Privately run water and sewer utility systems are gaining favor across the country where the extension of municipal facilities is deemed to be impractical. In a sense, this is a revival of an old practice. Back in 1790, water services were provided almost entirely by private enterprise, and it was not until a hundred years later that municipalities began to establish their water and sewer utilities.
The isolated settlements which first attracted private investment in utility services are replaced today by the innumerable subdivisions which sprawl beyond the corporate limits of metropolitan centers. Where public agencies are unwilling or unable to cope with the problem of servicing these fringe areas, and where housing developers are reluctant to tie up their skills, personnel, and capital in the conduct of utility operations, private concerns are moving in to provide the needed services. And some of them, having become expert in meeting the sewage disposal problems of subdivisions, are now offering their services to municipalities.
Judging by figures reported by the US Public Health Service, there is need for these services. In 1960, some 21 percent of the 109 million people living in metropolitan areas were relying on septic tanks for sewage disposal. Yet back in 1945, the ratio had been only 9 percent. For the community whose tax base is as yet too small to justify floating a bond issue, or whose revenues and administrative machinery are inadequate to provide for sewerage facilities, an arrangement, even a temporary one, whereby these responsibilities are taken over by private enterprise, can make good sense. Speed of congestion is also an inducement.
In a fast developing county of California, for example, a private company was formed in 1959 when sewage disposal needs in the new subdivisions became so pressing that there was no time to wait on orthodox public agency efforts to deal with the matter. The company, which serves some 22,000 people, is a co-operative undertaking in which an investment corporation, five local land developers and a college participate. The company holds a fifty-year franchise from the county. Some $2 million of private funds are reported to have been invested in facilities. Customers pay a monthly service charge and the company may exercise a lien on property owners for failure to meet payment.
Where, as in the above case, speed is especially important, there is no doubt that coordinated engineering, purchasing, and construction facilities can produce a functioning sewerage system capable of rapid extension as new houses are built. On some projects, mobile treatment units are used until the sewage load has increased sufficiently to justify installation of a permanent plant. These mobile units are shifted from project to project, and in this fashion capital outlays are minimized without sacrificing efficiency of treatment. Similarly, extension of collecting sewers can be carried out in successive stages to meet requirements as they develop —a practice not easily conducted under municipal ownership where the restraints of public financing and the economics of contract construction require that a project be built in its entirety and large enough to meet future needs as determined by the life of the bond issue.
Financing arrangements vary. With developers, for instance, a privately run sewage-disposal concern may contract to install and manage complete facilities on an ownership or part-ownership basis, on a fee basis, or on an amortization plan spread over several years. With industrial concerns, similar arrangements can be made or the installed facilities can be lease-purchased. With a municipality, the concern may provide engineering, design, and construction services for a sewage-disposal utility at a specified price which may be paid by means of municipal bonds or short-term financing. Or it may finance and operate sewage facilities as required, and recapture its investment by charging a specified amount based on the volume and strength of the sewage load to be handled.
One of the oldest of the private companies engaged in the business of sewage disposal has operated in Atlantic City since 1888. It services a permanent population of 60,000 which swells in summertime to 300,000. Although the city once obtained a fifteen-year option to purchase the utility it has never sought to exercise it—proof, presumably, that the arrangement works satisfactorily.
But perhaps the record for the Western Hemisphere is held by Rio de Janeiro. In 1862 the last emperor of Brazil, Dom Pedro II, established a private company to build and operate a sewerage system for the city. As with the later pioneer effort in Atlantic City, the project was largely prompted by the need to protect the city's beaches, which were endangered by water pollution. Six sewage treatment plants were built in Rio, and these were operated continuously and profitably by the company until 1947, when the city took over and modernized the sewerage system. Some of the original plants are still being used.
—Edward J. Cleary; prepared while working with RFF on leave from the Ohio River Valley Water Sanitation Commission. Last month Mr. Cleary returned to the Commission of which he is executive director and chief engineer.
A version of this article appeared in print in the May 1964 issue of Resources magazine.
