WATER

The Top Five Reasons to Keep

Tennessee’s Water in Public Hands
Fact Sheet • April 2009

T he waters of Tennessee belong to the people of Tennessee,1 and the resource

must remain public to keep it safe and affordable. When water and sewer
systems fall into private hands, costs grow and consumers end up paying too much
for poor-quality water. It can lead to sewage spills and service problems. Because
of these failures, taxpayer money should neither incentivize nor subsidize private
ownership, management or operation of water and sewer systems.

The research shows five main ways that private control of Figure 1: Annual Water Bill of a Typical Tennessee
water is a bad deal for Tennessee. Household Using 5,000 Gallons a Month

1. High Rates. The typical Tennessee household pays 400 $381

25 percent more for water from Tennessee American Wa- 350
ter, the state’s largest private utility, than for service from 300
$306
a public utility.2 That’s an extra $75 a year (see figure 1).
250
Chattanooga (water). In 2008, Chattanooga, 200
which receives water service from Tennessee Ameri-
can Water, had the most expensive water among the 150
state’s six largest cities. Public utilities served the 100
other five cities.3 Chattanooga households paid more
for water than almost everyone with public water did 50
in Northwest Georgia and Southeast Tennessee,4 and 0
the growing utility costs threatened jobs.5 Public Utilities Tennessee American
Water

Sumner and Williamson Counties (sewer).

In 2009, Tennessee Wastewater Systems, a private sewage treatment plants were more than three times as
sewer utility, sought to raise rates by as much as 70 likely to have had formal enforcement actions for viola-
percent, which would bring the typical household bill tions of the Clean Water Act in the last five years (see
up to anywhere from $60 to $93 a month.6 figure 3).8

