Socialism Won't Fix California's Struggling Public Utilities

Golden State activists want the government to take over the water companies.


Faced with rising water rates, some politicians and community activists in Southern California are revisiting a fundamental question that most of us thought had been answered by the collapse of the Soviet Union: Is government the most efficient way to provide services?

We know of the poor quality of products and services provided by government monopolies. Yet officials in Stanton and Claremont think otherwise. They have discussed spending tens of millions of tax dollars to "buy" their water systems from a private water company that doesn't want to sell them. To make matters worse, their efforts would require the use—some would say the abuse—of the power of eminent domain to acquire the properties by force. Taxpayers will be on the hook for all of this.

Their main beef is the water rates charged by the regulated Golden State Water Company are higher than those in surrounding communities, which is a legitimate complaint borne of a lack of competition in the regulated utility market. But their solution—epitomized by a commenter on the Claremonters Against Outrageous Water Rates Facebook page who boasted about the virtues of "socialist" utilities—is the wrong one. Private utilities are not competitive in the way that true private companies are, but the answer is to boost competition, not reduce it further.

In January, the city of Claremont voted to spend $300,000 to explore the possibility of starting a city run water company. Stanton recently tabled the proposal, but officials were talking about the same idea even though the purchase price is expected to be in the $100 million range. Any such idea means enormous debt spending and a strain on local finances to fix a non-existent problem.

Water rates are rising everywhere, driven by government-imposed conservation edicts. The government-owned Metropolitan Water District of Southern California is looking to raise rates for the 10th time in a decade, and if approved the hike would mean a 100-percent increase in rates since 2006, critics of the proposal note. It's unlikely that handing water systems over to the government will keep a lid on rate increases, despite the nonsense peddled by the water socialists.

Throughout California, public services are under strain. We see cities facing potential bankruptcy and dramatically cutting back services even as they refuse to roll back generous pay and pension packages for their employees. Stanton, which toyed with the idea that it could run a utility more efficiently than the private company that has been doing it for more than 80 years, recently declared a fiscal emergency and wants a special election so that voters can approve an increase in the utility users tax. Does that sound like a city that can run a water system efficiently?

In Fullerton, the city is embroiled in controversy over an almost-certainly illegal 10 percent tax that officials have been placing on water bills. This is how governments operate. Turning a private water system over to the government in a perverse reverse-privatization situation will only lead to more ways for cash-starved governments to impose dubious taxes, debts, and fees.

All of California's toughest municipal-finance issues have the same root cause—the government provision of services. Cities are cutting back police and fire services and letting roads and bridges crumble not because the public is under-taxed, but because governments misspend the money they have.

Golden State Water Company has relatively high rates, but that's in part because a private company cannot force taxpayers to assume costs it does not want to account for.  For instance, Golden State recently switched from a defined-benefit pension plan similar to those in the public sector to a defined-contribution plan common in the private sector because it cannot force taxpayers to pick up the costs of its future unfunded pension liabilities. As a Golden State official told the Orange County Register, "Golden State rates reflect the full cost to provide the service, maintain the infrastructure and make needed investments to improve the system."

That's the model the state needs to move toward. Claremont, Ojai and others who think water socialism is a good idea essentially want to lower water rates by subsidizing water users. They want to hide many of the costs of water provision by spreading them out among taxpayers.

Governments are notoriously bad at maintaining infrastructure. Advocates for government-run utility services claim that the political process—i.e., electing officials, who oversee the people who run the services—is the best way to assure accountability. The opposite is true. In a political system, the most powerful special interest groups are the ones whose voices are heeded. Unions, for instance, have enormous political power and they help elect those politicians who assure that their pay and benefit packages are not touched even as unseen water pipes—which lack powerful lobby groups—are allowed to decay.

In 2001, Huntington Beach city officials pleaded guilty to felony charges because they did not maintain the city's sewer pipes and they allowed millions of gallons of raw sewage to leak into the ground. There's a reason the Eastern bloc nations were among the most polluted nations in the world—the government does as it pleases. This sewer prosecution against public officials was extremely rare. It's far easier to hold private officials accountable.

Admittedly, the current regulated utility model is a bad one. Utilities set rates based on their cost to provide services after a bureaucratic process controlled by the Public Utilities Commission. It's not a competitive system, but a privatized system is better than a public one because the companies cannot offload costs onto taxpayers. This system also assures that long-term infrastructure investments are made and usually offers better customer service. This system has many flaws. But a further douse of water socialism won't fix them.

