As Springfield city officials struggle to deal with a significantly underfunded public pension plan and citizens debate how to fix a problem that isn't going away, they should consider that their government owns and manages an incredibly valuable asset that the private sector is fully capable of handling: City Utilities of Springfield.
Springfield is the largest city in Missouri, and one of the larger cities in the country, in which every utility is provided, owned and operated by the government. CU supplies gas, electricity, water, mass transit and even some telecommunications services to the people and businesses of Springfield.
It's worth comparing this to how Missouri's other major cities handle their utilities. In both St. Louis and Kansas City, private, investor-owned, regulated utilities provide natural gas and electricity. In St. Louis County, in addition to gas and electricity, the water also is provided by a private utility.
If Springfield were to break up CU and auction its parts to private utilities, it could potentially fund the $200 million pension shortfall and still have a substantial amount of money left over to cut taxes and pay off other public debts, or whatever else the city chooses. It is difficult to estimate the windfall Springfield might receive, because public utility valuations are very complicated. But Webster Groves, which has 1/10 the population of Springfield, received $9.5 million in 2002 just for its water system. Using a rough per-capita calculation and adjusting for inflation, a similar sale might bring more than $75 million for Springfield's water division alone.
Last year, after I suggested a similar course of action, a CU representative wrote me a nice letter arguing that the utility was doing a fine job for the people of Springfield. I don't disagree with that, but he provided as his primary evidence an annual survey of utility companies that generally ranks Springfield among the lowest average winter utility bills in the nation.
According to the 2009 survey, winter CU bills averaged $294 - the fourth-lowest ranking. However, St. Louis, which is primarily served by private utilities, usually falls close behind Springfield in this survey. In 2009, combined winter utility bills in St. Louis averaged $327, good for eighth place.
The citizens and leaders of Springfield might well choose to keep CU public because it might save them a few dollars per month. But the tax dollars to fund the pension shortfall have to come from somewhere.
Breaking up CU would be difficult and complicated, no doubt, but other utility privatization efforts have overcome similar hurdles. Studies have shown that private utilities are more efficient than public, especially after adjusting for government utilities' tax advantages, such as issuing tax-exempt bonds and property tax exemptions.
Breaking up and CU to fund the city's pension shortfall is a short-term solution. But in the long run, the citizens of Springfield would find themselves just as well served by private, regulated utilities. There is simply no reason for every utility service in Springfield to be provided by the government.
[[In-content Ad]]David Stokes is a policy analyst with the Show-Me Institute, a St. Louis-based think tank. He can be reached at David.Stokes@showmeinstitute.org.
