ABOUT DAVID MORRIS
David Morris is co-founder of the Institute for Local Self Reliance. His five non-fiction books range from an exploration of Chilean economic and political history to the future of electric power, to the transformation of cities and neighborhoods. For 14 years he was a regular columnist for the Saint Paul Pioneer Press. His essays have appeared in many print and on-line publications, including the New York Times, Wall Street Journal, Washington Post, Smithsonian, Salon, Alternet, Common Dreams, Utne Reader and the Huffington Post.
Morris has been a development consultant to local, state and federal governments in the U.S. and abroad and to private businesses as large as IBM and investor owned electric utilities and as small as microbreweries and local retail.
Trusted progressive analyst and perennial BMC visitor David Morris recently launched a weekly newsletter highlighting key political and social developments that most news organizations miss. Published by the Institute of Local Self Reliance, David Morris’ Weekly Picks offers an armload of stories you need to know about. He uncovers what’s really going on in business, education, technology, healthcare, government and local communities around the world. (See example below.)
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European Cities Back Away from Costly Privatization of Public Services They Once Embraced
By David Morris (From David Morris Weekly News Pick #5)
In the 1990s cities around the world privatized public services, either out of necessity (driven by budget cuts) or out of desire, convinced that private companies could provide better services at cheaper prices. Water, transportation, housing, energy, telecommunications, waste treatment, health, education and many other services were privatized
A decade later, after experiencing quality problems and spiraling prices, the citizenry rebelled. In the early years of the 21st century the pushback was modest. By its second decade it had become a tsunami.
Reclaiming Public Services, a recent study published by the Amsterdam-based Transnational Institute examines this tsunami. Since 2000, the report found 835 instances of what it calls re-municipalization. Until 2010 there were only a handful each year. Since then the number increased five-fold, to over 90 a year.
Re-municipalization takes many forms.
In 2012, the German city of Heinsburg re-municipalized its ambulance service. In 2017, the Catalan city of Cabils took back maintenance of public spaces and will soon in-source 90 percent of its workers. In 2017, Oslo’s dismal experience with privatizing waste management services convinced city hall to bring the service back in-house. Norway’s second-largest city Bergen re-municipalized two elderly care homes. Spanish and Austrian cities started public funeral services.
Two-thirds of the re-municipalization efforts dealt with energy or water. In each sector, initiatives were concentrated in one country. About 40 percent of the 267 identified examples of water re-municipalization occurred in France over 90 percent of the 311 energy initiatives took place in Germany.
Re-municipalization is rarely just about a change of ownership. After the French city of Montpelier took back its water system, it gave almost one third of its seats on its new Board of Directors to civil society representatives. The new Paris water utility began to work with farmers in water catchment areas to protect water and water quality.
The chapter in the report on energy, written by Soren Becker, co-author of the Energy Democracy in Europe focuses on Germany, especially the dynamics of re-municipalization in Hamburg. In 2000, Hamburg sold its shares in its electric, district heating and gas utilities. At the same time popular mobilizations convinced the German federal government to introduce feed-in tariffs for renewable energy, which led to massive buildup of citizen and farmer owned renewable energy. Major energy utilities remained unresponsive to renewable energy. So in 2009 Hamburg established Hamburg Energie as an autonomous subsidiary of its public water company, which was still public. By 2015 the new energy utility had built more than 13 MW of wind energy and 10 MW of community solar. About 100,000 citizens were buying renewable or locally produced energy.
Even with this success the Hamburg municipal government refused to move toward full re-municipalization of its energy infrastructure, even though the energy franchises were expiring. This led to a fiercely contested referendum. Those in opposition included the Social Democrats, the Christian Democrats and the Liberal Party, plus the Chamber of Commerce and many trade organizations. Supporters were outspent by as much as 100 to 1.
Nevertheless, in the fall of 2013, the referendum squeaked by, 50.1 to 49.9. In 2014 Hamburg became the full owner of its heating utility. In 2015 its electric grid became public and its gas network will become public this year.
For those who believe there are significant economies of scale in delivering cost-effective services, Lavinia Steinfort a researcher at the Transnational Institute responds in an interview with New Europe, “Economies of scale can also be achieved through cross-subsidization between public services and the clustering of metropolitan, inter-municipal and provincial services… In response to the failing Public Private Partnerships (PPPs)…, public utility companies have been experimenting with Public Public Parnterships (PUPs) to exchange expertise, reduce unit cost and increase productivity. The logic of cooperation is underpinned by peer-to-peer solidarity rather than profit.”
Despite the success in cities taking back their utilities, two significant roadblocks remain. One is the cost of recovering previously public assets. When the city of Terassa in eastern Catalonia decided to re-municipalize its water supply the municipality’s valuation of the company was $2.4 million while the operators’ was $70 million. In 2013, Berlin re-municipalized its water supply and sewage treatment company at the cost of almost $1.5 billion, which Steinfort notes, will take three decades to pay off and limit the public utility’s scope for innovation and social policy.
The other obstacle is the new legal framework contained in trade agreements, such as the right of foreign investors to sue governments in international tribunals (often comprised of former corporate lawyers) when cities decide to reclaim, or even just regulate, a public service. Reclaiming Public Services reports that decisions to de-privatize public services have triggered at least 20 international arbitration cases (ten in the water sector, four in telecommunications, and three each in energy and transport).