The Fine Print
Gregory DeFreitas is a professor of economics at Hofstra University and director of its Labor Studies Program and Center for the Study of Labor and Democracy. He warns that the short-term benefits of privatization deals often result in long-term costs for taxpayers.
“What you get is a weakened middle class, probably lower quality services, and also less accountability,” he explains. “Once you’ve sold off the jewels, and whether it lasts you one year or two years or three years, then what we have is a short-term strategy. Of course, politicians, they just live till the next election. The voters will have to live with it and their kids will have to live with it for a long, long time.”
DeFreitas says privatization schemes often result in wages being slashed, which leads to less-qualified workers, affecting the quality of services. In addition, private companies need to make profits, he adds—so the overall long-term costs don’t necessarily fall.
“In fact, it can rise, because of the private company’s administrative costs and its desire for profit,” he adds. “And then you need monitoring… And that costs money.”
Another major issue, DeFreitas stresses, is the lack of accountability.
“You’re really letting the fox in the chicken house when you get these kinds of privatizations,” he says. “It’s not a free lunch just bringing in some fancy global company like Veolia or others like it. It’s a very dangerous proposition.
“A private company has a very legitimate claim to a certain degree of secrecy,” he adds. “They make their little reports periodically, but they mainly are responsible to the shareholders, who are global in this case…. Nassau County voters may have very little say in what they do with the future of the infrastructure.”
Then, of course, there’s the potential ramifications on residents’ health and safety, continues DeFreitas, since it is sewers Mangano’s looking to relinquish.
“You’re dealing with a major public health situation that has great hazards for families all over Long Island, for the fishing industry, the tourism industry, water sports and so on,” he stresses. “And you’re putting it in the hands of a private company, in which there’s little or no accountability or transparency.
Elliott Sclar, economist and professor of urban planning and director of the Center for Sustainable Urban Development at Columbia University’s Earth Institute, echoes these concerns. Sclar is a nationally recognized expert on privatization and author of You Don’t Always Get What You Pay For: The Economics of Privatization.
Sclar says there’s no question taxpayers will end up paying more.
“They work one of two ways,” he explains of the process. “What the companies prefer is that the government raises the rates just before they take over so they don’t have to do the first raise. Or, they takeover, and then they pay a little less on the upfront money, or they’re going to raise the rates afterwards, because they have to pay back the money they give to the government, to the county.
“It’s a shell game,” Sclar continues. “Essentially [what the] county does is they say, ‘Well, we didn’t have to raise taxes, we got this. We bailed ourselves out.’… But what they’ve essentially done is they turned the power to tax over to a private entity, who will now charge people more. Because the money still has to come from citizens… What they did was all smoke and mirrors, because there isn’t anything that the private entity is going to do that’s terribly different.”
The county is essentially selling off its very future, he adds.
“What’s going on is just a way to sell a stream of future revenues to get present money to cover some of the shortfall now,” explains Sclar. “In the end, the only people who are going to be paying are going to be the Nassau County residents.
They’ll either being paying it as ratepayers or they’re going to be paying it as taxpayers.
“What this is about is a promised stream of revenue into a future that nobody can predict,” he adds. “I don’t even think the guys running the county have thought about all of these things. I don’t think they care. At this point, they’re short-term thinkers. All they hear care about is getting through the next election.”
By the next election, Nassau ratepayers may have already had their rates jacked up exponentially, according to facts outlined in nonprofit consumer advocacy group Food & Water Watch’s 2009 report Money Down the Drain: How Private Control of Water Wastes Public Resources.
Its key findings: “Private utilities charge higher rates than municipalities; privatization does not increase the efficiency of water and sewer systems; privatization has many hidden expenses; water corporations drive up costs and shoot down service quality; the public can do it better and cheaper.”
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