Sunday, May 01, 2005

Municipal utilities are unfair to taxpayers and private investors

Municipal utilities are unfair to taxpayers and private investors. Governments unfairly enjoy many advantages over private, tax-paying vendors: regulatory power (permits, licenses, fees) over competitors; power to condemn privately owned facilities; tax-exempt debt financing; ability to mask costs of service delivery in municipal bureaucracy, and free use of taxpayers’ assets (rights-of-way, tax revenue, municipal employees). Give OCTax a McDonald’s franchise with those unfair advantages, and we’ll sell burgers 23 percent cheaper than our competitors (or charge the same price and keep the excess profit), as Irvine’s consultant suggests the city may be able to do in the electricity market. Those artificially low rates (or the excess “profit” that the city might skim off for the city treasury) would be illusory. They would be subsidized by taxpayers, who would pay higher taxes for other services to make up for taxes not paid by the tax-exempt municipal utility.

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