Detroit is under water. While the city navigates potential bankruptcy, the Detroit Water and Sewage Department is owed $89 million in delinquent bills, including more than $43 million from an estimated 80,000 residential accounts. As of March 6, according to the DWSD, 165,000 out of 323,900 of Detroit’s business, school, and commercial accounts were overdue, and more than 154,000 of 296,000 residential accounts were similarly delinquent. Detroit Public Schools, which has been ravaged by budget cuts for years, owes $2.2 million. Other communities, such as economically devastated Highland Park, which is being sued by the DWSD for a $17.4 million water and sewerage debt, is among many examples.
All the red on DWSD’s balance sheets, seen through the lens of the greater Detroit bankruptcy, is considered as a significant liability by Detroit’s financial managers. As a result, Detroit may be forced to privatize DWSD in order to rid the city’s financials of ‘bad debt’ and raise cash in advance of bankruptcy. As Detroit’s official investment banker, Kenneth Buckfire, said during the bankruptcy hearings, “The only way is to sell it [the DWSD] or privatize it. Several private equity firms have expressed interest, but only if they can charge higher rates.”
In Detroit, as in many other municipalities across the country, water utilities incur largely fixed costs. Regardless of whether or not customers pay for their service, the water company or provider still incur the same costs. Detroit, which has seen nearly a million residents leave since 1950, has not adapted to the shrinking population, and as a result water bills have increased, leaving Detroit residents, 38% of which live below the poverty line, with a greater share of the financial burden.
But water isn’t free, and Detroit’s infrastructure is exacerbating the problem. Like that of nearly all large American cities, much of Detroit’s water infrastructure was laid more than 75 years ago, and it is crumbling. When a water main breaks or infrastructure fails, hundreds of thousands of gallons are wasted in Detroit’s abandoned neighborhoods. Without infrastructure upgrades, the city will continue to waste water and money servicing parts of the system that are unused in areas uninhabited.
While facing bankruptcy restructuring, Detroit is in no position to bear the financial burden it needs to construct and upgrade its water delivery system to be more efficient and fit its needs. But Detroit is by no means the only municipality that cannot undertake necessary infrastructure needs because of lack of funds and financing capabilities. While Detroit may be the most extreme, cities all across the country cannot assemble or find the funds to make necessary upgrades to their infrastructure. The federal government must become a better partner in promoting the general welfare of citizens across the country.