4. High Operating Costs. Public control is a

2. Expensive Financing. Private financing is far
more expensive than public financing (see figure 2).
From 2000 to 2007, even the best-rated corporate
bond was 28 percent more expensive than a typical
municipal bond issued in the state, and 192 percent
more expensive than loans from Tennessee’s State
Revolving Fund program.7
3. Clean Water Act Violations. Compared to
the their public counterparts, privately operated major
better deal for the ratepayer and the taxpayer.
Horn Lake (water). In 2008, Horn Lake termi-
nated its contract with Southwest Water and brought
its water services in-house after the public works
director predicted that public operation could save 36
percent to 55 percent a month.9
Southaven (water and sewer). In 2001, South-
aven aldermen voted not to renew its contract with
ECO Resources after determining that public opera-
tion of the city’s water and sewer systems will save
 Figure 2: Interest Rates on Tennessee State Revolving
Fund Loans, Municipal Bonds in Tennessee and
Corporate Bonds Nationwide from 2000 to 2007
8%
7%
6.1%
6%
5% 4.8%
4%
3% 2.5%
2% 1.7%
1%
0
Tennessee Tennessee Clean Municipal Top-Rated
Drinking Water Water State Bonds in Corporate Bonds Nationwide
State Revolving Revolving Fund Tennessee Nationwide
Fund (Moody’s Aaa)
The higher the interest rate, the greater the financing cost. That’s why
private financing is more expensive.
Note: Municipal bond rate is the market interest rate based on Bond Buyer
Index for 20-year general obligation (GO) bonds rated Moody’s Aa issued
in Tennessee. Corporate bond rate is Moody’s yield on seasoned corporate
bonds — all industries, rated Aaa and Baa
$400,000 annually after the first year. That’s two-
fifths of the $1 million annual fee that it had paid to
the company.10
5. Wasteful Water Practices. Private operators
are often reluctant to initiate water conservation programs
that help preserve water supplies but decrease revenue.
Chattanooga (water). In 2007, when Chattanooga
was experiencing its third-driest spring on record,
Tennessee American Water decided against water-
use restrictions that other utilities implemented.11
The company later reported that it lost and could not
account for 28 percent of its total water production
in 2007. That is twice the amount reported by most
water utilities that responded to an American Water
Works Association survey.12
Hardin County (water). Aqua Utilities Company
lost or failed to account for 50 percent of its water
in 2005. It wanted to recover the cost of that water
through rate increases, but the Tennessee Regulatory
Authority allowed it to recover only 15 percent.13
The Solution: Public Money for
Public Utilities
Local governments should keep their water and sewer
services in public hands and reject privatization. Instead
of allowing irresponsible private control of our water, we
need to plan ahead for future generations and create a
dedicated source of public funding so that communities
across the country can keep their water clean, safe, af-
fordable and publicly controlled.
A federal Clean Water Trust Fund for water and sewer
systems would realize this goal and take the burden of re-
juvenating our water infrastructure off state and munici-
pal coffers. To maximize the public benefit and to protect
taxpayers and ratepayers, this money should be available
to only public entities and public projects. Tennessee
needs a federal trust fund to ensure safe and sound water
and wastewater systems now and for future generations.
End Notes
1 Feldman, David Lewis and Julia O. Elmendorf. The University of
Tennessee-Knoxville. Environment and Resources Center. “Water
Supply Challenges Facing Tennessee: Case Study Analysis and the
7.0% Need for Long-Term Planning.” June 2000 at 31.
2 Allen & Hoshall. “Tennessee Water and Sewer Rate Survey.” June
2008; U.S. Environmental Protection Agency. Public Water Sys-
tem Inventory Data. October 2007. Available at www.epa.gov/
safewater/databases/pivottables.html, accessed September 2008;
Tennessee-American Water. “Eight Revision of Sheet No. 3-R.”
TRA No. 19. September 26, 2008 at 3, 8, 11.
3 Sher, Andy. “Water in Chattanooga is pricey.” Chattanooga
Times-Free Press. August 3, 2008.
4 Benton, Ben. “Chattanoogan: Soaring costs hurt water utilities.”
Chattanooga Times-Free Press. August 28, 2008.
5 Flessner, Dave and Jason Reynolds. “Chattanooga: Koch Foods
Corporate Bonds offical says utility prices threaten jobs.” Chattanooga Times-Free
Press. August 19, 2008.
(Moody’s Baa)
6 Carey, Clay. “Sewage company wants to raise rates up to 70%.”
The Tennessean. January 24, 2009.
7 U.S. Environmental Protection Agency. Office of Water. “Weight-
ed Average Interest Rate of Clean Water SRF Assistance, by
State.” October 26, 2007; U.S. Environmental Protection Agency.
Office of Water. “Interest Rates for Drinking Water SRF Assis-
tance, by State.” October 24, 2007; the Federal Reserve Board.
Data Download Program. Available at www.federalreserve.gov,
accessed November 20, 2008.
8 U.S. Environmental Protection Agency. Enforcement & Compli-
ance History Online (ECHO) – Water Data. Available at www.
epa-echo.gov, accessed February 20, 2009; Veolia Water North
America. “Municipal Government Partnerships Project Map.” Ac-
cessed March 16, 2009. On file with Food & Water Watch.
9 Bayne, William C. “Horn Lake ending water contract – City will
service own water, sewer system.” The Commercial Appeal (TN).
September 17, 2008.
10 Purdy, Jean. “Aldermen vote for return to city-run water and
sewer.” The Commercial Appeal (TN). May 4, 2001.
11 Herrington, Angie. “Dry grip from rain drop.” Chattanooga
Times-Free Press. June 9, 2007.
12 Gorman, Michael. Brubaker & Associates, Inc. Testimony on Peti-
tion of Tennessee-American Water Company to Change and In-
crease Certain Rates and Charges so as to Permit it to Earn a Fair
and Adequate Rate of Return on its Property Used and Useful in
Furnishing Water Services to its Customers. Tennessee Regula-
tory Authority. July 18, 2008 at 14-15.
13 “Final Order Approving Rate Increase and Rate Design.” Petition
of Aqua Utilities Company for Approval of Adjustment of its
Rates and Charges and Revised Tariff, Docket 06-00187. Ten-
nessee Regulatory Authority. November 27, 2007 at 8-9.
Figure 3: Portion of Major Wastewater Treatment Facili-
ties in Tennessee with Formal Enforcement Actions for
Violations of the Clean Water Act in the Last Five Years
25%
25%
20%
15%
10%
8%
5%
0
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