OPINION | Fix the damn dams: Rethinking excessive privatization of public infrastructure

Monica Plawecki

This piece was originally published by the Southeast Michigan Sustainable Business Forum.

In the few short months that have passed since a week of heavy rain caused the failure of the Edenville and Sanford Dams, much of the news coverage of the disaster has focused on the finger-pointing that has arisen in the aftermath. On one end, many have been quick to blame the owner and operator of the now-defunct dams, Boyce Hydro LLC, operated by Lee Mueller, which neglected to comply with federal safety standards prior to the dam failure and which also recently filed for bankruptcy in the wake of the disaster (Detroit Free Press). Others, meanwhile, have blamed Michigan’s Department of the Environment, Great Lakes & Energy (EGLE) and Department of Natural Resources (DNR) for not taking steps to avert the crisis (MLive).

While the investigation of the failure is ongoing, regardless of their findings of fault, the grim facts remain the same: The May 19 flooding that struck Midland, which has been described as an event that happens once in 500 years, forced evacuations of more than 10,000 people, damaged homes and small businesses, and displaced thousands of Midland residents, prompting Governor Whitmer to call upon the federal government to declare a state of emergency (Detroit Free Press, MLive).

In light of the disaster, we’re ultimately left wondering, “How could this happen?” More to the point, why would we allow critical infrastructure, like dams, to be privately owned and controlled in the first place? Most importantly, how can we ensure a similar disaster doesn’t occur in the future?

Ultimately, in order to prevent the future failure of dams and other aging infrastructure, we believe the government must rethink its current approach that relies too heavily on private ownership and operation of infrastructure, while ensuring citizens have access to safe, reliable infrastructure, and truly put people over profits. At the same time, we as citizens must rework our basic understanding of the role our government needs to fill, and once again expect government to be an arbiter of services that preserve and uphold the public good.

A Quick History on Private Ownership of Infrastructure

Let’s start with how we got here. How could a dam of the size and potential destructive force of Edenville Dam come to be privately owned in the first place? In short, privatization of public sector assets and services has been the general trend since the Reagan administration began implementing reforms to reduce the size and budget of the federal government in the 1980s, summed up in the economic policy: “Don’t just stand there, undo something.” Indeed, proponents of privatization trusted in the power of the free market, where private ownership would supposedly offer higher quality and more efficient services to citizens that would simultaneously “shrink the government” and cut taxes for Americans (Harvard Business Review).

While privatization of infrastructure wasn’t a phenomenon unique to the United States in the 1980s and 1990s, our country embraced the shift towards private management of public services at all levels of government–federal, state, and local. In the early 1990s, “more and more state and local governments…adopted privatization to balance their budgets,” privatizing services including, but not limited to, prisons, roadways, dams, recreational facilities, and public transit vehicle fleets (Harvard Business Review). Of course, this trend has continued to this day, embraced by political conservatives as sound economic policy: smaller government is better, and the free market can more efficiently provide public services than the government can.

The core incentive at the root of privatization seems to be an obvious one: money, or reduced financial burden for the government. In Indiana, for example, the state transferred ownership of its toll roads to private operators in 2006, where the state government, strapped for cash, gave up “a source of revenue that’s spread out over a number of years…and [received] a lump of cash upfront” (Washington Post). At the same time, transferring public assets to private operators can be enticing for politicians and government officials eager to “wipe their hands clean,” as private owners take on the primary responsibility of managing infrastructure–and assume liability for disasters.

The Reality of Michigan Dams Today

In that context, it may be unsurprising that today, more than two-thirds of Michigan’s dams that are regulated by either the state or the federal government are privately owned, according to EGLE (EGLE – Edenville Dam Failure). What’s more concerning, however, is that another two-thirds of Michigan’s dams have reached or are older than the average dam life expectancy of 50 years, indicating that most of the dams “will need to be repaired or removed to address deficiencies” and “require considerable maintenance and significant reinvestment in the coming years,” a burden that private dam owners often are financially constrained to take on. In fact, EGLE has estimated the funding needed to update aging dams at $225 million (EGLE – Edenville Dam Failure). Without dedicated funds to update and maintain aging dams, other Michigan dams, like Edenville and Sanford, “eventually will fail and put public safety at risk” (Michigan River Partnership via PSC – The Growing Crisis of Aging Dams).

