Public Policy Forum Blog

Should Milwaukee County continue to run a water utility?

Every day, as thousands of commuters drive south on Highway 45 towards the zoo interchange,  it’s likely that very few of them notice the newer water tower on the County Grounds proudly advertising the location of the Milwaukee Regional Medical Center (MRMC). Even fewer know that the water tower, and the entire water system serving the MRMC, is owned and operated by Milwaukee County. 

This is the only utility operated by the County, and while it has consistently supplied safe drinking water to County Grounds occupants, whether the utility should continue to be run by the County is unclear. Originally, the utility was put in place to serve large public institutions such as the County Poor Farm, Doyne Hospital, and others, but these institutions have faded away over time. In their place is an impressive regional medical center made up of private non-profit hospitals, a few remaining County operations, and private development. Furthermore, remaining County operations at the County Grounds, such as the Mental Health Complex and Children’s Court, may be downsized or relocated in the next 10 years. 

For its part, the City of Wauwatosa has an ongoing interest in the County Grounds from a variety of perspectives, including economic development, open space and conservation, flood control, fire protection, etc. For these and other reasons, last year the City and County jointly commissioned the Public Policy Forum to study the feasibility of transferring the county water utility to the City.

In a report released this morning, we find that while there are many compelling reason for both parties to consider a transfer, there are also several financial and policy considerations that would complicate an agreement. The most difficult obstacle is, not surprisingly, financial. As an enterprise fund, the water utility passes along its expenses to customers through water charges. These expenses include about $900,000 in annual labor costs, most of which are for plumbers, laborers, and engineers. If the County no longer owned the utility, that labor could be diverted to other county maintenance needs, a definite benefit. However, all of the county expenses that are charged to the water utility would need to be allocated to other parts of the county budget, increasing property tax levy by close to $700,000. 

On the City side, annexing the county utility is projected to increase net revenue to the utility. That could produce a benefit for city ratepayers, but further analysis of the value of utility assets is needed before the City could consider any proposed rate changes. Additionally, there are a number of capital improvements that likely would need to be made before the City could take ownership of the utility; how much they would cost and how they would be funded is unclear at this point, which also could impact the attractiveness of a potential ownership transfer to the City. 

One group that would see a clear benefit from a transfer is the private customers of the Milwaukee County water utility. Since the county utility is not regulated by the PSC, there is no upper limit to county water rates, while city rates need to be approved by the PSC. Our report estimates that water utility customers would save between 35% and 45% in water charges. 

Our report concludes that the question of which government entity should operate the water utility should be linked to the broader question of the County’s future role at the County Grounds. Indeed, the opportunity for the County, City, and private occupants to discuss a possible shift in the utility’s ownership also represents an opportunity to consider general public service provision on the Grounds, as well as the possibility of developing a new governance framework that will meet the 21st century economic development needs and objectives of the respective governments, tenants, and taxpayers.

Author: 
Davida Amenta