Friday, March 6, 2009

If I Were Mayor: Water Rate Increase

The city recently announced plans to increase water rates. According to the Chronicle's political blog on March 3:

This year's inflation-related increase will be 3.3 percent, and the proposed
population increase on top of that is 1.79 percent for a total of 5.09 percent.

The Chronicle correctly asks why an increased customer base requires an increase in price.

As for the salient question of why population increases justify higher rates -
given that in most businesses more product sales can lead to cheaper goods - the
answer is that the fiscal situation of the water and wastewater department is
more dire.

In other words, the city has a monopoly on water service, it can't operate efficiently, and it has the power to force consumers to pay more money for water.

I have previously said that if I were Mayor, selling the city's water and wastewater services would be a priority. Providing water, or trash collection, or libraries, or a myriad other things is not a proper function of government. And if we needed more evidence, this latest rate increase demonstrates that government does not and cannot provide these services efficiently. The only reason they can provide them is that they have a monopoly on the service--which means, the city uses force to prohibit competitors.

For decades we have been told that only government can provide certain services, such as water, mail, roads, etc. Yet, the government prohibits (with very few exceptions) private companies from offering these services. In that sense, the claim is true--only government can provide these services because it is illegal for anyone else to do so. (As an aside, it is the height of hypocrisy for government to prosecute businesses for "anti-competitive" behavior while simultaneously prohibiting competition in certain areas.)

The fact is, private companies can provide any service desired by consumers--if they are willing to pay for it. Just consult the yellow pages or a local mall for evidence. If consumers desire water, mail, roads, etc. there will be an abundance of businesses providing these services, just as there are a multitude of companies providing tanning, limousines, tutoring, and a large number of other services.

These services exist because consumers want them and entrepreneurs seek to fill that need. But unlike government, entrepreneurs cannot get their customers by prohibiting competition. Entrepreneurs get their customers by offering a better service, or better quality, or a lower price, or by offering some other value. Entrepreneurs get their customers by voluntary consent; governments get their "customers" through coercion.

The fact that the government will not compete with the private sector speaks volumes. It is time for the city government to get out of the water business and restrict itself to its proper function--the protection of individual rights. If I were Mayor, this is precisely what would happen.

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