The Kansas City suburb of Sugar Creek is considering selling off its water system to Missouri American Water. The proposal is on the April 8 ballot.
Sugar Creek doesn’t operate its own water utility, which makes this proposal a little different from other privatization proposals. Sugar Creek buys water from the Independence municipal utility (which should also be privatized along with the Independence electric utility, but that’s another story).
Privatization, however, is still a very good idea for the residents of Sugar Creek. The main problem with public utilities is that customers are also voters, and politicians are hesitant to raise rates on their voters. This leads to an underinvestment in the system. As the City of St. Louis said in 2024 when it finally increased water rates:
Major I-64 Water Main Break Highlights Need for Long Overdue, Much-Needed Investment in City’s Water System
This was the city’s own water system it was talking about! Cheap rates have harmful consequences down the line.
Beyond that problem, studies have demonstrated that private utilities are generally more efficient than municipal utilities. In 2000, economist B. Delworth Gardner of Brigham Young University determined that private water utilities in Utah charged lower rates for water than comparable public utilities despite the large advantages in taxation and regulation that government utilities have. A recent comparison of public and private electric utilities in Florida concluded that private utilities outperformed public utilities in nine of 14 categories.
Missouri American Water is offering $5 million for the system and has promised to invest $8 million in upgrades over five years. The equipment would also go onto the tax rolls, expanding the property tax base for Sugar Creek. Most importantly, it would put water services in Sugar Creek in the hands of a more efficient private operator, which is closely regulated by the Missouri public service commission. The idea that Missouri American Water could use its monopoly power to keep raising rates is incorrect.
This policy change would be a very good move for the people of Sugar Creek.
