Fair market value legislation has been expanding to several states in the Great Lakes region. Illinois, Ohio, Pennsylvania, and Indiana have all adopted forms of fair market value legislation that rewrite the rules for how water systems are appraised and acquired, making it easier for private companies to outbid municipalities and privatize your community water system. On average, privatized systems charge rates 59% higher than public water systems, only increasing the financial pressure on water customers..
Illinois was one of the first states to adopt fair market value legislation, when in 2013, the Illinois Water System Viability Act allowed municipalities to receive “fair market value” for their water systems. This initial law created a new appraisal system where the Illinois Commerce Commission, which regulates investor-owned utilities, selects three appraisers to value the system, and the average price is offered to the community. Disguised as a way for municipalities to receive higher valuations for their water systems, the law was extended in 2018 when Governor Bruce Rauner signed the Water Privatization Act. The Water Privatization Act took an even more drastic toll on consumers, since it removed a cap on the size of the water system that a private utility company could acquire.
In 2016, Pennsylvania adopted fair market value legislation (Act 12) allowing municipal water and sewer systems to be sold at prices determined by independent appraisals and not by the book or depreciated value. Since Act 12 was implemented, more than 30 water systems have been sold to private companies in Pennsylvania, affecting thousands of consumers. This does not include the nearly dozen other municipalities that are currently considering enticing privatization offers from large corporations, according to the Pennsylvania Municipal Authorities Association.
Ohio quickly followed suit and adopted fair market value legislation in January of 2019, when Governor John Kasich allowed companies to pay a fair market value for the purchase of water and wastewater systems. Much like Illinois and Pennsylvania, the passage of this legislation made the acquisition of community water systems much more lucrative, and companies such as Aqua swooped in to take over 38 water systems and 7 wastewater treatment facilities!
Indiana has faced similar private company takeovers since passing fair market value legislation. Indiana’s law outlined the procedures for water system acquisitions in 2019, and the simplification of the sale/acquisition process has attracted private companies. Thousands of residents are serviced by private water companies such as Aqua or American Water in the Hoosier state. Communities, such as Lake Station, were caught between a rock and a hard place when their aging water system needed $4 million in repairs and they were approached with a bid by American Water.
While water privatization continues to expand under a blanket of fair market value legislation within these states, it is important to also look at states in the Great Lakes region that have not adopted FMV legislation. Stay tuned for our next blog post that will cover water privatization in New York, Wisconsin, Michigan, and Minnesota!