Steven Greenhut is vice president of journalism for the Franklin Center for Government and Public Integrity.

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  1. Annoying leftoid trollfest fillows.

      1. Fallows?

  2. Love the picture of Louis Gossett, Jr. in full “Enemy Mine” garb going after the whyte wimmens! Although it is a bit racist…

    1. You know what’s racist? The latest Verizon “Suzy’s Lemonade” commercial. At the end, a young girl says, “I wonder how she does it.” to which a black male kid replys, “That’s why she’s the boss.”

      1. I LOVE that commercial. But you’re right – Susie’s just Nr. Charlie with a skirt, keepin a brother down.

  3. Also, living in Michigan, surrounded by the Great Lakes?, with a creek behind my house, and living on well water (I need to go about two inches deep to hit water in my backyard)….


    I’ve been saying for years – the end times won’t be due to fights over oil, but fights over potable water. It’s a comin’. Michigan will be Ground Zero at some point, but I think I’ll be dead and gone by then, so, in the meantime….HAHAHAHAHAHAHAHAHAHAHA!!!

    1. I should make a movie about that!

      1. Needs more water…

        1. And less movie

        1. I actually liked Waterworld pretty well. Although it could have been substantially shorter. But I thought it was an OK story.

          1. Except for the fact that it would take a couple of hundred Earth’s worth of melting polar ice to inundate the world to that depth. The whole was Green propaganda.

            1. In case you were wondering, to inundate the Earth to where just the tip of Everest is peaking out would require 4,525,000,000,000 cubic kilometers of water.

              1. WHATEVER!!! I liked it

                1. I’m sorry, not “hundreds of Earths,” only 136 Earths worth of Polar ice caps required to make Waterworld.

            2. F that….Jeanne Tripplehorn naked!

              Okay…it could have been a 5 minute movie!

          2. I never have seen the entire movie. I do remember one scene where Kevin Costner takes a woman underwater. He’s able to breathe underwater, I guess, but she can’t, so he takes her down in some sort of diving bell contraption.

            Problem is, a volume of air that small, captured at sea level then submerged, would provide enough air at depth (and they were deep) for maybe one or two lungfuls of air, tops.

            It sucks, but stupid little shit like that spoils my respect for a movie. Kind of like when the bad guy cocks the hammer on his Glock.

    2. yeah ice pirates bitches

  4. Also, living in Michigan, surrounded by the Great Lakes?, with a creek behind my house, and living on well water (I need to go about two inches deep to hit water in my backyard)….

    I guess houses ni Michigan are like house in Florida: no basements?

    1. Nope – lots o’ basements. Cause we’re also prone to tornadoes.

      You just build on hills or sloped land or whatever. My last house was 1 block from a lake, but the well was like 150 feet deep because the land rose so steeply from the lake.

      1. You have a basement? You are a leftist coward

      2. I grew up with a basement, but here in Florida, they’re almost nonexistent. Like you, we don’t have to dig very deep to hit water; unlike you, almost the entire state is within a few feet of sea level.

        Sucks, because I actually miss having a basement.

        1. Me, too. I grew up in Virginia, and live in Houston. Basements are few and far between around here.

          Although recently, I did find 3 houses with them while I was house shopping. Very odd.

  5. Greenhut touches on, but does not explain, how the bureaucratic “cost-plus” system of regulation helps to boost costs.

    Essentially, the utility has every incentive to raise non-capital costs, because the regulators say “OK, you can have X percent over your cost.

    So long as the utility does not put more of their own capital in, the more they increase cost, the more the ROE will rise.

    1. Contractors and governments love them some “Cost Plus”, don’t they 🙂

  6. There’s a reason the Eastern bloc nations were among the most polluted nations in the world?the government does as it pleases. This sewer prosecution against public officials was extremely rare. It’s far easier to hold private officials accountable.

    But… But… but private companies are totally unaccountable because nobody votes for them!

    1. And the worst is that his viewers applaud such claptrap.

  7. Socialism fixes nothing.

    1. Wrong. It raises mediocrity to a competitive bloodsport.

      1. Wrong. It raises mediocrity to a competitive bloodsport.

        . . . which, after all is said and done, still doesn’t fix anything . . .

    2. It fixes the uppity proles acting freely in large part. Can never stamp it out completely, but you can make it damned difficult so it’s very limited.

      Then everyone’s better off, because Our Betters? are making the decisions. As Ceiling Cat intended…

    3. What are you talking about?

      Socialism fixes everything by starving the world to death. No people = no problem.

