Saturday, July 18, 2009

Poor Communities Oppose Raising LA Water Prices

The LA Times has an article today stating that communities such as Compton and Lynwood are not happy about the doubling of residential water prices over the next two years. Now it is true that if water represents a large share of household consumption that LA household inflation would jump sharply but water isn't a big budget share. Southern California is in drought and it is important that all people and firms in this region face the true scarcity signal. This article highlights though that the Central Basin Municpal Water District made one public relations mistake. It has used some of its revenue to make a $80,000 donation to the Whittier Narrows Wildlife santuary. As a guy who likes birds, I understand this but this is the problem with non-profit firms --- they have multiple objectives rather than simply focusing on profit maximization. The poor guys in Compton do not care about these birds and will be angry that their scarce dollars are being sent to protect birds.

What is the right public relations strategy for justifying raising prices sharply? Be honest about water scarcity and about the challenges we face ahead in adapting to a changing climate. The Utility should explain how the revenue collected will be used to build a pipeline for recycled water and how this "unsexy" infrastructure will help LA cope with water scarcity in the future. Just as declining crime has improved Compton's quality of life, this unseen infrastructure will play the same role and the money must be collected to pay for it.

People might be willing to pay public fees and taxes with less anger if they believe that government provides a good deal in terms of public services per $ of expenditure.