Reporting on WPRI, Dan McGowan and Walt Buteau explain that Democrat Mayor of Providence Jorge Elorza is looking to sale of the city’s water supply as a means of filling the giant chasm of Providence employees’ pension fund:
Elorza, who is planning to run for re-election next year, said he’s seeking a “once and for all” solution to the city’s pension challenges.
As a general proposition, selling the water supply might or might not be a good idea, but this reason is horrible. Just look to Woonsocket, which sold pension obligation bonds to fill its fund to 100% in 2003, but by 2011 was down to 57.7% funded. The latest numbers on the Web site of the state Division of Municipal Finance put Woonsocket’s funding at 49.1%.
Unless a municipality fixes its underlying problems — such as overly generous employee packages and a more-realistic estimate for investment returns — every scheme will be a temporary fix. In this case, Providence will have one fewer asset to help with unforeseen challenges in the future.
Even more, Elorza explicitly claims that another entity could run the system better because Providence is “so heavily regulated by the Public Utilities Commission.” If that’s the problem, fix the PUC, and if Elorza thinks the PUC is little more than an expensive restriction, he should advocate for its abolishment. Otherwise, he’s just condemning those who drink and pay for Providence water to unnecessary expense (if the PUC is an excess) or unhealthy drinking water (if its regulations are actually needed).
By all means, if the city is having trouble running its water system, sell it off, but only if the new system is a better system of itself. If a private company is willing to buy the water, it’s because there’s profit to be made (at least for employees), which indicates a problem with city management. And if the money for the assets ultimately comes from the state, the whole thing will have been a one-time scam whose benefits for the city will rapidly disappear.