David Zetland has a post from last year at Aguanomics that should stir some thoughts in What about Detroit. Still relevant.
I have followed Detroit’s fall with interest, mostly because I am hoping that an entrepreneurial government will allow a thousand flowers to bloom in the hollowed-out city(population has dropped by 60 percent; 200,000 properties are vacant). That process will take time, even if it’s going in the right direction.
In the meantime, the city is bankrupt, and one-third of its debt ($5 billion) is linked to the Detroit Water and Sewerage Department (DWSD), which is trying to collect $175 million in past-due debt from its customers.
This action is sensible but controversial in two ways. First, DWSD is cutting service to customers who do not pay their bills. Second — and far worse — DWSD is going after debts of as little as $150 from 150,000 residential customers even as it waits for repayment from 11,000 larger customers who owe half the total.
These actions have led to a petition from the human-right-to-water crowd, asking the President to declare a human health crisis, i.e., to prevent DWSD from charging customers. That’s a terrible idea because it undermines the utility’s finances now AND later. Why would anyone pay for water they can get for free?
My opposition to the petition does not mean I oppose financial help for the poor or their continued access to drinking water. Here’s how I’d handle the situation:
- Drinking water SERVICES should NOT be a human right (=free) because they — like electrical services — cost money
- Detroit has mismanaged many dimensions of life, including poverty, jobs and water management
- The utility MUST continue to operate, and it needs money for that
- Past debt may not be customers’ fault, since the utility may have over spent, etc.
- The poor should income support to pay for food, rent and water. They should NOT be given free water
- The utility should go after biggest customers FIRST, as the cost per $1,000 of debt recovery will be MUCH lower
- The government may face a welfare burden, but welfare works through income transfers, not cheap — or free — water
Bottom Line: The government (and taxpayers) should bail out the poor. Bigger customers should be chased for repayment. All customers should pay their future water bills.