nine years, it was producing the same amount of water.11
5 6 7
U.S. Bureau of Land Management. National Science & Technology Center. Western States Water Laws. “New Mexico Water Rights Fact Sheet.” August 15, 2001. New Mexico Environment Department. Construction Program Bureau. “Municipal Water and Wastewater User Charge Survey for 2007 Rates (Based on 6,000 gallons/month – December 2007).” May 2008; U.S. Environmental Protection Agency, Office of Water. “Safe Drinking Water Information System PWS Inventory.” October 2007; Olson, Thomas W. New Mexico-American Water Company, Inc. Re: Case No. 06-00208-UT. Filed with the New Mexico Public Regulation Commission, Records Bureau. June 25, 2007. U.S. Environmental Protection Agency. Office of Water. “Weighted Average Interest Rate of Clean Water SRF Assistance, by State.” October 26, 2007; U.S. Environmental Protection Agency. Office of Water. “Interest Rates for Drinking Water SRF Assistance, by State.” October 24, 2007; the Federal Reserve Board. Data Download Program. Available at www.federalreserve.gov, accessed November 20, 2008. U.S. Environmental Protection Agency. Enforcement & Compliance History Online (ECHO) – Water Data. Available at www.epa-echo.gov, accessed April 2, 2009; Contract operations compiled from corporate releases and may be incomplete, on file with Food & Water Watch. Boyle, Christina. “PRC criticizes water district budget.” The Santa Fe New Mexican. August 18, 2008. Olson, Sean. “Water utilities Ok takeover - $60M settlement ends 4 lawsuits.” Albuquerque Journal. January 29, 2009. The Albuquerque Bernalillo County Water Utility Authority. [Press Release]. “Water utility authority files condemnation suit to protect aquifer and ratepayers from actions by New Mexico Utilities, Inc.” January 19, 2007. Boyle, Christina. “Company look for contractors to repair district water valves.” The Santa Fe New Mexican. September 28, 2008. “Water utility asks city to withdaw [sic] water rights protest.” Clovis News Journal (NM). March 4, 2009; Wilson, Kevin. “Dairy farmers express water concerns.” Clovis News Journal (NM). September 5, 2008. “Water rates increasing up to 13 percent.” Clovis News Journal (NM). June 23, 2007; “Water company holding meeting on proposed rate increase.” Clovis News Journal (NM). November 13, 2008. Monte, Gabriel. “Residents ask questions on proposed rate hike.” Clovis News Journal (NM). November 18, 2008.
Figure 3: Portion of Major Municipal Sewage Treatment Facilities with Alleged Current Significant Violations Under the Clean Water Act
80% 70% 60% 50% 40% 30% 20% 10% 0
The Solution: Public Money for Public Utilities
Local governments should keep their water and sewer services in public hands and reject privatization. Instead of allowing irresponsible private control of our water, we need to plan ahead for future generations and create a dedicated source of public funding so that communities across the country can keep their water clean, safe and affordable. A federal Clean Water Trust Fund for water and sewer systems would realize this goal and take the burden of rejuvenating our water infrastructure off state and municipal coffers. To maximize the public benefit and to protect taxpayers and ratepayers, this money should be available only to public entities and public projects. New Mexico needs a federal trust fund to ensure safe and sound water and wastewater systems now and for future generations.
For more information: web: www.foodandwaterwatch.org email: firstname.lastname@example.org phone: (202) 683-2500 (DC) • (415) 293-9900 (CA) Copyright © June 2009 Food & Water Watch