Fair Market Value vs. Original Value

Before Act 12, water and wastewater systems were sold based on their original cost minus depreciation, which serves as a check on the rates that can be charged to ratepayers. With Act 12, they are now sold at "fair market value," meaning that both the buyer and the seller have motive to increase the purchase price as high as possible which is passed directly to the customers as higher rates. This allows private companies to recover the cost of their over-priced purchase for the system and increase their profits which means higher dividends to shareholders and higher compensation to their executives.


Pre-Act 12 Sale: A water system built for $10 million 50 years ago might have depreciated to a value of $2 million. If sold, the price would be close to this depreciated value.

Post-Act 12 Sale: The same water system, now sold at “fair market value”, could fetch $25 million because the buyer sees future revenue potential (increasing the profit paid to its shareholders by ratepayers) and the seller will get the highest, one-time financial benefit for its community but at the expense of its customers. This higher sale price means the buyer may increase water/wastewater rates to cover their costs and make a profit.

Loss of Local Control

When a municipal authority or municipal water or sewer system is sold to a private company, authorities and local governments lose control over those services. Decisions about rates, maintenance, and infrastructure are made by the private company, which may not prioritize community needs. 

Local residents might find it harder to influence decisions about their water/wastewater service, such as addressing service quality or rate hikes, because the private company operates with a profit motive - their first responsibility is to shareholders, not customers.

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