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Remunicipalization

Water remunicipalization commonly refers to the return of services to municipal authorities after having been previously owned or managed by private companies. It can also refer to services returned to state control at a regional or national level.

The MSP first conducted comparative studies of water remunicipalization in Buenos Aires (Argentina), Paris (France), Dar es Salaam (Tanzania), Hamilton (Canada) and Malaysia, which are compiled in the book Remunicipalisation: Putting Water Back in Public Hands. The first two cases are presented in our 5-minute animation video looking at the challenges and benefits of reclaiming public water. 

Further collaborative research was published in the book Our Public Water Future, which recorded 235 cases of water remunicipalization in 37 countries between 2000 and 2015, affecting some 100 million people. Remunicipalization cases are concentrated in high-income countries, notably France and the US, but it is a truly global phenomenon, with numerous cases in Africa, Asia and Latin America as well.

Universal reasons to remunicipalize

Our series of case studies – in collaboration with Reclaiming Public Water, Transnational Institute, Corporate Europe Observatory and PSIRU – reveals that the reasons for water remunicipalization differ but that similar problems with private water management have persuaded many communities and policy makers that the public sector is better placed to provide quality services to citizens. These problems include: poor performance of private companies (e.g. Accra, Dar es Salaam, Maputo), under-investment (e.g. Berlin, Buenos Aires), disputes over operational costs and price increases (e.g. Almaty, Maputo, Indianapolis), soaring water bills (e.g. Berlin, Kuala Lumpur), difficulties in monitoring private operators (e.g. Atlanta), lack of financial transparency (e.g. Grenoble, Paris, Berlin), and workforce cuts and poor service quality (e.g. Atlanta, Indianapolis).

It is often utility managers, bureaucrats and politicians that recognize problems with water privatization, although there have been civil society-led campaigns as well. In some cases remunicipalization advocates have used legal strategies such as referenda and litigation, such as in Germany, Italy and Uruguay (see Shields and Swords). Labour involvement appears critical for the success of remunicipalization because frontline workers have important insights into operational challenges and opportunities.

Benefits

Financially, there have been direct savings from remunicipalization for most municipalities – some €35 million in the first year in Paris, and about C$6 million in the first three years of remunicipalization in Hamilton. As a result, newly constituted public operators can increase investments in water infrastructure to avoid the health and environmental hazards experienced under privatization, the cost of which was borne by the state in the past.

Further social benefits can arise from water remunicipalization if public operators are committed to equitable access for low-income households (e.g. setting progressive tariffs, engaging the unemployed in network extension).

Research on Buenos Aires and Hamilton has shown that staff morale also tends to improve among frontline workers and management after remunicipalization. Public water employees in those cities became more engaged in the planning and operation of water services than they were in the past, and more committed to public water services beyond the narrow financial and technocratic concerns that dominate private water management.

Remunicipalization also allows strengthening accountability and transparency. In Paris and Grenoble (France), the new public water operators have introduced advanced forms of public participation. This allows civil society to take part in decisions on the management of this most essential public service, and to make operations responsive to the interests of local communities.

Many remunicipalized water entities have also demonstrated their ability to think beyond their sector to be more holistic in their planning and action. Inter-governmental coordination is often essential on issues such as watershed management, for example.

Risks

Successful remunicipalization requires careful planning and assessment of external risks, even more so for countries of the South which are often restricted by conditionalities imposed by multilateral agencies such as the World Bank. Each privatization experience leaves significant structural, financial and ideological legacies that constrain the potential for public sector success.

Even where political will is strong and financial and technical capacity exists, reverting to public ownership and management is fraught with difficulties. There can be institutional memory loss, degraded assets, communication and accounting systems that do not mesh with public sector systems, for example. The asset deficit left by many private water companies means that municipalities are working with decrepit equipment and collapsing infrastructure that can be more expensive to repair than to replace and build anew.

Private firms have also demonstrated that they can be politically difficult in the transition period, sabotaging efforts to revert to public control. In many cases private companies refuse to release critical operational information, attempt to take the municipalities to court for breach of contract, or use public relation campaigns to try and undercut the credibility of remunicipalization initiatives.

When a private contract is terminated before its expiry date, private companies can sue local governments to receive compensation for the full profits granted under the contract. Berlin residents have had to accept very high costs to buy back the shares held by two private operators. Private concessionaires also use international arbitration tribunals to obtain compensation, like in the case of Tucuman and Buenos Aires, Argentina.

The risk of having to pay hefty compensation can distort the decision-making process of local governments who are considering termination and remunicipalization (e.g. Jakarta, Indonesia). But in other cases the potential benefits are so clear that local authorities are ready to face such risks.

Finally, it must be noted that donor funding cannot be relied on for remunicipalization efforts. After decades of generous (and ongoing) political and financial support for privatization from international financial institutions and bilateral donors, support for the implementation of remunicipalization is practically non-existent and in some cases there have even been attempts to undermine the transition to public services (such as the World Bank’s in Dar es Salaam).

Innovative public models

Remunicipalization should not simply be an unquestioned return to older models of public water delivery, however. It should seek to improve on what is meant by ‘public’ and expand the democratic terms of engagement, for example by working with other public operators. In Spain, a regional public company (Aguas del Huesna, in Andalusia) facilitated remunicipalization for 22 municipalities. The remunicipalized water operators from Paris and Grenoble played a key role in helping other local authorities in France and elsewhere to remunicipalize and improve their water services. There are other such examples across boundaries.

Cooperation between public water companies as part of public-public partnerships can be an effective way to improve services.

Other sectors

Hospitals and electricity services have also been taken back into public hands, at all levels of government, and there are vibrant debates around the world about how various services can be returned to public ownership and control. Each service sector offers its own managerial, technical, geographic and political challenges, but there is much to be learned from inter-sectoral debate and dialogue.

There is also a wealth of experience to explore in historical movements that used local governments to challenge private service delivery and advance ‘socialist’ agendas from the late 1800s to the 1940s (Municipal Socialism Then and Now: Some Lessons for the Global South).