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Is This How America Will Pay for its Future?

January 2, 2017
Plain English Version

Privately owned water treatment plant in Bayonne, NJ.

Republicans and Democrats do agree on something. They agree that the U.S. has to invest in rebuilding itself. Things get old. Tunnels that carry water get old. Buildings that house people get old. You name it. Most things that are fifty or more years old need repair or replacement.

You need money to pay for public works. Raising taxes is one way to get money. Going into debt is another way. Charging more for use is yet another way. A fourth way is to sell public works to private owners.

Selling public works to private buyers is a popular idea. It means towns and cities can get money right away. Private companies take over things like water and sewer systems.

And there is room for more of these public/private deals. New York City is selling some of its public housing to private companies. They will own and manage the housing. The companies say there will be protections for the tenants.

Here is how the deals work. Private companies such as Goldman Sachs, Blackstone, and the Carlyle Group have vast amounts of money. They make deals with cities. The private companies will own and operate a building or a water system. They will give the cities much needed money upfront. They promise to make annual payments to the city.

The companies make the needed improvements. So far, so good. But the companies have to make a profit. To do that, they have to raise the rates or the rents. Instead of an increase in taxes or debt for all, it is the users and renters who have to pay more money.

In itself, none of this is good or bad. Citizens may not be aware that when they turn on the tap water, some company is making a profit.

More private ownership of public works will take place in the future. Donald Trump thinks this is the way to rebuild America. Democrats call the deals partnerships. It makes them sound better.

The quest for profit often brings out the worst in people. Companies have to make profits because they have to make investors happy. Cities need money to fix things. There is always a price to pay. The question is: who pays the price?

Source: The New York Times December 24, 2016

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