    4. Socialism fixes things where they are; no more progress.

      1. Winner.

  8. Is government the most efficient way to provide services?

    Rarely. However, it’s difficult to provide a true ‘public good’ otherwise. The efficiency loss is a tradeoff for compensating for the free rider effect.

    Note I said difficult, not impossible.

  9. Turning a private water system over to the government in a perverse reverse-privatization situation will only lead to more ways for cash-starved governments to impose dubious taxes, debts, and fees.

    Isn’t that the whole point?

    1. Yup. Water is a money maker for cities.

  10. Speaking of California’s embattled public utilities, Pat Robertson thinks it would serve the Broncos right if Manning got hurt this season. You know, because they kicked God out of Denver.

    1. In a way, I feel sorry for Tebow. He’s just a football player that is a devout Christian and, to my knowledge, has never showed any interest in anyone’s politcal agenda.

      But many socons have latched on to Tebow as one of their own due to his devottion and now any perceived slight of Tebow is now a swipe at God, religion, Christianity, baseball, apple pie, and motherhood.

      Robertson’s stupid comments reflect this to a tee. And just the other day I was complementing the Reverend for his MJ comments. Sheesh.

      1. You’re right. Tebow might not be that great an NFL quarterback yet, but he’s a class act all the way. Like John Elway said the other day, if I had to choose someone to marry my daughter, it’d be Tim Tebow. But if I had to choose a quarterback . . .

        1. Tebow might not be that great an NFL quarterback yet

          Dude. Tebow is a TERRIBLE QB, and will continue to be.

        2. Sorry, but anyone that prays in public is not a class act all the way. That’s doesn’t make him a bad guy, but public prayer IS a political agenda and denial of it is just a lie which violates at least one on the Top Ten list.

  11. sorry but when has socialism fixed fucking anything other than the un-stated goal of keeping the proles in check?

    1. Send this one to the uranium mines

    2. un-stated goal

      I can’t help it if you won’t pay attention when Your Betters? speak

  12. Is government the most efficient way to provide services?

    Yes, in some cases. The government is the most efficient way to keep government workers serviced.

  13. I don’t know what’s most efficient but I know what is least efficient, Capitalism. And I count it as least since I require not only the provision of service/product x. But also some likelihood of long run enjoyment of x. But under Capitalism there is no prospect of human survival. It has sequenced the production of various potentially species extinguishing technologies. And will produce a finite number of others before the inevitable miscalculation in the pursuit of profit puts an end to the whole sad tale of class society as the historical driver of technical change.

    1. Never has someone written so much, yet said so little.

      1. They never think about the fact that capitalism is what gave them cut and paste in the first place.

        1. I know, but Ctrl+Alt+Delete was invented in a Soviet lab during the early years of the Cold War. These fuckers will forever be hanging that over our heads.

          1. Yeah, and Al Gore invented Mac OS. Everyone gets to contribute.

            1. Of course you people don’t understand what Babeouf wrote… you’re selfish, undereducated hillbillies.

    2. Since I am neither your mother or your father, why should I care that you require not only the provision of service/product x? The answer, something is in it for me i.e. a profit

    3. But under Capitalism there is no prospect of human survival

      So THIS is why we’re all dead! I was wondering how that happened – now we know!

    4. Yeah, I remember my first beer.

  14. Bullshit, the government socialism in California has done wonders for equality, oh wait…

  15. Their only hope is to start breading cats:…

    1. Don’t forget Bonsai kittens!

  16. WHY do I have to do a facebook quiz before reading the article?

    1. Yeah that was a seriously annoying ad.

      Reason dudes! Kick that shit to the curb!

    If that’s where reason is going I’ll no longer read it.

    1. Like anyone reads the articles anyway.

  18. I would make the arguement that a government monopoly is probably better than a private monopoly. It’s not practical (for instance) to have seven different water companies running pipes in one city; even two is probably not practical in the real world. I can’t think of a single place on the planet that has more than one water system run by different companies in the same geographic area (if somebody knows of one, please share). Therefore, in natural monopoly situations where the choices are the government (which, at least in theory, has the citizen’s best interests first) and a private monopoly (which only cares about the bottom line), the first is a better choice.

    1. In short, you are wrong.

  19. Socialism Won’t Fix California’s Struggling Public Utilities


    1. Impossible.

      1. That’s Christ-fagtalk.

        1. Treasonous!

          1. Words escape me.

  20. All Power to the Imagination!

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