Capital-Intensive Privatization

Abstract

The City of Auburn, Alabama, a university city of 45,000, privatized its wastewater treatment facilities in the early 1980s. At the time, the city was faced with outdated wastewater facilities that were built in the 1950s. Overflows from the many pump stations into local creeks were common occurrences. Federal financial assistance was several years away because of Auburn’s lower priority on the funding list, and interest rates were very high for municipal bond issues. Federal tax law favored private investment in public facilities so the city choose a private company to build, own, and operate two new treatment plants. In 2001, the city purchased the treatment facilities from the private owner because it needed to expand treatment capacity and build a major new sewer line. This article presents the case study of the privatization and subsequent return to public ownership of a capital-intensive privatization project of the early 1980s.

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