There are also rumblings of privatization, this being an effort to make the "public" water utility prove its ability to garner payment (which is what its bonds are rated on and its interest rates are determined by; see here for good coverage of the bond insurance companies and demands for their pound of flesh). And, if we know anything from experience, privatization will result in even more massive rate hikes than 8-9% and even less competent service for small account holders. And if insurance companies are suing to avoid a cramdown, at the end of the day, they're just upset about making a bad bet and having to pay for it.
But how bad of a bet is it? This is the 2012 "in words" audit of the 2012 financial statement of the Detroit Water and Sewage Department. The 2013 report is not available on their website.
It shows, basically, that as of 2012 the DWSD was doing fine.
Not great, given the depopulation of Detroit (as concerns about declining water sales show), but fine: its margins were 20% for water and 22% for sewer, more than enough to cover their debt obligations. Let's ask the report, shall we?
The current ratio (current assets divided current liabilities) of 1.9 for water and 2.21 for sewer (M) indicates that the system is in a good position to meet its short term obligations, a key measure of fiscal health.And let us not neglect the figure which shows this in detail:
So, the "$5 billion in debt" the media keeps talking about is the COMBINED debt of the WATER ($2.6B) and SEWER ($3.3B) operations, which have different revenue streams... and besides, that's not a very big number. For comparison, the water utility that serves Las Vegas has $3.6 billion in debt, not counting any sewage operations (which is a separate utility). There are more people in Las Vegas now, true, but should we expect Detroit water bills to be the same as the nation's average per capita, given its recent depopulation and aging infrastructure? Of course not.
Any justification for cutting off users based on debt is bullshit. Public water utilities have debt for very large capital investments that they pay off for very long periods of time. To cover the interest, they deliver water to customers basically at cost (they're regulated, after all), plus a legally required margin to cover debts. Detroit followed the law, and in fact exceeded the required margin.
Now, if a utility has a revenue problem, there are many ways to deal with it. One is charging more of the people who can pay more (i.e. industrial, commercial, and large residential customers such as apartment complexes). You can also tier rates among classes of user so that larger users (e.g. in residential, white suburbanites with lawns) pay more for each marginal unit of water, thus subsidizing basic human needs (drinking, cooking, washing) for others. OH WAIT!!! DWSD does charge variable rates, but they charge LESS for each marginal unit you use, and their tiers are incredibly weak (there are only two, really). This is awful financial management, and represents the exact opposite of how you should organize your water rates if you have any sense of environmental and social responsibility.
Utilities can even vary charges for the kinds of connections and pipes demanded by users and property owners (as the Las Vegas utility did in the 2000s). DWSD does this, but obviously isn't charging enough of the people and corporations who can afford to pay. DWSD has not been shutting off commercial customers who owe them money. I wonder why.
There are many more ways to get people's attention than shutting off their water. Public utilities are unique in that they are public, and there can be assessed penalties in other areas of life, seizure of assets, liens on properties, for non-payment. What moral person denies anyone else the right to drink water? To literally survive? Has the power to give someone life, but instead takes it away?
I mean this deeply: after three days without drinking water a human being dies. I don't expect anyone to die of thirst, but to avoid it, people will leave their homes in short order if that home doesn't have water in it. Shut off the power, shut off the cable, shut off the heat even and people will gut it out. But if I can't flush, I'm probably not living in the house for long.
DWSD will not free up significant resources, or improve operating revenues, by cutting deliveries: the less water DWSD delivers, the less money they make (they worry about that out-loud in their reports!). They say a little more than half the accounts are paid? Then this shows how easily they could have gotten the money other ways. There is no conceivable way that cutting off water increases revenue for DWSD under their current model, since one less address receiving water is one less resident able to pay in the future (no water, no people). Asking people to pay now when they cannot only increases poverty. Cutting delivery (rather than assessing a fine or *reducing delivery* as a signal to pay up) only serves to depopulate Detroit further, thus destroying the city that demonstrated the greatest successes of Labor in America and inspired a generation of workers to organize.
This is about undermining unions: nothing more, nothing less.
Well, perhaps more (or less, depending...) Two other facts: Having your water cut off means child protective services can come and take your kid, and getting your water turned back on requires at least some of the following: deed to the property, lease agreement-notarized, mortgage documents, tax records, driver’s licence, social security cards, notarized statements from the owners of the property, background checks...
Water is the leash... tug it, and the people move.
The elites have the leash now, not the people (emergency financial manager/dictator, anyone?), and now the leash is getting shorter, rapidly.
So you tell me what's going on. Is it about debt? Debt that DWSD has plenty of ways to continue paying? Or is it about waging war on the poor, working, minority citizens of a great American city that showed the way towards workers' - and peoples' - rights?
Ask Romney. He'll tell you.