Given this knowledge, transferring ownership of privately held dams to the public sector may be a sensible solution. Inevitably–and probably very soon–owners will be compelled to update existing dams in need of repairs, a cost burden that private owners, incentivized more by profits than benefiting the public interest, may not be willing or able to take on. In fact, the Edenville Dam failure has already demonstrated the dangerous consequences of private owners failing to comply with regulatory agencies’ orders to safely maintain existing infrastructure—in this case, orders to increase spillway capacity (EGLE – Edenville Dam Failure).

Certainly, imposing harsher penalties for private operators who refuse to comply with demands to make needed repairs would be a step in the right direction (Detroit Free Press). Indeed, it’s possible that compliance with federal regulators would have saved the Edenville Dam from failing and flooding Midland. Still, this seems to ignore the underlying issue with privately-owned infrastructure: operators are not always incentivized to act in the public interest, and they could very well choose to pay noncompliance fines rather than investing in expensive repairs in order to save money in the short-term. We must, therefore, reassess with clearer eyes the potential devastating costs of private dam ownership and private owners’ regulation noncompliance in order to prevent future disasters.

A Call for Change: Reframing the Way We View Government & Public Services

While it’s obvious that we need to reassess our complex system of dam ownership, this is just one symptom of a bigger problem; we ultimately need to reconsider the way we view government in the general context of infrastructure and providing public services. For starters, we need to demand that our government fulfils its duty to citizens–that is, to provide quality public services and goods that are accessible and safe for all. Basic necessities like clean drinking water, safe roads, and reliable public transit shouldn’t be benefits granted to a lucky few in a wealthy nation like the United States. An obsession with limited government, idolizing the free market, and outsourcing critical public services to the private sector have been embraced for too long in policymaking, and we’re witnessing the consequences of our neglected infrastructure on innocent human lives. In fact, we’re continuing to see these harmful ideals grow with President Trump’s recent calls for the defunding of the United States Postal Service, which currently provides accessible and affordable mail services to all citizens, an especially critical need for rural and low-income residents.

At the same time, we need to change the way we think about funding public goods and services–namely, through the taxes we pay. Though it may not be popular, there is no getting around the reality that fixing our broken tax framework is the best solution to government budget shortfalls and ensuring that our public goods and infrastructure are in safe conditions. And while we know that taxes are the primary source of funding for our public services, tax increase may not even be required; rather, the federal government could divert more dollars that would ordinarily fund overseas military projects, and use those funds for public infrastructure updates and maintenance, including repairs to our aging dams.

Ultimately, shedding preconceived notions about the public sector’s supposed inability to provide quality public services, and demanding that public goods and infrastructure be made accessible and safe for all citizens is of the utmost importance. While outsourcing ownership and management of public services to private enterprises may be a temporary fix to bridge gaps in tightening state budgets, it has become clear that doing so leads to private owners cutting corners that can have far more expensive long-term consequences when disaster strikes.

Though the Edenville Dam incident may seem an extreme example of the consequences of privatized infrastructure, its likelihood of being followed by similar disasters in the near future compels us to take a closer look at our current reality. Rather than privatizing and prioritizing short-term profits, it’s time we as taxpayers and our governing bodies put people first and ensure our public infrastructure is safe for all.

Sources:

Detroit Free Press

MLive

Harvard Business Review

Washington Post

EGLE – Edenville Dam Failure

Michigan River Partnership via PSC – The Growing Crisis of Aging Dams

Detroit Free Press